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1.1 INTRODUCTION
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Exchange is professionally managed under the overall direction of the Board of
Directors. The Board comprises eminent professionals, representatives of Trading
Members and the Managing Directors of the Exchange.
The Board is inclusive and is designed to benefit from the participation of market
intermediaries. In terns of organization structure, the Board formulates larger policy
issues and exercises over-all control. The committee constituted by the board is broad-
based. The day-to-day operations of the exchange are managed by the Managing Director
& CEO and a Management team of professionals.
The exchange has a nation-wide reach with a presence in 417 cities and towns of
India. The systems and processes of the Exchange are designed to safeguard market
integrity and enhance transparency in operations.
Capital market reforms in India and the launch of the Securities and Exchange
Board of India (SEBI) accelerated the incorporation of the second Indian stock exchange
called the National Stock Exchange (NSE) in 1992. After a few years of operations, the
NSE has become the largest stock exchange in India.
Three segments of the NSE trading platform were established one after another. The
Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital
Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options
segment began operating in 2000. Today the NSE takes the 14th position in the top 40
futures exchanges in the world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX
Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified
index of 50 stocks from 25 different economy sectors. The Indices are owned and
managed by India Index Services and Products Ltd (IISL) that has a consulting and
licensing agreement with Standard & Poor's.
In 1998, the National Stock Exchange of India launched its web-site and was the
first exchange in India that started trading stock on the Internet in 2000. The NSE has
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also proved its leadership in the Indian financial market by gaining many awards such as
'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web
Award by CHIP magazine (1999).
The need for the study is to analyze portfolio management service in various share
price movements of various companies belonging to various sectors of National Stock
Market, which is also funneled down to the NIFTY stocks.
There is always an expectation of the stock holders to get an optimum return for
the risk being beard by the investors in investing in such stocks. The returns are expected
in the form of appreciation of the share values and in the form of dividends declared by
the companies.
There is a need to analyze whether the equity and other instruments issued by the
companies is playing a major role in the price movements of the stocks. The portfolio
management service is having an impact in prices changes of the s tocks market.
Primary objectives
To construct a portfolio on selected scrips in S&P CNX Nifty.
Secondary objectives
To observe the rate of fluctuations of selected scrip’s.
To determine the share price movement of the selected scrip’s.
To find out the risk and return of the sample scrip’s.
To find out suitable portfolio from scrip’s in Nifty.
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1.4 SCOPE OF THE STUDY
The purpose of the study is to find out whether the company share prices
movements depends on the company’s profit and their dividend issues. The research
reveals a general study related to the investment patterns of investors relate to the price
changes. The researches reveal the results regarding the investment details of investors in
various companies during that period. Data are collected from the web sites helped to
find out the impact and causes of price changes.
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CHAPTER2
Company Profile
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the
Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a
member of both the exchanges. It is engaged in the businesses of Equities broking,
Wealth Advisory Services and Portfolio Management Services. It offers broking services
in the Cash and Derivatives segments of the NSE as well as the Cash segment of the
BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a
one-stop solution for clients trading in the equities market. It has recently launched its
Investment banking and Institutional Broking business.
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India infoline media and research services limited:
The content services represent a strong support that drives the broking,
commodities, mutual fund and portfolio management services businesses. Revenue
generation is through the sale of content to financial and media houses, Indian as well as
global.
It undertakes equities research which is acknowledged by none other than Forbes as
'Best of the Web' and '…a must read for investors in Asia'. India Infoline's research is
available not just over the internet but also on international wire services like Bloomberg
(Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst
the most read Indian brokers.
India Infoline Marketing and Services Limited is the holding company of India
Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited.
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the largest Corporate Agent for ICICI Prudential Life Insurance Co
Limited, which is India's largest private Life Insurance Company. India
Infoline was the first corporate agent to get licensed by IRDA in early
2001.
(b) India Infoline Insurance Brokers Limited is a newly formed subsidiary
which will carry out the business of Insurance broking. We have applied
to IRDA for the insurance broking licence and the clearance for the same
is awaited. Post the grant of license, we propose to also commence the
general insurance distribution business.
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Equities:
India Infoline provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist
prior to India Infoline. India Infoline leveraged technology to bring the convenience of
trading to the investor’s location of preference (residence or office) through computerized
access. India Infoline made it possible for clients to view transaction costs and ledger
updates in real time.
Commodities
India Infolines extension into commodities trading reconciles its strategic intent to
emerge as a one stop solutions financial intermediary. Its experience in securities broking
has empowered it with requisite skills and technologies. Increased offering: The
Companies commodities business provides a contra-cyclical alternative to equities
broking. The Company was among the first to offer the facility of commodities trading in
Indias young commodities market (the MCX commenced operations only in 2003).
Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs
20.02 bn. The commodities market has several products with different and non-correlated
cycles. On the whole, the business is fairly insulated against cyclical gyrations in the
business.
Insurance
An entry into this segment helped complete the client's product basket;
concurrently, it graduated the Company into a one stop retail financial solutions provider.
To ensure maximum reach to customers across India, we have employed a multi pronged
approach and reach out to customers via our Network, Direct and Affiliate channels.
Following the opening of the sector in 1999-2000, a number of private sector insurance
service providers commenced operations aggressively and helped grow the market.
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The Company’s entry into the insurance sector derricked the Company from a
predominant dependence on broking and equity-linked revenues. The annuity based
income generated from insurance intermediation result in solid core revenues across the
tenure of the policy.
India Infoline has made investing in Mutual funds and primary market so effortless.
All you have to do is register with us and that’s all. No paperwork no queues and No
registration charges.
If you are 5p customer use your existing login ID and Ledger (fund transfer)
password. Indiainfoline offers you a host of mutual fund and IPO choices under one roof;
backed by in-depth information and research to help you invest effortlessly.
Invest In Mf
Indiainfoline offers you a host of mutual fund choices under one roof, backed by in-
depth research and advice from research house and tools configured as investor friendly.
Investing in Mutual Funds has never been easier.
APPLY IN IPOs
You could also invest in Initial Public Offers (IPOs) online without going through
the hassles of filling ANY application form/ paperwork.
Loans
They say you mustn't trust a man till you know his house. Everyone likes hearing
people say Wow, what a beautiful house you have! From cave dwelling, we have evolved
and now a house provides far more than just shelter...it also becomes a source of pride. A
Housing Loan is used as finance to help you buy or modify that perfect home.
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The different Housing Loan products can be classified as:
Portfolio Management:
You get recessions. You have stock market declines. If you don't understand that's
going to happen, then you're not ready; you won't do well in the markets. No need to
worry. We at India Infoline would take care of all issues related to managing your hard
earned money.
Our Portfolio Management Service is a product wherein an equity investment
portfolio is created to suit the investment objectives of a client. We at India Infoline
invest your resources into stocks from different sectors, depending on your risk-return
profile. This service is particularly advisable for investors who cannot afford to give time
or don't have that expertise for day-to-day management of their equity portfolio.
It is all about your money, being managed by the experts, while you continue with
your routine life. Isn't it simple and totally hassle free.
What's more, you can keep track of your dividends / bonus / rights issues with
paperless tracking. So you always know how fast your investment is growing. It basically
means assigning the right job to the right person.
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CHAPTER3
Research Methodology:
Research methodology is a way to find out the solution to the problem. The
research is carries out using scientific methods which is elaborated in next part.
Beta
Systematic & Unsystematic risk
Standard deviation
Sharpe’s optimal portfolio model
Cut-off Rate
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CHAPTER4
Beta (β) =
N = No of Months
∑X = Change in percentage of Nifty
∑Y = Change in percentage of Companies
∑X2 = Square of Change in percentage of Nifty
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SUMMARY OF VALUES OF BETA AND THE RELATIONSHIP TO MARKET
MOVEMENTS:
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TABLE 1: COMPARE WITH NIFTY AND TATA STEEL
Percentage
Square of Change Square of
Change Change in Change in on Nifty
change in Tatasteel in change in
Date1 Nifty2 in Nifty percentage percentage and
percentage 6 Tatasteel percentage
3 8=7/6*100 Tatasteel
5 7 9
4=3/2*100 10=4*8
4839.18
MAR-APR08 (99.849) (2.0633) 4.257 718.493 117.296 16.325 266.518 (33.684)
6
4739.33
MAY-JUN08 (478.68) (10.100) 102.012 835.790 (202.558) (24.235) 587.364 244.783
7
4260.65
JUL-AUG08 (540.051) (12.675) 160.663 633.231 (234.076) (36.965) 1366.439 468.547
7
3720.60
SEP-OCT08 (852.968) (22.925) 525.579 399.155 (205.515) (51.487) 2650.977 1180.380
6
2867.63
NOV-DEC08 (30.403) (1.060) 1.124 193.639 (2.452) (1.266) 1.603 1.342
8
2837.23
JAN-FEB09 221.212 7.796 60.789 191.187 19.657 10.281 105.714 80.164
5
3058.44
MAR-APR09 1150.11 37.604 1414.089 210.844 165.739 78.607 6179.156 2955.990
7
4208.55
MAY-JUN09 243.365 5.782 33.438 376.584 52.093 13.833 191.358 79.992
7
4451.92
JUL-AUG09 474.786 10.664 113.736 428.678 75.677 17.653 311.655 188.272
2
4926.70
SEP-OCT09 101.715 2.064 4.262 504.356 47.164 9.351 87.448 19.306
8
5028.42
NOV-DEC09 (34.585) (0.687) 0.473 551.520 43.103 7.815 61.080 (5.375)
3
4993.83
JAN-FEB10 594.624
8
Beta calculation,
BETA =
= 2.135046
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Interpretation
From the above table 4.1, we got the beta value of Tatasteel compare with NIFTY
value as 2.135046. From beta value one can identify that the investment is more volatile
than the market, because beta value is more than one. Based on this, high investment can
be made.
BETA =
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=
= 1.044655
Interpretation
From the above table 4.2, we got the beta value of SBIN compare with NIFTY value
as 1.044655. From beta value one can identify that the investment is more volatile than the
market, because beta value is more than one. Based on this, high investment can be made.
Percentage
Square of Change in
Change Change in ICICI Change in Square of On Nifty
change in ICICI
Nifty2 in Nifty percentage BANK percentage change in And
percentag BANK
Date1 3 6 8=7/6*100 percentage 9 Icicibank
e5 7
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 845.321 (35.689) (4.221) 17.825 8.711
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 809.631 (163.255) (20.164) 406.591 203.660
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 646.376 (121.674) (18.824) 354.345 238.600
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 524.702 (124.928) (23.809) 566.883 545.840
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 399.774 6.861 1.716 2.945 (1.819)
JAN-FEB09 2837.235 221.212 7.796 60.789 406.635 (42.380) (10.422) 108.622 (81.259)
MAR-APR09 3058.447 1150.11 37.604 1414.089 364.255 316.476 86.882 7548.654 3267.181
MAY-JUN09 4208.557 243.365 5.782 33.438 680.731 50.781 7.459 55.648 43.137
JUL-AUG09 4451.922 474.786 10.664 113.736 731.512 126.812 17.335 300.525 184.880
SEP-OCT09 4926.708 101.715 2.064 4.262 858.325 11.440 1.332 1.776 2.751
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 869.765 (29.640) (3.407) 11.613 2.343
JAN-FEB10 4993.838 840.125
BETA =
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=
= 1.819506
Interpretation
From the above table 4.3, we got the beta value of ICICIBANK compare with NIFTY
value as 1.819506. From beta value one can identify that the investment is more volatile
than the market, because beta value is more than one. Based on this, high investment can
be made.
Percentage
Square of Square of
Change Change in Change in Change in On Nifty
change in HDFC change in
Date1 Nifty2 in Nifty percentage Hdfc Bankl percentage And
percentage BANK 6 percentage
3 7 8=7/6*100 Hdfcbank
5 9
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 1367.342 (74.586) (5.454) 29.755 11.255
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 1292.756 (167.073) (12.923) 167.024 130.532
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 1125.683 51.328 4.559 20.791 (57.795)
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 1177.011 (212.264) (18.034) 325.233 413.443
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 964.746 (35.555) (3.685) 13.582 3.907
JAN-FEB09 2837.235 221.212 7.796 60.789 929.191 35.571 3.828 14.655 29.847
MAR-APR09 3058.447 1150.11 37.604 1414.089 964.762 421.385 43.677 1907.740 1642.472
MAY-JUN09 4208.557 243.365 5.7826 33.438 1386.148 52.161 3.763 14.160 21.760
JUL-AUG09 4451.922 474.786 10.664 113.736 1438.309 156.7 10.894 118.695 116.189
SEP-OCT09 4926.708 101.715 2.064 4.262 1595.009 133.531 8.371 70.087 17.284
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 1728.54 (66.118) (3.825) 14.631 2.630
JAN-FEB10 4993.838 1662.422
BETA =
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=
= 0.953841
Interpretation
From the above table 4.4, we got the beta value of HDFCBANK compare with
NIFTY value as 0.953841. From beta value one can identify that the investment is less
volatile than the market, because beta value is less than one.
Percentage
Square of Square of
Change Change in Change in Change in On Nifty
change in RELCAPI change in
Date1 Nifty2 in Nifty percentage Relcapital percentage And
percentage TAL 6 percentage
3 7 8=7/6*100 Relcapital
5 9
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 1325.996 (120.698) (9.102) 82.854 18.781
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 1205.298 11.662 0.967 0.936 (9.772)
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 1216.96 (209.706) (17.231) 296.940 218.420
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 1007.254 (476.501) (47.306) 2237.949 1084.536
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 530.752 (109.344) (20.601) 424.436 21.842
JAN-FEB09 2837.235 221.212 7.796 60.789 421.407 (18.745) (4.448) 19.787 (34.682)
MAR-APR09 3058.447 1150.11 37.604 1414.089 402.662 441.886 109.741 12043.145 4126.752
MAY-JUN09 4208.557 243.365 5.7826 33.438 844.548 2.896 0.342 0.1176 1.983
JUL-AUG09 4451.922 474.786 10.664 113.736 847.445 48.017 5.666 32.104 60.427
SEP-OCT09 4926.708 101.715 2.064 4.262 895.462 (59.761) (6.673) 44.539 (13.778)
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 835.701 (21.649) (2.590) 6.711 1.781
JAN-FEB10 4993.838 814.051
BETA =
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=
= 2.275518
Interpretation
From the above table 4.5, we got the beta value of RELCAPITAL compare with
NIFTY value as 2.275518. From beta value one can identify that the investment is more
volatile than the market, because beta value is more than one. Based on this, high
investment can be made.
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BETA =
= 2.081216
Interpretation
From the above table 4.6, we got the beta value of IDFC compare with NIFTY value
as 2.081216. From beta value one can identify that the investment is more volatile than the
market, because beta value is more than one. Based on this, high investment can be made.
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4926.70
SEP-OCT09 101.715 2.064 4.262 2251.733 163.008 7.239 52.406 14.945
8
5028.42
NOV-DEC09 (34.585) (0.687) 0.473 2414.741 125.342 5.191 26.943 (3.570)
3
4993.83
JAN-FEB10 2540.083
8
BETA =
= 0.740425
Interpretation
From the above table 4.7, we got the beta value of INFOSYSTCH compare with
NIFTY value as 0.740425. From beta value one can identify that the investment is less
volatile than the market, because beta value is less than one.
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Square of Square of Percentage
Change Change in Change in Change in
change in TCS change in on Nifty
Date1 Nifty2 in Nifty percentage TCS percentage
percentage 6 percentage and TCS
3 7 8=7/6*100
4=3/2*100 5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 872.468 59.358 6.803 46.287 (14.037)
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 931.826 (107.035) (11.486) 131.943 116.017
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 824.791 (162.391) (19.688) 387.646 249.561
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 662.4 (152.047) (22.954) 526.886 526.232
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 510.352 (9.194) (1.801) 3.246 1.910
JAN-FEB09 2837.235 221.212 7.796 60.789 501.157 37.331 7.449 55.488 58.078
MAR-APR09 3058.447 1150.11 37.604 1414.089 538.489 64.815 12.036 144.878 452.627
MAY-JUN09 4208.557 243.365 5.782 33.438 603.304 (123.327) (20.441) 417.874 (118.208)
JUL-AUG09 4451.922 474.786 10.664 113.736 479.977 111.304 23.189 537.7496 247.309
SEP-OCT09 4926.708 101.715 2.064 4.262 591.281 98.637 16.681 278.286 34.441
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 689.918 61.199 8.871 78.686 (6.101)
JAN-FEB10 4993.838 751.117
BETA =
= 0.645238
Interpretation
From the above table 4.8, we got the beta value of TCS compare with NIFTY value
as 0.645238. From beta value one can identify that the investment is less volatile than the
market, because beta value is less than one.
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Square of Square of Percentage
Change Change in Change in Change in
change in WIPRO change in On Nifty
Date1 Nifty2 in Nifty percentage Wipro percentage
percentag 6 percentage And Wipro
3 7 8=7/6*100
4=3/2*100 e5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 421.982 68.057 16.127 260.111 (33.277)
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 490.040 (70.484) (14.383) 206.881 145.274
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 419.555 (76.281) (18.181) 330.565 230.455
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 343.274 (101.535) (29.578) 874.895 678.105
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 241.738 (14.882) (6.156) 37.899 6.526
JAN-FEB09 2837.235 221.212 7.796 60.789 226.856 27.476 12.111 146.691 94.431
MAR-APR09 3058.447 1150.11 37.604 1414.089 254.332 129.996 51.112 2612.509 1922.061
MAY-JUN09 4208.557 243.365 5.782 33.438 384.328 83.375 21.693 470.625 125.447
JUL-AUG09 4451.922 474.786 10.664 113.736 467.704 107.614 23.009 529.415 245.385
SEP-OCT09 4926.708 101.715 2.064 4.262 575.318 68.358 11.881 141.176 24.531
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 643.676 36.079 5.605 31.418 (3.855)
JAN-FEB10 4993.838 679.756
BETA =
= 1.390466
Interpretation
From the above table 4.9, we got the beta value of WIPRO compare with NIFTY
value as 1.044655. From beta value one can identify that the investment is more volatile
than the market, because beta value is more than one. Based on this, high investment can
be made.
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Square of Square of Percentage
Change Change in Change in
change in HCLTE Change in change in on Nifty and
Date1 Nifty2 in Nifty percentage percentage
percentage CH 6 HCLTech 7 percentage HCLTech
3 8=7/6*100
4=3/2*100 5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 260.463 29.533 11.338 128.565 (23.395)
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 289.996 (65.631) (22.631) 512.195 228.583
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 224.365 (23.896) (10.651) 113.441 135.003
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 200.468 (65.745) (32.795) 1075.565 751.860
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 134.723 (21.489) (15.951) 254.437 16.911
JAN-FEB09 2837.235 221.212 7.796 60.789 113.233 (2.469) (2.181) 4.757 (17.005)
MAR-APR09 3058.447 1150.11 37.604 1414.089 110.763 62.427 56.360 3176.519 2119.406
MAY-JUN09 4208.557 243.365 5.782 33.438 173.190 64.927 37.489 1405.438 216.785
JUL-AUG09 4451.922 474.786 10.664 113.736 238.118 79.293 33.299 1108.882 355.134
SEP-OCT09 4926.708 101.715 2.064 4.262 317.411 21.649 6.821 46.522 14.081
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 339.061 20.345 6.001 36.006 (4.127)
JAN-FEB10 4993.838 359.406
BETA =
= 1.542903
Interpretation
From the above table 4.10, we got the beta value of HCL compare with NIFTY value
as 1.542903. From beta value one can identify that the investment is more volatile than the
market, because beta value is more than one. Based on this, high investment can be made.
Page 24 of 77
Square of Square of Percentage
Change Change in Change in
change in Change in change in on Nifty
Date1 Nifty2 in Nifty percentage L&T 6 percentage
percentage L&T 7 percentage and L&T
3 8=7/6*100
4=3/2*100 5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 2900.214 (148.847) (5.132) 26.340 10.589
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 2751.367 (179.13) (6.510) 42.387 65.757
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 2572.237 (809.633) (31.475) 990.728 398.965
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 1762.604 (977.382) (55.451) 3074.817 1271.243
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 785.221 (96.646) (12.308) 151.490 13.049
JAN-FEB09 2837.235 221.212 7.796 60.789 688.575 24.832 3.606 13.005 28.117
MAR-APR09 3058.447 1150.11 37.604 1414.089 713.408 624.116 87.483 7653.424 3289.775
MAY-JUN09 4208.557 243.365 5.782 33.438 1337.525 145.343 10.866 118.082 62.837
JUL-AUG09 4451.922 474.786 10.664 113.736 1482.868 144.826 9.766 95.386 104.158
SEP-OCT09 4926.708 101.715 2.064 4.262 1627.694 8.551 0.525 0.275 1.084
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 1636.245 (104.644) (6.395) 40.901 4.398
JAN-FEB10 4993.838 1531.601
BETA =
= 2.18874
Interpretation
From the above table 4.11, we got the beta value of L&T compare with NIFTY value
as 2.18874. From beta value one can identify that the investment is more volatile than the
market, because beta value is more than one. Based on this, high investment can be made.
Page 25 of 77
Square of Square of Percentage
Change Change in Change in Change in
change in change in on Nifty
Date1 Nifty2 in Nifty percentage DLF 6 DLF percentage
percentage percentage and DLF
3 7 8=7/6*100
4=3/2*100 5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 653.135 (94.498) (14.468) 209.337 29.853
MAY-JUN08 4739.337 (478.68) (10.100) 102.013 558.636 (77.311) (13.839) 191.524 139.778
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 481.325 (119.725) (24.874) 618.722 315.287
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 361.6 (113.089) (31.274) 978.113 716.990
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 248.510 (67.142) (27.017) 729.969 28.644
JAN-FEB09 2837.235 221.212 7.796 60.789 181.367 9.480 5.227 27.324 40.756
MAR-APR09 3058.447 1150.11 37.604 1414.089 190.848 140.437 73.585 5414.841 2767.141
MAY-JUN09 4208.557 243.365 5.782 33.438 331.285 31.413 9.482 89.912 54.832
JUL-AUG09 4451.922 474.786 10.664 113.736 362.698 61.308 16.903 285.726 180.271
SEP-OCT09 4926.708 101.715 2.064 4.262 424.007 (52.911) (12.478) 155.721 (25.763)
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 371.096 (34.548) (9.309) 86.675 6.403
JAN-FEB10 4993.838 336.547
BETA =
= 1.78672
Interpretation
From the above table 4.12, we got the beta value of DLF compare with NIFTY value
as 1.78672. From beta value one can identify that the investment is more volatile than the
market, because beta value is more than one. Based on this, high investment can be made.
Page 26 of 77
Percentage
Square of Change Square of
Change Change in Change in On Nifty
change in UNITECH in change in
Date1 Nifty2 in Nifty percentage percentage And
percentage 6 Unitech percentage
3 8=7/6*100 Unitech
5 7 9
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 280.707 (46.327) (16.503) 272.374 34.052
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 234.380 (69.495) (29.651) 879.167 299.477
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 164.884 (55.399) (33.598) 1128.885 425.875
SEP-OCT08 3720.606 (852.968) (22.9250 525.579 109.485 (71.039) (64.884) 4210.021 1487.514
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 38.446 (6.484) (16.866) 284.486 17.882
JAN-FEB09 2837.235 221.212 7.796 60.789 31.961 3.941 12.330 152.052 96.141
MAR-APR09 3058.447 1150.11 37.604 1414.089 35.902 38.669 107.707 11600.917 4050.275
MAY-JUN09 4208.557 243.365 5.782 33.438 74.572 10.513 14.098 198.772 81.527
JUL-AUG09 4451.922 474.786 10.664 113.736 85.086 18.519 21.766 473.761 232.129
SEP-OCT09 4926.708 101.715 2.064 4.262 103.606 (19.642) (18.959) 359.449 (39.142)
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 83.963 (6.559) (7.812) 61.033 5.373
JAN-FEB10 4993.838 77.403
BETA =
= 2.803783
Interpretation
From the above table 4.13, we got the beta value of UNITECH compare with NIFTY
value as 2.803783. From beta value one can identify that the investment is more volatile
than the market, because beta value is more than one. Based on this, high investment can
be made.
Page 27 of 77
Percentage
Square of Square of
Change Change in JINDAL Change in Change in On Nifty
change in change in
Date1 Nifty2 in Nifty percentage STEL Jindalstel percentage And
percentage percentage
3 6 7 8=7/6*100 Jindalstel
5 9
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 2038.058 137.616 6.752 45.593 (13.932)
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 2175.674 (266.743) (12.260) 150.313 123.830
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 1908.931 (704.103) (36.884) 1360.479 467.524
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 1204.828 (392.247) (32.556) 1059.911 746.369
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 812.5808 144.792 17.818 317.510 (18.891)
JAN-FEB09 2837.235 221.212 7.796 60.789 957.3731 305.335 31.893 1017.169 248.662
MAR-APR09 3058.447 1150.11 37.604 1414.089 1262.709 869.414 68.853 4740.746 2589.177
MAY-JUN09 4208.557 243.365 5.782 33.438 2132.123 720.737 33.803 1142.691 195.474
JUL-AUG09 4451.922 474.786 10.664 113.736 2852.86 (1603.847) (56.218) 3160.566 (599.560)
SEP-OCT09 4926.708 101.715 2.064 4.262 1249.013 (546.571) (43.760) 1914.961 (90.345)
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 702.441 (48.156) (6.855) 46.999 4.715
JAN-FEB10 4993.838 654.284
BETA =
= 1.537131
Interpretation
From the above table 4.14, we got the beta value of JINDAL STEEL compare with
NIFTY value as 1.537131. From beta value one can identify that the investment is more
volatile than the market, because beta value is more than one. Based on this, high
investment can be made.
Page 28 of 77
Square of Square of Percentage
Change Change in Change in
change in Change in change in On Nifty
Date1 Nifty2 in Nifty percentage STER 6 percentage
percentage Sterlite 7 percentage And Sterlite
3 8=7/6*100
4=3/2*100 5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 773.061 61.041 7.895 62.346 (16.292)
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 834.102 (209.111) (25.070) 628.5111 253.211
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 624.991 (223.439) (35.751) 1278.118 453.151
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 401.552 (148.857) (37.071) 1374.222 849.860
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 252.694 12.674 5.015 25.156 (5.317)
JAN-FEB09 2837.235 221.212 7.796 60.789 265.369 76.502 28.828 831.091 224.769
MAR-APR09 3058.447 1150.11 37.604 1414.089 341.871 240.178 70.253 4935.621 2641.857
MAY-JUN09 4208.557 243.365 5.782 33.438 582.05 47.353 8.135 66.188 47.045
JUL-AUG09 4451.922 474.786 10.664 113.736 629.403 139.476 22.160 491.071 236.332
SEP-OCT09 4926.708 101.715 2.064 4.262 768.88 72.274 9.400 88.360 19.406
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 841.154 (36.088) (4.290) 18.406 2.951
JAN-FEB10 4993.838 805.066
BETA =
= 1.932968
Interpretation
From the above table 4.15, we got the beta value of STER compare with NIFTY
value as 1.932968. From beta value one can identify that the investment is more volatile
than the market, because beta value is more than one. Based on this, high investment can
be made.
Page 29 of 77
Square of Square of Percentage
Change Change in Change Change in
change in change in on Nifty
Date1 Nifty2 in Nifty percentage SAIL 6 in SAIL percentage
percentage percentage and SAIL
3 7 8=7/6*100
4=3/2*100 5 9 10=4*8
4839.18
MAR-APR08 (99.849) (2.063) 4.257 188.381 (24.519) (13.015) 169.411 26.856
6
4739.33
MAY-JUN08 (478.68) (10.100) 102.012 163.862 (23.823) (14.538) 211.380 146.845
7
4260.65
JUL-AUG08 (540.051) (12.675) 160.663 140.038 (18.156) (12.965) 168.104 164.341
7
3720.60
SEP-OCT08 (852.968) (22.925) 525.579 121.881 (47.091) (38.637) 1492.851 885.782
6
2867.63
NOV-DEC08 (30.403) (1.060) 1.124 74.7897 6.115 8.176 66.859 (8.669)
8
2837.23
JAN-FEB09 221.212 7.796 60.789 80.905 15.417 19.056 363.157 148.580
5
3058.44
MAR-APR09 1150.11 37.604 1414.089 96.322 55.350 57.463 3302.087 2160.890
7
4208.55
MAY-JUN09 243.365 5.782 33.438 151.673 12.601 8.308 69.024 48.042
7
4451.92
JUL-AUG09 474.786 10.664 113.736 164.275 8.838 5.380 28.949 57.381
2
4926.70
SEP-OCT09 101.715 2.064 4.262 173.113 26.778 15.468 239.288 31.936
8
5028.42
NOV-DEC09 (34.585) (0.687) 0.473 199.892 21.902 10.956 120.055 (7.536)
3
4993.83
JAN-FEB10 221.794
8
BETA =
= 1.496804
Interpretation
From the above table 4.16, we got the beta value of SAIL compare with NIFTY value
as 1.496804. From beta value one can identify that the investment is more volatile than the
market, because beta value is more than one. Based on this, high investment can be made.
Page 30 of 77
Square of Square of Percentage
Change Change in Change in
change in Change in change in on Nifty
Date1 Nifty2 in Nifty percentage M&M 6 percentage
percentage M&M 7 percentage and M&M
3 8=7/6*100
4=3/2*100 5 9 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 651.435 (43.323) (6.650) 44.228 13.722
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 608.112 (69.620) (11.448) 131.070 115.632
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 538.491 (48.667) (9.037) 81.681 114.556
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 489.824 (185.741) (37.919) 1437.921 869.333
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 304.083 (7.474) (2.457) 6.041 2.605
JAN-FEB09 2837.235 221.212 7.796 60.789 296.609 100.305 33.817 1143.626 263.666
MAR-APR09 3058.447 1150.11 37.604 1414.089 396.914 260.683 65.677 4313.537 2469.762
MAY-JUN09 4208.557 243.365 5.782 33.438 657.598 131.623 20.015 400.633 115.744
JUL-AUG09 4451.922 474.786 10.664 113.736 789.222 93.569 11.855 140.563 126.440
SEP-OCT09 4926.708 101.715 2.064 4.262 882.792 147.966 16.7611 280.937 34.604
1030.75
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 32.854 3.187 10.159 (2.192)
9
1063.61
JAN-FEB10 4993.838
3
BETA =
= 1.671474
Interpretation
From the above table 4.17, we got the beta value of M&M compare with NIFTY
value as 1.671474. From beta value one can identify that the investment is more volatile
than the market, because beta value is more than one. Based on this, high investment can
be made.
Page 31 of 77
TABLE 18: COMPARE WITH NIFTY AND TATAMOTOR
Percentage
Square of
Change Change in Square of TATA Change in Change in On Nifty
change in
Date1 Nifty2 in Nifty percentage change in MOTOR Tatamotor percentage And
percentage
3 percentage 5 6 7 8=7/6*100 Tatamotor
9
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 643.157 (62.996) (9.794) 95.941 20.210
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 580.161 (162.907) (28.079) 788.469 283.609
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 417.253 (88.021) (21.095) 445.021 267.392
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 329.231 (174.798) (53.092) 2818.847 1217.180
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 154.433 (7.475) (4.841) 23.432 5.132
JAN-FEB09 2837.235 221.212 7.796 60.789 146.957 47.573 32.372 1047.957 252.397
MAR-APR09 3058.447 1150.11 37.604 1414.089 194.531 131.250 67.470 4552.212 2537.171
MAY-JUN09 4208.557 243.365 5.782 33.438 325.781 57.695 17.710 313.644 102.410
JUL-AUG09 4451.922 474.786 10.664 113.736 383.477 182.259 47.527 2258.908 506.873
SEP-OCT09 4926.708 101.715 2.064 4.262 565.736 109.374 19.333 373.771 39.914
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 675.111 61.258 9.073 82.333 (6.241)
JAN-FEB10 4993.838 736.369
BETA =
2.134346
Interpretation
From the above table 4.18, we got the beta value of TATAMOTOR compare with
NIFTY value as 2.134346. From beta value one can identify that the investment is more
volatile than the market, because beta value is more than one. Based on this, high
investment can be made.
Page 32 of 77
TABLE 19: COMPARE WITH NIFTY AND HERO HONDA
Percentage
Square of Change Square of
Change Change in HERO Change in On Nifty
change in in Hero change in
Date1 Nifty2 in Nifty percentage HONDA percentage And
percentage Honda percentage
3 6 8=7/6*100 Herohonda
5 7 9
4=3/2*100 10=4*8
MAR-APR08 4839.186 (99.849) (2.063) 4.257 740.175 40.087 5.415 29.332 (11.174)
MAY-JUN08 4739.337 (478.68) (10.100) 102.012 780.262 -26.372 (3.379) 11.424 34.138
JUL-AUG08 4260.657 (540.051) (12.675) 160.663 753.889 73.339 9.728 94.637 (123.307)
SEP-OCT08 3720.606 (852.968) (22.925) 525.579 827.229 -59.084 (7.142) 51.014 163.744
NOV-DEC08 2867.638 (30.403) (1.060) 1.124 768.144 97.747 12.725 161.928 (13.491)
JAN-FEB09 2837.235 221.212 7.796 60.789 865.892 168.091 19.412 376.846 151.354
MAR-APR09 3058.447 1150.11 37.604 1414.089 1033.984 322.321 31.172 971.738 1172.231
MAY-JUN09 4208.557 243.365 5.782 33.438 1356.305 156.07 11.506 132.411 66.540
JUL-AUG09 4451.922 474.786 10.664 113.736 1512.375 111.41 7.366 54.266 78.562
SEP-OCT09 4926.708 101.715 2.064 4.262 1623.785 31.594 1.945 3.785 4.017
NOV-DEC09 5028.423 (34.585) (0.687) 0.473 1655.379 -6.47 (0.391) 0.152 0.268
JAN-FEB10 4993.838 1648.909
BETA =
= 0.58595
Interpretation
From the above table 4.19, we got the beta value of HERO HONDA compare with
NIFTY value as 0.58595. From beta value one can identify that the investment is less
volatile than the market, because beta value is less than one.
Page 33 of 77
TABLE 20: COMPARE WITH NIFTY AND MARUTI
BETA =
= 0.925758
Interpretation
Page 34 of 77
From the above table 4.20, we got the beta value of MARUTI compare with NIFTY
value as 0.925758. From beta value one can identify that the investment is less volatile
than the market, because beta value is less than one.
Beta
Beta is sensitivity of security to the market movement of variance companies of
founded.
Beta
Company (β)
Herohonda 0.586
Tcs 0.645 If Beta < 1 than If Beta > 1 than
Infosys 0.74 Less volatile for the More
Maruti 0.926
volatile for the
Hdfc 0.954
Market movement Market movement
Beta
X (β)
Sbin 1.045
Wipro 1.39
Sail 1.496
Jindalsteel 1.537
Hcl 1.543
M&M 1.671
Dlf 1.787
Icici 1.82
Ster 1.932
Idfc 2.081
Tatamotor 2.134
Tatasteel 2.135
L&T 2.189
Relcapital 2.276
Unitech 2.804
Page 35 of 77
Chart-1
If Beta < 1 than, Less volatile for the Market movement
Chart-2
If Beta > 1 than, More volatile for the Market movement
Page 36 of 77
Beta (β) Sbin
Wipro
1.045 Sail
1.39 Jindalsteel
2.804
1.496 Hcl
2.276
1.537 M&M
Dlf
2.189 1.543 Icici
1.671 Ster
2.135 Idfc
1.787 Tatamotor
2.134
1.82 Tatasteel
2.081 1.932 L&T
Relcapital
Unitech
Any rational investor, before investing his or her investable wealth in the stock,
analysis the risk associated with the particular stock. The actual return he receives from a
stock may vary from his expected in terms of return. The down side risk may be caused
by several factors, either common to all stocks or specific to a particular stock. Investor
in general would like to analyze the risk factor and a thorough knowledge of the risk
helps him to plan his portfolio in such a manner so as minimize the risk associated with
the investment.
Therefore, we can see there is some degree of risk involved in financial assets in the
sense that there is always a chance that the expected return from the asset will not
materialize. It is important to find out more about the “risks” involved in financial assets
in greater details. These risks, by their nature, can be divided into two main categories;
namely, systematic risk and unsystematic risk.
Page 37 of 77
Systematic Risk
Systematic risks affect almost all assets in the economy at least to some degree
while unsystematic risks usually affect a small number of assets. When we discuss the
principle of diversification at the bottom part of this article, you can see that highly
diversified portfolios will tend to have almost no unsystematic risk. Systematic Risks are
general market conditions that affect large number of assets (or companies), each to a
greater or lesser extent and are sometimes called market risks. Uncertainties about
general economic conditions such as GNP, interest rates, exchange rates, inflation or
unemployment levels are some of the examples of systematic risks.
Let us assume that there is an unanticipated increase in inflation which would affect
cost of supplies, wages, and the value of the raw materials and affect the prices of the
finished products leading to a fall in the real purchasing power of the individuals. Forces
such as these, which all companies are susceptible, are the essence of systematic risks.
You might wonder whether it is possible to avoid systematic risk. The answer is no
because these types of risks affect the whole economy and which would adversely affect
the values of the financial assets irrespective of the different types of assets in the
portfolio.
βi2 = beta
Page 38 of 77
Unsystematic Risk
Business Risk is where the revenues of the company are insufficient to cover the
fixed cost of the operations.
Financial Risk occurs when the revenues are insufficient to cover fixed charges
such as interest rate payments on debt. High- geared companies (companies that
are more reliance on borrowed funds than equity) are more exposed to this type
of risk.
Management Risk is where the managers of the company are unable to manage
the business at a profit may be due to inexperience or incompetence’s or where
there is evidence of organized fraud by the management.
Finally, there is Collateral Risk, which refers to the inadequacy of the claims
(security) that a lender may have on a borrower. In the case of a company going into
liquidation, an ordinary shareholder faces a much higher Collateral Risk than a secured
creditor. We can see from the above points that unsystematic risk does not depend on
economic activities and therefore it can be reduced and essentially eliminated by applying
a diversification strategy. This means, if you have a number of assets in your portfolio,
and as long as the unsystematic risk associated with these assets are not correlated (not
Page 39 of 77
moving in the same direction), the positive and negative events should largely cancel out
each other.
Systematic Risk
Systematic risk is the general ebb and flow of the market as a whole - or the
tendency for all stocks to increase or decrease in value at the same time with a certain
degree of positive correlation. For example, ‘Black Monday’ on October 19th, 1987 was
a Systematic event in that almost all stocks fell in value on that single day. Macro-
economic events and stimuli can be expected to have broad systematic effects on capital
markets - positive or negative - on an on-going basis such as interest rate levels, political
events, war, etc. It is important to note that systematic risk cannot be diversified away. In
other words, you could have a portfolio that is diversified with 1000 different stocks from
a given market and there will always be a base level of return variance (shown as the
asymptote in the figure below).
Page 40 of 77
Non-Systematic Risk
Non-Systematic risk is the element of price risk than can be largely eliminated
through sufficient diversification within a particular asset class. The best way to describe
it is to build an analogy. Let us assume you owned one stock - if that company went
Bankrupt you will have lost 100% of your portfolio. If you owned one hundred stocks,
and one company went bankrupt you would have lost 1% of your portfolio. Conversely,
what if that one company doubled in value? You either doubled your money or only
gained 1% if you held 1 stock or 100, respectively. Non-Systematic risk is the individual
business risk associated with the underlying stock - if this company goes bankrupt - this
is a non-systematic risk event and generally has very little to do with the general ebb and
flow of the overall markets.
Page 41 of 77
It is generally debated as to how many securities one needs to hold to eliminate
non-systematic risk. Research has shown that between thirty and forty securities are
enough to eliminate non-systematic risk.
Page 42 of 77
CALCULATION OF SYSTEMATIC &UNSYSTEMATIC RISK
Square
Nifty Variance Variance Square of
of
Date percentage from Tatasteel from variance
variance
average average
MAR-APR08 (2.063) (3.372) 11.370 16.325 12.997 168.922
MAY-JUN08 (10.100) (11.409) 130.165 -24.235 (27.563) 759.719
JUL-AUG08 (12.675) (13.984) 195.552 -36.965 (40.293) 1623.526
SEP-OCT08 (22.925) (24.234) 587.287 -51.487 (54.815) 3004.684
NOV-DEC08 (1.060) (2.369) 5.612 -1.266 (4.594) 21.105
JAN-FEB09 7.796 6.487 42.081 10.281 6.953 48.344
1317.32
MAR-APR09 37.604 36.295 7 78.607 75.279 5666.928
MAY-JUN09 5.782 4.473 20.008 13.833 10.505 110.355
JUL-AUG09 10.664 9.355 87.516 17.653 14.325 205.206
SEP-OCT09 2.064 0.755 0.570 9.351 6.023 36.277
NOV-DEC09 (0.687) (1.996) 3.984 7.815 4.487 20.133
JAN-FEB10
2401.47
TOTAL 14.401 3 39.913 11665.198
AVG 1.309 3.628
S.D 218.316 1060.473
Beta = 2.135046
Page 43 of 77
TABLE 21: SYSTEMATIC & UNSYSTEMATIC RISK OF SBIN
Square Square
Nifty Variance Variance
of of
Date percentage from SBIN from
variance variance
average average
(14.755
MAR-APR08 (2.063) (3.263) 4.257 ) (17.574) 308.845
MAY-JUN08 (10.100) (11.300) 102.010 (7.101) (9.920) 98.406
JUL-AUG08 (12.675) (13.875) 160.656 6.078 3.259 10.621
(16.999
SEP-OCT08 (22.925) (24.125) 525.556 ) (19.818) 392.753
NOV-DEC08 (1.060) (2.260) 1.124 (4.768) (7.587) 57.563
JAN-FEB09 7.796 6.596 60.778 (3.534) (6.353) 40.361
1414.06
MAR-APR09 37.604 36.404 1 49.625 46.806 2190.802
MAY-JUN09 5.782 4.582 33.432 4.557 1.738 3.021
JUL-AUG09 10.664 9.464 113.721 23.239 20.420 416.976
SEP-OCT09 2.064 0.864 4.260 6.793 3.974 15.793
NOV-DEC09 (0.687) (1.887) 0.472 (9.308) (12.127) 147.064
JAN-FEB10
2420.32
TOTAL 14.401 5 33.825 368.483
AVG 1.309 3.075
S.D 218.316 334.680
Beta = 1.045
Page 44 of 77
= 334.680
Square Square
Nifty Variance Variance
of of
Date percentage from icici from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 (4.221) (7.301) 53.305
MAY-JUN08 (10.100) (11.409) 130.165 (20.164) (23.244) 540.284
JUL-AUG08 (12.675) (13.984) 195.552 (18.824) (21.904) 479.785
SEP-OCT08 (22.925) (24.234) 587.287 (23.809) (26.889) 723.018
NOV-DEC08 (1.060) (2.369) 5.612 1.716 (1.364) 1.860
JAN-FEB09 7.796 6.487 42.081 (10.422) (13.502) 182.304
1317.32
MAR-APR09 37.604 36.295 7 86.882 83.802 7022.775
MAY-JUN09 5.782 4.473 20.008 7.459 4.379 19.176
JUL-AUG09 10.664 9.355 87.516 17.335 14.255 203.205
SEP-OCT09 2.064 0.755 0.570 1.332 (1.748) 3.056
NOV-DEC09 (0.687) (1.996) 3.984 (3.407) (6.487) 42.081
JAN-FEB10
2401.47
TOTAL 14.401 3 33.878 9270.849
AVG 1.309 3.080
S.D 218.316 842.804
Beta = 1.820
Page 45 of 77
TABLE 21: SYSTEMATIC & UNSYSTEMATIC RISK OF HDFC
Square Square
Nifty Variance Variance
of of
Date percentage from Hdfc from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 -5.454 (8.288) 68.691
MAY-JUN08 (10.100) (11.409) 130.165 -12.923 (15.757) 248.283
JUL-AUG08 (12.675) (13.984) 195.552 4.559 1.725 2.976
SEP-OCT08 (22.925) (24.234) 587.287 -18.034 (20.868) 435.473
NOV-DEC08 (1.060) (2.369) 5.612 -3.685 (6.519) 42.497
JAN-FEB09 7.796 6.487 42.081 3.828 0.994 0.988
1317.32
MAR-APR09 37.604 36.295 7 43.677 40.843 1668.151
MAY-JUN09 5.782 4.473 20.008 3.763 0.929 0.863
JUL-AUG09 10.664 9.355 87.516 10.894 8.060 64.964
SEP-OCT09 2.064 0.755 0.570 8.371 5.537 30.658
NOV-DEC09 (0.687) (1.996) 3.984 -3.825 (6.659) 44.342
JAN-FEB10
2401.47
TOTAL 14.401 3 31.172 2607.886
AVG 1.309 2.834
S.D 218.316 237.081
Beta = 0.954
Page 46 of 77
TABLE 21: SYSTEMATIC & UNSYSTEMATIC RISK OF RELCAPITAL
Square
Nifty Variance Variance Square of
of
Date percentage from Relcapital from variance
variance
average average
MAR-APR08 (2.063) (3.372) 11.370 (9.102) (9.899) 97.990
MAY-JUN08 (10.100) (11.409) 130.165 0.967 0.170 0.029
JUL-AUG08 (12.675) (13.984) 195.552 (17.231) (18.028) 325.009
SEP-OCT08 (22.925) (24.234) 587.287 (47.306) (48.103) 2313.899
NOV-DEC08 (1.060) (2.369) 5.612 (20.601) (21.398) 457.874
JAN-FEB09 7.796 6.487 42.081 (4.448) (5.245) 27.510
1317.32
MAR-APR09 37.604 36.295 7 109.741 108.944 11868.795
MAY-JUN09 5.782 4.473 20.008 0.342 (0.455) 0.207
JUL-AUG09 10.664 9.355 87.516 5.666 4.869 23.707
SEP-OCT09 2.064 0.755 0.570 (6.673) (7.470) 55.801
NOV-DEC09 (0.687) (1.996) 3.984 (2.590) (3.387) 11.472
JAN-FEB10
2401.47
TOTAL 14.401 3 8.762 15182.293
AVG 1.309 0.797
S.D 218.316 1380.208
Beta = 2.276
Page 47 of 77
TABLE 21: SYSTEMATIC & UNSYSTEMATIC RISK OF IDFC
Square
Nifty Variance Variance Square of
of
Date percentage from IDFC from variance
variance
average average
MAR-APR08 (2.063) (3.372) 11.370 (9.454) (13.310) 177.156
(31.042
MAY-JUN08 (10.100) (11.409) 130.165 ) (34.898) 1217.870
(28.754
JUL-AUG08 (12.675) (13.984) 195.552 ) (32.610) 1063.412
(12.676
SEP-OCT08 (22.925) (24.234) 587.287 ) (16.532) 273.307
NOV-DEC08 (1.060) (2.369) 5.612 (6.722) (10.578) 111.894
JAN-FEB09 7.796 6.487 42.081 3.386 (0.470) 0.221
1317.32
MAR-APR09 37.604 36.295 7 101.910 98.054 9614.587
MAY-JUN09 5.782 4.473 20.008 10.979 7.123 50.737
JUL-AUG09 10.664 9.355 87.516 10.473 6.617 43.785
SEP-OCT09 2.064 0.755 0.570 10.010 6.154 37.872
NOV-DEC09 (0.687) (1.996) 3.984 (5.693) (9.549) 91.183
JAN-FEB10
2401.47
TOTAL 14.401 3 42.417 12682.024
AVG 1.309 3.856
S.D 218.316 1152.911
Beta = 2.081
Page 48 of 77
= 945.626+207.286
= 1152.911
Square Square
Nifty Variance Variance
of of
Date percentage from Infosys from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 23.625 17.785 316.306
MAY-JUN08 (10.100) (11.409) 130.165 (10.264) (16.104) 259.339
JUL-AUG08 (12.675) (13.984) 195.552 (11.771) (17.611) 310.147
SEP-OCT08 (22.925) (24.234) 587.287 (18.617) (24.457) 598.145
NOV-DEC08 (1.060) (2.369) 5.612 3.555 (2.285) 5.221
JAN-FEB09 7.796 6.487 42.081 8.255 2.415 5.832
1317.32
MAR-APR09 37.604 36.295 7 23.998 18.158 329.713
MAY-JUN09 5.782 4.473 20.008 18.301 12.461 155.277
JUL-AUG09 10.664 9.355 87.516 14.732 8.892 79.068
SEP-OCT09 2.064 0.755 0.570 7.239 1.399 1.957
NOV-DEC09 (0.687) (1.996) 3.984 5.191 (0.649) 0.421
JAN-FEB10
2401.47
TOTAL 14.401 3 64.245 2061.426
AVG 1.309 5.840
S.D 218.316 187.402
Beta = 0.740
Square Square
Nifty Variance Variance
of of
Date percentage from Tcs from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 6.803 6.925 47.956
(11.486
MAY-JUN08 (10.100) (11.409) 130.165 ) (11.364) 129.140
(19.688
JUL-AUG08 (12.675) (13.984) 195.552 ) (19.566) 382.828
(22.954
SEP-OCT08 (22.925) (24.234) 587.287 ) (22.832) 521.300
NOV-DEC08 (1.060) (2.369) 5.612 (1.801) (1.679) 2.819
JAN-FEB09 7.796 6.487 42.081 7.449 7.571 57.320
1317.32
MAR-APR09 37.604 36.295 7 12.036 12.158 147.817
(20.441
MAY-JUN09 5.782 4.473 20.008 ) (20.319) 412.862
JUL-AUG09 10.664 9.355 87.516 23.189 23.311 543.403
SEP-OCT09 2.064 0.755 0.570 16.681 16.803 282.341
NOV-DEC09 (0.687) (1.996) 3.984 8.871 8.993 80.874
JAN-FEB10
2401.47
TOTAL 14.401 3 (1.342) 2608.660
AVG 1.309 (0.122)
S.D 218.316 237.151
Beta = 0.645
Page 50 of 77
= 146.259
Total risk = Systematic risk + Unsystematic risk
= 90.892+146.259
= 237.151
Square Square
Nifty Variance Variance
of of
Date percentage from wipro from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 16.127 9.469 89.662
(14.383
MAY-JUN08 (10.100) (11.409) 130.165 ) (21.041) 442.724
(18.181
JUL-AUG08 (12.675) (13.984) 195.552 ) (24.839) 616.976
(29.578
SEP-OCT08 (22.925) (24.234) 587.287 ) (36.236) 1313.048
NOV-DEC08 (1.060) (2.369) 5.612 (6.156) (12.814) 164.199
JAN-FEB09 7.796 6.487 42.081 12.111 5.453 29.735
1317.32
MAR-APR09 37.604 36.295 7 51.112 44.454 1976.158
MAY-JUN09 5.782 4.473 20.008 21.693 15.035 226.051
JUL-AUG09 10.664 9.355 87.516 23.009 16.351 267.355
SEP-OCT09 2.064 0.755 0.570 11.881 5.223 27.280
NOV-DEC09 (0.687) (1.996) 3.984 5.605 (1.053) 1.109
JAN-FEB10
2401.47
TOTAL 14.401 3 73.243 5154.296
AVG 1.309 6.658
S.D 218.316 468.572
Beta = 1.390
Page 51 of 77
= 422.091
Unsystematic risk = (Total variance of security return)-(systematic risk)
= 468.572- 422.091
= 46.481
Total risk = Systematic risk + Unsystematic risk
= 422.091+46.481
= 468.572
Square Square
Nifty Variance Variance
of of
Date percentage from Hcltech from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 11.338 5.238 27.437
(22.631
MAY-JUN08 (10.100) (11.409) 130.165 ) (28.731) 825.470
(10.651
JUL-AUG08 (12.675) (13.984) 195.552 ) (16.751) 280.596
(32.795
SEP-OCT08 (22.925) (24.234) 587.287 ) (38.895) 1512.821
(15.951
NOV-DEC08 (1.060) (2.369) 5.612 ) (22.051) 486.247
JAN-FEB09 7.796 6.487 42.081 (2.181) (8.281) 68.575
1317.32
MAR-APR09 37.604 36.295 7 56.360 50.260 2526.068
MAY-JUN09 5.782 4.473 20.008 37.489 31.389 985.269
JUL-AUG09 10.664 9.355 87.516 33.299 27.199 739.786
SEP-OCT09 2.064 0.755 0.570 6.821 0.721 0.520
NOV-DEC09 (0.687) (1.996) 3.984 6.001 (0.099) 0.010
JAN-FEB10
2401.47
TOTAL 14.401 3 67.098 7452.798
AVG 1.309 6.100
S.D 218.316 677.527
Beta = 1.543
Page 52 of 77
Systematic risk = β2×variance of market index
= (1.543)2×218.316
= 519.712
Unsystematic risk = (Total variance of security return)-(systematic risk)
= 677.527-519.712
= 157.815
Total risk = Systematic risk + Unsystematic risk
= 519.712+157.815
= 677.527
Square
Nifty Variance Variance Square of
of
Date percentage from L&T from variance
variance
average average
MAR-APR08 (2.063) (3.372) 11.370 (5.132) (5.589) 31.237
MAY-JUN08 (10.100) (11.409) 130.165 (6.510) (6.967) 48.539
JUL-AUG08 (12.675) (13.984) 195.552 (31.475) (31.932) 1019.653
SEP-OCT08 (22.925) (24.234) 587.287 (55.451) (55.908) 3125.704
NOV-DEC08 (1.060) (2.369) 5.612 (12.308) (12.765) 162.945
JAN-FEB09 7.796 6.487 42.081 3.606 3.149 9.916
1317.32
MAR-APR09 37.604 36.295 7 87.483 87.026 7573.525
MAY-JUN09 5.782 4.473 20.008 10.866 10.409 108.347
JUL-AUG09 10.664 9.355 87.516 9.766 9.309 86.657
SEP-OCT09 2.064 0.755 0.570 0.525 0.068 0.005
NOV-DEC09 (0.687) (1.996) 3.984 (6.395) (6.852) 46.950
JAN-FEB10
2401.47 (5.025
TOTAL 14.401 3 ) 12213.478
(0.457
AVG 1.309 )
S.D 218.316 1110.316
Page 53 of 77
Beta = 2.189
Square Square
Nifty Variance Variance
of of
Date percentage from DLF from
variance variance
average average
(14.468
MAR-APR08 (2.063) (3.372) 11.370 ) (11.917) 142.015
(13.839
MAY-JUN08 (10.100) (11.409) 130.165 ) (11.288) 127.419
(24.874
JUL-AUG08 (12.675) (13.984) 195.552 ) (22.323) 498.316
(31.274
SEP-OCT08 (22.925) (24.234) 587.287 ) (28.723) 825.011
(27.017
NOV-DEC08 (1.060) (2.369) 5.612 ) (24.466) 598.585
JAN-FEB09 7.796 6.487 42.081 5.227 7.778 60.497
1317.32
MAR-APR09 37.604 36.295 7 73.585 76.136 5796.690
MAY-JUN09 5.782 4.473 20.008 9.482 12.033 144.793
JUL-AUG09 10.664 9.355 87.516 16.903 19.454 378.458
(12.478
SEP-OCT09 2.064 0.755 0.570 ) (9.927) 98.545
NOV-DEC09 (0.687) (1.996) 3.984 (9.309) (6.758) 45.671
JAN-FEB10
Page 54 of 77
2401.47 (28.065
TOTAL 14.401 3 ) 8716.001
AVG 1.309 (2.551)
S.D 218.316 792.364
Beta = 1.787
Square
Nifty Variance Variance Square of
of
Date percentage from Unitech from variance
variance
average average
(16.503
MAR-APR08 (2.063) (3.372) 11.370 ) (13.560) 183.874
(29.651
MAY-JUN08 (10.100) (11.409) 130.165 ) (26.708) 713.317
(33.598
JUL-AUG08 (12.675) (13.984) 195.552 ) (30.655) 939.729
(64.884
SEP-OCT08 (22.925) (24.234) 587.287 ) (61.941) 3836.687
(16.866
NOV-DEC08 (1.060) (2.369) 5.612 ) (13.923) 193.850
JAN-FEB09 7.796 6.487 42.081 12.330 15.273 233.265
1317.32
MAR-APR09 37.604 36.295 7 107.707 110.650 12243.423
MAY-JUN09 5.782 4.473 20.008 14.098 17.041 290.396
Page 55 of 77
JUL-AUG09 10.664 9.355 87.516 21.766 24.709 610.535
(18.959
SEP-OCT09 2.064 0.755 0.570 ) (16.016) 256.512
NOV-DEC09 (0.687) (1.996) 3.984 (7.812) (4.869) 23.707
JAN-FEB10
2401.47 (32.373
TOTAL 14.401 3 ) 19525.294
AVG 1.309 (2.943)
S.D 218.316 1775.027
Beta = 2.804
Square
Nifty Variance Variance Square of
of
Date percentage from Jindalsteel from variance
variance
average average
MAR-APR08 (2.063) (3.372) 11.370 6.752 9.426 88.849
MAY-JUN08 (10.100) (11.409) 130.165 (12.260) (9.586) 91.891
JUL-AUG08 (12.675) (13.984) 195.552 (36.884) (34.210) 1170.324
SEP-OCT08 (22.925) (24.234) 587.287 (32.556) (29.882) 892.934
NOV-DEC08 (1.060) (2.369) 5.612 17.818 20.492 419.922
JAN-FEB09 7.796 6.487 42.081 31.893 34.567 1194.877
1317.32
MAR-APR09 37.604 36.295 7 68.853 71.527 5116.112
Page 56 of 77
MAY-JUN09 5.782 4.473 20.008 33.803 36.477 1330.572
JUL-AUG09 10.664 9.355 87.516 (56.218) (53.544) 2866.960
SEP-OCT09 2.064 0.755 0.570 (43.760) (41.086) 1688.059
NOV-DEC09 (0.687) (1.996) 3.984 (6.855) (4.181) 17.481
JAN-FEB10
2401.47
TOTAL 14.401 3 (29.415) 14877.982
AVG 1.309 (2.674)
S.D 218.316 1352.544
Beta = 1.537
Square Square
Nifty Variance Variance
of of
Date percentage from Ster from
variance variance
average average
MAR-APR08 (2.063) (3.372) 11.370 7.895 3.394 11.519
(25.070
MAY-JUN08 (10.100) (11.409) 130.165 ) (29.571) 874.444
(35.751
JUL-AUG08 (12.675) (13.984) 195.552 ) (40.252) 1620.224
(37.071
SEP-OCT08 (22.925) (24.234) 587.287 ) (41.572) 1728.231
NOV-DEC08 (1.060) (2.369) 5.612 5.015 0.514 0.264
Page 57 of 77
JAN-FEB09 7.796 6.487 42.081 28.828 24.327 591.803
1317.32
MAR-APR09 37.604 36.295 7 70.253 65.752 4323.326
MAY-JUN09 5.782 4.473 20.008 8.135 3.634 13.206
JUL-AUG09 10.664 9.355 87.516 22.160 17.659 311.840
SEP-OCT09 2.064 0.755 0.570 9.400 4.899 24.000
NOV-DEC09 (0.687) (1.996) 3.984 (4.290) (8.791) 77.282
JAN-FEB10
2401.47
TOTAL 14.401 3 49.508 9576.139
AVG 1.309 4.501
S.D 218.316 870.558
Beta = 1.932
Square Square
Nifty Variance Variance
of of
Date percentage from Sail from
variance variance
average average
(13.015
MAR-APR08 (2.063) (3.372) 11.370 ) (17.165) 294.637
(14.538
MAY-JUN08 (10.100) (11.409) 130.165 ) (18.688) 349.241
JUL-AUG08 (12.675) (13.984) 195.552 (12.965 (17.115) 292.923
Page 58 of 77
)
(38.637
SEP-OCT08 (22.925) (24.234) 587.287 ) (42.787) 1830.727
NOV-DEC08 (1.060) (2.369) 5.612 8.176 4.026 16.209
JAN-FEB09 7.796 6.487 42.081 19.056 14.906 222.189
1317.32
MAR-APR09 37.604 36.295 7 57.463 53.313 2842.276
MAY-JUN09 5.782 4.473 20.008 8.308 4.158 17.289
JUL-AUG09 10.664 9.355 87.516 5.380 1.230 1.513
SEP-OCT09 2.064 0.755 0.570 15.468 11.318 128.097
NOV-DEC09 (0.687) (1.996) 3.984 10.956 6.806 46.322
JAN-FEB10
2401.47
TOTAL 14.401 3 45.654 6041.423
AVG 1.309 4.150
S.D 218.316 549.220
Beta = 1.496
Square Square
Nifty Variance Variance
of of
Date percentage from M&M from
variance variance
average average
Page 59 of 77
(11.448
MAY-JUN08 (10.100) (11.409) 130.165 ) (19.066) 363.512
JUL-AUG08 (12.675) (13.984) 195.552 (9.037) (16.655) 277.389
(37.919
SEP-OCT08 (22.925) (24.234) 587.287 ) (45.537) 2073.618
NOV-DEC08 (1.060) (2.369) 5.612 (2.457) (10.075) 101.506
JAN-FEB09 7.796 6.487 42.081 33.817 26.199 686.388
1317.32
MAR-APR09 37.604 36.295 7 65.677 58.059 3370.847
MAY-JUN09 5.782 4.473 20.008 20.015 12.397 153.686
JUL-AUG09 10.664 9.355 87.516 11.855 4.237 17.952
SEP-OCT09 2.064 0.755 0.570 16.761 9.143 83.596
NOV-DEC09 (0.687) (1.996) 3.984 3.187 (4.431) 19.634
JAN-FEB10
2401.47
TOTAL 14.401 3 83.801 7351.704
AVG 1.309 7.618
S.D 218.316 668.337
Beta = 1.671
Square
Nifty Variance Variance Square of
of
Date percentage from Tatamotor from variance
variance
average average
Page 60 of 77
MAR-APR08 (2.063) (3.372) 11.370 (9.794) (16.756) 280.764
MAY-JUN08 (10.100) (11.409) 130.165 (28.079) (35.041) 1227.872
JUL-AUG08 (12.675) (13.984) 195.552 (21.095) (28.057) 787.195
SEP-OCT08 (22.925) (24.234) 587.287 (53.092) (60.054) 3606.483
NOV-DEC08 (1.060) (2.369) 5.612 (4.841) (11.803) 139.311
JAN-FEB09 7.796 6.487 42.081 32.372 25.410 645.668
1317.32
MAR-APR09 37.604 36.295 7 67.470 60.508 3661.218
MAY-JUN09 5.782 4.473 20.008 17.710 10.748 115.520
JUL-AUG09 10.664 9.355 87.516 47.527 40.565 1645.519
SEP-OCT09 2.064 0.755 0.570 19.333 12.371 153.042
NOV-DEC09 (0.687) (1.996) 3.984 9.073 2.111 4.456
JAN-FEB10
2401.47
TOTAL 14.401 3 76.584 12267.047
AVG 1.309 6.962
S.D 218.316 1115.186
Beta = 2.134
Square Square
Nifty Variance Variance
of Hero of
Date percentage from from
variance Honda variance
average average
Page 61 of 77
MAR-APR08 (2.063) (3.372) 11.370 5.415 (2.617) 6.849
MAY-JUN08 (10.100) (11.409) 130.165 (3.379) (11.411) 130.211
JUL-AUG08 (12.675) (13.984) 195.552 9.728 1.696 2.876
SEP-OCT08 (22.925) (24.234) 587.287 (7.142) (15.174) 230.250
NOV-DEC08 (1.060) (2.369) 5.612 12.725 4.693 22.024
JAN-FEB09 7.796 6.487 42.081 19.412 11.380 129.504
1317.32
MAR-APR09 37.604 36.295 7 31.172 23.140 535.460
MAY-JUN09 5.782 4.473 20.008 11.506 3.474 12.069
JUL-AUG09 10.664 9.355 87.516 7.366 (0.666) 0.444
SEP-OCT09 2.064 0.755 0.570 1.945 (6.087) 37.052
NOV-DEC09 (0.687) (1.996) 3.984 (0.391) (8.423) 70.947
JAN-FEB10
2401.47
TOTAL 14.401 3 88.357 1177.685
AVG 1.309 8.032
S.D 218.316 107.062
Beta = 0.586
= 32.106
Total risk = Systematic risk + Unsystematic risk
= 74.956+32.106
= 107.062
Page 62 of 77
MAR-APR08 (2.063) (3.372) 11.370 (6.248) (13.064) 170.668
MAY-JUN08 (10.100) (11.409) 130.165 (19.175) (25.991) 675.532
JUL-AUG08 (12.675) (13.984) 195.552 9.812 2.996 8.976
SEP-OCT08 (22.925) (24.234) 587.287 (20.783) (27.599) 761.705
NOV-DEC08 (1.060) (2.369) 5.612 11.138 4.322 18.680
JAN-FEB09 7.796 6.487 42.081 28.746 21.930 480.925
1317.32
MAR-APR09 37.604 36.295 7 30.819 24.003 576.144
MAY-JUN09 5.782 4.473 20.008 29.087 22.271 495.997
JUL-AUG09 10.664 9.355 87.516 20.200 13.384 179.131
SEP-OCT09 2.064 0.755 0.570 0.712 (6.104) 37.259
NOV-DEC09 (0.687) (1.996) 3.984 (9.331) (16.147) 260.726
JAN-FEB10
2401.47
TOTAL 14.401 3 74.980 3665.743
AVG 1.309 6.816
S.D 218.316 333.249
Beta = 0.926
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Company Systematic Unsystematic
Risk risk
(σei2)
Hero Honda 74.956 32.106
Hdfc 198.627 38.454
Wipro 422.091 46.481
Ster 814.892 55.667
M&M 609.936 58.400
Unitech 1716.226 58.801
Sail 488.594 60.626
L&T 1045.861 64.455
Tatasteel 995.176 65.296
Infosys 116.687 67.715
Dlf 696.945 95.419
Sbin 238.249 96.431
Icici 722.757 120.047
Tatamotor 994.524 120.662
Maruti 187.103 146.146
Tcs 90.892 146.259
Hcl 519.712 157.815
Idfc 945.627 207.284
Relcapital 1130.436 249.772
Jindalstee 515.831 836.713
Chart3
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4.1.3 Constructing an optimal portfolio - Methodology and analysis
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Nifty 50 scrips have been taken as the market index and monthly index figures for
the Period of Mar 1, 2008 to February 28, 2010 have been obtained from
www.nseindia.com. Risk free return has been taken to be the treasure bill rate at 4.5%
p.a. Monthly returns of 20 stocks from Mar 1, 2008 to February 28, 2010 have been taken
from www.nseindia.com. Only those stocks with returns greater than the risk free rate of
return and with positive beta have been selected. The expected return, variance,
correlation with the market, unsystematic risk, the intercept and the beta for all the 20
stocks have been calculated below:
From the above table it can be seen that a few stocks gave negative returns. This
could be due to a host of reasons including bear hammering in a sluggish secondary
market. As the criteria for selection mentioned above ignores stocks with negative
returns, stocks with negative returns have been ignored. The Sharpe model will
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automatically exclude such stocks as its ranking is based on excess returns (returns
greater than risk free rate of return). As can be seen from the above table, nine of the
twenty stocks have expected returns higher than the risk free rate of return. For
determining which of these stocks will be included in the optimal portfolio it is necessary
to rank the stocks from highest to lowest based on excess return to beta ratio. (Table 1)
The next step is to determine the stocks for which the excess return to beta ratio is higher
than a particular unique cutoff point C*. The value of the cutoff rate C* is given by:
Ci =
Table1
Table2
Calculations for determining cut off rate
Company Ci
From above the table - 2 it can be seen that the first eight securities have C values
exceeding the corresponding (Ri – Rf)/β value. The cutoff rate C* is C5 or 1.157 and
only the top eight securities make it to the optimal portfolio.
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Chart4
Cut-off rate
Ci
1.4
1.2
1
Cut-off value
0.8
Ci
0.6
0.4
0.2
0
er
i
o
&M
Hc
s
ut
or
a
ipr
sy
St
nd
ar
ot
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fo
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M
m
Ho
In
ta
ro
Ta
He
Co m p a nie s
Once the composition of the optimal portfolio is known, the next step is to calculate
the percentage to be invested in each security which is given by:
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Xi =
Zi =
The second expression determines the relative investment in each security, and the
first expression simply scales the weights on each security so that they sum to 1. The
residual variance σei2 plays an important role in determining how much to invest in each
security.
Table3
Optimal Portfolio
Zi = βi/σei2[(Ri-Rf)/β-
Company Ci
c*]
Hero
6.028 0.582 0.089 64.896
Honda
Maruti 2.501 0.679 0.009 6.218
M&M 1.866 1.024 0.020 14.810
Infosys 1.811 1.061 0.007 5.220
Wipro 1.553 1.157 0.012 8.641
Table 4
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Honda
Maruti 6.816 0.062 0.424
M&M 7.618 0.148 1.128
Infosys 5.840 0.052 0.305
Wipro 6.658 0.086 0.575
Expected
return on
portfolio 7.645
The expected return on the portfolio is the sum of the expected returns of the
individual stocks which works out to7.645 The portfolio return is higher than the
expected returns of the individual stocks in the portfolio with the exception of Hero
Honda.
Chart5
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CHAPTER5
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5.1 FINDING OF THE STUDY
Beta
Beta is sensitivity of security to the market movement of variance
companies of founded.
Beta
Company (β)
Sbin 1.045
Beta Wipro 1.39
Company (β) Sail 1.496
Herohonda 0.586 Jindalsteel 1.537
Tcs 0.645 Hcl 1.543
Infosys 0.74 M&M 1.671
Maruti 0.926 Dlf 1.787
Hdfc 0.954 Icici 1.82
Ster 1.932
Idfc 2.081
Tatamotor 2.134
Tatasteel 2.135
L&T 2.189
Relcapital 2.276
Unitech 2.804
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Company Systematic Unsystematic
Risk risk
(σei2)
Hero Honda 74.956 32.106
Hdfc 198.627 38.454
Wipro 422.091 46.481
Ster 814.892 55.667
M&M 609.936 58.400
Unitech 1716.226 58.801
Sail 488.594 60.626
L&T 1045.861 64.455
Tatasteel 995.176 65.296
Infosys 116.687 67.715
Dlf 696.945 95.419
Sbin 238.249 96.431
Icici 722.757 120.047
Tatamotor 994.524 120.662
Maruti 187.103 146.146
Tcs 90.892 146.259
Hcl 519.712 157.815
Idfc 945.627 207.284
Relcapital 1130.436 249.772
Jindalstee 515.831 836.713
Optimal Portfolio
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From above the table - 2 it can be seen that the first eight securities have C values
exceeding the corresponding (Ri – Rf)/β value. The cutoff rate C* is C5 or 1.157 and
only the top eight securities make it to the optimal portfolio.
Optimal Portfolio
Zi = βi/σei2[(Ri-Rf)/β-
Company Ci
c*]
The optimum portfolio can be broken down into two parts viz the stocks that it
comprises and the percentage of funds that go to acquire such stocks. The composition of
the optimum portfolio would be:
Suggestions:
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When beta value of a company stays more than one, it is the better option to
invest high level in Indian stock market.
When beta value of a company stays less than one, it is the low option to invest in
Indian stock market.
When systematic risk and unsystematic risk value minimum value companies to
invest the better in Indian stock market.
The cut-off rate value minimum risk and maximum return of company is best
invests in Indian stock market.
Investment of the company where there is minimum risk maximum return of our
share value. For example, from the study we can invest in companies i.e., out of 100
percentage to distributed for investments in following companies.
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Conclusion:
Stock market more contemporary, but the use of scientific tool will rationalize to
the investment approach. But past performance would not be certain for the future
investment as it is only an indicative.
To conclude out of the different company variables taken for the study, that no
single variable has significantly influenced the company of the selected industries.
Finally the investors should kindly watch the situation like market price,
economy, company progress, etc… and according to that they should take decisions
whether to buy or sell securities. Hence investing in shares especially the secondary
market becomes a very rich experience.
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