An Investigative Study On Stock Performance of Selected Companies in Food and Beverage Sector Listed Under B. S. E.

ZENITH International Journal of Business Economics & Management Research_______ ISSN 2249- 8826
ZIJBEMR, Vol.7 (4), APRIL (2017), pp. 59-70

Online available at zenithresearch.org.in
AN INVESTIGATIVE STUDY ON STOCK PERFORMANCE OF

SELECTED COMPANIES IN FOOD AND BEVERAGE SECTOR LISTED
UNDER B. S. E.
DR. M. AYISHA MILLATH
(ASSISTANT PROFESSOR),
ALAGAPPA INSTITUTE OF MANAGEMENT, ALAGAPPA UNIVERSITY, KARAIKUDI.
S. THOWSEAF
(RESEARCH SCHOLAR),
ALAGAPPA INSTITUTE OF MANAGEMENT, ALAGAPPA UNIVERSITY, KARAIKUDI.
ABSTRACT
Unlike savings, investments in; capital, commodities, commercials and other such
compounds are made with an objective to multiply invested composite in terms of value.
Investment in the share of the companies had been in practice for quite a long time, whereas lack
of knowledge and risk associated with them like every such investment have endorsed less than
2% of the total population in India to invest in a company's shares listed on Indian stock
exchanges. The study is made with an objective to analyze the market share price movements
using various fundamental tools for selected companies in the food and beverage sectors listed
under B. S. E. (Bombay Stock Exchange). Apart analysis on share price, capital budgeting
techniques such as I. R. R. (Internal Rate of Retun), N. P. V. (Net Present Value) and P. I.
(Profitability Index, Value) is being calculated with 6.5% interest as margin, which is prevailing
on an average to make a comparative study. Which are considered as the elementary level
variables in assessing companies performance and its relationship with share price is
determined. B. S. E. is the oldest stock exchange in India, it is being selected for data collection
and convenience purpose, also the following companies, i.e. Nestle, Britannia, and Glaxo-Smith
had been chosen based on market capitalization as criteria.
KEYWORDS - Nestle, Britannia and Glaxo-Smith Share price movements and companies
performance.
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INTRODUCTION
The money cycle involves spending and savings. Savings are apparently an idle part of
earned money to meet the future expense. Investment is the process of spending the savings to
earn a better return on idle resources (kaur, 2014). Investing early and regularly with a long-term
objective are supposed to yield better and reduce risk and increase investment effectiveness, but
on other side unexpected situations may force investors to take back prior before the time period,
sometimes, at that point of time right analysis if not made may yield low returns or even loss
(Ronak Nangalia, 2017). Investment options can be classified into two types namely; physical
asset and financial asset. Stocks are part of the financial asset; the stock exchanges are the places
where companies are listed to generate required a huge sum of money from public investment
which is generally cannot be availed from bank loans or through other means. The stock market
is a summation of all stock exchanges within the country; it is this platform where real exchange
and transaction between company and investor takes place. The stock market is classified into
primary market where newly listed companies sell their securities or stocks for a very first
time, and secondary market - where already listed companies reissued securities for raising funds
to ignition different projects. Stocks are classified into various types, but all can be categorized
into preferential shares or stock and Equity share or stock (Ronak Nangalia, 2017). Stocks are
currently seen as best investment options due to the following reasons; they dont need lots of
money, unlike buying a physical asset such as property, the exchange and transaction time is
very minimum and reliable than buying a conventional asset, the stocks bought can be readily
converted into cash, the return is comparatively more compared to banks interest if investment is
made with proper analysis (JSE, 2017). It is being reported in various studies, that agriculture
and it directly associated sector will make a leap in profitability despite the same level of
productivity. Food and beverage are being an allied sector, the study pertains to identifying the
impact on the level of investment and profitability the companies associated with it (S.
Thowseaf, 2016).
METHODOLOGY
Though various companies are listed on Indian stock exchanges, the indolent sectors are
agricultural - food and beverage sector, which is considered as the one among the basic amenities
for human existence. Hereby, top three companies based on market capitalization were chosen,
i.e. Nestle, Britannia and Glaxo-Smith listed under B. S. E. The stock exchange is selected for
60
convenient data collection purpose. It is only secondary data, that is being used for analysis
obtained from the respective official websites.
SELECTED COMPANIES DESCRIPTIVE STATISTICS
Descriptive statistics are elementary and fundamental level analyses to interpret the distribution
of the dataset. It is being here used to bring out the average value, shift in distribution and to
examine the level of the peak in the data set of the considered companies.
Table 1 Descriptive statistics of Nestle, Britannia and Glaxo-Smith companies
NESTLE0BSE BRITANNIA0BSE GLAXOSMITHCON0BSE

N Valid 247 247 247
Missing 0 0 0
Mean 6122.2277 2953.6731 5860.9065
Std. Error of Mean 36.09949 16.83434 26.32125
Median 6263.9500 2858.7000 5942.6000
a
Mode 6758.40 2682.85 6220.00
Std. Deviation 567.34799 264.57247 413.67091
Variance 321883.739 69998.590 171123.619
Skewness -.307 .759 -.805
Std. Error of Skewness .155 .155 .155
Kurtosis -1.019 -.732 -.048
Std. Error of Kurtosis .309 .309 .309
Range 2210.60 967.75 1737.50
Minimum 5012.35 2566.40 4921.00
Maximum 7222.95 3534.15 6658.50
Descriptive statistics are made using the closing price on selected companies, it is being
found that among the considered companies Nestle companys share price is highest, followed
by Glaxo-Smith then Britannia, this can be interpreted from its mean value which is 6122.23,
5860.90 and 2953.67 respectively. The mode and median value calculated indicates that Nestle
and Glaxo-Smith shares are performing better than their mean value calculated, while Britannia
on an average comparatively. Despite stumpy share performance, Britannia shares standard
deviation is minimal in comparison to other selected companies, i.e. 264.57, it Nestle, whose
shares standard deviation is maximum i.e. 576.35, while Glaxo Smith is 413.67. Hence it can be
interpreted from the standard deviation value that Britannia company shares hold less risk
compared to Nestle and Glaxo-Smith. From the skewness, it can be interpreted that, the
distribution of Nestle shares price is normally distributed, whereas Britannia share price is
61
moderate positively skewed i.e. right-hand tail is larger and Glaxo-Smith is moderate
negatively skewed i.e. left-hand tail is larger, this skewness further confirms the above mean,
median and Mode values (uky.edu, 2017). The value obtained from Kurtosis test indicated all
three selected companies has platykurtic distribution i.e. that is they are lightly tailed and their
value is less than 0, also among the selected companies it is Nestle having high level of peak in
share price value, this can also be noted from the maximum, minimum and Range value
(Statistics, 2016).
Fig 1 Histogram of Nestle, Britannia and Glaxo-Smith Share price Distribution

Respectively
The histogram, thus obtained for all selected companies indicates the distribution of closing
prices over an 5 years, though the level of skewness and kurtosis can be interpreted form above
diagram, the level of normal distribution is still un-quantifiable for which normality test is
carried out, whose values are depicted in the table below.
NORMALITY TEST ON SELECTED COMPANIES SHARE PRICE
62
Table 2 Normality test on selected companies share price
a
Kolmogorov-Smirnov Shapiro-Wilk
Statistic df Sig. Statistic df Sig.
NESTLE0BSE .111 247 .000 .953 247 .000
BRITANNIA0BSE .169 247 .000 .883 247 .000
GLAXOSMITHCON0BSE .097 247 .000 .916 247 .000
The normality test made using Kolmogorov-Smirnov and Shapiro-Wilk tools indicates that the
data set or share price is almost normally distributed for the considered sample size of 247
(Wolverton, 2016). As interpreted from the skewness test the share price of the given three
companies are not highly skewed, whereas moderately skewed, the test for normality using
above mentioned tools confirms that the share price have much deviated on the either ends, most
of the data sets are crowded with respect to mean value on either side, this can be further seen
clearly through graphical representation depicted below i.e. Null hypothesis is rejected, which
means they are significantly different from normal (Webspace, 2016).
Fig 2 Normality graph of Nestle, Britannia and Glaxo-Smith Share price Distribution
Respectively
63
The above graph obtained through normality test indicates that, all the selected companies share
price is not distributed normally, hereby there exist considerable risk associated with investing in
selected companies.
ANALYSIS ON CAPITAL BUDGETING WITH RESPECT TO

SELECTED COMPANIES
The analysis made had indicated the mean value of share price and other descriptive variables for
preliminary decision making also the normality test made indicate there exists unevenly
distributed dataset hereby capital budgeting techniques have been made analyze the potential of
selected companies despite it abnormally distributed data set.
Table 3 - Analysis on capital budgeting on Nestle Company
Year Share Price Change of Price-C Dividend Cumulative Earning/year Amount

Dividend-D (C+D=E) Left
Rs (R'-R1or R2 or R3..) Rs Rs Rs Rs
2012 -3,854.50 0.00 48.5 48.50 48.50 3,806.00
2013 4,477.50 623.00 48.5 97.00 720.00 3,134.50
2014 5,137.50 1,283.00 48.5 145.50 1,428.50 2,426.00
2015 5,580.50 1,726.00 63 208.50 1,934.50 1,920.00
2016 5,775.00 1,920.50 48.5 257.00 2,177.50 1,677.00
2017(P) 6,326.50 2,472.00 52.85 309.85 2,781.85 1,072.65
2018(P) 6,760.05 2,905.55 54.88 364.73 3,270.28 584.22
2019(P) 7,113.24 3,258.74 54.33 419.06 3,677.80 176.70
2020(P) 7,526.22 3,671.72 51.42 470.48 4,142.20 -287.70
Here closing price during 2012 is considered as the investment price and dividend and closing
value of share price in preceding years is calculated to estimate the capital budgeting values with
6.5% as the interest value. Hereby interpretation made for Nestle is depicted in below
interpretation table -
Interpretation table
NPV 1,375.10
IRR 18.92%
PI 1.88
Payback period (Real) 5.77014925
Payback period (Projected) 8.93054433
It is being estimated that the Net Present Value (N.P.V.) is positive and calculated to be 1375.10,
with a 6.5 % interest rate, which is assumed interest rate at the Bank whereby it is found that it
is favorable to invest in Nestle company than in Bank giving 6.5% interest rate. Through Internal
64
rate of return (I. R. R.) it can be interpreted that the investment is capable of producing a return
with additional 18.92% interest rate for 5 years, which once again greater than the bank interest
value (R.Madumathi, 2017). The profitability index value is greater than 1 which further
confirms the investment benefit the company has besides saving in the bank. The payback period
is projected through trend indicates return can possibly be obtained after 8.93 years
approximately.
Table 4 - Analysis on capital budgeting on Britannia Company

2012 -478.00 0.00 16.6 16.60 16.60 461.40
2013 499.50 21.50 21.6 38.20 59.70 418.30
2014 739.00 261.00 33 71.20 332.20 145.80
2015 1,535.50 1,057.50 57.4 128.60 1,186.10 -708.10
2016 2,722.00 2,244.00 67.2 195.80 2,439.80 -1,961.80
6.5% as the interest value. Hereby interpretation made for Britannia is depicted in below
interpretation table-
NPV 2,749.37
IRR 90.72%
PI 6.75
is favorable to invest in Britannia company than in Bank giving 6.5% interest rate. Through
Internal rate of return (I. R. R.) it can be interpreted that the investment is capable of producing a
return with additional 90.72% interest rate for 5 years, which once again greater than bank
interest value. The profitability index value is greater than 6.75 which further confirm the
investment benefit the company has besides saving in the bank. The payback period is
calculation indicates return can be obtained after 3.4 years approximately.
65
Table 5 - Analysis on capital budgeting on Galxo-Smith Company

2012 -2311 0 35 35 35 2276
2013 3150.5 839.5 45 80 919.5 1391.5
2014 4757.5 2446.5 45 125 2571.5 -260.5
2015 6042 3731 55 180 3911 -1600
2016 6109.5 3798.5 70 250 4048.5 -1737.5
6.5% as the interest value. Hereby interpretation made for Nestle is depicted in below
interpretation table-
NPV 7,204.28
IRR 81.61%
PI 4.12
is favorable to invest in Britannia company than in Bank giving 6.5% interest rate. Through
Internal rate of return (I. R. R.) it can be interpreted that the investment is capable of producing a
return with additional 81.61% interest rate for 5 years, which once again greater than bank
interest value. The profitability index value is greater than 4.12 which further confirm the
investment benefit the company has besides saving in the bank. The payback period is
calculation indicates return can be obtained after 2.9 years approximately.
RATE OF CHANGE (R.O.C.) AND RELATIVE STRENGTH INDEX (R.S.I.) OF

SELECTED COMPANIES
The rat of change and relative strength index calculation have been made to analyze the
momentum of the share price of the selected companies, with a key motive to understand the
extend of momentum existed in a year.
66
Table 6 R.O.C. and R.S.I. Of Nestle Company's share price
Month ROC / Month ROC / Year RSI / Month RSI / Year

Jan -4.000127367 4.210917449 39.32922527 50.74039013
Feb -7.801977572 28.82716049
Mar 5.244288811 68.43048042
Apr -1.163917034 45.25444557
May -5.577267722 23.45392432
Jun 10.11463872 73.57623045
Jul 2.144020905 66.68378263
Aug 6.179599227 58.65684744
Sep 1.932581478 49.10593432
Oct 14.25925926 77.15526524
Nov -8.246611201 27.56274924
Dec -5.107886937 34.544789
Change per Year 4.210917449 50.74039013
Table 7 R.O.C. and R.S.I. Of Britannia Company's share price

Jan -4.001865206 -3.639190251 37.01754386 49.35686449
Feb -8.683431286 35.33834586
Mar -4.889673687 45.41381351
Apr -1.318951873 44.68150141
May 19.68258369 75.51994545
Jun 4.501275123 65.77052766
Jul -0.247860619 54.03623073
Aug -5.364761838 41.17852975
Sep 6.562237762 65.8660145
Oct -5.790492958 43.86419114
Nov -1.520831102 53.54415554
Dec -10.30407382 25.50079491
Change per Year -3.639190251 49.35686449
67
Table 8 R.O.C. and R.S.I. Of Galxo-Smith Company's share price

Jan -2.810436542 -21.44979251 50.26935509 61.96646225
Feb -17.89465027 18.8256063
Mar -2.002260617 53.678609
Apr -3.725509043 36.31748718
May -2.174744251 47.63151902
Jun 4.526504363 66.99663272
Jul 2.374169863 58.40315426
Aug -0.895885658 45.0569406
Sep -1.978093158 41.68330422
Oct 10.77734949 73.06213317
Nov -5.436348536 37.03271621
Dec -8.277791751 86.2458381
Change per Year -21.44979251 61.94611564
The R.O.C. and R.S.I. calculated using share price considering one year daily based data,
indicates that all selected companies share performance or momentum are on an average as none
of the companies R.S.I. is above 70 (thismatter, 2016). Among the companies selected share
performance Glaxo-Smith is having better performed, it is a Nestle that whose R.O.C. Is positive
compared to the other two countries, which indicates it had better perform in share price
compared to previous years, while Britannia have exhibited least difference in negative term by
the value of -3.64 approximately followed by Glaxo-smith. Hereby sensitivity of share price the
very minimal in Britannia; Nestle had provided positive cash return compared to previous years;
and Glaxo-Smith share performance in the market is comparable better than any other selected
companies. Thereby the investment decision solely depends on investor criteria as each company
offers benefits in different term.
CONCLUSION
Every selected company have an almost normal distribution of share price and have depicted less
level of skewness and kurtosis, this clearly indicates the marginal level of risk associated with
Nestle, Britannia and Glaxo Smith companies. On considering the capital budgeting values
computed, clearly all the companies indicated the positive value of Net Present Value (N.P.V.) at
the 6.5 % interest level, thereby it is favorable to invest in companies rather than any bank or
entities giving 6.5% interest rate for the money deposited. Whereas the Internal Rate of Return
(I. R. R.) indicates Britannia company is lending more return (i.e. - 90.72%) on considering the
share price movement every year, as well as the dividend, issued, followed by Glaxo-Smith
68
holds a value of 81.61%. The profitability index thus calculated also indicated favorableness
towards Britannia followed by Glaxo, Smith, whose value is 6.75 and 4.12 respectively. Whereas
considering the payback period, Glaxo-Smith which has very less value compared to Britannia
and Nestle, it is calculated that investing on Glaxo-Smith will provide the invested return in 2.9
years while investing on Britannia will yield returns after 3.4 years, similarly, Nestle will pay
back our return approximately over 8.93 years. Analysis using R.O.C. and R.S.I. indicated
among the companies selected share performance Glaxo-Smith is having better performed in
terms of share price compared, but not out performed the share price value compared to price
during the beginning of the period. Britannia had indicated a steady, sustainable movement in
share price, Nestle had exhibited positive value of R.O.C. which explains that Nestle share price
have increased compared to the share price it was in the beginning of the year 2016, also Nestle
overall have lagged in above aspects even R.S.I compared to Glaxo-Smith,. Hereby it favorable
to give priority on Galxo-Smith and Britannia as per the analyses carried out; also there is a
possibility of Nestle better performing in the forthcoming years as the R.O.C. is positive which
indicates favorable buying time of shares of Nestle.
REFERENCES
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https://www.jse.co.za/content/JSEEducationItems/Why%20Invest%20in%20Shares.pdf
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EXCHANGE. International Journal of Commerce, Business and Management , Vol. 3,
No. 4, PP 549-556.
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http://nptel.ac.in/courses/122106032/Pdf/2_4.pdf
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FLAME University.
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EXPORT CONTRIBUTION TO INDIAN GDP AND FUTURE TREND. GLOBAL
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http://thismatter.com/money/technical-analysis/momentum.htm
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https://www.uky.edu/Centers/HIV/cjt765/9.Skewness%20and%20Kurtosis.pdf
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http://webspace.ship.edu/pgmarr/Geo441/Lectures/Lec%205%20-
%20Normality%20Testing.pdf
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70

An Investigative Study On Stock Performance of Selected Companies in Food and Beverage Sector Listed Under B. S. E.

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ZENITH International Journal of Business Economics & Management Research_______ ISSN 2249- 8826

ZIJBEMR, Vol.7 (4), APRIL (2017), pp. 59-70

AN INVESTIGATIVE STUDY ON STOCK PERFORMANCE OF

SELECTED COMPANIES DESCRIPTIVE STATISTICS

Table 1 Descriptive statistics of Nestle, Britannia and Glaxo-Smith companies

NESTLE0BSE BRITANNIA0BSE GLAXOSMITHCON0BSE

Fig 1 Histogram of Nestle, Britannia and Glaxo-Smith Share price Distribution

NORMALITY TEST ON SELECTED COMPANIES SHARE PRICE

Table 2 Normality test on selected companies share price

ANALYSIS ON CAPITAL BUDGETING WITH RESPECT TO

Table 3 - Analysis on capital budgeting on Nestle Company

Year Share Price Change of Price-C Dividend Cumulative Earning/year Amount

Table 4 - Analysis on capital budgeting on Britannia Company

Year Share Price Change of Price-C Dividend Cumulative Earning/year Amount

Table 5 - Analysis on capital budgeting on Galxo-Smith Company

Year Share Price Change of Price-C Dividend Cumulative Earning/year Amount

RATE OF CHANGE (R.O.C.) AND RELATIVE STRENGTH INDEX (R.S.I.) OF

Table 6 R.O.C. and R.S.I. Of Nestle Company's share price

Month ROC / Month ROC / Year RSI / Month RSI / Year

Table 7 R.O.C. and R.S.I. Of Britannia Company's share price

Month ROC / Month ROC / Year RSI / Month RSI / Year

Table 8 R.O.C. and R.S.I. Of Galxo-Smith Company's share price

Month ROC / Month ROC / Year RSI / Month RSI / Year

1. JSE. (2017). www.jse.co.za. Retrieved from

2. kaur, G. (2014). EVOLUTION OF STOCK MARKETS AND ROLE OF STOCK

3. R.Madumathi. (2017). nptel.ac.in. Retrieved from

4. Ronak Nangalia, S. K. (2017). Basics Of Stock Market. FLAME Investment LAB .

5. S. Thowseaf, D. M. (2016). AGRICULTURAL AND PROCESSED FOOD PRODUCTS

6. thismatter. (2016). thismatter.com. Retrieved from

7. uky.edu. (2017). www.uky.edu. Retrieved from

8. Webspace. (2016). webspace.ship.edu. Retrieved from

9. Wolverton. (2016). geography.unt.edu. Retrieved from

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