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RISK AND RETURN ANALYSIS

CHAPTER 1
1.1 INTRODUCTION
Risk and return are most important concepts in finance. Risk and return concepts are
basic to the understanding of the valuation of assets or securities.
Return expresses the amount which an investor actually earned on an investment
during a certain period. Return includes the interest, dividend and capital gains; while
risk represents the uncertainty associated with a particular task. In financial terms, risk
is the chance or probability that a certain investment may or may not deliver the
actual/expected returns.
The risk and return trade off says that the potential return rises with an increase in
risk. It is important for an investor to decide on a balance between the desire for the
lowest possible risk and highest possible return.
Risk in investment exists because of the inability to make perfect or accurate
forecasts. Risk in investment is defined as the variability that is likely to occur in
future cash flows from an investment. The greater variability of these cash flows
indicates greater risk.
Variance or standard deviation measures the deviation about expected cash flows of
each of the possible cash flows and is known as the absolute measure of risk; while
co-efficient of variation is a relative measure of risk.
The term "risk and return" refers to the potential financial loss or gain
experienced through investments in securities. An investor who has registered
a profit is said to have seen a "return" on his or her investment. The "risk" of
the investment, meanwhile, denotes the possibility or likelihood that the
investor could lose money.
If an investor decides to invest in a security that has a relatively low risk, the
potential return on that investment is typically fairly small. Conversely, an

investment in a security that has a high risk factor also has the potential to
garner higher returns.
Any rational investor, before investing his or her invertible wealth in the stock,
analyses the risk associated with particular stock. The actual return he receives from a
stock may vary from his expected return and the risk is expressed in terms of
variability of return. The down side risk may be caused by several factors, either
common to all stock or specific to a particular stock. Investor in general would like to
analyze the risk factors and a through knowledge of the risk help him to plan his
portfolio in such a manner so as to minimize the risk associated with the investment.
RISK & RETURN
Investment decisions are influenced by various motives. Some people invest in
a business to acquire control & enjoy the prestige associated with in. some people
invest in expensive yachts & famous villas to display their wealth. Most investors,
however, are largely guided by the pecuniary motive of earning a return on their
investment. For earning returns investors have to almost invariably bear some risk. In
general, risk & return go hand in hand.
Sometimes the best investments are the ones you don't make. This is a maxim which
best explains the complexity of making investments. There are many investment
avenues available for investors today.
In financial planning, the investment goal must be considered in defining risk. If your
goal is to provide an acceptable amount of retirement income, you should construct an
investment portfolio to generate an expected return that is sufficient to meet your
investment goal. But because there is uncertainty that the portfolio will earn
its expected long-term return, the long-term realized return may fall short of the
expected return. This raises the possibility that available retirement funds fall short of
needs - that is, the investor might outlive the investment portfolio. This is an example
of "shortfall risk." The magnitude and consequences of the potential shortfall deserve
special consideration from investors. [3] However, since the uncertainty of return
could also result in a realized return that is higher than the expected return,
the investment portfolio might "outlive" the investor. Therefore, considerations of
shortfall risk are subsumed by considering risk as theuncertainty of investment return.

Different people have different motives for investing. For most investors their interest
in investment is an expectation of some positive rate of return. But investors cannot
overlook the fact that risk is inherent in any investment. Risk varies with the nature of
return commitment. Generally, investment in equity is considered to be more risky
than investment in debentures & bonds. A closer look at risk reveals that some are
uncontrollable (systematic risk) and some are controllable (unsystematic risk).
RETURN
Return is the primary motivating force that drives investment. It represents the reward
for undertaking investment. Since the game of investing is about returns (after
allowing for risk), measurement of realized (historical) returns is necessary to assess
how well the investment manager has done.
In addition, historical returns are often used as an important input in estimating future
prospective returns.
Components of Return
The return of an investment consists of two components.
Current Return:
The first component that often comes to mind when one is thinking about return is the
periodic cash flow, such as dividend or interest, generated by the investment. Current
return is measured as the periodic income in relation to the beginning price of the
investment.
Capital Return:
The second component of return is reflected in the price change called the capital
return- it is simply the price appreciation (or depreciation) divided by the beginning
price of the asset. For assets like equity stocks, the capital return predominates.Thus,
the total return for any security (or for that matter any asset) is defined as:
Total Return = Current return + Capital return

RISK AND RETURN ANALYSIS


RISK
Investor cannot talk about investment returns without talking about risk because
investment decisions invariably involve a trade-off between the risk & return. Risk
refers to the possibility that the actual outcome of an investment will differ from its
expected outcome.
More specifically, most investors are concerned about the actual outcome being less
than the expected outcome. The wider range of possible outcomes, the greater the
risk. Investments have two components that create risk. Risks specific to a particular
type of investment, company, or business are known as unsystematic risks.
Unsystematic risks can be managed through portfolio diversification, which consists
of making investments in a variety of companies & industries. Diversification reduces
unsystematic risks because the prices of individual securities do not move exactly
together. Increases in value & decreases in value of different securities tend to cancel
one another out, reducing volatility. Because unsystematic risk can be eliminated by
use of a diversified portfolio, investors are not compensated for this risk.
Systematic risks, also known as market risk, exist because there are systematic risks
within the economy that affect all businesses. These risks cause stocks to tend to
move together, which is why investors are exposed to them no matter how many
different companies they own.
Investors who are unwilling to accept systematic risks have two options. First, they
can opt for a risk-free investment, but they will receive a lower level of return. Higher
returns are available to investors who are willing to assume systematic risk. However,
they must ensure that they are being adequately compensated for this risk. The Capital
Asset Pricing Model theory formalizes this by stating that companies desire their
projects to have rates of return that exceed the risk- free rate to compensate them for
systematic risks & that companies desire larger returns when systematic risks are
greater. The other alternative is to hedge against systematic risk by paying another

entity to assume that risk. A perfect hedge can reduce risk to nothing except for the
costs of the hedge.

The market tends to move in cycles. A John Train says:


You need to get deeply into your bones the sense that any market, & certainly the
stock market, moves in cycles, so that you will infallibly get wonderful bargains every
few years, & have a chance to sell again at ridiculously high prices a few years later.
Systematic Risk
Systematic Risk, as the name suggests is the risk inherent in the economic system.
Macro factors such as domestic as well as international policies, employment rate, the
rate and momentum of inflation and general level of consumer confidence etc. are
what constitute systematic risk. Generally, investors cannot hedge or diversify against
this risk as it affects all kinds of asset classes and affects the entire economy as such.
The systematic risk is further subdivided into three types.
1. Market risk
2. Interest rate risk
3. Purchasing power risk
1. Market Risk:
This is the possibility that the financial markets will drop in value and create a ripple
effect in your portfolio. For example, if the stock market as a whole loses value,
chances are your stocks or stock funds will decrease in value as well until the market
returns to a period of growth. Market risk exposes you to potential loss of principal,
since some companies don't survive market downturns. But the greater threat is the
loss of principal that can result from selling when prices are low.
2. Interest rate risk:
This is the possibility that interest rates will go up. If that happens, inflation
increases, and the value of existing bonds and other fixed-income investments

declines, since they're worth less to investors than newly issued bonds paying a higher
rate. Rising interest rates also usually mean lower stock prices, since investors put
more money into interest-paying investments because they can get a strong return
with less risk.
3. Purchasing power risk:
Variations in the return are caused also by the loss of the purchasing power of
currency. Inflation is the reason behind the loss of the purchasing power. Purchasing
power risk is probable loss in the purchasing power of returns to be received.
Inflation may be demand pull or cost push inflation. On demand pull inflation the
demand for goods and services are in excess of their supply. At full employment level
of factors of production, economy would not be able to supply more goods in short
run and the demand for the products pushes the price upwards. The equilibrium
between the demand and the supply is attained at the higher price.
The cost push inflation as the name itself indicates that the inflation or the raise in the
price is caused by the increase in the cost. The increase in the cost of raw material,
labour and equipment makes the cost of production high and ends in high price level.
Thus the cost inflation has a spiraling effect on the price level.
Unsystematic Risk
This is the risk inherent in a particular asset class. The best way to combat this risk is
by diversification. However, one must remember that the diversification must be in
the class of asset and not the asset itself. An example of the above is evenly
distributing your portfolio in bank deposits, Reserve Bank of India (RBI) bonds, real
estate and equities. That way if a certain unsystematic risk affects let's say the real
estate market (say the prices crashes), then the presence of other classes of assets in
your portfolio saves you from a total washout. However, note that diversifying within
the same asset class (buying different equity shares) is not strictly combating
unsystematic risk.
Unsystematic risk can be classified into five types.
1. Business Risk 2. Financial Risk 3. Regulation Risk 4. Reinvestment Risk
5. International Risk

1. Business Risk:
It is that portion of unsystematic risk caused by operating environment of the
business. Business risk arises from the inability of the firm to maintain its competitive
edge and the growth of the stability of the earning variation that occurs in the
operating environment is reflected in the operating income and expected dividends. It
indicates business risk. Business risk is any risk that can lower a businesss net assets
or net income that could, in turn, lower the return of any security based on it. Some
business risks are sector risks that can affect every company in a particular sector,
while some business risks affect only a particular company.
2. Financial Risk:
It refers to the variability of the income to the equity capital due to debt capital.
Financial risk in a company is associated with the capital structure of the company.
Capital structure of the company consists of equity funds and borrowed funds. The
presence of debt and preference capital results in commitment of paying interest or
prefixed rate of dividend.
This arises due to changes in the capital structure of the company. It is also known as
leveraged risk and expressed in the terms of debt-equity ratio. Excess of debt over
equity in the capital structure of a company indicates that the company is highly
geared even if the per capital earnings of such company may be more. Because of
highly dependence on borrowings exposes to the risk of winding up for its inability to
honour its commitments towards lenders and creditors. So the investors should be
aware of this risk and portfolio manager should also be very careful.
3. Regulation Risk:
Some investment can be relatively attractive to other investments because of
certain regulations or tax laws that give them an advantage of some kind. Municipal
bonds, for example pay interest that is exempt from local, state and federal taxation.

As a result of that special tax exemption, municipal can price bonds to yield a lower
interest rate since the net after-tax yield may still make them attractive to investors.
The risk of a regulatory change that could adversely affect the stature of an
investment is a real danger. In 1987, tax laws changes dramatically lessened the
attractiveness of many existing limited partnership that relied upon special tax
considerations as part of their total return. Prices for many limited partnership tumbled
when investors were left with different securities, in effect, than what they originally
bargained for. To make matter worse, there was not an extensive secondary market for
these liquid securities and many investors found themselves unable to sell those
securities at anything but "fire sale" prices if at all.
4. Reinvestment Risk:
It is important to understand that YTM is a promised yield, because investors
can earn the indicated yield only if the bond is held to maturity and the coupons are
reinvested at the calculated YTM (yield to maturity). Obviously, no trading can be
done for a particular bond if the YTM is to earned. The investor simply buys and
holds. Reinvestment risk the YTM calculation assumes that the investor reinvests all
coupons received from a bond at a rate equal to computed YTM at the bond, thereby
earning interest over interest over the life of the bond at the computed YTM rate in
effect, this calculation assumes that the reinvestment rate is the yield to maturity. If
the investor spends the coupons, or reinvest them at a rate different from the assumed
reinvestment rate of 10 percent, the realized yield that will actually be earned at the
termination of the investment in the bond will differ from the promised YTM. And, in
fact-coupons almost always will be reinvested at rates higher or lower than the
computed YTM, resulting in a realized yield that differs from the promised yield. This
gives rise to reinvestment rate risk. This interest-on-interest concept significantly
affects the potential dollar return. The exact impact is a function of coupon and time
of maturity, with reinvestment becoming more important as either coupon or time to
maturity, or both, rises specifically.
1. Holding everything else constant, the longer maturity of a bond, the
greater the reinvestment risks. Holding everything else constant, the higher
the coupon rate, the greater the dependence of the total dollar returns from
the bond on the reinvestment of the coupon payments.

In fact, for long-term bonds the interest-on-interest component of the total


realized yield may account for more than three-fourths of the bond's total dollar
return.

5. International Risk:
International risk can include both country risk and exchange rate risk.
i. Exchange Rate Risk:
All investors who invest internationally in today's increasingly global
investment arena face the prospect of uncertainty in the returns after they convert the
foreign gain back to their own currency. Unlike the past when most U.S. investors
ignored international investing alternatives, investors today must recognize and
understand exchange rate risk, which can be defined as the variability in returns on
securities caused by currency fluctuations. Exchange rate risk is sometimes called
currency risk. Currency risk affects international mutual funds, global mutual funds,
closed-end single country funds, American depository receipts, foreign stocks and
foreign bonds. For example, a U.S. investor who buys a German stock denominated in
marks must ultimately convert the returns from this stock back to dollars. If the
exchange rate has moved against the investor, losses from these exchange rate
movements can partially or totally negate the original return earned.
ii. Country Risk:
Country risk, also referred to as political risk, is an important risk for investors
today. With more investors investing internationally, both directly and indirectly, the
political, and therefore economic, stability and viability of a country's economy needs
to be considered. The United States has the lowest country risk, and other countries
can be judged on a relative basis using the United States as a benchmark. Example of
countries that needed careful monitoring in the 1990s because of country risk included
the former Soviet Union and Yugoslavia, China, Hong Kong and South Africa.
iii. Liquidity risk
Liquidity risk is the risk associated with particular secondary market in which a
security trades. An investment that can be bought or sold quickly and without
significant price concession is considered liquid. The more uncertainty about the time
element and the price concession, the greater the liquidity risks. A treasury bill has
little or no liquidity risk, whereas a small OTC stock may have substantial liquidity
risk. \

RISK AVOIDANCE:
Investment planning is almost impossible without a thorough understanding of risk.
There is a risk/return trade off. That is, the greater risk is accepted, and the greater
must be the potential return as reward for committing ones fund to an uncertain
outcome. Generally, as the level of risk rises, the rate of return should also rise, and
vice versa. One way to handle risk is to avoid it. Risk avoidance occurs when one
chooses to completely avoid the activity the risk is associated with. In the investment
world, avoidance of some risk is deemed to be possible through the act of investing in
risk-free investments. Stock market risk can be completely avoided by one choosing
to have no exposure to it by not investing in equity securities.
1. Risk transfer:
Another way to handle risk is to transfer the risk. Risk transfer in investing can be
done where one may choose to purchase a municipal bond that is insured. One may
purchase a put option on a stock, which allows the person to put to or sell to
someone his or her stock at a set price, regardless of how much lower the stock may
drop. There are many examples of risk transfer in the area of investing.
2. The Risk Averse Investor:
Do investors dislike risk? In economics in general, and investments in particular, the
standard assumption is that investors are rational. Rational investors prefer certainty
to uncertainty. A risk-averse investor is one who will not assume risk simply for its
own sake and will not incur any given level of risk unless there is an expectation of
adequate compensation for having done so. In fact, investors cannot reasonably
expect to earn larger returns without assuming larger risks. Investors deal with risk by
choosing (implicitly or explicitly) the amount of risk they are willing to incur. Some
investors choose to incur high level of risk with expectation of high levels of return.
Other investors are unwilling to assume much risk, and they should not expect to earn
large returns.

MEANING OF RETURN:
Return is one of the primary objectives of investment, which acts as a driving force
for investment. Risk is inevitable and it is positively correlated with expected return.
Return to an investor is of two types, current yield and capital appreciation. Current
yield is the return, which is got in the form of individuals/interest whereas capital
appreciation is the return, which we get after liquidation of shares.
Return = Current yield (dividend/interest) + Capital
Appreciation/ Capital Gain
TYPES OF RETURN
1.

HISTORICAL RETURNS

Return calculated are on past data which has already occurred is called as historical
return. Historical return is a post-mortem analysis of investment, which lacks insight
for future. Historical return is less risky and more accurate compared to expected
return since it does not involve prediction of interest or dividend or closing price.
Historical return is also called as post return or actual return.
Return = Cash payment + Closing price - Beginning price
Beginning Price
2.

EXPECTED RETURN

Return calculated based or future estimates and calculation is called as expected return.
Expected Return = Expected Dividend + Capital Gain (expected)
Beginning price

RISK MEASUREMENT
Understanding the nature of risk is not adequate unless the investor or analyst is
capable of expressing it in some quantitative terms. Expressing the risk of a stock in
quantitative terms makes it comparable with other stocks. Measurement cannot be
assured of cent percent accuracy because risk is caused by numerous factors such as
social, political, economic and managerial efficiency. Measurement provides and
approximates qualification of risk.
1. Volatility:
Of all the ways to describe risk, the simplest and possibly most accurate is "the
uncertainty of a future outcome". The anticipated for some future period is known as
expected return. The actual return over some past period is known as the realized
return. The simplest fact that dominates investing is that the realized return on an asset
with any risk attached to it may be different from what was expected. Volatility may
be described as the range of movement (or price fluctuation) from the expected level of
return. The more a stock. For example, goes up and down in price, the more volatile
that stock is. Because wide price swings create more uncertainty of an eventual
outcome, increased volatility can be equated with increased risk. Being able to
measure and determine the past volatility of a security is important in that it provides
some insight into the riskness of that security as an investment.
2. Standard Deviation:
Investors and analyst should be at least familiar with study of probability
distributions. Since the return, an investor will earn from investing is not known, it
must be estimated.
In statistics and probability theory, standard deviation (represented by the symbol
sigma, ) shows how much variation or "dispersion" exists from the average (mean,
or expected value). A low standard deviation indicates that the data points tend to be
very close to the mean; high standard deviation indicates that the data points are
spread out over a large range of values.

The standard deviation of a random variable, statistical population, data set, or


probability distribution is the square root of its variance. It is algebraically simpler
though practically less robust than the average absolute deviation. A useful property
of standard deviation is that, unlike variance, it is expressed in the same units as the
data.
FORMULA
s h are pricet h e closings h are price at t h e opening
S h are pricet h e opening

Rate of Return =

Deviation = Return Avg. Return

Variance (2) =

Deviation

12

Standard deviation =

PROCEDURE TO CALCULATE STANDARD DEVIATION


1. Calculate the mean of your data set.
2. Subtract the mean from each of the data values and list the differences.
3. Square each of the differences from the previous step and make a list of the
squares.
o In other words, multiply each number by itself.
o Be careful with negatives. A negative times a negative makes a
positive.
4. Add the squares from the previous step together.
5. Subtract one from the number of data values you started with.
6. Divide the sum from step four by the number from step five.

7. Take the square root of the number from the previous step. This is the standard
deviation.
o You may need to use a basic calculator to find the square root.
o Be sure to use significant figures when rounding your answer.

Probability Distribution:
Probability represents the likelihood of various outcomes and are typically
expressed as a decimal (sometimes fractions arc used). The sum of the probabilities of
all possible outcomes must be 1.0, because they must completely describe all the
(perceived) likely occurrences. Probability distribution can be either discrete or
continuous. With a discrete probability, a probability is assigned to each possible
outcome. With a continuous probability distribution an infinite number of possible
outcomes exist. The most familiar continuous distribution is the normal distribution
depicted by the well-known bell shaped curve often used in statistics. It is a twoparameter distribution in that the mean and the variance fully describe it. To describe
the single most likely outcomes from a particular probability distribution, it is
necessary to calculate its expected value. The expected value is average of all possible
return outcomes, where each outcome is weighted by its respective probability of
occurrence. For investors, this can be described as the expected return. To calculate
the total risk associated with the expected return, the variance or standard deviation is
used. Since variance, volatility and risk can in this context be used synonymously, the
larger the standard deviation, the more uncertain the outcome.
Calculating a standard deviation using probability distributions involves
making subjective estimates of the probabilities and the likely returns. However, we
cannot avoid such estimates because future returns are uncertain. The prices of
securities are based on investors' expectations about the future. The relevant standard
deviation in this situation is the ex-ante standard deviation and not the ex-post based
on realized returns. Although standard deviations are based on realized returns are

often used as proxies for ex-ante standard deviations, investors should be careful to
remember that the past cannot always be extrapolated into the future without
modifications. Ex-post standard deviations may be convenient, but they are subject to
errors. One important point about the estimation of standard deviation is the distinction
between individual securities and portfolios. Standard deviation is a measure of the
total risk of an asset or a portfolio, including therefore both systematic and
unsystematic risk. It captures the total variability in the assets or portfolio's return,
whatever the sources of that variability. In summary, the standard deviation of return
measures the total risk of one security or the total risk of a portfolio of securities.

The historical standard deviation can be calculated for individual securities or


portfolios of securities using total returns for some specific period of time. This expost value is useful in evaluating the total risk for a particular historical period and in
estimating the total risk that is expected to prevail over some future period.
3. Beta:
Beta is a measure of the systematic risk of a security that cannot be avoided
through diversification. Beta is a relative measure of risk-the-risk of an individual stock
relative to the market portfolio of all stocks. If the security's returns move more (less)
than the market's return as (he latter changes, the security's returns have more (less)
volatility (fluctuations in price) than those of the market. It is important to note that
beta measures a security's volatility, or fluctuations in price, relative to a benchmark,
the market portfolio of all stocks. Beta is useful for comparing the relative systematic
risk of different stocks and, in practice, is used by investors to judge a stock's riskiness.
Stocks can be ranked by their betas. Because the variance of the market is a constant
across all securities for a particular period, ranking stocks by beta is the same as
ranking them by their absolute systematic risk. Stocks with high betas are said to be
high-risk securities.
OPERATIONAL DEFINITION OF CONCEPTS
Portfolio: In finance, a portfolio is a collection of investments held by an institution
or a private individual. Holding a portfolio is part of an investment and risk-limiting
strategy called diversification. By owning several assets, certain types of risk (in
particular specific risk) can be reduced. The assets in the portfolio could include
stocks, bonds, options, warrants, gold certificates, real estate, futures contracts,
production facilities, or any other item that is expected to retain its value.
Portfolio Management:
Portfolio management involves deciding what assets to include in the portfolio,
given the goals of the portfolio ow ;ner and changing economic conditions. Selection
involves deciding what assets to purchase, how many to purchase, when to purchase
them, and what assets to divest.

These decisions always involve some sort of performance measurement,


mostly expected return on the portfolio, and the risk associated with this return
(i.e. the standard deviation of the return). Typically the expected return from
portfolios comprised of different asset bundles is compared.
Risk:
The chance that an investment's actual return will be different than expected.
This includes the possibility of losing some or all of the original investment. Risk is
usually measured by calculating the standard deviation of the historical returns or
average returns of a specific investment.
A fundamental idea in finance is the relationship between risk and return. The
greater the amount of risk that an investor is willing to take on. the greater the
potential return.
The reason for this is that investors need to he compensated for taking on
additional risk.
Return:
The gain or loss of a security in a particular period. The return consists of the
income and the capital gains relative on an investment. It is usually quoted as a
percentage. The general rule is that the more risk you take, the greater the potential for
higher return - and loss.
Risk-Free Rate of Return:
The theoretical rate of return of an investment with zero risk. The risk-free rate
represents the interest an investor would expect from an absolutely risk-free
investment over a specified period of time. The risk-free rate is the minimum return
an investor expects for any investment because he or she will not accept additional
risk unless the potential rate of return is greater than the risk-free rate.

These decisions always involve some sort of performance measurement, most y


expected return on the portfolio, and the risk associated with this return (i.e. the
standard deviation of the return). Typically the expected return from portfolios
comprised of different asset bundles is compared.
Risk:
The chance that an investment's actual return will be different than expected.
This includes the possibility of losing some or all of the original investment. Risk is
usually measured by calculating the standard deviation of the historical returns or
average returns of a specific investment.
A fundamental idea in finance is the relationship between risk and return. The
greater the amount of risk that an investor is willing to take on. the greater the
potential return.
The reason for this is that investors need to be compensated for taking on
additional risk.
Return:
The gain or loss of a security in a particular period. The return consists of the
income and the capital gains relative on an investment. It is usually quoted as a
percentage. The general rule is that the more risk you take, the greater the potential
for higher return - and loss.
Risk-Free Rate of Return:
The theoretical rate of return of an investment with zero risk. The risk-free rate
represents the interest an investor would expect from an absolutely risk-free
investment over a specified period of time. The risk-free rate is the minimum return
an investor expects for any investment because he or she will not accept additional
risk unless the potential rate of return is greater than the risk-free rate.

Risk-Return Tradeoff
The principle thai potential return rises with an increase in risk. Low levels of uncertainty
(low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk)
are associated with high potential returns. According to the risk-return tradeoff, invested money
can render higher profits only if it is subject to the possibility of being lost.

1.2 INDUSTRY PROFILE


HISTORY OF INDIAN STOCK MARKET:
Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago.
The earliest records of security dealings in India are meagre and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used to be
transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of Europe
was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about
200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began
(for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a
place in a street (now appropriately called as Dalal Street) where they would conveniently
assemble and transact business. In 1887, they formally established in Bombay, the "Native Share
and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange "). In
1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899.
Thus, the Stock Exchange at Bombay was consolidated.
Pre-Independance Scenario - Establishment of Different Stock Exchanges
1874

With the rapidly developing share trading business, brokers used to gather at a

1875

street (now well known as "Dalal Street") for the purpose of transacting business.
"The Native Share and Stock Brokers' Association" (also known as "The Bombay

1880's
1894
1880 - 90's

Stock Exchange") was established in Bombay


Development of cotton mills industry and set up of many others
Establishment of "The Ahmedabad Share and Stock Brokers' Association"
Sharp increase in share prices of jute industries in 1870's was followed by a boom

1908
1920

in tea stocks and coal


"The Calcutta Stock Exchange Association" was formed
Madras witnessed boom and business at "The Madras Stock Exchange" was

1923

transacted with 100 brokers.


When recession followed, number of brokers came down to 3 and the Exchange

1934
1936
1937

was closed down


Establishment of the Lahore Stock Exchange
Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange
Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited
led by improvement in stock market activities in South India with establishment

1940

of new textile mills and plantation companies


Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was

1944
1947

established
Establishment of "The Hyderabad Stock Exchange Limited"
"Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and
Shares Exchange Limited" were established and later on merged into "The Delhi
Stock Exchange Association Limited"

Post Independance Scenario:


The depression witnessed after the Independance led to closure of a lot of exchanges in the
country. Lahore Estock Exchange was closed down after the partition of India, and later on
merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in
1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till
1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The
Exchanges that were recognized under the Act were:
1. Bombay
2. Calcutta
3. Madras
4. Ahmedabad
5. Delhi
6. Hyderabad
7. Bangalore
8. Indore
Many more stock exchanges were established during 1980's, namely:
1. Cochin Stock Exchange (1980)
2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982)
3. Pune Stock Exchange Limited (1982)
4. Ludhiana Stock Exchange Association Limited (1983)
5. Gauhati Stock Exchange Limited (1984)
6. Kanara Stock Exchange Limited (at Mangalore, 1985)
7. Magadh Stock Exchange Association (at Patna, 1986)

8. Jaipur Stock Exchange Limited (1989)


9. Bhubaneswar Stock Exchange Association Limited (1989)
10. Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989)
11. Vadodara Stock Exchange Limited (at Baroda, 1990)
12. Coimbatore Stock Exchange
13. Meerut Stock Exchange
Trading Pattern of the Indian Stock Market
Indian Stock Exchanges allow trading of securities of only those public limited companies that
are listed on the Exchange(s). They are divided into two categories:

Types of Transactions
The flowchart below describes the types of transactions that can be carried out on the Indian
stock exchanges:

Indian stock exchange allows a member broker to perform following activities:


1. Act as an agent,
2. Buy and sell securities for his clients and charge commission for the same,
3. Act as a trader or dealer as a principal,
4. Buy and sell securities on his own account and risk.
Over The Counter Exchange of India (OTCEI)
Traditionally, trading in Stock Exchanges in India followed a conventional style where people
used to gather at the Exchange and bids and offers were made by open outcry.
This age-old trading mechanism in the Indian stock markets used to create many functional
inefficiencies. Lack of liquidity and transparency, long settlement periods and benami
transactions are a few examples that adversely affected investors. In order to overcome these
inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is the
first screen based nationwide stock exchange in India created by Unit Trust of India, Industrial
Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital
Markets, Industrial Finance Corporation of India, General Insurance Corporation and its
subsidiaries and CanBank Financial Services.

Advantages of OTCEI
1. Greater liquidity and lesser risk of intermediary charges due to widely spread trading
mechanism across India
2. The screen-based scripless trading ensures transparency and accuracy of prices
3. Faster settlement and transfer process as compared to other exchanges
4. Shorter allotment procedure (in case of a new issue) than other exchanges
National Stock Exchange:
In order to lift the Indian stock market trading system on par with the international standards. On
the basis of the recommendations of high powered Pherwani Committee, the National Stock
Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit
and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance
Corporations, selected commercial banks and others.
NSE provides exposure to investors in two types of markets, namely:
1. Wholesale debt market
2. Capital market
Wholesale Debt Market - Similar to money market operations, debt market operations involve
institutional investors and corporate bodies entering into transactions of high value in financial

instrumets

like

treasury

bills,

government

securities,

commercial

papers

etc.

Trading at NSE
1. Fully automated screen-based trading mechanism
2. Strictly follows the principle of an order-driven market
3. Trading members are linked through a communication network
4. This network allows them to execute trade from their offices
5. The prices at which the buyer and seller are willing to transact will appear on the screen
6. When the prices match the transaction will be completed
7. A confirmation slip will be printed at the office of the trading member
Advantages of trading at NSE
1. Integrated network for trading in stock market of India
2. Fully automated screen based system that provides higher degree of transparency
3. Investors can transact from any part of the country at uniform prices
4. Greater functional efficiency supported by totally computerized network.

1.3 COMPANY PROFILE

Overview
TheIIFLGroupisaleadingfinancialservicescompanyinIndia,promotedbyfirstgeneration
entrepreneurs.Wehaveadiversifiedbusinessmodelthatincludescreditandfinance,wealth
management, financial product distribution, asset management, capital market advisory and
investmentbanking.
Wehavealargelyretailfocussedmodel,servicingover2millioncustomers,includingseveral
lakh firsttime customers for mutual funds, insurance and consumer credit. This has been
achievedduetoourextensivedistributionreachofcloseto4,000businesslocationsandalso
innovativemethodslikeseminarsalesanduseofmobilevansformarketinginsmallerareas.
Ourevolutionfromanentrepreneurialstartuptoamarketleadershippositionisastoryofsteady
growthbyadaptingtothechangingenvironment,withoutlosingthefocusonourcoredomainof
financialservices.OurNBFCandlendingbusinessaccountsfor68%ofourconsolidatedincome
inFY13andhasadiversifiedproductportfolioratherthanremainingamonolineNBFC.Weare
aleaderindistributionoflifeinsuranceandmutualfundsamongnonbankentities.Althoughthe
shareofequitybrokingintotalincomewasonly13%inFY13,IIFLcontinuestoremaina
leadingplayerinboth,retailandinstitutionalspace.

Location

Mumbai

Corporateoffice

IIFLC entre,LowerParel
IIFLHouse,SunInfotechPark,RoadNo.16V,PlotNo.B23,Thane

Registeredoffice
Yearof
incorporation
Industry
Keybusinesses
Employees
Businesslocations
Globalreach

IndustrialArea,WagleEstate,Thane,Maharashtra400604

1995
FinancialServices
Credit &Finance,WealthManagement,Financial

Product

Distri bution,CapitalMarketRelated
14,000+
Aroun d4,000locationsin900citiesandtowns
SriLanka,Singapore,Dubai,NewYork,Mauritius,UK,HongKong,
Switzerland

Listings
Listingdate

NSE, BSE
17May,2005

Registrars
Shorttermdebt

Link IntimeIndiaPvt.Ltd.

rating
Longtermdebt
rating
Domains

ISINcode
Bloombergcode

CRISILA1+&ICRA(A1+)

ICRA(AA)&CRISILAA/Stable
www.indiainfoline.com,www.iiflfinance.com,
www.ttweb.indiainfoline.com,www.flame.org.in
INE53 0B01024
IIFLINEQUITY

Wehaveatrackrecordofuninterruptedprofitsanddividendssincelisting.

Revenues

EBIDTA

PAT

Networth

ROE

Segmentalrevenuesplit

Vision

TobecomethemostrespectedcompanyinthefinancialservicesspaceinIndia.
Values

ValuesareIIFLaresummarisedinoneacronym:GIFTS.

Growthwithfocusedteamofdynamicprofessionals.

Integrityinallaspectsofbusinessnocompromiseinanysituation.

Fairnessinallourdealingsemployees,customers,vendorsandshareholdersallincluded.

Transparencyinwhatwedoandinhowandwhywedoit.

Serviceorientationisourcorevalue,imbibedbyallsalesaswellassupportteams.
Businessstrategy

Steadygrowthbyadaptingtothechangingenvironment,withoutlosingthefocusonour
coredomainoffinancialservices.

Deriskedbusinessthroughmultipleproductsanddiversifiedrevenuestream.

Knowledgeisthekeytopowersuperiorfinancialdecisions.

Keepcostslowandcontinuouslystriveforinnovation.
Customerstrategy

Remainlargelyaretailfocusedorganisation,drivingstickinessthroughknowledgeand
qualityservice.

Catertountappedareasinsemiurbanandruralareas,whichisrelativelysafefromcut
throatcompetition.

Targetthemicro,smallandmediumenterprisesmushroomingacrossthecountrythrough
aclusterapproachforlendingbusiness.

Usewidemultimodalnetworkservingasonestopshoptocustomers.
Peoplestrategy

Attractthebesttalentanddrivenpeople.

Ensureconducivemeritenvironment.

Liberalownershipsharing.

Ourlogo
The Shree Yantra is regarded in India as the most powerful and
mysticallybeautifulofallyantras(Sanskritwordforasymbolusedto
focus the mind). It predates the Vedas and is supposed to be the
favouriteYantraofLakshmi,theGoddessofWealthandProsperity.
Thispowerfulsymbol,saidtopromoteharmonyandtranquillityas
well,hasenduredformanycenturies.IIFLisengagedinthebusiness
ofcreatingwealthandtheadoptionoftheShreeYantraasitslogowas
butnatural.

Positioning
WhenwepioneeredonlinetradinginIndiawiththelaunchofourbrand5paisa,thetagline
wasItsallaboutmoney,honey.
WerecentlyrealignedourpositioningfromKnowledgeistheEdgetoWhenitsabout
Money.
TheIIFLbrandisassociatedwithtrust,knowledgeandqualityservice.Butmoreimportantly,the
brandstandsfortimelyassistanceprovidedtothecountrysunderbankedcustomers.

OurStrengths:
Managerialdepth
OurpromotersindividuallyarefirstgenerationIndianentrepreneurswithmeritoriousacademic
backgroundsandimpeccableprofessionalcareers.
NirmalJain,Chairman,isarankholderCharteredAccountant,CostAccountantandanMBA
fromIIMAhmedabadandMr.R.Venkataraman,ManagingDirector,isanElectronicsEngineer
fromIITKharagpurandanMBAfromIIMBangalore.
ThePromotershavebuiltthebusinessfromscratch,withoutpedigreeofalargefamilybusiness
orinheritedwealthandsteeredittowardsamarketleadingpositionbydintofhardworkand
enterprise.
Wehaveconsistentlyattractedthebestofthetalentfromacrossthefinancialsectorprivate
sectorbanks,foreignbanks,publicsectorbanksandestablishedNBFCs.Theseniormanagement
teamhaveyearsofexperienceandbackgroundssimilartopromotersandleadscompetentteams.
IIFLhasuninterruptedhistoryofprofitsanddividendssincelisting.Wehavedeliveredtotal
shareholderreturnsof34.3%CAGRfromlistingtillMarch31,2013.

Governance
ThePromotershavedemonstratedanexemplarytrackrecordofgovernanceandutmostintegrity.
Therehavebeennonotableregulatorystricturesoroversighteverinthegroupshistory.Thisis
despiteawidespreadandbroadrangeofoperationsgovernedbymultipleregulatorsincluding
RBI,SEBI,IRDA,FMCandNHB.Inaddition,wehaveeightlicensedsubsidiariesinmajor
globalfinancialcentres.
OurBoardhasindependentdirectors,highlyrespectedfortheirprofessionalintegrityaswellas
richfinancialandbankingexperienceandexpertise.Wehaveanadvisoryboardcomprising
stalwartswithlongandimmaculatecareersinbanks,publicserviceandlegalprofession.
Noneofthepromotersfamilymembershasheldmanagerialorboardpositionorhaverelated
partyorfinancialtransactionofanysignificance,sincelisting.Further,wehavenotlenttoany
relatedpartyorassociatedconcerns.Thepromotersdonothaveanyotherbusinessinterestsand
arecommittedtothecorebusinessoffinancialservicesundertheIIFLumbrella.

People
Ourpeopleformthebackboneofourorganizationandarethefoundationofoursuccess.We
havesignificantownershipbyemployeeswithacredoofownerswork,workersown,which
hasenabledustomaintainahighlymotivatedstaffdrivenbyownermindset.Wecreateowners
outofouremployeesnotjustbyofferingafinancialstakebutalsothroughautonomytotake
decisions,makemistakesandgrowconfidence,competenceandcareer.

Knowledge
IIFL is a knowledge driven organization and has over the years developed and
institutionalizedknowledgeaboutitsbusinessesatallthelevels.
Ourrootsareinoriginalresearchoneconomy,sectors,companies,capitalmarketsandglobal
financial trends. Our inhouse research capabilities gives us an edge in understanding
industrytrends,macroeconomicsituations,businesscycles,inflationandinterestratetrends,
technologicalchanges,regulatoryandlegalupdates,environmentalfactorsimpactinglabour,
rawmaterialsupply,pollutionnormsandforintermediateproductstrendsinendusersectors
andforconsumptionproductstrendsincustomershabits.
We have strong origination and KYC processes across our businesses to get deep
understandingofcustomersneedsandprofile.

Innovation
Wehavesuccessfullyexecutedanumberofinnovativeanddisruptiveideasinthefinancial
servicesindustrytorisefromastartuptoleadershippositioninlessthantwodecades.For
instance:

Wegaveawayallourresearchfreeonindiainfoline.comandacquiredmillionsofreaders.

Wepioneeredonlinetradingandrevolutionizedbrokingatlowestrateof5basispoints.

Weinductedahighprofileinstitutionalteamfromaforeignbrokeragehouseinafirstofits
kinddealinIndiabrokingindustry.

Distributionreach
Wearepresentinaround4,000businesslocationsacrossmorethan900citiesinIndia.Our
global footprint covers Colombo, Dubai, New York, Mauritius, London, Geneva and
Singapore.

Deriskedbusiness
IIFLhasaderiskedanddiversifiedbusinessmodelacrossmultiplerevenuestreams.We
offermultipleproductsacrossallsegmentsoffinancialservices.

Riskmanagement
The basis of our risk management and hence our sustainability is our underlying
conservatism.Theobjectiveofourriskmanagementprocessistoinsulatethecompanyfrom
risksassociatedwiththebusinesswhilesimultaneouslycreatinganenvironmentconducive
forgrowth.
Theeffectivenessofourriskmanagementpracticeemanatesfromourrichexperience.Itis
derivedfromadeepunderstandingoftheIndianeconomy,sectorialtrendsandcorporate
fundamentals.
Ourabilitytomanageorganizationalriskcascadesfromourboardofdirectors,comprising
professionals with rich and varied experience. The risk appetite defined by our board is
reflectedinourbusinessplansandintegratedintoouroperations.
Weidentifyrisksthroughappropriatesystems,indicatorsandrisksurveysreinforcedbyour
mangers. The companys welldefined organizational structure, documented policies and
standardoperatingprocedures,authoritymatrixandinternalcontrols ensureefficiencyof
operations,compliancewithinternalandregulatoryrequirements.
Wecontinuouslystrengthenourriskmeasurementtoolscustomizedtothenatureofeach
businesssegment.Manycriticaldecisionlevelsforinvestments,majorlendingandpolicy
initiativesareinstitutionalizedtroughappropriatecommittees.

Wellcapitalized
TheGrouphasnetworthofaroundRs20billion.Thecompanyhasasignificantlyunutilized
capacitytoleverage.

Technology
Rightfrominception,IIFLhasincubatedanddevelopednextgenerationtechnologyforits
corebusinesses.
IIFLsfrontofficesoftwareisseamlesslyintegratedtoahighlyautomatedproprietaryback
office,riskmanagementandMISsoftware.
IIFL Trader Terminal is an entirely home grown proprietary technology, which allows
tradinginEquitiesCash&Derivatives,Commodities,Forex,MutualFunds,NFOsandIPOs
onasinglescreen.

Customerservice
Ourexistingcustomerserviceorganizationhasevolvedwiththesingulargoalsinceinception
thatourcustomerexperienceshouldbethebest.Weofferservicesthroughmultiplecustomer
touchpointssuchaspersonalinteractionatouroffices,callcentre,email,andonlineweb
basedinterface.Wehavemadesignificantinvestmentinsystems,technology,peopleand
their training, to ensure high service standards. We have also won an award for Best
CustomerServiceinFinancialServices2013.

3
4

Whatwedo(ProductandServices)?
IIFLGroupofferscredit&financefacilitiesthroughitssubsidiaries:

IndiaInfolineFinanceLtd(98.87%subsidiary);and

IndiaInfolineHousingFinanceLtd(Whollyownedsubsidiary).
TheNBFChas ahighqualityloanbookofclosetoRs10,000crores,withadiversified
portfolioincluding:

Homeloans

SME&Traderloans

Healthcare&Equipmentfinancing

LoanssecuredagainstGold

CommercialVehiclefinancing

LoanssecuredagainstProperty

LoanssecuredagainstShares
WehavechosentobeadiversifiedportfoliocompanyratherthanamonolineNBFC.We
exerciseutmostprudenceincreditselection,monitoringandavoidconcentration.Ourcredit
evaluationprocessnotonlytakesintoaccountthevalueandqualityofthecollateral,butalso
thecashflowsofthepotentialborrower.Backedbyadiversifiedportfolio,robustcredit
assessment,effectiveriskmanagementtechniquesandanefficientcollectionmechanism,the

netNPAsarekeptwellundercontrolatlessthan0.2%.TheNBFCandlendingbusiness
accountedfor68%ofourconsolidatedincomeinFY13.

3
5

Revenues

Loanbook

36

Loanbookbreakup

NIM

37

GrossNPA

NetNPA

CAR

38

IIFLGroupofferswealthadvisoryservicesthroughitssubsidiaryIIFLWealthManagement
Ltd(82.44%subsidiary).
Thereisanincreasingneedforacomprehensivewealthmanagementsolutionasopposedto
disparateservicestoaddresscomplexityrelatedtotreasury,personalportfolio,cashflows
andlongterminvestments.Weareamongsttheleadingwealthmanagementcompanieswith
AssetsunderAdvice(AuA)ofmorethanRs40,000croreswithaHNIclientbaseofover
4,000families.
Our fixed income practice coupled with a large bond desk facilitate s direct access to
sovereign,corporateandcollateraliseddebt.
ThebusinessgrewrevenuesfromRs180millionin200809toRs2billionin201213.We
havemanagedthefivesignificantconstituentsthatgointosuccessfulwealthmanagement
andadvisoryservices:

We distribute a range of financial products like life insurance, mutual funds, National
PensionScheme(NPS),governmentandcorporatebonds.Infact,weareamarketleader
amongnonbankpromotedentitiesindistributionoflifeinsuranceandmutualfunds.
Wefollowanopenarchitectureapproachandconstantlytrytoinnovatechannelsthatreach
outtocustomersinthemostcosteffectivewaypossible.Ourstrengthinsemiurbanandrural
areashashelpedusreachseverallakhfirsttimecustomers.Weconductedasurveyofour
100smallcustomers.Watchthemonwww.indiainfoline.com/inclusion

IIFLsannualpremiummobilisation(APE)stoodatoverRs320croresduringFY13.

WepioneeredinternetbrokinginIndiaandrationalisedbrokerageratesfrom150basis
pointsinthelateninetiesto5basispoints.Althoughtheshareofequitybrokingintotal
incomewasonly13%inFY13,wecontinuetoremainaleadingplayerinboth,retailand
institutionalspace.
Ourextensionintocommoditiesandcurrencyadvisoryreconcileswithitsvisiontoemerge
asaonestopshopfinancialintermediary.Weareintheprocessofbuildingacultureof
advisoryandfinancialplanningtomoveawayfrompureexecutionandderiskourbusiness
further.
IIFLCapital,theinstitutionalequitiesdivisionoftheIIFLGroup,isthefirstportofcallfor
most leading foreign institutional investors and mutual funds that in vest in India. Our
unmatchedblockplacementcapabilityisrenownedandisunderpinnedbyourreputationfor
integrityandclientconfidentiality.
Revenuesincreased2.3%toRs552.53crin201213.

Marketshareinequity

Marketshareincommodity

4
1

WelaunchedourMutualFundbusinesstooffernicheproducts.TheIIFLNiftyETF,our
maidenscheme,carriesthelowestexpensesofanyequityETFinIndia.
Ourpassively managed Dividend OpportunitiesETF has beenrankedthesecondbest
performerbyValueResearch.Atotalofsixschemeshave beenlaunched,includingfour
closeendeddebtschemesandtwoopenendedequity
schemes.Total assets under
management (AUM) stoodat Rs3,271million
asonMarch 31,
2013.
Ourstrengthliesingaugingthemarketpulseandlaunchingnicheproductswithlowchurn
andoperationalefficiency,therebykeepingcostslow.
Thebusinessleveragesuponthestrengthofourresearchandplacementcapabilitiesofthe
institutionalandretailsalesteams.Ourexperiencedinvestmentbankingteampossessesthe
skillsettomanageallkindsofinvestmentbankingtransactions.Ourcloseinteractionswith
investorsaswellascorporatehelpsusunderstandandoffertailormadesolutionstofulfil
requirements.
Wepossessstrongplacementcapabilitiesacrossinstitutional,HNIandretailinvestors.
Someofourmarqueetransactions:

Awards:
1)BestWealthManagementHouse(India),2011&2012,TripleA
2) No.1inFixedIncomePortfolioManagementinIndia,2012EuroMoney
3)BestBrokingHousewithGlobalPresence,2011&2012D&B
4)TopPerformer,Equity(FICategory),2012BSEBestCommoditiesInvestment,2012Euro
Money

5)BestCustomerServiceinFinancialServices,2013RetailerCustomerServiceAwards
IndiaInfolineLtd
BSE:532636|NSE:INDIAINFO|ISIN:INE530B01024
MarketCap:[Rs.Cr.]1,426|FaceValue:[Rs.]2Industry:Finance&Investments

49.651.40(2.9%)
BSE
Day'sHigh|Low
Day'sVolumes
52WkHigh|Low
OpenPrice
Turnover
DeliverableVol.
6Mth.Avg.Vol.
49.901.35(2.8%)
NSE
Day'sHigh|Low
Day'sVolumes
52WkHigh|Low
OpenPrice
Turnover
DeliverableVol.
6Mth.Avg.Vol.

2014Jul31,00:00
50.25|47.05
64,802
93.35|47.05
48.50
3,136,730.00
15,345
280,636.89

2014Jul31,00:00
50.45|47.40
384,610
93.30|47.40
48.85
18,527,443.10
148,065
662,095.40

DividendHistory

Dividend
(Rs)

Date

25Jan06 2
21Jul06 1
24Mar
3
07
30Jun08 6

FacevalueRs)
10
10
10
10

30Jan09 2.8
18Aug
1.2
09

27Jan10 1.8
8Mar11 3

2
2

21May
12

1.5
3

5Feb13

Annualdividend(Rs)Dividend%ofFV
FY06
FY07

3
3

30
30

FY08
FY09

6
2.8

60
140

FY010
FY011

3
3

150
150

FY012
FY013

1.5
3

75
150

45

ShareholdingPattern
Mar2013

Dec2012

Sep2012

Jun2012

Mar2012

Promoter
and 31.10%
PromoterGroup
Indian
31.10%

31.61%

31.68%

31.60%

31.61%

31.61%

31.68%

31.60%

31.61%

Foreign

Public
Institutions

68.90%
43.68%

68.39%
44.19%

68.32%
44.70%

68.40%
44.86%

68.39%
44.16%

FII

39.34%

39.92%

40.08%

39.63%

39.84%

DII
NonInstitutions

4.34%
25.22%

4.27%
24.20%

4.62%
23.62%

5.23%
23.54%

4.32%
24.23%

BodiesCorporate

2.78%

2.99%

2.29%

2.39%

2.05%

Custodians

Total

29,52,29,883 28,99,57,953 28,91,16,953 28,90,81,953 28,90,24,203

Philosophy:
IIFL(IndiaInfoline)iscommittedtoplacingtheInvestorFirst,bycontinuouslystrivingto
increasetheefficiencyoftheoperationsaswellasthesystemsandprocessesforuseof
corporateresourcesinsuchawaysoastomaximizethevaluetothestakeholders.TheGroup
aims at achieving not only the highest possible standards of legal and regu latory
compliances,butalsoofeffectivemanagement.

Committees:
AuditCommittee
Termsofreference&Composition,NameofmembersandChairman:TheAuditcommittee
comprisesMrNileshVikamsey(Chairman),MrRVenkataraman,MrKrantiSinha,twoof
whom are independent Dire ctors. The Chairman along with the Statutory and Internal
AuditorsareinviteestotheMeeting.TheTermsofreferenceofthiscommitteeareasunder:
ToinvestigateintoanymatterthatmaybeprescribedundertheprovisionsofSection292A
ofThe Companies Act,1956Recommendationand removal ofExternalAuditor and
fixationoftheAuditFees.Reviewingwiththemanagementthefinancialstatementsbefore
submissionofthesametotheBoard.OverseeingofCompany'sfinancialreportingprocess
anddisclosureofitsfinancialinformation.ReviewingtheAdequacyoftheInternalAudit
Function.
Compensation/RemunerationCommittee
Termsofreference&Composition,NameofmembersandChairman:TheCompensation/
RemunerationCommitteecomprisesMrKrantiSinha(Chairman)&MrNileshVikamsey,
bothofwhomareindependentDirectors.TheTermsofreferenceofthiscommitteeareas
under: To fix suitable re muneration package of all the Executive Directors and Non
ExecutiveDirectors,SeniorEmployeesandofficersi.e.Salary,perquisites,bonuses,stock
options,pensions etc.Determinationofthefixedcomponentandperformancelinked
incentivesalongwiththeperformancecriteriatoallemployeesofthecompanyService
Contracts,NoticePeriod,SeveranceFeesofDirectorsandemployees.StockOptiondetails:
whethertobeissuedatdiscountaswellastheperiodoverwhichtobeaccruedandover
which exercisable.Tocon ductdiscussions withthe HRdepartmentandform suitable
remunerationpolicies.

ShareTransferandInvestorGrievanceCommittee
DetailsoftheMembers,ComplianceOfficer,NoofComplaintsreceivedandpendingand
pending transfers as on close of the financial year. The committee functions under the
Chairmanship of Mr Kranti Sinha, a Nonexecutive independent Director. The other
MembersofthecommitteeareMr.NirmalJainandMr.RVenkataraman.MsSunilLotke,
CompanySecretaryistheComplianceOfficeroftheCompany.

BoardofDirectors
Mr.NirmalJain(Chairman,IndiaInfolineLtd).
Mr.R.Venkataraman(ManagingDirector,IndiaInfolineLtd).
Mr.ArunKumarPurwar
(IndependentDirectorofIndiaInfolineLimitedsinceMarch2008).
Mr.ChandranRatnaswami
(NonExecutiveDirectorofIndiaInfolineLimitedsinceMay2012).
Mr.KrantiSinha(IndependentDirectorofIndiaInfolineLimitedsinceJanuary2005).
Mr.MaheshNarayanSingh
(IndependentDirectorofIndiaInfolineFinanceLimitedsinceSeptember2009).
Mr.NileshVikamsey
(Independent Director of India Infoline Limited & India Infoline Finance Limited since
February2005).
Dr.SubbaramanNarayan
(IndependentDirectorofIndiaInfolineLimitedsinceJuly2012).
Mr.VijayKumarChopra
(IndependentDirectorofIndiaInfolineFinanceLimitedsinceJune2012).

IIFLFoundation
InlinewithIIFLsvisiontobethemostrespectedcompanyinthefinancialservicesspace,
the company recognises the importance of contributing to and sustaining social
transformation.TheIIFLFoundationhasbeensetuptoworkinareasofskilldevelopment
forvariousindustriesandtoensurefinancialinclusionthroughthesupportandupliftmentof
theunderprivilegedsectionsofsociety.
TheIIFLFoundationfocusesonspecificareasofneed,includinghealthcareandeducation.
Thefoundationwillscreenandselectinstitutionsanddevelopmentalagencieswhichare
working in these domains and will provide necessary aid to improve the lives of the
underprivilegedandhelptheminachievingtheirpotential.
TheIIFLFoundationhasinitiatedcareerguidancetothestudentsofHighSchoolandJunior
collegesinremoteareasofMaharashtratoenablethemtopursuethecareerwhichprovides
rightemploymentopportunities.

FLAME
FLAME(FinancialLiteracyAgendaforMassEmpowerment) isanIIFLFoundation
initiativetopromotefinancialliteracyamongstthemassesinordertomakethemanintegral
partofIndia'sspectaculargrowthstory.InaneraofacceleratingGDPandrisingpercapita
growth,financialliteracyhasbecomemorecriticalthaneverbeforesuchthatweallreapthe
tangiblebenefitsofthenation'seconomicprosperity.Financialinclusionhasbeenquitehigh
on the governmental agenda , given its emphasis on widening the Banking & Financial
servicesnetworkacrossthecountry.TheFLAMEinitiativestandscommittedtocomplement
this effortbyhelpingcommonpeoplegainfinancialgrowthandsecuritythoughbetter
awarenessandeducationonthevarietyoffinancialproductswhileavoidingthelureofand
loss from unrealistic claims made byunscrupulous agents and ponzi schemes. Visit our
dedicatedsiteforfinancialliteracy:www.flame.org.in

Scholarships
HNemkumarandNirmalJainScholarship(May2012)Indiahasalargenumberofgifted
anddeservingstudentswhoareunabletoavailofahighqualitylearningexperiencefrom
reputedinstitutionsinIndiaorabroadduetofinancialorotherconstraints.YoungIndia
Fellowsreachesouttosuchstudents.TheYIFscholarshipshavebeenmadepossibleby
generous donations by a stellar set of individuals including Mr. Nirmal Jain and Mr. H
NemkumaronbehalfofIIFLFoundation.
Thisyear,57YoungIndiaFellowsoftheFoundingClassgraduatedandembarkedupon
careersrangingfromdesigntechnologytoruraldevelopment,fromventurephilanthropyto
corporate strategy, and from ethnographic research to institution building. The Founding
FellowsareFulbrightScholars,INSEADWhartonMBAcandidates,PrimeMinisters,Rural
Development Fellows, legal entrepreneurs, McKinsey and BCG consultants, budding
psychologists,artists,writersandfilmmakers,researchscholarsatleadingthinktanksand
inspired entrepreneurs trying and testing new ideas for technologydriven social change.
Expressing gratitude for the support offered by Mr. Nirmal Jain & Mr. Nemkumar, in
launchingthisprograminitsfoundingyear,theYoungIndiaFellowsawardedapersonalized
ValedictoryScrolltograduatingFellows.

FinancialliteracyforSupportingtheUnderprivileged
IIFLhasalsotiedupwithKJSomaiyaInstituteofManagementStudies&Research(SIMSR)
toimpartbasicfinancialknowledgetounderprivilegedsectionsandphysicallyhandicapped
sections of the society. The programmes covers lessons on savings, budgeting, banking,
creditmanagement,microfinanceandselfhelpgroups(SHGs).TheIIFLFoundationunder
the FLAME initiative has tied up with Somaiya Institute to impart financial literacy to
NationalSocietyforEqualOpportunitiesfortheHandicappedIndia(NASEOH)sincethe
lasttwoyears.

SWOTANALYSISOFIIFL
STRENGHTS:
Lowbrokeragesystem
Effective after sales services
system
A
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Consolidated statementsa
uniqueserviceoffering
WEAKNESSES:
Lack of
Aggressive
advertiseme
nts and
sales
promotion
programme
d. The
working of
the sales
force is
traditional.
Inventoryinvestmentsshouldbe
more.
Miscommunication

and
ineffective coordination at
variouslevelofhierarchy.
OPPORTUNITIES:
G
r
o
w
i
n
g

c
a
p

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m
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t

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BettergovernancebySEBI
Decreasing interest rates in
India, so people are
motivated to earn more
returns through capital
market.
THREATS:

Demand&supply
Increasing competition in

securitymarket
Lostinfaithinsharemarket
afterbigscamsinthestock
market
Naturalcalamities
Inabilityofcustomerstopay
brokerageattherighttime
High risk involved in the
stockmarket.

COMPETITORSOFIIFL:

SHAREKHAN
RELIANCEMONEY
UNICON
KARVY
INDIABULLS
RKGLOBALSECURITIES
RELIGARE

CHAPTER 2
REVIEW OF LITERATURE
RETURN:
Return can be defined as Income received on an investment plus any change in market price,
usually expressed as a percent of the beginning market price of the investment.
+(P 1 p 0)
Rate of return (R) =
p0
DIV=dividend per share received in year.

P1=price of share in the beginning of the year.


P0=price of share at the end of the year.

DIVIDEND YIELD:
Dividend yield is the percentage of dividend income, and it is given by dividing the
dividend per share at the end the year by the share price in the beginning of the year.
Dividend yield=DIV/p0

CAPITAL GAIN:
Capital Gain is the difference of the share price at the end and share price in the beginning
divided by the share price in the beginning.
Capital Gain= (p1-p0)/p0
Positive capital gain or loss:
If the ending price were greater than the beginning price, there would be a positive capital
gain or capital loss.
Negative capital gain or loss:
If the ending price were less than the beginning price, there would be a negative capital
gain or capital loss.

Unrealized capital gain or loss:


If an investor holds a share and does not sell it at the end of a period ,the difference
between the beginning and ending share prices is the unrealized capital gain(or loss).
AVERAGE RATE OF RETUEN:
The average rate of return is the sum of the various one period rates of return by the number of
periods. Average rate of return can be calculated as follows.
n
1
[R 1+ R 2+ .+ Rn]
1/
n
Rt

Ro= n
=
t=1

Ro = average rate of return.


Rt=the observed or realized rates of return in periods 1,2,t
n = the total number of periods.
RISK
Risk may be described as variability/fluctuation/deviation of actual return from expected return
from a given asset/investment. Higher the variability, greater is the risk.
TYPES OF RISK:
The risk of a security can be broadly classified into two types. Such as systematic risk and
unsystematic risk. Standard deviation has been used as a proxy measure for total risk.
SYSTEMATIC RISK:
Systematic risk is due to risk factors that affect the entire market such as investment policy
changes, foreign investment policy, change in taxation clauses, shift in socio-economic
parameters, global security threats and measures etc.
Systematic risk is the risk that affects a security or portfolio due to its relationship with the
market. Systematic risk is also called market risk, aggregate risk, or undiversifiable risk.
Systematic risk cant be reduced through portfolio diversification. Since this risk is associated
with overall market sentiment rather than performance of few stocks. Systematic risk results
from

forces

which

cant

be

controlled

by

firm.

Systematic risk is measured with beta coefficient. It represents the securitys volatility relative to
that of an average security.
if beta = 1 means that security is of average risk (or exactly in sync with market).
If beta > 1 means that security has more unavoidable risk.
If beta <1 means, it is a less risky stock compared to average risk.
UNSYSTEMATIC RISK:

Unsystematic risk is due to factors specific to an industry or a company like labor unions,
product category, research and development, pricing, marketing strategy etc.unlike systematic
risk, the unsystematic risk can be reduced /avoided through diversification. Total risk of a fully
diversified portfolio equals to the market risk of the portfolio as its specific risk becomes zero.
MEASUREMENT RISK FOR A SINGLE ASSET:
The statistical measures of a risk of an asset are:
(a ) Standard deviation
(b) co-efficient of variation
STANDARD DEVIATION OF RETURN:
Standard deviation is the most common statistical measure of risk of an asset from the expected
value of return.It measures the fluctuations around mean returns.It represents the square root of
average squared deviations of individual returns(Ri) from the expected return(Ro).symbolically,
n

= Square root of

standard deviation =

( RRo ) 2/n
t 1

variance

VARIANCE:
It equals to average of squares of deviations of individual returns from expected returns.
Symbolically,
n

2=

BETA

( RRo ) 2/ n
t 1

The Beta () of a stock or portfolio is a number describing the relation of its returns with that of
the financial market as a whole.]
An asset has a Beta of zero if its returns change independently of changes in the market's returns.
A positive beta means that the asset's returns generally follow the market's returns, in the sense
that they both tend to be above their respective averages together, or both tend to be below their
respective averages together. A negative beta means that the asset's returns generally move
opposite the market's returns: one will tend to be above its average when the other is below its
average.[
The beta coefficient is a key parameter in the capital asset pricing model (CAPM). It measures
the part of the asset's statistical variance that cannot be removed by the diversification provided
by the portfolio of many risky assets, because of the correlation of its returns with the returns of
the other assets that are in the portfolio. Beta can be estimated for individual companies using
regression analysis against a stock market index .
The formula for the beta of an asset within a portfolio is

,
Where ra measures the rate of return of the asset, rp measures the rate of return of the portfolio,
and cov(ra,rp) is the covariance between the rates of return. The portfolio of interest in the CAPM
formulation is the market portfolio that contains all risky assets, and so the rp terms in the
formula are replaced by rm, the rate of return of the market.

CHAPTER 3
RESEARCH METHODOLOGY

RESEARCH DESIGN
I used DESCRIPTIVE research design for this study.This project analyses the equity
market and its fluctuations in India. The project aims to analyze the average return of the selected
companies listed in NIFTY for the study. It also measures the risk involved in investing in the
stocks. BETA value is calculated for all 12 companies to know whether investment in that
company is risky or not.
METHODOLOGY
SAMPLE SIZE:
For risk and return analysis, I took 12 NIFTY companies out of 50 companies.
Population size=50
Sample size=12
SAMPLING TECHNIQUE:
I used simple random sampling to select samples from population.
DATA AND SOURCES OF DATA
Main objective of this analysis

is to analysis the risk and returns using statistical

tools.Source of data collected are Secondary. Print media and internet has been used for data
collection.

The

data

was

obtained

from

the

national

stock

exchange

website

(www.nseindia.com). For the purpose of this study the daily closing prices of 12 companies
included in National Stock Exchange were taken and their price movements are computed and
studied. The 12 companies are,
1.Hindalco
2.Tata steel
3. DLF
4. BPCL

5. NTPC
6. WIPRO
7. GRASIM
8. SAIL
9. L&T
10.CIPLA
11. SIEMENS
12. BHEL
TIME PERIOD COVERED
The daily share prices of above mentioned companies and NIFTY were taken for a period of one
year from 1 march 2013 to 31st march 2014. The closing prices of share prices were taken and the
risk and return of companies were analyzed.

DATA ANALYSIS AND INTERPRETATION


CALCULATION OF RATE OF RETURN OF SECURITY FOR PERIOD OF
ONE YEAR
1. HINDALCO
Month

Average
close
Price

Capital
Gain/
Loss(%)
-

Dividend
per share

Dividend
yield

Rate of
Return
(%)(R)

(R-R1)

(R-R1)2

5.267763

1.35

0.79

6.06

3.5

12.25

159.42

-14.6542

1.35

0.75

-13.91

-13.47

181.44

June-13

144.77

-9.18956

1.35

0.85

-8.34

-13.9

118.81

July-13

151.4

4.579678

1.35

0.93

5.51

2.95

8.7

Aug-13

167.7

13.76618

1.35

0.89

11.66

9.1

82.81

Sep-13

186.76

11.36553

1.35

0.81

12.17

9.61

92.35

Oct-13

212.02

13.52538

1.35

0.72

14.24

11.69

136.06

Nov-13

217.49

2.57994

1.35

0.63

3.21

0.66

0.44

Dec-13

227.86

4.768035

1.35

0.62

5.39

2.83

8.01

Jan-14

234.5

2.91407

1.35

0.59

3.51

0.95

0.9

Feb-14

218.39

-6.86995

1.35

0.58

-6.29

-8.85

78.32

Mar-14

205.08

-6.0946

1.35

0.62

-5.47

-8.04

64.64

Mar -13

171.42

Apr-13

180.45

May-13

Average Rate of Return (R1):


= 6.06-13.91-8.34+5.51+11.66+12.17+14.24+3.21+5.39+3.51
-6.29-5.47
= 2.56%

VARIANCE:
(R-R1)2=785.33, n=12
Var =785.33/11
=71.39
STANDARD DEVIATION:
=

71.393

=38.44

GRAPH
CALCULATION OF RATE OF RETURN OF HINDALCO FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 13.53% was obtained in October 2013 and lowest return 0f -14.65% was obtained in
may 2013.The average rate of return of HINDALCO for 12 months period was 1.83%.Standard
Deviation of returns of HINDALCO was 8.44.

2. TATA STEEL
CALCULATION OF RATE OF RETURN OF TATASTEEL FOR PERIOD OF
ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss(%)

Dividend
per share

Dividend
yield(%)

Rate of
Return
(%)(R)

(R-R1)

(R-R1)2

Mar -13

625.22

Apr-13

665.14

6.38

1.28

7.66

6.15

37.82

May-13

539.61

-18.87

1.2

-17.67

-19.18

367.87

June-13

482.98

-13.49

1.48

-9.01

-13.52

113.67

July-13

508.39

5.26

1.66

6.92

5.41

29.27

Aug-13

524.44

3.16

1.57

4.73

3.22

13.37

Sep-13

602.84

14.95

1.53

16.48

14.97

224.1

Oct-13

635

5.33

1.33

6.66

5.15

26.52

Nov-13

613.38

-3.4

1.26

-2.14

-3.65

13.32

Dec-13

647.83

5.62

1.3

6.92

5.41

29.27

Jan-14

651.19

0.52

1.23

1.75

0.24

0.06

Feb-14

623.21

-4.3

1.23

-3.07

-4.58

20.98

Mar-14

608.03

-2.44

1.28

-1.16

-2.67

7.13

Average Rate of Return(R1):


= 7.66+(-17.67)+(-9.01)+6.92+4.73+16.48+6.66+(-2.14)+6.92+1.75
+(-3.07)+(-1.16)

= 1.51%
VARIANCE:
(R-R1)2=877.38,n=12
Var =877.38/11
=79.76
STANDARD DEVIATION:
=

79.76

=8.94

GRAPH
CALCULATION OF RATE OF RETURN OF TATASTEEL FOR PERIOD OF ONE
YEAR

INTERPRETATION:

During the period of last 12 months (march 2013-march 2014),the highest


return of 16.48% was obtained in September 2013 and lowest return 0f -17.67% was obtained in
may 2013.The average rate of return of TATA STEEL for 12 months period was 1.51%.standard
deviation of returns was 8.94.
3. DLF
CALCULATION OF RATE OF RETURN OF DLF FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss(%)

Dividend
per share

Dividend
yield

Rate of
Return
(%)(R)

(R-R1)

(R-R1)2

Mar -13

307.15

Apr-13

324.71

5.72

0.65

6.37

7.62

58.06

May-13

285.66

-12.03

0.62

-14.41

-13.16

133.23

June-13

277.28

-2.9

0.7

-2.2

-0.95

0.9

July-13

305.87

13.27

0.72

13.99

12.24

149.82

Aug-13

315.66

3.2

0.65

3.85

5.1

26.01

Sep-13

343.67

8.87

0.63

9.5

13.75

115.56

Oct-13

375.21

9.18

0.58

9.76

11.01

121.22

Nov-13

328.72

-12.89

0.53

-14.86

-13.61

112.57

Dec-13

291.15

-14.43

0.61

-13.82

Jan-14

258.97

-14.05

0.69

-13.36

-9.11

82.99

Feb-14

232.96

-13.04

0.77

-9.27

-8.02

64.32

Mar-14

232.08

-0.38

0.86

0.48

1.73

2.99

-9.57

91.58

Average Rate of Return(R1):


=(6.37+(-14.41)+(-2.2)+13.00+3.85+9.5+9.76+(-14.86)+(-13.82)+(-13.36)

+(-9.27)+0.48/12
= -1.25%

VARIANCE:
(R-R1)2=929.25,n=12
Var =929.25/11
=84.47
STANDARD DEVIATION:
=

84.47

=9.19

GRAPH
CALCULATION OF RATE OF RETURN OF DLF FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 13 months (march 2013-march 2014),the highest
return of 13.99% was obtained in July 2013 and lowest return 0f -14.86% was obtained in Nov
2013.The average rate of return of DLF for 13 months period was -1.25%.Standard Deviation of
returns of DLF was 9.19.
4.BPCL
CALCULATION OF RATE OF RETURN OF BPCL FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss (%)

Dividend
per share

Dividend
yield

Rate of
Return
(%) (R)

(R-R1)

(R-R1)2

Mar -13

528.69

Apr-13

504.05

-4.66

14

2.65

-2.01

-5.24

27.46

May-13

547.06

8.53

14

2.78

11.31

8.08

65.29

June-13

568.02

3.83

14

2.56

6.39

3.16

9.99

July-13

659.81

16.16

14

2.46

18.62

15.39

236.85

Aug-13

695.27

5.37

14

2.12

7.49

4.26

18.15

Sep-13

771.65

13.99

14

2.01

13

9.77

95.45

Oct-13

731

-5.27

14

1.81

-3.46

-6.69

44.76

Nov-13

727.02

-0.54

14

1.92

1.38

-1.85

3.42

Dec-13

678.41

-6.69

14

1.93

-4.76

-7.99

63.84

Jan-14

612.39

-9.73

14

2.06

-7.67

-13.9

118.81

Feb-14

583.81

-4.67

14

2.29

-2.38

-5.61

31.47

Mar-14

574.69

14

2.4

0.84

-2.39

5.71

-1.56

Average Rate of Return(R1):


=-2.01+11.31+6.39+18.62+7.49+13+(-3.46)+1.38+(-4.76)+(-7.67)
+ (-2.38)+0.84
= 3.23%

VARIANCE:
(R-R1)2=721.2,n=12
Var =721.2/11
=65.56
STANDARD DEVIATION:
=

65.56

=8.09

GRAPH
CALCULATION OF RATE OF RETURN OF BPCL FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 18.62% was obtained in July 2013 and lowest return 0f -7.67% was obtained in JAN
2014.The average rate of return of BPCL for 12 months period was 3.23%.Standard Deviation
of returns of BPCL was 8.09.

5. NTPC
CALCULATION OF RATE OF RETURN OF NTPC FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss (%)

Dividend
per share

Dividend
yield

Rate
of Return
(%)(R)

(R-R1)

(R-R1)2

Mar -13

203.3

Apr-13

207.66

2.14

3.8

1.87

4.01

3.04

9.24

May-13

202.35

-2.56

3.8

1.83

-0.73

-1.7

2.89

June-13

199.35

-1.48

3.8

1.88

0.4

-0.57

0.32

July-13

200.56

0.61

3.8

1.91

2.52

1.55

2.4

Aug-13

196.13

-2.22

3.8

1.89

-0.33

-1.3

1.69

Sep-13

206.13

5.1

3.8

1.94

7.04

6.07

36.84

Oct-13

207.87

0.86

3.8

1.84

2.7

1.73

2.99

Nov-13

187.82

-9.65

3.8

1.83

-7.82

-8.79

77.26

Dec-13

193.68

3.12

3.8

2.02

5.14

4.17

17.32

Jan-14

192.55

-0.58

3.8

1.96

1.38

0.41

0.17

Feb-14

176.68

-8.24

3.8

1.97

-6.27

-7.24

52.42

Mar-14

179.29

1.48

3.8

2.15

3.63

2.66

7.08

Average Rate of Return(R1):


= 4.01+(-0.73)+0.4+2.52+(-0.33)+7.04+2.7+(-7.82)+5.14+1.38+
(-6.27)+3.63/12
= 0.97%

VARIANCE:
(R-R1)2=213.69,n=12
Var =213.69/11
=19.15
STANDARD DEVIATION:
=

19.15

=4.38

GRAPH
CALCULATION OF RATE OF RETURN OF NTPC FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 7.04% was obtained in Sep 2013 and lowest return 0f -7.82% was obtained in NOV
2014.The average rate of return of NTPC for 12 months period was 0.97%.Standard Deviation
of returns of NTPC was 4.38.
6. WIPRO
CALCULATION OF RATE OF RETURN OF WIPRO FOR PERIOD OF ONE YEAR
Month

Mar -13

Average
close
Price
712.13

Capital Gain/ Dividend Dividend Rate of


Loss (%)
per
yield
Return
share
(%)(R)

(R-R1)

(R-R1)2

Apr-13

706.75

-0.76

0.28

-0.48

2.35

5.52

May-13

658.94

-6.76

0.28

-6.48

-3.65

13.32

June-13

515.23

-21.81

0.3

-21.51

-18.68

348.94

July-13

403.89

-21.61

0.39

-21.22

-18.39

338.19

Aug-13

414.66

2.67

0.5

3.17

36

Sep-13

423.65

2.17

0.48

2.65

5.48

30.03

Oct-13

457.16

7.91

0.47

8.38

11.21

125.66

Nov-13

423.36

-7.39

0.44

-6.95

-4.21

16.97

Dec-13

460.81

8.85

0.47

9.32

12.15

147.62

Jan-14

464.65

0.83

0.43

1.26

4.09

16.73

Feb-14

432.18

-6.99

0.43

-6.56

-3.73

13.91

Mar-14

449.40

3.98

0.46

4.44

7.27

52.85

Average Rate of Return(R1):


= (-0.48)+(-6.48)+(-21.51)+(-21.22)+3.17+2.65+8.38+(- 6.95)
+9.32+1.26+(-6.56)+4.44
= -2.83%

VARIANCE:
(R-R1)2=1145.74,n=12
Var =1145.74/11
=134.15

STANDARD DEVIATION:
=

1145.74

=13.20

GRAPH
CALCULATION OF RATE OF RETURN OF WIPRO FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 9.32% was obtained in Dec 2013 and lowest return 0f -21.51% was obtained in JUN
2014.The average rate of return of WIPRO for 12 months period was -2.83%.standard Deviation
of returns of WIPRO was 13.20.

7. GRASIM
CALCULATION OF RATE OF RETURN OF GRASIM FOR PERIOD OF ONE YEAR

Month

Average
close
Price

Capital
Gain/ Loss
(%)

Dividend Dividend Rate of


per
yield
Return
share
(%) ( R)

(R-R1)

(R-R1)2

Mar -13

2848.76

Apr-13

2824.94

-0.84

30

1.05

0.21

0.21

0.04

May-13

2431.98

-13.91

30

1.06

-12.85

-12.85

165.12

June-13

1788.21

-26.47

30

1.23

-25.24

-25.24

637.06

July-13

1838.63

2.82

30

1.68

4.5

4.5

20.25

Aug-13

1975.33

7.43

30

1.63

9.06

9.06

82.08

Sep-13

2174.21

13.07

30

1.52

11.59

11.59

134.33

Oct-13

2290.62

5.35

30

1.38

6.73

6.73

45.29

Nov-13

2314.97

1.06

30

1.31

2.37

2.37

5.62

Dec-13

2319.57

0.2

30

1.3

1.5

1.5

2.25

Jan-14

2386.86

2.9

30

1.29

4.19

4.19

17.56

Feb-14

2281.16

-4.43

30

1.26

-3.17

-3.17

13.05

Mar-14

2391.73

4.85

30

1.32

6.17

6.17

38.07

Average Rate of Return(R1):


= 0.21+(-12.85)+(-25.24)+4.5+9.06+11.59+6.73+2.37+1.5+4.19
+(-3.17)+6.17
= 0.42%

VARIANCE:

(R-R1)2=1157.72,n=12
Var =1157.72/11
=135.24
STANDARD DEVIATION:
=

135.24

=13.26

GRAPH
CALCULATION OF RATE OF RETURN OF GRASIM FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 11.59% was obtained in Sep 2013 and lowest return 0f -25.24% was obtained in JUN
2014.The average rate of return of GRASIM for 12 months period was 0.42%.Standard
Deviation of returns of GRASIM was 13.26.

8. SAIL
CALCULATION OF RATE OF RETURN OF SAIL FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss (%)

Dividend Dividend Rate of


per
yield
Return
share
(%)( R)

(R-R1)

(R-R1)2

Mar -13

238.31

Apr-13

231.78

-2.74

3.3

1.38

-1.36

0.04

0.0016

May-13

206.96

-13.71

3.3

1.42

-9.29

-7.89

62.25

June-13

197.6

-4.52

3.3

1.59

-2.93

-1.53

2.34

July-13

199.15

0.78

3.3

1.67

2.45

3.85

14.82

Aug-13

192.76

-3.21

3.3

1.66

-1.55

-0.15

0.02

Sep-13

201.11

4.33

3.3

1.71

6.04

7.44

55.35

Oct-13

219.49

9.14

3.3

1.64

13.78

12.18

148.35

Nov-13

188.84

-13.96

3.3

1.5

-12.46

-14.06

122.32

Dec-13

182.88

-3.16

3.3

1.75

-1.41

-0.01

0.0001

Jan-14

170.95

-6.52

3.3

1.8

-4.72

-3.32

11.02

Feb-14

159.28

-6.83

3.3

1.93

-4.9

-3.5

12.25

Mar-14

160.11

0.52

3.3

2.07

2.59

3.99

15.92

Average Rate of Return(R1):


= (-1.36)+(-9.29)+(-2.93)+2.45+(-1.55)+6.04+13.78+(-12.46)+
(-1.41)+(-4.72)+(-4.9)+2.59/12
= -1.31%
%

VARIANCE:
(R-R1)2=444.66,n=12
Var =444.66/11
=40.42
STANDARD DEVIATION:
=

40.42

=6.36

GRAPH
CALCULATION OF RATE OF RETURN OF SAIL FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 13.78% was obtained in oct 2013 and lowest return 0f -12.46% was obtained in NOV

2014.The average rate of return of SAIL for 12 months period was -1.31%.Standard deviation
of returns of SAIL was 6.36.
9. L&T
CALCULATION OF RATE OF RETURN OF L&T FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capita
l Gain/
Loss
(%)

Dividen
d per
share

Dividend Rate of
yield
Return
(%)( R)

(R-R1)

(R-R1)2

Mar -13

1604.70
5

Apr-13

1613.05
8

0.33

12.5

0.78

1.11

0.37

0.14

May-13

1586.48
8

-1.46

12.5

0.78

-0.68

-1.42

2.02

June-13

1723.85

8.66

12.5

0.79

9.45

8.71

75.86

July-13

1849.60
9

7.3

12.5

0.73

8.03

7.29

53.14

Aug-13

1820.38
2

-1.58

12.5

0.68

-0.9

-1.64

2.69

Sep-13

1944.03
6

6.79

12.5

0.69

7.48

6.74

45.43

Oct-13

2032.56
9

4.55

12.5

0.64

5.19

4.45

19.8

Nov-13

2070.90
7

1.89

12.5

0.61

2.5

1.76

3.1

Dec-13

1978.18

-4.48

12.5

0.6

-3.88

-4.62

21.34

Jan-14

1746.42
5

-14.72

12.5

0.63

-14.09

-14.83

139.95

Feb-14

1580.99
5

-9.47

12.5

0.72

-8.75

-9.49

90.06

Mar-14

1575.28
9

-0.36

12.5

0.79

0.43

-0.31

0.1

Average Rate of Return(R1):


= 1.11+(-0.68)+9.45+8.03+(-0.9)+7.48+5.19+2.5+(-3.88)
+ (-14.09)+(-8.75)+0.43/12
=0.74%

VARIANCE:
(R-R1)2=453.63,n=12
Var =453.63/11
=41.239
STANDARD DEVIATION:
=

41.239

=6.42

GRAPH
CALCULATION OF RATE OF RETURN OF L&T FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 9.45% was obtained in May 2013 and lowest return 0f -14.09% was obtained in JAN
2014.The average rate of return of L&T for 12 months period was 0.74%.standard Deviation of
returns of L&T was 6.42.

13. CIPLA
CALCULATION OF RATE OF RETURN OF CIPLA FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss (%)

Dividen
d per
share

Dividend
yield

Rate of
Return
(%)(R)

(R-R1)

(R-R1)2

Mar -13

327.481

Apr-13

335.05

2.31

0.61

2.92

2.81

7.9

May-13

321.25

-4.12

0.6

-3.52

-3.63

13.18

June-13

334.413
6

4.1

0.62

4.72

4.61

21.25

July-13

331.406
8

-0.9

0.6

-0.3

-0.41

0.17

Aug-13

313.006
8

-5.55

0.6

-4.95

-5.06

25.6

Sep-13

312.619

-0.12

0.64

0.52

0.41

0.17

Oct-13

338.285
7

8.21

0.64

8.85

8.74

76.39

Nov-13

344.321
4

1.78

0.59

2.37

2.26

5.11

Dec-13

363.527
3

5.58

0.58

6.16

6.05

36.6

Jan-14

351.245

-3.38

0.55

-2.83

-2.94

8.64

Feb-14

311.4325

-14.33

0.57

-13.76

-13.87

118.16

Mar-14

303.572
7

-2.52

0.64

-1.88

-1.99

3.96

Average Rate of Return(R1):


= 2.92+(-3.52)+4.72+(-0.3)+(-4.95)+0.52+8.85+2.37+6.16+(-2.83)
+(-13.76)+(-1.88)/12
=0.11%

VARIANCE:
(R-R1)2=453.63,n=12

Var =317.13/11
=28.83
STANDARD DEVIATION:
=

317.13

=28.83
= 5.37

GRAPH
CALCULATION OF RATE OF RETURN OF CIPLA FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 8.85% was obtained in OCT 2013 and lowest return 0f -13.76% was obtained in Feb
2014.The average rate of return of CIPLA for 12 months period was 0.11%.Standard Deviation
of returns of CIPLA was 5.37.
11. SIEMENS

CALCULATION OF RATE OF RETURN OF SIEMENS FOR PERIOD OF ONE YEAR


Month

Average
close
Price

Capital
Gain/ Loss
(%)

Dividend Dividend Rate of


per
yield
Return
share
(%)( R)

(R-R1)

(R-R1)2

Mar -13

729.314

Apr-13

727.365

-0.27

0.69

0.42

-1.81

3.28

May-13

681.382
5

-6.32

0.69

-5.63

-7.86

61.78

June-13

715.572
7

5.02

0.73

5.75

3.52

12.39

July-13

722.152
3

0.92

0.7

1.62

-0.61

0.37

Aug-13

704.409

-2.46

0.69

-1.77

-4

16

Sep-13

752.767

6.87

0.71

7.58

5.35

28.62

Oct-13

823.238

9.36

0.66

13.02

7.79

60.68

Nov-13

807.186

-1.95

0.61

-1.34

-3.57

12.74

Dec-13

788.143
2

-2.36

0.62

-1.74

-3.97

15.76

Jan-14

768.895

-2.44

0.63

-1.81

-4.04

16.32

Feb-14

844.812
5

9.87

0.65

13.52

8.29

68.72

Mar-14

866.602
3

2.58

0.59

3.12

0.94

0.88

Average Rate of Return(R1):


= 0.42+(-5.63)+5.75+1.62+(-1.77)+7.58+13.02+(-1.34)+(-1.74)+

(-1.81)+13.52+3.12
= 2.23%

VARIANCE:
(R-R1)2=297.54,n=12
Var =297.54/11
=27.05
STANDARD DEVIATION:
=

297.54

=27.05
= 5.2

GRAPH
CALCULATION OF RATE OF RETURN OF SIEMENS FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 13.52% was obtained in Feb 2014 and lowest return 0f -5.65% was obtained in May
2013.The average rate of return of SIEMENS for 12 months period was 2.23%.Standard
Deviation of returns of SIEMENS was 5.2.
12. BHEL
CALCULATION OF RATE OF RETURN OF BHEL FOR PERIOD OF ONE YEAR
Month

Average
close
Price

Capital
Gain/
Loss (%)

Dividend
per share

Dividend
yield

Rate of
Return
(%)
(R)

R-R1

(R-R1)2

Mar -13

2398.1

Apr-13

2496.56

4.11

23.3

0.97

5.08

5.46

29.81

May-13

2354.19

-5.7

23.3

0.93

-4.77

-4.39

19.27

June-13

2384.40

1.28

23.3

0.99

2.27

2.65

7.02

July-13

2425.19

1.71

23.3

0.98

2.69

3.07

9.42

Aug-13

2482.96

2.38

23.3

0.96

3.34

3.72

13.84

Sep-13

2501.48

0.75

23.3

0.94

1.69

2.07

4.28

Oct-13

2547.12

1.82

23.3

0.93

2.75

3.13

9.8

Nov-13

2354.19

-7.57

0.91

-6.66

-6.28

39.44

Dec-13

2285.28

-2.93

23.3

0.99

-1.94

-1.56

2.43

Jan-14

2237.84

-2.08

23.3

1.02

-1.06

-0.68

0.46

Feb-14

2094.29

-6.41

23.3

1.04

-5.37

-4.99

24.9

Mar-14

2017.33

-3.67

23.3

1.11

-2.56

-2.18

4.75

23.3

Average Rate of Return(R1):


= 5.08-4.77+2.27+2.69+3.34+1.69+2.75-6.66-1.94-1.06-5.37-2.56
= -0.38%

VARIANCE:
(R-R1)2=165.42,n=12
Var =165.42/11
=15.04
STANDARD DEVIATION
=

15.04

=3.89

GRAPH
CALCULATION OF RATE OF RETURN OF BHEL FOR PERIOD OF ONE YEAR

INTERPRETATION:
During the period of last 12 months (march 2013-march 2014),the highest
return of 5.08% was obtained in Apr 2013 and lowest return 0f -6.66% was obtained in Nov
2013.The average rate of return of BHEL for 12 months period was -0.38%.Standard deviation
of returns of BHEL was 3.89.

Calculation of beta value for period of one year (Mar2013-Mar11)


3.1 HINDALCO
Date

Dividend

Average return
on NIFTY

BETA

1.35

Average return
on
HINDALCO
0.006006

Mar 2014

0.002875

1.169854

Feb 2014

1.35

-0.00043

-0.0005

Jan 2014

1.35

0.002528

-0.00562

Dec 2013

1.35

0.013129

0.001384

Nov 2013

1.35

0.005046

-0.00188

Oct 2013

1.35

0.008092

-0.00081

Sep 2013

1.35

0.013655

0.005077

Aug 2013

1.35

0.008808

-3.59E-05

July 2013

1.35

0.014513

0.001232

June 2013

1.35

0.01

0.003414

May 2013

1.35

0.000423

-0.00101

Apr 2013

1.35

0.00611

8.31E-05

Mar 2013

1.35

0.011542

0.002466

BETA calculation:
Cov (return on Hindalco, return on NIFTY)
Beta = ______________________________
Var (return on NIFTY)
Cov(return on hindalco, return on nifty) = 7.99434E-06
Var (return on nifty)
Beta

= 7.40309E-06
7.99434E-06
__________________
7.40309E-06

= 1.169
3.1 GRAPH
Calculation of BETA value of Hindalco

HINDALCO
0.02
0.01
f(x) = 1.17x + 0.01
0.01
R = 0.42
0.01
HINDALCO

0.01

Return on Hindalco

Linear (HINDALCO)

0.01
0
0
0
-0.01 -0.01

0.01 0.01

return on NIFTY

INTERPRETATION:
Since the beta value is GREATER than 1(BETA=1.169), return on HINDALCO is
more volatile than the return on NIFTY.
2. TATA STEEL
Table showing calculation of beta value of Tatasteel for period of one year

Date

dividend

Average return
on NIFTY

BETA

Average return
on
Tata steel
0.012369

Mar 2014

0.002875

1.29423

Feb 2014

0.010981

-0.0005

Jan 2014

0.007368

-0.00562

Dec 2013

0.011216

0.001384

Nov 2013

0.012646

-0.00188

Oct 2013

0.013647

-0.00081

Sep 2013

0.023141

0.005077

Aug 2013

0.013205

-3.59E-05

July 2013

0.021762

0.001232

June 2013

0.017424

0.003414

May 2013

0.005674

-0.00101

Apr 2013

0.009419

8.31E-05

Mar 2013

0.0114738

0.002466

BETA CALCULATION:
Cov (return on tatasteel, return on NIFTY)
______________________________
Var (return on nifty)

Beta =

Cov (return on tatasteel, return on nifty) = 8.8282E-06


Var (return on nifty)

= 7.40309E-06

BETA

1.29423
GRAPH

Calculation of BETA value of Tata steel

Tata steel
0.03
0.02
f(x) = 1.29x + 0.01
R = 0.48
0.02
return on tatasteel

tata steel
Linear (tata steel)

0.01
0.01
0
-0.01 -0.01

0.01

0.01

return on Nifty

INTERPRETATION:
Since the beta value is GREATER than 1(BETA=1.29), return on Tata steel is
more volatile than the return on NIFTY.

3. DLF
Table showing calculation of beta value of DLF for period of one year

Date

dividend

Average return
on NIFTY

BETA

Average return
on
DLF
0.018056

Mar 2014

0.002875

1.41406

Feb 2014

0.006513

-0.0005

Jan 2014

-0.00647

-0.00562

Dec 2013

-0.00391

0.001384

Nov 2013

0.003959

-0.00188

Oct 2013

0.007955

-0.00081

Sep 2013

0.010686

0.005077

Aug 2013

-0.00008

-3.59E-05

July 2013

0.0030607

0.001232

June 2013

0.003248

0.003414

May 2013

-0.004753

-0.00101

Apr 2013

0.000057

8.31E-05

Mar 2013

0.0029438

0.002466

BETA CALCULATION:
Cov (return on DLF, return on nifty) =9.51178E-06
Var (return on nifty)

=9.45206E-06
9.66315E-06
Beta = __________________
7.40309E-06
= 1.41406

GRAPH
Calculation on BETA value of DLF

DLF
0.02
0.02
0.01
f(x) = 1.41x + 0
R = 0.33
0.01

Return on DLF

DLF
Linear (DLF)
Linear (DLF)

0
-0.01

-0.01

0.01

0.01

-0.01
-0.01
Return on NIFTY

INTERPRETATION:
Since the beta value is GREATER than 1(BETA=1.41), return on DLF is more
volatile than the return on NIFTY.

4. BPCL
Table showing calculation of beta value of BPCL for period of one year

Date

dividend

Average return
on NIFTY

BETA

14

Average return
on
BPCL
0.026855

Mar 2014

0.002875

0.41575

Feb 2014

14

0.02165

-0.0005

Jan 2014

14

0.019236

-0.00562

Dec 2013

14

0.017954

0.001384

Nov 2013

14

0.01381

-0.00188

Oct 2013

14

0.01761

-0.00081

Sep 2013

14

0.01633

0.005077

Aug 2013

14

0.0287

-3.59E-05

July 2013

14

0.020139

0.001232

June 2013

14

0.032245

0.003414

May 2013

14

0.031467

-0.00101

Apr 2013

14

0.028509

8.31E-05

Mar 2013

14

0.024404

0.002466

BETA CALCULATION:
Cov (return on BPCL, return on nifty) = 2.84108E-06
Var (return on nifty)

= 7.40309E-06
2.84108E-06
Beta = __________________

7.40309E-06
= 0.41575

GRAPH
Calculation of BETA value of BPCL

BPCL
0.04
0.03
0.03
f(x) = 0.42x + 0.02
0.02
R = 0.03
Return on BPCL

BPCL
Linear (BPCL)

0.02
0.01
0.01
0
-0.01-0.01 0

0.01

Return on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.4175), return on BPCL is less
volatile than the return on NIFTY.

5. NTPC

Table showing calculation of beta value of NTPC for period of one year
Date

dividend

Mar 2014

3.80

Average return
on
NTPC
0.019867

Feb 2014

3.80

0.018304

-0.0005

Jan 2014

3.80

0.018244

-0.00562

Dec 2013

3.80

0.019566

0.001384

Nov 2013

3.80

0.018683

-0.00188

Oct 2013

3.80

0.018897

-0.00081

Sep 2013

3.80

0.023247

0.005077

Aug 2013

3.80

0.012514

-3.59E-05

July 2013

3.80

0.017863

0.001232

June 2013

3.80

0.023298

0.003414

May 2013

3.80

0.022424

-0.00101

Apr 2013

3.80

0.017058

8.31E-05

Mar 2013

3.80

0.024382

0.002466

BETA calculation:
Cov (return on NTPC, return on nifty)

= 2.51691E-06

Var (return on nifty)

= 7.40309E-06
2.51691E-06
Beta = __________________
7.40309E-06
= 0.36831

GRAPH

Average return
on NIFTY

BETA

0.002875

0.36381

Calculation of beta value of NTPC for period of one year

NTPC
0.03
0.03
0.02
f(x)
= 0.37x + 0.02
R = 0.1
Return on NTPC

0.02

NTPC
Linear (NTPC)

0.01
0.01
0
-0.01 -0.01

0.01

0.01

Return on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.3683), return on NTPC is less
volatile than the return on NIFTY.

6. WIPRO

Calculation of beta value of WIPRO for period of one year


Date

dividend

Mar 2014

3.80

Average return
on
WIPRO
0.00389

Feb 2014

3.80

0.00122

-0.0005

Jan 2014

3.80

-0.00497

-0.00562

Dec 2013

3.80

0.012528

0.001384

Nov 2013

3.80

0.004419

-0.00188

Oct 2013

3.80

-0.00019

-0.00081

Sep 2013

3.80

0.010235

0.005077

Aug 2013

3.80

0..003348

-3.59E-05

July 2013

3.80

0.009534

0.001232

June 2013

3.80

-0.01631

0.003414

May 2013

3.80

0.002902

-0.00101

Apr 2013

3.80

-0.00088

8.31E-05

Mar 2013

3.80

0.003279

0.002466

BETA calculation:
Cov (return on WIPRO, return on nifty)

= 3.52192E-06

Var (return on nifty)

= 7.40309E-06
3.52192E-06

Beta = __________________

7.40309E-06
= 0.51358

GRAPH

Average return
on NIFTY

BETA

0.002875

0.51358

Calculation of beta value of WIPRO for period of one year

WIPRO
0.02
0.01

Return on WIPRO -0.01

0.01
f(x) = 0.52x + 0
R = 0.04
0
-0.01
0
0.01
-0.01

WIPRO
0.01

Linear (WIPRO)

-0.01
-0.02
-0.02
Return on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.513), return on NTPC is less
volatile than the return on NIFTY.

7. GRASIM

Calculation of beta value of GRASIM for period of one year


Date

dividend

Mar 2014

30

Average return
on
GRASIM
0.015888

Feb 2014

30

0.013199

-0.0005

Jan 2014

30

0.010967

-0.00562

Dec 2013

30

0.01357

0.001384

Nov 2013

30

0.012135

-0.00188

Oct 2013

30

0.013363

-0.00081

Sep 2013

30

0.01803

0.005077

Aug 2013

30

0.019441

-3.59E-05

July 2013

30

0.016085

0.001232

June 2013

30

0.017957

0.003414

May 2013

30

-0.00532

-0.00101

Apr 2013

30

0.00878

8.31E-05

Mar 2013

30

0.012336

0.002466

BETA calculation:
Cov (return on GRASIM, return on nifty)
Var (return on nifty)

= 6.58492E-06
= 7.40309E-06

6.58492E-06
Beta = __________________

7.40309E-06
= 0.89

GRAPH

Average return
on NIFTY

BETA

0.002875

0.88944

Calculation of beta value of GRASIM for period of one year

GRASIM
0.03
0.02
f(x)
0.02= 0.96x + 0.01
R = 0.18
GRASIM

0.01
Return on GRASIM

Linear (GRASIM)

0.01
0
-0.01 -0.01
0
-0.01

0.01

0.01

-0.01
Return on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.89), return on GRASIM is less
volatile than the return on NIFTY.

8. SAIL

Calculation of beta value of SAIL for period of one year


Date

dividend

Mar 2014

3.3

Average return
on
SAIL
0.024019

Feb 2014

3.3

0.018102

-0.0005

Jan 2014

3.3

0.011455

-0.00562

Dec 2013

3.3

0.018639

0.001384

Nov 2013

3.3

0.013203

-0.00188

Oct 2013

3.3

0.008118

-0.00081

Sep 2013

3.3

0.020849

0.005077

Aug 2013

3.3

0.013138

-3.59E-05

July 2013

3.3

0.020256

0.001232

June 2013

3.3

0.015415

0.003414

May 2013

3.3

0.013525

-0.00101

Apr 2013

3.3

0.006958

8.31E-05

Mar 2013

3.3

0.019873

0.002466

BETA calculation:
Cov (return on SAIL, return on nifty)

= 8.03265E-06

Var (return on nifty)

= 7.40309E-06
6.58492E-06

Beta = __________________

7.40309E-06
= 1.18

Average return
on NIFTY

BETA

0.002875

1.1754

GRAPH

Calculation of beta value of SAIL for period of one year

SAIL
0.03
0.03
0.02
f(x)
= 1.18x + 0.02
R = 0.39
0.02

Return on SAIL

SAIL
Linear (SAIL)

0.01
0.01
0
-0.01

-0.01

0.01

0.01

Return on NIFTY

INTERPRETATION:
Since the beta value is GREATER than 1(BETA=1.18), return on SAIL is more
volatile than the return on NIFTY.

9. L&T

Calculation of beta value of L&T for period of one year


Date

dividend

Average return
on L&T

Average return
on NIFTY

BETA
1.24115

Mar 2014

12.5

0.009292

0.002875

Feb 2014

12.5

0.006622

-0.0005

Jan 2014

12.5

-0.00259

-0.00562

Dec 2013

12.5

0.005181

0.001384

Nov 2013

12.5

0.002844

-0.00188

Oct 2013

12.5

0.004558

-0.00081

Sep 2013

12.5

0.012179

0.005077

Aug 2013

12.5

0.006959

-3.59E-05

July 2013

12.5

0.006829

0.001232

June 2013

12.5

0.01346

0.003414

May 2013

12.5

0.009367

-0.00101

Apr 2013

12.5

0.006688

8.31E-05

Mar 2013

12.5

0.009275

0.002466

BETA calculation:
Cov (return on L&T, return on nifty)

= 9.18876E-06

Var (return on nifty)

= 7.40309E-06
9.18876E-06

Beta = __________________

7.40309E-06
= 1.24

GRAPH

Calculation of beta value of L&T for period of one year

L&T
0.02
0.01
f(x)
= 1.34x + 0.01
0.01
R = 0.79
0.01
0.01
Return on L&T

L&T

0.01

Linear (L&T)

0
0
0
-0.01

-0.01

0.01

0.01

0
Return on NIFTY

INTERPRETATION:
Since the beta value is GREATER than 1 (BETA=1.24), return on L&T is
more volatile than the return on NIFTY.

10. CIPLA
Calculation of beta value of CIPLA for period of one year

Date

dividend

Average return
on CIPLA

Average return
on NIFTY

BETA
0.914027

Mar 2014

0.009155

0.002875

Feb 2014

0.001563

-0.0005

Jan 2014

-0.00021

-0.00562

Dec 2013

0.006237

0.001384

Nov 2013

0.004122

-0.00188

Oct 2013

0.010339

-0.00081

Sep 2013

0.009182

0.005077

Aug 2013

0.003076

-3.59E-05

July 2013

0.004778

0.001232

June 2013

0.00814

0.003414

May 2013

0.003574

-0.00101

Apr 2013

0.006732

8.31E-05

Mar 2013

0.009773

0.002466

BETA calculation:
Cov (return on CIPLA, return on nifty)
Var (return on nifty)

= 9.18876E-06
= 7.40309E-06

6.24611E-06
Beta = __________________

7.40309E-06
= 0.914

GRAPH

Calculation of beta value of CIPLA for period of one year

CIPLA
0.03
0.02
f(x) = 0.96x + 0.01
0.02
R = 0.18
0.01

CIPLA

Return on CIPLA

Linear (CIPLA)

0.01
0
-0.01 -0.01 0
-0.01

0.01 0.01

-0.01
REturn on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.91), return on CIPLA is less
volatile than the return on NIFTY.

11. SIEMENS
Calculation of beta value of SIEMENS for period of one year
Date

dividend

Average return
on SIEMENS

Average return
on NIFTY

BETA

Mar 2014

0.007477

0.002875

0.710962

Feb 2014

0.005868

-0.0005

Jan 2014

0.008877

-0.00562

Dec 2013

0.008671

0.001384

Nov 2013

0.00264

-0.00188

Oct 2013

0.00513

-0.00081

Sep 2013

0.01525

0.005077

Aug 2013

0.00654

-3.59E-05

July 2013

0.00589

0.001232

June 2013

0.01131

0.003414

May 2013

0.00755

-0.00101

Apr 2013

0.00516

8.31E-05

Mar 2013

0.01134

0.002466

BETA calculation:
Cov (return on CIPLA, return on nifty)

=4.858844E-06

Var (return on nifty)

= 7.40309E-06
4.858844E-06

Beta = __________________

7.40309E-06
= 0.71092

GRAPH

Calculation of beta value of SIEMENS for period of one year

SIEMENS
0.02
0.02
0.01
0.01
f(x) = 0.71x + 0.01
0.01
R = 0.34
0.01

Return on SIEMENS

SIEMENS
Linear (SIEMENS)

0.01
0
0
0
-0.01

0.01

Return on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.71), return on SIEMENS is
less volatile than the return on NIFTY.

12. BHEL

Calculation of beta value of BHEL for period of one year


Date

dividend

Average return
on BHEL

Average return
on NIFTY

BETA

Mar 2014

23.30

0.011872

0.002875

0.6597

Feb 2014

23.30

0.006309

-0.0005

Jan 2014

23.30

0.007714

-0.00562

Dec 2013

23.30

0.012614

0.001384

Nov 2013

23.30

0.004457

-0.00188

Oct 2013

23.30

0.006314

-0.00081

Sep 2013

23.30

0.010715

0.005077

Aug 2013

23.30

0.008489

-3.59E-05

July 2013

23.30

0.009855

0.001232

June 2013

23.30

0.01277

0.003414

May 2013

23.30

0.005697

-0.00101

Apr 2013

23.30

0.011074

8.31E-05

Mar 2013

23.30

0.008976

0.002466

BETA calculation:
Cov (return on BHEL, return on nifty)

= 4.5088E-06

Var (return on nifty)

= 7.40309E-06
4.858844E-06

Beta = __________________

7.40309E-06
= 0.6597

GRAPH

Calculation of beta value of BHEL for period of one year

BHEL
0.01
0.01
f(x) = 0.66x + 0.01
R = 0.42
0.01
0.01
Return on BHEL

BHEL
Linear (BHEL)

0.01
0
0
0
-0.01 -0.01

0.01 0.01

Return on NIFTY

INTERPRETATION:
Since the beta value is LESSER than 1(BETA=0.65), return on BHEL is less
volatile than the return on NIFTY.

FINDINGS
HINDALCO:

During the period of last 12 months (march 2013-march 2014),the highest return of
14.24% was obtained in October 2013 and lowest return 0f -10.91% was obtained in may

2013.
The average rate of return of HINDALCO for 12 months period was 2.56%.
Standard Deviation of returns of HINDALCO was 8.44.
BETA value of HINDALCO was 1.16

HINDALCO yield moderate returns for the last 12 months. Returns deviate on an average by
about 8% from the average rate of return of 2.56%.In future, average returns may be, between
2.36 to 2.76.
Since the beta value is GREATER than 1(BETA=1.16), return on HINDALCO is more volatile
than the return on NIFTY. So that investment in this share is high risky.
TATA STEEL:

During the period of last 12 months (march 2013-march 2014),the highest return of
16.48% was obtained in September 2013 and lowest return 0f -17.67% was obtained in

may 2013.
The average rate of return of TATA STEEL for 12 months period was 1.51%.
Standard deviation of returns of TATA STEEL was 8.94.
BETA value of TATA STEEL was 1.3

Returns deviate on an average by about 9% from the average rate of return of 1.51%. In future,
average returns may be, between 1.01 to 1.29.
Since the beta value is GREATER than 1(BETA=1.3), return on TATA STEEL is more volatile
than the return on NIFTY. So that investment in this share is high risky.

DLF:

During the period of last 13 months (march 2013-march 2014),the highest return of 10.99% was
obtained in July 2013 and lowest return 0f -11.86% was obtained in Nov 2013.

The average rate of return of DLF for 13 months period was -1.25%.
Standard Deviation of returns of DLF was 9.19.
BETA value of DLF was 1.4.

Returns deviate on an average by about 9% from the average rate of return of -1.25% .In futures,
average returns may go high because budget 2014 gives more importance to infrastructure sector.
Since the beta value is GREATER than 1(BETA=1.4), return on DLF is more volatile than the
return on NIFTY. So that investment in this share is highly risky.
BPCL:

During the period of last 12 months (march 2013-march 2014),the highest return of
18.62% was obtained in July 2013 and lowest return 0f -7.67% was obtained in JAN

2014.
The average rate of return of BPCL for 12 months period was 3.23%.
Standard Deviation of returns of BPCL was 8.09.
BETA value of BPCL was 0.41

The monthly rate of returns of BPCL shows a low degree of variability. Returns deviate on an
average by about 8% from the average rate of return of 3.23%.BPCL yield more returns among
12 companies.
Since the beta value is LESSER than 1(BETA=0.41), return on BPCL is less volatile than the
return on NIFTY. So that investment in this share is less risky.
NTPC:

During the period of last 12 months (march 2013-march 2014),the highest return of

7.04% was obtained in Sep 2013 and lowest return 0f -7.82% was obtained in NOV 2014.
The average rate of return of NTPC for 12 months period was 0.97%.
Standard Deviation of returns of NTPC was 4.38.
BETA value of NTPC was 0.37

The monthly rate of returns of NTPC shows a low degree of variability. Returns deviate on an
average by about 4% from the average rate of return of 0.97%.
Since the beta value is LESSER than 1(BETA=0.37), return on NTPC is less volatile than the
return on NIFTY. So that investment in this share is less risky.
WIPRO:

During the period of last 12 months (march 2013-march 2014),the highest return of
9.32% was obtained in Dec 2013 and lowest return 0f -21.51% was obtained in JUN

2014.
The average rate of return of WIPRO for 12 months period was -2.83%.
Standard Deviation of returns of WIPRO was 10.20.
BETA value of WIPRO was 0.53

The monthly rate of returns of WIPRO shows a moderate degree of variability. Returns deviate
on an average by about 10% from the average rate of return of -2.8%.
Since the beta value is LESSER than 1(BETA=0.53), return on WIPRO is less volatile than the
return on NIFTY. So that investment in this share is less risky.
GRASIM:

During the period of last 12 months (march 2013-march 2014),the highest return of
11.59% was obtained in Sep 2013 and lowest return 0f -25.24% was obtained in JUN

2014.
The average rate of return of GRASIM for 12 months period was 0.42%.
Standard Deviation of returns of GRASIM was 10.26.
BETA value of GRASIM was 0.88

The monthly rate of returns of GRASIM shows a moderate degree of variability. Returns deviate
on an average by about 10% from the average rate of return of 0.42%
Since the beta value is LESSER than 1(BETA=0.88), return on GRASIM is less volatile than the
return on NIFTY. So that investment in this share is moderate risky.
SAIL:

During the period of last 12 months (march 2013-march 2014),the highest return of
10.78% was obtained in oct 2013 and lowest return 0f -12.46% was obtained in NOV

2014.
The average rate of return of SAIL for 12 months period was -1.31%.
Standard deviation of returns of SAIL was 6.36.
BETA value of SAIL was 1.17

The Returns deviate on an average by about 6% from the average rate of return of -1.31%.
Since the beta value is GREATER than 1(BETA=1.71), return on SAIL is more volatile than the
return on NIFTY. So that investment in this share is highly risky.
L&T

During the period of last 12 months (march 2013-march 2014),the highest return of
9.45% was obtained in May 2013 and lowest return 0f -11.09% was obtained in JAN

2014
.The average rate of return of L&T for 12 months period was 0.74%.
Standard Deviation of returns of L&T was 6.42.
BETA value of L&T was 1.24

Returns deviate on an average by about 6% from the average rate of return of 0.74%.
Since the beta value is GREATER than 1(BETA=1.24), return on L&T is more volatile than the
return on NIFTY. So that investment in this share is highly risky.

CIPLA:

During the period of last 12 months (march 2013-march 2014),the highest return of
8.85% was obtained in OCT 2013 and lowest return 0f -10.76% was obtained in Feb

2014.
The average rate of return of CIPLA for 12 months period was 0.11%.
Standard Deviation of returns of CIPLA was 5.37.
BETA value of CIPLA was 0.91.

The monthly rate of returns of CIPLA shows a low degree of variability. Returns deviate on an
average by about 5% from the average rate of return of 0.11%.
Since the beta value is LESSER than 1(BETA=0.91), return on CIPLA is less volatile than the
return on NIFTY. So that investment in this share is less risky.
SIEMENS:

During the period of last 12 months (march 2013-march 2014),the highest return of
10.52% was obtained in Feb 2014 and lowest return 0f -5.65% was obtained in May

2013.
The average rate of return of SIEMENS for 12 months period was 2.23%.
Standard Deviation of returns of SIEMENS was 5.2.
BETA value of BHEL was 0.71.

The monthly rate of returns of SIEMENS shows a low degree of variability. Returns deviate on
an average by about 5% from the average rate of return of 2.23
Since the beta value is LESSER than 1(BETA=0.71), return on SIEMENS is less volatile than
the return on NIFTY. So that investment in this share is less risky.
BHEL:

During the period of last 12 months (march 2013-march 2014),the highest return of

5.08% was obtained in Apr 2013 and lowest return 0f -6.66% was obtained in Nov 2013.
The average rate of return of BHEL for 12 months period was -0.38%.
Standard deviation of returns of BHEL was 3.89.
BETA value of BHEL was 0.65.

The monthly rate of returns of BHEL shows a low degree of variability. Returns deviate on
an average by about 3% from the average rate of return of -0.38%.
Since the beta value is LESSER than 1(BETA=0.65), return on BHEL is less volatile than the
return on NIFTY. So that investment in this share is less risky.

SUGGESTIONS
In a fast growing economy country like India, everyone wants to earn maximum profit from
Indian Stock Market, and thats obvious. Everyone want to be rich as earlier as possible, and I
think stock market trading is best option to be. There are different sectors related to the Indian
growing Economy which provides excellent investment and money making opportunities.
In market buying the right stocks and a good company from the top sectors is not a science, but
is still not an easy game. With thousands of companies to invest and choose from, luck is not the
way to go. Any company you choose to invest, just make sure that they have an outstanding

business model, clean books, and low debt and rising business revenues with atleast 5 years
business growth plans and certain factors we need to considered.
The factors are,

Annual returns of companys share.


Risk incurred in that company.
Companies can face such risks as:

Critical raw materials becoming depleted


Rail transportation service being terminated
Manpower and/or skills shortages occurring

Moving average of company share.


Beta value of returns of company

I suggest that new investors gain profit if they involved in safety investment. For experienced
investors, both risky and safety investment is suitable. Before investing in stock market,
investors need to analysis many factors. Just investing in company without analyzing those
factors, gives them loss. Sometimes investors may gain profit by luck. But luck wont help you
at all time.

CONCLUSION
In India most of the industries require huge amount of investments. Funds are raised mostly
through the issue of share. An investor is satisfied from the reasonable return from investment in
shares. Besides the investors are motivated to buy the shares from the stock market either for
speculation or investments. Speculation involves higher risks to get return on the other hand
investment involves no such risks and returns will be fair.
An investor can succeed in his investment only when he is able to select the right shares. The
investors should keenly watch the situations like market price, economy, company progress,

returns, and the risk involved in a share before taking decision on a particular share. This study
made will help the investors know the behavior of share prices and thus can succeed.

REFERENCES
1. Kothari.C.R. Research Methods and Techniques, Wishwa Prakashan Publishing,
New Delhi, 1990.
2. Prasanna Chandra, Financial Management-Theory and Practice, Tata Mc Graw Hill,
International Edition, 5th edition, 2000.
3. IM pandey ,Financial management, ninth edition 2005.
4. NCFM capital market (Dealers module).
WEBSITES

1. www.nseindia.com
2. www.moneycontrol.com
3. www.equitymaster.com
4. www.stockmaster.com