Security Analysis
Content
A STUDY ON SECURITY ANALYSIS
With reference to
“INDIA INFOLINE PVT LIMITED”
HYDERABAD Project report submitted to Andhra University, Visakhapatnam in partial Fulfillment for the Award of the Degree in
MASTER OF BUSINESS ADMINISTRATION
By
T.V.NARENDRA KUMAR Regd.No. 208 !"000 2
Under the esteemed guidance of S#$ K.BALA KRISHNA
P#o%e&' ()$de
MBA
DEPARTMENT OF MANA(EMENT STUDIES ADITYA INSTITUTE OF P.( STUDIES
(Affiliated to Andhra University)
SURAMPALEM
2008*20"0
1
2
ADITYA INSTITUTE OF P.G.STUDIES (Approved by AICTE, Affiliated to A.U SU!A"PA#E" $ %&&'&( E.G.DIST (AP
)ONAFIDE CE!TIFICATE
This is to certify that the project entitled *a +t,dy o- SECU!ITY ANA#YSIS. I- *INDIA INFO#INE P/T #I"ITED, 0YDE!A)AD. is the bonafide record of work done by "r. T./.Nare-dra 1,2ar !e3.No.456%'7555%4 during the period 455684575 in partial fulfillment of the requirement for the award of the Degree of "ASTE! OF )USINESS AD"INIST!ATION in Aditya I-+tit,te of P.G. Colle3e affiliated to AND0!A UNI/E!SITY.
Project Guide S!I. 1.)A#A 1!IS0NA #$%$&$
(aculty in &ditya P$G$)ollege$
!ead "f the Department S!I.9.NAGEND!A 1U"A! #$%$&$$'
!ead of the Department$
*
DEC#A!ATION
+ hereby declare that the project work entitled , SECU!ITY ANA#YSIS. with reference to INDIA INFO#INE #td- 0YDE!A)AD is originally prepared and submitted by me to AND0!A UNI/E!SITY' .+/&0!&P&T1&# in partial fulfillment of the requirements for the award of the degree of "ASTE! OF )USINESS AD"INIST!ATION$ The empirical findings in the report are based on the data collected by me while preparing this project$ +t has not been submitted to any other uni2ersity or publication at any time before$
(T./.NA!END!A 1U"A! !e3.-o 456%'7555%4 P#ACE: DATE:
3
AC1NO;#EDGE"ENT
+ wish to thank Sri 9.Na3e-dra 1,2ar' !"D' &D+T4& +1/T+T5T6 "( P$G$/T5D+6/ for his 2aluable support in doing this project$ + thank my project guide' Sri.1.)A#A 1!IS0NA 7ecturer in #anagement /tudies for pro2iding me his 2aluable guidance and e8pertise in successful completion of this project$ + thank my project internal guide "r.S./I9AY )0A!AT0 !EDDY, (#anager 9 &ccounts "fficer: who shows infinite patience and perse2erance in teaching' suggesting remedies for the problems encountered in my project and in answering all my questions$
+ also e8tend my heartfelt thanks to my friends for their cooperation during my entire project period$
T$.$1&;61D;& 05#&;
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CONTENTS
C0APTE! 7
+1T;"D5)T+"1
C0APTE! 4 P;"(+76 "( T!6 /6)5;+T+6/ +1D5/T;4 )apital market !istory of market 1ational stock e8change =1/6: %ombay stock e8change =%/6: C0APTE! & P;"(+76 "( +1D+& +1("7+16 P.T 7TD C0APTE! ' /6)5;+T4 &1&474/+/ T!6";6T+)&7 (; W";0 C0APTE! % /6)5;+T4 .s #&;06T )"1D+T+"1 >&1 6?&#+1&T+"1 C0APTE! < • • • • /5GG6/T+"1/ (+1D+1G/ /5##&;4 )"1)75/+"1 )I)#IOG!AP0Y
@
"bjecti2es of the study 1eed for study #ethodology of the study 7imitations of the study
CHAPTER- I
INT!ODUCTION
A
C0APTE! 8I
INT!ODUCTION
A. SECU!ITIES
The definition of securities as per the /ecurities )ontracts ;egulation act =/);&:' 1B<@' includes instruments such as shares' bonds' scripCs$ /tocks or other marketable securities of similar nature in or of any incorporate company or body corporate' go2ernment securities' deri2ati2es of securities' security receipt or any other instruments so declared by the central Go2ernment$ I Se=,rity a-aly+i+
The security a2ailable to an in2estor for in2estment is numerous and of 2arious types the shares of o2er se2en thousand companies are listed in the stock e8change of the country$ Traditionally the securities were classified into ownership securities such as equity shares and preference shares and creditor ship securities such as debentures and bonds$ /ecurity analysis is the initial phase of the Portfolio management this consists of two alternati2e approaches namely fundamental analysis and technical analysis II F,-da2e-tal a-aly+i+ The primary moti2e of buying a share is to sell it subsequently at a higher rate an in2estor would be interested to know the di2idend to be paid on the share in the future as also the future price of the share$ These 2alues can only be estimated and predicted with certainty$ These 2alues are primarily determined by the performance of the company' which in turn is influenced' by the performance of the industry$ &n in2estor at the time of the in2estment has to e2aluate a lot of information about the past performance and the e8pected future performance of companies' industries and the economy as a whole before taking the in2estment decision such e2aluation or analysis is called fundamental analysis$ (undamental analysis insists that no one should purchase or sell a share on the basis of tips and rumors$ The fundamental approach calls upon the information about company belongs and the economy this result in informed in2esting for the fundamentalist makes use of 6+) framework of analysis$
The multitude of factors affecting the performance of a company can be broadly classified as
D
i$
)ompany specific factors such as the age of its plant' the quality of management' brand image of its labor management relations act' and these factors are likely to make a company performance quite different from that of its competitors in the same industry$ +ndustry wide factors such as demand supply gap in the industry' the emergence of substitute products' change in go2ernment policy relating to industry etc and these factors affect only those companies belonging to a specific industry$ 6conomy wide factors such as growth rate of the economy' inflation rate' and foreign e8change rates etc' which affects all companies$
ii$
iii$
B
O)9ECTI/ES OF T0E STUDY
i$ ii$ iii$ i2$ 2$ To e2aluate the performance of 12 different companies based on ;ate of return' %eta' &lpha$ To e2aluate the performance of 12 different companies based on coefficient of correlation' co2ariance$ To compare the returns of the company to that of /9P )1? <EE$ To measure the ma8imum return and minimum risk on securities$ To pro2ide information frame work facilitating the in2estors in in2esting in right stock$ To study about the performing and non>performing scripts$ To study about the fluctuations in the stock market$
2i$ 2ii$ $
1E
NEED FO! T0E STUDY
&s the business and industry e8panded and economy became more comple8 in nature' a need for permanent finance arose$ 6ntrepreneurs require money for long>term needs' were as in2estors demand liquidity the solution to this problem ga2e way for an origin of stock e8change' which is a ready market for in2estment and liquidity$ &s per the securities contract &ct' 1B<@' /tock 68change means anybody of indi2iduals whether incorporated or not' constituted for the purpose of regulating or controlling the business of buying' selling or dealing in securities$ i. SECU!ITIES INC#UDE 1$ /hares' scripFs' stocks' bonds' debentures and other marketable 2$ /ecurities$ *$ Go2ernment securities$ 3$ ;ights or interests in securities$
11
"ET0ODO#OGY OF T0E STUDY
The study is conducted to know the past performance of the selected companies based on ;+/0 and ;&T6 "( ;6T5;1/ of the companies SOU!CES OF T0E DATA The source includes only the secondary data$ /econdary data is collected from the internet =www$nseindia$com: )ollecting information through internet and also from the website www$indiainfoline$com
#I"ITATIONS OF T0E STUDY
12
i$ ii$ iii$ i2$ 2$
The study is limited to only 12 companies$ +n2estors desired le2el of 2ariance and desired e8pected return was not taken into consideration There may be scope for committing statistical errors There is no time duration Gi$e 2 monthsH for an e8clusi2e study$ To know the entire acti2ities of stock e8change is 2ery difficult as it takes a long period to understand$
1*
)!&PT6; ++
+1D5/T;4P;"(+76
13
A. CAPITA# "A!1ET )apital market is one of the most important segments of the +ndian financial system$ +t is the market a2ailable to the companies for meeting their requirements of the long>term funds$ +t refers to all the facilities and the institutional arrangements for borrowing and lending funds$ +n other words' it is concerned with the raising of money capital for purposes of making long>term in2estments$ The market consists of a number of indi2iduals and institutions =including the Go2ernment: that canaliIe the supply and demand for long >term capital and claims on it$ The demand for long term capital comes predominantly from pri2ate sector manufacturing industries' agriculture sector' trade and the Go2ernment agencies$ While' the supply of funds for the capital market comes largely from indi2idual and corporate sa2ings' banks' insurance companies' specialiIed financing agencies and the surplus of Go2ernments$ i: Pri2ary 2ar>et (Ne? i++,e 2ar>et its deals with Fnew securitiesF' that is' securities which were not pre2iously a2ailable and are offered to the in2esting public for the first time$ +t is the market for raising fresh capital in the form of shares and debentures$ +t pro2ides the issuing company with additional funds for starting a new enterprise or for either e8pansion or di2ersification of an e8isting one' and thus its contribution to company financing is direct$ The new offerings by the companies are made either as an initial public offering =+P": or rights issue$ ii: Se=o-dary 2ar>et@ +to=> 2ar>et (old i++,e+ 2ar>et or +to=> eA=Ba-3e +t is the market for buying and selling securities of the e8isting companies$ 5nder this' securities are traded after being initially offered to the public in the primary market andJor listed on the stock e8change$ The stock e8changes are the e8clusi2e centers for trading of securities$ +t is a sensiti2e barometer and reflects the trends in the economy through fluctuations in the prices of 2arious securities$ +t been defined as' Ka body of indi2iduals' whether incorporated or not' constituted for the purpose of assisting' regulating and controlling the business of buying' selling and dealing in securitiesK$ 7isting on stock e8changes enables the shareholders to monitor the mo2ement of the share prices in an effecti2e manner$ This assist them to take prudent decisions on whether to retain their holdings or sell off or e2en accumulate further$ !owe2er' to list the securities on a stock e8change' the issuing company has to go through set norms and procedures$
). 0ISTO!Y OF STOC1 ECC0ANGES
1<
The stock e8changes operating in the 1Bth century were those of %ombay set up in 1DA< and &hmedabad set up in 1DB3$ Those were organiIed as 2oluntary non>profit making association of brokers to regulate and protect their interests$ %efore the control on securities trading becomes a central subject under the constitution in 1B<E' it was a state subject and the %ombay securities$ 5nder this act' the %ombay stock e8change was recogniIed in 1B2A and &hmedabad in 1B*A$ During the war period' a number of stock e8changes were organiIed e2en in %ombay' &hmedabad and other centers' but they were not recogniIed$ /oon after it became a central subject' central legislation for securities regulation$ "n this basis of the committeeCs recommendations and public discussion' the securities contracts =regulation: act became law in 1B<@$ i Defi-itio- of +to=> eA=Ba-3e ,& stock e8change means any body or indi2iduals whether incorporated or not' constituted for the purpose of assisting' regulating' or controlling the business of buying' selling in securitiesL$ +t is an association of member brokers for the purpose of self>regulation and protecting the interest of these members$ +t can operate only by the go2ernment under the securities contract =regulation: act 1B<@$ The recognition is granted under section * of the act by the central go2ernment' ministry of finance$ ii CBara=teri+ti=+ of +to=> eA=Ba-3e
a: +t is a place where securities are purchased and sold b: & stock e8change is an association of personCs whether incorporated or not$ c: Trading in stock e8changes are strictly regulated by the rules and regulations prescribed by /ecurities 68change %oard of +ndia =/6%+: d: %oth genuine in2estors and speculators buy and sell shares in a stock e8change$ e: /ecurities of corporation' trusts' Go2ernment' #unicipal )orporation etc are traded at stock e8changes$
iii F,-=tio-+ of +to=> eA=Ba-3e+
1@
a: "ai-tai-i-3 A=tive Tradi-3 /hares are traded on the stock e8changes enabling the in2estor to buy and sell securities$ The prices may 2ary from transaction to transaction$ & continuous trading increases the liquidity or marketability of the shares traded on the /tock 68changes$ b: FiAatio- of Pri=e+ Price is determined by the transactions that flow from in2estorCs demand and supplierCs preferences$ 5sually the traded prices are made known to the public$ They help the in2estors to make better decisions$ c: E-+,re+ Safe a-d Fair Deali-3 The rules' regulations and by> laws of the /tock 68changes pro2ide' a measure of safety to the in2estor$ Transactions are conducted under competiti2e conditions enabling the in2estors to get a fair deal$ d: Aid+ i- Fi-a-=i-3 tBe I-d,+try & continuous market for shares pro2ides a fa2ourable climate for raising capital$ The negotiability and Transferability of the securities helps the companies to raise long term funds$ When it is easy to trade the securities' in2estors are willing to subscribe to the +nitial Public "fferings$ This stimulates the )apital formulation e: Di++e2i-atio- of I-for2atio- /tock 68changes pro2ide +nformation through their 2arious publications$ They publish the share prices traded on daily basis along with the corporate$ !andouts' !andbooks and pamphlets pro2ide +nformation regarding the functions of /tock 68changes f: Perfor2a-=e I-d,=er The prices of /tock reflect the performance of the traded companies$ This makes the corporate more concerned with its public image and tries to maintain good performance$ g: Self8!e3,lati-3 Or3a-iDatio- The /tock 68changes monitor the integrity of the members' brokers' listed companies and clientCs continuous internal audit safeguards the in2estors against unfair trade practice$ +t settles the disputes between member brokers' in2estors and brokers$
C. NATIONA# STOC1 ECC0ANGE
1A
The 1ational /tock 68change =1/6: is +ndiaCs leading stock e8change co2ering 2arious cities and town across the country$ 1/6 was set up by leading institutions to pro2ide a modern' fully automated screen M based trading system with national reach$ The e8change has brought about unparalleled transparency' speed and efficiency' safety and market integrity$ +t has set up facilities that ser2e as a model for the securities industry in terms of systems' practices and procedures$ 1/6 has played a catalytic role in reforming the +ndian securities market in terms of micro structure' market practices and trading 2olumes$ The market today uses slate M of M art information technology to pro2ide an efficient and transparent trading' clearing and settlement mechanism' and has witnessed se2eral inno2ations in products and ser2ices 2iI$' dematerialiIation of stock e8change go2ernance' screen based trading' compression of settlement cycles' dematerialiIation and electronic transfer of securities' securities lending and borrowing' professionalisation of trading members' fine M turned risk management systems' emergence of clearing corporations to assume counter party risks' market of debt and deri2ati2e instruments and intensi2e use of information technology$
The 1ational /tock 68change of +ndia 7imited has genesis in the report of the !igh Powered /tudy Group of 6stablishment of 1ew /tock 68changes' which recommended promotion of a 1ational /tock 68change by financial institutions =(+/: to pro2ide access to in2estors from all across the country on an equal footing$ %ased on the recommendations' 1/6 was promoted by leading (inancial +nstitutions at the behest of the Go2ernment of +ndia and was incorporated in 1o2ember 1BB2 as a ta8 paying company unlike other stock e8changes in the country$
"n its recognition as a stock e8change under the /ecurities )ontracts =;egulation: &ct' 1B<@ in &pril 1BB*' 1/6 commenced operations in the Wholesale Debit #arket =WD#: segment commenced operations in 1o2ember 1BB3 operations in Deri2ati2es segment commenced in Nune 2EEE$
i
"i++io-
1D
1/6Cs' mission is setting the agenda for change in the securities markets in +ndia$ The 1/6 was set>up with the main objecti2es of a: 6stablishing a nation wide trading facility for equities' debt instruments and hybrids$ b: 6nsuring equal access to in2estors all o2er the country through an appropriate communication network$ c: Pro2iding a fair' efficient and transparent securities market to in2estors using electronic trading systems$ d: 6nabling shorter settlement cycles and book entry settlements systems and e: #eeting the current international standards of securities markets$ The standards set by 1/6 in terms of market practices and technology has become industry benchmarks and is being emulated by other market participants$ 1/6 is more than a mere market facilitator$ +tCs that force which is guiding the industry towards new horiIons and greater opportunities$
ii Pro2oter+
1/6 has been promoted by leading financial institutions' banks' insurance companies and other financial intermediaries a: +ndustrial De2elopment %ank of +ndia 7imited$ b: +ndustrial (inance )orporation of +ndia 7imited$ c: 7ife +nsurance )orporation of +ndia d: /tate %ank of +ndia e: +)+)+ %ank 7imited f: +7 9 (/ Trust )ompany 7imited g: /tock !olding )orporation of +ndia 7imited h: /%+ )apital #arkets 7imited i: The &dministrator of the /pecified 5ndertaking of 5nit Trust of +ndia j: %ank of %aroda k: )anara %ank l: General +nsurance )orporation of +ndia 1B
m: 1ational +nsurance )ompany 7imited n: The 1ew +ndia &ssurance )ompany 7imited o: The "riental +nsurance )ompany 7imited p: Punjab 1ational %ank q: "riental %ank of )ommerce r: )orporation %ank s: +ndian %ank t: 5nion %ank of +ndia
iii #o3o
The logo of the 1/6 symboliIe a single nationwide securities trading facility ensuring equal and fair access to in2estors' trading members and issuers all o2er the country$ The initials of the 68change 2iI$' 1' / and 6 ha2e been etched on the logo and are distinctly 2isible$ The logo symboliIes use of state of the art information technology and satellite connecti2ity to bring about the change within the securities industry$ The logo symboliIes 2ibrancy and unleashing of creati2e energy to constantly bring about change through inno2ation$
iv Corporate Str,=t,re
1/6 is one of the first demutualised stock e8changes in the country' where the ownership and management of the 68change is completely di2orced from the right to trade on it$ Though the impetus for its establishment came from policy makers in the country' it has been setup as a public limited company' owned by the leading institutional in2estors in the country$ (rom day one' 1/6 has adopted the form of a demutualised e8change the ownership' management and trading is in the hands of three different sets of people$ 1/6 is owned by a set of leading financial institutions' banks' insurance companies and other financial intermediaries and is managed by professional' who do not directly or indirectly trade on the 68change$ This has completely eliminated any conflict of interest and helped 1/6 in aggressi2ely pursuing policies and practices within a public interest framework$
2E
The 1/6 model howe2er' does not preclude' but in fact accommodates in2ol2ement' support and contribution of trading members in a 2ariety of way$ +ts board comprises of senior e8ecuti2es from promoter institutions' eminent professionals in the fields of law' economics' accountancy' finance' and ta8ation etc$ public representati2e' nominees of /6%+ and one full time e8ecuti2e of the 68change$ While the %oard deals with broad policy issues decisions relating to market operations are delegated by the %oard to 2arious committee constituted by it$ /uch committee includes representati2es from trading members' professionals' the public and the management$ The day>to>day management of the 68change is delegated to the #anaging Director who is supported by a team of professional staff$
D. )O")AY STOC1 ECC0ANGE
The /tock 68change' #umbai' which was established in 1DA< as ,The 1ati2e /hare and /tockbrokers &ssociationL =a 2oluntary non>profit making association:' has e2ol2ed o2er the years into it present status as the premier /tock 68change in the country$ +t may be noted that the /tock 68change is the oldest one in &sia' e2en older than the Tokyo /tock 68change' which was founded in 1DAD$ The 68change while pro2iding an efficient market also upholds the interests of the in2estors and ensures redressal of their grie2ances' whether against the companies or its own member M brokers$ +t also stri2es to educate and enlighten the in2estors by making a2ailable necessary informati2e inputs$ & Go2erning %oard comprising of B elected directors =one third of them retire e2ery year by rotation: and 68ecuti2e Director' three Go2ernment nominees' a ;eser2e %ank of +ndia nominee and fi2e public representati2es' is the ape8 which regulates the e8change and decides its policies$ The Go2erning %oard following the election of directors annually elects a President' .ide President and an !onorary Treasurer from among the elected directors$
21
The 68ecuti2e Director as the )hief 68ecuti2e "fficer is responsible for the day> do>day administration of the 68change$ The e8change has obtained permission from /ecurities and 68change %oard of +ndia =/6%+: for e8pansion of its %/6>on>7ine Trading =%"7T: network to locations outside #umbai$ +n term of the permission granted by /6%+' the members of the 68change are free to install their trading terminals to cities where there are no /tock 68change$ !owe2er' at centers where the other e8changes are located' the 68change is required to sign a #emorandum of 5nderstanding with these 68changes permitting it to install the %"7T terminals in their jurisdictional areas$ The e8pression of %"7T network was inaugurated by the (inance #inister' Go2ernment of +ndia' /ri P$ )hidambaram on &ugust *E' 1BBA$ The 68change has signed #emorandum of 5nderstanding with ele2en /tock 68changes' 2iI$' )alcutta' Pune' &dhmedabad' /aurashtra' 0ulch =;ajkot:' #adhayapradesh' .adodara' %hubaneshwar and #agadh =i$e$' Patna: Naipur' )oimbatore and )hennai =#adras: to pro2ide %"7T connections to the members of these 68changes after obtaining necessary clearance from /6%+$ The %"7T network has been e8panded to centers outside #umbai and co2ers 2*2 centres ha2ing A2@ ./&Ts =.ery /mall &perture Terminals: and 1E2E TW/s =Trader Work /tations: as on "ctober *1' 1BBB$ "f these' @3D ./&Ts and DA2 TW/s respecti2ely are installed outside #umbai$ With the e8pansion of %"7T outside #umbai' the total a2erage daily turno2er at the 68change has increased from ;s$1E@3 crores in &ugust 1BBA to ;s$ 13E3 crores in &pril 1BBD and further to ;s$2DD< crores in "ctober 1BBB$ The a2erage daily turno2er at the 68change has increased from ;s$ D<1 crores in 1BBA>BD to ;$12D3 crores in 1BBD>BB and further to ;s$2DD< crores in 1BBB>2EEE =&pril M "ctober 1BBB:$ /ome of the important aspects of the working of the stock 68change' #umbai are discussed below$
i
Tradi-3
22
The 68change has switched o2er from the open outcry trading system to a fully automated computeriIed mode of trading known as %"7T =%/6 "n 7ine Trading: /ystem$ This system' which is both order and quote dri2en was commissioned on #arch 13' 1BB<$ +t facilitates more efficient processing' automatic order matching and faster e8ecution of trades$ &bo2e all' the system is more transparent$ The members now enter orders J quotes on their Trader Work /tations =TW/s: in their offices instead of assembling in the trading ring$ The scripCs traded on the 68change ha2e been classified into ,&L' ,%1L' ,%2L' ,)L' ,(L and ,OL group$ The number of scripCs listed on the 68change under ,&L' ,%1L and ,%2L groups which represent the equity segments as on "ctober 1BBB was 1<2' 11EB and 3<1E respecti2ely$ The ,(L group represents the debt market =fi8ed income securities: segment wherein @AE securities were listed as at the end of "ctober 1BBB$ The ,OL group was introduced in the month of Nuly 1BBB and co2ers the list of companies that fail to comply with listing requirements and also fail to resol2e in2estor complaints$ The ,OL group comprises of <*B scripts as of "ctober 1BBB$ The ,)L group co2ers the odd lot securities in ,&L' ,%1L and ,%2L groups and ;ights renunciations$ The stock 68change' #umbai' is the only /tock 68change in the country to pro2ide a facility of on>line trading in odd lot securities and rights renunciations$ This facility of trading in odd lots of securities and ;ights renunciations not only offers an e8it route to in2estors to dispose of their odd lot of securities but also pro2ides them an opportunity to consolidate their securities into market lots$ Trading in this segment co2ers all the scripts listed in the equity segment$ The trading cycle for all these groups of securities is weekly$ The trading cycle for ,&' %1' %2L' ,)L and ,OL group securities representing the equity segment is from #onday to (riday and that for ,(L group securities representing the debt market is from Thursday to Wednesday$ The Transactions in ,&L group scripts are allowed to be carried forward from one settlement to another settlement subject to a ma8imum of A< days from the date of outstanding positions in ,&L group scripts$ The trading session for carry forward of transactions from one settlement to another is conducted on /aturdays' i$e$' at the end of e2ery trading cycle in the equity segment$
2*
Trading on the %"7T system is conducted from #onday to (riday between 1E$EE a$m$ and *$*E p$m$ while the carry M forward session for ,&L group securities is conducted on /aturdays between 1E$EE a$m$ and 12$*E p$m$ The +nformation /ystems Department of the 68change generates the following statements that can be downloaded by the members in their back offices on a daily basis
a: /tatements gi2ing details of the daily transactions entered into by the members$ b: /tatements gi2ing details of margins payable by the members in respect of the trades e8ecuted by them$ The members are allowed to enter into transactions on behalf of their +nstitutional clients' 2iI$' /cheduled )ommercial %anks' +ndian (inancial +nstitutions =+(+s: and (oreign +nstitutional +n2estors =(++s: and #utual (unds registered with /6%+$ The settlement of the trades =money and securities: done on behalf of the +nstitutions may be either through the member himself or through a /6%+ registered )ustodian appointed by an institution$ +n case the deli2ery J payment is to be gi2en or taken by a )ustodian on behalf of an +nstitution- the former has to confirm the trade done by a member$ (or this purpose' the )ustodians ha2e been admitted as members of the )learing !ouse$ +n case the )ustodian does not confirm an institutional transaction' the liability for pay in funds or securities de2ol2es on the concerned member$
23
C0APTE!8III
CO"PANY P!OFI#E
C0APET8III
2<
T0E CO"PANY P!OFI#E
i O!IGIN
+ndia +nfo line was founded by a group of professionals in 1BB<' a seemingly distant past in the international meticulous research was published and distributed in printed form to a client base comprising the whole business including leading #1)s' in2estment banks and consulting firms$ +ndia +nfo line saw the opportunity to e8pand out client base' from a few hundreds to se2eral millions and also 2alue chain$ +n early 1BBB' when internet penetration in +ndia was at its infancy and the future unknown and hard decision of killing our earlier business model and embracing the +nternet' we discontinued deli2ering the printed form and made a2ailable quality research at the click of mouse$ Thus' was born www$indiainfoline$com site has emerged as the most popular website on +ndian business and finance$ +ndia +nfo line is a one>stop financial ser2ices shop' most respected for quality of its ad2ice' personaliIed ser2ice and cutting>edge technology$ +ndia +nfoline 7td is listed on both the leading stock e8changes in +ndia' 2iI$ the stock 68change' #umbai =%/6: and the 1ational /tock 68change =1/6:$ The +ndia +nfoline group' comprising the holding company' +ndia +nfoline 7td and its subsidiaries' straddles the entire financial ser2ices space with offerings ranging from 6quity research' 6quities and deri2ati2es trading' )ommodities trading' Portfolio #anagement /er2ices' #utual (unds' 7ife +nsurance' (i8ed deposits' Gol %onds and other small sa2ings instruments to loan products and +n2estment banking$ +ndia +nfoline also owns and manages the websites' www$indiainfoline$com and www$<paisa$com$
ii /ISION
2@
To be the most respected company in the financial ser2ices space$ To be the premier pro2ider of in2estment ad2isory and financial planning ser2ices in +ndia$
a: Approa=B to re+ear=B
The )ompany follows a simple approach to research as follows
1$ Data collection 2$ &nalysis *$ )ommunication 3$ (eedback
&ll the analysts of the firm ha2e significant e8perience' which they share with each other$ They belie2e that they ha2e an inno2ati2e sources of data' that helps to keep ahead to identify trends$ +t would be unfair on our part not to mention the immense contribution which our clients and readers feed back forms to the P) as well as ;9D for us$ The feedback helps us in all stages> data collection and communication' most importantly' in impro2ing our methodology as well$ ST!ENGT0S The following are the strengths that set the firm apart$ The firm has been in information ser2ices for the last se2en years and has assiduously built the necessary for the business$ We ha2e le2eraged our content to create the +ndia +nfoline brand' which is synonymous with credible information on business and finance$ The firmCs top management team represents a skill set' which is mutually e8clusi2e but collecti2ely e8hausti2e$ The strength of the organiIation has been to continuously inno2ate and rein2ent itself$ CHAIRMA N NNNNNNN
ECECUTI/E DI!ECTO!
iii ST!UCTU!E OF INDIA INFO#INE P/T #TD
BOARD OF DIRECTORS
2A No-8 EAe=,tive I-depe-de-t Dire=tor I-depe-de-t Dire=tor I-depe-de-t Dire=tor
T0E "ANAGE"ENT TEA"
a "r. Nir2al Eaiis the founder and )hairman of +ndia +nfoline 7td$ !e holds an #%& degree from ++# &hmedabad and )hartered &ccountant =&ll +ndia ;ank2: and a )ost &ccountant$ b: "r. /e->atara2a+s the co>promoter and 68ecuti2e Director of +ndia +nfoline 7td$ !e holds a %$Tech 6lectronics and 6lectrical )ommunications 6ngineer from ++T 0haragpur and an #%& degree also$ c: T0E )OA!D OF DI!ECTO!S &part from 1irmal Nain and ; .enkataraman' the %oard of Directors of +ndia +nfoline comprises a 1on>68ecuti2e Director and three +ndependent Directors$ They areQ 1$ #r$ /at Pal 0hattar 2$ #r$ /anji2 &huja *$ #r$ 1ilesh .ikamse 3$ #r$ kranti /ingh
iv IN/ESTO!S !E#ATIONS
2D
The +ndia +nfo line group' comprising the holding company' +ndia info line ltd and its wholly owned subsidiaries entire gamut of in2estment products ranging from 6quities and deri2ati2es trading' )ommodities trading' #anagement /er2ices' #utual (unds' 7ife +nsurance' (i8ed Deposits' Gol bonds and other small sa2ings$ +ndia +nfo line also owns and manages the websites' www$indiainfoline$com and www$<paisa$com$ +ndia +nfo line 7td company listed on both the leading stock e8changes in +ndia namely the /tock 68change' #umbai =%/6: and 1ational /tock 68change =1/6:$ +ndia +nfo line is a forerunner in the field of equity research$ +ndia +nfo line acknowledged by none other than (orbes as R%est of the WebC and RSa must read for in2estors in &sia$ +ndia +nfo lineCs research is a2ailable not just o2er the internet but also on international wire ser2ices 7td$ =code +77:' Thomson (irst )all and +nternet /ecurities where it is amongst the most read +ndian broking companies$ +ndia +nfo line group has a significant presence across the country owing to its 12< offices across 3< cities in +ndia$ These offices are networked and are connected with the corporate office in #umbai$ The group has initiated significantly in technology and research' the results of which are there for e2eryone to see$ The <paisa$com is one the most ad2anced platforms a2ailable to retail in2estor in +ndia$ The group has memberships on %/6 and 1/6 for equities trading and on #)? and 1)D6? for commodities and has a /6%+ license for portfolio #anagement under which' 2arious schemes are offered which ha2e been beating the benchmark indices since inception$ +ndia +nfo line is the one>stop shop for all in2estments in +ndia$
2B
v SU)SIDIA!IES a: I-dia I-fo li-e Se=,ritie+ Pvt #td
+ndia +nfo line securities P2t 7td is a 1EET subsidiary of +ndia +nfo line 7td' which is engaged in the businesses of 6quities broking and portfolio #anagement /er2ices$ +t holds memberships of both the leading stock e8changes of +ndia 2iI$ the /tock 68change' #umbai =%/6: and the 1ational /tock 68change =1/6:$ +t offers broking ser2ices in the )ash and Deri2ati2es segments of the 1/6 as well as the )ash segment of the %/6$
*E
b: I-dia I-foli-e Co22oditie+ Pvt #td
+ndia +nfoline )ommodities P2t 7td is q 1EET subsidiary of +ndia +nfoline 7td' which is engaged in the business of commodities broking$ "ur e8perience in securities broking empowered us with the requisite skills and technologies allow us offer commodities broking as a contra>cyclical alternati2e to equities broking$ We enjoy memberships with the #)? and 1)D6?' two leading +ndian commodities e8changes' and recently acquired membership of DG)?$ W6 ha2e a multi>channel deli2ery model' making it among the select few to online as well as offline trading facilities$
c: I-dia I-foli-e di+trib,tio- Co ltd (II#D
+ndia +nfoline$com Distribution )o 7td is a 1EET subsidiary of +ndia +nfoline ltd and is engaged in the business of distribution of #utual (unds' +P"s' (i8ed Deposits and other small sa2ing products$ +t is one of the largest R2endor>independentC distribution houses and has a wide pan>+ndia footprint of o2er 2*2 branches coupled with a huge number of Rfeet>on>streetC' which help source and ser2ice customers across the length and breadth of +ndia$ +ts unique 2alue proposition of free doorstep e8pert ad2ice coupled with free pick> up and deli2ery of cheques has been met with an enthusiastic response from customers and fund houses alike$ "ur business has e8panded to include the online offerings and download application forms which they can later submit to the product pro2ider$
d: I-dia I-foli-e I-+,ra-=e Servi=e+ #td
+ndia +nfoline insurance ser2ices 7td is also a 1EET subsidiary of +ndia +nfoline 7td and is a registered corporate agent with the insurance regulatory and de2elopment authority =+;D&:$ +t is the largest corporate agent for +)+)+ Prudential 7ife +nsurance )ompany 7td' which is +ndiaCs largest P2t 7ife +nsurance )ompany$
*1
e: I-dia I-foli-e I-ve+t2e-t Servi=e+ #td
+ndia +nfoline /er2ices 7td is also a 1EET subsidiary of +ndia +nfoline 7td$ +t has a 1%() license from ;%+ and offers margin>funding facility to the broking customers$
f: I-dia I-foli-e I-+,ra-=e )ro>er+ #td
+ndia +nfoline +nsurance %rokers 7td is 1EET subsidiary of +ndia +nfoline 7td$ and is a newly formed subsidiary which will carry out the business of +nsurance of %roking$ We ha2e applied to +;D& for the insurance broking license and the clearance for the same is awaited$
vi %pai+a.=o2
<paisa is the trade name of +ndia +nfoline /ecurities Pri2ate 7imited =<paisa:' member of 1ational /tock 68change and The /tock e8change' #umbai$ <paisa is a wholly owned subsidiary of +ndia portal$ <paisa has emerged as one of leading players in e>broking space in +ndia$ "ur key product offerings are as follows a: I-ve+tor Ter2i-al (IT +n2estor Terminal is recommended for infrequesU1T in2estors' who fall into the ,buy and !oldL school of in2esting' made 2ery popular by warren %uffet M the "racle of "maha$ & typical retail in2estor is a busy corporate e8ecuti2e or a businessman who makes equity in2estments for long term and does not trade e2eryday$ !e prefers a trading interface which works behind pro8y and firewalls as they access the +nternet and the stock markets from their work place' where a direct connection is difficult because of corporate +T security policies$ This product does not ha2e intra>day tick by tick charts$
*2
b: Tar3et of I-ve+tor Ter2i-al i$ +n2estors' who in2est quite often' churn their portfolios regularly and keep a close watch on the market$ They need to watch li2e quoted and li2e charts$ ii$ iii$ i2$ &cti2e stock market traders with medium 2olumes$ /tudents and researchers who need li2e streaming quotes and intra day charts$ )orporate treasury people$
c: Trader ter2i-al (TT Trader Terminal is for the dedicated day traders' who churn their portfolio on minor mo2ements in the market' sometimes se2eral times a day$ Their rapid and high 2olume trading requires a powerful interface for lightning fast order e8ecution$ They monitor marked to market positions on a minute>to>minute basis' with facilities for panic e8it$ They need all the analysis M fundamental and technical' market gossip' price and 2olume information and much more M all at one click$
d: Tar3et of Trader Ter2i-al i$ +t is for dedicated day traders' who churn their portfolio on minor mo2ements in the market' sometimes se2eral times a day$ Their rapid and high 2olume trading requires a powerful interface for lightening fast order e8ecution$ ii$ iii$ !igh net worth indi2iduals with large and acti2e equities portfolio who need to monitor and action swiftly$ 7arge corporate or trust who ha2e dedicated staff to monitor' analyIe and shuffle their portfolios$
**
e: Feat,re+ of Trader Ter2i-al 1$ Trade e8ecution in a fraction of a secondV 2$ 7i2e streaming quotes$ Price watch on any number of scrips$ *$ +ntra day charts' updated li2e' tick>by>tick$ 3$ 7i2e margin' position' marked to market profit 9 7oss report$ <$ The lowest %rokerage on the face of the earthV @$ /et any number of price alerts on any no of scrips A$ (le8ibility to customiIe screen layout and setting D$ (acility to customiIe any no of portfolios and watch lists B$ (acility to cancel all pending orders in one click$ 1E$ Top gainers' top losers' most acti2e' updated li2e 11$ +nde8 information +nde8 chart' +nde8 stock +nformation 2alue 12$ #arket depth i$e$ best < bids and offers' updated li2e for all scrips 1*$ +nstant trade confirmation 13$ "nline access to both accounts and DP 1<$ 7i2e updated order and trade book 1@$ Details of pending' e8ecuted and rejected orders 1A$ "nline access to customer ser2ices 1D$ 12D>bid super safe encryption 1B$ (acility to place orders on the phone in all major cities 2E$ (acility to place after market orders 21$ "nline fund transfer facility from leading banks$ 22$ "nline intra>day technical calls 2*$ 68hausti2e data base of o2er <EEE companies 23$ !istorical charts and technical analysis tools$ 2<$ +ndia +nfo lineCs world> acclaimed news ser2ice and research 2@$ 7ots moreS$last but not the least ideas that help people make money$
*3
C0APTE!8I/
SECU!ITY ANA#YSIS T0EO!ITICA# F!A"E;O!1
&$+1.6/T#61T %$/6)5;+T+6/ )$;+/0>;6T5;1
*<
C0APTE!8I/
SECU!ITY ANA#YSIS: T0EO!ITICA# F!A"E;O!1
). IN/EST"ENT
i: Definitions
&ccording to ($ &miling in2estment may be defined as a purchase by an indi2idual or institutional in2estor of a financial or real asset that produces a return proportional to the risk assumed o2er some future in2estment period$ &ccording to D ! (ischer and ; N Nordan in2estment is a commitment of funds made in the e8pectation of some positi2e rate of return +f the in2estment is properly undertaken the return will be commensurate with the risk the in2estor assures$ ii: )oncept of in2estment
+n2estment will generally be used in its financial sense and as such in2estment is the allocation of monitory resources to assets that are e8pected to yield some gain or positi2e return o2er a gi2en period of time$ +n2estment is a commitment of personCs funds to deri2e future income in the form of interest' di2idends' rent' premiums' pension benefits are the appreciation of 2alue of his principal capital$ &ny in2estor would like to know the media or range of in2estments so that he can use his discretion and safe in those in2estments' which will gi2e him both security and stable return$ The ultimate objecti2e of the in2estor is to deri2e a 2ariety of in2estments that meet his preference for risk and e8pected return The in2estor will select the Portfolio that will ma8imiIe his utility$ &ll in2estments is risky as the in2estor will put his money an efficient in2est with proper training can reduce the risk and ma8imiIe the returns !e can a2oid pitfalls and protect his interest #oney and information are the basis and the first requirement of in2estment is the a2ailability of money or sa2ings but money is not enough as in2estments are generally made on the basis of information of the companies' instruments' industry and economy$ %oth money and information flow do help making in2estment management iii I-ve+t2e-t obEe=tive+ The main in2estment objecti2es are increasing the rate of return and reducing the risk$ "ther objecti2es like safety' liquidity and hedge against inflation can be considered as subsidiary objecti2es$ *@
iv I-ve+t2e-t pro=e++ The in2estment process in2ol2es a series of acti2ities leading to the purchase of securities or other in2estment alternati2es$ The in2estment process can be di2ided into fi2e stages' they are as follows a: +n2estment policy b: /ecurity analysis c: .aluation d: Portfolio construction e: Portfolio e2aluation
C. SECU!ITIES
The definition of securities as per the /ecurities )ontracts ;egulation act =/);&:' 1B<@' includes instruments such as shares' bonds' scripCs$ /tocks or other marketable securities of similar nature in or of any incorporate company or body corporate' go2ernment securities' deri2ati2es of securities' security receipt or any other instruments so declared by the central Go2ernment$ III Se=,rity a-aly+i+
The security a2ailable to an in2estor for in2estment is numerous and of 2arious types the shares of o2er se2en thousand companies are listed in the stock e8change of the country$ Traditionally the securities were classified into ownership securities such as equity shares and preference shares and creditor ship securities such as debentures and bonds$ /ecurity analysis is the initial phase of the Portfolio management this consists of two alternati2e approaches namely fundamental analysis and technical analysis I/ F,-da2e-tal a-aly+i+ The primary moti2e of buying a share is to sell it subsequently at a higher rate an in2estor would be interested to know the di2idend to be paid on the share in the future as also the future price of the share$ These 2alues can only be estimated and predicted with certainty$ These 2alues are primarily determined by the performance of the company' which in turn is influenced' by the performance of the industry$ &n in2estor at the time of the in2estment has to e2aluate a lot of information about the past performance and the e8pected future performance of companies' industries and the economy as a whole before taking the in2estment decision such e2aluation or analysis is called fundamental analysis$
*A
(undamental analysis insists that no one should purchase or sell a share on the basis of tips and rumors$ The fundamental approach calls upon the information about company belongs and the economy this result in informed in2esting for the fundamentalist makes use of 6+) framework of analysis$ The multitude of factors affecting the performance of a company can be broadly classified as i2$ )ompany specific factors such as the age of its plant' the quality of management' brand image of its labor management relations act' and these factors are likely to make a company performance quite different from that of its competitors in the same industry$ +ndustry wide factors such as demand supply gap in the industry' the emergence of substitute products' change in go2ernment policy relating to industry etc and these factors affect only those companies belonging to a specific industry$ 6conomy wide factors such as growth rate of the economy' inflation rate' and foreign e8change rates etc' which affects all companies$ A. E=o-o2y a-aly+i+ The performance of a company depends on the performance of the economy if the economy is booming' income raises and the demand for the goods will increase' on the other hand' if the economy is in recession' the performance of the companies will be generally bad$ The following are the same of the key economic 2ariable that an in2estor must monitor as a part of his fundamental analysis$ i$ ii$ iii$ i2$ 2$ 2i$ 2ii$ 2iii$ Growth rate of national income +nflation +nterest rate Go2ernmentCs re2enue' e8penditure and deficits 68change rate +nfrastructure #onsoon 6conomic and political stability
2$
2i$
). I-d,+try a-aly+i+ +n2estors ultimately in2est his money in the securities of one or more specific companies$ 6ach company can be characteriIed as belonging to an industry$ The performance of companies would therefore' be influenced by the fortunes of the industry to which it belongs (or this reason an analyst has to undertake an industry analysis so as to study the fundamentals factors affecting the performance of different industries$
*D
I.
I-d,+try life =y=le
#arketing e8perts belie2es that each product has a life cycle$ +n the same way' an industry is also said to ha2e a life cycle this industry life cycle theory is generally attributed to Nulius Gowdinsky$ &ccording to the theory' the life of an industry can be segregated into i$ ii$ iii$ i2$ Pioneering stage The e8pansion stage The stagnation stage The decay stage
C. Co2pa-y a-aly+i+ )ompany analysis is the final stage of fundamental analysis the economy analysis pro2ides the in2estor a board outline of prospectus of growth in the economy$ The industry analysis helps the in2estor to select the industry in which in2estment would be rewarding$ 1ow he has to decide the company in which he should in2est his money$ )ompany analysis pro2ides the answer to this question$ )ompany analysis deals with the estimation of return and risk of indi2idual shares$ This calls for information this information influence in2estment decisions +nformation regarding companies can be broadly classified into two board groups' internal and e8ternal$ +nternal information sources include annual reports to shareholder' public and pri2ate statement of officers of the company' the companyFs financial statements' etc' e8ternal sources of information are those generated independently these are prepared by in2estment ser2ices and the financial press$ The prosperity of a company would depend upon its profitability and financial health$ The financial statements published by a company periodically help us to assess the profitability and financial healthFs of the company are the balance sheet and the profit and loss account$ The first gi2es us the picture of the companyFs assets and liabilities while the second gi2es us a picture of its earnings$ /ome of the factors to be analyIed at the time of selecting a company for in2estment are i$ ii$ iii$ i2$ 2$ 2i$ 2ii$ 2iii$ Top management officials of that company The companyFs past performance$ The rate of di2idend declared by the company in the past Growth opportunities of the company )ompetiti2e opportunities of the company )ompanyFs Turno2er rate )ompanyFs goodwill Past annual reports' etc
.: Technical analysis *B
The analysts belie2e that share prices are determined by the demand and supply forces operating in the market$ These demand and supply forces in turn are influenced by a number of factors these factors cannot be qualified$ The combined impact of all these factors is reflected in the share price moment$ Technical analysis is the name gi2en to forecasting techniques that utiliIe historical share price date$ The basic premise of technical analysis sis that price mo2e in trends or wa2es which may be upward or down ward$ +t is belie2ed that due present trends are influenced by the past trends and that due projection of future trends is possible by an analysis of past price trends$ The technical analysis is really a study of past or historical price and 2olume mo2ement so as to predict the future stock price beha2ior$ A Do? tBeory Whate2er is generally being accepted today as technical analysis has roots in due Dow theory )harles Dow formulated a hypothesis that the stock markets does not mo2e on a random basis but it is influenced by three distinct cyclical trends that guide its direction$ &ccording to Dow Theory' The market has three moments 9 these moments are simultaneous in nature$ These moments are the primary moments' secondary reactions and minor moments$ The primary moment is the long range cycle that carries the entire market up or down$ This is due long term trend in the market The secondary reactions act as a restraining force on due primary moment These are in due opposite direction to the primary moment and last only for a short while these are also known as corrections$ The third moment in the market is the minor moments which are the day to day inculcations in the market$ These moments are not significant and ha2e a 2ery short duration$ &ccording to Dow Theory' the price moment in the market can be identified by means of a line chart in this chart' the closing prices of shares or the closing 2alues of the market inde8 may be plotted against the corresponding trading days$ ) )a+i= pri-=iple+ of te=B-i=al a-aly+i+ 1$ The market 2alue of security is related to demand and supply factors operating in the market$ 2$ There are both rational and irrational factors which surround the supply and demand factors of a security$ *$ /ecurity prices beha2e in a manner that their moment in continuous in a particular direction for same length of time$ 3$ Trends in stock prices ha2e been seen to changes when there is a shift in the demand and supply factors$
3E
<$ The shifts in demand and supply can be detected through charts prepared specially to show market action$ @$ Patterns which are projected by charts record price moments and these recorded patterns are used by analysts to make forecasts about the moment of prices in future$
D. !IS1
62ery in2estment is characteriIed by return and risk & person making an in2estment e8pects to get some return from the in2estment in the future +t as future is uncertain' so is the future e8pected return +t is this uncertainty associated with the returns from an in2estment that introduces risk into an in2estment$ ;isk distinguishes between the e8pected return and the realiIe return from an in2estment The e8pected return is the uncertain future return that an in2estor e8pects to get from his in2estment The realiIed return is the certain return that an in2estor has actually obtained form his in2estments are the end of the holding period$ The in2estor makes the in2estment decision based on the e8pected return from the in2estment The actual return realiIed from the in2estment may not compare to the e8pected return This possibility of 2ariation of the actual return from the e8pected return is termed risk$
I.
Type+ of ri+>
A. "ar>et ri+> #arket risk arises due to ups and downs in the market this risk affects the share #arket prices of share mo2e up or down consistently for some time period' a general rise in share price is refereed to as a bullish trend' whereas a general fall in share prices is referred to as a mo2ement of share price indices such as a %/6 /ensiti2e +nde8' %/($ 1ational inde8' 1/6 +nde8 etc$ ). I-tere+t 2ar>et ri+> +nterest rate risk is a type of risk that particularly affect debt securities like bonds' debentures & bond or debenture normally has a fi8ed coupon rate of interest$ The issuing company pays interest to the bondholder at this coup rate & bond is normally issued with a coupon rate' which is equal to the interest rate pre2ailing in the market at the time of issue$ The market interest rate may change but the coupon rate remains constant till the maturity of the instrument$ C. P,r=Ba+i-3 po?er ri+> This risk refers to the 2ariation in in2estor return caused by inflation results in lowering of the purchasing power of money this type or risk is more inflationary in fi8ed income securities and less in 2ariable return securities$
31
D. ),+i-e++ ri+> 62ery company operates within a particular operating en2ironment$ This operating en2ironment comprises both internal and e8ternal en2ironment$ The impact of these operation conditions is reflected in the operating costs of the company %usiness risk is thus a function of the operating conditions faced by a company and is the 2ariability in operating income caused by the operating conditions of the company$ E. Fi-a-=ial ri+> (inancial risk is a function of financial le2erage' which is the use of debt in the capital structure The presence of debt in the capital structure creates fi8ed payments in the form of interest This fi8ed interest payment creates more 2ariability in the earnings per share =6P/: a2ailable to equity share holders This 2ariability in 6P/ due to the presence of debt in the capital structure of a company is referred to as financial risk This risk is an a2oidable risk$ II. !et,r-
The gain or loss for a security in a particular period' consisting of income plus capital gains relati2e to in2estment$ +t is usually quoted as a percentage$
III.
!IS1 $ !ETU!N PA!A"ETE!S
A. CO!!E#ATION COEFFICIENT The correlation is one of the most common and most useful statistics$ & correlation is the measure of association between two related 2ariables$ +t range lies between >1 and1$ +f there is a perfect positi2e correlation =W1: means that the 2ariables mo2e together$ +f there is a perfect negati2e correlation =>1: means that the 2ariables mo2e opposite direction$ +f the correlation is E the 2ariables mo2e independently of one another$ The formula for the correlation is
32
). CO/E!IANCE & statistical measure of correlation of the fluctuations is of two different quantities$ +n finance' co2ariance is applied to the annual rates of return of different in2estments' to measure the correlation of their year>to>year fluctuations in performance$ +f two 2ariables tend to 2ary together =that is' when one of them is abo2e its e8pected 2alue' then the other 2ariable tends to be abo2e its e8pected 2alue too:' then the co2ariance between the two 2ariables will be positi2e$ "n the other hand' if one of them is abo2e its e8pected 2alue and the other 2ariable tends to be below its e8pected 2alue' then the co2ariance between the two 2ariables will be negati2e$
TBe defi-itio- i+
)o2e =r1' r2: U 1Jn X
=r1 i > r1 a2er: X =r2 i > r2 a2er:
Where the terms r1 i and r2 i are actual 2alues of the annual rates of return of two in2estments' taken o2er se2eral years' n is the total number of 2alues of r 1 i and r2 i used' and r1 a2e and r2 a2e are the a2erage 2alues of r1 i and r2 i$ C. A#P0A &lpha is used to measure the e8tra return rewarded to in2estor for taking on risk posed by factors other than market 2olatility$ +t also measures how much of this e8tra risk helped the fund out performance to its corresponding benchmark$ & positi2e alpha is the e8tra return awarded to the in2estor for taking additional risk rather than accepting the market return$ & negati2e alpha indicates the fund underperformed for the amount of e8tra return$
3*
The formula for alpha is the following G=sum of y: > ==b: =sum of 8::H J n Where n U number of obser2ations b U beta of the fund 8 U rate of return for the market y U rate of return for the fund
D. )ETA
The %6T& coefficient is a measure of systematic risk$ %6T& is the measure of 2olatilityJresponsi2eness of the indi2idual security return with respect to the changes in the market price$ i$ ii$ +f %6T&U1' the securities are called normal securities i$e$ a gi2en change in market say 1ET is followed by an incidental change in the security$ +f %6T&Y1' the securities are called &ggressi2e securities i$e$ a gi2en change in market is followed by a more than proportionate change in the security$
68 +f the change in the market is 1ET and %6T& of the security is say 1$< there will be 1<T change in the indi2idual securities return$ iii$ +f %6T&Z1' the securities are called Defensi2e securities i$e$ a gi2en change in market is followed by a less than proportionate change in the indi2idual security$ 68 if the change in the market is 1ET and %eta of security is E$< there will be <T change in the indi2idual securities return$
33
C0APTE!8/
SECU!ITY v+. "A!1ET CONDITION8 AN ECA"INITION
&$)0A!T0I AI!TE# %$ !.CO" )$ AND0!A )AN1 D$D!.!EDDYS 6$ 0DFC ($ TCS G$)A9A9 AUTO !$)PC# +$ 9ET AI!;AYS N$ PANTA#OON 0$ITC 7$ A!A/IND "I##S
3<
C0APTE!8/ SECU!ITY v+. "A!1ET CONDITION8 AN ECA"INITION
+n the present chapter' an attempt is made to study the selected securities status by using risk>return parameters and made comparison with the market conditions taken /9P )1? <EE as the base$ The 2arious securities like /atyam' ;$com' &ndhra %ank' Dr$;eddys' !dfc' Tcs' %ajaj &uto' %pcl' Net airways' +tc' Pantaloon' and &ra2ind #ills are studied$ The 2arious risk> return parameters like &2erage rate of return' %eta' &lpha' )o2ariance' and )orrelation coefficient are used to make comparison between the scripts performance with market condition$
3@
A. )0A!AT0I AI!TE#
The monthly risk>return parameters on the security %harathi airtel basing on the technical information$ &nd the following table<$1 shows the o2erall market risk>return parameters with respect to /9P )1? <EEbasing on the technical information$
TA)#E8%.7: PE!FO!"ANCE E/A#UATION OF )0A!AT0I AI!TE#
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 741.21 729.25 585.79 502.11 609.70 657.52 669.48 334.74 382.56 406.47 406.47 442.33 0 -0.0161 -0.1967 -0.1429 0.2143 0.0784 0.0182 -0.5000 0.1429 0.0625 0.0000 0.0882
(X-X’)2 0 0.0000 0.0322 0.0158 0.0536 0.0092 0.0013 0.2331 0.0256 0.0064 0.0003 0.0111 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
DX*DM 0 0.00005 0.0269 0.0047 -0.0022 0.0082 0.0027 -0.0158 0.0029 0.0016 0.0003 0.0099 0.0001
0 0.0011 0.1795 0.1256 0.2315 0.0957 0.0354 0.4828 0.1601 0.0797 0.0172 0.1055
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
454.29 0.0270 0.0443 0.0020 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
3A
TA)#E8%.7.7: TEC0NICA# INFO!"ATION
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6
!ESU#T >E$E1A23@ E$AD@*EB >E$E23AD* E$1*<3B2 E$EE*2D1
Fro2 tBe above table %.7.7, I ob+erved tBe follo?i-3 poi-t+:8
&$ +n this security the a2erage rate of return is negati2e i$e$ =>E$E1A23@:$+t indicates loss to in2estor$ %$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$AD@*EB:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return )$ &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E23AD1: it indicates that the fund has an underperformance$ D$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$1*<3B2: it indicates the positi2e correlation means the price of the security and market mo2e together$ 6$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE*2D1: it indicates that the return of security and return on market mo2e together$ ($ /o this company script is not suitable for in2est because the return is bad and risk is also high$
3D
DIAGRAM-5.1: GRAPHICAL REPRESENTATION:COMPARISON OF BHARTHI AIRTEL WITH MARKET (2
0.3 0.2 0.1 RETURN 0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$1 shows the fluctuations in market return and script return$
3B
). !.CO"
The monthly risk>return parameters on the security ;$com basing on the technical information$ &nd the following table<$2 shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.4: PE!FO!"ANCE E/A#UATION OF !.CO"
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 0.2030 -0.3544 -0.2615 0.2036 0.3750 2.2219 0 0.0365 0.5210 0.4281 0.0370 0.2085 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 113.14 136.11 87.87 64.89 78.10 107.39 346.00
(X-X’)2 0 0.0013 0.2714 0.1833 0.0014 0.0435 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95
M
DX*DM 0 0.0016 0.0780 0.0159 -0.0004 0.0180 0.1578 -0.0023 -0.0007 -0.0123 -0.0015 -0.0219 -0.0005
2.0553 4.2244 2988.25 378.85 0.0949 0.0716 0.0051 3114.55 427.95 0.1296 0.0370 0.0014 3200.45 236.03 -0.4485 0.6150 0.3783 3295.05 257.86 0.0925 0.0741 0.0055 3393.10 240.63 -0.0668 0.2334 0.0545 3107.75 234.88 0.0239 0.1905 0.0363 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
<E
TA)#E8%.4.7: TEC0NICA# INFO!"ATION:8 ECP!ESSION
&.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6
!ESU#T
E$1@@<A2 3$@2D2A2 E$12221 E$E<DAE2 E$E1B*13
Fro2 tBe above table %.4.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$1@@<A2:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =3$@2D2A2:$ &s beta Y1 it means the change in market price leads to more proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$12221: it indicates that the fund has an out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$E<DAE2: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$E1B*13: it indicates that the return of security and return on market mo2e together$ /o this company script is suitable for in2est because the return is good and risk is also low$
%$
)$
D$
6$
($
<1
DIAGRAM-5.2: GRAPHICAL REPRESENTATION:COMPARISION OF R#COM WITH MARKET (2
2.5 2 1.5 RETURN 1 0.5 0 1 -0.5 -1 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$2 shows the fluctuations in market return and script return$
<2
C. AND0!A )AN1
The monthly risk>return parameters on the security &ndhra %ank basing on the technical information$ &nd the following table<$* shows the o2erall market risk>return parameters with respect to /9P )1? <EEbasing on the technical information$
TA)#E8%.&: PE!FO!"ANCE E/A#UATION OF AND0!A )AN1
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 82.11 73.40 68.94 53.64 52.29 67.20 68.55 69.91 71.27 81.92 83.85 82.11 80.37 0 -0.1061 -0.0608 -0.2219 -0.0252 0.2851 0.0201 0.0198 0.0195 0.1494 0.0236 -0.0208 -0.0212
(X-X’)2 0 0.0123 0.0043 0.0514 0.0009 0.0786 0.0002 0.0002 0.0002 0.0209 0.0004 0.0007 0.0007 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75 3145.35
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 -0.0048 0.0098 0.0084 0.0003 0.0242 0.0012 0.0005 0.0003 0.0029 0.0004 -0.0024 0.0001
0 -0.1108 -0.0655 -0.2267 -0.0299 0.2804 0.0153 0.0151 0.0147 0.1447 0.0188 -0.0255 -0.0259
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
=/ource /econdary data from www$nseindia$com:
<*
TA)#E8%.&.7: TEC0NICA# INFO!"ATION:8 ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T E$EE3A31 E$D112A1 >E$EE*E*< E$*1A*D3 E$EE**D@
Fro2 tBe above table %.&.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$EE3A31:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$D112A1:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$EE*E*<: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$*1A*D3: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE**D@: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
<3
DIAGRAM-5.3: GRAPHICAL REPRESENTATION:-
COMPARISON OF ANDHRA BANK WITH MARKET(2
0.5 0.4 0.3 0.2 0.1
!- ")
N U T E R
0 -0.1 -0.2 -0.3 PERIOD
ret n&ret
1
2
3
4
5
6
7
8
9
10
11
12
13
The abo2e diagram><$* shows the fluctuations in market return and script return$
<<
D. D!.!EDDYS
The monthly risk>return parameters on the security Dr$;eddys basing on the technical information$ &nd the following table<$3 shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.': PE!FO!"ANCE E/A#UATION OF D!.!EDDYS
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 0.5000 0.1640 -0.3023 0.0261 0.0444 -0.0646 0.0337 -0.0010 0.0629 -0.0579 -0.0779 0 0.4709 0.1349 0.3314 0.0030 0.0154 0.0937 0.0046 0.0301 0.0339 0.0870 0.1070 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 595.29 892.94 1039.40 725.22 744.12 777.19 727.00 751.50 750.75 798.00 751.80 693.25
(X-X’)2 0 0.2218 0.0182 0.1098 0.0000 0.0002 0.0088 0.0000 0.0009 0.0011 0.0076 0.0114 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M
DX*DM 0 0.0205 -0.0202 0.0123 0.0000 0.0013 -0.0072 0.0002 -0.0005 0.0007 -0.0018 -0.0100 0.0001
728.25 0.0505 0.0214 0.0005 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.'.7: TEC0NICA# INFO!"ATION:8
<@
ECP!ESSION /&.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6
!ESU#T E$E2BEAB >E$EB3D13 E$E2BBDD >E$E1D@AA >E$EEE*B@
Fro2 tBe above table %.'.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$E2BEAB:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =>E$EB3D13:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$E2BBD: it indicates that the fund has an out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =>E$E1D@AA: it indicates the negati2e correlation means the price of the security and market mo2e opposite direction$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is negati2e i$e$ =>E$EEE*B@: it indicates that the return of security and return on market mo2e opposite direction$ /o this company script is suitable for in2est because the return is good and risk is also low$
%$
)$
D$
6$
($
DIAGRAM-5.4: GRAPHICAL REPRESENTATION:<A
COMPARISION OF DR#REDDYS WITH MARKET (2
0.6 0.5 0.4 RETURN 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10
!- ")
11
12
13
The abo2e diagram><$3 shows the fluctuations in market return and script return$
F
E. 0DFC
<D
The monthly risk>return parameters on the security !dfc basing on the technical information$ &nd the following table<$< shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.%: PE!FO!"ANCE E/A#UATION OF 0DFC
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 -0.0187 -0.1435 0.0145 0.0330 0.1127 0.1702 -0.0452 0.1250 -0.0122 0.0289 0 0.0316 0.1563 0.0016 0.0201 0.0999 0.1574 0.0580 0.1122 0.0250 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 1336.80 1311.75 1123.55 1139.80 1177.40 1310.15 1533.15 1463.90 1646.95 1626.90 1673.85
(X-X’)2 0 0.0010 0.0244 0.0000 0.0004 0.0100 0.0248 0.0034 0.0126 0.0006 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05
M
DX*DM 0 -0.0014 0.0234 -0.0001 -0.0002 0.0086 0.0121 -0.0019 0.0020 -0.0005 0.0003 -0.0105 0.0000
0.0160 0.0003 3393.10 1507.25 -0.0995 0.1124 0.0126 3107.75 1509.80 0.0017 0.0112 0.0001 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.%.7: TEC0NICA# INFO!"ATION:8
<B
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!&
'O##&O!&'O$!!
!ESU#T E$E12D3 E$@*@2EE E$EE@A32 E$3@ADE2 E$EE2@<<
)".&;+&1)6
Fro2 tBe above table %.%.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$E12D3:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$@*@2EE:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$EE@A32: it indicates that the fund has a out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$3@ADE2: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE2@<<: it indicates that the return of security and return on market mo2e together$ /o this company script is suitable for in2est because the rate of return is good and risk is also low$
%$
)$
D$
6$
($
DIAGRAM-5.5: GRAPHICAL REPRESENTATION:@E
COMPARISION OF HDFC WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 1 -0.05 -0.1 -0.15 -0.2 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9
!- ")
10
11
12
13
The abo2e diagram><$< shows the fluctuations in market return and script return$
@1
F. TCS
The monthly risk>return parameters on the security Tcs basing on the technical information$ &nd the following table<$@ shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.<: PE!FO!"ANCE E/A#UATION OF TCS
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 0.0333 -0.0993 -0.0248 -0.4616 0.0661 0.0240 0.0009 0.1028 0.0194 0.0457 -0.0661 0 0.0584 0.0742 0.0003 0.4366 0.0912 0.0491 0.0260 0.1278 0.0444 0.0708 0.0411 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 1915.50 1979.35 1782.90 1738.75 936.15 998.05 1022.05 1087.10 1198.80 1222.00 1277.90 1193.40
(X-X’)2 0 0.0034 0.0055 0.0000 0.1906 0.0083 0.0024 0.0007 0.0163 0.0020 0.0050 0.0017 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M
DX*DM 0 0.0025 0.0111 0.0000 0.0042 0.0079 0.0038 0.0008 0.0023 0.0009 0.0014 -0.0038 0.0001
1233.85 0.0339 0.0589 0.0035 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.<.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$E2<E33
@2
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
E$3A2<B2 >E$E2B<A< E$1*31B1 E$EE1BA2
Fro2 tBe above table %.<.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E2<E33:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$3A2<B2:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ =>E$E2B<A<: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$1*31B1: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE1BA2: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the rate of return is negati2e and risk is also high$
%$
)$
D$
6$
($
DIAGRAM-5.6: GRAPHICAL REPRESENTATION:-
@*
COMPARISION TCS WITH MARKET (2
0.2 0.1 0 RETURN 1 -0.1 -0.2 -0.3 -0.4 -0.5 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9
!- ")
10
11
12
13
The abo2e diagram><$@ shows the fluctuations in market return and script return$
G.)A9A9 AUTO
@3
The monthly risk>return parameters on the security %jajj &uto basing on the technical information$ &nd the following table<$A shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.(: PE!FO!"ANCE E/A#UATION OF )A9A9 AUTO
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 2746.25 3011.10 2741.15 2748.75 2462.20 2695.90 2996.40 2748.00 2646.45 2619.15 2772.15 2618.55 0 0.0964 -0.0897 0.0028 -0.1042 0.0949 0.1115 -0.0829 -0.0370 -0.0103 0.0584 -0.0554
(X-X’)2 0 0.0107 0.0069 0.0001 0.0095 0.0103 0.0140 0.0058 0.0009 0.0000 0.0043 0.0024 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 0.0045 0.0124 -0.0004 0.0009 0.0088 0.0091 -0.0025 -0.0005 -0.0001 0.0013 -0.0046 -0.0002
0 0.1032 -0.0829 0.0096 -0.0975 0.1017 0.1183 -0.0761 -0.0302 -0.0035 0.0652 -0.0486
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
2427.60 -0.0729 -0.0661 0.0044 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.(.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$EE@ABB
@<
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
*$E3EE@* >E$E*<B*D E$<@@321 E$EE232D
Fro2 tBe above table %.(.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$EE@ABB:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =*$E3EE@*:$ &s betaY1 it means the change in market price leads to greater proportionate change in security return$ &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E*<B*D: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$<@@321: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE232D: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
DIAGRAM-5.7: GRAPHICAL REPRESENTATION:-
@@
COMPARISION OF BA$A$ AUTO WITH MARKET (2
0.15 0.1 0.05 RETURN 0 1 -0.05 -0.1 -0.15 -0.2 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10
!- ")
11
12
13
The abo2e diagram><$A shows the fluctuations in market return and script return$
0.)PC#
@A
The monthly risk>return parameters on the security %pcl basing on the technical information$ &nd the following table<$D shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.6: PE!FO!"ANCE E/A#UATION OF )PC#
CLOS E PRICE RETUR N ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(MM’)
MRKT VAR
X Mar2008 &Apr2008 May2008 Jun2008 &&Jul2008 Aug2008 Sep2008 &Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 425.30 438.05 396.50 334.50 312.45 361.55 366.30 400.90 344.30 338.05 360.40 311.25 0 0.0300 -0.0949 -0.1564 -0.0659 0.1571 0.0131 0.0945 -0.1412 -0.0182 0.0661 -0.1364
(X-X’)2 0 0.0027 0.0054 0.0182 0.0020 0.0319 0.0012 0.0134 0.0143 0.0000 0.0077 0.0132 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 0.0022 0.0110 0.0050 0.0004 0.0154 0.0027 0.0038 -0.0022 0.0001 0.0018 -0.0108 0.0000
0 0.0515 -0.0734 -0.1349 -0.0444 0.1786 0.0346 0.1159 -0.1197 0.0033 0.0876 -0.1149
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
302.75 -0.0273 -0.0058 0.0000 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.6.7: TEC0NICA# INFO!"ATION: 8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$E213D@
@D
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
E$<DA1B@ >E$E2A113 E$*@EB<* E$EE23<E
Fro2 tBe above table %.6.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E213D@:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$<DA1B@:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E2A113: it indicates that the fund has an underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$*@EB<*: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE23<E: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high
%$
)$
D$
6$
($
DIAGRAM-5.8: GRAPHICAL REPRESENTATION:-
@B
COMPARISION OF BPCL WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 1 -0.05 -0.1 -0.15 -0.2 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10
!- ")
11
12
13
The abo2e diagram><$D shows the fluctuations in market return and script return$
I. 9ET AI!;AYS
AE
The monthly risk>return parameters on the security Net &irways basing on the technical information$ &nd the following table<$B shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.G: PE!FO!"ANCE E/A#UATION OF 9ET AI!;AYS
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 982.65 963.70 738.60 589.75 507.30 536.30 647.45 595.75 673.75 617.35 763.35 597.70 633.20 0 -0.0193 -0.2336 -0.2015 -0.1398 0.0572 0.2073 -0.0799 0.1309 -0.0837 0.2365 -0.2170 0.0594
(X-X’)2 0 0.0000 0.0448 0.0322 0.0139 0.0062 0.0525 0.0034 0.0233 0.0038 0.0667 0.0381 0.0066 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75 3145.35
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 0.0001 -0.0317 0.0067 0.0011 0.0068 0.0176 -0.0019 0.0027 -0.0012 0.0052 -0.0183 0.0002
0 0.0025 0.2118 -0.1797 -0.1180 0.0790 0.2291 -0.0580 0.1527 -0.0619 0.2583 -0.1952 0.0812
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
=/ource /econdary data from www$nseindia$com
TA)#E8%.G.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$2D*<*2
A1
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
E$2<2<A1 >E$E232*1 E$E2BE2D E$EE1E<3
Fro2 tBe above table %.G.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E21D13:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$2<2<A1:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E232*1: it indicates that the fund has an underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$E2BE2D: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE1E<3: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
DIAGRAM-5.9: GRAPHICAL REPRESENTATION:-
A2
COMPARISION OF $ET AIRWAYS WITH MARKET (2
0.3
!- ")
0.2 0.1
RETURN
0 1 -0.1 -0.2 2 3 4 5 6 7 8 9 10 11 12 13
-0.3 PERIOD #$% N&#$%
The abo2e diagram><$B shows the fluctuations in market return and script return$
9. PANTA#OON
A*
The monthly risk>return parameters on the security Pantaloon basing on the technical information$ &nd the following table<$1E shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.75: PE!FO!"ANCE E/A#UATION OF PANTA#OON
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 1962.60 1947.50 1642.50 1350.00 1252.70 1656.75 1886.30 1861.35 2256.60 409.95 464.90 421.45 0 -0.0077 -0.1566 -0.1781 -0.0721 0.3225 0.1386 -0.0133 0.2123 -0.8183 0.1340 -0.0935
(X-X’)2 0 0.0029 0.0411 0.0503 0.0140 0.0764 0.0085 0.0035 0.0276 0.7474 0.0077 0.0195 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 -0.0023 0.0304 0.0083 0.0011 0.0238 0.0071 -0.0019 0.0030 -0.0173 0.0018 -0.0131 -0.0003
0 -0.0539 -0.2028 -0.2243 -0.1182 0.2764 0.0924 -0.0594 0.1662 -0.8645 0.0879 -0.1396
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
392.75 -0.0681 -0.1143 0.0131 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
A3
TA)#E8%.75.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T E$E3@1@3 E$D1E<12 E$E*D*B< E$EDD123 E$EE**D2
Fro2 tBe above table %.75.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$E3@1@3:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$D1E<12:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$E*D*B<: it indicates that the fund has an out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$EDD123: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE**D2: it indicates that the return of security and return on market mo2e together$ /o this company script is suitable for in2est because the return is good and risk is also low$
%$
)$
D$
6$
($
A<
DIAGRAM-5.10: GRAPHICAL REPRESENTATION:COMPARISION OF PANTALOON WITH MARKET (2
0.4 0.2 RETURN 0 1 -0.2 -0.4 -0.6 -0.8 -1 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$1E shows the fluctuations in market return and script return$
A@
1.ITC
The monthly risk>return parameters on the security +tc basing on the technical information$ &nd the following table<$11 shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.77: PE!FO!"ANCE E/A#UATION OF ITC
DATE
CLOSE PRICE
RETURN ON PRICE
RETRET’ DX=(XX’)
(RETRET’ ) SQ
NINIFTY
RETURN ON NIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 195.15 203.75 165.40 182.40 167.40 191.50 187.70 190.00 185.10 176.10 174.60 171.70 0 0.0441 -0.1882 0.1028 -0.0822 0.1440 -0.0198 0.0123 -0.0258 -0.0487 -0.0085 -0.0166
(X-X’)2 0& 0.0038 0.0292 0.0144 0.0042 0.0260 0.0000 0.0009 0.0001 0.0010 0.0001 0.0000 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM &&&&&&&&&&0& 0.0027 0.0256 -0.0045 0.0006 0.0139 -0.0002 0.0010 -0.0002 -0.0006 0.0002 0.0001 -0.0003
0& 0.0613 -0.1710 0.1200 -0.0650 0.1612 -0.0026 0.0295 -0.0086 -0.0314 0.0087 0.0006
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
151.15 -0.1197 -0.1025 0.0105 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
AA
TA)#E8%.77.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T >E$E1<DD3 E$A@313* >E$E23<*1 E$<D3@AA E$EE*1DB
Fro2 tBe above table %.77.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E1<DD3:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$A@313*:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E23<*1: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$<D3@AA: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE*1DB: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
AD
DIAGRAM-5.11: GRAPHICAL REPRESENTATION:COMPARISION OF ITC WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 -0.05 -0.1 -0.15 -0.2 -0.25 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$11 shows the fluctuations in market return and script return$
AB
#. A!A/IND "I##S
The monthly risk>return parameters on the security &ra2ind #illsC basing on the technical information$ &nd the following table<$12 shows the o2erall market risk> return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.74: "I##S
PE!FO!"ANCE
E/A#UATION
OF
A!A/IND
DATE
CLOSE PRICE
RETURN ON PRICE
RETRET’ DX=(XX’) 0& -0.0132 -0.1472 -0.1594 0.0122 0.1802 0.1673 -0.0289 -0.0932
(RETRET’ ) SQ
NINIFTY
RETURN ON NIFTY
NIFTYNIFTY’ DM=(M -M’) 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
MRKT VAR
X Mar-08 Apr-08 May08 Jun-08 Jul-08 Aug08 Sep08 Oct-08 Nov08 ec08 Jan-09 !e"-09 Mar-09 100.50 93.15 73.85 57.65 54.90 61.50 68.10 62.05 52.55 0 -0.0731 -0.2072 -0.2194 -0.0477 0.1202 0.1073 -0.0888 -0.1531
(X-X’)2 0 0.0002 0.0217 0.0254 0.0001 0.0325 0.0280 0.0008 0.0087
M 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM &0 -0.0006 0.0220 0.0059 -0.0001 0.0155 0.0128 -0.0009 -0.0017 0.0009 0.0041 -0.0083 -0.0002
51.80 -0.0143 0.0457 0.0021 3295.05 59.30 0.1448 0.2047 0.0419 3393.10 50.50 -0.1484 -0.0884 0.0078 3107.75 43.45 -0.1396 -0.0797 0.0063 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
DE
TA)#E8%.74.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T >E$E<<*2A E$BBE1<< >E$E@B3*2 E$<*@3ED E$EE31*2
Fro2 tBe above table %.74.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E<<*2A:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$BBE1<<:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E@B3*2: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$<*@3ED: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE31*2: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
D1
DIAGRAM-5.12: GRAPHICAL REPRESENTATION:COMPARISION OF ARAVIND MILLS WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 -0.05 -0.1 -0.15 -0.2 -0.25 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$12 shows the fluctuations in market return and script return$
D2
C0APTE!8/I
FINDINGS, SUGGESTIONS HSU""A!Y
D*
C0APTE! /I
FINDINGS, SUGGESTIONS H SU""A!Y
FINDINGS
1$ %!&;&T+ &+;T67 script is not suitable for in2est because the return is bad 9 the risk also high$ 2$ ;$)"# this script is suitable for in2est because the return is good 9 the risk also low$ *$ &1D!;& %&10 script is not suitable for in2est because the return is negati2e 9 the risk is also high$ 3$ Dr$ ;6DD4C/ this script is suitable for in2est because the risk is low although the return is positi2e$ <$ !D() this script is suitable for in2est because the return is good 9 the risk also low$ @$ T)/ script is not suitable for in2est because the return is negati2e 9 the risk is also high$ A$ %&N&N &5T" script is not suitable for in2est because the risk is high and the return is bad$ D$ %P)7 this script is not suitable for in2est although the risk is high but return is low$ B$ N6T &+;W&4/ this script is not suitable for in2est because the return is bad 9 the risk is high$ 1E$ P&1T7""1 script is suitable for in2est because the return is good 9 the risk also low$ 11$ +T) script is not suitable for in2est because the risk is high and the return is bad$ 12$ &;.+1D #+77/ script is not suitable for in2est because the risk is high and the return is bad$
SUGGESTIONS
D3
i$
/hares are not for short term in2estments' usually the best returns will be gained o2er the medium and long term$ The in2estor should consider in2esting in steady and long growth shares only$ The in2estor has to consider both risk and returns of the company before in2esting in it$ The in2estor can eliminate di2ersifiable risk by holding a large enough portfolio of securities$ The in2estor has to analyIe the performance of the company before making in2estment decisions$ The in2estor should not belie2e in rumors about the market trends$ The in2estor has to consider the information about the company profile' performance history and economic factors' before buying or selling any share$ +n2estors need to ha2e high le2el of financial ad2ice so that they can take appropriate decisions based on their risk' return$
ii$ iii$ i2$
2$
2i$ 2ii$
2iii$
D<
SU""A!Y
The focus of the study was on ,P6;(";#&1)6 6.&75&T+"1 "( D+((6;61T /6)5;+T+6/ & study of selected instruments traded at +ndia +nfo 7ine 7td$' !yderabadII with an objecti2e to calculate the risk>return parameters and the status of the company performance$ +ndia +nfo 7ine 7td$' was set up in 1BB< is a stock broking )ompany$ +t is a trading member in both 1/6 and %/6$ +ts main action isonline trading of /ecurities$
+n my study + ha2e taken 12 selected scripCs i$e$' %harthi airtel' ;$com' &ndhra %ank' Dr$;eddys' !dfc' Tcs' %ajaj &uto' %pcl' Net airways' +tc' Pantaloon' and &ra2ind #ills$ The main aim is to find out risk>return parameters base on the market /9P )1? <EE$ The past one year monthly market price data of each selected scrip ha2e been collected$ The calculation of the risk>return has been done based on the a2erage rate of return' beta' alpha' co2ariance and correlation coefficient$ ;$)om is performing well the in2estor can in2est in this$ The risk taker in2estor can in2est in ,%ajaj &utoL$ The normal in2estor can in2est in ,Dr$reddys hdfc pantaloonL this gi2es moderate return with moderate risk$ The remaining company scripCs ha2e not Performed well$ +n +ndia +nfo 7ine 7td$' daily market information is collected and updated to enable the in2estors to in2est in profitable shares$ Depending on the calculation of this risk and ;eturn it made the in2estor easier to decide where to in2est$ This study makes the in2estor understand clearly the performance of each company' it #akes easier for them to take the right decision$
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With reference to
“INDIA INFOLINE PVT LIMITED”
HYDERABAD Project report submitted to Andhra University, Visakhapatnam in partial Fulfillment for the Award of the Degree in
MASTER OF BUSINESS ADMINISTRATION
By
T.V.NARENDRA KUMAR Regd.No. 208 !"000 2
Under the esteemed guidance of S#$ K.BALA KRISHNA
P#o%e&' ()$de
MBA
DEPARTMENT OF MANA(EMENT STUDIES ADITYA INSTITUTE OF P.( STUDIES
(Affiliated to Andhra University)
SURAMPALEM
2008*20"0
1
2
ADITYA INSTITUTE OF P.G.STUDIES (Approved by AICTE, Affiliated to A.U SU!A"PA#E" $ %&&'&( E.G.DIST (AP
)ONAFIDE CE!TIFICATE
This is to certify that the project entitled *a +t,dy o- SECU!ITY ANA#YSIS. I- *INDIA INFO#INE P/T #I"ITED, 0YDE!A)AD. is the bonafide record of work done by "r. T./.Nare-dra 1,2ar !e3.No.456%'7555%4 during the period 455684575 in partial fulfillment of the requirement for the award of the Degree of "ASTE! OF )USINESS AD"INIST!ATION in Aditya I-+tit,te of P.G. Colle3e affiliated to AND0!A UNI/E!SITY.
Project Guide S!I. 1.)A#A 1!IS0NA #$%$&$
(aculty in &ditya P$G$)ollege$
!ead "f the Department S!I.9.NAGEND!A 1U"A! #$%$&$$'
!ead of the Department$
*
DEC#A!ATION
+ hereby declare that the project work entitled , SECU!ITY ANA#YSIS. with reference to INDIA INFO#INE #td- 0YDE!A)AD is originally prepared and submitted by me to AND0!A UNI/E!SITY' .+/&0!&P&T1&# in partial fulfillment of the requirements for the award of the degree of "ASTE! OF )USINESS AD"INIST!ATION$ The empirical findings in the report are based on the data collected by me while preparing this project$ +t has not been submitted to any other uni2ersity or publication at any time before$
(T./.NA!END!A 1U"A! !e3.-o 456%'7555%4 P#ACE: DATE:
3
AC1NO;#EDGE"ENT
+ wish to thank Sri 9.Na3e-dra 1,2ar' !"D' &D+T4& +1/T+T5T6 "( P$G$/T5D+6/ for his 2aluable support in doing this project$ + thank my project guide' Sri.1.)A#A 1!IS0NA 7ecturer in #anagement /tudies for pro2iding me his 2aluable guidance and e8pertise in successful completion of this project$ + thank my project internal guide "r.S./I9AY )0A!AT0 !EDDY, (#anager 9 &ccounts "fficer: who shows infinite patience and perse2erance in teaching' suggesting remedies for the problems encountered in my project and in answering all my questions$
+ also e8tend my heartfelt thanks to my friends for their cooperation during my entire project period$
T$.$1&;61D;& 05#&;
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CONTENTS
C0APTE! 7
+1T;"D5)T+"1
C0APTE! 4 P;"(+76 "( T!6 /6)5;+T+6/ +1D5/T;4 )apital market !istory of market 1ational stock e8change =1/6: %ombay stock e8change =%/6: C0APTE! & P;"(+76 "( +1D+& +1("7+16 P.T 7TD C0APTE! ' /6)5;+T4 &1&474/+/ T!6";6T+)&7 (; W";0 C0APTE! % /6)5;+T4 .s #&;06T )"1D+T+"1 >&1 6?&#+1&T+"1 C0APTE! < • • • • /5GG6/T+"1/ (+1D+1G/ /5##&;4 )"1)75/+"1 )I)#IOG!AP0Y
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"bjecti2es of the study 1eed for study #ethodology of the study 7imitations of the study
CHAPTER- I
INT!ODUCTION
A
C0APTE! 8I
INT!ODUCTION
A. SECU!ITIES
The definition of securities as per the /ecurities )ontracts ;egulation act =/);&:' 1B<@' includes instruments such as shares' bonds' scripCs$ /tocks or other marketable securities of similar nature in or of any incorporate company or body corporate' go2ernment securities' deri2ati2es of securities' security receipt or any other instruments so declared by the central Go2ernment$ I Se=,rity a-aly+i+
The security a2ailable to an in2estor for in2estment is numerous and of 2arious types the shares of o2er se2en thousand companies are listed in the stock e8change of the country$ Traditionally the securities were classified into ownership securities such as equity shares and preference shares and creditor ship securities such as debentures and bonds$ /ecurity analysis is the initial phase of the Portfolio management this consists of two alternati2e approaches namely fundamental analysis and technical analysis II F,-da2e-tal a-aly+i+ The primary moti2e of buying a share is to sell it subsequently at a higher rate an in2estor would be interested to know the di2idend to be paid on the share in the future as also the future price of the share$ These 2alues can only be estimated and predicted with certainty$ These 2alues are primarily determined by the performance of the company' which in turn is influenced' by the performance of the industry$ &n in2estor at the time of the in2estment has to e2aluate a lot of information about the past performance and the e8pected future performance of companies' industries and the economy as a whole before taking the in2estment decision such e2aluation or analysis is called fundamental analysis$ (undamental analysis insists that no one should purchase or sell a share on the basis of tips and rumors$ The fundamental approach calls upon the information about company belongs and the economy this result in informed in2esting for the fundamentalist makes use of 6+) framework of analysis$
The multitude of factors affecting the performance of a company can be broadly classified as
D
i$
)ompany specific factors such as the age of its plant' the quality of management' brand image of its labor management relations act' and these factors are likely to make a company performance quite different from that of its competitors in the same industry$ +ndustry wide factors such as demand supply gap in the industry' the emergence of substitute products' change in go2ernment policy relating to industry etc and these factors affect only those companies belonging to a specific industry$ 6conomy wide factors such as growth rate of the economy' inflation rate' and foreign e8change rates etc' which affects all companies$
ii$
iii$
B
O)9ECTI/ES OF T0E STUDY
i$ ii$ iii$ i2$ 2$ To e2aluate the performance of 12 different companies based on ;ate of return' %eta' &lpha$ To e2aluate the performance of 12 different companies based on coefficient of correlation' co2ariance$ To compare the returns of the company to that of /9P )1? <EE$ To measure the ma8imum return and minimum risk on securities$ To pro2ide information frame work facilitating the in2estors in in2esting in right stock$ To study about the performing and non>performing scripts$ To study about the fluctuations in the stock market$
2i$ 2ii$ $
1E
NEED FO! T0E STUDY
&s the business and industry e8panded and economy became more comple8 in nature' a need for permanent finance arose$ 6ntrepreneurs require money for long>term needs' were as in2estors demand liquidity the solution to this problem ga2e way for an origin of stock e8change' which is a ready market for in2estment and liquidity$ &s per the securities contract &ct' 1B<@' /tock 68change means anybody of indi2iduals whether incorporated or not' constituted for the purpose of regulating or controlling the business of buying' selling or dealing in securities$ i. SECU!ITIES INC#UDE 1$ /hares' scripFs' stocks' bonds' debentures and other marketable 2$ /ecurities$ *$ Go2ernment securities$ 3$ ;ights or interests in securities$
11
"ET0ODO#OGY OF T0E STUDY
The study is conducted to know the past performance of the selected companies based on ;+/0 and ;&T6 "( ;6T5;1/ of the companies SOU!CES OF T0E DATA The source includes only the secondary data$ /econdary data is collected from the internet =www$nseindia$com: )ollecting information through internet and also from the website www$indiainfoline$com
#I"ITATIONS OF T0E STUDY
12
i$ ii$ iii$ i2$ 2$
The study is limited to only 12 companies$ +n2estors desired le2el of 2ariance and desired e8pected return was not taken into consideration There may be scope for committing statistical errors There is no time duration Gi$e 2 monthsH for an e8clusi2e study$ To know the entire acti2ities of stock e8change is 2ery difficult as it takes a long period to understand$
1*
)!&PT6; ++
+1D5/T;4P;"(+76
13
A. CAPITA# "A!1ET )apital market is one of the most important segments of the +ndian financial system$ +t is the market a2ailable to the companies for meeting their requirements of the long>term funds$ +t refers to all the facilities and the institutional arrangements for borrowing and lending funds$ +n other words' it is concerned with the raising of money capital for purposes of making long>term in2estments$ The market consists of a number of indi2iduals and institutions =including the Go2ernment: that canaliIe the supply and demand for long >term capital and claims on it$ The demand for long term capital comes predominantly from pri2ate sector manufacturing industries' agriculture sector' trade and the Go2ernment agencies$ While' the supply of funds for the capital market comes largely from indi2idual and corporate sa2ings' banks' insurance companies' specialiIed financing agencies and the surplus of Go2ernments$ i: Pri2ary 2ar>et (Ne? i++,e 2ar>et its deals with Fnew securitiesF' that is' securities which were not pre2iously a2ailable and are offered to the in2esting public for the first time$ +t is the market for raising fresh capital in the form of shares and debentures$ +t pro2ides the issuing company with additional funds for starting a new enterprise or for either e8pansion or di2ersification of an e8isting one' and thus its contribution to company financing is direct$ The new offerings by the companies are made either as an initial public offering =+P": or rights issue$ ii: Se=o-dary 2ar>et@ +to=> 2ar>et (old i++,e+ 2ar>et or +to=> eA=Ba-3e +t is the market for buying and selling securities of the e8isting companies$ 5nder this' securities are traded after being initially offered to the public in the primary market andJor listed on the stock e8change$ The stock e8changes are the e8clusi2e centers for trading of securities$ +t is a sensiti2e barometer and reflects the trends in the economy through fluctuations in the prices of 2arious securities$ +t been defined as' Ka body of indi2iduals' whether incorporated or not' constituted for the purpose of assisting' regulating and controlling the business of buying' selling and dealing in securitiesK$ 7isting on stock e8changes enables the shareholders to monitor the mo2ement of the share prices in an effecti2e manner$ This assist them to take prudent decisions on whether to retain their holdings or sell off or e2en accumulate further$ !owe2er' to list the securities on a stock e8change' the issuing company has to go through set norms and procedures$
). 0ISTO!Y OF STOC1 ECC0ANGES
1<
The stock e8changes operating in the 1Bth century were those of %ombay set up in 1DA< and &hmedabad set up in 1DB3$ Those were organiIed as 2oluntary non>profit making association of brokers to regulate and protect their interests$ %efore the control on securities trading becomes a central subject under the constitution in 1B<E' it was a state subject and the %ombay securities$ 5nder this act' the %ombay stock e8change was recogniIed in 1B2A and &hmedabad in 1B*A$ During the war period' a number of stock e8changes were organiIed e2en in %ombay' &hmedabad and other centers' but they were not recogniIed$ /oon after it became a central subject' central legislation for securities regulation$ "n this basis of the committeeCs recommendations and public discussion' the securities contracts =regulation: act became law in 1B<@$ i Defi-itio- of +to=> eA=Ba-3e ,& stock e8change means any body or indi2iduals whether incorporated or not' constituted for the purpose of assisting' regulating' or controlling the business of buying' selling in securitiesL$ +t is an association of member brokers for the purpose of self>regulation and protecting the interest of these members$ +t can operate only by the go2ernment under the securities contract =regulation: act 1B<@$ The recognition is granted under section * of the act by the central go2ernment' ministry of finance$ ii CBara=teri+ti=+ of +to=> eA=Ba-3e
a: +t is a place where securities are purchased and sold b: & stock e8change is an association of personCs whether incorporated or not$ c: Trading in stock e8changes are strictly regulated by the rules and regulations prescribed by /ecurities 68change %oard of +ndia =/6%+: d: %oth genuine in2estors and speculators buy and sell shares in a stock e8change$ e: /ecurities of corporation' trusts' Go2ernment' #unicipal )orporation etc are traded at stock e8changes$
iii F,-=tio-+ of +to=> eA=Ba-3e+
1@
a: "ai-tai-i-3 A=tive Tradi-3 /hares are traded on the stock e8changes enabling the in2estor to buy and sell securities$ The prices may 2ary from transaction to transaction$ & continuous trading increases the liquidity or marketability of the shares traded on the /tock 68changes$ b: FiAatio- of Pri=e+ Price is determined by the transactions that flow from in2estorCs demand and supplierCs preferences$ 5sually the traded prices are made known to the public$ They help the in2estors to make better decisions$ c: E-+,re+ Safe a-d Fair Deali-3 The rules' regulations and by> laws of the /tock 68changes pro2ide' a measure of safety to the in2estor$ Transactions are conducted under competiti2e conditions enabling the in2estors to get a fair deal$ d: Aid+ i- Fi-a-=i-3 tBe I-d,+try & continuous market for shares pro2ides a fa2ourable climate for raising capital$ The negotiability and Transferability of the securities helps the companies to raise long term funds$ When it is easy to trade the securities' in2estors are willing to subscribe to the +nitial Public "fferings$ This stimulates the )apital formulation e: Di++e2i-atio- of I-for2atio- /tock 68changes pro2ide +nformation through their 2arious publications$ They publish the share prices traded on daily basis along with the corporate$ !andouts' !andbooks and pamphlets pro2ide +nformation regarding the functions of /tock 68changes f: Perfor2a-=e I-d,=er The prices of /tock reflect the performance of the traded companies$ This makes the corporate more concerned with its public image and tries to maintain good performance$ g: Self8!e3,lati-3 Or3a-iDatio- The /tock 68changes monitor the integrity of the members' brokers' listed companies and clientCs continuous internal audit safeguards the in2estors against unfair trade practice$ +t settles the disputes between member brokers' in2estors and brokers$
C. NATIONA# STOC1 ECC0ANGE
1A
The 1ational /tock 68change =1/6: is +ndiaCs leading stock e8change co2ering 2arious cities and town across the country$ 1/6 was set up by leading institutions to pro2ide a modern' fully automated screen M based trading system with national reach$ The e8change has brought about unparalleled transparency' speed and efficiency' safety and market integrity$ +t has set up facilities that ser2e as a model for the securities industry in terms of systems' practices and procedures$ 1/6 has played a catalytic role in reforming the +ndian securities market in terms of micro structure' market practices and trading 2olumes$ The market today uses slate M of M art information technology to pro2ide an efficient and transparent trading' clearing and settlement mechanism' and has witnessed se2eral inno2ations in products and ser2ices 2iI$' dematerialiIation of stock e8change go2ernance' screen based trading' compression of settlement cycles' dematerialiIation and electronic transfer of securities' securities lending and borrowing' professionalisation of trading members' fine M turned risk management systems' emergence of clearing corporations to assume counter party risks' market of debt and deri2ati2e instruments and intensi2e use of information technology$
The 1ational /tock 68change of +ndia 7imited has genesis in the report of the !igh Powered /tudy Group of 6stablishment of 1ew /tock 68changes' which recommended promotion of a 1ational /tock 68change by financial institutions =(+/: to pro2ide access to in2estors from all across the country on an equal footing$ %ased on the recommendations' 1/6 was promoted by leading (inancial +nstitutions at the behest of the Go2ernment of +ndia and was incorporated in 1o2ember 1BB2 as a ta8 paying company unlike other stock e8changes in the country$
"n its recognition as a stock e8change under the /ecurities )ontracts =;egulation: &ct' 1B<@ in &pril 1BB*' 1/6 commenced operations in the Wholesale Debit #arket =WD#: segment commenced operations in 1o2ember 1BB3 operations in Deri2ati2es segment commenced in Nune 2EEE$
i
"i++io-
1D
1/6Cs' mission is setting the agenda for change in the securities markets in +ndia$ The 1/6 was set>up with the main objecti2es of a: 6stablishing a nation wide trading facility for equities' debt instruments and hybrids$ b: 6nsuring equal access to in2estors all o2er the country through an appropriate communication network$ c: Pro2iding a fair' efficient and transparent securities market to in2estors using electronic trading systems$ d: 6nabling shorter settlement cycles and book entry settlements systems and e: #eeting the current international standards of securities markets$ The standards set by 1/6 in terms of market practices and technology has become industry benchmarks and is being emulated by other market participants$ 1/6 is more than a mere market facilitator$ +tCs that force which is guiding the industry towards new horiIons and greater opportunities$
ii Pro2oter+
1/6 has been promoted by leading financial institutions' banks' insurance companies and other financial intermediaries a: +ndustrial De2elopment %ank of +ndia 7imited$ b: +ndustrial (inance )orporation of +ndia 7imited$ c: 7ife +nsurance )orporation of +ndia d: /tate %ank of +ndia e: +)+)+ %ank 7imited f: +7 9 (/ Trust )ompany 7imited g: /tock !olding )orporation of +ndia 7imited h: /%+ )apital #arkets 7imited i: The &dministrator of the /pecified 5ndertaking of 5nit Trust of +ndia j: %ank of %aroda k: )anara %ank l: General +nsurance )orporation of +ndia 1B
m: 1ational +nsurance )ompany 7imited n: The 1ew +ndia &ssurance )ompany 7imited o: The "riental +nsurance )ompany 7imited p: Punjab 1ational %ank q: "riental %ank of )ommerce r: )orporation %ank s: +ndian %ank t: 5nion %ank of +ndia
iii #o3o
The logo of the 1/6 symboliIe a single nationwide securities trading facility ensuring equal and fair access to in2estors' trading members and issuers all o2er the country$ The initials of the 68change 2iI$' 1' / and 6 ha2e been etched on the logo and are distinctly 2isible$ The logo symboliIes use of state of the art information technology and satellite connecti2ity to bring about the change within the securities industry$ The logo symboliIes 2ibrancy and unleashing of creati2e energy to constantly bring about change through inno2ation$
iv Corporate Str,=t,re
1/6 is one of the first demutualised stock e8changes in the country' where the ownership and management of the 68change is completely di2orced from the right to trade on it$ Though the impetus for its establishment came from policy makers in the country' it has been setup as a public limited company' owned by the leading institutional in2estors in the country$ (rom day one' 1/6 has adopted the form of a demutualised e8change the ownership' management and trading is in the hands of three different sets of people$ 1/6 is owned by a set of leading financial institutions' banks' insurance companies and other financial intermediaries and is managed by professional' who do not directly or indirectly trade on the 68change$ This has completely eliminated any conflict of interest and helped 1/6 in aggressi2ely pursuing policies and practices within a public interest framework$
2E
The 1/6 model howe2er' does not preclude' but in fact accommodates in2ol2ement' support and contribution of trading members in a 2ariety of way$ +ts board comprises of senior e8ecuti2es from promoter institutions' eminent professionals in the fields of law' economics' accountancy' finance' and ta8ation etc$ public representati2e' nominees of /6%+ and one full time e8ecuti2e of the 68change$ While the %oard deals with broad policy issues decisions relating to market operations are delegated by the %oard to 2arious committee constituted by it$ /uch committee includes representati2es from trading members' professionals' the public and the management$ The day>to>day management of the 68change is delegated to the #anaging Director who is supported by a team of professional staff$
D. )O")AY STOC1 ECC0ANGE
The /tock 68change' #umbai' which was established in 1DA< as ,The 1ati2e /hare and /tockbrokers &ssociationL =a 2oluntary non>profit making association:' has e2ol2ed o2er the years into it present status as the premier /tock 68change in the country$ +t may be noted that the /tock 68change is the oldest one in &sia' e2en older than the Tokyo /tock 68change' which was founded in 1DAD$ The 68change while pro2iding an efficient market also upholds the interests of the in2estors and ensures redressal of their grie2ances' whether against the companies or its own member M brokers$ +t also stri2es to educate and enlighten the in2estors by making a2ailable necessary informati2e inputs$ & Go2erning %oard comprising of B elected directors =one third of them retire e2ery year by rotation: and 68ecuti2e Director' three Go2ernment nominees' a ;eser2e %ank of +ndia nominee and fi2e public representati2es' is the ape8 which regulates the e8change and decides its policies$ The Go2erning %oard following the election of directors annually elects a President' .ide President and an !onorary Treasurer from among the elected directors$
21
The 68ecuti2e Director as the )hief 68ecuti2e "fficer is responsible for the day> do>day administration of the 68change$ The e8change has obtained permission from /ecurities and 68change %oard of +ndia =/6%+: for e8pansion of its %/6>on>7ine Trading =%"7T: network to locations outside #umbai$ +n term of the permission granted by /6%+' the members of the 68change are free to install their trading terminals to cities where there are no /tock 68change$ !owe2er' at centers where the other e8changes are located' the 68change is required to sign a #emorandum of 5nderstanding with these 68changes permitting it to install the %"7T terminals in their jurisdictional areas$ The e8pression of %"7T network was inaugurated by the (inance #inister' Go2ernment of +ndia' /ri P$ )hidambaram on &ugust *E' 1BBA$ The 68change has signed #emorandum of 5nderstanding with ele2en /tock 68changes' 2iI$' )alcutta' Pune' &dhmedabad' /aurashtra' 0ulch =;ajkot:' #adhayapradesh' .adodara' %hubaneshwar and #agadh =i$e$' Patna: Naipur' )oimbatore and )hennai =#adras: to pro2ide %"7T connections to the members of these 68changes after obtaining necessary clearance from /6%+$ The %"7T network has been e8panded to centers outside #umbai and co2ers 2*2 centres ha2ing A2@ ./&Ts =.ery /mall &perture Terminals: and 1E2E TW/s =Trader Work /tations: as on "ctober *1' 1BBB$ "f these' @3D ./&Ts and DA2 TW/s respecti2ely are installed outside #umbai$ With the e8pansion of %"7T outside #umbai' the total a2erage daily turno2er at the 68change has increased from ;s$1E@3 crores in &ugust 1BBA to ;s$ 13E3 crores in &pril 1BBD and further to ;s$2DD< crores in "ctober 1BBB$ The a2erage daily turno2er at the 68change has increased from ;s$ D<1 crores in 1BBA>BD to ;$12D3 crores in 1BBD>BB and further to ;s$2DD< crores in 1BBB>2EEE =&pril M "ctober 1BBB:$ /ome of the important aspects of the working of the stock 68change' #umbai are discussed below$
i
Tradi-3
22
The 68change has switched o2er from the open outcry trading system to a fully automated computeriIed mode of trading known as %"7T =%/6 "n 7ine Trading: /ystem$ This system' which is both order and quote dri2en was commissioned on #arch 13' 1BB<$ +t facilitates more efficient processing' automatic order matching and faster e8ecution of trades$ &bo2e all' the system is more transparent$ The members now enter orders J quotes on their Trader Work /tations =TW/s: in their offices instead of assembling in the trading ring$ The scripCs traded on the 68change ha2e been classified into ,&L' ,%1L' ,%2L' ,)L' ,(L and ,OL group$ The number of scripCs listed on the 68change under ,&L' ,%1L and ,%2L groups which represent the equity segments as on "ctober 1BBB was 1<2' 11EB and 3<1E respecti2ely$ The ,(L group represents the debt market =fi8ed income securities: segment wherein @AE securities were listed as at the end of "ctober 1BBB$ The ,OL group was introduced in the month of Nuly 1BBB and co2ers the list of companies that fail to comply with listing requirements and also fail to resol2e in2estor complaints$ The ,OL group comprises of <*B scripts as of "ctober 1BBB$ The ,)L group co2ers the odd lot securities in ,&L' ,%1L and ,%2L groups and ;ights renunciations$ The stock 68change' #umbai' is the only /tock 68change in the country to pro2ide a facility of on>line trading in odd lot securities and rights renunciations$ This facility of trading in odd lots of securities and ;ights renunciations not only offers an e8it route to in2estors to dispose of their odd lot of securities but also pro2ides them an opportunity to consolidate their securities into market lots$ Trading in this segment co2ers all the scripts listed in the equity segment$ The trading cycle for all these groups of securities is weekly$ The trading cycle for ,&' %1' %2L' ,)L and ,OL group securities representing the equity segment is from #onday to (riday and that for ,(L group securities representing the debt market is from Thursday to Wednesday$ The Transactions in ,&L group scripts are allowed to be carried forward from one settlement to another settlement subject to a ma8imum of A< days from the date of outstanding positions in ,&L group scripts$ The trading session for carry forward of transactions from one settlement to another is conducted on /aturdays' i$e$' at the end of e2ery trading cycle in the equity segment$
2*
Trading on the %"7T system is conducted from #onday to (riday between 1E$EE a$m$ and *$*E p$m$ while the carry M forward session for ,&L group securities is conducted on /aturdays between 1E$EE a$m$ and 12$*E p$m$ The +nformation /ystems Department of the 68change generates the following statements that can be downloaded by the members in their back offices on a daily basis
a: /tatements gi2ing details of the daily transactions entered into by the members$ b: /tatements gi2ing details of margins payable by the members in respect of the trades e8ecuted by them$ The members are allowed to enter into transactions on behalf of their +nstitutional clients' 2iI$' /cheduled )ommercial %anks' +ndian (inancial +nstitutions =+(+s: and (oreign +nstitutional +n2estors =(++s: and #utual (unds registered with /6%+$ The settlement of the trades =money and securities: done on behalf of the +nstitutions may be either through the member himself or through a /6%+ registered )ustodian appointed by an institution$ +n case the deli2ery J payment is to be gi2en or taken by a )ustodian on behalf of an +nstitution- the former has to confirm the trade done by a member$ (or this purpose' the )ustodians ha2e been admitted as members of the )learing !ouse$ +n case the )ustodian does not confirm an institutional transaction' the liability for pay in funds or securities de2ol2es on the concerned member$
23
C0APTE!8III
CO"PANY P!OFI#E
C0APET8III
2<
T0E CO"PANY P!OFI#E
i O!IGIN
+ndia +nfo line was founded by a group of professionals in 1BB<' a seemingly distant past in the international meticulous research was published and distributed in printed form to a client base comprising the whole business including leading #1)s' in2estment banks and consulting firms$ +ndia +nfo line saw the opportunity to e8pand out client base' from a few hundreds to se2eral millions and also 2alue chain$ +n early 1BBB' when internet penetration in +ndia was at its infancy and the future unknown and hard decision of killing our earlier business model and embracing the +nternet' we discontinued deli2ering the printed form and made a2ailable quality research at the click of mouse$ Thus' was born www$indiainfoline$com site has emerged as the most popular website on +ndian business and finance$ +ndia +nfo line is a one>stop financial ser2ices shop' most respected for quality of its ad2ice' personaliIed ser2ice and cutting>edge technology$ +ndia +nfoline 7td is listed on both the leading stock e8changes in +ndia' 2iI$ the stock 68change' #umbai =%/6: and the 1ational /tock 68change =1/6:$ The +ndia +nfoline group' comprising the holding company' +ndia +nfoline 7td and its subsidiaries' straddles the entire financial ser2ices space with offerings ranging from 6quity research' 6quities and deri2ati2es trading' )ommodities trading' Portfolio #anagement /er2ices' #utual (unds' 7ife +nsurance' (i8ed deposits' Gol %onds and other small sa2ings instruments to loan products and +n2estment banking$ +ndia +nfoline also owns and manages the websites' www$indiainfoline$com and www$<paisa$com$
ii /ISION
2@
To be the most respected company in the financial ser2ices space$ To be the premier pro2ider of in2estment ad2isory and financial planning ser2ices in +ndia$
a: Approa=B to re+ear=B
The )ompany follows a simple approach to research as follows
1$ Data collection 2$ &nalysis *$ )ommunication 3$ (eedback
&ll the analysts of the firm ha2e significant e8perience' which they share with each other$ They belie2e that they ha2e an inno2ati2e sources of data' that helps to keep ahead to identify trends$ +t would be unfair on our part not to mention the immense contribution which our clients and readers feed back forms to the P) as well as ;9D for us$ The feedback helps us in all stages> data collection and communication' most importantly' in impro2ing our methodology as well$ ST!ENGT0S The following are the strengths that set the firm apart$ The firm has been in information ser2ices for the last se2en years and has assiduously built the necessary for the business$ We ha2e le2eraged our content to create the +ndia +nfoline brand' which is synonymous with credible information on business and finance$ The firmCs top management team represents a skill set' which is mutually e8clusi2e but collecti2ely e8hausti2e$ The strength of the organiIation has been to continuously inno2ate and rein2ent itself$ CHAIRMA N NNNNNNN
ECECUTI/E DI!ECTO!
iii ST!UCTU!E OF INDIA INFO#INE P/T #TD
BOARD OF DIRECTORS
2A No-8 EAe=,tive I-depe-de-t Dire=tor I-depe-de-t Dire=tor I-depe-de-t Dire=tor
T0E "ANAGE"ENT TEA"
a "r. Nir2al Eaiis the founder and )hairman of +ndia +nfoline 7td$ !e holds an #%& degree from ++# &hmedabad and )hartered &ccountant =&ll +ndia ;ank2: and a )ost &ccountant$ b: "r. /e->atara2a+s the co>promoter and 68ecuti2e Director of +ndia +nfoline 7td$ !e holds a %$Tech 6lectronics and 6lectrical )ommunications 6ngineer from ++T 0haragpur and an #%& degree also$ c: T0E )OA!D OF DI!ECTO!S &part from 1irmal Nain and ; .enkataraman' the %oard of Directors of +ndia +nfoline comprises a 1on>68ecuti2e Director and three +ndependent Directors$ They areQ 1$ #r$ /at Pal 0hattar 2$ #r$ /anji2 &huja *$ #r$ 1ilesh .ikamse 3$ #r$ kranti /ingh
iv IN/ESTO!S !E#ATIONS
2D
The +ndia +nfo line group' comprising the holding company' +ndia info line ltd and its wholly owned subsidiaries entire gamut of in2estment products ranging from 6quities and deri2ati2es trading' )ommodities trading' #anagement /er2ices' #utual (unds' 7ife +nsurance' (i8ed Deposits' Gol bonds and other small sa2ings$ +ndia +nfo line also owns and manages the websites' www$indiainfoline$com and www$<paisa$com$ +ndia +nfo line 7td company listed on both the leading stock e8changes in +ndia namely the /tock 68change' #umbai =%/6: and 1ational /tock 68change =1/6:$ +ndia +nfo line is a forerunner in the field of equity research$ +ndia +nfo line acknowledged by none other than (orbes as R%est of the WebC and RSa must read for in2estors in &sia$ +ndia +nfo lineCs research is a2ailable not just o2er the internet but also on international wire ser2ices 7td$ =code +77:' Thomson (irst )all and +nternet /ecurities where it is amongst the most read +ndian broking companies$ +ndia +nfo line group has a significant presence across the country owing to its 12< offices across 3< cities in +ndia$ These offices are networked and are connected with the corporate office in #umbai$ The group has initiated significantly in technology and research' the results of which are there for e2eryone to see$ The <paisa$com is one the most ad2anced platforms a2ailable to retail in2estor in +ndia$ The group has memberships on %/6 and 1/6 for equities trading and on #)? and 1)D6? for commodities and has a /6%+ license for portfolio #anagement under which' 2arious schemes are offered which ha2e been beating the benchmark indices since inception$ +ndia +nfo line is the one>stop shop for all in2estments in +ndia$
2B
v SU)SIDIA!IES a: I-dia I-fo li-e Se=,ritie+ Pvt #td
+ndia +nfo line securities P2t 7td is a 1EET subsidiary of +ndia +nfo line 7td' which is engaged in the businesses of 6quities broking and portfolio #anagement /er2ices$ +t holds memberships of both the leading stock e8changes of +ndia 2iI$ the /tock 68change' #umbai =%/6: and the 1ational /tock 68change =1/6:$ +t offers broking ser2ices in the )ash and Deri2ati2es segments of the 1/6 as well as the )ash segment of the %/6$
*E
b: I-dia I-foli-e Co22oditie+ Pvt #td
+ndia +nfoline )ommodities P2t 7td is q 1EET subsidiary of +ndia +nfoline 7td' which is engaged in the business of commodities broking$ "ur e8perience in securities broking empowered us with the requisite skills and technologies allow us offer commodities broking as a contra>cyclical alternati2e to equities broking$ We enjoy memberships with the #)? and 1)D6?' two leading +ndian commodities e8changes' and recently acquired membership of DG)?$ W6 ha2e a multi>channel deli2ery model' making it among the select few to online as well as offline trading facilities$
c: I-dia I-foli-e di+trib,tio- Co ltd (II#D
+ndia +nfoline$com Distribution )o 7td is a 1EET subsidiary of +ndia +nfoline ltd and is engaged in the business of distribution of #utual (unds' +P"s' (i8ed Deposits and other small sa2ing products$ +t is one of the largest R2endor>independentC distribution houses and has a wide pan>+ndia footprint of o2er 2*2 branches coupled with a huge number of Rfeet>on>streetC' which help source and ser2ice customers across the length and breadth of +ndia$ +ts unique 2alue proposition of free doorstep e8pert ad2ice coupled with free pick> up and deli2ery of cheques has been met with an enthusiastic response from customers and fund houses alike$ "ur business has e8panded to include the online offerings and download application forms which they can later submit to the product pro2ider$
d: I-dia I-foli-e I-+,ra-=e Servi=e+ #td
+ndia +nfoline insurance ser2ices 7td is also a 1EET subsidiary of +ndia +nfoline 7td and is a registered corporate agent with the insurance regulatory and de2elopment authority =+;D&:$ +t is the largest corporate agent for +)+)+ Prudential 7ife +nsurance )ompany 7td' which is +ndiaCs largest P2t 7ife +nsurance )ompany$
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e: I-dia I-foli-e I-ve+t2e-t Servi=e+ #td
+ndia +nfoline /er2ices 7td is also a 1EET subsidiary of +ndia +nfoline 7td$ +t has a 1%() license from ;%+ and offers margin>funding facility to the broking customers$
f: I-dia I-foli-e I-+,ra-=e )ro>er+ #td
+ndia +nfoline +nsurance %rokers 7td is 1EET subsidiary of +ndia +nfoline 7td$ and is a newly formed subsidiary which will carry out the business of +nsurance of %roking$ We ha2e applied to +;D& for the insurance broking license and the clearance for the same is awaited$
vi %pai+a.=o2
<paisa is the trade name of +ndia +nfoline /ecurities Pri2ate 7imited =<paisa:' member of 1ational /tock 68change and The /tock e8change' #umbai$ <paisa is a wholly owned subsidiary of +ndia portal$ <paisa has emerged as one of leading players in e>broking space in +ndia$ "ur key product offerings are as follows a: I-ve+tor Ter2i-al (IT +n2estor Terminal is recommended for infrequesU1T in2estors' who fall into the ,buy and !oldL school of in2esting' made 2ery popular by warren %uffet M the "racle of "maha$ & typical retail in2estor is a busy corporate e8ecuti2e or a businessman who makes equity in2estments for long term and does not trade e2eryday$ !e prefers a trading interface which works behind pro8y and firewalls as they access the +nternet and the stock markets from their work place' where a direct connection is difficult because of corporate +T security policies$ This product does not ha2e intra>day tick by tick charts$
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b: Tar3et of I-ve+tor Ter2i-al i$ +n2estors' who in2est quite often' churn their portfolios regularly and keep a close watch on the market$ They need to watch li2e quoted and li2e charts$ ii$ iii$ i2$ &cti2e stock market traders with medium 2olumes$ /tudents and researchers who need li2e streaming quotes and intra day charts$ )orporate treasury people$
c: Trader ter2i-al (TT Trader Terminal is for the dedicated day traders' who churn their portfolio on minor mo2ements in the market' sometimes se2eral times a day$ Their rapid and high 2olume trading requires a powerful interface for lightning fast order e8ecution$ They monitor marked to market positions on a minute>to>minute basis' with facilities for panic e8it$ They need all the analysis M fundamental and technical' market gossip' price and 2olume information and much more M all at one click$
d: Tar3et of Trader Ter2i-al i$ +t is for dedicated day traders' who churn their portfolio on minor mo2ements in the market' sometimes se2eral times a day$ Their rapid and high 2olume trading requires a powerful interface for lightening fast order e8ecution$ ii$ iii$ !igh net worth indi2iduals with large and acti2e equities portfolio who need to monitor and action swiftly$ 7arge corporate or trust who ha2e dedicated staff to monitor' analyIe and shuffle their portfolios$
**
e: Feat,re+ of Trader Ter2i-al 1$ Trade e8ecution in a fraction of a secondV 2$ 7i2e streaming quotes$ Price watch on any number of scrips$ *$ +ntra day charts' updated li2e' tick>by>tick$ 3$ 7i2e margin' position' marked to market profit 9 7oss report$ <$ The lowest %rokerage on the face of the earthV @$ /et any number of price alerts on any no of scrips A$ (le8ibility to customiIe screen layout and setting D$ (acility to customiIe any no of portfolios and watch lists B$ (acility to cancel all pending orders in one click$ 1E$ Top gainers' top losers' most acti2e' updated li2e 11$ +nde8 information +nde8 chart' +nde8 stock +nformation 2alue 12$ #arket depth i$e$ best < bids and offers' updated li2e for all scrips 1*$ +nstant trade confirmation 13$ "nline access to both accounts and DP 1<$ 7i2e updated order and trade book 1@$ Details of pending' e8ecuted and rejected orders 1A$ "nline access to customer ser2ices 1D$ 12D>bid super safe encryption 1B$ (acility to place orders on the phone in all major cities 2E$ (acility to place after market orders 21$ "nline fund transfer facility from leading banks$ 22$ "nline intra>day technical calls 2*$ 68hausti2e data base of o2er <EEE companies 23$ !istorical charts and technical analysis tools$ 2<$ +ndia +nfo lineCs world> acclaimed news ser2ice and research 2@$ 7ots moreS$last but not the least ideas that help people make money$
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C0APTE!8I/
SECU!ITY ANA#YSIS T0EO!ITICA# F!A"E;O!1
&$+1.6/T#61T %$/6)5;+T+6/ )$;+/0>;6T5;1
*<
C0APTE!8I/
SECU!ITY ANA#YSIS: T0EO!ITICA# F!A"E;O!1
). IN/EST"ENT
i: Definitions
&ccording to ($ &miling in2estment may be defined as a purchase by an indi2idual or institutional in2estor of a financial or real asset that produces a return proportional to the risk assumed o2er some future in2estment period$ &ccording to D ! (ischer and ; N Nordan in2estment is a commitment of funds made in the e8pectation of some positi2e rate of return +f the in2estment is properly undertaken the return will be commensurate with the risk the in2estor assures$ ii: )oncept of in2estment
+n2estment will generally be used in its financial sense and as such in2estment is the allocation of monitory resources to assets that are e8pected to yield some gain or positi2e return o2er a gi2en period of time$ +n2estment is a commitment of personCs funds to deri2e future income in the form of interest' di2idends' rent' premiums' pension benefits are the appreciation of 2alue of his principal capital$ &ny in2estor would like to know the media or range of in2estments so that he can use his discretion and safe in those in2estments' which will gi2e him both security and stable return$ The ultimate objecti2e of the in2estor is to deri2e a 2ariety of in2estments that meet his preference for risk and e8pected return The in2estor will select the Portfolio that will ma8imiIe his utility$ &ll in2estments is risky as the in2estor will put his money an efficient in2est with proper training can reduce the risk and ma8imiIe the returns !e can a2oid pitfalls and protect his interest #oney and information are the basis and the first requirement of in2estment is the a2ailability of money or sa2ings but money is not enough as in2estments are generally made on the basis of information of the companies' instruments' industry and economy$ %oth money and information flow do help making in2estment management iii I-ve+t2e-t obEe=tive+ The main in2estment objecti2es are increasing the rate of return and reducing the risk$ "ther objecti2es like safety' liquidity and hedge against inflation can be considered as subsidiary objecti2es$ *@
iv I-ve+t2e-t pro=e++ The in2estment process in2ol2es a series of acti2ities leading to the purchase of securities or other in2estment alternati2es$ The in2estment process can be di2ided into fi2e stages' they are as follows a: +n2estment policy b: /ecurity analysis c: .aluation d: Portfolio construction e: Portfolio e2aluation
C. SECU!ITIES
The definition of securities as per the /ecurities )ontracts ;egulation act =/);&:' 1B<@' includes instruments such as shares' bonds' scripCs$ /tocks or other marketable securities of similar nature in or of any incorporate company or body corporate' go2ernment securities' deri2ati2es of securities' security receipt or any other instruments so declared by the central Go2ernment$ III Se=,rity a-aly+i+
The security a2ailable to an in2estor for in2estment is numerous and of 2arious types the shares of o2er se2en thousand companies are listed in the stock e8change of the country$ Traditionally the securities were classified into ownership securities such as equity shares and preference shares and creditor ship securities such as debentures and bonds$ /ecurity analysis is the initial phase of the Portfolio management this consists of two alternati2e approaches namely fundamental analysis and technical analysis I/ F,-da2e-tal a-aly+i+ The primary moti2e of buying a share is to sell it subsequently at a higher rate an in2estor would be interested to know the di2idend to be paid on the share in the future as also the future price of the share$ These 2alues can only be estimated and predicted with certainty$ These 2alues are primarily determined by the performance of the company' which in turn is influenced' by the performance of the industry$ &n in2estor at the time of the in2estment has to e2aluate a lot of information about the past performance and the e8pected future performance of companies' industries and the economy as a whole before taking the in2estment decision such e2aluation or analysis is called fundamental analysis$
*A
(undamental analysis insists that no one should purchase or sell a share on the basis of tips and rumors$ The fundamental approach calls upon the information about company belongs and the economy this result in informed in2esting for the fundamentalist makes use of 6+) framework of analysis$ The multitude of factors affecting the performance of a company can be broadly classified as i2$ )ompany specific factors such as the age of its plant' the quality of management' brand image of its labor management relations act' and these factors are likely to make a company performance quite different from that of its competitors in the same industry$ +ndustry wide factors such as demand supply gap in the industry' the emergence of substitute products' change in go2ernment policy relating to industry etc and these factors affect only those companies belonging to a specific industry$ 6conomy wide factors such as growth rate of the economy' inflation rate' and foreign e8change rates etc' which affects all companies$ A. E=o-o2y a-aly+i+ The performance of a company depends on the performance of the economy if the economy is booming' income raises and the demand for the goods will increase' on the other hand' if the economy is in recession' the performance of the companies will be generally bad$ The following are the same of the key economic 2ariable that an in2estor must monitor as a part of his fundamental analysis$ i$ ii$ iii$ i2$ 2$ 2i$ 2ii$ 2iii$ Growth rate of national income +nflation +nterest rate Go2ernmentCs re2enue' e8penditure and deficits 68change rate +nfrastructure #onsoon 6conomic and political stability
2$
2i$
). I-d,+try a-aly+i+ +n2estors ultimately in2est his money in the securities of one or more specific companies$ 6ach company can be characteriIed as belonging to an industry$ The performance of companies would therefore' be influenced by the fortunes of the industry to which it belongs (or this reason an analyst has to undertake an industry analysis so as to study the fundamentals factors affecting the performance of different industries$
*D
I.
I-d,+try life =y=le
#arketing e8perts belie2es that each product has a life cycle$ +n the same way' an industry is also said to ha2e a life cycle this industry life cycle theory is generally attributed to Nulius Gowdinsky$ &ccording to the theory' the life of an industry can be segregated into i$ ii$ iii$ i2$ Pioneering stage The e8pansion stage The stagnation stage The decay stage
C. Co2pa-y a-aly+i+ )ompany analysis is the final stage of fundamental analysis the economy analysis pro2ides the in2estor a board outline of prospectus of growth in the economy$ The industry analysis helps the in2estor to select the industry in which in2estment would be rewarding$ 1ow he has to decide the company in which he should in2est his money$ )ompany analysis pro2ides the answer to this question$ )ompany analysis deals with the estimation of return and risk of indi2idual shares$ This calls for information this information influence in2estment decisions +nformation regarding companies can be broadly classified into two board groups' internal and e8ternal$ +nternal information sources include annual reports to shareholder' public and pri2ate statement of officers of the company' the companyFs financial statements' etc' e8ternal sources of information are those generated independently these are prepared by in2estment ser2ices and the financial press$ The prosperity of a company would depend upon its profitability and financial health$ The financial statements published by a company periodically help us to assess the profitability and financial healthFs of the company are the balance sheet and the profit and loss account$ The first gi2es us the picture of the companyFs assets and liabilities while the second gi2es us a picture of its earnings$ /ome of the factors to be analyIed at the time of selecting a company for in2estment are i$ ii$ iii$ i2$ 2$ 2i$ 2ii$ 2iii$ Top management officials of that company The companyFs past performance$ The rate of di2idend declared by the company in the past Growth opportunities of the company )ompetiti2e opportunities of the company )ompanyFs Turno2er rate )ompanyFs goodwill Past annual reports' etc
.: Technical analysis *B
The analysts belie2e that share prices are determined by the demand and supply forces operating in the market$ These demand and supply forces in turn are influenced by a number of factors these factors cannot be qualified$ The combined impact of all these factors is reflected in the share price moment$ Technical analysis is the name gi2en to forecasting techniques that utiliIe historical share price date$ The basic premise of technical analysis sis that price mo2e in trends or wa2es which may be upward or down ward$ +t is belie2ed that due present trends are influenced by the past trends and that due projection of future trends is possible by an analysis of past price trends$ The technical analysis is really a study of past or historical price and 2olume mo2ement so as to predict the future stock price beha2ior$ A Do? tBeory Whate2er is generally being accepted today as technical analysis has roots in due Dow theory )harles Dow formulated a hypothesis that the stock markets does not mo2e on a random basis but it is influenced by three distinct cyclical trends that guide its direction$ &ccording to Dow Theory' The market has three moments 9 these moments are simultaneous in nature$ These moments are the primary moments' secondary reactions and minor moments$ The primary moment is the long range cycle that carries the entire market up or down$ This is due long term trend in the market The secondary reactions act as a restraining force on due primary moment These are in due opposite direction to the primary moment and last only for a short while these are also known as corrections$ The third moment in the market is the minor moments which are the day to day inculcations in the market$ These moments are not significant and ha2e a 2ery short duration$ &ccording to Dow Theory' the price moment in the market can be identified by means of a line chart in this chart' the closing prices of shares or the closing 2alues of the market inde8 may be plotted against the corresponding trading days$ ) )a+i= pri-=iple+ of te=B-i=al a-aly+i+ 1$ The market 2alue of security is related to demand and supply factors operating in the market$ 2$ There are both rational and irrational factors which surround the supply and demand factors of a security$ *$ /ecurity prices beha2e in a manner that their moment in continuous in a particular direction for same length of time$ 3$ Trends in stock prices ha2e been seen to changes when there is a shift in the demand and supply factors$
3E
<$ The shifts in demand and supply can be detected through charts prepared specially to show market action$ @$ Patterns which are projected by charts record price moments and these recorded patterns are used by analysts to make forecasts about the moment of prices in future$
D. !IS1
62ery in2estment is characteriIed by return and risk & person making an in2estment e8pects to get some return from the in2estment in the future +t as future is uncertain' so is the future e8pected return +t is this uncertainty associated with the returns from an in2estment that introduces risk into an in2estment$ ;isk distinguishes between the e8pected return and the realiIe return from an in2estment The e8pected return is the uncertain future return that an in2estor e8pects to get from his in2estment The realiIed return is the certain return that an in2estor has actually obtained form his in2estments are the end of the holding period$ The in2estor makes the in2estment decision based on the e8pected return from the in2estment The actual return realiIed from the in2estment may not compare to the e8pected return This possibility of 2ariation of the actual return from the e8pected return is termed risk$
I.
Type+ of ri+>
A. "ar>et ri+> #arket risk arises due to ups and downs in the market this risk affects the share #arket prices of share mo2e up or down consistently for some time period' a general rise in share price is refereed to as a bullish trend' whereas a general fall in share prices is referred to as a mo2ement of share price indices such as a %/6 /ensiti2e +nde8' %/($ 1ational inde8' 1/6 +nde8 etc$ ). I-tere+t 2ar>et ri+> +nterest rate risk is a type of risk that particularly affect debt securities like bonds' debentures & bond or debenture normally has a fi8ed coupon rate of interest$ The issuing company pays interest to the bondholder at this coup rate & bond is normally issued with a coupon rate' which is equal to the interest rate pre2ailing in the market at the time of issue$ The market interest rate may change but the coupon rate remains constant till the maturity of the instrument$ C. P,r=Ba+i-3 po?er ri+> This risk refers to the 2ariation in in2estor return caused by inflation results in lowering of the purchasing power of money this type or risk is more inflationary in fi8ed income securities and less in 2ariable return securities$
31
D. ),+i-e++ ri+> 62ery company operates within a particular operating en2ironment$ This operating en2ironment comprises both internal and e8ternal en2ironment$ The impact of these operation conditions is reflected in the operating costs of the company %usiness risk is thus a function of the operating conditions faced by a company and is the 2ariability in operating income caused by the operating conditions of the company$ E. Fi-a-=ial ri+> (inancial risk is a function of financial le2erage' which is the use of debt in the capital structure The presence of debt in the capital structure creates fi8ed payments in the form of interest This fi8ed interest payment creates more 2ariability in the earnings per share =6P/: a2ailable to equity share holders This 2ariability in 6P/ due to the presence of debt in the capital structure of a company is referred to as financial risk This risk is an a2oidable risk$ II. !et,r-
The gain or loss for a security in a particular period' consisting of income plus capital gains relati2e to in2estment$ +t is usually quoted as a percentage$
III.
!IS1 $ !ETU!N PA!A"ETE!S
A. CO!!E#ATION COEFFICIENT The correlation is one of the most common and most useful statistics$ & correlation is the measure of association between two related 2ariables$ +t range lies between >1 and1$ +f there is a perfect positi2e correlation =W1: means that the 2ariables mo2e together$ +f there is a perfect negati2e correlation =>1: means that the 2ariables mo2e opposite direction$ +f the correlation is E the 2ariables mo2e independently of one another$ The formula for the correlation is
32
). CO/E!IANCE & statistical measure of correlation of the fluctuations is of two different quantities$ +n finance' co2ariance is applied to the annual rates of return of different in2estments' to measure the correlation of their year>to>year fluctuations in performance$ +f two 2ariables tend to 2ary together =that is' when one of them is abo2e its e8pected 2alue' then the other 2ariable tends to be abo2e its e8pected 2alue too:' then the co2ariance between the two 2ariables will be positi2e$ "n the other hand' if one of them is abo2e its e8pected 2alue and the other 2ariable tends to be below its e8pected 2alue' then the co2ariance between the two 2ariables will be negati2e$
TBe defi-itio- i+
)o2e =r1' r2: U 1Jn X
=r1 i > r1 a2er: X =r2 i > r2 a2er:
Where the terms r1 i and r2 i are actual 2alues of the annual rates of return of two in2estments' taken o2er se2eral years' n is the total number of 2alues of r 1 i and r2 i used' and r1 a2e and r2 a2e are the a2erage 2alues of r1 i and r2 i$ C. A#P0A &lpha is used to measure the e8tra return rewarded to in2estor for taking on risk posed by factors other than market 2olatility$ +t also measures how much of this e8tra risk helped the fund out performance to its corresponding benchmark$ & positi2e alpha is the e8tra return awarded to the in2estor for taking additional risk rather than accepting the market return$ & negati2e alpha indicates the fund underperformed for the amount of e8tra return$
3*
The formula for alpha is the following G=sum of y: > ==b: =sum of 8::H J n Where n U number of obser2ations b U beta of the fund 8 U rate of return for the market y U rate of return for the fund
D. )ETA
The %6T& coefficient is a measure of systematic risk$ %6T& is the measure of 2olatilityJresponsi2eness of the indi2idual security return with respect to the changes in the market price$ i$ ii$ +f %6T&U1' the securities are called normal securities i$e$ a gi2en change in market say 1ET is followed by an incidental change in the security$ +f %6T&Y1' the securities are called &ggressi2e securities i$e$ a gi2en change in market is followed by a more than proportionate change in the security$
68 +f the change in the market is 1ET and %6T& of the security is say 1$< there will be 1<T change in the indi2idual securities return$ iii$ +f %6T&Z1' the securities are called Defensi2e securities i$e$ a gi2en change in market is followed by a less than proportionate change in the indi2idual security$ 68 if the change in the market is 1ET and %eta of security is E$< there will be <T change in the indi2idual securities return$
33
C0APTE!8/
SECU!ITY v+. "A!1ET CONDITION8 AN ECA"INITION
&$)0A!T0I AI!TE# %$ !.CO" )$ AND0!A )AN1 D$D!.!EDDYS 6$ 0DFC ($ TCS G$)A9A9 AUTO !$)PC# +$ 9ET AI!;AYS N$ PANTA#OON 0$ITC 7$ A!A/IND "I##S
3<
C0APTE!8/ SECU!ITY v+. "A!1ET CONDITION8 AN ECA"INITION
+n the present chapter' an attempt is made to study the selected securities status by using risk>return parameters and made comparison with the market conditions taken /9P )1? <EE as the base$ The 2arious securities like /atyam' ;$com' &ndhra %ank' Dr$;eddys' !dfc' Tcs' %ajaj &uto' %pcl' Net airways' +tc' Pantaloon' and &ra2ind #ills are studied$ The 2arious risk> return parameters like &2erage rate of return' %eta' &lpha' )o2ariance' and )orrelation coefficient are used to make comparison between the scripts performance with market condition$
3@
A. )0A!AT0I AI!TE#
The monthly risk>return parameters on the security %harathi airtel basing on the technical information$ &nd the following table<$1 shows the o2erall market risk>return parameters with respect to /9P )1? <EEbasing on the technical information$
TA)#E8%.7: PE!FO!"ANCE E/A#UATION OF )0A!AT0I AI!TE#
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 741.21 729.25 585.79 502.11 609.70 657.52 669.48 334.74 382.56 406.47 406.47 442.33 0 -0.0161 -0.1967 -0.1429 0.2143 0.0784 0.0182 -0.5000 0.1429 0.0625 0.0000 0.0882
(X-X’)2 0 0.0000 0.0322 0.0158 0.0536 0.0092 0.0013 0.2331 0.0256 0.0064 0.0003 0.0111 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
DX*DM 0 0.00005 0.0269 0.0047 -0.0022 0.0082 0.0027 -0.0158 0.0029 0.0016 0.0003 0.0099 0.0001
0 0.0011 0.1795 0.1256 0.2315 0.0957 0.0354 0.4828 0.1601 0.0797 0.0172 0.1055
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
454.29 0.0270 0.0443 0.0020 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
3A
TA)#E8%.7.7: TEC0NICA# INFO!"ATION
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6
!ESU#T >E$E1A23@ E$AD@*EB >E$E23AD* E$1*<3B2 E$EE*2D1
Fro2 tBe above table %.7.7, I ob+erved tBe follo?i-3 poi-t+:8
&$ +n this security the a2erage rate of return is negati2e i$e$ =>E$E1A23@:$+t indicates loss to in2estor$ %$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$AD@*EB:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return )$ &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E23AD1: it indicates that the fund has an underperformance$ D$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$1*<3B2: it indicates the positi2e correlation means the price of the security and market mo2e together$ 6$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE*2D1: it indicates that the return of security and return on market mo2e together$ ($ /o this company script is not suitable for in2est because the return is bad and risk is also high$
3D
DIAGRAM-5.1: GRAPHICAL REPRESENTATION:COMPARISON OF BHARTHI AIRTEL WITH MARKET (2
0.3 0.2 0.1 RETURN 0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$1 shows the fluctuations in market return and script return$
3B
). !.CO"
The monthly risk>return parameters on the security ;$com basing on the technical information$ &nd the following table<$2 shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.4: PE!FO!"ANCE E/A#UATION OF !.CO"
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 0.2030 -0.3544 -0.2615 0.2036 0.3750 2.2219 0 0.0365 0.5210 0.4281 0.0370 0.2085 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 113.14 136.11 87.87 64.89 78.10 107.39 346.00
(X-X’)2 0 0.0013 0.2714 0.1833 0.0014 0.0435 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95
M
DX*DM 0 0.0016 0.0780 0.0159 -0.0004 0.0180 0.1578 -0.0023 -0.0007 -0.0123 -0.0015 -0.0219 -0.0005
2.0553 4.2244 2988.25 378.85 0.0949 0.0716 0.0051 3114.55 427.95 0.1296 0.0370 0.0014 3200.45 236.03 -0.4485 0.6150 0.3783 3295.05 257.86 0.0925 0.0741 0.0055 3393.10 240.63 -0.0668 0.2334 0.0545 3107.75 234.88 0.0239 0.1905 0.0363 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
<E
TA)#E8%.4.7: TEC0NICA# INFO!"ATION:8 ECP!ESSION
&.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6
!ESU#T
E$1@@<A2 3$@2D2A2 E$12221 E$E<DAE2 E$E1B*13
Fro2 tBe above table %.4.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$1@@<A2:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =3$@2D2A2:$ &s beta Y1 it means the change in market price leads to more proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$12221: it indicates that the fund has an out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$E<DAE2: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$E1B*13: it indicates that the return of security and return on market mo2e together$ /o this company script is suitable for in2est because the return is good and risk is also low$
%$
)$
D$
6$
($
<1
DIAGRAM-5.2: GRAPHICAL REPRESENTATION:COMPARISION OF R#COM WITH MARKET (2
2.5 2 1.5 RETURN 1 0.5 0 1 -0.5 -1 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$2 shows the fluctuations in market return and script return$
<2
C. AND0!A )AN1
The monthly risk>return parameters on the security &ndhra %ank basing on the technical information$ &nd the following table<$* shows the o2erall market risk>return parameters with respect to /9P )1? <EEbasing on the technical information$
TA)#E8%.&: PE!FO!"ANCE E/A#UATION OF AND0!A )AN1
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 82.11 73.40 68.94 53.64 52.29 67.20 68.55 69.91 71.27 81.92 83.85 82.11 80.37 0 -0.1061 -0.0608 -0.2219 -0.0252 0.2851 0.0201 0.0198 0.0195 0.1494 0.0236 -0.0208 -0.0212
(X-X’)2 0 0.0123 0.0043 0.0514 0.0009 0.0786 0.0002 0.0002 0.0002 0.0209 0.0004 0.0007 0.0007 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75 3145.35
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 -0.0048 0.0098 0.0084 0.0003 0.0242 0.0012 0.0005 0.0003 0.0029 0.0004 -0.0024 0.0001
0 -0.1108 -0.0655 -0.2267 -0.0299 0.2804 0.0153 0.0151 0.0147 0.1447 0.0188 -0.0255 -0.0259
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
=/ource /econdary data from www$nseindia$com:
<*
TA)#E8%.&.7: TEC0NICA# INFO!"ATION:8 ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T E$EE3A31 E$D112A1 >E$EE*E*< E$*1A*D3 E$EE**D@
Fro2 tBe above table %.&.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$EE3A31:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$D112A1:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$EE*E*<: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$*1A*D3: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE**D@: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
<3
DIAGRAM-5.3: GRAPHICAL REPRESENTATION:-
COMPARISON OF ANDHRA BANK WITH MARKET(2
0.5 0.4 0.3 0.2 0.1
!- ")
N U T E R
0 -0.1 -0.2 -0.3 PERIOD
ret n&ret
1
2
3
4
5
6
7
8
9
10
11
12
13
The abo2e diagram><$* shows the fluctuations in market return and script return$
<<
D. D!.!EDDYS
The monthly risk>return parameters on the security Dr$;eddys basing on the technical information$ &nd the following table<$3 shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.': PE!FO!"ANCE E/A#UATION OF D!.!EDDYS
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 0.5000 0.1640 -0.3023 0.0261 0.0444 -0.0646 0.0337 -0.0010 0.0629 -0.0579 -0.0779 0 0.4709 0.1349 0.3314 0.0030 0.0154 0.0937 0.0046 0.0301 0.0339 0.0870 0.1070 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 595.29 892.94 1039.40 725.22 744.12 777.19 727.00 751.50 750.75 798.00 751.80 693.25
(X-X’)2 0 0.2218 0.0182 0.1098 0.0000 0.0002 0.0088 0.0000 0.0009 0.0011 0.0076 0.0114 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M
DX*DM 0 0.0205 -0.0202 0.0123 0.0000 0.0013 -0.0072 0.0002 -0.0005 0.0007 -0.0018 -0.0100 0.0001
728.25 0.0505 0.0214 0.0005 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.'.7: TEC0NICA# INFO!"ATION:8
<@
ECP!ESSION /&.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6
!ESU#T E$E2BEAB >E$EB3D13 E$E2BBDD >E$E1D@AA >E$EEE*B@
Fro2 tBe above table %.'.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$E2BEAB:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =>E$EB3D13:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$E2BBD: it indicates that the fund has an out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =>E$E1D@AA: it indicates the negati2e correlation means the price of the security and market mo2e opposite direction$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is negati2e i$e$ =>E$EEE*B@: it indicates that the return of security and return on market mo2e opposite direction$ /o this company script is suitable for in2est because the return is good and risk is also low$
%$
)$
D$
6$
($
DIAGRAM-5.4: GRAPHICAL REPRESENTATION:<A
COMPARISION OF DR#REDDYS WITH MARKET (2
0.6 0.5 0.4 RETURN 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10
!- ")
11
12
13
The abo2e diagram><$3 shows the fluctuations in market return and script return$
F
E. 0DFC
<D
The monthly risk>return parameters on the security !dfc basing on the technical information$ &nd the following table<$< shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.%: PE!FO!"ANCE E/A#UATION OF 0DFC
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 -0.0187 -0.1435 0.0145 0.0330 0.1127 0.1702 -0.0452 0.1250 -0.0122 0.0289 0 0.0316 0.1563 0.0016 0.0201 0.0999 0.1574 0.0580 0.1122 0.0250 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 1336.80 1311.75 1123.55 1139.80 1177.40 1310.15 1533.15 1463.90 1646.95 1626.90 1673.85
(X-X’)2 0 0.0010 0.0244 0.0000 0.0004 0.0100 0.0248 0.0034 0.0126 0.0006 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05
M
DX*DM 0 -0.0014 0.0234 -0.0001 -0.0002 0.0086 0.0121 -0.0019 0.0020 -0.0005 0.0003 -0.0105 0.0000
0.0160 0.0003 3393.10 1507.25 -0.0995 0.1124 0.0126 3107.75 1509.80 0.0017 0.0112 0.0001 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.%.7: TEC0NICA# INFO!"ATION:8
<B
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!&
'O##&O!&'O$!!
!ESU#T E$E12D3 E$@*@2EE E$EE@A32 E$3@ADE2 E$EE2@<<
)".&;+&1)6
Fro2 tBe above table %.%.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$E12D3:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$@*@2EE:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$EE@A32: it indicates that the fund has a out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$3@ADE2: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE2@<<: it indicates that the return of security and return on market mo2e together$ /o this company script is suitable for in2est because the rate of return is good and risk is also low$
%$
)$
D$
6$
($
DIAGRAM-5.5: GRAPHICAL REPRESENTATION:@E
COMPARISION OF HDFC WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 1 -0.05 -0.1 -0.15 -0.2 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9
!- ")
10
11
12
13
The abo2e diagram><$< shows the fluctuations in market return and script return$
@1
F. TCS
The monthly risk>return parameters on the security Tcs basing on the technical information$ &nd the following table<$@ shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.<: PE!FO!"ANCE E/A#UATION OF TCS
CLOSE PRICE RETURN ON PRICE RETRET’ DX=(XX’) 0 0.0333 -0.0993 -0.0248 -0.4616 0.0661 0.0240 0.0009 0.1028 0.0194 0.0457 -0.0661 0 0.0584 0.0742 0.0003 0.4366 0.0912 0.0491 0.0260 0.1278 0.0444 0.0708 0.0411 (RETRET’ ) SQ RETURN ON NIFTY NIFTYNIFTY’ DM=(M -M’) 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025 MRKT VAR (MM’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DATE
NINIFTY
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 1915.50 1979.35 1782.90 1738.75 936.15 998.05 1022.05 1087.10 1198.80 1222.00 1277.90 1193.40
(X-X’)2 0 0.0034 0.0055 0.0000 0.1906 0.0083 0.0024 0.0007 0.0163 0.0020 0.0050 0.0017 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M
DX*DM 0 0.0025 0.0111 0.0000 0.0042 0.0079 0.0038 0.0008 0.0023 0.0009 0.0014 -0.0038 0.0001
1233.85 0.0339 0.0589 0.0035 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.<.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$E2<E33
@2
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
E$3A2<B2 >E$E2B<A< E$1*31B1 E$EE1BA2
Fro2 tBe above table %.<.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E2<E33:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$3A2<B2:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ =>E$E2B<A<: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$1*31B1: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE1BA2: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the rate of return is negati2e and risk is also high$
%$
)$
D$
6$
($
DIAGRAM-5.6: GRAPHICAL REPRESENTATION:-
@*
COMPARISION TCS WITH MARKET (2
0.2 0.1 0 RETURN 1 -0.1 -0.2 -0.3 -0.4 -0.5 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9
!- ")
10
11
12
13
The abo2e diagram><$@ shows the fluctuations in market return and script return$
G.)A9A9 AUTO
@3
The monthly risk>return parameters on the security %jajj &uto basing on the technical information$ &nd the following table<$A shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.(: PE!FO!"ANCE E/A#UATION OF )A9A9 AUTO
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 2746.25 3011.10 2741.15 2748.75 2462.20 2695.90 2996.40 2748.00 2646.45 2619.15 2772.15 2618.55 0 0.0964 -0.0897 0.0028 -0.1042 0.0949 0.1115 -0.0829 -0.0370 -0.0103 0.0584 -0.0554
(X-X’)2 0 0.0107 0.0069 0.0001 0.0095 0.0103 0.0140 0.0058 0.0009 0.0000 0.0043 0.0024 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 0.0045 0.0124 -0.0004 0.0009 0.0088 0.0091 -0.0025 -0.0005 -0.0001 0.0013 -0.0046 -0.0002
0 0.1032 -0.0829 0.0096 -0.0975 0.1017 0.1183 -0.0761 -0.0302 -0.0035 0.0652 -0.0486
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
2427.60 -0.0729 -0.0661 0.0044 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.(.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$EE@ABB
@<
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
*$E3EE@* >E$E*<B*D E$<@@321 E$EE232D
Fro2 tBe above table %.(.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$EE@ABB:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =*$E3EE@*:$ &s betaY1 it means the change in market price leads to greater proportionate change in security return$ &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E*<B*D: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$<@@321: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE232D: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
DIAGRAM-5.7: GRAPHICAL REPRESENTATION:-
@@
COMPARISION OF BA$A$ AUTO WITH MARKET (2
0.15 0.1 0.05 RETURN 0 1 -0.05 -0.1 -0.15 -0.2 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10
!- ")
11
12
13
The abo2e diagram><$A shows the fluctuations in market return and script return$
0.)PC#
@A
The monthly risk>return parameters on the security %pcl basing on the technical information$ &nd the following table<$D shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.6: PE!FO!"ANCE E/A#UATION OF )PC#
CLOS E PRICE RETUR N ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(MM’)
MRKT VAR
X Mar2008 &Apr2008 May2008 Jun2008 &&Jul2008 Aug2008 Sep2008 &Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 425.30 438.05 396.50 334.50 312.45 361.55 366.30 400.90 344.30 338.05 360.40 311.25 0 0.0300 -0.0949 -0.1564 -0.0659 0.1571 0.0131 0.0945 -0.1412 -0.0182 0.0661 -0.1364
(X-X’)2 0 0.0027 0.0054 0.0182 0.0020 0.0319 0.0012 0.0134 0.0143 0.0000 0.0077 0.0132 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 0.0022 0.0110 0.0050 0.0004 0.0154 0.0027 0.0038 -0.0022 0.0001 0.0018 -0.0108 0.0000
0 0.0515 -0.0734 -0.1349 -0.0444 0.1786 0.0346 0.1159 -0.1197 0.0033 0.0876 -0.1149
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
302.75 -0.0273 -0.0058 0.0000 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
TA)#E8%.6.7: TEC0NICA# INFO!"ATION: 8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$E213D@
@D
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
E$<DA1B@ >E$E2A113 E$*@EB<* E$EE23<E
Fro2 tBe above table %.6.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E213D@:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$<DA1B@:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E2A113: it indicates that the fund has an underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$*@EB<*: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE23<E: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high
%$
)$
D$
6$
($
DIAGRAM-5.8: GRAPHICAL REPRESENTATION:-
@B
COMPARISION OF BPCL WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 1 -0.05 -0.1 -0.15 -0.2 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10
!- ")
11
12
13
The abo2e diagram><$D shows the fluctuations in market return and script return$
I. 9ET AI!;AYS
AE
The monthly risk>return parameters on the security Net &irways basing on the technical information$ &nd the following table<$B shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.G: PE!FO!"ANCE E/A#UATION OF 9ET AI!;AYS
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 982.65 963.70 738.60 589.75 507.30 536.30 647.45 595.75 673.75 617.35 763.35 597.70 633.20 0 -0.0193 -0.2336 -0.2015 -0.1398 0.0572 0.2073 -0.0799 0.1309 -0.0837 0.2365 -0.2170 0.0594
(X-X’)2 0 0.0000 0.0448 0.0322 0.0139 0.0062 0.0525 0.0034 0.0233 0.0038 0.0667 0.0381 0.0066 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75 3145.35
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 0.0001 -0.0317 0.0067 0.0011 0.0068 0.0176 -0.0019 0.0027 -0.0012 0.0052 -0.0183 0.0002
0 0.0025 0.2118 -0.1797 -0.1180 0.0790 0.2291 -0.0580 0.1527 -0.0619 0.2583 -0.1952 0.0812
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
=/ource /econdary data from www$nseindia$com
TA)#E8%.G.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 !ESU#T >E$2D*<*2
A1
%6T& &7P!& )";; "( )"6(( )".&;+&1)6
E$2<2<A1 >E$E232*1 E$E2BE2D E$EE1E<3
Fro2 tBe above table %.G.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E21D13:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$2<2<A1:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E232*1: it indicates that the fund has an underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$E2BE2D: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE1E<3: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
DIAGRAM-5.9: GRAPHICAL REPRESENTATION:-
A2
COMPARISION OF $ET AIRWAYS WITH MARKET (2
0.3
!- ")
0.2 0.1
RETURN
0 1 -0.1 -0.2 2 3 4 5 6 7 8 9 10 11 12 13
-0.3 PERIOD #$% N&#$%
The abo2e diagram><$B shows the fluctuations in market return and script return$
9. PANTA#OON
A*
The monthly risk>return parameters on the security Pantaloon basing on the technical information$ &nd the following table<$1E shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.75: PE!FO!"ANCE E/A#UATION OF PANTA#OON
RETURN ON PRICE (RETRET’ ) SQ RETURN ON NIFTY
DATE
CLOSE PRICE
RETRET’ DX=(XX’)
NINIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 1962.60 1947.50 1642.50 1350.00 1252.70 1656.75 1886.30 1861.35 2256.60 409.95 464.90 421.45 0 -0.0077 -0.1566 -0.1781 -0.0721 0.3225 0.1386 -0.0133 0.2123 -0.8183 0.1340 -0.0935
(X-X’)2 0 0.0029 0.0411 0.0503 0.0140 0.0764 0.0085 0.0035 0.0276 0.7474 0.0077 0.0195 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM 0 -0.0023 0.0304 0.0083 0.0011 0.0238 0.0071 -0.0019 0.0030 -0.0173 0.0018 -0.0131 -0.0003
0 -0.0539 -0.2028 -0.2243 -0.1182 0.2764 0.0924 -0.0594 0.1662 -0.8645 0.0879 -0.1396
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
392.75 -0.0681 -0.1143 0.0131 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
A3
TA)#E8%.75.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T E$E3@1@3 E$D1E<12 E$E*D*B< E$EDD123 E$EE**D2
Fro2 tBe above table %.75.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is positi2e i$e$ =E$E3@1@3:$+t indicates well to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$D1E<12:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is positi2e i$e$ =E$E*D*B<: it indicates that the fund has an out performance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$EDD123: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE**D2: it indicates that the return of security and return on market mo2e together$ /o this company script is suitable for in2est because the return is good and risk is also low$
%$
)$
D$
6$
($
A<
DIAGRAM-5.10: GRAPHICAL REPRESENTATION:COMPARISION OF PANTALOON WITH MARKET (2
0.4 0.2 RETURN 0 1 -0.2 -0.4 -0.6 -0.8 -1 PERIOD #$% N&#$% 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$1E shows the fluctuations in market return and script return$
A@
1.ITC
The monthly risk>return parameters on the security +tc basing on the technical information$ &nd the following table<$11 shows the o2erall market risk>return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.77: PE!FO!"ANCE E/A#UATION OF ITC
DATE
CLOSE PRICE
RETURN ON PRICE
RETRET’ DX=(XX’)
(RETRET’ ) SQ
NINIFTY
RETURN ON NIFTY
NIFTYNIFTY’ DM=(M -M’)
MRKT VAR
X Mar2008 Apr2008 May2008 Jun2008 Jul2008 Aug2008 Sep2008 Oct2008 Nov2008 ec2008 Jan2009 !e"2009 Mar2009 195.15 203.75 165.40 182.40 167.40 191.50 187.70 190.00 185.10 176.10 174.60 171.70 0 0.0441 -0.1882 0.1028 -0.0822 0.1440 -0.0198 0.0123 -0.0258 -0.0487 -0.0085 -0.0166
(X-X’)2 0& 0.0038 0.0292 0.0144 0.0042 0.0260 0.0000 0.0009 0.0001 0.0010 0.0001 0.0000 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 3295.05 3393.10 3107.75
M 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM &&&&&&&&&&0& 0.0027 0.0256 -0.0045 0.0006 0.0139 -0.0002 0.0010 -0.0002 -0.0006 0.0002 0.0001 -0.0003
0& 0.0613 -0.1710 0.1200 -0.0650 0.1612 -0.0026 0.0295 -0.0086 -0.0314 0.0087 0.0006
0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
151.15 -0.1197 -0.1025 0.0105 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
AA
TA)#E8%.77.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T >E$E1<DD3 E$A@313* >E$E23<*1 E$<D3@AA E$EE*1DB
Fro2 tBe above table %.77.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E1<DD3:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$A@313*:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E23<*1: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$<D3@AA: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE*1DB: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
)$
D$
6$
($
AD
DIAGRAM-5.11: GRAPHICAL REPRESENTATION:COMPARISION OF ITC WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 -0.05 -0.1 -0.15 -0.2 -0.25 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10 11 12 13
!- ")
The abo2e diagram><$11 shows the fluctuations in market return and script return$
AB
#. A!A/IND "I##S
The monthly risk>return parameters on the security &ra2ind #illsC basing on the technical information$ &nd the following table<$12 shows the o2erall market risk> return parameters with respect to /9P )1? <EE basing on the technical information$
TA)#E8%.74: "I##S
PE!FO!"ANCE
E/A#UATION
OF
A!A/IND
DATE
CLOSE PRICE
RETURN ON PRICE
RETRET’ DX=(XX’) 0& -0.0132 -0.1472 -0.1594 0.0122 0.1802 0.1673 -0.0289 -0.0932
(RETRET’ ) SQ
NINIFTY
RETURN ON NIFTY
NIFTYNIFTY’ DM=(M -M’) 0 0.0435 -0.1497 -0.0372 -0.0096 0.0862 0.0768 0.0327 0.0180 0.0200 0.0202 0.0937 0.0025
MRKT VAR
X Mar-08 Apr-08 May08 Jun-08 Jul-08 Aug08 Sep08 Oct-08 Nov08 ec08 Jan-09 !e"-09 Mar-09 100.50 93.15 73.85 57.65 54.90 61.50 68.10 62.05 52.55 0 -0.0731 -0.2072 -0.2194 -0.0477 0.1202 0.1073 -0.0888 -0.1531
(X-X’)2 0 0.0002 0.0217 0.0254 0.0001 0.0325 0.0280 0.0008 0.0087
M 2910.35 3064.70 2635.25 2562.50 2562.55 2807.95 2988.25 3114.55 3200.45 0 0.0530 -0.1401 -0.0276 0.0000 0.0958 0.0864 0.0423 0.0276 0.0296 0.0298 -0.0841 0.0121
(M-M’)2 0 0.0019 0.0224 0.0014 0.0001 0.0074 0.0059 0.0011 0.0003 0.0004 0.0004 0.0088 0.0000
DX*DM &0 -0.0006 0.0220 0.0059 -0.0001 0.0155 0.0128 -0.0009 -0.0017 0.0009 0.0041 -0.0083 -0.0002
51.80 -0.0143 0.0457 0.0021 3295.05 59.30 0.1448 0.2047 0.0419 3393.10 50.50 -0.1484 -0.0884 0.0078 3107.75 43.45 -0.1396 -0.0797 0.0063 3145.35 (So,r=e: Se=o-dary data fro2 ???.-+ei-dia.=o2
DE
TA)#E8%.74.7: TEC0NICA# INFO!"ATION:8
ECP!ESSION &.G ;6T "( /6)5;+T4 %6T& &7P!& )";; "( )"6(( )".&;+&1)6 !ESU#T >E$E<<*2A E$BBE1<< >E$E@B3*2 E$<*@3ED E$EE31*2
Fro2 tBe above table %.74.7, I ob+erved tBe follo?i-3 poi-t+:8
&$
+n this security the a2erage rate of return is negati2e i$e$ =>E$E<<*2A:$+t indicates loss to in2estor$ %eta is the measure of 2olatility of the indi2idual security return with respect to the change in the market price$ +n this company beta 2alue is =E$BBE1<<:$ &s beta Z1 it means the change in market price leads to less proportionate change in security return &lpha is used to measure the e8tra return rewarded to an in2estor for taking the risk posed by factors$ +t tells about the fund out performance with its corresponding benchmark$ +n this company alpha 2alue is negati2e i$e$ => E$E@B3*2: it indicates that the fund has a underperformance$ )orrelation coefficient measures the degree of association between two related 2ariables$ +n this company the 2alue is =E$<*@3ED: it indicates the positi2e correlation means the price of the security and market mo2e together$ )o2ariance means the degree to which returns on two risky assets mo2e together$ +n this company the 2alue is positi2e i$e$ =E$EE31*2: it indicates that the return of security and return on market mo2e together$ /o this company script is not suitable for in2est because the return is bad and risk is also high$
%$
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6$
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D1
DIAGRAM-5.12: GRAPHICAL REPRESENTATION:COMPARISION OF ARAVIND MILLS WITH MARKET (2
0.2 0.15 0.1 RETURN 0.05 0 -0.05 -0.1 -0.15 -0.2 -0.25 PERIOD #$% N&#$% 1 2 3 4 5 6 7 8 9 10 11 12 13
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The abo2e diagram><$12 shows the fluctuations in market return and script return$
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C0APTE!8/I
FINDINGS, SUGGESTIONS HSU""A!Y
D*
C0APTE! /I
FINDINGS, SUGGESTIONS H SU""A!Y
FINDINGS
1$ %!&;&T+ &+;T67 script is not suitable for in2est because the return is bad 9 the risk also high$ 2$ ;$)"# this script is suitable for in2est because the return is good 9 the risk also low$ *$ &1D!;& %&10 script is not suitable for in2est because the return is negati2e 9 the risk is also high$ 3$ Dr$ ;6DD4C/ this script is suitable for in2est because the risk is low although the return is positi2e$ <$ !D() this script is suitable for in2est because the return is good 9 the risk also low$ @$ T)/ script is not suitable for in2est because the return is negati2e 9 the risk is also high$ A$ %&N&N &5T" script is not suitable for in2est because the risk is high and the return is bad$ D$ %P)7 this script is not suitable for in2est although the risk is high but return is low$ B$ N6T &+;W&4/ this script is not suitable for in2est because the return is bad 9 the risk is high$ 1E$ P&1T7""1 script is suitable for in2est because the return is good 9 the risk also low$ 11$ +T) script is not suitable for in2est because the risk is high and the return is bad$ 12$ &;.+1D #+77/ script is not suitable for in2est because the risk is high and the return is bad$
SUGGESTIONS
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i$
/hares are not for short term in2estments' usually the best returns will be gained o2er the medium and long term$ The in2estor should consider in2esting in steady and long growth shares only$ The in2estor has to consider both risk and returns of the company before in2esting in it$ The in2estor can eliminate di2ersifiable risk by holding a large enough portfolio of securities$ The in2estor has to analyIe the performance of the company before making in2estment decisions$ The in2estor should not belie2e in rumors about the market trends$ The in2estor has to consider the information about the company profile' performance history and economic factors' before buying or selling any share$ +n2estors need to ha2e high le2el of financial ad2ice so that they can take appropriate decisions based on their risk' return$
ii$ iii$ i2$
2$
2i$ 2ii$
2iii$
D<
SU""A!Y
The focus of the study was on ,P6;(";#&1)6 6.&75&T+"1 "( D+((6;61T /6)5;+T+6/ & study of selected instruments traded at +ndia +nfo 7ine 7td$' !yderabadII with an objecti2e to calculate the risk>return parameters and the status of the company performance$ +ndia +nfo 7ine 7td$' was set up in 1BB< is a stock broking )ompany$ +t is a trading member in both 1/6 and %/6$ +ts main action isonline trading of /ecurities$
+n my study + ha2e taken 12 selected scripCs i$e$' %harthi airtel' ;$com' &ndhra %ank' Dr$;eddys' !dfc' Tcs' %ajaj &uto' %pcl' Net airways' +tc' Pantaloon' and &ra2ind #ills$ The main aim is to find out risk>return parameters base on the market /9P )1? <EE$ The past one year monthly market price data of each selected scrip ha2e been collected$ The calculation of the risk>return has been done based on the a2erage rate of return' beta' alpha' co2ariance and correlation coefficient$ ;$)om is performing well the in2estor can in2est in this$ The risk taker in2estor can in2est in ,%ajaj &utoL$ The normal in2estor can in2est in ,Dr$reddys hdfc pantaloonL this gi2es moderate return with moderate risk$ The remaining company scripCs ha2e not Performed well$ +n +ndia +nfo 7ine 7td$' daily market information is collected and updated to enable the in2estors to in2est in profitable shares$ Depending on the calculation of this risk and ;eturn it made the in2estor easier to decide where to in2est$ This study makes the in2estor understand clearly the performance of each company' it #akes easier for them to take the right decision$
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)I)#OG!AP0Y:8
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/6)5;+T4 &1&74&/+/ &1D (";TP"7+" #&1&G6#61T &uthor ($&miling
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(51D=T&7/ "( /6);5T+6/ &1&74/+/ &uthor D$!$(ischer ;$N$Nordan
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N"5;1&7/ o %usiness +ndia
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W6%/+T6 www$ 1seindia$com www$indiainfoline$com www$<paisa$com
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