CHAPTER – 3

REVIEW OF LITERATURE
 REVIEW OF LITERATURE
1. Roni Bhowmik and Shouyang (2020), In order to prevent uncertainty and risk in the stock market, it is
particularly important to measure effectively the volatility of stock index returns. the main purpose of this
review is to examine effective GARCH models recommended for performing market returns and
volatilities analysis. The secondary purpose of this review study is to conduct a content analysis of return
and volatility literature reviews over a period of 12 years (2008–2019) and in 50 different papers. The
study found that there has been a significant change in research work within the past 10 years and most of
researchers have worked for developing stock markets.

2. Dipankar Biswas and Swapan Sarkar (2020), this study analyzes the return dynamics of four broad
based and 18 sectoral indices using ARMA EGARCH techniques. This study finds the return dynamics
during the selected period can be well captured by a carefully selected conditional mean model under
ARMA approach. This economic crisis has affected the entire world will certainly have manifold impact.
This paper is humble attempt to model of volatility in the context of Indian stock market.

3. Robert F. Engle, Eric Ghysels, and Bumjean Sohn (2013), In this paper we introduced a new,
versatile class of component volatility models combining the insights of spline GARCH and MIDAS
filters. This new class allowed us to distinguish short- and long-run sources of volatility and link them
directly to economic variables. The new model specifications also relate to the long-established use of
realized volatility yet refines these measures through MIDAS filtering. Our analysis focused on long
historical time series. The long-time span limited the set of macroeconomic series available. The class of
GARCH-MIDAS models can easily handle any set of variables.

4. KLAUS ADAM, ALBERT MARCET, and JUAN PABLO NICOLIN (2016), it shows that
consumption-based asset pricing models with time-separable preferences generate realistic amounts of
stock price volatility if one allows for small deviations from rational expectations. Rational investors with
subjective beliefs about price behavior optimally learn from past price observations. This imparts
momentum and mean reversion into stock prices. The model quantitatively accounts for the volatility of
returns, the volatility and persistence of the price dividend ratio, and the predictability of long-horizon
returns.

5. Suparna Nandy (Pal), Arup Kr. Chattopadhyay (2019), The objectives of the study are to address
the following issues in relation with the Indian stock market: Is there any evidence of interdependence
between the stock market and different other components of domestic financial system (namely, foreign
exchange market, bullion market, money market and change in gross volume of FII trade) in India and
foreign stock markets. To understand the causal relationship between the returns in financial variables in
pairs we carry out test for Granger causality. For explaining economic significance over and above the
statistical significance we also analyze impulse response function and variance decomposition
 6. Piyali Roy Chowdhury and Anuradha. A (2018), In this study, one of the macroeconomic variables,
exchange rate, is studied along with Indian Stock Market (BSE Index). The linkage between exchange rate
and stock market index is considered as one of the important contributors to predict the growth/ business
cycle of any economy. This dynamic linkage between exchange rate and stock market has been analyzed
considering 15 years of data (from 2010 to 2016) on exchange rate and stock market index related to
Indian Economy. A stock index or stock market index is a measurement of the value of a section of the
stock market. It is computed from the prices of selected stocks (typically a weighted average). It is a tool
used by investors and financial managers to describe the market, and to compare the return on specific
investments.

7. Sameer Yadav (2017), Volatility is a statistical measure of the dispersion of returns for a given
security or Market Index. Commonly, the higher the volatility greater the risk associated with the security.
Volatility estimation is important for several reasons associated with different people in the market.
Developed markets continue to provide over long period of time with higher returns constituting low
volatility. Indian market has started becoming informational more efficient compared to developed
countries. The study would facilitate the reader to understand the past, current and future aspects of Indian
Stock Market.

8. Debasish Maitra and Saumya Ranjan Dash (2017), This article examines the relationship between
investor sentiment and stock return volatility in the context of Indian stock market. Our empirical analysis
for examining the sentiment and volatility relationship focuses on wavelet approach to carry out the time-
frequency domain analysis. The results reveal that there is weak conditional correlation between sentiment
and volatility.

9. Konstantinos Gkillas (Gillas), Dimitrios I. Vortelinostand Shrabani Saha (2017), Using non-
parametric estimation technique the properties examined include normality, long-memory, asymmetries,
jumps, and heterogeneity. The realized volatility is a useful technique which provides a relatively accurate
measure of volatility based on the actual variance which is beneficial for asset management for non-
speculative funds. The results show that realized volatility and correlation series are not normally
distributed, with some evidence of persistence.

10. Sushma K S, Charithra C M and Dr. Bhavya Vikas (2019). The study helps the investors to
examine and compare the assessments along with the market and to identify the company which would be
preferable to invest based on their risk-taking ability. The primary objective of the study was to assess the
risk and return of the eight NSE listed financial services companies along with a secondary objective to
compare individual company stock volatility before and after the event of demonetization. The tools and
techniques used for analysis were Mean, Standard deviation, Beta, Correlation, Covariance and T-test.
Analysis was done by using the closing prices of each month for all the selected companies (Bajaj
FinServ, HDFC, ICICI, Axis, Cholamandalam investment and finance, State bank of India, Mahindra &
Mahindra, Max finance services) for a specified time period.
11. Ruchi Nityanand Prabhu (2019) This paper analyzes the risk and return in banking sector taking
Nifty Index as the benchmark. The study compares the performance of the 50 stocks in the NSE. Indian
banking industry, the backbone of the country’s economy has always played a positive key role in
prevention the economic disaster from reaching horrible volume in the country. Risk & Return is a
concept that denotes a potential negative impact to an asset or some characteristic of value that may arise
from some present process or future event. It has achieved enormous appreciation for its strength,
particularly in the wake of some of the worldwide economic disasters. NSE Shares have proved to be
more volatile than the pure diversified equity funds which make some of them a high-risk proposition. The
study evaluates the performance of stocks mainly to identify the required rate of return and risk of a
particular stock based upon different risk elements prevailing in the market and other economic factors.

12. Gopala Krishnan. Muthu, P.K.Akarsh (2017) in is work “The study analysis the risk and return in
the automobile sector” studied Researcher select 8 sample size companies from NIFTY auto Index as on
21/April/2017. The researcher to investors after comparing the selected companies suggests that, when
investor’s equity contains more risk then will get more return. Vice versa

13. Dr.S. krishnapradha, Mr.M.Vijayakumar (2015) in is work “A study on risk and return analysis of
selected stocks of India” Studied the researcher compares different industry and identifying the best to
invest to the investors. The researcher selects 5 industries they are 1. Banking sector, 2. Automobile
sector, 3. Information technology sector, 4. Pharmaceutical sector, 5. Fast moving consumer goods sector.
Method of sampling: judgemental sampling. Long term investment on same industry will help in
predicting about when the share will raise. Information technology, fast moving consumer goods,
pharmaceutical sector give more return compared to banking sector and automobile sector.
 RESEARCH GAP
After reviewing the different articles associated with risk and return management it is observed that there
is no recent study in the Indian MNCs in risk and return management. So during this study I will be
considering 5 different Multinational companies.
RESEARCH OBJECTIVES:

➢ To analyse the risk and return of selected company of quarterly result.

➢ To know the relation between risk and return of selected companies.

➢ To find the standard deviation and variance of selected companies.

Period for the study The study covers the period of five years of selected commodities. The data has been
collected from the BSE/NSE.
Tools for analysis:
The collected data has been tabulated and used various portfolio management techniques for analyzing
and interpreting the data
1. Tabular presentation:
A table enables Quantitative comparisons and qualitative comparisons provide a precise way to
present the data.
2. Percentage analysis:
This helps to bring out a uniform study of the data, percentage used in making comparison about two
or more series of data.
3. Graphical presentation:
Graphical presentation is the only way to present qualitative information effectively. The various
charts used in report writing through different types of charts.
SOURCES OF DATA
The present study covers mainly primary data which the selected commodities are traded and daily
stock market indices are taken into the consideration. The data also collected from various sources like
various journals, reports, magazines, newspapers, and stock market sensex data.

Collection of data
The study is completely based on secondary data mainly collected from the website of NSE
(https://www.nseindia.com/). In addition to that, the data has been collected from published sources
and also from websites (https://www.moneycontrol.com/), newspapers (economic times), and report
by management, scholars, researchers etc. Data collected contains opening price, closing price and
dividend of the below mentioned companies of MNCs which were selected from NSE (national stock
exchange). The data analysis is conducted by using 5 years historical data of the companies.

METHODOLOGY OF THE STUDY

The process used to collect information and data for the purpose of making decisions regarding their
activities. This study is of secondary data. Secondary research is a common approach to a systematic
investigation in which the researcher depends solely on existing data in the course of the research
process. This research design involves organizing, collating, and analyzing these data samples for
valid research conclusions. The methodology in which data are collected are done from various
sources like website, journal, newspaper article and other publication research, interview, survey and
other research techniques and can include both present and past data

TITLE OF THE STUDY:

“The impact of stocks on benchmark index: Assessing the impact & interrelationship, risk analysis”

Tools for data analysis

The collected data have properly been analyzed with the assistance of Microsoft excel by applying
various statistical tools. The researcher has mainly used the subsequent techniques for analyzing the
collected data.

➢ Mean (expected return):

Expected return is the profit or loss an investor anticipates on an investment that has known or
expected rates of return. It is calculated by multiplying potential outcomes by the chances of them
occurring and then summing these results.

➢ Expected risk:
Risk implies future uncertainty about deviation from expected earnings or expected outcome. Risk
measures the uncertainty that an investor is willing to take to realize a gain from an investment.

➢ Standard deviation:
The standard deviation is a measure that is used to quantify the amount of variation or dispersion of a
set of data values. A low standard deviation indicates that the data points tend to be close to the mean
(also called the expected value) of the set, while a high standard deviation indicates that the data points
are spread out over a wider range of values.

➢ Variance:
Variance is a statistical measure of how much a set of observations differ from each other. In
accounting and financial analysis, variance also refers to how much an actual expense deviates from
the budgeted or forecast amount.

OBJECTIVES OF THE STUDY

1. To study the evaluation of stock and derivative market in India
2. To identify the risk and return analysis of selected commodities
3. To analyze the price volatility of commodities in selected period

LIMITATIONS OF THE STUDY

Like other studies, this study also has its own limitations. They are: -

➢ The analysis was completely based on the secondary data collected from the website of NSE, and
secondary data published literature, annual reports, etc., and so the findings of the study entirely
depend on the accuracy of such data.

➢ Different experts have different opinions regarding the analysis of equity shares, therefore, the view
used in this study cannot be treated as the absolute and perfect. The Researcher uses some statistical
tools for analyzing and interpreting the collected data. Therefore, the analysis is affected by the natural
limitations of the statistical tools
SAMPLING SIZE:
478
CHAPTER SCHEME
The chapter scheme of this study as fallows Chapter
I: Introduction Chapter
2: Industry and Company Profile Chapter
3: Research Methodology Chapter
4: Data Analysis and Interpretation Chapter
5: Summary of Findings, Recommendations and Conclusion
 CHAPTER 4
DATA ANALYSIS AND INTERPRETATION
Analysis – as we can see from 481 respondent’s male are – 49.5% and female – 50.5% so females
are more as compare to male in the study.
 Analysis- so when we do talk about how many of the respondent’s want to save money
So 78.8% said yes
15.2% said no
6% maybe
So majorly people interested

Analysis – 89.8% people said that they love to invest your money for better returns
10.2% said they are not interested in investing money

Analysis - when we talk about risk tolerance level so majorly people said 62.8% said moderate
28.5% - low risk tolerance level
62.8% - moderate risk tolerance level
8.7% - high risk tolerance level

Analysis – so when talking about preferring the financial instrument do you prefer to invest in
Stocks – 158 (32.8%)
Bonds – 204 (41.8%)
Mutual funds – 231 (48%)
FD – 170 (35.3%)
Future & Options – 90 (18.7%)

Analysis – 44.3% (reducing debt)

33.3% (setting a budget)
22.2% (starting an emergency fund)
Major short term financial goal is reducing your debt.

Analysis – 21.8% saving for a down payment on a house

27% funding for retirement
25.8% paying off large debts (eg. Credit cards)
9.8% saving for child’s education
14.6% paying for major vacation
Majorly – 27% focuses on funding for retirement

Analysis – brokerage charges – 163 (34%)

Frequent payment & transfer of securities – 207 (43.1%)
Less advance margin – 157 (32.7%)
Credit limits – 86 (17.9%)
Personal relations – 40 (8.3%)

Analysis – according to sample size investment do you feel more profitable

21% - fixed deposit
21.6% - equities
57.4% - Mutual Funds
Majorly people were 57.4%

Analysis – broker provide best services and easy transactions

30.2% - zerodha
36.5% - groww
11% - angel one
21.9% - IFCI financial services
Analysis – ifci financial services – 19.8%
Zerodha – 19.8%
Upstox – 20.8%
Sharekhan – 19%
Groww – 14%
Majorly people prefer – 20.8%

Analysis – AI will replace human traders and investors

73.3% - yes
26.7% - no
Analysis – financial advisor, if ROBO advisors will also exist
Yes – 75.4%
No – 24.6%

Analysis – AI will prevent fraud activities

Yes – 61.7%
No – 38.3%
Analysis – audience –prefer to be contacted?
43.7% - email
22.7% - SMS
33.3% - Phone

Analysis – how frequently audience want to receive update about the investment ?
33.3% - immediate
50.1% - within 24 hours
16% - within 48 hours
Analysis – invested in stock market / financial instruments before
Yes – 76.3%
No - 23.7%

Analysis – preference for any industry or not

55.1% - no
44.3% - yes

Analysis – 4- 153 (31.8%)

3 – 151 (31.4%)
5 – 134 (27.9%)

Analysis – 41.2% short term investment

37.6% - long term investment
21.2% - combination of both

Analysis - how long involved in stock market investing?

44.5% - 1-5 years
23.1% - 5-10 years
28.1% - 0-1 year
Analysis – preference for a particular trading platform or interface
Yes – 56.3%
No – 43.2%

Analysis – would you like to receive updates from IFIN

Daily – 20.6%
Monthly – 36.2%

Weekly – 42.6%
Analysis – primary investment goals
Wealth accumulation – 30.1%
Retirement planning – 37.4%
Short term gains – 32.2%

Analysis – how satisfied you with broking services if avail previously any
1 – 8 (1.7%)
2 – 9 (1.9%)
3 – 25 (5.2%)
4 – 51 (10.6%)
5 – 85 (17.7%)
6 – 62 (12.9%)
7 – 64 (13.3%)
8 – 54 (11.8%)
9 – 73 (14.8%)
10 – 52 (10.8%)