A STUDY ON RISK AND RETURN ANALYSIS OF AXIS BANK

A report submitted to DR.HIMANSHU BAROT

REPORT BY:
PGDM 2019-2021
DIKSHIT MAHESHWARI (PG190036)
MITESH KUMAR (PG19065)

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 INDEX
Contents
1. Introduction
2. Analysis of Return
3. Risk Analysis And Interpretation
4. Average return
5. Characteristic Line And Interpretation
6. Conclusion

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3
  INTRODUCTION
Axis Bank is the fifth-largest Indian bank offering a wide assortment of financial products.
The bank has its head office in Mumbai, Maharashtra.
- 4,050 branches,
- 11,801 ATMs and
- 4,917 cash recyclers spread across the country as of 31 March 2019 and nine
international offices.
- employees over 55,000 people
- market capitalization of ₹1.31 trillion (US$18 billion) (as on 31 March 2018). 
It sells financial services to large and mid-size corporates, SME and retail businesses.
As of 30 June 2016, 30.81% shares are owned by promoters and promoter group (United
India Insurance Company Limited, Oriental Insurance Company Limited, National Insurance
Company Limited, New India Assurance Company Ltd, GIC, LIC and UTI). The remaining
69.19% shares are owned by mutual funds, FIIs, banks, insurance companies, corporate
bodies and individual investors among others.

It provides services for

I. Retail banking such as loans to individuals and small businesses and along with
liability products, card services, Internet banking,  ATM services, depository,
financial advisory services, and Non-resident Indian (NRI) services. It is a participant
in RBI's NEFT enabled participating banks list.
II. Corporate banking
Transaction banking: Formed in April 2015, TxB provides integrated products and services
to customers in areas of current accounts, cash management services, capital market services,
trade, foreign exchange and derivatives, cross-border trade and correspondent banking
services and tax collections on behalf of the Government and various State Governments in
India
Investment banking and trustee services: The bank provides investment banking and
trusteeship services through its owned subsidiaries. Axis Capital Limited provides investment
banking services relating to equity capital markets, institutional stock brokering besides
M&A advisory. Axis Trustee Services Limited is engaged in trusteeship activities, acting as
debenture trustee and as trustee to various securitization trusts.
III. International banking
The bank continues to offer corporate banking, trade finance, treasury and risk management
through the branches at Singapore, Hong Kong, DIFC, Shanghai and Colombo, and also
retail liability products from its branches at Hong Kong and Colombo. 
SUBSIDIARIES :
Axis Capital Ltd.was incorporated in India as a wholly owned subsidiary of the bank on 6
December 2005 and received its certificate of commencement of business on 2 May 2006.
Certain businesses of M/s. Enam Securities Pvt. Ltd. were merged with Axis Capital Ltd. as
part of a scheme and the following companies became direct subsidiaries of ACL:

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 1. Axis Securities Ltd. (formerly Enam Securities Direct Pvt. Ltd.)
2. Axis Finance Ltd. (formerly Enam Finance Pvt. Ltd.)
3. Axis Securities Europe Ltd. (formerly Enam Securities Europe Ltd.)
4. Enam International Ltd., UAE (voluntarily dissolved with effect from 24 August
2014)
TRADED AS :
BSE:532215
LSE: AXBC

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  ANALYSIS OF RETURN
share price∈closing−share price∈opening
Rate of return = share price ∈opening
Date Opening Price(Rs.) Closing Price(Rs.) Monthly Return (%) Growth%
31-Jul-17 517.4 519.8 0
31-Aug-17 504 500.35 -0.04 1.000
29-Sep-17 511.1 509.15 0.02 1.000
31-Oct-17 495 523.15 0.03 1.000
30-Nov-17 547.15 535.4 0.02 1.000
29-Dec-17 548.2 563.95 0.05 1.001
31-Jan-18 589.3 593.6 0.05 1.001
28-Feb-18 534 528.75 -0.11 0.999
28-Mar-18 512.9 510.5 -0.03 1.000
30-Apr-18 535.8 517.3 0.01 1.000
31-May-18 543 545.9 0.06 1.001
29-Jun-18 505.8 510.8 -0.06 0.999
31-Jul-18 582 550.4 0.08 1.001
31-Aug-18 649.5 649.25 0.18 1.002
28-Sep-18 598.5 613.25 -0.06 0.999
31-Oct-18 568.3 582.4 -0.05 0.999
30-Nov-18 633 625.75 0.07 1.001
31-Dec-18 630.4 619.9 -0.01 1.000
31-Jan-19 697.25 722.7 0.17 1.002
28-Feb-19 723.45 709.55 -0.02 1.000
29-Mar-19 777 777.25 0.10 1.001
30-Apr-19 759.95 766.85 -0.01 1.000
31-May-19 811 808.3 0.05 1.001
28-Jun-19 801.15 808.55 0.00 1.000
31-Jul-19 694 674.1 -0.17 0.998
30-Aug-19 664.9 663.9 -0.02 1.000
30-Sep-19 704.05 685 0.03 1.000
31-Oct-19 748 736.35 0.07 1.001
29-Nov-19 749.9 739.05 0.00 1.000
31-Dec-19 753.85 754.1 0.02 1.000
31-Jan-20 734.7 729.3 -0.03 0.997

Risk and return analysis:

Average return =0.01

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 900
800
700
600
500
400
300
200
100
0
-100 7 7 7 8 8 8 8 8 8 9 9 9 9 9 9 0
l-1 -1 -1 -1 r-1 -1 l- 1 -1 -1 -1 r-1 -1 l- 1 -1 -1 -2
- Ju S ep Nov -Jan Ma May -Ju S ep Nov -Jan Ma May -Ju S ep Nov -Jan
31 29- 30- 31 28- 31- 31 28- 30- 31 29- 31- 31 30- 29- 31

Closing Price(Rs.) Monthly Return (%) Growth%

Interpretation: The average return of Axis bank is 0.01 wherein the maximum
returns are in the third month i.e. 31-Jan-19.
➢ As we know Axis Bank is a part of NIFTY50 and as per above we can see
that Axis bank gives 0.01 average return and NIFTY50 gives 0.64 average
return. So, investment in Axis bank is less profitable to the investor as the
average returns are comparatively less than the average return of NIFTY50

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  RISK ANALYSIS
Standard Deviation: it is a statistical measurement in finance that, when applied to the
annual rate of return of an investment, shed light on the historical volatility of the investment.
The greater the standard deviation of securities, the greater the variance between each price
and the mean, which shows a larger price range.

AXIS BANK
Date Closing Price(Rs.) Monthly Return (%) Growth% Ri-RA (Ri-RA)^2
31-Jul-17 519.8 0
31-Aug-17 500.35 -0.04 1.000 -0.0512 0.0026
29-Sep-17 509.15 0.02 1.000 0.0038 0.0000
31-Oct-17 523.15 0.03 1.000 0.0137 0.0002
30-Nov-17 535.4 0.02 1.000 0.0096 0.0001
29-Dec-17 563.95 0.05 1.001 0.0395 0.0016
31-Jan-18 593.6 0.05 1.001 0.0388 0.0015
28-Feb-18 528.75 -0.11 0.999 -0.1231 0.0151
28-Mar-18 510.5 -0.03 1.000 -0.0483 0.0023
30-Apr-18 517.3 0.01 1.000 -0.0005 0.0000
31-May-18 545.9 0.06 1.001 0.0415 0.0017
29-Jun-18 510.8 -0.06 0.999 -0.0781 0.0061
31-Jul-18 550.4 0.08 1.001 0.0637 0.0041
31-Aug-18 649.25 0.18 1.002 0.1658 0.0275
28-Sep-18 613.25 -0.06 0.999 -0.0693 0.0048
31-Oct-18 582.4 -0.05 0.999 -0.0641 0.0041
30-Nov-18 625.75 0.07 1.001 0.0606 0.0037
31-Dec-18 619.9 -0.01 1.000 -0.0232 0.0005
31-Jan-19 722.7 0.17 1.002 0.1520 0.0231
28-Feb-19 709.55 -0.02 1.000 -0.0320 0.0010
29-Mar-19 777.25 0.10 1.001 0.0816 0.0067
30-Apr-19 766.85 -0.01 1.000 -0.0272 0.0007
31-May-19 808.3 0.05 1.001 0.0402 0.0016
28-Jun-19 808.55 0.00 1.000 -0.0135 0.0002
31-Jul-19 674.1 -0.17 0.998 -0.1801 0.0324
30-Aug-19 663.9 -0.02 1.000 -0.0289 0.0008
30-Sep-19 685 0.03 1.000 0.0180 0.0003
31-Oct-19 736.35 0.07 1.001 0.0611 0.0037
29-Nov-19 739.05 0.00 1.000 -0.0101 0.0001
31-Dec-19 754.1 0.02 1.000 0.0065 0.0000
31-Jan-20 729.3 -0.03 0.997 -0.0467 0.0022
TOTAL 0.1489

(Ri−Ra)2
Variance = ∑ n−1

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 = 0.1489/ 30-1
= 0.005134482

Standard Deviation = √ variance

= √0.0051344
= 0.0071

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  AVERAGE RETURN OF AXIS BANK AND NIFTY50:
N0. STOCK AVERAGE RETURN STANDARD DEVIATION
1 AXIS BANK 0.01 0.07
2 NIFTY 50 0.64 3.69

4 3.69
3.5

2.5

1.5

1
0.64
0.5
0.01 0.07
0
AVERAGE RETURN STANDARD DEVIATION

AXIS BANK NIFTY 50

Interpretation:
From the above table and graph it can be understood by considering both
risk and return factors that the returns are more and risk is less for BSE.
Therefore, it shows investor to invest in BSE for getting more returns and less risk.

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 CALCULATION OF CO-VARIANCES
CO-VARIANCE= COV.AB= (∑ [RA-RA] [RB-RB])/N
Where:
RA= Return on A
RB= Return on B
RA= Expected return on A
RB= Expected return on B
N= Number of securities
COVA, B= ∑(riA-RA) (riB-RB)/n-1
AXIS BANK & NIFTY 50

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 Date DEVIATIONS OF AXIS BANK DEVIATIONS OF NIFTY 50 COMBINED DEVIATION
31-Jul-17
31-Aug-17 -0.051 -2.473 0.127
29-Sep-17 0.004 -2.041 -0.008
31-Oct-17 0.014 8.743 0.120
30-Nov-17 0.010 -1.647 -0.016
29-Dec-17 0.040 4.656 0.184
31-Jan-18 0.039 7.388 0.286
28-Feb-18 -0.123 -7.593 0.934
28-Mar-18 -0.048 -5.657 0.273
30-Apr-18 0.000 9.684 -0.005
31-May-18 0.041 -0.047 -0.002
29-Jun-18 -0.078 -0.319 0.025
31-Jul-18 0.064 9.383 0.598
31-Aug-18 0.166 4.466 0.740
28-Sep-18 -0.069 -10.053 0.696
31-Oct-18 -0.064 -7.789 0.499
30-Nov-18 0.061 7.388 0.448
31-Dec-18 -0.023 -0.204 0.005
31-Jan-19 0.152 -0.455 -0.069
28-Feb-19 -0.032 -0.556 0.018
29-Mar-19 0.082 12.060 0.984
30-Apr-19 -0.027 1.673 -0.046
31-May-19 0.040 2.327 0.094
28-Jun-19 -0.014 -1.759 0.024
31-Jul-19 -0.180 -8.909 1.604
30-Aug-19 -0.029 -1.334 0.039
30-Sep-19 0.018 6.408 0.115
31-Oct-19 0.061 5.498 0.336
29-Nov-19 -0.010 2.354 -0.024
31-Dec-19 0.007 1.460 0.010
31-Jan-20 -0.047 -2.655 0.124
TOTAL 8.114

COVAB =8.114/30
=0.270466

BETA VALUE
Definition:
“The market risk of a security reflects its sensitivity to market movements. It is called
BETA.”
CONCEPT OF BETA:
I. It is a measure of movement of share price with the movement of market.
II. Beta is positive, if share price moves in the direction of the movement of market.

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III. Beta is negative, if share price moves opposite to the direction of market.
IV. Beta is important because it measures the risk of an investment that cannot be reduced
by diversification.
V. It does not measure the risk of an investment held on a stand-alone basis, but the
amount of risk the investment adds to an already-diversified portfolio.
VI. In the Capital Asset Pricing Model (CAPM), beta risk is the only kind of risk for
which investors should receive an expected return higher than the risk-free rate of
interest.
VII. Beta decay refers to the tendency for a company with a high beta coefficient (β>1) to
have its beta coefficient decline to the market beta. It is an example of regression
toward the mean.

• A common expression for beta is

β = Cov(ra,rb)
Var(rb)
Where,
Cov = Covariance
Var = Variance
Variance = ∑(R-R)^2 /n-1
= 0.1547/30-1
=0.00533
Standard Deviation = √variance
= √0.00533
= 0.0730

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 Date Closing Price(Rs.) Monthly Return (%) AVERAGE RETURN Ri-RA (Ri-RA)^2
31-Jul-17 519.8 0 0.01
31-Aug-17 500.35 -0.04 0.01 -0.0374 0.0014
29-Sep-17 509.15 0.02 0.01 0.0176 0.0003
31-Oct-17 523.15 0.03 0.01 0.0275 0.0008
30-Nov-17 535.4 0.02 0.01 0.0234 0.0005
29-Dec-17 563.95 0.05 0.01 0.0533 0.0028
31-Jan-18 593.6 0.05 0.01 0.0526 0.0028
28-Feb-18 528.75 -0.11 0.01 -0.1092 0.0119
28-Mar-18 510.5 -0.03 0.01 -0.0345 0.0012
30-Apr-18 517.3 0.01 0.01 0.0133 0.0002
31-May-18 545.9 0.06 0.01 0.0553 0.0031
29-Jun-18 510.8 -0.06 0.01 -0.0643 0.0041
31-Jul-18 550.4 0.08 0.01 0.0775 0.0060
31-Aug-18 649.25 0.18 0.01 0.1796 0.0323
28-Sep-18 613.25 -0.06 0.01 -0.0554 0.0031
31-Oct-18 582.4 -0.05 0.01 -0.0503 0.0025
30-Nov-18 625.75 0.07 0.01 0.0744 0.0055
31-Dec-18 619.9 -0.01 0.01 -0.0093 0.0001
31-Jan-19 722.7 0.17 0.01 0.1658 0.0275
28-Feb-19 709.55 -0.02 0.01 -0.0182 0.0003
29-Mar-19 777.25 0.10 0.01 0.0954 0.0091
30-Apr-19 766.85 -0.01 0.01 -0.0134 0.0002
31-May-19 808.3 0.05 0.01 0.0541 0.0029
28-Jun-19 808.55 0.00 0.01 0.0003 0.0000
31-Jul-19 674.1 -0.17 0.01 -0.1663 0.0277
30-Aug-19 663.9 -0.02 0.01 -0.0151 0.0002
30-Sep-19 685 0.03 0.01 0.0318 0.0010
31-Oct-19 736.35 0.07 0.01 0.0750 0.0056
29-Nov-19 739.05 0.00 0.01 0.0037 0.0000
31-Dec-19 754.1 0.02 0.01 0.0204 0.0004
31-Jan-20 729.3 -0.03 0.01 -0.0329 0.0011

Calculation of Beta Values:

β = COV AB /σ m^2

Where COVAB = 1/ n-1 (D1D2)

σm^2 = Variance nifty50

AXIS BANK:

β = COV NIFTY50, AXIS BANK / Variance NIFTY50

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 COV NIFTY50, AXIS BANK = 8.114 /30-1
=0.2797
Variance NIFTY50 = 0.2798

β = 0.2797/0.2798
=0.999642

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 ALPHA VALUE
I. Alpha is used in finance as a measure of performance, indicating when a strategy,
trader, or portfolio manager has managed to beat the market return over same period.
II. Alpha, often considered the active return on an investment, gauges the performance of
an investment against a market index or benchmark that is considered to represent the
market’s movement as a whole.
III. The excess return of an investment relative to the return of a benchmark index is the
investment’s alpha.
IV. Alpha may be positive or negative and is the result of active investing.
V. Beta on the other hand, can be earned through passive index investing.

❖ Alpha σ^2A = RA-PA(RM)

Where, RA = Arithmetic mean of Bharti Airtel PA = Coveriance RM = Arithmetic mean of

NIFTY50

= 0.94-1.0877(0.64) = 0.24314

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 CHARACTERISTIC LINE
Date A=0.0086+0.0081RM
31-Jul-17
31-Aug-17 -0.0042
29-Sep-17 -0.0020
31-Oct-17 0.0540
30-Nov-17 0.0001
29-Dec-17 0.0328
31-Jan-18 0.0470
28-Feb-18 -0.0308
28-Mar-18 -0.0208
30-Apr-18 0.0589
31-May-18 0.0084
29-Jun-18 0.0070
31-Jul-18 0.0574
31-Aug-18 0.0318
28-Sep-18 -0.0436
31-Oct-18 -0.0318
30-Nov-18 0.0470
31-Dec-18 0.0076
31-Jan-19 0.0063
28-Feb-19 0.0057
29-Mar-19 0.0713
30-Apr-19 0.0173
31-May-19 0.0207
28-Jun-19 -0.0005
31-Jul-19 -0.0376
30-Aug-19 0.0017
30-Sep-19 0.0419
31-Oct-19 0.0372
29-Nov-19 0.0208
31-Dec-19 0.0162
31-Jan-20 -0.0052

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 Charactristic Line
12.0000

10.0000

8.0000

6.0000

4.0000

2.0000

0.0000
0 2 4 6 8 10 12

A characteristic line is a straight line formed using regression analysis that summarizes a
particular security’s systematic risk and rate of return. The characteristic line is also known as
the security characteristic line (SCL).
Interpretation:
AXIS BANK seems to have perform well in stock market as we can see
its share prices has increased from Rs519 to Rs. 808, around 65% increase which is relatively
a good percentage increase when compared to other companies and even when compared to
NIFTY50.
In the above characteristic line, we can see volatility in the share price of the company.
In that volatility there were many reasons such as strict of policies by RBI to give loans
because of rising NPA’s and the effect of demonetisation.
AXIS BANK NIFTY 50
ARITHEMATIC MEAN 0.01 0.64
GEOMETRIC MEAN 0.004 0.57
STANDARD DEVIATION 0.07 3.69
VARIANCE 0.0051 34.41
COVARIANCE 0.2798 0.2798
ALPHA 0.0081
BETA 0.0086

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  CONCLUSION
The investors should consider the securities with maximum returns and minimum risk. Thus,
it is advisable to invest in AXIS BANK.
As we know there were 3 types of investors[customers]:
I. Risk Averse
II. Risk Neutral
III. Risk Lovers
 In this case we can conclude that this share is only for Risk Aversers
orbinvestors[customers] can gain by investing into AXIS BANK as it seems to be a
good choice for investing in stock market as it advantage return is higher than Nifty ,
even though its standard deviation do not support the same but other measures like
alpha and beta, which are coming out of 0.0081 and 0.0086 respectively.

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