finance,investor behaviour in equity market

7/31/2019 finance,investor behaviour in equity market

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PROJECT REPORT

Submitted by

SRIDHAR K

Register No: 098001125050

In partial fulfillment for the award of the degree

of

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT

in

SRI RAMAKRISHNA INSTITUTE OF TECHNOLOGY

COIMBATORE - 641010

JUNE 2011

INVESTMENT PERFOMANCE

OF SELECTED STOCKS

TRADED IN NSE


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SRI RAMAKRISHNA INSTITUTE OF TECHNOLOGY

Coimbatore - 10

DEPARTMENT OF MANAGEMENT

PROJECT WORK

JUNE 2011

This is to certify that the project entitled

INVESTMENT PERFORMANCE OF SELECTED STOCKS

TRADED IN NSE

is the bonafide record of project work done by

SRIDHAR K


of Master of Business Administration during the year 2010-2011.

__________________

Mrs.D.Sangeetha

(Project guide)

____________________

Dr.R.Rajendran

(Head of the Department)

Submitted for the Project Viva-Voce examination held on _____________

_________________

Internal Examiner

___________________

External Examiner


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DECLARATION

I affirm that the project work titled INVESTMENT PERFORMANCE

OF SELECTED STOCKS TRADED IN NSE being submitted in partial

fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is

the original work carried out by me. It has not formed the part of any other project

work submitted for award of any degree or diploma, either in this or any other

University.

---------------------------------

SRIDHAR K


I certify that the declaration made above by the candidate is true.

Signature of the Guide

-------------------------------

Mrs.D.SANGEETHA

Assistant Professor


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ACKNOWLEDGEMENT

I would like to take this opportunity to express my sincere gratitude to all those

who have helped me throughout this final year project. It gives me immense pleasure to

acknowledge all those who have rendered encouragement and support for the successful

completion of this work.

I am highly indebted and grateful to Dr. R. JOSEPH XAVIER, Principal of Sri

Ramakrishna Institute of Technology , for his encouragement given to me in carrying out

the Institutional Training.

I wish to acknowledge my deep sense of gratitude to Dr.R.RAJENDRAN, Head

of the Department, Sri Ramakrishna Institute of Technology for giving this opportunity to

complete this project in a good atmosphere.

I express my heartfelt thanks to my respected guide Mrs.D.SANGEETHA,

Assistant Professor, for her constant encouragement and support during the entire project

work.

I also extend my sincere gratitude to Mr.P.BALAMUTHU, Branch Manager,NBSL, Karur , whose advice and guidance helped me in the successful completion of this

project.

Sincere gratitude and thanks to God ,my family and friends who has been my

guiding light and constant protector in all that we have done and making things possible

for me.

SRIDHAR.K



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CONTENT

CHAPTER PARTICULAR Pg.No

Abstract vii

List of tables viiiList of Charts x

1. Introduction

1.1 About the Study 1

1.2 About the Industry 7

1.3 About the Company 14

1.4 Review of Literature 17

2. Main Theme of the Project

2.1 Objective of the Study 19

2.2 Scope and Limitations 19

2.3 Methodology 20

3. Analysis & Interpretation 21

4. Findings, Recommendations and Conclusion

4.1 Findings 55

4.2 Recommendations 60

4.3 Conclusion 61

Appendix 62

Bibliography 64


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ABSTRACT

This project work was undertaken with a view to study and analyzes the

Investment performance of selected stock traded in National Stock Exchange with

reference to Northeast Broking Services Limited, Karur. The main objective of the study

is to identify the investable companies stocks for higher return than the guaranteed

market return during the months of March, April and May 2011. This study is used to

anticipate the Risk and Return for the stocks of selective companies with their market

price. The Risk and Return for the selected stock of the companies were calculated using

the Alpha, Beta, and Variance analysis.

The choice of the investment pattern of the investor were identified through the

Risk and Return value of the different sectors like Automobile, cement, Information

Technology, Pharmaceuticals and Power sectors that are listed in the National Stock Exchange.


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LIST OF TABLES

Table No Table Title Pg.No

3.1.1 Calculation of Beta for TVS Motors 22

3.1.2 Beta and Alpha Value of Automobile sector 25

3.1.3 Beta and Alpha Value of Cement Sector 26

3.1.4 Beta and Alpha Value of IT Sector 27

3.1.5 Beta and Alpha Value of Pharmaceutical Sector 28

3.1.6 Beta and Alpha Value of Power Sector 29

3.2.1 Expected Market Return of Automobile sector 31

3.2.2 Expected Market Return of Cement Sector 32

3.2.3 Expected Market Return of IT Sector 33

3.2.4 Expected Market Return of Pharmaceutical Sector 34

3.2.5 Expected Market Return of Power Sector 35

3.3.1 Variance of Automobile sector 37

3.3.2 Variance of Cement Sector 38

3.3.3 Variance of IT Sector 39

3.3.4 Variance of Pharmaceutical Sector 40

3.3.5 Variance of Power Sector 41

3.4.1 Systematic & Unsystematic Risk Value of Automobile sector 42


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3.4.2 Systematic & Unsystematic Risk Value of Cement Sector 43

3.4.3 Systematic & Unsystematic Risk Value of IT Sector 43

3.4.4 Systematic & Unsystematic Risk Value of Pharmaceutical Sector 44

3.4.5 Systematic & Unsystematic Risk Value of Power Sector 44

3.5.1 Risk and Return Values of Automobile sector 45

3.5.2 Risk and Return Values of Cement Sector 46

3.5.3 Risk and Return Values of IT Sector 47

3.5.4 Risk and Return Values of Pharmaceutical Sector 48

3.5.5 Risk and Return Values of Power Sector 49


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LIST OF CHARTS

Chart No Chart Title Pg.No

3.1.2 Beta and Alpha Value of Automobile sector 25

3.1.3 Beta and Alpha Value of Cement Sector 26

3.1.4 Beta and Alpha Value of IT Sector 27

3.1.5 Beta and Alpha Value of Pharmaceutical Sector 28

3.1.6 Beta and Alpha Value of Power Sector 29

3.2.1 Expected Market Return of Automobile sector 31

3.2.2 Expected Market Return of Cement Sector 32

3.2.3 Expected Market Return of IT Sector 33

3.2.4 Expected Market Return of Pharmaceutical Sector 34

3.2.5 Expected Market Return of Power Sector 35

3.3.1 Variance of Automobile sector 37

3.3.2 Variance of Cement Sector 38

3.3.3 Variance of IT Sector 39

3.3.4 Variance of Pharmaceutical Sector 40

3.3.5 Variance of Power Sector 41


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Chapter - 1

INTRODUCTION

1.1 ABOUT THE STUDY

1.1.1 INVESTMENT PERFORMANCE

The capital market plays a vital role in promoting economic growth through the

mobilization of long term savings and the savings get investment in the economy for

production purpose. India has a well developed capital market system, by far one of the

best in the developing world. The capital market in India is a well integrated structured

and its components include stock exchanges, development banks, investments trust and

unit trust, Insurance Corporation and provident fund organization. It caters to varied

needs for capital of agricultural, industrial and trading sector of economy.

In an economy all the savings neither nor invested in the stock market. Certain

portion of the money is invested as bank deposits. When people invest money directly in

the stock market they have to bear the risk involved. Investing in stock market may youmore return than the risk less return, but it also involves high risk. When money is

deposited in bank, the bank takes the responsibility of the risk involves.

Bank invested in comp0anies after detailed analysis and charge higher interest.

The bank gives guaranteed return to the investors. Since banks take the responsibility of

risk, it charges high interest rate to the companies and pays less interest to deposits.


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The present study shows the company scripts listed in NSE. They are classified as

five sectors:

1. Automobile Sector

2. Cement Sector

3. Information Technology Sector

4. Pharmaceutical Sector

5. Power Sector

Under each Sector five companies have been selected for the study. To evaluate

the performance of the fund, different tools like Beta, Alpha, and Variance are used.

Beta

The beta factor describes the movement in a stocks or a portfolios returns in

relation to that of the market return. For all practical purposes, the market returns are

measured by the returns on the index, since the index is a good reflector of the market.

The stocks with more than 1 beta value are considered to be risky.

Beta = +1.0

One percent changes in market index return causes exactly one percent change in

the stock return. It indicates that the stock moves in random with the market.

Beta = +0.5

One percent changes in market index return causes 0.5 percent changes in the

stock return. The stock is less volatile compared to the market.

Beta = + 2.0

One percent changes in market index return causes 2 percent changes in the stock

return. The stock is more volatile.

Negative beta value indicated that the stock return moves in the opposite direction.


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The formula for the Beta

N xy (x) (y)

Beta =

N x2 (x) 2

Where, x = market return, y = stock return, n = no. of days

Alpha

A positive value of alpha is healthy sign. Positive alpha values would yieldprofitable return. According, in a well diversified portfolio the average value of all stocks

turns out to be zero.

The formula for the alpha

A y (x )

here x arket return beta value y average value of stock return

1.1.2 THEORY OF INVESTMENT

Risk Analysis


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Risk in holding securities is generally associated with the possibility that realized

returns will be less than were expected. The source of such disappointed is the failure of

dividends and the securities price to materialize as expected.

Forces that contribute to variations in (Return Price) or (Dividend Constitute

elements of risk). Some influence are external to the firm that cannot be controlled and

affect large number of securities risk. Other influences are internal to the firm and are

controllable to a large degree. The force that is not controllable and affects the price of all

securities is called systematic risk.

Systematic Risk

Systematic risk refers to that portion of total variability in return caused by factors

affecting the prices of all securities risk. Their effect is to cause prices of all securities

risk. Their effect is to cause prices of nearly-individuals common stocks to move together

in the same manner.

Market Risk

Variability in return on most common stocks that are due to basic changes in

investor expectations is referred to as market risk. Market risk is caused by investor

reaction to tangible events. Expectations of lower corporate profits in general might cause

the larger body of common stocks to fall in price.

Intangible events are related to market psychology. Market risk is usually touched

off by a reaction of real events, but the emotional instability of investors acting

collectively leads to a snow balling over reaction.

Interest-Rate Risk

Interest-rate refers to the uncertainty of future market values and of the size of

future income, caused by fluctuations in the general level of interest rates. Suppose the


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Reserve Bank of India increases the interest rate, than it will send negative signal to stock

market.

Purchasing power Risk

Purchasing power risk is the uncertainty of the purchasing power of the amounts

to be received. In more every day terms, purchasing-power risk refers to the impact of

inflation or deflation on an investment.

Unsystematic Risk

Unsystematic risk is the proportion of total risk that is unique to a firm or industry.

Factors such as management capability, consumer preferences, and labour strikes causesystematic variability of returns in a firm. Unsystematic factors are largely independent

of factors affect one firm must be examined for each firm.

Financial Risk

Financial risk is associated with the way in which a company finaces its activities.

We usually gauge financial risk by looking at the capital structure of a firm. The presence

of borrowed money of debt in the capital structures creates fixed payments in the form of interest that must be sustained by the firm. With no debt financing has no financial risk.

Environmental Analysis

Environmental analysis is the first stage in the security analysis process. It centers

on tow important activities. 1) Estimating the long-run economic growth in the economy

and 2) Predicating the turning points in the business cycle. Returns on most securities

closely follow the performance of the general economy. Interest rate movements are tiedto the growth of the economy. High interest rates normally occur during boom periods,

and low interest rates are more often associated with low or negative rages of economic

growth.


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The level of market interest rates is a primary determinant of bond prices for any

given quality bond.

To analyze the growth factors for a specific common stock, investors need to go

beyond the general economic outlook and focus on industry and markets segments that

have growth rats differing form overall economy.

Investors often examine post growth rates for several of the more important

economic variables to arrive of reasonable expectations regarding future stock market

growth rates. An investigation of economic growth generally includes at a minimum of

the following three factors.

1. The expected changes in the current population and its age distribution.

2. The role of the government in fostering economic growth and

3. The behavior of corporations with regard to expenditures on plants, equipment,

and inventories.

Components of GNP

Investors interested in forecasting future economic growth need to look at major

components of GNP (Gross National Product). GNP figures show performance of an

economy. These are

1) Personal consumption expenditures.

2) Gross private domestic investment.

3) Government purchase of goods and services and

4) Net exports of goods and services.

Influences of GNP

Gross National Product is influenced in three basic ways. Two of these, fiscal and

monetary policies, involve government action or intervention in various reforms. The


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Investing in stock market may give more return than the risk less return but it also

involves high risk. In an economy all the savings are not invested in the stock market.

Certain portion of the money is invested as bank deposits when people invests money

directly in the stock market they have to bear the risk.

The major functions performed by a capital markets are:

Mobilization of financial resources on a nationwide scale.

Securing the foreign capital for rapid economic growth.

Effective allocation of the mobilized financial resources.

The stock market and other capital market allow investors to buy and sell stock

continuously. The stock prices provide instant feedback to corporate executives about

how investors judge their performance

Stock values reflect investor reaction to government policy as well. If the

government adopts policies that investors believe will hurt the economy and company

profits the market declines; if investors believe policies will help the economy the

market.


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1.2.2 STOCK MARKET SCENARIO DURING MARCH - MAY2011

This study includes automobiles, cement, information technology, power,

pharmaceuticals sectors as the prime sectors for analyzing the risk and return of the

companies listed in NSE.

Automobile sector

The Indian automotive industry has witnessed an unprecedented boom in recent

years, owing to the improvement in living standards of the middle class, and a significant

increase in their disposable incomes. The size of the Indian automotive industry is

estimated between US$ 120.09 billion and US$ 155.2 billion by 2016. The industry is

expected to touch the 10 million mark, to which the commercial vehicle segment will be

a major contributor. Industry experts project the Indian automobile sales growth at a

compounded annual growth rate (CAGR) of 10.5 per cent 14009million vehicles by

2011

The government spending on infrastructure in roads and airports and higher GDP

growth in the future will benefit the auto sector in general. In the 2-wheeler segment,

motorcycles are expected to witness a flurry of new model launches. Though the marketsize is expected to grow by 10% to 12%, competitive pressure could keep prices and

margins under control. TVS, Honda and Hero Honda are poised to benefit from higher

demand for un-geared scooters in the urban and rural markets.

With an estimated 40% of CVs plying on the roads 10 years old, demand for

HCVs is expected to grow by 7% to 8% over the long term. While the industry is going

through cyclical hiccups currently, we expect this factor to weaken in the future on

account of strong structural tailwinds. The privatization of select state transport

undertakings bodes well for the bus segment.


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Cement sector

India is the worlds second largest producer of cement The recent boom in

infrastructure and the housing market has only boosted the cement industry. Adding to

that an increasing global demand and a flurry of activity in infrastructure projects highways roads, bridges, ports and houses has sparked off a spate of mergers and

acquisitions in the sector.

The cement industry is likely to maintain its growth momentum and continue

growing at around 8% to 9% in the medium to long term. Government initiatives in the

infrastructure sector and the housing sector are likely to be the main growth drivers.

During the first half of FY11, a series of huge capacity expansions (through thebrown field or Greenfield route) against a corresponding poor off take in cement demand

due to subdued construction activity created excess supply, thus putting downward

pressure on realizations. This has been coupled with significant rises in input costs,

especially prices of coal and petroleum products. As a result, both the top line and

bottom-line have been badly hit. Though an excess supply scenario may prevail for some

time to come, the worst seems to be over following the good monsoon witnessed across

most parts of the country.

Good agricultural income will support demand for the commodity despite

slowdown in the real estate sector. The importance of the housing sector in cement

demand can be gauged from the fact that it consumes almost 60%-70% of the country's

cement. If this support wanes, it would impact the growth in consumption of cement,

leading to demand supply mismatch.


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Information technology sector

The Indian information technology sector has been instrumental in driving the

nations economy onto the rapid growth curve According to the Nasscom -Deloitte study,

the IT industrys contribution to the countrys GDP has increased to a share of 8 2 per

cent in 2010 as against 5.1 per cent in 2008.

Indias IT growth in the world is primarily dominated by IT software and services

such as custom Application Development and Maintenance (CADM), system Integration,

IT consulting, Application Management, Infrastructure Management services, software

testing, service-oriented architecture and web services.

The global IT services market is expected to grow by 4.2% in 2011 as companies

coming out of recession harness the need for IT to create competitive advantage. With the

government planning to invest Rs 400 billion on better technology enabled delivery

mechanisms the addressable market for technology and business outsourcing services in

India is expected to expand five-fold by 2020 to US$ 90-100 billion.

The integration of IT-BPO contracts is expected to become more common, as

clients look out for end-to-end service providers. Companies like Infosys, TCS, Wipro,Mahindra Satyam, HCL Technologies and Emphasis, all of which are also into BPO, will

benefit from this trend.

Billing rates will remain stressed in short term; companies are expected to

preserve their margins through effective cost containment. Lessons learnt during the

crisis can benefit in the long run. Rupee's volatility against the US dollar and other major

currencies is expected to remain a major concern for Indian IT companies.


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Pharmaceuticals sector

The Indian pharmaceutical sector is witnessing tremendous growth with the

contract research and clinical trials businesses taking wings, and the new patent regime

opening new avenues for players in the country. The pharmaceutical companies in India

have carved a place for themselves globally-consistently striving to innovate and make

healthcare affordable across all sections of society, with a focus on people who are most

deprived of it, causing the industry to grow faster and at the same time giving people

longer and healthier lives.

The Indian pharmaceutical industry ranks 4 th in terms of volume (with an 8 per

cent share in global sales) globally. In terms of value it ranks 13 th (with a share of 3 per cent in global sales) and

produces 20- 24 per cent of the worlds generic drugs (in terms of value)

The Indian pharmaceutical industry ranks 17 th with respect to exports value of

bulk actives and dosage.

The product patents regime heralds an era of innovation and research resulting in

the launch of new patented product launches. In the longer run, domestic companies

would face fresh competition from MNCs, as they would make aggressive new launches.

However, the latter would most likely be subject to price negotiation

Drugs having estimated sales of over US$ 108 billion are expected to go off patent

between CY09 and CY13. With the governments in the developed markets looking to cut

down healthcare costs by facilitating a speedy introduction of generic drugs into the

market, domestic pharmacy companies will stand to benefit. However, despite this huge

promise, intense competition and consequent price erosion would continue to remain a

cause for concern.

The life style segments such as cardiovascular, anti-diabetes and anti-depressants

will continue to be lucrative and fast growing owing to increased urbanization and


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change in lifestyles. Growth in domestic sales in the future will depend on the ability of

companies to align their product portfolio towards the chronic segment.

Contract manufacturing and research (CRAMS) is expected to gain momentum

going forward. India's competitive strengths in research services include English-

language competency, availability of low cost skilled doctors and scientists, large patient

population with diverse disease characteristics and adherence to international quality

standards. As for contract manufacturing, both global innovators and generic majors are

finding it profitable to outsource production. Although there has been a considerable

slowdown in this area, the scenario is expected to improve going forward as the pressure

to prune costs increases.

Power sector

The power sector has been in the forefront of lightning up the India growth story.

As the economy continues to surge ahead, electrification and electricity services have

been expanding concomitantly to support the growth rate.

Today, the Indian power system with its extensive regional grids-fast maturing into an integrated national grid and its millions of kilometers of transmission and

distribution lines crises-crossing the country, are truly symbolic of the successes of

Indias economic growth Indias electricity generation capacity has been increasing

continuously to meet the needs of the rapidly growing economic activity of the country.

Source wise, thermal power plants accounted for an overwhelming 64.6 per cent

of the total installed capacity. Within this group, coal, gas and oil based thermal power

plants accounted for 53.3 per cent, 10.5 per and 0.9 per cent, respectively.

Recognizing that electricity is one of the key drivers for rapid economic growth

and poverty alleviation, the industry has set itself the target of providing access to all

households over the next few years. As per government reports, about 44% of the


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households did not have access to electricity. Hence, meeting the target of providing

universal access is a daunting task requiring significant addition to generation capacity

and expansion of the transmission and distribution network.

Restoration of the financial health of SEBs and improvement in their operating

performance continue to remain a critical issue in the power sector.

On an overall basis, power distribution has been loss-making business in India.

But with the privatization coming in, the investment in transmission and distribution

networking is expected to improve

1.3 ABOUT THE COMPANY

1.3.1 NORTHEAST BROKING SERVICES LIMITED

Mission vision:

Our aim is to provide you with a reliable, secure, fast and most importantly cost

effective stock broking and demat services to enable you to gain better returns on your

investment. We wish to work together with you to maximize your assets and secure your

future.

Integrity: a company honoring commitment with highest ethical and business practices.

Team work: Attaining goals collectively and collaboratively.

Meritocracy: Performance gets differentiated, recognized and rewarded in a political

environment.

Passion & Attitude: High energy and self motivated with a Do It attitude amnd

entrepreneurial spirit. Excellence in Execution: Time bound results within the framework

of the companys value system


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Overview

Northeast Broking Services Ltd , founded in 1995, is one of the largest Investment

companies based in Andhra Pradesh, with 75 Professionals, 150 support staff and

extensive network in Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra,

Tamilnadu and rapidly entering into all over India.

Northeast is a premier broking, trading and clearing member of BSE CASH AND

F&O, NSE CASH, NSE CURRANCY SEGMENT AND F&O, and HSE and as well as

the two leading commodity exchanges in the country NCDEX and MCX. And it is also

registered as a Depository Participant (DP) with NSDL and CDSL.

With nearly 10 years in business, Northeast is known for its financial strength and

stability, superior customer service, and continued operation excellence.

Product and services

Northeast offers its clients most competitive brokerage with wide choice of products and

services

Stock Broking: Northeast offers trading in equities in NSE and BSE cash marketsegment. Northeast provides offline facilities like excellent trading atmosphere,

individual terminal and instant execution and confirmation.

Derivatives Broking : Northeast provides facility to trade in futures and options in NSE

F&O and BSE F&O market. Our efficient risk management takes adequate care and

precaution in monitoring the margin positions of the clients.

Commodities Broking : You can buy and sell commodities in both the leading MCX andNCDEX commodity exchanges through our subsidiary Northeast commodities private

limited.

Mutual Funds : Northeast offers a wealth of mutual fund choices along with the

competitive advice to help you invest wisely.


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Depository Services : Northeast as a Depository participant of NSDL and CDSL offers

effective demat services at all times, with economic fee structure for Individuals, traders

and sub brokers.

IPOs : Northeast enables you to invest prudently in the prospective and lucrative public

issues. Our research team would guide you to choose appropriate IPO that suit your

objective.

Internet Trading : A new value added product from Northeast designed for Traders and

Investors enabling to operate from any location, by using the state of art of internet

trading by logging on to www.northeastltd.com.

Research and Advisory Service: Northeast has well qualified and experienced research

team, who would constantly keep informing the Investors with wise investment

decisions. The information would be provided free of cost to our clients, who can access

the information using the user name and password that is given to them
http://www.northeastltd.com/http://www.northeastltd.com/


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1.4 Review of literature

Giewosz. G (1996) describes the use of accounting and other information in the

share investment decision process of an institutional investor. The focus is on qualitative

data, as revealed in the report as in the directors speech.

Rather than on qualitative data. He has concluded that the significance of

qualitative data as an information source to serving in a confirmatory role. Furthermore,

rather than a source of information the annual report also acts as a stimulus for

identifying specific questions.

Warner J.B and Wruchk K.H (1998) re-iterate the influence of management

change on stock prices. The scrutiny of management reputation should consider whether

the management is strong, growth oriented, professional, the nature of its goal and

principles and so on the past behavior pattern of management actions are a food clue to

assess these qualities of the management. Each company would have faced adverse

situations at one time or the other. A strong, professional team would have faced the

adversity better. The market position of the company should be analyzed in terms of the

product or service that it gives or provides to the community The companys goals and

values will be revealed through an analysis of the image the these products and service

carry to the customer. Good customer reputation automatically implies that the company

is doing also.

Malkiel and Cragg (1998) studied the effect of historical growth of earnings

dividend payout ratio and the stocks rate of return relative to the market in determining

P/E earnings growth was found to have a positive effect on the P/E the closer a stocks

return followed that of the market; the more negative the P/E effect. The dividend payout

effect was not clear in some years, the higher the payout the higher the P/E, but this was

not true for all years.


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Bernard V and Stober T (1991) have reported empirical evidence on the use of

these statements in predicting stock market returns. These performance indicators are also

linked to the shares through ratio analysis to evaluate performance for investment

purposes. The important measures are earnings per share, dividend per share, yield pmshare, piece earnings multiples and so on. Earnings per share are the net profit divided by

the total number of shares. Dividing the dividend distributed by the total number of

shares. The actual earnings per share paid to the investor are arrived at through this ratio.

Yield on shares (Yield) is dividend per share divided by market price per share. This is a

measure of return on shares in terms of capital appreciation. Price earrings ratio(P/E) is

defined as the closing market price of the share divided by the reported earnings per share

for the latest period. Low P/E s is typically associated with low earnings growth andcyclical businesses, and high P/E ratio is associated with the high earnings growth and

non cyclical businesses.

White beck and kisor (2001) studied a number of stocks over the same time span.

They speculated the difference in P/E ratios between stocks could be explained by (1)

projected earnings growth, (2) expected dividend payout and (3) the variation in the rate

of earnings growth, or growth risk. They applied their statistical technique to a cross

section of 135 stocks to explain difference in individual P/E ratios. They concluded that

P/E is an increasing function of growth and payout and inversely related to the variation

in the growth rate.

Bower and Bower (2002) used the same approach for a different time period with

another sample of firms. They used earnings growth and payout as variables but dividend

risk into subcomponents including marketability of the stock, its price variability and its

conformity with the market.


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Chapter 2

MAIN THEME OF THE PROJECT

2.1 Objective of the study

2.1.1 Primary objective

To identify investable companies stocks for higher returns than the guaranteed

market return.

2.1.2 Secondary objective

To assess the risk associated in the selected stocks for investment.

2.2 Scope of the study

The present study shows the company scripts listed in NSE. They are classified as

five sectors, under each sector five companies have been selected for the study. The study

may be an effective tool for selecting the best companies for the investors to invest their

funds for higher and safe returns.

2.2.1 Need of the study

To guide the investors in selecting the high return companies for their investment To know the performance of selected companies. To got knowledge about the practical functioning of the stock market.

2.2.2 Limitations of the study

The present performance of the funds studied may not be sustained in future.

The figure taken from the financial statement for analysis is historical in nature.

The study is confined to a short period of three months for five sectors. This would

not give the exact performance of the securities


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2.3 Methodology

Research Purpose

The research purpose revealed that this study was descriptive in nature. The study

aimed in assessing the market return of selected stocks of companies listed among the

automobiles, cement, information technology, power, pharmaceutical sectors.

Research design

The researcher has undertaken a descriptive type of research. In this design the

researcher has no control over the variables. The researcher can only report what has

happened earlier or what exists

Data collection

The collection of data is based on primary and secondary method. The primary

data has been collected through discussions with the officials of the share trading

institutions. Sample size is twenty five company form five sectors.

Period of Study

The daily NSE scripts price for the period of 18 th march 2011 to 18 th May 2011

has been used.

Sampling method

Non probability convenience sampling method is adopted.

Tools for analysis

Beta

Alpha

Variance


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Chapter - 3

ANALYSIS AND INTERPRETATION

Methodology of calculating risk:

Share price movements of selected companies, traded in national stock exchange

during the year 18 th March 2011 to 18 th May 2011 were taken for calculating risk and

return. Total of five sectors, a total of twenty five companies were selected for the study.

The five sectors are automobile, cement, information technology, pharmaceuticals and

power sector. Share price movements for Three months trading were taken for eachcompany.

3.1 Calculation of Alpha and Beta

First, the value of beta is calculated for every company by applying the formula

N xy (x) (y)

Beta =

N x2 (x) 2

Where, x = market return, y = stock return, N = no. of days

Let us take the example of the company TVS Motors


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Table 3.1.1 Calculation of Beta for TVS Motors

Date NSEIndex SharePrice MarketReturn(X) StockReturn(Y) XY X2

17-Mar-11 5446.65 58.5

18-Mar-11 5373.7 57.35 -1.33936 -1.96581 2.632921 1.793872844

21-Mar-11 5364.75 56.5 -0.16655 -1.48213 0.246851 0.027739539

22-Mar-11 5413.85 55.65 0.915234 -1.50442 -1.3769 0.837652728

23-Mar-11 5480.25 55.75 1.226484 0.179695 0.220392 1.504262819

24-Mar-11 5522.4 57.55 0.769125 3.2287 2.483275 0.591554029

25-Mar-11 5654.25 58 2.387549 0.781929 1.866893 5.700389711

28-Mar-11 5687.25 59.95 0.583632 3.362069 1.96221 0.340626056

29-Mar-11 5736.35 58.55 0.863335 -2.33528 -2.01613 0.74534672130-Mar-11 5787.65 59.05 0.894297 0.853971 0.763704 0.799766938

31-Mar-11 5833.75 59.85 0.796524 1.354784 1.079118 0.634449897

1-Apr-11 5826.05 61.8 -0.13199 3.258145 -0.43004 0.017421511

............ ............ ............ ............ ............ ............ ............

27-Apr-11 5833.9 60.2 -0.58789 -1.3923 0.818526 0.345619926

28-Apr-11 5785.45 59.75 -0.83049 -0.74751 0.620799 0.68971489

29-Apr-11 5749.5 56.35 -0.62139 -5.69038 3.535923 0.386121069

2-May-11 5701.3 56.5 -0.83833 0.266193 -0.22316 0.702803507

3-May-11 5565.25 55.4 -2.3863 -1.9469 4.64589 5.694417486

4-May-11 5537.15 53.3 -0.50492 -3.79061 1.913953 0.2549431125-May-11 5459.85 51.45 -1.39603 -3.47092 4.84549 1.948885887

6-May-11 5551.45 55.05 1.677702 6.997085 11.73902 2.814683224

9-May-11 5551.1 54.2 -0.0063 -1.54405 0.009735 0.00003974

10-May-11 5541.25 53.4 -0.17744 -1.47601 0.261907 0.031485773

11-May-11 5565.05 53.8 0.429506 0.749064 0.321727 0.184475385

12-May-11 5486.15 52.8 -1.41778 -1.85874 2.635273 2.010091676

13-May-11 5544.75 54.1 1.068144 2.462121 2.629901 1.14093230

16-May-11 5499 54.2 -0.825104 0.184884 -0.15251 0.68079798

17-May-11 5438.95 53.8 -1.09201 -0.738007 0.805916 1.19250054

18-May-11 5420.6 52.35 -0.337381 -0.738007 0.909299 0.11382614

sum -0.237349 -9.860585 57.91949 48.48161Average -0.005789 -0.240502079


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Sum of Market Return(X) and Stock Return(Y) is calculated. The value of X is

calculated by applying the formula.

Current day index Previous day indexX = X 100

Previous day index

5373.7 - 5446.65

= X 100 = 1.33936

5446.65

The value of Y is calculated by applying the formula

Current day Price Previous day Price

Y = X 100

Previous day Price

57.35 - 58.5

= X 100 = 1.96581

58.5

In this example we have got the value of X = 1.33936 and Y = 1.96581, for the

period of 18 th March 2011 to 18 th May, 2011 same formula is applied to calculate the

value of X and Y.

Then we have to calculate the sum of XY and X 2. Let us take the example of TVS

Motors.


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The calculated values are

x -0.237349 y 9.860585 xy 57.91949 x2 = 48.48161, N = 41

By substituting these values in the formula of Beta we get the value of

41 (57.91949) (0.237349X 9.860585)

Beta = = 1.193525688

41 (48.48161) (0.237349) 2

Beta describes the relationship between the stocks return and the market return. In

the above example, Beta indicated that one percent change in NSE index return would

cause 1.1935 percent changes in the TVS Stock return.

Then the value of Alpha is calculated by applying the formula.

A y (x )Where x Average of arket return beta value y Average value of tock return

The calculated value is

x 0.005789 y 0.240502079 1.193525688

By substituting we get the alpha value for TVS Motors

= ( 0.240502079) (1.193525688X 0.005789)

= 0.2335972


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Table 3.1.2 Beta and Alpha Value of Automobile Sector

Name of the Company Beta Alpha

TVS Motors 1.194 -0.234

TATA Motors 1.530 0.051

Hero Honda 0.659 0.523

M&M 1.359 0.081

Ashok Leyland 1.130 -0.293

Chart 3.1.2 Beta and Alpha Value of Automobile Sector

-0.5

0

0.5

1

1.5

2

TVS Motors TATA Motors Hero Honda M&M Ashok leyland

Chart Title

Beta

Alpha


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Table 3.1.5 Beta and Alpha Value of Pharmaceutical Sector

Name of the company Beta Alpha

Biocon 0.564 0.121CIPLA 0.695 0.072

JB Chemicals 0.712 0.359

Orchid 1.204 0.075

Ranbaxy 0.749 0.193

Chart 3.1.5 Beta and Alpha Value of Pharmaceutical Sector

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Biocon CIPLA JB Chemicals Orchid Ranbaxy

Beta

Alpha


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Table 3.1.6 Beta and Alpha Value of Power Sector

Name of the company Beta Alpha

CESC 0.792 -0.299

Neyvelli lignite 0.801 0.054

NTPC 0.836 -0.048

Rpower 1.056 -0.275

Tata power 0.529 0.057

Chart 3.1.6 Beta and Alpha Value of Power Sector

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

CESC Neyveli lignite NTPC Rpower Tata power

Chart Title

Beta

Alpha


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3.2 Calculation of Expected Market Return

After calculating the value of Alpha and Beta, expected market return for every

company is calculated. The formula is

Ex ected M rket Return (R) + (x)

Where, x is risk less return.

Here the value of x is taken as 6.25., since State Bank of India gives 6.25%

interest for 180days fixed deposit.

By substituting we get,


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Table 3.2.1 Expected Market Return of Automobile Sector

Name of the companyExpected Market Return

TVS Motors 7.225

TATA Motors 9.612

Hero Honda 4.644

M&M 8.575

Ashok Leyland 6.774

Chart 3.2.1 Expected Market Return of Automobile Sector

TVS Motors TATA Motors Hero Honda M&M Ashok Leyland

7.225

9.612

4.644

8.575

6.774

Expected Market Return


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Table 3.2.2 Expected Market Return of Cement Sector

Name of the company Expected Market Return

ACC 4.773

Ramco 2.254

Ambuja 7.495

Dalmia 2.645

India cement 5.878

Chart 3.2.2 Expected Market Return of Cement Sector

ACC Ramco Ambuja Dalmia India cement

4.773

2.254

7.495

2.645

5.878



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Table 3.2.4 Expected Market Return of Pharmaceutical Sector


Biocon 3.643

CIPLA 4.421JB Chemicals 4.808

Orchid 7.601

Ranbaxy 4.88

Chart 3.2.4 Expected Market Return of Pharmaceutical Sector


3.643

4.4214.808

7.601

4.88



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Table 3.2.5 Expected Market Return of Power Sector


CESC 4.653

Neyvelli lignite 5.062

NTPC 5.181

Rpower 6.329

Tata power 3.367

Chart 3.2.5 Expected Market Return of Power Sector

CESC Neyvelli

lignite

NTPC Rpower Tata power

4.6535.062 5.181

6.329

3.367



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3.3 Variance

Variance measures the dispersion of a return distribution. It is the sum of the

squares of a returns deviation from the mean divided by n. The value will always

be>=0, with larger values corresponding to data that is more spread out.

Market index

(x-x ) 2

N

here x arket return x Avg of arket return N No of days

Stock

(y-y ) 2

N

here y tock return y = Avg of Stock return, N = No. of days


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Table 3.3.1 Variance of Automobile Sector

Name of the company Variance of stock return variance of Market return

TVS Motors 6.047 1.182

TATA Motors 4.441 1.182

Hero Honda 6.812 1.182

M&M 4.271 1.182

Ashok Leyland 3.888 1.182

Chart 3.3.1 Variance of Automobile Sector

6.047

4.441

6.812

4.2713.888

1.182 1.182 1.182 1.182 1.182

TVS Motors TATA Motors Hero Honda M&M Ashok Leyland

Variance of stock return variance of Market return


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Table 3.3.3 Variance of IT Sector


HCL Infosys 2.011 1.182HCL Tech 4.643 1.182

Infosys Tech 3.963 1.182

TCS 3.32 1.182

Tech Mahindra 3.665 1.182

Chart 3.3.3 Variance of IT Sector

2.011

4.643

3.963

3.32

3.665

1.182 1.182 1.182 1.182 1.182

HCL Infosys HCL Tech Infosys Tech TCS Tech Mahindra



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Table 3.3.4 Variance of Pharmaceutical Sector


Biocon 2.419 1.182

CIPLA 2.228 1.182

JB Chemicals 7.935 1.182

Orchid 5.067 1.182

Ranbaxy 5.707 1.182

Chart 3.3.4 Variance of Pharmaceutical Sector

2.419 2.228

7.935

5.067

5.707

1.182 1.182 1.182 1.182 1.182




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Table 3.3.5 Variance of Power Sector


CESC 2.428 1.182

Neyvelli lignite 3.292 1.182

NTPC 2.43 1.182

Rpower 3.24 1.182

Tata power 2.023 1.182

Chart 3.3.5 Variance of Power Sector

2.428

3.292

2.43

3.24

2.023

1.182 1.182 1.182 1.182 1.182

CESC Neyvelli lignite NTPC Rpower Tata power



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3.4 Calculation of Systematic risk and Unsystematic risk

After calculating the variance has to calculate systematic risk and unsystematic

risk. The formula for systematic risk is as follows:

System tic risk 2 * Variance of Market index

For example TVS Motors

= (1.194) 2 * 1.182 =1.684

Unsystematic risk = Total risk Systematic risk

= 6.048 - 1.684

= 4.363

Table 3.4.1 Systematic & Unsystematic Risk value of Automobile Sector

Name of the

company

Uncontrollable (%)Systematic Risk

Controllable (%)Unsystematic Risk

Total Risk

Value (%) Value (%) Value (%)

TVS Motors 1.684 28 4.363 72 6.047 100

TATA Motors 2.767 62 1.673 38 4.440 100

Hero Honda 0.514 7.5 6.298 92.5 6.812 100

M&M 2.184 51 2.088 49 4.272 100

Ashok Leyland 1.512 39 2.376 61 3.888 100


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Table 3.4.2 Systematic & Unsystematic Risk value of Cement Sector

Name of the

company

Uncontrollable (%)

Systematic Risk

Controllable (%)

Unsystematic Risk Total Risk


ACC 0.707 31 1.555 69 2.262 100

Ramco 0.171 4 4.218 96 4.389 100

Ambuja 1.662 26 4.754 74 6.416 100

Dalmia 0.251 8 2.755 92 3.006 100

India cement 1.121 33 2.307 67 3.428 100

Table 3.4.3 Systematic & Unsystematic Risk value of IT Sector

Name of the

company

Uncontrollable (%)

Systematic Risk

Controllable (%)

Unsystematic Risk

Total Risk


HCL Infosys 0.568 28 1.443 72 2.011 100

HCL Tech 1.533 33 3.110 67 4.643 100

Infosys Tech 1.543 39 2.420 61 3.963 100

TCS 1.825 55 1.495 45 3.320 100

Tech Mahindra 0.642 18 3.023 82 3.665 100


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3.5 Interpretation

Table 3.5.1 Risk and Return Values of the Automobile Sector

Table 3.5.2 Risk and Return Values of the Cement Sector


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Table 3.5.3 Risk and Return Values of the IT Sector

Table 3.5.4 Risk and Return Values of the Pharmaceutical Sector


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Table 3.5.5 Risk and Return Values of the Power Sector


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Interpretation of Automobile Sector

This section describes the risk and return analysis made for the stocks in the

automobile sector. The calculation of risk and return for the company TVS Motors

presented as a sample in appendix.

Inference were made based on the ranks secured for the market return,

uncontrollable risk, Alpha and overall rank secured by the stock based on the above three

rank.

Rank 1:

Hero Honda secured the Return of 4.121% with Uncontrollable risk of 7.5%, andAlpha of 0.523 which suits both Low Return and Low risk takers.

Rank 2:

M&M secured the Return of 8.494% with Uncontrollable risk of 51% and Alpha

of 0.081 which suits both High Return and Moderate risk takers.

Rank 3:

Tata Motors secured the Return of 9.562% with Uncontrollable risk of 62% and

Alpha of 0.051, which suits both Higher Return and High risk takers.

Rank 4:

TVS Motors secured the Return of 7.459% with Uncontrollable risk of 28% and

Alpha of -0.234, which suits both Moderate Return and High risk takers.

Rank 5:

Ashok Leyland secured the Return of 7.068% with Uncontrollable risk of 39% and



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Interpretation of Cement Sector


cement sector. Inference were made based on the ranks secured for the market return,


rank.

Rank 1:

Ambuja cements secured the Return of 7.495% with Uncontrollable risk of 26%

and Alpha of 0.085, which suits both Higher Return and Moderate risk takers.

Rank 2:

Ramco cements secured the Return of 2.254% with Uncontrollable risk of 4% and

Alpha of -0.124, which suits both Low Return and Low risk takers.

Rank 3:

ACC cements secured the Return of 4.773% with Uncontrollable risk of 31% and

Alpha of -0.061, which suits both Moderate Return and Moderate risk takers.

Rank 3:

India cements secured the Return of 5.878% with Uncontrollable risk of 33% and

Alpha of -0.206, which suits both Moderate Return and Moderate risk takers.

Rank 5:

Dalmia cements secured the Return of 2.645% with Uncontrollable risk of 8% and



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Interpretation of IT Sector

This section describes the risk and return analysis made for the stocks in the IT

sector. Inference were made based on the ranks secured for the market return,


rank.

Rank 1:

HCL Tech secured the Return of 7.379% with Uncontrollable risk of 33% and

Alpha of 0.264, which suits both Higher Return and Moderate risk takers.

Rank 2:

TCS secured the Return of 7.912% with Uncontrollable risk of 55% and Alpha of

0.147, which suits both Higher Return and High risk takers.

Rank 3:

HCL Infosys secured the Return of 4.417% with Uncontrollable risk of 28% and

Alpha of 0.083, which suits both Low Return and Low risk takers.

Rank 4:

Infosys Tech secured the Return of 7.052% with Uncontrollable risk of 39% and

Alpha of -0.087, which suits both Higher Return and High risk takers.

Rank 5:

Tech Mahindra secured the Return of 4.356% with Uncontrollable risk of 18% and


Interpretation of Pharmaceutical Sector


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Pharmaceutical sector. Inference were made based on the ranks secured for the market

return, uncontrollable risk, Alpha and overall rank secured by the stock based on the

above three rank.

Rank 1:

JB Chemicals secured the Return of 4.808% with Uncontrollable risk of 7.5% and

Alpha of 0.359, which suits both Moderate Return and Low risk takers.

Rank 2:

Ranbaxy secured the Return of 4.880% with Uncontrollable risk of 12% andAlpha of 0.193, which suits both Moderate Return and Low risk takers.

Rank 3:

Orchid secured the Return of 7.601% with Uncontrollable risk of 34% and Alpha

of 0.075, which suits both Higher Return and High risk takers.

Rank 4:

Biocon secured the Return of 3.643% with Uncontrollable risk of 15.5% and


Rank 5:

CIPLA secured the Return of 4.421% with Uncontrollable risk of 26% and Alpha

of 0.072, which suits both Moderate Return and High risk takers.


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Chapter 4

Findings, Recommendations and Conclusion

4.1 Findings

This study focused in identifying the risk and return of the stocks of the companies

in the Automobile, Cement, Information Technology, Pharmaceutical and Power sectors.

Automobile Sector

High Return and High Risk

Tata Motors secured the Return of 9.562% with Uncontrollable risk of 62%

and Alpha of 0.051, which suits both Higher Return and High risk takers.

High Return and Moderate Risk

M&M secured the Return of 8.494% with Uncontrollable risk of 51% and

Alpha of 0.081 which suits both High Return and Moderate risk takers.

Moderate Return and High Risk

TVS Motors secured the Return of 7.459% with Uncontrollable risk of 28%

and Alpha of -0.234, which suits both Moderate Return and High risk takers.

Ashok Leyland secured the Return of 7.068% with Uncontrollable risk of 39%

and Alpha of -0.293, which suits both Moderate Return and High risk takers.

Low Return and Low Risk

Hero Honda secured the Return of 4.121% with Uncontrollable risk of 7.5%,

and Alpha of 0.523 which suits both Low Return and Low risk takers.


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Cement Sector


Ambuja cements secured the Return of 7.495% with Uncontrollable risk of

26% and Alpha of 0.085, which suits both Higher Return and Moderate risk

takers.


Ramco cements secured the Return of 2.254% with Uncontrollable risk of 4%

and Alpha of -0.124, which suits both Low Return and Low risk takers.

Dalmia cements secured the Return of 2.645% with Uncontrollable risk of 8%and Alpha of -0.234, which suits both Low Return and Low risk takers.

Moderate Return and Moderate Risk

ACC cements secured the Return of 4.773% with Uncontrollable risk of 31%

and Alpha of -0.061, which suits both Moderate Return and Moderate risk

takers.

India cements secured the Return of 5.878% with Uncontrollable risk of 33%and Alpha of -0.206, which suits both Moderate Return and Moderate risk

takers.

Information Technology Sector


HCL Tech secured the Return of 7.379% with Uncontrollable risk of 33% and

Alpha of 0.264, which suits both Higher Return and Moderate risk takers.


TCS secured the Return of 7.912% with Uncontrollable risk of 55% and Alpha

of 0.147, which suits both Higher Return and High risk takers.


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Infosys Tech secured the Return of 7.052% with Uncontrollable risk of 39%

and Alpha of -0.087, which suits both Higher Return and High risk takers.


HCL Infosys secured the Return of 4.417% with Uncontrollable risk of 28%

and Alpha of 0.083, which suits both Low Return and Low risk takers.

Tech Mahindra secured the Return of 4.356% with Uncontrollable risk of 18%

and Alpha of -0.250, which suits both Low Return and Low risk takers.

Pharmaceutical Sector

Moderate Return and Low Risk

JB Chemicals secured the Return of 4.808% with Uncontrollable risk of 7.5%

and Alpha of 0.359, which suits both Moderate Return and Low risk takers.

Ranbaxy secured the Return of 4.880% with Uncontrollable risk of 12% and

Alpha of 0.193, which suits both Moderate Return and Low risk takers.


Orchid secured the Return of 7.601% with Uncontrollable risk of 34% and

Alpha of 0.075, which suits both Higher Return and High risk takers.

Moderate Return and High Risk

CIPLA secured the Return of 4.421% with Uncontrollable risk of 26% and

Alpha of 0.072, which suits both Moderate Return and High risk takers.


Biocon secured the Return of 3.643% with Uncontrollable risk of 15.5% and



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Power Sector


Tata Power secured the Return of 3.367% with Uncontrollable risk of 16% and



Neyvelli Lignite secured the Return of 5.062% with Uncontrollable risk of

33% and Alpha of 0.054, which suits both High Return and High risk takers.

NTPC secured the Return of 5.181% with Uncontrollable risk of 34% and

Alpha of -0.048, which suits both High Return and High risk takers. Reliance Power secured the Return of 6.329% with Uncontrollable risk of 41%

and Alpha of -0.275, which suits both High Return and High risk takers.

Moderate Return and Moderate Risk

CESC secured the Return of 4.653% with Uncontrollable risk of 31% and


4.2 Recommendations

This analysis would facilitate investor make their choice of company among the

above sector to invest based on their perception of the risk and return of the stocks.

Among the 25 companies the most profitable company is Tata Motors which

earns the Return of 9.562% but it involves high risk. So investors who arewilling to take more risk can go for Tata Motors and get the maximum return.

The moderate risk takers can opt to M&M, Ambuja cements and HCL Tech

which yields High returns more than the risk taken by the Investors.


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The Low risk takers can go for Tata Power, Biocon, JB Chemicals and HCL

Infosys because these companies returns are higher when compared to the risk

taken.

Investors who like to have higher returns when compared to the risk taken cango for Pharmaceutical Sectors where all the companies have positive Alpha.

The high risk takers can opt to Automobile sector where the risk is high and as

well as the returns are also high.

Investors can opt to the companies where the Alpha value is positive like Tata

Motors, Hero Honda, M&M, Ambuja Cements, HCL Infosys, HCL Tech, TCS

and Neyvelli lignite where whatever the risk taken by them will have high

returns than the risk taken. The safest companies are Hero Honda, JB Chemicals, Ranbaxy, Biocon and

Tata Power because these companies are low risky when compared to other

companies.

4.3 Conclusion

From this study, the researcher has identified the risk and return for the stocks of

Automobiles, Cement, Information Technology, Pharmaceutical and Power Sectors listed

in National Stock Exchange (NSE).

The stock market during the period of study was not highly fluctuating and overall

there was a bearish trend. The NSE index on March 18 th 2011 was 5446.65 and on the

end of May 18 th were 5420.60.

The study would help the future investors to make their choice of stock for

investment based on the expected Market Return and Risk taking ability.


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Appendix

AnnexureData for TVS Motors - EQ from 18-03-2011 to 18-05-2011

Series Date Avg Index Avg Price Market Return(X) StockReturn(Y) XY X2

EQ 17-Mar-11 5446.65 58.5EQ 18-Mar-11 5373.7 57.35 -1.339355384 -1.965811966 2.63292084 1.793872844EQ 21-Mar-11 5364.75 56.5 -0.16655191 -1.482127289 0.246851131 0.027739539EQ 22-Mar-11 5413.85 55.65 0.915233701 -1.504424779 -1.376900259 0.837652728EQ 23-Mar-11 5480.25 55.75 1.226483925 0.179694519 0.220392439 1.504262819EQ 24-Mar-11 5522.4 57.55 0.769125496 3.228699552 2.483275144 0.591554029EQ 25-Mar-11 5654.25 58 2.387548892 0.781928758 1.866893139 5.700389711EQ 28-Mar-11 5687.25 59.95 0.583631781 3.362068966 1.9622103 0.340626056EQ 29-Mar-11 5736.35 58.55 0.863334652 -2.335279399 -2.016127628 0.745346721EQ 30-Mar-11 5787.65 59.05 0.894296896 0.853970965 0.763703583 0.799766938EQ 31-Mar-11 5833.75 59.85 0.796523632 1.354784081 1.079117537 0.634449897EQ 1-Apr-11 5826.05 61.8 -0.131990572 3.258145363 -0.430044471 0.017421511

EQ 4-Apr-11 5908.45 62.1 1.41433733 0.485436893 0.686571519 2.000350082EQ 5-Apr-11 5910.05 61.65 0.02707986 -0.724637681 -0.019623087 0.000733319EQ 6-Apr-11 5891.75 60.6 -0.30964205 -1.703163017 0.527370889 0.095878199EQ 7-Apr-11 5885.7 60 -0.102685959 -0.99009901 0.101669267 0.010544406EQ 8-Apr-11 5842 59 -0.74247753 -1.666666667 1.23746255 0.551272883EQ 11-Apr-11 5785.7 57.3 -0.963711058 -2.881355932 2.776794573 0.928739003EQ 13-Apr-11 5911.5 58.8 2.174326356 2.617801047 5.691953812 4.727695104EQ 15-Apr-11 5824.55 59.95 -1.470861879 1.955782313 -2.876685648 2.163434668EQ 18-Apr-11 5729.1 58.2 -1.638753208 -2.919099249 4.783683261 2.685512078EQ 19-Apr-11 5740.75 59.1 0.203347821 1.546391753 0.314455393 0.041350336EQ 20-Apr-11 5851.65 60.05 1.931803336 1.607445008 3.105267629 3.731864128EQ 21-Apr-11 5884.7 59.1 0.564797963 -1.582014988 -0.893518842 0.318996739EQ 25-Apr-11 5874.5 58.4 -0.173330841 -1.184433164 0.205298796 0.03004358EQ 26-Apr-11 5868.4 61.05 -0.103838625 4.537671233 -0.47118554 0.01078246EQ 27-Apr-11 5833.9 60.2 -0.587894486 -1.392301392 0.818526311 0.345619926EQ 28-Apr-11 5785.45 59.75 -0.830490752 -0.747508306 0.620798735 0.68971489EQ 29-Apr-11 5749.5 56.35 -0.621386409 -5.690376569 3.535922662 0.386121069EQ 2-May-11 5701.3 56.5 -0.838333768 0.266193434 -0.223158944 0.702803507EQ 3-May-11 5565.25 55.4 -2.386297862 -1.946902655 4.645889643 5.694417486EQ 4-May-11 5537.15 53.3 -0.504918916 -3.790613718 1.913952572 0.254943112EQ 5-May-11 5459.85 51.45 -1.396025031 -3.470919325 4.845490257 1.948885887EQ 6-May-11 5551.45 55.05 1.677701768 6.997084548 11.73902112 2.814683224EQ 9-May-11 5551.1 54.2 -0.006304659 -1.544050863 0.009734714 0.00003974EQ 10-May-11 5541.25 53.4 -0.177442309 -1.47601476 0.261907467 0.031485773EQ 11-May-11 5565.05 53.8 0.429505978 0.74906367 0.321727324 0.184475385

EQ 12-May-11 5486.15 52.8 -1.417777019 -1.858736059 2.63527327 2.010091676EQ 13-May-11 5544.75 54.1 1.068144327 2.462121212 2.629900805 1.140932303EQ 16-May-11 5499 54.2 -0.825104829 0.184842884 -0.152514756 0.680797979EQ 17-May-11 5438.95 53.8 -1.09201673 -0.73800738 0.805916406 1.192500539EQ 18-May-11 5420.6 52.35 -0.337381296 -2.695167286 0.909299032 0.113826139

Sum -0.237349368 -9.860585255 57.91949125 48.48161245

AVG -0.005789008 -0.24050207


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Automobile Sector

TVS Motors

41 (57.91949) (0.237349X 9.860585)

=

41 (48.48161) (0.237349) 2

= 1.193

= ( 0.240502079) (1.193525688X 0.005789)

= 0.234

Expected Market Return + (x) = 0.234 + 1.193(6.25)

= 7.225

Variance

Market Index Stock

(x-x )2

(y-y )2

N N

Market Index = 1.182 Stock = 6.047

Systematic risk 2 * Variance of Market index

= (1.194) 2 * 1.182

=1.684

Unsystematic risk = Total risk Systematic risk

= 6.048 - 1.684

= 4.363


70/70

BIBLIOGRAPHY

1. Bhalla V.K (1999), Financial Management, Eighth edition, Vikas Publishing House

Private Limited, New Delhi, India.

2. Stanley B.B and Geoffrey A.H, Foundation of Financial Management, Sixth edition,

Irwin, New York.

3. Pandy I.M (1999) Financial Management, Eighth edition Vikas Publishing House

Private Limited, New Delhi, India.

4.

Jack C.F (1996), Investment Analysis and Management, Fifth edition, Mc Graw Hill,inc., New York.

5. Business Line News Papers, March, April, May of 2011.

6. Websites

www.moneycontrol.com

www.equitymaster.com

www.nseindia.com

www.northeastltd.com

finance,investor behaviour in equity market

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