risk return analysis
DESCRIPTION
INTRODUCTIONINDUS PROFILEDATA ANALYSISTRANSCRIPT
INTRODUCTION
Investment is the employment of funds with the aim of achieving additional
income or growth in value. The essential quality of an investment is that it involves
‘waiting’ for a reward. It involves the commitment of resources which have been
saved or put away from current consumption in the hope that some benefits will
accrue in future. The term ‘Investment’ does not appear to be as simple as it has been
defined. Investment has been further categorized by financial experts and economists.
It has also often been confused with the term speculation. The following discussion
will give an explanation of the various ways in which investment is related or
differentiated from the financial and economic sense and how speculation differs from
investment. However, it must be clearly established that investment involves long-
term commitment.
RETURNS:
A major purpose of investment is to set a return of income on the funds
invested. On a bond an investor expects to receive interest. On a stock, dividends
may be anticipated. The investor may expect capital gains from some investments
and rental income from house property.
RISK:
In the investing world, the dictionary definition of risk is the chance that an
investment’s actual return will be different than expected. Technically, this is
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measured in statistics by Standard Deviation. Risk means you have the possibility of
losing some, or even all, of our original investment.
Risk consists of 2 components:
1. Systematic risk (uncontrollable risk) non-diversifiable risk
2. Unsystematic risk (controllable risk) diversifiable risk
SYSTEMATIC RISK:
The risk that affects the entire market, the factors are beyond the control of the
corporate and the investor. They cannot be avoided by the investor. It is sub-divided
into.
a) Market risk
b) Interest rate risk
c) Purchase power risk
UNSYSTEMATIC RISK OF DIVERSIFIABLE RISK:
It is unique to the firm or industry. It stems from managerial inefficiency,
technological changes, consumer preferences, labour problems etc. The magnitude
and nature differs from firm to firm, industry to industry.
It can be classified into 2 types
1) Business risk
Internal risk
Fluctuations in sales
Research and development
Personal management
External risk (P,E,S,T factors)
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2) Financial risk
It is associated with the capital structure of the company.
STATEMENT OF THE PROBLEM
The problem undertaken to study in the present project work is to calculate
returns and risk associated with different stocks listed on NSE Stock Exchange.
Returns and Risk are calculated to study the price movements in the stock market.
After doing this project one can make decisions regarding the investment in which
company one can expect.
NEED FOR THE STUDY
Stock Markets have existed in India for a very long time yet the professionals
in the field of finance talking negatively about these instruments. The reason why I
bring it up again is that it is very important to understand what the old system was
verse the new the old system were based on trust. They were closed group system
and hence deviation from truly competitive markets. Such closed groups are
vulnerable to problem when the demand of the economy reach beyond the capacity of
the group and group has expended without open and transparent criteria for entry, the
net work of trust gets disrupted, with the result that the system is disrupted by frauds.
On the other hand, the modern market place of Stock Markets, having well
developed risk management, transparent rules for entry and stringent regulation, is
faceless. That the old type system had to transform into a new is definitely clear they
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have played a very important role in the past. In is merely that had to modern markets
to keep up with the demand of the times.
SCOPE OF THE STUDY
The present study has been undertaken to observe the risk and returns
associated with few selected stocks. The scope of the study consists of 15 Company
stocks from different sectors like infrastructure, Pharmacy, Automobile, Power,
Public Sector and Energy etc., the scope of the study is confined to 50 Companies.
RESEARCH METHODOLOGY
This research study has been based on descriptive and explanative and
exploratory method. It describes securities market in India, and explains risk and
returns involved in equity investment. Finally it explores various alternatives
regarding equity investment.
TOOLS OF DATA COLLECTION
The present data is based upon secondary data sources:
a) Data collected from journals, magazines and newspapers.
b) Data collected from the reference books.
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OBJECTIVES OF THE STUDY
1. The main objective of this project is to analyze the price fluctuations of
various companies.
2. To observe the relation between Returns and Risk in the daily fluctuations in
prices.
3. To evaluate the price movements of the selected stocks based on fundamental
analysis.
LIMITATIONS
1. This project report data collected from secondary sources only.
2. This project analysis report may not be applicable in all equity markets.
3. Project took only 15 companies of NSE for equity analysis. It will not
applicable to total NSE’S Nifty Index.
4. The accuracy of the study is based on the accuracy of the data presented
in the NSE listings.
5. Detailed study of topic was not possible due to limited size of the project.
The time taken for the study is limited.
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INTRODUCTION
RETURNS
A major purpose of investment is to set a return of income on the funds
invested. On a bond an investor expects to receive interest. On a stock, dividends
may be anticipated. The investor may expect capital gains from some investments
and rental income from house property. Return may take several forms.
Measurement of Returns
The purpose of investment is to get a return or income on the funds invested in
different financial assets. The most important characteristics of financial assets are
the size and variability of their future returns. Since the return on income varies,
various statistical techniques are used to measure it. Over the years, may methods
were adopted for quantifying returns. These are now categorized as traditional and
modern techniques of measurement.
Traditional Method of Measurement
Computation of yield to measure a financial asset’s return is the simplest and
oldest technique of measurement. Yield can be both expected or estimated and actual
for a particular period. The formula used to find yield is:
Expected Cash Income
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a) Estimated Yield = ----------------------------
Current Price of Asset
Cash Income
b) Actual Yield = ---------------------
Amount Invested
The yield that is calculated is for a particular period to find out the return on
the amount that is invested. For example, the annual yield on the Unit Trust
Certificate is the dividend income divided by the amount invested.
Measuring Returns – Improved Technique
The ‘holding period yield’ is one of the new techniques in measuring returns.
The traditional methods did not provide a satisfactory returns measure. Some of the
gaps that were identified were: (a) that the traditional method does not distinguish
between divided and earnings portion that the traditional method does not distinguish
between divided and earnings portion that the company retains (Earnings Yield
Method), (b) Dividend Yield Method ignores the possibility of price appreciation on
retained earnings. It is useful only for those shareholders who wish to retain shares
always and are not interested in selling and anticipate that dividends are not going to
change; (c) the yield to maturity is useful only to those bond holders who will hold it
to maturity. All investors may not hold bonds till maturity for obvious reasons.
These methods are thus known to serve a limited purpose only. The better method
measures return through the holding period yield. This measure appears more rational
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and clearly defined. It serves two purposes: (a) It measures that total return per rupee
of the original investment, and (b) through this method, comparisons can be drawn of
any asset’s expected return. An asset can be compared with other both historically
and for future periods.
The holding period yield can be used for any asset. For example, returns from
savings accounts, stocks money, real estate and bonds can be compared through this
measure. The formula for the holding period yield is:
Income payments received during the year in Rs. + Capital change for the period in
Rs.
Price in rupees of original investment at the beginning of period
Dividend + (Pt-Po)
= --------------------------
Po
A look at this formula shows that the Holding Period Yield (HPY) considers
everything the investor receives over the specified period during which the asset is
held relative to what was originally invested in the assets. It also considers all income
payments; and positive and negative capital changes during the period. These are
then measured relative to the original investment in rupees. The HPY also measures
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past receipts of payments as well as for an unknown future. It is useful for comparing
any time period, it can be used on both Bond and Stocks.
Measure of Dispersion
Dispersion methods help to assess risk in receiving a reward or return on
investment. The greater the potential dispersion, the greater the risk. One of the
simplest methods in calculating dispersion is range. The range, however, has limited
importance. It is useful when there are small samples. It loses its effectiveness when
the number of values in a sample increases. The best and most effective method to
find out how the data scattered around a frequency distribution is to use the standard
deviation method. This method is related to the mean deviation and implies in this
case the means as a point of reference from which deviation occurs. The standard
deviation is based on mean and it cannot show any result without first finding out the
mean. The standard deviation is recognized by the following symbol. The standard
deviation is also related to variance. Variance is the square of standard deviation. In
other words, standard deviation is the square root of the variance. This relationship
shows that they have similar statistical characteristics. Therefore, standard deviation
and variance are considered equivalent to each other as measures of risk. For a
security analyst they help in depicting dispersion of HPYs around HPY.
There are 22 stock exchanges in India, the first being the Bombay Stock
Exchange (BSE), which began formal trading in 1875, making it one of the oldest in
Asia. Over the last few years, there has been a rapid change in the Indian securities
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market, especially in the secondary market. Advanced technology and online-based
transactions have modernized the stock exchanges. In terms of the number of
companies listed and total market capitalization, the Indian equity market is
considered large relative to the country’s stage of economic development. The
number of listed companies increased from 5,968 in March 1990 to about 10,000 by
May 1998 and market capitalization has grown almost 11 times during the same
period.
The debt market, however, is almost non-existent in India even though there
has been a large volume of Government bonds traded. Banks and financial institutions
have been holding a substantial part of these bonds as statutory liquidity requirement.
The portfolio restrictions on financial institutions’ statutory liquidity requirement are
still in place. A primary auction market for Government securities has been created
and a primary dealer system was introduced in 1995. There are six authorized primary
dealers. Currently, there are 31 mutual funds, out of which 21 are in the private
sector. Mutual funds were opened to the private sector in 1992. Earlier, in 1987, banks
were allowed to enter this business, breaking the monopoly of the Unit Trust of India
(UTI), which maintains a dominant position. Before 1992, many factors obstructed
the expansion of equity trading. Fresh capital issues were controlled through the
Capital Issues Control Act. Trading practices were not transparent, and there was a
large amount of insider trading. Recognizing the importance of increasing investor
protection, several measures were enacted to improve the fairness of the capital
market. ‘The Securities and Exchange Board of India (SEBI) was established in
1988’. Despite the rules it set, problems continued to exist, including those relating to
disclosure criteria, lack of Brokers, capital adequacy, and poor regulation of merchant
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bankers and underwriters. There have been significant reforms in the regulation of the
securities market since 1992 in conjunction with overall economic and financial
reforms. In 1992, the SEBI Act was enacted giving SEBI statutory status as an apex
regulatory body. And a series of reforms was introduced to improve investor
protection, automation of stock trading, integration of national markets, and efficiency
of market operations. India has seen a tremendous change in the secondary market for
equity. Its equity market will most likely be comparable with the world’s most
advanced secondary markets within a year or two. The key ingredients that underlie
market quality in India’s equity market are:
Exchanges based on open electronic limit order book
Nationwide integrated market with a large number of informed traders and
fluency of short or long positions.
No counterparty risk.
Among the processes that have already started and are soon to be fully
implemented are electronic settlement trade and exchange-traded derivatives.
Before 1995, markets in India used open outcry, a trading process in which traders
shouted and hand signaled from within a pit. One major policy initiated by SEBI from
1993 involved the shift of all exchanges to screen-based trading, motivated primarily
by the need for greater transparency. The first exchange to be based on an open
electronic limit order book was the National Stock Exchange (NSE), which started
trading debt instruments in June 1994 and equity in November 1994. In March 1995,
BSE shifted from open outcry to a limit order book market. Currently, 17 of India’s
stock exchanges have adopted open electronic limit order. Before 1994, India’s stock
markets were dominated by BSE in other parts of the country.
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Recent Developments and Policy Issues.
Financial industry did not have equal access to markets and was unable to
participate in forming prices, compared with market participants in Mumbai
(Bombay). As a result, the prices in markets outside Mumbai were often different
from prices in Mumbai. These pricing errors limited order flow to these markets.
Explicit nationwide connectivity and implicit movement toward one national
market has changed this situation. NSE has established satellite communications
which give all trading members of NSE equal access to the market. Similarly, BSE
and the Delhi Stock Exchange are both expanding the number of trading terminals
located all over the country. The arbitrages are eliminating pricing discrepancies
between markets. The Indian capital market still faces many challenges if it is to
promote more efficient allocation and mobilization of capital in the economy.
Firstly, market infrastructure has to be improved as it hinders the efficient
flow of information and effective corporate governance. Accounting standards will
have to adapt to internationally accept accounting practices.
The court system and legal mechanism should be enhanced to better protect small
shareholders’ rights and their capacity to monitor corporate activities.
Secondly, the trading system has to be made more transparent. Market
information is a crucial public good that should be disclosed or made available to all
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participants to achieve market efficiency. SEBI should also monitor more closely
cases of insider trading.
Thirdly, India may need further integration of the national capital market
through consolidation of stock exchanges. The trend all over the world is to
consolidate and merge existing stock exchanges. Not all of India’s 22 stock exchanges
may be able to justify their existence. There is a pressing need to develop a uniform
settlement cycle and common clearing system that will bring an end to unnecessary
speculation based on arbitrage opportunities.
Fourthly, the payment system has to be improved to better link the banking
and securities industries. India’s banking system has yet to come up with good
electronic funds transfer (EFT) solutions. EFT is important for problems such as
direct payments of dividends through bank accounts, eliminating counterparty risk,
and facilitating foreign institutional investment. The capital market cannot thrive
alone; it has to be integrated with the other segments of the financial system. The
global trend is for the elimination of the traditional wall between banks and the
securities market. Securities market development has to be supported by overall
macroeconomic and financial sector environments. Further liberalization of interest
rates, reduced fiscal deficits, fully market-based issuance of Government securities
and a more competitive banking sector will help in the development of a sounder and
a more efficient capital market in India. Capital Market Reforms and Developments
Reforms in the Capital Market Over the last few years, SEBI has announced several
far-reaching reforms to promote the capital market and protect investor interests.
Reforms in the secondary market have focused on three main areas
structure and functioning of stock exchanges,
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automation of trading and post trade systems,
And the introduction of surveillance and monitoring systems. Computerized
online trading of securities.
And settings up of clearing houses or settlement guarantee funds were made
compulsory for stock exchanges.
Stock exchanges were permitted to expand their trading to locations outside
their jurisdiction through computer terminals. Thus, major stock exchanges in India
have started locating computer terminals in far-flung areas, while smaller regional
exchanges are planning to consolidate by using centralized trading under a federated
structure.
Online trading systems have been introduced in almost all stock exchanges.
Trading is much more transparent and quicker than in the past. Until the early 1990s,
the trading and settlement infrastructure of the Indian capital market was poor.
Trading on all stock exchanges was through open outcry, settlement systems were
paper-based, and market intermediaries were largely unregulated.
The regulatory structure was fragmented and there was neither comprehensive
registration nor an apex body of regulation of the securities market. Stock exchanges
were run as “brokers clubs” as their management was largely composed of brokers.
There was no prohibition on insider trading, or fraudulent and unfair trade practices.
Since 1992, there has been intensified market reform, resulting in a big improvement
in securities trading, especially in the secondary market for equity. Most stock
exchanges have introduced online trading and set up clearing houses/corporations. A
depository has become operational for scrip less trading and the regulatory structure
has been overhauled with most of the powers for regulating the capital market vested
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with SEBI. The Indian capital market has experienced a process of structural
transformation with operations conducted to standards equivalent to those in the
developed markets. It was opened up for investment by foreign institutional investors
(FII’s) in 1992 and Indian companies were allowed to raise resources abroad through
Global Depository Receipts (GDRs) and Foreign Currency Convertible Bonds
(FCCBs). The primary and secondary segments of the capital market expanded
rapidly, with greater institutionalization and wider participation of individual
investors accompanying this growth. However, many problems, including lack of
confidence in stock investments, institutional overlaps, and other governance issues,
remain as obstacles to the improvement of Indian capital market efficiency.
PRIMARY MARKET
Since 1991/92, the primary market has grown fast as a result of the removal
of investment restrictions in the overall economy and a repeal of the restrictions
imposed by the Capital Issues Control Act. In 1991/92, Rs62.15 billion was raised in
the primary market. This figure rose to Rs276.21 billion in 1994/95. Since 1995/1996,
however, smaller amounts have been raised due to the overall downtrend in the
market and tighter entry barriers introduced by SEBI for investor protection .SEBI has
taken several measures to improve the integrity of the secondary market. Legislative
and regulatory changes have facilitated the corporatization of stockbrokers. Capital
adequacy norms have been prescribed and are being enforced. A mark-to-market
margin and intraday trading limit have also been imposed. Further, the stock
exchanges have put in place circuit breakers, which are applied in times of excessive
volatility. The disclosure of short sales and long purchases is now required at the end
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of the day to reduce price volatility and further enhance the integrity of the secondary
market.
MARK-TO-MARKET MARGIN AND INTRADAY LIMIT
Under the current clearing and settlement system, if an Indian investor buys
and subsequently sells the same number of shares of stock during a settlement period,
or sells and subsequently buys, it is not necessary to take or deliver the shares. The
difference between the selling and buying prices can be paid or received. In other
words, the squaring-off of the trading position during the same settlement period
results in non delivery of the shares that the investor traded.
Thus, possible at a relatively low cost. FII’s and domestic institutional
investors are, however, not permitted to trade without delivery, since no delivery
transactions are limited only to individual investors. One of SEBI’s primary concerns
is the risk of settlement chaos that may be caused by an increasing number of no
delivery transactions as the stock market becomes excessively speculative.
Accordingly, SEBI has introduced a daily mark-to-market margin and
intraday trading limit. The daily mark-to-market margin is a margin on a broker’s
daily position. The intraday trading limit is the limit to a broker’s intraday trading
volume. Every broker is subject to these requirements.
Each stock exchange may take any other measures to ensure the safety of the
market. BSE and NSE impose on members a more stringent daily margin, including
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one based on concentration of business. A daily mark-to-market margin is 100 percent
of the notional loss of the stockbroker for every stock, calculated as the difference
between buying or selling price and the closing price of that stock at the end of that
day. However, there is a threshold limit of 25 percent of the base minimum capital
plus additional capital kept with the stock exchange or Rs1 million, whichever is
lower. Until the notional loss exceeds the threshold limit, the margin is not payable.
This margin is payable by a stockbroker to the stock exchange in cash or as a bank
guarantee from a scheduled commercial bank, on a net basis. It will be released on the
pay-in day for the settlement period. The margin money is held by the exchange for 6-
12 days. This cost the broker about 0.4-1.2 percent of the notional loss, assuming that
the broker’s funding cost is about 24-36 percent (Endo 1998).
Thus, speculative trading without the delivery of shares is no
longer cost-free. Each broker’s trading volume during a day is not allowed to exceed
the intraday trading limit. This limit is 33.3 times the base minimum capital deposited
with the exchange on a gross basis, i.e., purchase plus sale. In the event of brokers
wishing to exceed this limit, they have to deposit additional capital with the exchange
and this cannot be withdrawn for six months.
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INDUSTRY PROFILE
Stock exchange is an organized market place where securities are traded.
These securities are issued by the government, semi-government bodies, public sector
undertakings and companies for borrowing funds and raising resources. Securities are
defined as any monetary claims (promissory notes or I.O.U) and also include shares,
debentures, bonds and etc., if these securities are marketable as in the case of the
government stock, they are transferable by endorsement and alike movable property.
They are tradable on the stock exchange. So, are the case shares of companies.
Under the Securities Contract Regulation Act of 1956, securities’ trading is
regulated by the Central Government and such trading can take place only in stock
exchanges recognized by the government under this Act. As referred to earlier there are
at present 23 such recognized stock exchanges in India. Of these, major stock
exchanges, like Bombay Stock Exchange, National Stock Exchange, Inter-Connected
Stock Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are
permanently recognized while a few are temporarily recognized. The above act has also
laid down that trading in approved contract should be done through registered members
of the exchange. As per the rules made under the above act, trading in securities
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permitted to be traded would be in the normal trading hours (10 A.M to 3.30 P.M) on
working days in the trading ring, as specified for trading purpose.
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Contracts approved to be traded are the following:
Spot delivery deals are for deliveries of shares on the same day or the next day
as the payment is made.
Hand deliveries deals for delivering shares within a period of 7 to 14 days from
the date of contract.
Delivery through clearing for delivering shares with in a period of two months
from the date of the contract, which is now reduce to 15 days.(Reduced to 2
days in demat trading)
Special Delivery deals for delivering of shares for specified longer periods as
may be approved by the governing board of the stock exchange.
Except in those deals meant for delivery on spot basis, all the rest are to be put
through by the registered brokers of a stock exchange. The securities contracts
(Regulation) rules of 1957 laid down the condition for such trading, the trading hours,
rules of trading, settlement of disputes, etc. as between the members and of the members
with reference to their clients.
HISTORY OF STOCK EXCHANGES IN INDIA
The origin of the Stock Exchanges in India can be traced back to the later half of
19th century. After the American Civil War (1860-61) due to the share mania of the
public, the number of brokers dealing in shares increased. The brokers organized an
informal association in Mumbai named “The Native Stock and Share Brokers
Association in 1875”.later evolved as Bombay stock exchange. Increased activity in
trade and commerce during the First World War and Second World War resulted in an
increase in the stock trading. The Growth of Stock Exchanges suffered a set after the
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end of World War. Worldwide depression affected those most of the Stock Exchanges
in the early stages had a speculative nature of working without technical strength. After
independence, government took keen interest to regulate the speculative nature of stock
exchange working. In that direction, securities and Contract Regulation Act 1956 was
passed, this gave powers to Central Government to regulate the stock exchanges.
Further to develop secondary markets in the country, stock exchanges established at
Mumbai, Chennai, Delhi, Hyderabad, Ahmedabad and Indore. The Bangalore Stock
Exchange was recognized in 1963. At present there are 23 Stock Exchanges. Till
recent past, floor trading took place in all Stock Exchanges. In the floor trading system,
the trade takes place through open outcry system during the official trading hours.
Trading posts are assigned for different securities whereby and sell activities of
securities took place. This system needs a face – to – face contact among the traders
and restricts the trading volume. The speed of the new information reflected on the
prices was rather than the investors. The Setting up of NSE and OTCEI (Over the
counter exchange of India with the screen based trading facility resulted in more and
more Sock exchanges turning towards the computer based trading. BSE introduced the
screen based trading system in 1995, which known as BOLT (Bombay on – line
Trading. System) Madras Stock Exchange introduced Automated Network Trading
System (MANTRA) on October 7, 1996 Apart from Bombay Stock Exchanges have
introduced screen based trading.
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FUNCTIONS OF STOCK EXCHANGE
Maintain Active Trading:
Shares are traded on the stock exchanges, enabling the investors to buy and sell
securities. The prices may vary from transaction to transaction. A continuous trading
increases the liquidity or marketability of the shares traded on the stock exchanges.
Fixation of Prices:
Price is determined by the transactions that flow from investors demand and the
supplier’s preferences. Usually the traded prices are made known to the public. This
helps the investors to make the better decision.
Ensures safe and fair dealings:
The rules, regulations and bylaws of the Stock Exchanges provide a measure of
safety to the investors. Transactions are conducted under competitive conditions
enabling the investors to get a fair deal.
Aids in financing the Industry:
A continuous market for shares provides a favorable climate for raising capital.
The negotiability and transferability of the securities, investors are willing to subscribe
to the initial public offering (IPO). This stimulates the capital formation.
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Dissemination of Information:
Stock Exchanges provide information through their various publications. They
publish the share prices traded on their basis along with the volume traded. Directory of
Corporate Information is useful for the investor’s assessment regarding the corporate.
Handouts, handbooks and pamphlets provide information regarding the functioning of
the Stock Exchanges.
Performance Inducer:
The prices of stocks reflect the performance of the traded companies. This
makes the corporate more concerned with its public image and tries to maintain good
performance.
Self-regulating organization:
The Stock Exchanges monitor the integrity of the members, brokers, listed
companies and clients. Continuous internal audit safeguards the investors against unfair
trade practices. It settles the disputes between member brokers, investors and brokers.
REGULATORY FRAME WORK
This Securities Contract Regulation Act, 1956 and Securities and Exchange
board of India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier
regulatory structure comprising the ministry of finance, SEB1 and the Governing
Boards of the Stock Exchanges regulates the functioning of Stock Exchanges.
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Ministry of finance
The Stock Exchange division of the Ministry of Finance has powers related to
the application of the provision of the SCR Act and licensing of dealers in the other
area. According to SEBI Act, The Ministry of Finance has the appellate and the
supervisory power over the SEBI. It has powered to grant recognition to the Stock
Exchange and regulation of their operations. Ministry of Finance has the power to
approve the appointments of executives chiefs and the nominations of the public
representatives in the government Boards of the Stock Exchanges. It has the
responsibility of preventing undesirable speculation.
The Securities and Exchange Board of India
The Securities and Exchange Board of India even though established in the year
1988. Received statutory powers only on 30th January 1992. Under the SEBI Act, a
wide variety of powers are vested in the hands of SEBI. SEBI has the powers to regulate
the business of Stock Exchanges, other security and mutual funds. Registration and
regulation of market intermediaries are also carried out by SEBI. It has responsibility to
prohibit the fraudulent unfair trade practices and insider dealings. Takeovers are also
monitored by the SEBI has the multi pronged duty to promote the healthy growth of the
capital market and protect the investors.
The Governing Board of Stock Exchanges:
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The Governing Board of the Stock Exchange consists of elected members of
directors, government nominees and public representatives. Rules, by laws and
regulations of the Stock Exchange substantial powers to the executive director for
maintaining efficient and smooth day-to day functioning of Stock Exchange. The
Governing Board has the responsibility to maintain and orderly and well-regulated
market.
The Governing body of the Stock Exchange consists of 13 members of which
Six members of the Stock Exchange are elected by the members of the Stock
Exchange.
Central Government nominates not more than three members.
The board nominates three public representatives.
SEBI nominates persona not exceeding three and
The Stock Exchange appoints one Executive Director.
One third of the elected members retire at annual general meeting (AGM). The
retired member can offer himself for election if he is not elected for two consecutive
years. If a member serves in the governing body for two years consecutively, he should
refrain offering himself for another two years.
The members of the governing body elect the president and vice-president. It needs to
approval from the Central Government or the Board. The office tenure for the president
and vice-president is on year. They can offer themselves for re-election, if they have not
held for two consecutive years. In that case they can offer themselves for re-election
after a gap of one-year period.
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NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE) of India became operational in the capital
market segment on third November 1994 in Mumbai. The genesis of the NSE lies in the
recommendations of the pherwani committee (1991). Apart from the NSE. It had
recommended for the establishment of National Stock market System also. The
committee pointed out some major defects in the Indian stock market.
The defects specified are.
Lack of liquidity in most of the markets in terms of depth and breadth.
Lack of ability to develop markets for debt.
Lack of infrastructure facilities and outdated trading system.
Lack of transparency in the operations that affect investors’ confidence.
Outdated settlement system that are inadequate to cater to the growing volume,
leading to delays.
Lack of single market due to the inability of various stock exchanges to function
cohesively with legal structure and regulatory framework.
These factors led to the establishment of the NSE.
The main objectives of NSE are as follows
To establish a nationwide trading facility for equities, debt and hybrid
instruments
To ensure equal access investors all over the country through appropriate
communication network.
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To provide a fair, efficient and transparent securities market to investors using
an electronic communication network.
To enable shorter settlement cycle and book entry settlement system.
To meet current international standards of securities market.
Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara
Bank, Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of
India, Punjab National Bank, Infrastructure Leasing and Financial Services, Stock
Holding Corporation of India and SBE capital market are the promoters of NSE.
MEMBERSHIP
Membership is based on factors such as capital adequacy, corporate structure, track
record, education, experience etc. Admission is a two-stage process with applicants
requiring going through a written examination followed by an interview. A committee
consisting of experienced people from the industry to assess the applicant’s capability to
operate as an exchange member, interviews candidates. The exchange admits members
separately to Wholesale Debt Market (WDM) segment and the capital market segment.
Only corporate members are admitted on the debt market segment whereas individuals
and firms are also eligible on the capital market segment. Eligibility criteria for trading
membership on the segment of WDM are as follows.
The persons eligible to become trading members are bodies corporate,
companies
Institutions including subsidiaries of banks engaged in financial services and
such other
Persons or entities as may be permitted form time to time by RBI/SEBI.
[27]
The whole-time directors should possess at least two years experience in any
activity related to banking or financial services or treasury.
The applicant must possess a minimum net worth of Rs.2 cores.
The applicant must be engaged solely in the business of securities and must not
be engaged in any fund-based activities.
The securities market achieves one of the most important functions of channeling
idle resources to productive resources or from less productive resources to more
productive resources. Hence in the broader context the people who save and investors
who invest focus more towards the economy’s abilities to invest and save
respectively. This enhances savings and investments in the economy, the two pillars
for economic growth. The Indian Capital Market has come a long way in this process
and with a strong regulator it has been able to usher an era of a modern capital market
regime. The past decade in many ways has been remarkable for securities market in
India. It has grown exponentially as measured in terms of amount raised from the
market, the number of listed stocks, market capitalization, trading volumes and
turnover on stock exchanges, and investor population. The market has witnessed
fundamental institutional changes resulting in drastic reduction in transaction costs
and significant improvements in efficiency, transparency and safety.
Dependence on Securities Market
Three main sets of entities depend on securities market- the corporate, the
government & households. While the corporate and governments raise resources from
the securities market to meet their obligations, the households invest their savings in
securities.
Primary Market & Secondary Market
[28]
The securities market comprises two segments- primary market (new issues,
offer for sale) & secondary market (trading of stocks). There are two major types of
issuers who issue securities. The corporate entities issue mainly debt and equity
instruments (shares, debentures, etc.), while the governments (central and state
governments) issue debt securities (dated Securities, treasury bills). The two major
exchanges, namely the NSE and the BSE provide trading of securities.
Laws governing capital market
The four main legislations governing the securities market are:
a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop
and regulate the Markets.
b) The Companies Act, 1956, which sets out the code of conduct for the
corporate sector in relation to issue, allotment and transfer of securities, and
disclosures to be made in public issues.
c) The Securities Contracts (Regulation) Act, 1956, read with the Securities
Contracts (Regulation) Rules, 1957 which provide for regulation of
transactions in securities through control over stock exchanges, and
d) The Depositories Act, 1996 which provides for electronic maintenance and
transfer of ownership of demat securities.
Regulators
SEBI is the primary regulator of the Securities Market and the entities
operating therein. The SEBI Act and the Depositories Act are mostly administered by
SEBI. The rules under the securities laws are framed by government and regulations
[29]
by SEBI. All these are administered by SEBI. The powers under the Companies Act
relating to issue and transfer of securities and non-payment of dividend are
administered by SEBI in case of listed public companies and public companies
proposing to get their securities listed
Nifty 50
The 50 stocks that were most favored by institutional investors in the 1960s
and 1970s. Companies in this group were usually characterized by consistent earnings
growth and high P/E ratios. The Nifty-50 stocks got their notoriety in the bull markets
of the 1960s and early 1970s. They became known as "one-decision" stocks because
investors were told. They could buy and hold forever.
Examples of Nifty-50 stocks included General Electric, Coca-Cola, and IBM.
However, part of this list included companies that have been troubled in the last
decade, such as Xerox and Polaroid.
Nifty Junior
The CNX Nifty Junior is an index for companies on the National Stock
Exchange of India. It consists of 50 companies representing approximately 10% of the
traded value of all stocks on the National Stock Exchange of India. The CNX Nifty
Junior is owned and operated by India Index Services and Products Ltd. It is quoted
using the symbol
NSMIDCP.
The CNX Nifty Junior and the S&P CNX Nifty represent the 100 most liquid
commodities traded on the National Stock Exchange of India. Together, they form a
[30]
disjoint set; that is to say, no one company can be listed on both indices
simultaneously.
Equity
Stock or any other security representing an ownership interest.
On the balance sheet, the amount of the funds contributed by the owners (the
stockholders) plus the retained earnings (or losses). Also referred to as "shareholder's
equity”. In the context of margin trading, the value of securities in a margin account
minus what has been borrowed from the brokerage. In the context of real estate, the
difference between the current market value of the property and the amount the owner
still owes on the mortgage. Thus, it is the amount, if any; the owner would receive
after selling a property and paying off the mortgage.
Equity is a term whose meaning depends very much on the context. In general,
you can think of equity as ownership in any asset after all debts associated with that
asset are paid off. For example, a car or house with no outstanding debt is considered
the owner's equity since he or she can readily sell the items for cash. Stocks are equity
because they represent ownership of a company, whereas bonds are classified as debt
because they represent an obligation to pay and not ownership of assets.
Market Value
The current quoted price at which investors buy or sell a share of common
stock or a bond at a given time. Also known as "market price” The market
[31]
capitalization plus the market value of debt. Sometimes referred to as "total market
value".
In the context of securities, market value is often different from book value
because the market takes into account future growth potential. Most investors who use
fundamental analysis to pick stocks look at a company's market value and then
determine whether or not the market value is adequate or if it's undervalued in
comparison to its book value, net assets or some other measure.
Stock
A type of security that signifies ownership in a corporation and represents a
claim on part of the corporation’s assets and earnings. There are two main types of
stock: common and preferred. Common stock usually entitles the owner to vote at
shareholders' meetings and to receive dividends. Preferred stock generally does not
have voting rights, but has a higher claim on assets and earnings than the common
shares. For example, owners of preferred stock receive dividends before common
shareholders and have priority in the event that a company goes. Bankrupt and is
liquidated. Also known as "shares" or "equity".
A holder of stock (a shareholder) has a claim to a part of the corporation's
assets and earnings. In other words, a shareholder is an owner of a company.
Ownership is determined by the number of shares a person owns relative to the
number of outstanding shares. For example, if a company has 1,000 shares of stock
outstanding and one person owns 100 shares, that person would own and have. Claim
to 10% of the company’s assets Stocks are the foundation of nearly every portfolio.
Historically, they have outperformed most other investments over the long run.
[32]
Shareholder
Any person, company, or other institution that owns at least 1 share in a
company. A shareholder may also be referred to as a stockholder.
Shareholders are the owners of a company. They have the potential to profit if the
company does well, but that comes with the potential to lose if the company does
poorly.
Share
A unit of ownership interest in a corporation or financial asset. While owning
shares in a business does not mean that the shareholder has direct control over the
business's day-to-day operations, being a shareholder does entitle the possessor to an
equal distribution in any profits, if any are declared in the form of dividends. The two
main types of shares are common shares and preferred shares.
In the past, shareholders received a physical paper stock certificate that indicated that
they owned "x" shares in a company. Today, brokerages have electronic records that
show ownership details. Owning a paperless share makes conducting trades a simpler
and more streamlined process, which is a far cry from the days were stock certificates
needed to be taken to a. Brokerage before a trade could be conducted. While shares
are often used to refer to the stock of a corporation, shares can also
represent ownership of other classes of financial assets, such as mutual funds.
[33]
Risk- Risk is defined as uncertainty in outcomes
The chance that an investment's actual return will be different than expected.
This includes the possibility of losing some or all of the original investment. It is
usually measured by calculating the standard deviation of the historical returns or
average returns of a specific investment. A fundamental idea in finance is the
relationship between risk and return. The greater the amount of risk that an investor is
willing to take on, the greater the potential return. The reason for this is that investors
need to. be compensated for taking on additional risk
Stock Option
A privilege, sold by one party to another, that gives the buyer the right, but not
the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a.
certain period or on a specific date. In the U.K., it is known as a "share option”.
American options can be exercised anytime between the date of purchase and the
expiration date. European options may only be redeemed at the expiration date. Most
exchange-traded stock options are American.
Security
An instrument representing ownership (stocks), a debt agreement (bonds), or
the rights to ownership (derivatives).A security is essentially a contract that can be
assigned a value Andrade.
Examples of a security include a note, stock, preferred share, bond, debenture, option,
future, swap, right, warrant, or virtually any other financial asset.
[34]
Closing Price
The final price at which a security is traded on a given trading day. The
closing price represents the most up-to-date valuation of a security until trading
commences again on the next trading day.
INTRODUCTION(CP)
INDIA BULLS is India’s leading Financial, Real Estate and Power Company
with a wide presence throughout India. They ensure convenience and reliability in all
their products and services. INDIA BULLS has over 640 branches all over India. The
customers of INDIA BULLS are more than 4,50,000 which covers from a wide range
of financial services and products from securities, derivatives trading, depositary
services, research & advisory services, consumer secured & unsecured credit, loan
against shares and mortgage & housing finance. The company employs around 4000
Relationship managers who help the clients to satisfy their customized financial goals.
INDIA BULLS entered the Real Estate business in the year 2005 with its group of
companies. Large scale projects worth several hundred million dollars are evaluated
by them.
INDIA BULLS Financial Services Ltd is listed on the National Stock Exchange
(NSE), Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The
market capitalization of INDIA BULLS is around USD 2500 million (29thDecember,
2006). Consolidated net worth of the group is around USD 700 million. INDIA
BULLS and its group companies have attracted USD 500 million of equity capital in
Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of
[35]
INDIA BULLS are the largest financial institutions of the world such as Fidelity
Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Growth of INDIA BULLS
Year 2000-01:
One of India’s first trading platforms was set up by INDIA BULLS Financial Services
Ltd. with the development of an in-house team.
Year 2001-03:
The service offered by INDIA BULLS was increased to include Equity, F&O,
Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research.
Year 2003-04:
In this particular year INDIA BULLS ventured into Distribution and Commodities
Trading business.
Year 2004-05:
This was one of the most important years in the history of INDIA BULLS. In
this year:
INDIA BULLS came out with its initial public offer (IPO) in September 2004.
INDIA BULLS started its Consumer Finance business.
[36]
INDIA BULLS entered the Indian Real Estate market and became the first
company to bring FDI in Indian Real Estate.
INDIA BULLS won bids for landmark properties in Mumbai.
Year 2005-06:
In this year the company acquired over 115 acres of land in Sonepat for
residential home site development. The world renowned investment banks like Merrill
Lynch and Goldman Sachs increased their shareholding in INDIA BULLS. It also
became a market leader in securities brokerage industry, with around 31% share in
Online Trading. The world’s largest hedge fund, Farallon Capital and its affiliates
committed Rs. 2000 million for INDIA BULLS subsidiaries Viz. INDIA BULLS
Credit Services Ltd. and INDIA BULLS Housing Finance Ltd. In the same year, the
Steel Tycoon Mr. L N Mittal promoted LNM India Internet venture Ltd. acquired
8.2% stake in INDIA BULLS Credit Services Ltd.
Year 2006-07:
In this year, INDIA BULLS Financial Services Ltd. was included in the
prestigious Morgan Stanley Capital International Index (MSCI). INDIA BULLS
Financial Services Ltd. was benefited with the Farallon Capital agreeing to invest Rs.
6,440 million in it. The company also received an “in principle approval” from
Government of India for development of multi product SEZ in the state of
Maharashtra. INDIA BULLS Financial Services Ltd acquired 100% of the equity
[37]
share capital of Noble Realtors Pvt. Ltd. Noble Realtors is a Company engaged in the
business of construction and development of real estate projects. INDIA BULLS Real
Estate Business was demerged to become a separate entity called INDIA BULLS Real
Estate Ltd. The Board of INDIA BULLS Financial Services Ltd., Resolved to
Amalgamate INDIA BULLS Credit Services Ltd and demerge INDIA BULLS
Securities Limited.
INDIA BULLS Financial Services Ltd
Year 2008-09:
Several developments across its group companies have propelled INDIA
BULLS forward and are expected to continue to power the rise of this conglomerate.
INDIA BULLS financial services limited has recently signed a joint venture
agreement with sogecap, the insurance arm of Societe Generale (SocGen) for its
upcoming life insurance venture.
At the same time it has also signed a Memorandum of understanding with MMTC.
On the asset management front, the company has received formal approval
uhby7hbfrom SEBI and is expected to shortly launch its first NFO.
INDIA BULLS enter in to Public issue for his INDIA BULLS power Ltd.
Promoters for INDIA BULLS
Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal
Are the promoters of INDIA BULLS Financial Services Limited. While
Sameer Gehlaut will have a 23.0% stake in the company post the IPO
[38]
Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and 10.1%
respectively.
All the three promoters of the company are engineering graduates while Saurabh
Mittal is a management graduate as well.
Sector
Since INDIA BULLS derives most of its revenues from the brokerage
business, its fortunes are very much dependent on the Performance of the capital
markets, i.e. debt, derivative and equity markets.
The Indian equity markets have grown from strength to strength in the last
decade with combined daily volumes of all segments on the BSE and the NSE
touching Rs 232 bn in April 2004, from Rs 5 bn in FY96.
Total shareholders in the country are over 20 m (2% of population) and this is
the third largest after the US and Japan, in absolute terms.
However, if one were to compare the percentage of all households in India that
are invested in the stock markets, it is only about 1.9% as compared to an estimated
52%(including indirect ownership by way of mutual funds) of all households in the
US. This highlights the long-term potential for the sector. to apply
The Team:
INDIA BULLS Securities Ltd, main strength lies in its formidable team.
This team comprising highly qualified and experienced personnel has been
[39]
Senior Vice PresidentYuv Raj Singh
Regional ManagerDashmeet Singh
Branch ManagerSenior Sales ManagerSujeet Roy Chowdary
Sujeet Roy Chowdary
Support SystemVishal
Sales FunctionSubrot
RM/SRMSatish Kumar
S
ARMRaja
Local ComplianceOfficerChary
Back OfficeExecutive
Ifran Khan
DealerBadri Nath
responsible for the overall management of the company and has provided direction in
diverse areas of business strategy, operating management, regulatory reporting,
human resources development and product development.
[40]
Vision statement
To become the preferred long term financial partner to a wide base of
customers whilst optimizing stake holder’s value
Mission statement
To establish a base of 1 million satisfied customers by 2010. We will create
this by being a responsible and trustworthy partner
Corporate action
An Approach to Business that reflects Responsibility, Transparency and Ethical
Behavior. Respect for Employees, Clients & Stakeholder groups
INDIA BULLS Group entities in India
[41]
INDIA BULLS Capital Services Ltd.
INDIA BULLS Commodities Pvt. Ltd.
INDIA BULLS Credit Services Ltd.
INDIA BULLS Finance Co. Pvt. Ltd
INDIA BULLS Housing Finance Ltd.
INDIA BULLS Insurance Advisors Pvt. Ltd.
INDIA BULLS Resources Ltd.
INDIA BULLS Securities Ltd.
INDIA BULLS Power Ltd.
INDIA BULLS Securities Ltd is listed on the National Stock Exchange (NSE) and
the Bombay Stock Exchange (BSE) and its global depository shares are listed on the
Luxembourg Stock Exchange
Online trading potential is huge:
Online trading accounted for 5% of overall market in FY04 as compared to an
estimated 3% in FY03. INDIA BULLS currently has almost 20% market share of
volumes in the Internet trading space. The table below indicates the growth in
volumes of the Internet trading segment on the NSE over the last few years. The
growth is indicative of the potential of this segment, which we believe is likely to be
robust going forward as well.
This is primarily driven by increasing penetration of computers, significant
decline in Internet charges, convenience of usage and cost advantage. To put things in
perspective, the offline brokerage on equities is around 1.0% as compared to 0.5% in
the online trading space.
[42]
NSE online trading statistics
Enabled
members*Registered
clients*Trading Value (Rs bn)
% of total trading value
FY00 3 FY01 61 123,578 73 0.5FY02 82 231,899 81 1.6FY03 CM 80 346,420 154 2.5F&O** 13 69,340 51 1.4FY04 CM 70 413,454 379 3.5F&O** 14 164,642 430 2
CM: Cash Market, F&O: Futures and Options market
* At the end of the financial year
** trading value for F&O segment compiled from June 2009
Advisory services:
INDIA BULLS is also into mutual fund and insurance advisory businesses.
Though this field is extremely competitive and requires significant research skills,
these are highly profitable business segments. Though these businesses currently
account for an insignificant portion of overall revenues, considering the penetration
levels of mutual funds and insurance in the country, prospects are promising.
Aggressive growth plans:
INDIA BULLS has set aggressive targets to expand its business in the offline
space. This includes investments in upgradation of branch network and opening
another 75 branches by the end of calendar year 2009 (150 in total). The company has
[43]
also indicated its intent to acquire strategic stake in other companies towards growing
the business inorganically
Products provided
Power INDIA BULLS An online trading system designed for the high-
volume trader. The platform provides enhanced trade information and executes orders
on an integrated software based trading platform.
INDIA BULLS financial service offers
a) SME finance
b) Mortgage loans
c) Commercial vehicle loans
d) Farm equipment loans
e) Commercial credit loans
f) Loan against shares and
g) Third part distribution of insurance products.
Broking Equity, Derivatives, Commodities, Currency Derivatives.
Distribution Mutual funds, IPO’s, Home loans, Insurace.
Divisions
Investment Advisory and Broking Division
Project Syndication Division
[44]
Institutional Equity Broking Division
Institutional Debt Broking Division
Retail Offerings:
Wealth Management Services
Portfolio Management Services
Securities Broking-Equities and derivatives
Depository & Custodial Service & Distribution of financial .
. Products.
SERVICES
INDIA BULLS securities provides a wide range of services that include
Power INDIA BULLS
[45]
An online trading system designed for the high-volume trader. The platform provides
enhanced trade information and executes orders on an integrated software based
trading platform.
1) Equities
2) Commodities
3) Wholesale debts
4) Futures and options
5) Depository services
6) Equity research services
7) Post Trade -Custodial,
8) Depository Services
9) Payment Gateway
10) Other back office support
Online Banks Tie-ups for trading:
Company having online transaction tie-ups with banks like
a) HDFC BANK,
[46]
b) ICICI BANK,
c) IDBI BANK,
d) CITI BANK.
Company Achievements:
The INDIA BULLS Group is one of the top fifteen conglomerates in the
country with businesses in several significant sectors. The INDIA BULLS
Financial Services stock is the best performing stock in the MSCI Index – the
global benchmark for equity investments. INDIA BULLS Real Estate Limited
partnered Farallon Capital Management LLC of the US to bring the first
Foreign Direct Investment into real estate.
INDIA BULLS Financial Services Limited was accorded the highest rating
P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for
loan receivables securitization while INDIA BULLS Securities Limited is the
only broker in India to be assigned CRISIL’s highest broker quality grading of
BQ1.
In December 2007, INDIA BULLS acquired Pyramid Retail including
Piramyd Megastores and Trumart, their chain of lifestyle and convenience
outlets
FINANCIAL POSITION
Balancesheet of India bulls securities Ltd In crores
[47]
Sources Of FundsMar '06 Mar '07 Dec '07 Mar '08 Mar '09
12 mths 12 mths 9 mths 12 mths 12 mths
Total Share Capital 17.83 17.83 55.28 55.28 55.28
Equity Share Capital 17.83 17.83 50.69 50.69 50.69
Share Application Money 0 0 0 0 0
Preference Share Capital 0 0 4.59 4.59 4.59
Reserves 163.24 301.33 475.95 308.74 236.02
Revaluation Reserves 0 0 0 0 0
Networth 181.07 319.16 531.23 364.02 291.3
Secured Loans 2.91 4.55 44.74 45.04 42.5
Unsecured Loans 349.3 35 105 335 69.5
Total Debt 352.21 39.55 149.74 380.04 112
Total Liabilities 533.28 358.71 680.97 744.06 403.3
Application Of FundsMar '06 Mar '07 Dec '07 Mar '08 Mar '09
12 mths 12 mths 9 mths 12 mths 12 mths
Gross Block 60.92 132.71 153.09 155.33 161.32
Less: Accum. Depreciation 12.64 27.01 42.49 48.14 71.23
Net Block 48.28 105.7 110.6 107.19 90.09
Capital Work in Progress 3.14 2.96 1.54 0.92 0.18
Investments 0 0 48.27 48.32 51.77
Sundry Debtors 0 95.24 0 112.62 26.24
Cash and Bank Balance 728.3 109.95 718.83 655.77 27.63
Total Current Assets 728.3 205.19 718.83 768.39 53.87
Loans and Advances 104.07 49.76 459.93 67.21 126.54
Fixed Deposits 0 307.4 0 416.9 434.56Total CA, Loans & Advances 832.37 562.35 1,178.76 1,252.50 614.97
Deffered Credit 0 0 0 0 0
Current Liabilities 342.98 296.66 616.93 430.99 288.37
Provisions 7.53 15.63 41.27 233.89 65.35
Total CL & Provisions 350.51 312.29 658.2 664.88 353.72
Net Current Assets 481.86 250.06 520.56 587.62 261.25
Miscellaneous Expenses 0 0 0 0 0TOTAL ASSETS 533.28 358.72 680.97 744.05 403.29
Contingent Liabilities 0 1.54 1.75 1.87 0.29
Book Value (Rs) 101.53 178.96 20.78 14.18 11.31
ABOUT INDIA BULLS GROUP
The INDIA BULLS Group is one of the top fifteen conglomerates in the
country with businesses in several significant sectors.
[48]
The group companies have a market capitalization of over Rs. 25,000 crore
(US$ 6.25 billion) while group revenues have grown at a cumulative annual rate of
over 100% to now reach Rs. 3100 crore (US$ 775 million) and the group profit has
surged to over Rs. 1200 crore (US$ 300 million). Its companies, listed in important
Indian and overseas markets, have
distributed over Rs. 700 crore (US$ 175 million) as dividend in the year 2008.
INDIA BULLS Financial Services Limited was accorded the highest rating
P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan
receivables securitization while INDIA BULLS Securities Limited is the only broker
in India to be assigned CRISIL’s highest broker quality grading of BQ1.
In December 2007, INDIA BULLS acquired Pyramid Retail including
Piramyd Megastores and Trumart, their chain of lifestyle and convenience
outlets INDIA BULLS’ growth has been nothing short of stupendous. In less than
eight years since the company was first registered, it has grown from just five
employees to 21,000 and from one office to 600 across the country. The INDIA
BULLS Financial Services stock is the best performing stock in the MSCI Index – the
global benchmark for equity investments.
A person who bought INDIA BULLS shares in the IPO at Rs. 19 (US$ 0.48)
in September 2004 has been rewarded almost 100 times in three and a half years – a
feat unparalleled in the history of Indian capital markets. INDIA BULLS Real Estate
Limited partnered Farallon Capital Management LLC of the US to bring the first
Foreign Direct Investment into real estate.
Companies History in India
[49]
In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh
Mittal acquired Orbis,a Delhi based stock broking company. Young entrepreneur
Sameer Gehlaut established INDIA BULLS in 2000, after acquiring orbis Securities,
a stock brokerage company in Delhi. The group started its operations from a small
office near Hauz Khas bus terminal in Delhi.The office had a tin roof and two
computers. The idea of leveraging technology for trading stocks led to the creation of
INDIA BULLS Incorporated on 10th January 2000, it was converted into a public
limited company on 27th February 2004.
Its original idea of leveraging technology bore fruit when INDIA BULLS was
accorded permission to conduct online trading on Indian stock exchanges.
The company had achieved the distinction of becoming only the second
brokerage firm in India to be granted this consent. The challenges facing it were
immense – not least of all the mind set of investors who were called to make the big
leap from traditional stock trading to a completely online interface. Having overcome
this resistance, the company later expanded its service portfolio to include equity,
F&O, wholesale debt, mutual fund distribution and equity research.
In 2003/04, INDIA BULLS ventured into insurance distribution and
commodity trading. It successfully floated its IPO in September 2004 and in the same
year entered the consumer finance segment. Real estate, the new sunrise industry, was
the next frontier for INDIA BULLS. In 2004/05, it entered this sector. But it wasn’t
just real estate that was booming.
Opportunities were opening up in retail and infrastructure as well. To cement
its position in the Indian business and industry firmament,
[50]
INDIA BULLS acquired Pyramid Retail In 2007 and marked its presence in the
power sector by launching INDIA BULLS Power
Brand Values
INDIA BULLS is amongst the largest non-banking financial services
companies in India and enjoys strong brand recognition and customer acceptance.
The company attributes its dominant position in the brokerage industry to the
preferential status it enjoys with investors Coupled with its forays into various
segments; the Group believes that the bulk of its brand story is yet to be written.
Indeed, when a case study on India’s youngest brands which have had a profound
impact on the economy is crafted, INDIA BULLS will feature prominently in it.
Recent Developments
Several developments across its group companies have propelled INDIA
BULLS forward and are expected to continue to power the rise of this conglomerate.
INDIA BULLS Financial Services Limited has recently signed a joint venture
agreement with Sogecap, the insurance arm of Societe Generale (SocGen) for its
upcoming life insurance venture.
At the same time it has also signed a Memorandum of Understanding with
MMTC, the largest commodity trading house in India, to establish a Commodities
Exchange with 26% Ownership held by MMTC.
On the asset management front, the company has received formal approval
from SEBI and is expected to shortly launch its first NFO.
The Board of Directors
[51]
Following is the list of our Board Members as on November 4, 2009
Mr. Sameer Gehlaut Chairman & CEO
Gagan Banga Executive Director
Rajiv Rattan CEO
Shamsher Singh Director
Aishwarya Katoch Director
Karan Singh Director
Prem Prakash Mird Director
Saurabh K Mittal Executive Director
Amit Jain Company Secretary
DATA ANALYSIS
ABB RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 454 485.15 0.068612335 0.054568 0.014044335 0.000197243
February 471.05 367.2 -0.22046492 0.054568 -0.27503292 0.075643106
March 370 426.7 0.153243243 0.054568 0.098675243 0.009736804
April 426.15 487 0.142790097 0.054568 0.088222097 0.007783138
May 490 650.95 0.328469388 0.054568 0.273901388 0.07502197
June 666 778.4 0.168768769 0.054568 0.114200769 0.013041816
July 780 700.6 -0.10179487 0.054568 -0.15636287 0.024449348
[52]
August 695 758.7 0.091654676 0.054568 0.037086676 0.001375422
September 764.95 784.45 0.025491862 0.054568 -0.02907614 0.000845422
October 785.1 769.55 -0.01980639 0.054568 -0.07437439 0.00553155
November 745.35 741.05 -0.0057691 0.054568 -0.0603371 0.003640566
December 749.4 767.1 0.023618895 0.054568 -0.0309491 0.000957847
Total 0.654813979 0.218224232
Standard Deviation 0.134853
BHARATI AIRTEL RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 715 633.95 -0.11335664 -0.0495 -0.06385664 0.004077671
February 629.7 638.5 0.013974909 -0.0495 0.063474909 0.004029064
March 632.7 625.75 -0.01098467 -0.0495 0.038515331 0.001483431
April 626.4 752.75 0.201708174 -0.0495 0.251208174 0.063105547
May 765.35 820.15 0.071601228 -0.0495 0.121101228 0.014665507
June 870 802.15 -0.07798851 -0.0495 -0.02848851 0.000811595
July 803.15 410.1 -0.48938554 -0.0495 -0.43988554 0.193499292
August 418 424.6 0.015789474 -0.0495 0.065289474 0.004262715
September 418.65 418.75 0.000238863 -0.0495 0.049738863 0.002473954
October 426 292.85 -0.31255869 -0.0495 -0.26305869 0.069199872
November 292 299.55 0.025856164 -0.0495 0.075356164 0.005678552
December 304.9 329.75 0.081502132 -0.0495 0.131002132 0.017161559
Total -0.5936031 0.380448759
Standard Deviation 0.1780563
BHEL RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 1372 1320.8 -0.03731778 0.049991 -0.08730878 0.007622824
February 1315 1403.85 0.06756654 0.049991 0.01757554 0.0003089
March 1385 1510.55 0.090649819 0.049991 0.040658819 0.00165314
April 1520 1655.7 0.089276316 0.049991 0.039285316 0.001543336
May 1703.65 2178.15 0.278519649 0.049991 0.228528649 0.052225343
June 2134.6 2204.05 0.03253537 0.049991 -0.01745563 0.000304699
July 2229 2230.3 0.000583221 0.049991 -0.04940778 0.002441129
[53]
August 2250 2309.5 0.026444444 0.049991 -0.02354656 0.00055444
September 2319 2328.85 0.00424752 0.049991 -0.04574348 0.002092466
October 2301 2217.8 -0.03615819 0.049991 -0.08614919 0.007421683
November 2209.95 2243.75 0.015294464 0.049991 -0.03469654 0.00120385
December 2249.75 2403.3 0.068252028 0.049991 0.018261028 0.000333465
Total 0.599893395 0.077705274
Standard Deviation 0.08047
CIPLA RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 187 191.95 0.026470588 0.05324 -0.02676941 0.000716601
February 192 191.5 -0.00260417 0.05324 -0.05584417 0.003118571
March 188 220.05 0.170478723 0.05324 0.117238723 0.013744918
April 218.5 240.75 0.101830664 0.05324 0.048590664 0.002361053
May 243.05 222.8 -0.08331619 0.05324 -0.13655619 0.018647593
June 225 253.35 0.126 0.05324 0.07276 0.005294018
July 253.35 275.05 0.08565226 0.05324 0.03241226 0.001050555
August 277 270.85 -0.02220217 0.05324 -0.07544217 0.00569152
September 271 279.9 0.032841328 0.05324 -0.02039867 0.000416106
October 283 287.1 0.014487633 0.05324 -0.03875237 0.001501746
November 284.2 320 0.125967628 0.05324 0.072727628 0.005289308
December 315.1 335.05 0.063313234 0.05324 0.010073234 0.00010147
Total 0.638919535 0.057933459
Standard Deviation 0.0694823
HCL TECH RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 116.5 116.1 -0.00343348 0.1141 -0.11753348 0.013814118
February 111.15 100.2 -0.09851552 0.1141 -0.21261552 0.045205359
March 98 102.05 0.041326531 0.1141 -0.07277347 0.005295978
April 100.55 129.85 0.291397315 0.1141 0.177297315 0.031434338
May 130.55 166.9 0.27843738 0.1141 0.16433738 0.027006775
June 172 185.95 0.081104651 0.1141 -0.03299535 0.001088693
July 186 241 0.295698925 0.1141 0.181598925 0.032978169
[54]
August 242 300 0.239669421 0.1141 0.125569421 0.01576768
September 299 340.8 0.139799331 0.1141 0.025699331 0.000660456
October 342 306.25 -0.10453216 0.1141 -0.21863216 0.047800023
November 302.5 337.1 0.114380165 0.1141 0.000280165 7.84926E-08
December 339.95 371.8 0.093690249 0.1141 -0.02040975 0.000416558
Total 1.369022808 0.221468225
Standard Deviation 0.1358517
INFOSYS RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 1116 1306.65 0.170833333 0.1459 0.024933333 0.000621671
February 1292 1231.25 -0.04702012 0.1459 -0.19292012 0.037218174
March 1218 1323.9 0.086945813 0.1459 -0.05895419 0.003475596
April 1331.15 1509.25 0.133794088 0.1459 -0.01210591 0.000146553
May 1520.1 1605.1 0.055917374 0.1459 -0.08998263 0.008096873
June 1615.35 1776.5 0.099761662 0.1459 -0.04613834 0.002128746
July 1770.55 2064.35 0.165937138 0.1459 0.020037138 0.000401487
August 2064 2131.15 0.032533915 0.1459 -0.11336609 0.012851869
September 2139.95 2306.4 0.077782191 0.1459 -0.06811781 0.004640036
October 2330 2206.2 -0.05313305 0.1459 -0.19903305 0.039614154
November 2203 2379.35 0.080049932 0.1459 -0.06585007 0.004336231
December 2427 2601.1 0.071734652 0.1459 -0.07416535 0.005500499
Total 0.875136926 0.11903189
Standard Deviation 0.09959580
M&M RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 276 302.25 0.095108696 0.11799 -0.0228813 0.000523554
February 295 311.7 0.056610169 0.11799 -0.06137983 0.003767484
March 305 383.65 0.257868852 0.11799 0.139878852 0.019566093
April 384.85 487.95 0.267896583 0.11799 0.149906583 0.022471984
May 501 668.9 0.335129741 0.11799 0.217139741 0.047149667
June 674 691.25 0.025593472 0.11799 -0.09239653 0.008537118
July 698.7 859.05 0.229497638 0.11799 0.111507638 0.012433953
[55]
August 876.65 863.65 -0.01482918 0.11799 -0.13281918 0.017640934
September 865.05 883.2 0.020981446 0.11799 -0.09700855 0.00941066
October 892 921.95 0.033576233 0.11799 -0.08441377 0.007125684
November 930 1029.35 0.106827957 0.11799 -0.01116204 0.000124591
December 1079 1080.85 0.001714551 0.11799 -0.11627545 0.01351998
Total 1.415976159 0.162271703
Standard Deviation 0.11628689
ONGC RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 667 654.95 -0.01806597 0.63876 0.620694033 0.385261083
February 650.3 691 0.062586499 0.63876 0.701346499 0.491886911
March 664.05 780.2 0.174911528 0.63876 0.813671528 0.662061355
April 780 864.75 0.108653846 0.63876 0.747413846 0.558627457
May 898.7 1169.25 0.301045955 0.63876 0.939805955 0.883235234
June 1171.1 1069.3 -0.08692682 0.63876 0.551833179 0.304519858
July 1065.2 1164.05 0.092799474 0.63876 0.731559474 0.535179264
August 1165 1185.5 0.017596567 0.63876 0.656356567 0.430803942
September 1175.55 1172 -0.00301986 0.63876 0.635740137 0.404165522
October 1175.45 1131.8 -0.03713471 0.63876 0.601625286 0.361952984
November 1144.9 1199.75 0.047908114 0.63876 0.686668114 0.471513099
December 1204 1178 -0.02159468 0.63876 0.617165316 0.380893027
Total 0.63876 5.870099736
Standard Deviation 0.69941045
REL RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 1240 1323.6 0.067419355 0.00723 0.060189355 0.003622758
February 1290 1266.05 -0.01856589 0.00723 -0.02579589 0.000665428
March 1228.7 1524.75 0.240945715 0.00723 0.233715715 0.054623035
April 1523 1806.25 0.185981615 0.00723 0.178751615 0.03195214
May 1851 2271.9 0.2273906 0.00723 0.2201606 0.04847069
June 2330 2023.4 -0.13158798 0.00723 -0.13881798 0.019270432
[56]
July 2029.9 1955.4 -0.03670132 0.00723 -0.04393132 0.00192996
August 1968.9 2005.1 0.018385901 0.00723 0.011155901 0.000124454
September 2024.8 2201.65 0.08734196 0.00723 0.08011196 0.006417926
October 2199.9 1931.15 -0.12216464 0.00723 -0.12939464 0.016742974
November 1920.05 1063.5 -0.44610817 0.00723 -0.45333817 0.2055155
December 1075 1090.55 0.014465116 0.00723 0.007235116 5.23469E-05
Total 0.086802254 0.389387646
Standard Deviation 0.180136
SATYAM RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 175 53.85 -0.69228571 0.04825 -0.74053571 0.548393144
February 55 41.35 -0.24818182 0.04825 -0.29643182 0.087871823
March 42.5 38.45 -0.09529412 0.04825 -0.14354412 0.020604914
April 38.95 46.8 0.201540436 0.04825 0.153290436 0.023497958
May 47.25 53.35 0.129100529 0.04825 0.080850529 0.006536808
June 54.4 71 0.305147059 0.04825 0.256897059 0.065996099
July 71.25 104.65 0.46877193 0.04825 0.42052193 0.176838693
August 104 122.3 0.175961538 0.04825 0.127711538 0.016310237
September 122.9 119.1 -0.03091945 0.04825 -0.07916945 0.006267801
October 119 102.2 -0.14117647 0.04825 -0.18942647 0.035882388
November 100.5 90.15 -0.10298507 0.04825 -0.15123507 0.022872048
December 91 98.15 0.078571429 0.04825 0.030321429 0.000919389
Total 0.048250279 1.011991302
Standard Deviation 0.29040077
SBI RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 1329 1151 -0.13393529 0.0464 -0.18033529 0.032520817
February 1139 1025.3 -0.09982441 0.0464 -0.14622441 0.021381577
March 1014.7 1067.1 0.051640879 0.0464 0.005240879 2.74668E-05
April 1076.15 1278.6 0.188124332 0.0464 0.141724332 0.020085786
May 1325.25 1868.85 0.410186757 0.0464 0.363786757 0.132340805
June 2039.7 1745.3 -0.14433495 0.0464 -0.19073495 0.036379822
[57]
July 1731 1811.65 0.046591566 0.0464 0.000191566 3.66974E-08
August 1820 1742.9 -0.04236264 0.0464 -0.08876264 0.007878806
September 1761 2194.95 0.246422487 0.0464 0.200022487 0.040008995
October 2191.55 2191.05 -0.00022815 0.0464 -0.04662815 0.002174184
November 2187 2239.55 0.024028349 0.0464 -0.02237165 0.000500491
December 2246 2269 0.010240427 0.0464 -0.03615957 0.001307515
Total 0.556549363 0.294606301
Standard Deviation 0.15668607
TATA MOTORS RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 160.95 149.65 -0.07020814 0.14874218 -0.21895032 0.047939242
February 148.05 149.3 0.008443094 0.14874218 -0.14029909 0.019683834
March 146.1 180.3 0.234086242 0.14874218 0.085344062 0.007283609
April 182 243.8 0.33956044 0.14874218 0.19081826 0.036411608
May 250.2 336.85 0.346322942 0.14874218 0.197580762 0.039038157
June 348.6 290.75 -0.16594951 0.14874218 -0.31469169 0.099030861
July 292.3 421.55 0.442182689 0.14874218 0.293440509 0.086107332
August 423 489.7 0.157683215 0.14874218 0.008941035 7.99421E-05
September 491.4 591.15 0.202991453 0.14874218 0.054249273 0.002942984
October 594.8 567.25 -0.04631809 0.14874218 -0.19506027 0.038048509
November 563.5 663.15 0.176841171 0.14874218 0.028098991 0.000789553
December 682.8 791.55 0.15927065 0.14874218 0.01052847 0.000110849
Total 1.784906154 0.37746648
Standard Deviation 0.17735709
TATATEA RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 605.05 605.9 0.001404843 0.03419 -0.03278516 0.001074867
February 606 579.85 -0.04315182 0.03419 -0.07734182 0.005981756
March 571 584.55 0.023730298 0.03419 -0.0104597 0.000109405
April 593.5 678.5 0.143218197 0.03419 0.109028197 0.011887148
May 695 693.15 -0.00266187 0.03419 -0.03685187 0.00135806
June 704 721.15 0.024360795 0.03419 -0.0098292 9.66133E-05
July 730 850.95 0.165684932 0.03419 0.131494932 0.017290917
[58]
August 855 944.85 0.105087719 0.03419 0.070897719 0.005026487
September 950.55 897 -0.05633581 0.03419 -0.09052581 0.008194921
October 901 856.65 -0.04922309 0.03419 -0.08341309 0.006957743
November 854 904.8 0.059484778 0.03419 0.025294778 0.000639826
December 906 941.05 0.038686534 0.03419 0.004496534 2.02188E-05
Total 0.410285519 0.058637962
Standard Deviation 0.069903482
WIPRO RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 233.4 231.55 -0.00792631 0.10074 -0.10866631 0.011808366
February 229 207.5 -0.09388646 0.10074 -0.19462646 0.03787946
March 204.5 245.9 0.202444988 0.10074 0.101704988 0.010343905
April 246 330.85 0.344918699 0.10074 0.244178699 0.059623237
May 330.2 382.25 0.157631738 0.10074 0.056891738 0.00323667
June 385.1 377.95 -0.01856661 0.10074 -0.11930661 0.014234066
July 378 490.15 0.296693122 0.10074 0.195953122 0.038397626
August 494.9 549.95 0.111234593 0.10074 0.010494593 0.000110136
September 551 602.1 0.092740472 0.10074 -0.00799953 6.39925E-05
October 604 605.9 0.003145695 0.10074 -0.0975943 0.009524648
November 603 629.05 0.043200663 0.10074 -0.05753934 0.003310775
December 631.25 680 0.077227723 0.10074 -0.02351228 0.000552827
Total 1.208858317 0.18908571
Standard Deviation 0.1255275
ZEEL RETURNS FOR THE YEAR 2009
Month Start End Returns Avg.Ret Deviation (Deviation)2
January 141.9 110.35 -0.22233968 0.051322 -0.27366168 0.074890713
February 109.8 106.85 -0.02686703 0.051322 -0.07818903 0.006113525
March 106.5 106.35 -0.00140845 0.051322 -0.05273045 0.0027805
April 106.25 113 0.063529412 0.051322 0.012207412 0.000149021
May 116.7 168.3 0.442159383 0.051322 0.390837383 0.15275386[59]
June 175 177.25 0.012857143 0.051322 -0.03846486 0.001479545
July 178.1 185.95 0.044076362 0.051322 -0.00724564 5.24993E-05
August 187.8 210.6 0.121405751 0.051322 0.070083751 0.004911732
September 217 238.75 0.100230415 0.051322 0.048908415 0.002392033
October 238.1 231.55 -0.02750945 0.051322 -0.07883145 0.006214397
November 230 254.25 0.105434783 0.051322 0.054112783 0.002928193
December 256 257.1 0.004296875 0.051322 -0.04702512 0.002211362
Total 0.615865515 0.256877381
Standard Deviation 0.14630943
[60]
TABLE-1
SELECTED COMPANIES AVG RISK & AVG RETURN FOR THE YEAR
2005
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.046 0.0772 BHARATI AIRTEL 0.050 0.1083 BHEL 0.024 0.1144 CIPLA -0.037 0.2645 HCLTECH 0.003 0.0696 INFOSYS 0.023 0.0637 M&M 0.020 0.0558 ONGC -0.001 0.0869 REL 0.006 0.15710 SATYAM 0.013 0.08511 SBI 0.010 0.10712 TATA MOTORS 0.012 0.07713 TATA TEA 0.019 0.07714 WIPRO -0.034 0.20215 ZEEL 0.016 0.065
INTERPRETRATION:
CIPLA and WIPRO are in loss and risk is more, ABB is showing less risk compare to
other companies in 2005
TABLE-2
[61]
SELECTED COMPANIES AVG. RISK & AVG. RETURNS
FOR THE YEAR 2006
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.055 0.0892 BHARATI AIRTEL 0.006 0.0933 BHEL 0.049 0.1134 CIPLA 0.049 0.1285 HCLTECH 0.037 0.0966 INFOSYS 0.029 0.0777 M&M 0.044 0.1108 ONGC 0.030 0.0809 REL 0.004 0.08710 SATYAM 0.048 0.04811 SBI 0.030 0.09612 TATA MOTORS 0.008 0.10013 TATA TEA 0.051 0.08814 WIPRO -0.045 0.19915 ZEEL -0.011 0.108
INTERPRETATION:
WIPRO and ZEEL are in loss and risk is more, ABB earned more returns than other
companies and risk is less compare to other companies in the year 2006.
TABLE-3
SELECTED COMPANIES AVG. RISK & AVG. RETURN
[62]
FOR THE YEAR 2007
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.057 0.1502 BHARATI AIRTEL 0.004 0.0543 BHEL 0.035 0.1084 CIPLA -0.010 0.2085 HCLTECH 0.018 0.0896 INFOSYS 0.022 0.1777 M&M 0.047 0.0598 ONGC -0.009 0.1139 REL -0.006 0.07310 SATYAM -0.022 0.15011 SBI -0.024 0.18912 TATA MOTORS 0.091 0.26413 TATA TEA -0.017 0.07314 WIPRO 0.029 0.08415 ZEEL 0.053 0.139
INTERPRETATION:
SATYAM, SBI earned more, loss risk is more. CIPLA, ONGC and TATA
TEA also earned loss and risk is high. TATA MOTORS returns are high compare to
other companies in the year 2006.
TABLE-4
SELECTED COMPANIES AVG. RISK & AVG. RETURN
FOR THE YEAR 2008
[63]
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB -0.028 0.2392 BHARATI AIRTEL 0.050 0.0443 BHEL 0.043 0.1914 CIPLA -0.014 0.0725 HCLTECH -0.032 0.1716 INFOSYS -0.021 0.0657 M&M -0.003 0.0668 ONGC 0.035 0.1029 REL 0.128 0.17710 SATYAM -0.010 0.08911 SBI 0.062 0.10812 TATA MOTORS -0.005 0.07513 TATA TEA 0.025 0.12614 WIPRO -0.015 0.05715 ZEEL 0.027 0.123
INTERPRETATION:
ABB, HCL earned more loss CIPLA, INFOSYS, SATYAM, WIPRO, M&M also
earned loss risk is high. AIRTEL earned high returns and risk is less compare to other
companies in the year 2008
TABLE-5
SELECTED COMPANIES AVG. RISK & AVG. RETURN
FOR THE YEAR 2009
[64]
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.055 0.134852 BHARATI AIRTEL -0.050 0.178063 BHEL 0.050 0.080474 CIPLA 0.053 0.069485 HCLTECH 0.114 0.135856 INFOSYS 0.146 0.099597 M&M 0.118 0.116298 ONGC 0.639 0.699419 REL 0.007 0.1801410 SATYAM 0.048 0.2904111 SBI 0.046 0.1566912 TATA MOTORS 0.149 0.1773613 TATA TEA 0.034 0.0699014 WIPRO 0.101 0.1255315 ZEEL 0.051 0.14631
INTERPRETATION:
ABB, Dr.REDDY’S and INFOSYS are in huge losses. NALCO earned high returns
and risk is less compare to other companies in the year 2008.
[65]
NSE INDEX
Year Avg.Returns Avg.Risk
2005 0.0113 0.1071
2006 0.0256 0.1008
2007 0.0179 0.1287
2008 0.01613 0.1137
2009 0.1041 0.1774
[66]
FINDINGS
After the data is analyzed the following facts have been observed.
2005: From risk-return analysis of 2005, it is found that risk of all companies are
higher than their returns, but in comparison returns of ABB and BHARTHI
AIRTEL has higher, where as CIPLA and WIPRO has negative returns.
2006: From the analysis, the risk of all companies is higher than their returns
excluding satyam (Mahindra satyam). In comparison returns of ABB and
TATA TEA is higher, WIPRO continued its negative returns along with ZEEL.
2007: From the analysis, the M&M is performing better than other companies. In this
year most of the companies has negative returns. Satyam in particular has
negative returns and higher risk, this is due to BANKRUPTCY.
2008: From the analysis, BHARATI AIRTEL is performing better followed by
RELIANCE industries. In this year total software industry is not doing well
because of financial crisis in USA, followed by high inflation rate. In this year
TELECOM industry is performing better when compared to other industries.
2009: From the analysis, total software industry having started recovering, so their
stocks were going along with their risk. This year was good as all the
companies are doing well. TATA Motors is also another stock which is
performing well, this is due to launch of TATA NANO (world’s cheapest car)
[67]
Suggestions
After observing the facts found out after the analysis and interpretations the
following suggestions are made to the investors.
1. When there is more risk, the return will also be highs but this does not hold in all
situations especially in the case of economic crisis.
2. As the world economy is influenced by US economy, the worst scenario of US
economy is influencing the others countries stock markets.
3. The sentiments and emotions sometimes play a vital role in causing fluctuations in the
stock markets. Therefore it is not advisable to invest at the time of crisis.
4. When markets are sliding down steeply, the investors will not be protected against the
risk of investment. Therefore it is not advisable to invest when the markets are very
volatile.
5. Always it is felt that market position never stays for a long time. In this opinion
Bullish and Bearish markets end after some time. Therefore one can invest the time
of Bearish and soon after they reach bullish trend they can sell them off.
[68]
CONCLUSION
The present project work has been undertaken to study the risk-return
relationship of individual securities as well as nifty index to observe whether the stock
prices have any relationship with risk and return. As this project work is done by
studying 15 individual stocks of nifty and nifty index, there is much scope for the
analysis, interpretation and conclusion.
As the economy is fluctuations very badly, the stock prices are affected by
these fluctuations and the market has become so volatile. In this situation investors
should be very careful. The firm which is dealing the trading of share market should
be caution enough so that investors may not suffer losses.
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BIBLIOGRAPHY
Investing management
- By Puthi Sing.
Security analysis and portfolio management
- By Punithvathy Pandiyam
NSEindia.com
Investopedia.com
Glossary.reuters.com
Capitalmarket.com
Answers.com
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