COMPARATIVE STUDY OF RETURNS OF

STOCK WITH SECTORAL INDEX, MARKET

INDEX and RISK FREE BOND
Adarsh Chhajed (411)
Apoorva Sharma (422)
Anoop Kumar Sharma (420)
Arpit Somani(423)
Rushikesh Chinderker (458)

January 04, 2016

Agenda

IT Industry overview
Methodology
Nifty IT performances & choices of stocks
Methodology
Correlations & Inferences

Overview

Nifty 50

The CNX Nifty is a well diversified 50 stock index accounting

for 22 sectors of the economy.
It is used for a variety of purposes such as benchmarking
fund portfolios, index based derivatives and index funds.

Government Security

Government security (G-Sec) means a security created and

issued by the Government for the purpose of raising a
public loan or any other purpose as notified by the
Government in the Official Gazette and having one of the
following forms.
o a Government Promissory Note (GPN) payable to or to
the order of a certain person; or
o a bearer bond payable to a bearer; or
o a stock; or
o a bond held in a Bond Ledger Account (BLA).

Methodology

The Nifty IT index is computed using free float market capitalization

method with a base date of Jan 1, 1996 indexed to a base value of
1000 wherein the level of the index reflects total free float market value
of all the stocks in the index relative to a particular base market
capitalization value. The base value of the index was revised from
1000 to 100 with effect from May 28, 2004. The method also takes into
account constituent changes in the index and importantly corporate
actions such as stock splits, rights, new issue of shares etc. without
affecting the index value.

Effective May 29, 2015, the index is computed with 10 companies and
weights of each company in the index are capped at 25%. At the time
of rebalancing of shares/ change in index constituents/ change in
investable weight factors (IWFs), the weightage of the index
constituent (where applicable) is capped at 25%. Weightage of such
stock may increase beyond 25% between the rebalancing periods.

The constituents (stocks) have been chosen based on the

weightage:
Company Name
Infosys Ltd.

Tata Consultancy Services Ltd.

HCL Technologies Ltd.
Wipro Ltd.
Tech Mahindra Ltd.

Weight (%)

24.77
24.2
16.81
12.83
11.37

Procedure
Step 1 : Get value of stocks, all Index
Step 2 : Calculate daily returns from company stock
price, Nifty 50, Nifty IT and G-Sec
Step 3 :To obtain co-relation between stock price
and various
indexes(Nifty 50, G-Sec)
Step 4 : Calculate descriptive statistics of all the
returns and compare the Daily, Annual and 5-year
mean
Step 5 : Inferences were generated by using
statistic tool like t-Test

Descriptive Analysis

Annual

5 Years

Average Nifty IT

-0.07%

-16.62%

-68.51%

Average Nifty 50

-0.04%

-10.02%

-41.29%

0.01%

1.78%

7.34%

-0.08%

-20.08%

-82.77%

0.02%

5.20%

21.44%

-0.04%

-11.10%

-45.78%

Average Infy

0.08%

19.70%

81.23%

Average HCL

-0.07%

-18.01%

-74.27%

Average G sec
Average TCS
Average Tech Mahindra
Average Wipro

Daily

TCS
Return TCS- Nifty 50

-5.0000%

Return TCS- G sec

15.0000%

15.0000%

10.0000%

10.0000%

5.0000%

5.0000%

f(x) = 0.55x
R = 0.13
0.0000%
0.0000%

5.0000%

10.0000%

= - 0.08x 0.0000%
-10.0000% f(x) -5.0000%
0.0000%
R = 0

-5.0000%

-5.0000%

-10.0000%

-10.0000%

-15.0000%

-15.0000%

5.0000%

10.0000%

Particulars

P-value

Inference

Nifty 50

0.406710075

The is no significant difference between

mean of returns of NIFTY 50 and TCS

Nifty IT

0.682889285

The is no significant difference between

mean of returns of NIFTY 50 and TCS

G-Sec

0.108730795

The mean of returns of NIFTY IT and TCS

are equal

TCS

Return Nifty IT
-0.000659424
0.000175418
1037
1036
0.70275998

FReturn TCS Test

Mean
-0.000796636
Variance
0.000249613
Observations
1037
df
1036
F
F Critical one0.902800976
tail
F value is less than F critical so null hypothesis is
accepted, there isnt any significant difference
between the variances on returns in Nifty IT and
TCS returns

Mean

Return Nifty 50

Return TCS

-0.000397436

-0.000796636

0.000109466

0.000249613

Observations

1037

1037

df

1036

1036

Variance

0.438542369

F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty 50 and TCS
returns

t- Test

Return Nifty IT
Return TCS
Observations
1037
1037
Pooled Variance 0.000212515
df
2072
t Stat
0.214324411
P(T<=t) one-tail 0.415157586
t Critical one-tail 1.645589368
P(T<=t) two-tail 0.830315172
t Critical two-tail 1.961109561
p value is 0.83 which is greater than alpha 0.05 so
null hypothesis accepted which implies that both
mean are equal

Return Nifty 50
Return TCS
Observations
1037
1037
Pooled Variance
0.000179539
df
2072
t Stat
0.678398043
P(T<=t) one-tail
0.248797553
t Critical one-tail
1.645589368
P(T<=t) two-tail
0.497595106
t Critical two-tail
1.961109561
Daily returns of both NIFTY 50 and TCS are equal
which means whether we invest in NIFTY 50 or TCS
for a day the returns are same or similar.

Tech Mahindra
Return Tech Mahindra- G sec
160.0000%

160.0000%

140.0000%

140.0000%

120.0000%

120.0000%

100.0000%

100.0000%

80.0000%

80.0000%

60.0000%

60.0000%

40.0000%

40.0000%

20.0000%

20.0000%

0.0000%
-10.0000% f(x) =
-5.0000%
0.12x
0.0000%
R = 0
-20.0000%

10

Return Tech Mahindra- Nifty 50

5.0000%

10.0000%

0.0000%
-5.0000% f(x) = 0.58x
0.0000%
R = 0.02
-20.0000%

5.0000%

10.0000%

Particulars

P-value

Inference

Nifty 50

0.681064881

The mean of returns of Return Nifty 50 and

Tech Mahindra are equal

Nifty IT

0.553248328

The mean of returns of NIFTY IT and Tech

Mahindra are equal

G-Sec

0.927248451

The mean of returns of Return G Sec and

Tech Mahindra are equal

Tech Mahindra

Return Nifty IT

FTest

Return Tech
Mahindra
0.000206351
0.002255191
1037
1036

Mean
-0.000659424
Variance
0.000175418
Observations
1037
df
1036
F
0.077783966
F Critical one-tail 0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty IT and Tech
Mahindra returns

Mean
Variance

Return Nifty 50

Return HCL

-0.000397436 -0.000714816
0.000109466

0.000848765

Observations

1037

1037

df

1036

1036

0.128970591

F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty 50 and
HCL returns

t- Test

Return Nifty IT Return Tech Mahindra

Observations
1037
1037
Pooled Variance
0.001215305
df
2072
t Stat
-0.565505127
P(T<=t) one-tail
0.285895733
t Critical one-tail 1.645589368
P(T<=t) two-tail
0.571791467
t Critical two-tail
1.961109561
p value is 0.57 which is greater than alpha 0.05 so null
hypothesis accepted which implies that both mean are
equal
11

Return Tech
Mahindra
1037

Return Nifty 50
Observations
1037
Pooled Variance
0.001182329
df
2072
t Stat
-0.399842668
P(T<=t) one-tail
0.344656808
t Critical one-tail
1.645589368
P(T<=t) two-tail
0.689313616
t Critical two-tail
1.961109561
Daily returns of both NIFTY 50 and Tech Mah are equal
which means whether we invest in NIFTY 50 or TM for a
day the returns are same or similar.

Wipro
Return Wipro- Nifty 50

-5.0000%

12

Return Wipro- G Sec

15.0000%

15.0000%

10.0000%

10.0000%

5.0000%

5.0000%

f(x) = 0.5x
R = 0.1
0.0000%
0.0000%

5.0000%

10.0000%

= 0.02x
-10.0000% f(x) -5.0000%
R = 0

0.0000%
0.0000%

-5.0000%

-5.0000%

-10.0000%

-10.0000%

5.0000%

10.0000%

Particulars

P-value

Inference

Nifty 50

0.933588756

The mean of returns of Return Nifty 50 and

Wipro are equal

Nifty IT

0.609043177

The mean of returns of NIFTY IT and Wipro

are equal

G-Sec

0.359387073

The mean of returns of Return G Sec and

Wipro are equal

Wipro

FTest

Return Nifty
Return Wipro
IT
Mean
-0.000659424
-0.00044058
Variance
0.000175418
0.000278732
Observations
1037
1037
df
1036
1036
F
0.629341323
F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty IT and Wipro
returns

Mean
Variance
Observations
df
F
F Critical one-tail

t- Test

Return Nifty IT
Return Wipro
Observations
1037
1037
Pooled Variance 0.000227075
df
2072
t Stat
-0.33069149
P(T<=t) one-tail 0.370455483
t Critical one-tail 1.645589368
P(T<=t) two-tail 0.740910967
t Critical two-tail 1.961109561
p value is 0.74 which is greater than alpha 0.05 so
null hypothesis accepted which implies that both
mean are equal

13

Return Nifty 50 Return Wipro

-0.000397436
-0.00044058
0.000109466
0.000278732
1037
1037
1036
1036
0.392727023
0.902800976

F value is less than F critical so null hypothesis is

accepted, there is not any significant difference
between the variances on returns in Nifty 50 and
Wipro returns

Return Nifty

50
Return Wipro
Observations
1037
1037
Pooled Variance
0.000194099
df
2072
t Stat
0.070515172
P(T<=t) one-tail
0.471895215
t Critical one-tail 1.645589368
P(T<=t) two-tail
0.94379043
t Critical two-tail
1.961109561
Daily returns of both NIFTY 50 and Wipro are
equal which means whether we invest in NIFTY
50 or Wipro for a day the returns are same or
similar.

Infosys
Return Infy- G sec

Return Infy- Nifty 50

80.0000%

80.0000%

70.0000%

70.0000%

60.0000%

60.0000%

50.0000%

50.0000%

40.0000%

40.0000%

30.0000%

30.0000%

20.0000%

20.0000%

10.0000%

10.0000%

0.0000%
0.15x
-10.0000% f(x) =
-5.0000%
0.0000%
-10.0000%
R = 0

5.0000%

10.0000%

-5.0000%

-20.0000%

14

f(x) =0.0000%
0.63x
0.0000%
R -10.0000%
= 0.03

5.0000%

10.0000%

-20.0000%

Particulars

P-value

Inference

Nifty 50

0.288010555

The mean of returns of NIFTY 50 and Infosys are

equal

Nifty IT

0.147523538

The mean of returns of NIFTY IT and Infosys are

equal

G-Sec

0.531378012

The mean of returns of NIFTY IT and Infosys are

equal

Infosys

Mean

Return Nifty IT

Return Infy

FTest

-0.000659424

0.000781784

0.000175418

0.001305646

Observations

1037

1037

df

1036

1036

Variance

0.134353241

F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty IT and Infy
returns

Return Nifty 50
Return Infy
Mean
-0.000397436 0.000781784
Variance
0.000109466 0.001305646
Observations
1037
1037
df
1036
1036
F
0.083840273
F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty 50 and
Infy returns

t- Test

Return Nifty IT
Return Infy
Observations
1037
1037
Pooled Variance
0.000740532
df
2072
t Stat
-1.205949216
P(T<=t) one-tail
0.11398738
t Critical one-tail
1.645589368
P(T<=t) two-tail
0.227974759
t Critical two-tail
1.961109561
p value is 0.228 which is greater than alpha 0.05 so
null hypothesis accepted which implies that both mean
are equal

15

Return Nifty 50
Return Infy
Observations
1037
1037
Pooled Variance
0.000707556
df
2072
t Stat
-1.009459585
P(T<=t) one-tail
0.15643607
t Critical one-tail
1.645589368
P(T<=t) two-tail
0.312872141
t Critical two-tail
1.961109561
Daily returns of both NIFTY 50 and Infy are equal
which means whether we invest in NIFTY 50 or Infy
for a day the returns are same or similar.

HCL
Return HCL Nifty 50

-5.0000%

Return HCL G sec

80.0000%

80.0000%

70.0000%

70.0000%

60.0000%

60.0000%

50.0000%

50.0000%

40.0000%

40.0000%

30.0000%

30.0000%

20.0000%

20.0000%

10.0000%

10.0000%

f(x) =0.0000%
0.64x
0.0000%
R-10.0000%
= 0.05

5.0000%

10.0000%

0.0000%
0.11x
-10.0000% f(x) =-5.0000%
0.0000%
-10.0000%
R = 0

-20.0000%

16

5.0000%

10.0000%

-20.0000%

Particulars

P-value

Inference

Nifty 50

0.721038774

The mean of returns of NIFTY 50 and HCL are equal

Nifty IT

0.947311901

The mean of returns of NIFTY IT and HCL are equal

G-Sec

0.395123164

The mean of returns of NIFTY IT and HCL are equal

HCL

Mean

Return Nifty IT

FReturn HCL Test

-0.000659424

-0.000714816

0.000175418

0.000848765

Observations

1037

1037

df

1036

1036

Variance

0.206674147

F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty IT and HCL
returns

Return Nifty
50
Return HCL
Mean
-0.000397436 -0.000714816
Variance
0.000109466 0.000848765
Observations
1037
1037
df
1036
1036
F
0.128970591
F Critical one-tail
0.902800976
F value is less than F critical so null hypothesis is
accepted, there is not any significant difference
between the variances on returns in Nifty 50 and
HCL returns

t- Test

Return Nifty IT
Return HCL
Observations
1037
1037
Pooled Variance
0.000512091
df
2072
t Stat
0.055737567
P(T<=t) one-tail 0.477778123
t Critical one-tail 1.645589368
P(T<=t) two-tail 0.955556246
t Critical two-tail 1.961109561
p value is 0.95 which is greater than alpha 0.05 so
null hypothesis accepted which implies that both
mean are equal

17

Return Nifty
Return HCL
50
Observations
1037
1037
0.00047911
Pooled Variance

5
df
2072
0.33016648
t Stat

5
0.37065377
P(T<=t) one-tail

3
1.64558936
t Critical one-tail

8
0.74130754
P(T<=t) two-tail

7
1.96110956
t Critical two-tail

1
Daily returns of both NIFTY 50 and HCL are equal

Thank you