THE EFFECT OF CHANGES IN CREDIT RATINGS ON EQUITY

RETURNS

A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor of Management Studies

Under the Faculty of Commerce

By

PRATIK TIWARI

Under the Guidance of

Dr. ANIL R. CHOUGULE

MA, NET, M. PHIL, PH.D.

SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS

B ROAD, CHURCHGATE, MUMBAI-400020.

Academic Year

2019-2020
THE EFFECT OF CHANGES IN CREDIT RATINGS ON EQUITY
RETURNS

A Project Submitted to

University of Mumbai for partial completion of the degree of

Bachelor of Management Studies

Under the Faculty of Commerce

By

PRATIK TIWARI

Under the Guidance of

Dr. ANIL R. CHOUGULE

MA, NET, M. PHIL, PH.D.

SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS

B ROAD, CHURCHGATE, MUMBAI-400020.

Academic Year

2019-2020
 CERTIFICATE

This is to certify that Mr. PRATIK TIWARI has worked and duly completed his
Project Work for the degree of Bachelor of Management Studies under the Faculty
of Commerce in the subject of FINANCE and his project is entitled, “THE
EFFECT OF CHANGES IN CREDIT RATINGS ON EQUITY RETURNS”
under my supervision.

I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree or
Diploma of any University.

It is his own work and facts reported by his personal feelings and investigations.

Dr. ANIL R. CHOUGULE

Project Guide

Date of Submission:
 DECLARATION

I the undersigned Mr. PRATIK TIWARI here by, declare that the work
embodied in this project work titled “THE EFFECT OF CHANGES IN
CREDIT RATINGS ON EQUITY RETURNS”, forms my own contribution to
the research work carried out under the guidance of Dr. ANIL R. CHOUGULE is
a result of my own research work and has not been previously submitted to any
other University for any other Degree/Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the Bibliography.

I, here by further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

PRATIK TIWARI

Student Researcher

Certified By:

Dr. ANIL R. CHOUGULE

Project Guide
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the UNIVERSITY OF MUMBAI for giving me

chance to do this project.

I would like to thank my principal, Dr. SANGITA PAKDE for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our coordinator Dr. JHARNA KALRA, for her
annual support and guidance.

I would also like to express my sincere gratitude towards my project guide

Dr. ANIL R. CHOUGULE, whose guidance and care made the project
successful.

I would like to thank DR. BABASAHEB AMBEDKAR LIBRARY,

SYDENHAM COLLEGE for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers who
supported me throughout my project.
 INDEX

CHAPTER NO.                          TITLE PAGE NO.

      I INTRODUCTION AND RESEARCH 1-13

DESIGN

1.1 Introduction 1

1.2 Significance of Study 5

1.3 Rationale Behind Selecting the Topic 6

1.4 Objectives of the Study 6

1.5 Scope and Limitation 6

1.6 Review of Literature 7

1.7 Chapter Scheme 10

1.8 References 11

            II INTRODUCTION TO CREDIT RATING 14-29

AGENCIES

2.1 Introduction 14

2.2 Origin of Credit Rating Agencies 15

2.3 Growth of Credit Rating Agencies 17

2.4 Reasons for the Setup of Credit Rating 17

 Agencies 

2.5 Uses of Credit Ratings by Credit Rating 18

Agencies

2.6 Functions of Credit Rating Agencies 19

2.7 Regulations & Guidelines for Credit 21

Rating Agencies in India

2.8 Credit Rating Agencies in India 23

2.9 Practical Problems of Credit Rating 28

Agencies in India

2.10 Future of Credit Rating Agencies in 29

India

           III WORKING OF CREDIT RATING 30-43

AGENCIES IN INDIA

3.1 Introduction 30

3.2 Registration of Credit Rating Agencies 31

3.3 Types of Credit Ratings 34

3.4 Credit Rating Symbols 36

3.5 Credit Rating Methodology 38

3.6 Credit Rating Process 41

           IV A STUDY OF AWARNESS ABOUT 44-63
CREDIT RATING AGENCIES

           V SUMMARY, MAJOR OBSERVATION & 64-68

SUGGESTION

APPENDIX 69-72

BIBLIOGRAPHY 73-75
 LIST OF TABLES

TABLE NO.                  TITLE OF TABLE PAGE NO.

         1 Age        45
         2 Gender        47
         3 Awareness of Credit Rating        48
         4 Awareness of Credit Rating Agencies        49
         5 Sources of knowledge about Credit Ratings        50
         6 Credit Rating Agency preference        51
         7 Investment decisions on the basis of Credit        52
Rating
         8 Additional purpose other than investment        53
decisions to check Credit Rating
         9 Credit Rating given by agencies easy to        54
understand
        10 Credit Rating given by agencies reliable        55
        11 Affect on equity return        56
        12 Transparency the agencies in the Credit        57
rating process
        13 Comparison of foreign and Indian agencies        58
        14 Affect on corporate image of a company        59
        15 Affect in saving time and effort in        60
analyzing the financial strength of a
company
        16 Affects on growth and expansion        61
        17 Agreement or diagreement with the        62
following statements
        18 Usefulness in future        63
 LIST OF CHARTS

CHART NO.                  TITLE OF CHART PAGE NO.

         1 Age        45
         2 Gender        47
         3 Awareness of Credit Rating        48
         4 Awareness of Credit Rating Agencies        49
         5 Sources of knowledge about Credit Ratings        50
         6 Credit Rating Agency preference        51
         7 Investment decisions on the basis of Credit        52
Rating
         8 Additional purpose other than investment        53
decisions to check Credit Rating
         9 Credit Rating given by agencies easy to        54
understand
        10 Credit Rating given by agencies reliable        55
        11 Affect on equity return        56
        12 Transparency the agencies in the Credit        57
rating process
        13 Comparison of foreign and Indian agencies        58
        14 Affect on corporate image of a company        59
        15 Affect in saving time and effort in        60
analyzing the financial strength of a
company
        16 Affects on growth and expansion        61
        17 Agreement or diagreement with the        62
following statements
        18 Usefulness in future        63