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Risk Return Analysis
Risk Return Analysis
‘waiting’ for a reward. It involves the commitment of resources which have been
saved or put away from current consumption in the hope that some benefits will
accrue in future. The term ‘Investment’ does not appear to be as simple as it has been
defined. Investment has been further categorized by financial experts and economists.
It has also often been confused with the term speculation. The following discussion
differentiated from the financial and economic sense and how speculation differs from
term commitment.
RETURNS:
may be anticipated. The investor may expect capital gains from some investments
RISK:
In the investing world, the dictionary definition of risk is the chance that an
[1]
measured in statistics by Standard Deviation. Risk means you have the possibility of
SYSTEMATIC RISK:
The risk that affects the entire market, the factors are beyond the control of the
corporate and the investor. They cannot be avoided by the investor. It is sub-divided
into.
a) Market risk
1) Business risk
Internal risk
Fluctuations in sales
Personal management
[2]
2) Financial risk
returns and risk associated with different stocks listed on NSE Stock Exchange.
Returns and Risk are calculated to study the price movements in the stock market.
After doing this project one can make decisions regarding the investment in which
Stock Markets have existed in India for a very long time yet the professionals
in the field of finance talking negatively about these instruments. The reason why I
bring it up again is that it is very important to understand what the old system was
verse the new the old system were based on trust. They were closed group system and
hence deviation from truly competitive markets. Such closed groups are vulnerable to
problem when the demand of the economy reach beyond the capacity of the group and
group has expended without open and transparent criteria for entry, the net work of
trust gets disrupted, with the result that the system is disrupted by frauds.
On the other hand, the modern market place of Stock Markets, having well
developed risk management, transparent rules for entry and stringent regulation, is
faceless. That the old type system had to transform into a new is definitely clear they
[3]
have played a very important role in the past. In is merely that had to modern markets
The present study has been undertaken to observe the risk and returns
associated with few selected stocks. The scope of the study consists of 15 Company
stocks from different sectors like infrastructure, Pharmacy, Automobile, Power, Public
Sector and Energy etc., the scope of the study is confined to 50 Companies.
RESEARCH METHODOLOGY
This research study has been based on descriptive and explanative and
exploratory method. It describes securities market in India, and explains risk and
[4]
OBJECTIVES OF THE STUDY
various companies.
2. To observe the relation between Returns and Risk in the daily fluctuations in
prices.
analysis.
LIMITATIONS
2. This project analysis report may not be applicable in all equity markets.
3. Project took only 15 companies of NSE for equity analysis. It will not
4. The accuracy of the study is based on the accuracy of the data presented
5. Detailed study of topic was not possible due to limited size of the project.
[5]
INTRODUCTION
RETURNS
may be anticipated. The investor may expect capital gains from some investments
and rental income from house property. Return may take several forms.
Measurement of Returns
different financial assets. The most important characteristics of financial assets are
the size and variability of their future returns. Since the return on income varies,
various statistical techniques are used to measure it. Over the years, may methods
were adopted for quantifying returns. These are now categorized as traditional and
oldest technique of measurement. Yield can be both expected or estimated and actual
[6]
a) Estimated Yield = ----------------------------
Cash Income
Amount Invested
The yield that is calculated is for a particular period to find out the return on
the amount that is invested. For example, the annual yield on the Unit Trust
The ‘holding period yield’ is one of the new techniques in measuring returns.
The traditional methods did not provide a satisfactory returns measure. Some of the
gaps that were identified were: (a) that the traditional method does not distinguish
between divided and earnings portion that the traditional method does not distinguish
between divided and earnings portion that the company retains (Earnings Yield
Method), (b) Dividend Yield Method ignores the possibility of price appreciation on
retained earnings. It is useful only for those shareholders who wish to retain shares
always and are not interested in selling and anticipate that dividends are not going to
change; (c) the yield to maturity is useful only to those bond holders who will hold it
to maturity. All investors may not hold bonds till maturity for obvious reasons. These
methods are thus known to serve a limited purpose only. The better method measures
return through the holding period yield. This measure appears more rational and
[7]
clearly defined. It serves two purposes: (a) It measures that total return per rupee of
the original investment, and (b) through this method, comparisons can be drawn of
any asset’s expected return. An asset can be compared with other both historically
The holding period yield can be used for any asset. For example, returns from
savings accounts, stocks money, real estate and bonds can be compared through this
Income payments received during the year in Rs. + Capital change for the period in
Rs.
Dividend + (Pt-Po)
= --------------------------
Po
A look at this formula shows that the Holding Period Yield (HPY) considers
everything the investor receives over the specified period during which the asset is
held relative to what was originally invested in the assets. It also considers all income
payments; and positive and negative capital changes during the period. These are
then measured relative to the original investment in rupees. The HPY also measures
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past receipts of payments as well as for an unknown future. It is useful for comparing
Measure of Dispersion
investment. The greater the potential dispersion, the greater the risk. One of the
simplest methods in calculating dispersion is range. The range, however, has limited
importance. It is useful when there are small samples. It loses its effectiveness when
the number of values in a sample increases. The best and most effective method to
find out how the data scattered around a frequency distribution is to use the standard
deviation method. This method is related to the mean deviation and implies in this
case the means as a point of reference from which deviation occurs. The standard
deviation is based on mean and it cannot show any result without first finding out the
mean. The standard deviation is recognized by the following symbol. The standard
other words, standard deviation is the square root of the variance. This relationship
shows that they have similar statistical characteristics. Therefore, standard deviation
and variance are considered equivalent to each other as measures of risk. For a
There are 22 stock exchanges in India, the first being the Bombay Stock
Exchange (BSE), which began formal trading in 1875, making it one of the oldest in
Asia. Over the last few years, there has been a rapid change in the Indian securities
[9]
market, especially in the secondary market. Advanced technology and online-based
companies listed and total market capitalization, the Indian equity market is
considered large relative to the country’s stage of economic development. The number
of listed companies increased from 5,968 in March 1990 to about 10,000 by May
1998 and market capitalization has grown almost 11 times during the same period.
The debt market, however, is almost non-existent in India even though there
has been a large volume of Government bonds traded. Banks and financial institutions
have been holding a substantial part of these bonds as statutory liquidity requirement.
still in place. A primary auction market for Government securities has been created
and a primary dealer system was introduced in 1995. There are six authorized primary
dealers. Currently, there are 31 mutual funds, out of which 21 are in the private
sector. Mutual funds were opened to the private sector in 1992. Earlier, in 1987, banks
were allowed to enter this business, breaking the monopoly of the Unit Trust of India
(UTI), which maintains a dominant position. Before 1992, many factors obstructed
the expansion of equity trading. Fresh capital issues were controlled through the
Capital Issues Control Act. Trading practices were not transparent, and there was a
protection, several measures were enacted to improve the fairness of the capital
market. ‘The Securities and Exchange Board of India (SEBI) was established in
1988’. Despite the rules it set, problems continued to exist, including those relating to
disclosure criteria, lack of Brokers, capital adequacy, and poor regulation of merchant
bankers and underwriters. There have been significant reforms in the regulation of the
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securities market since 1992 in conjunction with overall economic and financial
reforms. In 1992, the SEBI Act was enacted giving SEBI statutory status as an apex
of market operations. India has seen a tremendous change in the secondary market for
equity. Its equity market will most likely be comparable with the world’s most
advanced secondary markets within a year or two. The key ingredients that underlie
No counterparty risk.
Among the processes that have already started and are soon to be fully
Before 1995, markets in India used open outcry, a trading process in which traders
shouted and hand signaled from within a pit. One major policy initiated by SEBI from
1993 involved the shift of all exchanges to screen-based trading, motivated primarily
by the need for greater transparency. The first exchange to be based on an open
electronic limit order book was the National Stock Exchange (NSE), which started
trading debt instruments in June 1994 and equity in November 1994. In March 1995,
BSE shifted from open outcry to a limit order book market. Currently, 17 of India’s
stock exchanges have adopted open electronic limit order. Before 1994, India’s stock
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Recent Developments and Policy Issues.
Financial industry did not have equal access to markets and was unable to
(Bombay). As a result, the prices in markets outside Mumbai were often different
from prices in Mumbai. These pricing errors limited order flow to these markets.
market has changed this situation. NSE has established satellite communications
which give all trading members of NSE equal access to the market. Similarly, BSE
and the Delhi Stock Exchange are both expanding the number of trading terminals
located all over the country. The arbitrages are eliminating pricing discrepancies
between markets. The Indian capital market still faces many challenges if it is to
The court system and legal mechanism should be enhanced to better protect small
information is a crucial public good that should be disclosed or made available to all
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participants to achieve market efficiency. SEBI should also monitor more closely
Thirdly, India may need further integration of the national capital market
through consolidation of stock exchanges. The trend all over the world is to
consolidate and merge existing stock exchanges. Not all of India’s 22 stock exchanges
may be able to justify their existence. There is a pressing need to develop a uniform
settlement cycle and common clearing system that will bring an end to unnecessary
Fourthly, the payment system has to be improved to better link the banking
and securities industries. India’s banking system has yet to come up with good
electronic funds transfer (EFT) solutions. EFT is important for problems such as
and facilitating foreign institutional investment. The capital market cannot thrive
alone; it has to be integrated with the other segments of the financial system. The
global trend is for the elimination of the traditional wall between banks and the
and a more competitive banking sector will help in the development of a sounder and
a more efficient capital market in India. Capital Market Reforms and Developments
Reforms in the Capital Market Over the last few years, SEBI has announced several
far-reaching reforms to promote the capital market and protect investor interests.
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automation of trading and post trade systems,
their jurisdiction through computer terminals. Thus, major stock exchanges in India
have started locating computer terminals in far-flung areas, while smaller regional
structure.
Online trading systems have been introduced in almost all stock exchanges.
Trading is much more transparent and quicker than in the past. Until the early 1990s,
the trading and settlement infrastructure of the Indian capital market was poor.
Trading on all stock exchanges was through open outcry, settlement systems were
The regulatory structure was fragmented and there was neither comprehensive
registration nor an apex body of regulation of the securities market. Stock exchanges
were run as “brokers clubs” as their management was largely composed of brokers.
There was no prohibition on insider trading, or fraudulent and unfair trade practices.
Since 1992, there has been intensified market reform, resulting in a big improvement
in securities trading, especially in the secondary market for equity. Most stock
depository has become operational for scrip less trading and the regulatory structure
has been overhauled with most of the powers for regulating the capital market vested
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with SEBI. The Indian capital market has experienced a process of structural
(FII’s) in 1992 and Indian companies were allowed to raise resources abroad through
(FCCBs). The primary and secondary segments of the capital market expanded
PRIMARY MARKET
Since 1991/92, the primary market has grown fast as a result of the removal
imposed by the Capital Issues Control Act. In 1991/92, Rs62.15 billion was raised in
the primary market. This figure rose to Rs276.21 billion in 1994/95. Since 1995/1996,
however, smaller amounts have been raised due to the overall downtrend in the
market and tighter entry barriers introduced by SEBI for investor protection .SEBI has
taken several measures to improve the integrity of the secondary market. Legislative
adequacy norms have been prescribed and are being enforced. A mark-to-market
margin and intraday trading limit have also been imposed. Further, the stock
exchanges have put in place circuit breakers, which are applied in times of excessive
volatility. The disclosure of short sales and long purchases is now required at the end
[15]
of the day to reduce price volatility and further enhance the integrity of the secondary
market.
Under the current clearing and settlement system, if an Indian investor buys
and subsequently sells the same number of shares of stock during a settlement period,
or sells and subsequently buys, it is not necessary to take or deliver the shares. The
difference between the selling and buying prices can be paid or received. In other
words, the squaring-off of the trading position during the same settlement period
investors are, however, not permitted to trade without delivery, since no delivery
transactions are limited only to individual investors. One of SEBI’s primary concerns
daily position. The intraday trading limit is the limit to a broker’s intraday trading
Each stock exchange may take any other measures to ensure the safety of the
market. BSE and NSE impose on members a more stringent daily margin, including
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one based on concentration of business. A daily mark-to-market margin is 100 percent
of the notional loss of the stockbroker for every stock, calculated as the difference
between buying or selling price and the closing price of that stock at the end of that
day. However, there is a threshold limit of 25 percent of the base minimum capital
plus additional capital kept with the stock exchange or Rs1 million, whichever is
lower. Until the notional loss exceeds the threshold limit, the margin is not payable.
guarantee from a scheduled commercial bank, on a net basis. It will be released on the
pay-in day for the settlement period. The margin money is held by the exchange for 6-
12 days. This cost the broker about 0.4-1.2 percent of the notional loss, assuming that
longer cost-free. Each broker’s trading volume during a day is not allowed to exceed
the intraday trading limit. This limit is 33.3 times the base minimum capital deposited
with the exchange on a gross basis, i.e., purchase plus sale. In the event of brokers
wishing to exceed this limit, they have to deposit additional capital with the exchange
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INDUSTRY PROFILE
These securities are issued by the government, semi-government bodies, public sector
undertakings and companies for borrowing funds and raising resources. Securities are
defined as any monetary claims (promissory notes or I.O.U) and also include shares,
debentures, bonds and etc., if these securities are marketable as in the case of the
government stock, they are transferable by endorsement and alike movable property.
They are tradable on the stock exchange. So, are the case shares of companies.
regulated by the Central Government and such trading can take place only in stock
exchanges recognized by the government under this Act. As referred to earlier there are
Stock Exchange, Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are
permanently recognized while a few are temporarily recognized. The above act has also
laid down that trading in approved contract should be done through registered members
of the exchange. As per the rules made under the above act, trading in securities
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permitted to be traded would be in the normal trading hours (10 A.M to 3.30 P.M) on
[19]
Contracts approved to be traded are the following:
Spot delivery deals are for deliveries of shares on the same day or the next day
Hand deliveries deals for delivering shares within a period of 7 to 14 days from
Delivery through clearing for delivering shares with in a period of two months
Special Delivery deals for delivering of shares for specified longer periods as
Except in those deals meant for delivery on spot basis, all the rest are to be put
(Regulation) rules of 1957 laid down the condition for such trading, the trading hours,
rules of trading, settlement of disputes, etc. as between the members and of the members
The origin of the Stock Exchanges in India can be traced back to the later half of
19th century. After the American Civil War (1860-61) due to the share mania of the
public, the number of brokers dealing in shares increased. The brokers organized an
informal association in Mumbai named “The Native Stock and Share Brokers
trade and commerce during the First World War and Second World War resulted in an
increase in the stock trading. The Growth of Stock Exchanges suffered a set after the
[20]
end of World War. Worldwide depression affected those most of the Stock Exchanges in
the early stages had a speculative nature of working without technical strength. After
independence, government took keen interest to regulate the speculative nature of stock
exchange working. In that direction, securities and Contract Regulation Act 1956 was
passed, this gave powers to Central Government to regulate the stock exchanges.
Mumbai, Chennai, Delhi, Hyderabad, Ahmedabad and Indore. The Bangalore Stock
Exchange was recognized in 1963. At present there are 23 Stock Exchanges. Till
recent past, floor trading took place in all Stock Exchanges. In the floor trading system,
the trade takes place through open outcry system during the official trading hours.
Trading posts are assigned for different securities whereby and sell activities of
securities took place. This system needs a face – to – face contact among the traders and
restricts the trading volume. The speed of the new information reflected on the prices
was rather than the investors. The Setting up of NSE and OTCEI (Over the counter
exchange of India with the screen based trading facility resulted in more and more Sock
exchanges turning towards the computer based trading. BSE introduced the screen
based trading system in 1995, which known as BOLT (Bombay on – line Trading.
(MANTRA) on October 7, 1996 Apart from Bombay Stock Exchanges have introduced
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FUNCTIONS OF STOCK EXCHANGE
Shares are traded on the stock exchanges, enabling the investors to buy and sell
securities. The prices may vary from transaction to transaction. A continuous trading
increases the liquidity or marketability of the shares traded on the stock exchanges.
Fixation of Prices:
Price is determined by the transactions that flow from investors demand and the
supplier’s preferences. Usually the traded prices are made known to the public. This
The rules, regulations and bylaws of the Stock Exchanges provide a measure of
A continuous market for shares provides a favorable climate for raising capital.
The negotiability and transferability of the securities, investors are willing to subscribe
to the initial public offering (IPO). This stimulates the capital formation.
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Dissemination of Information:
publish the share prices traded on their basis along with the volume traded. Directory of
Corporate Information is useful for the investor’s assessment regarding the corporate.
Performance Inducer:
The prices of stocks reflect the performance of the traded companies. This
makes the corporate more concerned with its public image and tries to maintain good
performance.
Self-regulating organization:
The Stock Exchanges monitor the integrity of the members, brokers, listed
companies and clients. Continuous internal audit safeguards the investors against unfair
trade practices. It settles the disputes between member brokers, investors and brokers.
This Securities Contract Regulation Act, 1956 and Securities and Exchange
board of India (SEB1) Act, 1992, provides a comprehensive legal framework. A 3-tier
regulatory structure comprising the ministry of finance, SEB1 and the Governing
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Ministry of finance
The Stock Exchange division of the Ministry of Finance has powers related to
the application of the provision of the SCR Act and licensing of dealers in the other
area. According to SEBI Act, The Ministry of Finance has the appellate and the
supervisory power over the SEBI. It has powered to grant recognition to the Stock
Exchange and regulation of their operations. Ministry of Finance has the power to
approve the appointments of executives chiefs and the nominations of the public
The Securities and Exchange Board of India even though established in the year
1988. Received statutory powers only on 30th January 1992. Under the SEBI Act, a
wide variety of powers are vested in the hands of SEBI. SEBI has the powers to regulate
the business of Stock Exchanges, other security and mutual funds. Registration and
regulation of market intermediaries are also carried out by SEBI. It has responsibility to
prohibit the fraudulent unfair trade practices and insider dealings. Takeovers are also
monitored by the SEBI has the multi pronged duty to promote the healthy growth of the
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The Governing Board of the Stock Exchange consists of elected members of
regulations of the Stock Exchange substantial powers to the executive director for
maintaining efficient and smooth day-to day functioning of Stock Exchange. The
Governing Board has the responsibility to maintain and orderly and well-regulated
market.
Six members of the Stock Exchange are elected by the members of the Stock
Exchange.
One third of the elected members retire at annual general meeting (AGM). The
retired member can offer himself for election if he is not elected for two consecutive
years. If a member serves in the governing body for two years consecutively, he should
The members of the governing body elect the president and vice-president. It needs to
approval from the Central Government or the Board. The office tenure for the president
and vice-president is on year. They can offer themselves for re-election, if they have not
held for two consecutive years. In that case they can offer themselves for re-election
[25]
NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE) of India became operational in the capital
market segment on third November 1994 in Mumbai. The genesis of the NSE lies in the
recommendations of the pherwani committee (1991). Apart from the NSE. It had
recommended for the establishment of National Stock market System also. The
committee pointed out some major defects in the Indian stock market.
Outdated settlement system that are inadequate to cater to the growing volume,
leading to delays.
Lack of single market due to the inability of various stock exchanges to function
instruments
To ensure equal access investors all over the country through appropriate
communication network.
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To provide a fair, efficient and transparent securities market to investors using an
Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda. Canara
Bank, Corporation Bank, Indian Bank, Oriental Bank of Commerce. Union Bank of
India, Punjab National Bank, Infrastructure Leasing and Financial Services, Stock
Holding Corporation of India and SBE capital market are the promoters of NSE.
MEMBERSHIP
consisting of experienced people from the industry to assess the applicant’s capability to
separately to Wholesale Debt Market (WDM) segment and the capital market segment.
Only corporate members are admitted on the debt market segment whereas individuals
and firms are also eligible on the capital market segment. Eligibility criteria for trading
companies
such other
The applicant must be engaged solely in the business of securities and must not
The securities market achieves one of the most important functions of channeling
productive resources. Hence in the broader context the people who save and investors
who invest focus more towards the economy’s abilities to invest and save
respectively. This enhances savings and investments in the economy, the two pillars
for economic growth. The Indian Capital Market has come a long way in this process
and with a strong regulator it has been able to usher an era of a modern capital market
regime. The past decade in many ways has been remarkable for securities market in
India. It has grown exponentially as measured in terms of amount raised from the
market, the number of listed stocks, market capitalization, trading volumes and
turnover on stock exchanges, and investor population. The market has witnessed
Three main sets of entities depend on securities market- the corporate, the
government & households. While the corporate and governments raise resources from
the securities market to meet their obligations, the households invest their savings in
securities.
[28]
The securities market comprises two segments- primary market (new issues,
offer for sale) & secondary market (trading of stocks). There are two major types of
issuers who issue securities. The corporate entities issue mainly debt and equity
instruments (shares, debentures, etc.), while the governments (central and state
governments) issue debt securities (dated Securities, treasury bills). The two major
exchanges, namely the NSE and the BSE provide trading of securities.
a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop
b) The Companies Act, 1956, which sets out the code of conduct for the
c) The Securities Contracts (Regulation) Act, 1956, read with the Securities
d) The Depositories Act, 1996 which provides for electronic maintenance and
Regulators
SEBI is the primary regulator of the Securities Market and the entities
operating therein. The SEBI Act and the Depositories Act are mostly administered by
SEBI. The rules under the securities laws are framed by government and regulations
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by SEBI. All these are administered by SEBI. The powers under the Companies Act
Nifty 50
The 50 stocks that were most favored by institutional investors in the 1960s
and 1970s. Companies in this group were usually characterized by consistent earnings
growth and high P/E ratios. The Nifty-50 stocks got their notoriety in the bull markets
of the 1960s and early 1970s. They became known as "one-decision" stocks because
However, part of this list included companies that have been troubled in the last
Nifty Junior
The CNX Nifty Junior is an index for companies on the National Stock
traded value of all stocks on the National Stock Exchange of India. The CNX Nifty
Junior is owned and operated by India Index Services and Products Ltd. It is quoted
NSMIDCP.
The CNX Nifty Junior and the S&P CNX Nifty represent the 100 most liquid
commodities traded on the National Stock Exchange of India. Together, they form a
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disjoint set; that is to say, no one company can be listed on both indices
simultaneously.
Equity
On the balance sheet, the amount of the funds contributed by the owners (the
stockholders) plus the retained earnings (or losses). Also referred to as "shareholder's
equity”. In the context of margin trading, the value of securities in a margin account
minus what has been borrowed from the brokerage. In the context of real estate, the
difference between the current market value of the property and the amount the owner
still owes on the mortgage. Thus, it is the amount, if any; the owner would receive
Equity is a term whose meaning depends very much on the context. In general,
you can think of equity as ownership in any asset after all debts associated with that
asset are paid off. For example, a car or house with no outstanding debt is considered
the owner's equity since he or she can readily sell the items for cash. Stocks are equity
because they represent ownership of a company, whereas bonds are classified as debt
Market Value
The current quoted price at which investors buy or sell a share of common
stock or a bond at a given time. Also known as "market price” The market
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capitalization plus the market value of debt. Sometimes referred to as "total market
value".
In the context of securities, market value is often different from book value
because the market takes into account future growth potential. Most investors who use
fundamental analysis to pick stocks look at a company's market value and then
Stock
claim on part of the corporation’s assets and earnings. There are two main types of
stock: common and preferred. Common stock usually entitles the owner to vote at
shareholders' meetings and to receive dividends. Preferred stock generally does not
have voting rights, but has a higher claim on assets and earnings than the common
shares. For example, owners of preferred stock receive dividends before common
shareholders and have priority in the event that a company goes. Bankrupt and is
number of outstanding shares. For example, if a company has 1,000 shares of stock
outstanding and one person owns 100 shares, that person would own and have. Claim
to 10% of the company’s assets Stocks are the foundation of nearly every portfolio.
Historically, they have outperformed most other investments over the long run.
[32]
Shareholder
Shareholders are the owners of a company. They have the potential to profit if the
company does well, but that comes with the potential to lose if the company does
poorly.
Share
shares in a business does not mean that the shareholder has direct control over the
equal distribution in any profits, if any are declared in the form of dividends. The two
In the past, shareholders received a physical paper stock certificate that indicated that
they owned "x" shares in a company. Today, brokerages have electronic records that
show ownership details. Owning a paperless share makes conducting trades a simpler
and more streamlined process, which is a far cry from the days were stock certificates
are often used to refer to the stock of a corporation, shares can also
[33]
Risk- Risk is defined as uncertainty in outcomes
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. It is
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
Stock Option
A privilege, sold by one party to another, that gives the buyer the right, but not
the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a.
American options can be exercised anytime between the date of purchase and the
expiration date. European options may only be redeemed at the expiration date. Most
Security
Examples of a security include a note, stock, preferred share, bond, debenture, option,
[34]
Closing Price
The final price at which a security is traded on a given trading day. The
closing price represents the most up-to-date valuation of a security until trading
INTRODUCTION(CP)
INDIA BULLS is India’s leading Financial, Real Estate and Power Company
with a wide presence throughout India. They ensure convenience and reliability in all
their products and services. INDIA BULLS has over 640 branches all over India. The
customers of INDIA BULLS are more than 4,50,000 which covers from a wide range
services, research & advisory services, consumer secured & unsecured credit, loan
against shares and mortgage & housing finance. The company employs around 4000
Relationship managers who help the clients to satisfy their customized financial goals.
INDIA BULLS entered the Real Estate business in the year 2005 with its group of
companies. Large scale projects worth several hundred million dollars are evaluated
by them.
INDIA BULLS Financial Services Ltd is listed on the National Stock Exchange
(NSE), Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The
2006). Consolidated net worth of the group is around USD 700 million. INDIA
BULLS and its group companies have attracted USD 500 million of equity capital in
Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of
[35]
INDIA BULLS are the largest financial institutions of the world such as Fidelity
Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Year 2000-01:
One of India’s first trading platforms was set up by INDIA BULLS Financial Services
Year 2001-03:
The service offered by INDIA BULLS was increased to include Equity, F&O,
Year 2003-04:
In this particular year INDIA BULLS ventured into Distribution and Commodities
Trading business.
Year 2004-05:
This was one of the most important years in the history of INDIA BULLS. In
this year:
INDIA BULLS came out with its initial public offer (IPO) in September 2004.
[36]
INDIA BULLS entered the Indian Real Estate market and became the first
Year 2005-06:
In this year the company acquired over 115 acres of land in Sonepat for
residential home site development. The world renowned investment banks like Merrill
Lynch and Goldman Sachs increased their shareholding in INDIA BULLS. It also
became a market leader in securities brokerage industry, with around 31% share in
Online Trading. The world’s largest hedge fund, Farallon Capital and its affiliates
committed Rs. 2000 million for INDIA BULLS subsidiaries Viz. INDIA BULLS
Credit Services Ltd. and INDIA BULLS Housing Finance Ltd. In the same year, the
Steel Tycoon Mr. L N Mittal promoted LNM India Internet venture Ltd. acquired
Year 2006-07:
In this year, INDIA BULLS Financial Services Ltd. was included in the
Financial Services Ltd. was benefited with the Farallon Capital agreeing to invest Rs.
6,440 million in it. The company also received an “in principle approval” from
Maharashtra. INDIA BULLS Financial Services Ltd acquired 100% of the equity
[37]
share capital of Noble Realtors Pvt. Ltd. Noble Realtors is a Company engaged in the
business of construction and development of real estate projects. INDIA BULLS Real
Estate Business was demerged to become a separate entity called INDIA BULLS Real
Estate Ltd. The Board of INDIA BULLS Financial Services Ltd., Resolved to
Amalgamate INDIA BULLS Credit Services Ltd and demerge INDIA BULLS
Securities Limited.
Year 2008-09:
BULLS forward and are expected to continue to power the rise of this conglomerate.
INDIA BULLS financial services limited has recently signed a joint venture
agreement with sogecap, the insurance arm of Societe Generale (SocGen) for its
At the same time it has also signed a Memorandum of understanding with MMTC.
On the asset management front, the company has received formal approval
INDIA BULLS enter in to Public issue for his INDIA BULLS power Ltd.
Sameer Gehlaut will have a 23.0% stake in the company post the IPO
[38]
Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and 10.1%
respectively.
All the three promoters of the company are engineering graduates while Saurabh
Sector
Since INDIA BULLS derives most of its revenues from the brokerage
business, its fortunes are very much dependent on the Performance of the capital
The Indian equity markets have grown from strength to strength in the last
decade with combined daily volumes of all segments on the BSE and the NSE
Total shareholders in the country are over 20 m (2% of population) and this is
However, if one were to compare the percentage of all households in India that
are invested in the stock markets, it is only about 1.9% as compared to an estimated
US. This highlights the long-term potential for the sector. to apply
The Team:
INDIA BULLS Securities Ltd, main strength lies in its formidable team. This
team comprising highly qualified and experienced personnel has been responsible for
[39]
the overall management of the company and has provided direction in diverse areas of
Regional Manager
Dashmeet Singh
Branch Manager
Senior Sales Manager
Sujeet Roy Chowdary
RM/SRM
Back Office Local Compliance Satish Kumar
Executive Officer
Ifran Khan Chary S
ARM
Raja
Dealer
Badri Nath
[40]
Vision statement
Mission statement
Corporate action
[41]
INDIA BULLS Capital Services Ltd.
INDIA BULLS Securities Ltd is listed on the National Stock Exchange (NSE) and
the Bombay Stock Exchange (BSE) and its global depository shares are listed on the
estimated 3% in FY03. INDIA BULLS currently has almost 20% market share of
volumes in the Internet trading space. The table below indicates the growth in
volumes of the Internet trading segment on the NSE over the last few years. The
decline in Internet charges, convenience of usage and cost advantage. To put things in
Advisory services:
INDIA BULLS is also into mutual fund and insurance advisory businesses.
Though this field is extremely competitive and requires significant research skills,
these are highly profitable business segments. Though these businesses currently
levels of mutual funds and insurance in the country, prospects are promising.
INDIA BULLS has set aggressive targets to expand its business in the offline
another 75 branches by the end of calendar year 2009 (150 in total). The company has
[43]
also indicated its intent to acquire strategic stake in other companies towards growing
Products provided
Power INDIA BULLS An online trading system designed for the high-
volume trader. The platform provides enhanced trade information and executes orders
a) SME finance
b) Mortgage loans
Divisions
[44]
Institutional Equity Broking Division
Retail Offerings:
SERVICES
[45]
An online trading system designed for the high-volume trader. The platform provides
trading platform.
1) Equities
2) Commodities
3) Wholesale debts
5) Depository services
8) Depository Services
9) Payment Gateway
a) HDFC BANK,
[46]
b) ICICI BANK,
c) IDBI BANK,
d) CITI BANK.
Company Achievements:
The INDIA BULLS Group is one of the top fifteen conglomerates in the
Financial Services stock is the best performing stock in the MSCI Index – the
global benchmark for equity investments. INDIA BULLS Real Estate Limited
P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for
BQ1.
In December 2007, INDIA BULLS acquired Pyramid Retail including
outlets
FINANCIAL POSITION
[47]
Mar '06 Mar '07 Dec '07 Mar '08 Mar '09
Sources Of Funds 12 mths 12 mths 9 mths 12 mths 12 mths
The INDIA BULLS Group is one of the top fifteen conglomerates in the
(US$ 6.25 billion) while group revenues have grown at a cumulative annual rate of
over 100% to now reach Rs. 3100 crore (US$ 775 million) and the group profit has
surged to over Rs. 1200 crore (US$ 300 million). Its companies, listed in important
distributed over Rs. 700 crore (US$ 175 million) as dividend in the year 2008.
INDIA BULLS Financial Services Limited was accorded the highest rating
P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan
receivables securitization while INDIA BULLS Securities Limited is the only broker
outlets INDIA BULLS’ growth has been nothing short of stupendous. In less than
eight years since the company was first registered, it has grown from just five
employees to 21,000 and from one office to 600 across the country. The INDIA
BULLS Financial Services stock is the best performing stock in the MSCI Index – the
A person who bought INDIA BULLS shares in the IPO at Rs. 19 (US$ 0.48)
in September 2004 has been rewarded almost 100 times in three and a half years – a
feat unparalleled in the history of Indian capital markets. INDIA BULLS Real Estate
Limited partnered Farallon Capital Management LLC of the US to bring the first
[49]
In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh
Mittal acquired Orbis,a Delhi based stock broking company. Young entrepreneur
Sameer Gehlaut established INDIA BULLS in 2000, after acquiring orbis Securities,
a stock brokerage company in Delhi. The group started its operations from a small
office near Hauz Khas bus terminal in Delhi.The office had a tin roof and two
computers. The idea of leveraging technology for trading stocks led to the creation of
INDIA BULLS Incorporated on 10th January 2000, it was converted into a public
Its original idea of leveraging technology bore fruit when INDIA BULLS was
The company had achieved the distinction of becoming only the second
brokerage firm in India to be granted this consent. The challenges facing it were
immense – not least of all the mind set of investors who were called to make the big
leap from traditional stock trading to a completely online interface. Having overcome
this resistance, the company later expanded its service portfolio to include equity,
commodity trading. It successfully floated its IPO in September 2004 and in the same
year entered the consumer finance segment. Real estate, the new sunrise industry, was
the next frontier for INDIA BULLS. In 2004/05, it entered this sector. But it wasn’t
[50]
INDIA BULLS acquired Pyramid Retail In 2007 and marked its presence in the
Brand Values
companies in India and enjoys strong brand recognition and customer acceptance.
The company attributes its dominant position in the brokerage industry to the
preferential status it enjoys with investors Coupled with its forays into various
segments; the Group believes that the bulk of its brand story is yet to be written.
Indeed, when a case study on India’s youngest brands which have had a profound
impact on the economy is crafted, INDIA BULLS will feature prominently in it.
Recent Developments
BULLS forward and are expected to continue to power the rise of this conglomerate.
INDIA BULLS Financial Services Limited has recently signed a joint venture
agreement with Sogecap, the insurance arm of Societe Generale (SocGen) for its
On the asset management front, the company has received formal approval
[51]
Following is the list of our Board Members as on November 4, 2009
DATA ANALYSIS
ABB RETURNS FOR THE YEAR 2009
[52]
September 764.95 784.45 0.025491862 0.054568 -0.02907614 0.000845422
October 785.1 769.55 -0.01980639 0.054568 -0.07437439 0.00553155
November 745.35 741.05 -0.0057691 0.054568 -0.0603371 0.003640566
December 749.4 767.1 0.023618895 0.054568 -0.0309491 0.000957847
Total 0.654813979 0.218224232
Standard Deviation 0.134853
BHARATI AIRTEL RETURNS FOR THE YEAR 2009
[54]
September 2139.95 2306.4 0.077782191 0.1459 -0.06811781 0.004640036
October 2330 2206.2 -0.05313305 0.1459 -0.19903305 0.039614154
November 2203 2379.35 0.080049932 0.1459 -0.06585007 0.004336231
December 2427 2601.1 0.071734652 0.1459 -0.07416535 0.005500499
Total 0.875136926 0.11903189
Standard Deviation 0.09959580
M&M RETURNS FOR THE YEAR 2009
[55]
February 1290 1266.05 -0.01856589 0.00723 -0.02579589 0.000665428
March 1228.7 1524.75 0.240945715 0.00723 0.233715715 0.054623035
April 1523 1806.25 0.185981615 0.00723 0.178751615 0.03195214
May 1851 2271.9 0.2273906 0.00723 0.2201606 0.04847069
June 2330 2023.4 -0.13158798 0.00723 -0.13881798 0.019270432
July 2029.9 1955.4 -0.03670132 0.00723 -0.04393132 0.00192996
August 1968.9 2005.1 0.018385901 0.00723 0.011155901 0.000124454
September 2024.8 2201.65 0.08734196 0.00723 0.08011196 0.006417926
October 2199.9 1931.15 -0.12216464 0.00723 -0.12939464 0.016742974
November 1920.05 1063.5 -0.44610817 0.00723 -0.45333817 0.2055155
December 1075 1090.55 0.014465116 0.00723 0.007235116 5.23469E-05
Total 0.086802254 0.389387646
Standard Deviation 0.180136
[58]
TABLE-1
SELECTED COMPANIES AVG RISK & AVG RETURN FOR THE YEAR 2005
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.046 0.077
2 BHARATI AIRTEL 0.050 0.108
3 BHEL 0.024 0.114
4 CIPLA -0.037 0.264
5 HCLTECH 0.003 0.069
6 INFOSYS 0.023 0.063
7 M&M 0.020 0.055
8 ONGC -0.001 0.086
9 REL 0.006 0.157
10 SATYAM 0.013 0.085
11 SBI 0.010 0.107
12 TATA MOTORS 0.012 0.077
13 TATA TEA 0.019 0.077
14 WIPRO -0.034 0.202
15 ZEEL 0.016 0.065
INTERPRETRATION:
CIPLA and WIPRO are in loss and risk is more, ABB is showing less risk compare to
other companies in 2005
TABLE-2
SELECTED COMPANIES AVG. RISK & AVG. RETURNS
[59]
FOR THE YEAR 2006
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.055 0.089
2 BHARATI AIRTEL 0.006 0.093
3 BHEL 0.049 0.113
4 CIPLA 0.049 0.128
5 HCLTECH 0.037 0.096
6 INFOSYS 0.029 0.077
7 M&M 0.044 0.110
8 ONGC 0.030 0.080
9 REL 0.004 0.087
10 SATYAM 0.048 0.048
11 SBI 0.030 0.096
12 TATA MOTORS 0.008 0.100
13 TATA TEA 0.051 0.088
14 WIPRO -0.045 0.199
15 ZEEL -0.011 0.108
INTERPRETATION:
WIPRO and ZEEL are in loss and risk is more, ABB earned more returns than other
companies and risk is less compare to other companies in the year 2006.
TABLE-3
SELECTED COMPANIES AVG. RISK & AVG. RETURN
FOR THE YEAR 2007
[60]
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.057 0.150
2 BHARATI AIRTEL 0.004 0.054
3 BHEL 0.035 0.108
4 CIPLA -0.010 0.208
5 HCLTECH 0.018 0.089
6 INFOSYS 0.022 0.177
7 M&M 0.047 0.059
8 ONGC -0.009 0.113
9 REL -0.006 0.073
10 SATYAM -0.022 0.150
11 SBI -0.024 0.189
12 TATA MOTORS 0.091 0.264
13 TATA TEA -0.017 0.073
14 WIPRO 0.029 0.084
15 ZEEL 0.053 0.139
INTERPRETATION:
SATYAM, SBI earned more, loss risk is more. CIPLA, ONGC and TATA TEA
also earned loss and risk is high. TATA MOTORS returns are high compare to other
companies in the year 2006.
TABLE-4
SELECTED COMPANIES AVG. RISK & AVG. RETURN
FOR THE YEAR 2008
S.No. Name of the company Avg.Returns Avg.Risk
[61]
1 ABB -0.028 0.239
2 BHARATI AIRTEL 0.050 0.044
3 BHEL 0.043 0.191
4 CIPLA -0.014 0.072
5 HCLTECH -0.032 0.171
6 INFOSYS -0.021 0.065
7 M&M -0.003 0.066
8 ONGC 0.035 0.102
9 REL 0.128 0.177
10 SATYAM -0.010 0.089
11 SBI 0.062 0.108
12 TATA MOTORS -0.005 0.075
13 TATA TEA 0.025 0.126
14 WIPRO -0.015 0.057
15 ZEEL 0.027 0.123
INTERPRETATION:
ABB, HCL earned more loss CIPLA, INFOSYS, SATYAM, WIPRO, M&M also
earned loss risk is high. AIRTEL earned high returns and risk is less compare to other
companies in the year 2008
TABLE-5
[62]
S.No. Name of the company Avg.Returns Avg.Risk
1 ABB 0.055 0.13485
2 BHARATI AIRTEL -0.050 0.17806
3 BHEL 0.050 0.08047
4 CIPLA 0.053 0.06948
5 HCLTECH 0.114 0.13585
6 INFOSYS 0.146 0.09959
7 M&M 0.118 0.11629
8 ONGC 0.639 0.69941
9 REL 0.007 0.18014
10 SATYAM 0.048 0.29041
11 SBI 0.046 0.15669
12 TATA MOTORS 0.149 0.17736
13 TATA TEA 0.034 0.06990
14 WIPRO 0.101 0.12553
15 ZEEL 0.051 0.14631
INTERPRETATION:
ABB, Dr.REDDY’S and INFOSYS are in huge losses. NALCO earned high returns
and risk is less compare to other companies in the year 2008.
[63]
NSE INDEX
FINDINGS
[64]
After the data is analyzed the following facts have been observed.
2005: From risk-return analysis of 2005, it is found that risk of all companies are
higher than their returns, but in comparison returns of ABB and BHARTHI
AIRTEL has higher, where as CIPLA and WIPRO has negative returns.
2006: From the analysis, the risk of all companies is higher than their returns
TEA is higher, WIPRO continued its negative returns along with ZEEL.
2007: From the analysis, the M&M is performing better than other companies. In this
year most of the companies has negative returns. Satyam in particular has
RELIANCE industries. In this year total software industry is not doing well
because of financial crisis in USA, followed by high inflation rate. In this year
2009: From the analysis, total software industry having started recovering, so their
stocks were going along with their risk. This year was good as all the
companies are doing well. TATA Motors is also another stock which is
performing well, this is due to launch of TATA NANO (world’s cheapest car)
Suggestions
[65]
After observing the facts found out after the analysis and interpretations the
1. When there is more risk, the return will also be highs but this does not hold in all
3. The sentiments and emotions sometimes play a vital role in causing fluctuations in the
4. When markets are sliding down steeply, the investors will not be protected against the
risk of investment. Therefore it is not advisable to invest when the markets are very
volatile.
5. Always it is felt that market position never stays for a long time. In this opinion
Bullish and Bearish markets end after some time. Therefore one can invest the time
of Bearish and soon after they reach bullish trend they can sell them off.
CONCLUSION
[66]
The present project work has been undertaken to study the risk-return
relationship of individual securities as well as nifty index to observe whether the stock
prices have any relationship with risk and return. As this project work is done by
studying 15 individual stocks of nifty and nifty index, there is much scope for the
As the economy is fluctuations very badly, the stock prices are affected by
these fluctuations and the market has become so volatile. In this situation investors
should be very careful. The firm which is dealing the trading of share market should
[67]
BIBLIOGRAPHY
Investing management
- By Puthi Sing.
- By Punithvathy Pandiyam
NSEindia.com
Investopedia.com
Glossary.reuters.com
Capitalmarket.com
Answers.com
[68]