P18FW21M0012 - Dissertation Report

A STUDY ON RISK AND RETURN ANALYSIS OF
PHARMACEUTICAL COMPANIES IN INDIA USING VALUE AT RISK
Dissertation Report submitted in partial fulfilment of the requirements for the award
of the degree of
MASTER OF BUSINESS ADMINISTRATION
of
RV INSTITUTE OF MANAGEMENT
Autonomous Institution Affiliated to Bengaluru City University
By
NISHANTH KRISHNA
REG NO: P18FW21M0012
Under the guidance of
Internal Guide
Dr. Santhosh M
Associate Professor
RV Institute of Management
Rashtreeya Sikshana Samithi Trust

RV INSTITUTE OF MANAGEMENT
Autonomous Institution Affiliated to Bengaluru City University
CA 17, 36TH cross, 26th main, 4th T Block,
Jayanagar, Bangalore-560041
2023
DECLARATION BY THE STUDENT
I hereby declare that “A Study on Risk and Return Analysis of Pharmaceutical Companies in
India using Value at Risk” is the result of the project work carried out by me under the guidance
of Dr. Santhosh M in partial fulfillment for the award of Master’s Degree in Business
Administration by RV Institute of Management, Autonomous Institution Affiliated to Bengaluru
City University.
I also declare that this project is the outcome of my own efforts and that it has not been submitted
to any other university or Institute for the award of any other degree or Diploma or Certificate.
Name: Nishanth Krishna

Register Number: P18FW21M0012 Signature
Place: Bengaluru
Date:
ACKNOWLEDGEMENT
The success and final finish of this project necessitated a great deal of direction and
assistance from many people, and I consider myself quite fortunate to have received
this during the duration of my Dissertation. All of what I have accomplished is
possible solely because of their guidance and aid, and I would like to express my
gratitude to each of them.
I respect and thank Dr. Purushottam Bung, Director, RVIM, Bengaluru, and
Dr. Dileep, RVIM, Bengaluru, for their provision of such a program under MBA
Course.
I owe my deep gratitude to Associate Professor Dr. Santhosh M, RVIM, my internal
guide, who took a personal interest in my Dissertation work and guided me through
it until it’s Completion and Submission.
NISHANTH KRISHNA
GUIDE CERTIFICATE
This is to certify that Mr. Nishanth Krishna of RV Institute of Management, Autonomous

Institution Affiliated to Bengaluru City University, has undertaken Master Thesis entitled “A
Study on Risk and Return Analysis of Pharmaceutical Companies in India using Value at
Risk” under my Guidance and it has not been submitted to any other University or Institute for the
award of any other degree or Diploma or Certificate. His/Her Conduct and work is Original, and
Excellent.
Name: Dr. Santhosh M
Date: Signature
TABLE OF CONTENTS
CHAPTER CONTENTS PAGE NO.
1 INTRODUCTION 01
REVIEW OF LITERATURE AND
2 09
RESEARCH DESIGN
PROFILE OF SELECTED
3 19
ORGANIZATIONS
DATA ANALYSIS AND
4 28
INTERPRETATION
FINDINGS, CONCLUSIONS AND
5 53
SUGGESTIONS
BIBLIOGRAPHY 59
ANNEXURES 61
LIST OF TABLES
SL. NO DESCRIPTION PAGE NO.

SWOT Analysis of Indian Pharmaceutical
1.1 2
Industry
Return And Risk Analysis – Traditional
4.1 28
Method
4.2 ANOVA Table – Traditional Method 31
4.3 NSE Nifty Pharma – Monte Carlo Simulation 32
4.4 NSE Nifty Pharma – Var Calculation 33
4.5 NSE Nifty Pharma – Var, Risk and Return 33

NSE Nifty Pharma – Frequency Table of
4.6 34
Simulated Returns
Sun Pharmaceutical Industries Ltd – Monte
4.7 35
Carlo Simulation
Sun Pharmaceutical Industries Ltd – Var
4.8 36
Calculation
Sun Pharmaceutical Industries Ltd – Var, Risk
4.9 36
and Return
Sun Pharmaceutical Industries Ltd –
4.10 37
Frequency Table of Simulated Returns
Dr. Reddy’s Laboratories Ltd – Monte Carlo
4.11 38
Simulation
Dr. Reddy’s Laboratories Ltd – Var
4.12 39
Calculation
Dr. Reddy’s Laboratories Ltd – Var, Risk and
4.13 39
Return
Dr. Reddy’s Laboratories Ltd – Frequency
4.14 40
Table of Simulated Returns
4.15 Cipla Ltd – Monte Carlo Simulation 41
4.16 Cipla Ltd – Var Calculation 42
4.17 Cipla Ltd – Var, Risk and Return 42

Cipla Ltd – Frequency Table of Simulated
4.18 43
Returns
Torrent Pharmaceuticals Ltd – Monte Carlo
4.19 44
Simulation
4.20 Torrent Pharmaceuticals Ltd – Var Calculation 45
Torrent Pharmaceuticals Ltd – Var, Risk and
4.21 45
Return
Torrent Pharmaceuticals Ltd – Frequency
4.22 46
Table of Simulated Returns
Zydus Lifesciences Ltd – Monte Carlo
4.23 47
Simulation
4.24 Zydus Lifesciences Ltd – Var Calculation 48
4.25 Zydus Lifesciences Ltd – Var, Risk and Return 48

Zydus Lifesciences Ltd – Frequency Table of
4.26 49
Simulated Returns
4.27 ANOVA Table – Value at Risk Approach 50
LIST OF GRAPHS

NSE Nifty Pharma – Simulated Returns
4.1 34
Distribution Curve
NSE Nifty Pharma – Frequency of Simulated
4.2 35
Returns
4.3 37
Simulated Returns Distribution Curve
4.4 38
Frequency of Simulated Returns
Dr. Reddy’s Laboratories Ltd – Simulated
4.5 40
Returns Distribution Curve
Dr. Reddy’s Laboratories Ltd – Frequency of
4.6 41
Simulated Returns
Cipla Ltd – Simulated Returns Distribution
4.7 43
Curve
4.8 Cipla Ltd – Frequency of Simulated Returns 44
Torrent Pharmaceuticals Ltd – Simulated
4.9 46
Returns Distribution Curve
Torrent Pharmaceuticals Ltd – Frequency of
4.10 47
Simulated Returns
Zydus Lifesciences Ltd – Simulated Returns
4.11 49
Distribution Curve
Zydus Lifesciences Ltd – Frequency of
4.12 50
Simulated Returns
LIST OF FIGURES
1.1 Valuation of Indian Pharmaceutical Market 1
3.1 Logo of Sun Pharmaceutical Industries Ltd. 20
3.2 Logo of Dr. Reddy’s Laboratories Ltd. 22
3.3 Logo of Cipla Ltd. 23
3.4 Logo of Torrent Pharmaceuticals Ltd. 25
3.5 Logo of Zydus Lifesciences Ltd. 26

EXECUTIVE SUMMARY
This study presents a comprehensive analysis of the risk and return profiles of
pharmaceutical companies in India, employing the innovative financial tool,
Value at Risk (VaR). The pharmaceutical industry in India is a vital contributor to
the economy, facing dynamic market conditions and regulatory challenges.
Understanding the risk factors associated with investment in this sector is crucial
for investors, policymakers, and industry stakeholders.
The study delves into the nuanced relationship between risk and return, focusing
on a sample of prominent pharmaceutical companies operating in India. By
utilizing the Value at Risk methodology, the research assesses the potential loss
in value of these companies investment under various risk scenarios. VaR, a
robust statistical tool, provides insights into the downside risk and aids in making
informed investment decisions.
The study provides valuable insights into the risk-return dynamics of

pharmaceutical companies in India, shedding light on their financial resilience
and vulnerability. The application of VaR as a risk assessment tool offers a novel
perspective, enabling stakeholders to make informed decisions in a volatile
market environment. As the pharmaceutical industry continues to play a pivotal
role in India's economic landscape, the findings of this research are instrumental
for shaping investment strategies and policy frameworks, ensuring sustainable
growth and stability in the sector.
A Study on Risk and Return Analysis of Pharmaceutical Companies in India using Value at
Risk
CHAPTER 1: INTRODUCTION
INDUSTRY PROFILE
India is one of the biggest suppliers of low-cost vaccines in the world. India accounts for 60 %
of global vaccine production, contributing up to 70 % of the WHO demand for Diphtheria,
Tetanus and Pertussis (DPT) and Bacillus Calmette–Guérin (BCG) vaccines, and 90% of the
WHO demand for the measles vaccine. As of 2023, the Indian pharmaceutical industry is the
world's 13th largest by value and third largest in the world by volume. The industry produces
over 60,000 generic drugs in different 60 therapeutic categories.
The pharmaceutical industry in India is currently valued at $50 Bn. The pharmaceutical
industry in India is expected to reach $65 Bn by 2024 and to $130 Bn by 2030. India is a major
exporter of Pharmaceuticals, with over 200+ countries served by Indian pharma exports. India
supplies over 50% of Africa’s requirement for generics, 40% of generic demand in the US and
25% of all medicine in the UK. India also accounts for 60% of global vaccine demand, and is
a leading supplier of DPT, BCG and Measles vaccines. 70% of WHO’s vaccines (as per the
essential Immunization schedule) are sourced from India.
FIGURE 1.1 VALUATION OF INDIAN PHARMACEUTICAL MARKET
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Over the last few decades, the Indian pharmaceutical industry has experienced rapid expansion,
which may be divided into four stages. We can consider the time before 1970 as the first stage
of the pharma industry. At that time, the Indian market was dominated by foreign companies.
The second stage covers 1970 to 1990 when several domestic companies began operations.
1990 to 2010 is the third stage, where liberalization led Indian components to launch operations
in foreign countries.
The introduction of the patent bill was one of the first advancements in the pharma industry.
The patent bill was proposed for the first time in 1970. The bill allowed the Indian
pharmaceutical sector to become less reliant on intellectual property laws in the United States.
SWOT Analysis for Indian Pharmaceutical Industry:
Strengths Weakness
1. Low Manufacturing Cost 1. Lack of Investments for R&D
2. Highly Skilled Workforce 2. Absence of collaboration between
3. Better Marketing and Distribution industry and academicians
3. Low Cost results in Low Quality
Opportunities Threats
1. Greater Export Possibilities 1. Product Patent Policy
2. Major Role in global pharmaceutical 2. Pressure from Government on
R&D Product Pricing
3. Potential to become a hub for
international clinical trials
TABLE 1.1 SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY
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Indian Pharmaceutical Market Trends:
Respiratory drugs commonly comprise of bronchodilators, corticosteroids, mast cell

stabilizers, anti-IgE antibodies, leukotriene receptor antagonists, antivirals, pulmonary
surfactants, and respiratory stimulants, among others. The respiratory therapy segment is
expected to witness significant growth due to the rising burden of respiratory diseases and
increasing air pollution, together with R&D activities and the introduction of newer drugs over
the coming years.
A generic drug is a medication created to be the same as an existing approved brand-name drug
in dosage form, safety, strength, route of administration, quality, and performance
characteristics. About 8 out of 20 global generic companies are from India, and over 55% of
the exports from the country are for highly regulated markets. The GOI is planning to provide
free generic medications to half of the Indian population through Pradhan Mantri Bhartiya
Janaushadhi Kendras at an estimated cost of USD 5.4 billion.
THEORETICAL BACKGROUND OF THE STUDY
Risk Analysis:
1. Definition: In the world of finance, risk analysis entails determining how unpredictable
or uncertain investment results can be. It seeks to estimate possible losses along with
their likelihood.
2. Types of Risk:
• Market Risk: The chance of suffering losses as a result of general market fluctuations.
• Credit Risk: The possibility of suffering losses if an issuer or borrower defaults.
• Operational Risk: The possibility of losses as a result of human error, internal systems,
or processes.
• Liquidity Risk: The danger of being unable to purchase or dispose of assets without
having an effect on their value.
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3. Measurement Tools: Standard deviation, beta, Value at Risk (VaR), and Conditional
Value at Risk (CVaR) are examples of common risk metrics.
4. Applications: Asset allocation, risk management tactics, and investment decisions are
all influenced by risk analysis. It aids in investors' comprehension of the possible
drawbacks of an investment.
Return Analysis:
1. Definition: Return analysis evaluates an investment's profits or losses in relation to the

capital originally invested.
2. Types of Returns:
• Total Return: Includes any income from an investment as well as capital gains
or losses.
• Annualized Return: Represents the average yearly return for a given time
frame.
• Risk-Adjusted Return: Returns are adjusted for the amount of risk assumed.
3. Measurement Tools: A number of metrics, such as the geometric mean return,

logarithmic return, and simple return, can be used to compute returns.
4. Applications: Return analysis is useful for comparing various investment options,

determining how profitable an investment is, and gauging the effectiveness of
investment strategies and portfolios.
VALUE AT RISK
Value at risk (Var) has been called as “new science of risk management”. VAR summarizes the
predicted maximum loss (or worst loss) over a target horizon within a given confidence
interval. This single number summarizes the portfolio's exposure to market risk as well as the
probability of an adverse move.
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METHODS TO CALCULATE VALUE AT RISK
Historical data:
The historical method simply re-organizes actual historical returns, putting them in order from
worst to best. It then assumes that history will repeat itself, from a risk perspective.
The variance and co-variance method:
This method assumes that stock returns are normally distributed. In other words, it requires that
we estimate only two factors - an expected (or average) return and a standard deviation - which
allow us to plot a normal distribution curve. Here we plot the normal curve against the same
actual return data.
Monte Carlo simulation:
The third method involves developing a model for future stock price returns and running
multiple hypothetical trials through the model. A Monte Carlo simulation refers to any method
that randomly generates trials, but by itself does not tell us anything about the underlying
methodology.
TYPES OF VALUE AT RISK
Marginal Var:
Marginal Var refers to the additional amount of risk that a new investment position adds to a
firm or portfolio. Marginal Var allows risk managers to study the effects of adding or
subtracting positions from an investment portfolio. Since value at risk (Var) is affected by the
correlation of investment positions, it is not enough to consider an individual investment's Var
level in isolation. Rather, it must be compared with the total portfolio to determine what
contribution it makes to the portfolio's Var amount. Marginal Var computes the incremental
change in aggregate risk to a firm or portfolio due to adding one more investment.
Value at risk (Var) models the probability of a loss for a firm or portfolio based on statistical
techniques. Marginal Var allows risk managers or investors to understand how new investments
will alter their Var picture.
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Component Var:
Component Var for the i-th asset is nothing but the product of Marginal Var and the value of
the i-th asset. Component Var has the useful property that it adds up to the dollar Var of the
portfolio, that makes life very easy from a risk disaggregation perspective.
Incremental Var:
Incremental value at risk (incremental Var) is the amount of uncertainty added to or subtracted
from a portfolio by purchasing or selling an investment. Investors use incremental value at risk
to determine whether a particular investment should be undertaken, given its likely impact on
potential portfolio losses.
The idea of incremental value at risk was developed by Kevin Dowd in his 1999 book, "Beyond
Value at Risk: The New Science of Risk Management." Incremental Var is closely related to,
but differs from, Incremental value at risk is a measure of how much risk a particular position
is adding to a portfolio.
It's a risk assessment used by investors who are thinking of making a change to their holdings,
by either adding or removing a particular position. Incremental value at risk is a variation on
the value at risk measurement (Var), which looks at the worst-case scenario for a portfolio as a
whole in a specific period of time.
IMPORTANCE OF THE TOPIC
Value at Risk (VaR) is a critical concept in the field of risk management and financial analysis.
It is used to quantify and manage the potential losses that an investment or portfolio of assets
may face under adverse market conditions. The importance of Value at Risk can be understood
in several ways:
1. Risk Management: VaR is a fundamental tool for assessing and managing risk in
financial institutions, investment firms, and corporate treasury departments. By
calculating VaR, these entities can identify their exposure to potential losses and take
appropriate measures to mitigate risks.
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2. Decision-Making: VaR helps decision-makers, such as portfolio managers and traders,

make informed choices about asset allocation and risk tolerance. It provides a
quantitative estimate of the downside risk associated with different investment
strategies.
3. Capital Allocation: Regulators and financial institutions use VaR to allocate capital
requirements for risk management purposes. It helps determine the amount of capital
that should be held in reserve to cover potential losses, ensuring the stability of financial
systems.
4. Risk Assessment: VaR allows organizations to assess the risk-return trade-offs of
various investment opportunities. It helps in evaluating the riskiness of different assets,
portfolios, or business strategies.
5. Performance Evaluation: VaR can be used to evaluate the performance of investment
portfolios and trading desks. By comparing the actual losses to the predicted VaR,
investors can assess whether returns are consistent with the level of risk taken.
6. Stress Testing: Financial institutions use VaR in stress testing scenarios to simulate
extreme market conditions and assess the impact on their portfolios. This helps identify
vulnerabilities and ensures preparedness for worst-case scenarios.
7. Regulatory Compliance: Many financial regulatory frameworks, such as Basel III for
banks, require the calculation and reporting of VaR as part of risk management and
regulatory compliance. Demonstrating compliance with these standards is crucial for
the stability of the financial system.
8. Risk Communication: VaR provides a concise and standardized way to communicate
risk levels to stakeholders, including investors, board members, and regulators. It
enables clear and transparent discussions about the potential for financial losses.
9. Diversification: VaR aids in understanding how diversification can reduce overall
portfolio risk. It helps investors determine the optimal mix of assets to achieve a desired
level of risk exposure.
10. Hedging Strategies: Investors and corporations use VaR to assess the effectiveness of
hedging strategies aimed at mitigating specific risks, such as currency risk or interest
rate risk.
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In this study, Value at Risk is used as calculations helping to assess the probability and
magnitude of losses of top pharmaceutical companies in India under on going and past market
scenarios, providing a quantitative measure of risk. This information is essential for investors
seeking to balance risk and return when making investment decisions in the pharmaceutical
sector. By comparing the VaR figures of different companies, one can identify which firms
offer a more favourable risk-return trade-off, aiding in the selection of the most suitable
investments within this dynamic and critical industry.
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CHAPTER 2: REVIEW OF LITERATURE AND RESEARCH

METHODOLOGY
REVIEW OF LITERATURE
I.N. Khindanova, et al (2020)
The study states that Value-at-Risk (VAR) metrics are frequently used to calculate market risk
exposure. Traditional methods for doing VAR computations, such as the variance-covariance
technique, historical simulation, Monte Carlo simulation, and stress testing, do not adequately
assess potential losses. In this article, we examine recent developments in VAR techniques. The
suggested enhancements still don't have a strong, cohesive method for capturing the observed
financial data phenomena, like large tails, time-varying volatility, and short- and long-range
dependence. In VAR modelling, we advise using stable Paretian distributions.
Pilar Abad, et al (2013)
The article provides a comprehensive review of existing literature on Value at Risk (VaR)
estimation methods. It analyzes various approaches, ranging from standard techniques to more
advanced methods, emphasizing their strengths and weaknesses. The study also delves into
backtesting procedures used to assess VaR approach performance. Empirical evidence suggests
that approaches based on Extreme Value Theory and Filtered Historical Simulation are
effective for VaR forecasting. Additionally, the Parametric method, especially under non-
standard distributions and with consideration for conditional high-order moments, yields
promising results. The article also highlights the potential of asymmetric extensions of the
CaViaR method.
Ben Salem, et al (2022)
This paper investigates various statistical methods for estimating Value-at-Risk (VaR) for stock
returns in BRICS countries from 2011 to 2018. Four different methods (Historical Simulation,
Riskmetrics, Historical Method, and GARCH Process) are compared using the Backtesting
technique. The study aims to assess the effectiveness of these methods by comparing calculated
VaR with actual portfolio or index losses or gains. The findings indicate that the Historical
Method and Historical Simulation are suitable for all BRICS countries at different confidence
levels, whereas the GARCH model fails to accurately predict VaR for these nations.
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Khreshna Syuhada (2020)
This study focuses on Value-at-Risk (VaR), a key measure in financial risk management. The
research aims to find a VaR forecast for processes with varying volatility (heteroscedastic
processes) that closely matches the intended probability coverage. The study considers the
impact of estimator variability, including biases and mean square errors, on VaR forecasts. The
analysis involves numerical computations for two types of models: the observable volatility
model (Autoregressive Conditional Heteroscedastic or ARCH model) and the unobservable
volatility model (Stochastic Volatility Autoregressive or SVAR model). The findings highlight
the significant influence of estimator variability on achieving accurate VaR forecasts,
especially in the SVAR model where the volatility process is unobservable, making it
challenging to assess conditional coverage probabilities.
Muneer Shaik (2021)
This study investigates Value-at-Risk (VaR) estimation models and their predictive
performance by applying various backtesting methods on BRICS (Brazil, Russia, India, China,
South Africa) and US stock market indices. Three VaR estimation models (normal, historical,
exponential weighted moving average) and eight backtesting models are employed, and the
analysis spans three periods: overall (2006–2021), global financial crisis (GFC) (2008–2009),
and COVID-19 (2020–2021). The results indicate that the exponential weighted moving
average (EMWA) model outperforms normal and historical models for all six stock market
indices across both overall and crisis periods. However, all VaR models perform poorly during
crisis periods like the GFC and COVID-19, with the study showing weaker predictive accuracy
during the COVID-19 era compared to the GFC period.
Le Trung Thanh, et al (2018)
Here the author examines various Value-at-Risk techniques which are applied to stock indices
of 9 Asian emerging financial markets. The results from our selected models are then back
tested by Unconditional Coverage, Independence, Joint Tests of Unconditional Coverage and
Independence and Basel tests to ensure the quality of Value-at-Risk (Var) estimates.
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Evangelos Vasileiou (2021)
The study addresses the challenge of accurately forecasting Value-at-Risk (VaR) in financial
risk management. Despite advances in financial econometrics, global financial crises persist,
partly due to overly complex models that are difficult to implement in practice. To bridge this
gap, the researchers propose a computational method based on the leverage effect, simplifying
the approach and focusing on financial theory. Studying the US stock market from 2000 to
2020, the new method, which uses an appropriate observation period, significantly enhances
the accuracy of the Conventional Delta Normal VaR model. The findings demonstrate that this
approach generates VaR estimations as precise as those from advanced econometric models
like GARCH (1,1).
Nour Alshamali, et al (2021)
The study examines the impact of COVID-19 on UK economic activity, particularly focusing
on banking stocks. The research employs various Value-at-Risk (VaR) methodologies on five
major UK banking stocks: HSBC Holdings Plc, Barclays Plc, Standard Chartered Plc, Llyods
Banking Group Plc, and NatWest Group Plc. Three VaR methods are utilized: historical
simulation, variance-covariance, and Monte Carlo simulation (GBM approach). The findings
indicate a high VaR magnitude primarily due to a rise in the confidence interval, especially at
99%. The historical simulation method predicts smaller losses compared to the other two
methods, which do not assume normal distribution and consider changing variances and
covariances over time, especially during crises. The study suggests the portfolio was at high
risk at the start of the pandemic. Analyzing VaR over time provides insights into the changing
risk profile, although the study doesn't identify the maximum loss as a limitation.
Katherine Uylangco, et al (2016)
This study investigates Value-at-Risk (VaR) measures for Australian banks, focusing on the
period including the Global Financial Crisis (GFC). The research evaluates the importance of
methodology and parameter selection for capital adequacy holdings during crisis periods.
Despite criticism of VaR methodology under Basel II during the GFC, this study finds that 1-
year parametric and historical models offer better VaR measures compared to models with
longer time frames. VaR estimates from Monte Carlo simulations indicate a high percentage of
violations, although with lower average magnitudes. VaR estimates from the ARMA GARCH
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model also show a relatively high percentage of violations but with low average magnitudes.
The findings support the revised Basel II VaR methodology adopted under Basel III.
Shengyuan Lu (2023)
This paper discusses the widely used Value at Risk (VaR) method in the financial sector for
risk analysis. The study focuses on four stocks (APPL, BAC, AXP, KO) held by Berkshire
Hathaway. Data is collected, and portfolio weights are calculated based on the company's
quarterly statements. The paper employs the simple variance-covariance VaR method,
assuming the sample data follows a normal distribution. This method provides a reliable risk
value, aiding in predicting and estimating risks for securities investments, and holds practical
significance for risk management in the financial industry.
Yichuan Dong, et al (2020)
This paper introduces a new category of coherent risk measures named "set-valued weighted
value at risk." The proposed measure consists of two versions: the "regulator" version, which
is independent of other market scenarios, and the "market extension" version, which is linked
to different market scenarios. The paper provides proofs for the properties of both versions and
offers equivalent representations to calculate their values. Additionally, examples are presented
to illustrate the theoretical constructs and features of the set-valued weighted value at risk.
Shige Peng, et al (2018)
This study explores Value-at-Risk (VaR) predictors, crucial in financial risk management.
Traditional methods combine AR-GARCH filtering and extreme value theory. This research
introduces a novel predictor, G-VaR, based on sublinear expectation theory. G-VaR
incorporates model uncertainty, acknowledging that financial returns' volatility isn't described
by a single distribution but multiple ones. By considering the worst-case scenario among these
potential distributions, G-VaR is precisely determined. Experiments on NASDAQ Composite
Index and S&P500 Index demonstrate G-VaR's superior performance over existing benchmark
VaR predictors.
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Darman Saputra, et al (2023)
This study addresses the need for accurate and reliable risk measurement techniques in the face
of growing trading activity and market uncertainty. The focus is on Value at Risk (VaR), a
method used to calculate market risk and determine the maximum potential loss in a portfolio
under specific conditions. The research employs secondary data from two companies listed on
the Indonesia Stock Exchange. Utilizing the Monte Carlo simulation method in Microsoft
Excel, the study demonstrates that higher returns correspond to greater risks in portfolios. The
analysis highlights the importance of precise risk calculation for investors in making informed
decisions aligned with market conditions. The study's findings emphasize the specific risks and
benefits associated with purchasing shares in companies like BBRI in the banking sector and
ANTM in the Mining Company sub-sector, showcasing the applicability of the VaR Monte
Carlo simulation method for individual stocks.
Evangelos Vasileiou, et al (2020)
This paper investigates the role of Value at Risk (VaR) in ensuring financial market stability,
specifically focusing on the 12 stock markets of countries using the euro. The study applies the
historical simulation VaR (HVaR) model, widely used in the industry due to cost
considerations. The research reveals that HVaR, while commonly employed, does not
significantly contribute to financial stability. The model, being backward-looking, fails to
represent real financial risk and does not provide insights into future trends. Moreover, the
suggested confidence level of 99 percent leads to hidden pro-cyclicality, and gaps in the
legislative framework incentivize the use of conventional models, hindering the effectiveness
of VaR estimations. The paper emphasizes the need for scholars and researchers to address
these issues to ensure the relevance and effectiveness of VaR in promoting financial stability.
Daniel Reghin, et al (2019)
This study examines the effectiveness of different Value-at-Risk (VaR) calculation methods,
specifically comparing the parametric method with neural networks, including Feedforward
and Long Short-Term Memory (LSTM) recurrent networks. The research, conducted using the
B3 São Paulo Stock Exchange (IBOVESPA) index, explores various volatility models under
the parametric approach, such as standard deviation, Exponentially Weighted Moving Average
(EWMA), and Generalized Autoregressive Conditional Heteroskedasticity (GARCH). In the
case of neural networks, the study investigates different architectures, activation functions,
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predictors, and the inclusion of macroeconomic data. The results indicate that during periods
of crisis or abrupt market changes, the parametric method outperforms both LSTM and
Feedforward networks in predicting VaR. However, LSTM networks exhibit better overall
performance when considering the exception rate generated by the entire model.
RESEARCH GAP
1. Limited Application of VaR in Pharmaceutical Sector: Although Value at Risk (VaR)

is a well-established risk measurement tool, there is a limited application of VaR
specifically within the pharmaceutical sector in India. Most existing research on VaR
tends to focus on broader market indices or other industries, leaving a research gap in
the context of pharmaceutical companies.
2. Inadequate Analysis of Indian Pharmaceutical Companies: While there are
numerous studies analysing the financial performance of pharmaceutical companies
globally, there's a gap in in-depth analysis specifically focusing on the top
pharmaceutical companies in India. Existing literature might not provide a
comprehensive understanding of the unique risks and challenges faced by these
companies in the Indian market.
3. Need for Comprehensive Risk Assessment: The existing studies might lack a
comprehensive risk assessment that combines both historical and predictive analysis.
This gap indicates a need for research that not only uses historical data but also
incorporates future projections and market trends to assess the risk factors
comprehensively.
4. Integration of Macroeconomic Factors: Many studies often overlook the influence of
macroeconomic factors on the pharmaceutical industry. Considering the sensitivity of
pharmaceutical companies to regulatory changes, healthcare policies, and economic
fluctuations, there's a gap in research that integrates these macroeconomic factors into
the risk analysis framework.
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5. Comparative Analysis Across Companies: A significant research gap lies in the

absence of comparative studies across different pharmaceutical companies.
Understanding how various companies within the same sector manage risks differently
and the impact of those strategies on their financial performance can be a valuable area
of exploration.
6. Dynamic Risk Modelling: Most studies tend to use static risk models. There is a gap
in research that explores dynamic risk modelling techniques, such as time-varying VaR
models, to capture the changing risk profiles of pharmaceutical companies over time.
Addressing these research gaps would contribute significantly to the understanding of the risk
landscape in the Indian pharmaceutical sector and provide valuable insights for investors,
policymakers, and industry stakeholders.
STATEMENT OF THE PROBLEM
The study aims on how value at risk is measured, evaluated using different models and
approaches compared to other studies which only aims at the overview of value at risk.
NEED FOR THE STUDY
1. Investor Decision-Making: Investors, both individual and institutional, need accurate

and comprehensive analyses of companies before making investment decisions. A study
on the return and risk analysis of top pharmaceutical companies in India using Value at
Risk (VaR) can provide investors with insights into the volatility and potential losses
associated with their investments, aiding them in making informed decisions.
2. Risk Management: Pharmaceutical companies operate in a highly regulated and
competitive environment. Understanding the risks associated with their operations is
crucial for strategic decision-making. Analyzing risks through VaR can help these
companies in managing their financial exposures effectively, especially in a market as
dynamic as India's pharmaceutical sector.
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3. Policy Making and Regulation: Policymakers and regulatory authorities in India need
empirical studies to formulate policies that promote the growth and stability of the
pharmaceutical industry. Understanding the financial risks faced by the top companies
can assist in developing regulations that safeguard investors and ensure the stability of
the market.
4. Academic Contribution: The study can contribute to the academic knowledge base by
providing empirical evidence and insights into the financial risk profiles of
pharmaceutical companies in India. This research can be a valuable resource for
academicians, researchers, and students interested in finance, risk management, and the
pharmaceutical industry.
5. Industry Competitiveness: Analyzing the financial risks of top pharmaceutical
companies can shed light on their competitive positions in the market. Companies
armed with such insights can make strategic decisions to enhance their competitive
advantage, innovate, and adapt to market challenges effectively.
6. Market Stability: Understanding the risk levels of major players in the pharmaceutical
sector contributes to the overall stability of the financial market. Investors and
stakeholders can adjust their strategies based on this analysis, potentially reducing
market volatility and enhancing overall stability.
7. Investor Confidence: Providing a clear analysis of the risks associated with the top
pharmaceutical companies can enhance investor confidence in the sector. Informed
investors are more likely to participate actively in the market, leading to increased
liquidity and stability.
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SCOPE OF THE STUDY
The scope of the study is limited to top five market capitalised pharmaceutical companies in
India as on 31st March 2023.
The top 5 pharma companies as on 31st March 2023 by market capitalization being:
1. Sun Pharmaceutical Industries Ltd

2. Dr. Reddy's Laboratories Ltd
3. Cipla Ltd
4. Torrent Pharmaceuticals Ltd
5. Zydus Lifesciences Ltd
OBJECTIVES OF THE STUDY
1. To calculate Return and Risk of top five pharmaceutical companies and Index by
applying traditional formula.
2. To calculate Return and Risk of top five pharmaceutical companies and Index by
applying Value at Risk.
3. To check whether there is any relationship between Return and Risk of pharmaceutical
companies and the Index – Both Traditional Approach and Value at Risk Approach.
HYPOTHESIS
NULL HYPOTHESIS (H0): There is no significant impact of Risk on Return of the top five
pharmaceutical companies and Index.
ALTERNATE HYPOTHESIS (H1): There is a significant impact of Risk on Return of the

top five pharmaceutical companies and Index.
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RESEARCH METHODS
The research is descriptive in nature and general analysis is done using historical data. The
study is conducted by taking the data for a period of 6 years (01-04-2017 to 31-03-2023). The
data is collected from NSE website. The data collected is grouped and quoted in Microsoft
Excel. Different models like capital assets pricing model, historical simulation model,
minimum Var model etc are used to analyse the data. ANOVA test is used to test the hypothesis.
TOOLS FOR DATA COLLECTION
Secondary Data: It is collected from NSE, screener website
LIMITATIONS OF THE STUDY
1. The study is limited to only the top five Pharmaceutical Companies and not to the
complete Pharmaceutical Industry in India.
2. The study is wholly dependent on Secondary Data: The data obtained from balance
sheet and financial statement uploaded in the web.
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CHAPTER 3: PROFILE OF THE SELECTED ORGANIZATIONS
NIFTY PHARMA
The Nifty Pharma index is a sectoral index of the National Stock Exchange of India (NSE)
comprising pharmaceutical companies listed on the exchange. It is a prominent benchmark that
reflects the performance of the pharmaceutical sector in India, which is one of the largest and
fastest-growing industries in the country. The index includes a mix of large-cap, mid-cap, and
small-cap pharmaceutical companies, offering investors a comprehensive view of the sector's
performance.
The Nifty Pharma index consists of leading pharmaceutical companies involved in various
aspects of the healthcare industry, including the manufacturing and distribution of
pharmaceuticals, research and development, and other related activities. These companies
operate both in domestic and international markets, catering to a wide range of healthcare
needs.
Several factors influence the performance of the Nifty Pharma index:
1. Research and Development: Pharmaceutical companies invest heavily in research and

development to discover new drugs, improve existing ones, and meet regulatory
standards. Breakthroughs in drug development often lead to significant market gains
for companies involved.
2. Regulatory Environment: The pharmaceutical industry is heavily regulated. Changes
in regulations, both in India and in major export markets, can significantly impact the
industry's performance.
3. Global Demand: The demand for generic drugs and other pharmaceutical products in
international markets, especially in developed countries, plays a crucial role in the
performance of Indian pharmaceutical companies.
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4. Currency Fluctuations: Since many pharmaceutical companies export their products,

fluctuations in currency exchange rates, especially the Indian Rupee against major
global currencies like the US Dollar and Euro, can affect their revenues and
profitability.
5. Healthcare Policies: Changes in healthcare policies, both in India and abroad, can
affect pharmaceutical companies. Policies related to pricing, intellectual property
rights, and access to healthcare can impact the industry's bottom line.
Investors often look at the Nifty Pharma index to diversify their portfolios. The pharmaceutical
sector is known for its resilience, often performing well even in economic downturns due to
the essential nature of healthcare products. However, it's important to note that individual
company performance within the index can vary widely based on their specific products,
pipelines, and global market presence.
The pharmaceutical industry faces challenges such as increasing competition, pricing

pressures, stringent regulatory requirements, and the need for constant innovation. Companies
need to adapt to changing market dynamics and invest in research to stay competitive.
SUN PHARMACEUTICAL INDUSTRIES LTD.
Sun Pharmaceutical Industries Ltd., headquartered in Mumbai, India, is one of the world's
leading pharmaceutical companies. Established in 1983 by Mr. Dilip Shanghvi, Sun Pharma
has evolved into a global powerhouse in the pharmaceutical industry, focusing on the discovery,
development, manufacturing, and marketing of a wide range of high-quality, affordable generic
and branded medicines.
FIGURE 3.1 LOGO OF SUN PHARMACEUTICAL INDUSTRIES LTD.
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With a strong presence in over 100 countries and a robust portfolio of products, Sun Pharma is
renowned for its commitment to improving the quality of life for millions of people worldwide.
The company operates multiple manufacturing facilities across the globe, adhering to stringent
quality standards and regulatory requirements. Sun Pharma's diverse product portfolio includes
prescription generics, specialty pharmaceuticals, and active pharmaceutical ingredients (APIs).
The company caters to various therapeutic areas such as cardiology, psychiatry, neurology,
gastroenterology, and oncology, addressing a broad spectrum of healthcare needs.
Innovation lies at the core of Sun Pharma's operations. The company invests significantly in
research and development to create novel formulations and delivery systems. Its research
centers and collaborations with leading scientific institutions facilitate the development of
cutting-edge medicines, ensuring a competitive edge in the global market. Sun Pharma is
committed to maintaining the highest standards of quality and compliance. The company's
adherence to Good Manufacturing Practices (GMP) and stringent quality control measures has
earned it the trust of healthcare professionals and patients alike. Its focus on quality assurance
extends to every stage of the manufacturing process, ensuring the safety and efficacy of its
products.
Beyond business, Sun Pharma is dedicated to environmental sustainability. The company

implements eco-friendly practices, invests in renewable energy, and promotes responsible
water usage. Sun Pharma's commitment to corporate social responsibility is reflected in its
efforts to contribute to community development and healthcare access, particularly in
underserved regions. Sun Pharma's relentless pursuit of excellence has been acknowledged
through numerous awards and accolades. The company's innovative products, research
initiatives, and corporate governance practices have earned it recognition both in India and on
the international stage.
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DR. REDDY'S LABORATORIES LTD.
Founded in 1984 by Dr. K. Anji Reddy, Dr. Reddy's Laboratories Ltd. is a leading Indian
multinational pharmaceutical company headquartered in Hyderabad, India. Renowned for its
commitment to innovation, quality, and affordability, Dr. Reddy's has emerged as a global
powerhouse in the pharmaceutical industry, serving the healthcare needs of millions around the
world.
FIGURE 3.2 LOGO OF DR. REDDY’S LABORATORIES LTD.
Dr. Reddy's operates in multiple countries, with a strong presence in key markets such as North
America, Europe, Russia, and India. The company's extensive global footprint enables it to
provide a diverse portfolio of high-quality generic and branded pharmaceutical products,
including prescription medications, biologics, biosimilars, and active pharmaceutical
ingredients (APIs), catering to a wide range of therapeutic areas. At the heart of Dr. Reddy's
success lies its relentless focus on research and development (R&D). The company invests
significantly in innovative drug discovery and development, striving to address unmet medical
needs and improve patient outcomes. Dr. Reddy's state-of-the-art research centers and
collaborations with leading scientific institutions underscore its dedication to advancing
healthcare through groundbreaking solutions.
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Dr. Reddy's is committed to maintaining the highest standards of quality and compliance across
its operations. The company's manufacturing facilities adhere to stringent global quality
standards, ensuring the safety, efficacy, and reliability of its products. Rigorous quality control
measures and adherence to Good Manufacturing Practices (GMP) have earned Dr. Reddy's a
stellar reputation in the pharmaceutical industry. Dr. Reddy's is a pioneer in the development
and commercialization of biosimilar products, offering affordable alternatives to complex
biologic drugs. The company's expertise in biosimilars has positioned it as a leader in the global
market, providing patients with access to life-saving treatments at a fraction of the cost of
originator biologics.
Beyond business, Dr. Reddy's is deeply committed to corporate social responsibility (CSR).
The company actively engages in community development initiatives, focusing on healthcare,
education, and environmental sustainability. Dr. Reddy's CSR programs aim to make a positive
impact on society, reflecting its ethos of giving back to the communities it serves. Dr. Reddy's
Laboratories has received numerous accolades for its contributions to the pharmaceutical
industry. Awards recognizing its excellence in R&D, product innovation, and corporate
governance highlight the company's dedication to maintaining the highest standards of
performance and integrity.
CIPLA LTD.
Founded in 1935 by Dr. K.A. Hamied in Mumbai, India, Cipla Ltd. has established itself as a
global pharmaceutical company committed to providing affordable and accessible healthcare
solutions. With a focus on innovation, quality, and sustainability, Cipla has become a trusted
name in the pharmaceutical industry, serving patients in over 150 countries.
FIGURE 3.3 LOGO OF CIPLA LTD.
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Cipla operates a robust global network with a significant presence in both developed and
emerging markets. The company's international footprint allows it to deliver a wide range of
pharmaceutical products, including prescription medicines, active pharmaceutical ingredients
(APIs), and respiratory devices, addressing diverse therapeutic areas such as respiratory,
antiretroviral, oncology, and cardiovascular.
Innovation is at the core of Cipla's philosophy. The company invests substantially in research
and development (R&D) to create novel formulations and delivery systems. Cipla's dedicated
research centers and collaborations with global scientific institutions enable the development
of high-quality, affordable medicines, ensuring patients have access to cutting-edge treatments.
Cipla has gained international recognition for its expertise in respiratory care. The company
specializes in the development of inhalation and aerosol therapies, offering a range of inhalers
and devices for the management of asthma, chronic obstructive pulmonary disease (COPD),
and other respiratory conditions. Cipla's commitment to respiratory health has significantly
improved the lives of patients worldwide.
Cipla places a strong emphasis on quality assurance and compliance. The company's
manufacturing facilities adhere to stringent global quality standards and Good Manufacturing
Practices (GMP). Cipla's dedication to quality ensures the safety, efficacy, and reliability of its
products, earning the trust of healthcare professionals and patients alike. Cipla is renowned for
its initiatives to make essential medicines more affordable and accessible, especially in
developing countries. Through strategic partnerships, voluntary licensing agreements, and
innovative pricing models, Cipla has played a pivotal role in increasing access to life-saving
medications, particularly for diseases like HIV/AIDS, malaria, and tuberculosis.
Cipla is deeply committed to corporate social responsibility (CSR). The company actively
engages in community development programs, focusing on healthcare, education, and
environmental sustainability. Cipla's CSR initiatives aim to improve healthcare infrastructure,
enhance education opportunities, and promote environmental conservation, demonstrating its
commitment to social welfare. Cipla's dedication to excellence has been recognized through
numerous awards and accolades. The company has received honors for its contributions to the
pharmaceutical industry, innovative research, and commitment to corporate governance,
reinforcing its position as a leader in the global healthcare sector.
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TORRENT PHARMACEUTICALS LTD.
Founded in 1959 by U. N. Mehta, Torrent Pharmaceuticals Ltd. has emerged as one of India’s
leading pharmaceutical companies, known for its unwavering commitment to quality,
innovation, and patient well-being. Headquartered in Ahmedabad, India, Torrent
Pharmaceuticals has a rich legacy of more than six decades and a global presence in several
key markets.
FIGURE 3.4 LOGO OF TORRENT PHARMACEUTICALS LTD.
Torrent Pharmaceuticals operates in over 40 countries, with a significant presence in major

pharmaceutical markets, including the United States, India, Brazil, Germany, and Russia. The
company’s international reach allows it to provide a diverse portfolio of high-quality generic
and branded pharmaceutical products, addressing a wide range of therapeutic areas such as
cardiovascular, central nervous system, gastro-intestinal, and anti-infective.
Torrent Pharmaceuticals places a strong emphasis on research and development (R&D) to

create innovative and affordable healthcare solutions. The company invests significantly in
cutting-edge research, focusing on developing new formulations, drug delivery systems, and
biosimilars. This dedication to R&D ensures that Torrent Pharmaceuticals remains at the
forefront of medical advancements, delivering novel treatments to patients globally. Torrent
Pharmaceuticals is synonymous with quality and manufacturing excellence. The company’s
state-of-the-art manufacturing facilities adhere to stringent global quality standards, ensuring
the safety, efficacy, and consistency of its products. Torrent Pharmaceuticals’ commitment to
quality assurance and adherence to Good Manufacturing Practices (GMP) have earned it the
trust of healthcare professionals and patients alike.
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One of Torrent Pharmaceuticals’ key strengths lies in its focus on specialized therapies. The
company specializes in niche therapeutic segments, developing and marketing medications for
complex diseases and conditions. This specialization allows Torrent Pharmaceuticals to cater
to patients’ specific needs, providing targeted treatments for diseases that might otherwise have
limited therapeutic options. Torrent Pharmaceuticals is deeply committed to corporate social
responsibility (CSR) initiatives. The company actively engages in community development
programs, focusing on healthcare, education, and environmental sustainability. Through its
CSR activities, Torrent Pharmaceuticals aims to create a positive impact on society, enhancing
healthcare infrastructure, promoting education, and contributing to environmental conservation
efforts.
Beyond business, Torrent Pharmaceuticals prioritizes environmental sustainability. The

company integrates eco-friendly practices into its operations, emphasizing energy efficiency,
waste reduction, and responsible water usage. Torrent Pharmaceuticals’ commitment to
sustainable practices reflects its dedication to minimizing its environmental footprint and
contributing to a greener, healthier planet. Torrent Pharmaceuticals has received numerous
accolades for its contributions to the pharmaceutical industry. Awards recognizing its
excellence in research, product innovation, and corporate governance highlight the company’s
commitment to maintaining the highest standards of performance and integrity.
ZYDUS LIFESCIENCIES LTD.
Zydus Lifesciences Limited, popularly known as Zydus Cadila, is one of India's leading and
most diverse healthcare companies. Founded in 1952 by Ramanbhai Patel and headquartered
in Ahmedabad, Gujarat, Zydus Lifesciences has evolved into a global pharmaceutical and
healthcare powerhouse, driven by a commitment to innovation, quality, and affordability.
FIGURE 3.5 LOGO OF ZYDUS LIFESCIENCES LTD.
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With a robust presence in over 50 countries worldwide, Zydus Lifesciences is recognized for
its wide-ranging portfolio of pharmaceuticals, biotechnology products, and consumer
healthcare items. The company offers an extensive array of medicines, spanning therapeutic
areas such as cardiovascular, respiratory, oncology, anti-infectives, and central nervous system
disorders. Zydus Lifesciences also excels in the production of biosimilars and generic
medicines, making vital medications accessible and affordable to a broad demographic.
At the heart of Zydus Lifesciences's success lies its robust research and development initiatives.
The company invests significantly in cutting-edge research, focusing on developing novel drug
formulations, complex generics, and biosimilars. Zydus Lifesciences's state-of-the-art research
facilities and collaborations with global scientific institutions enable the company to introduce
innovative healthcare solutions, addressing unmet medical needs and enhancing patient
outcomes. Zydus Lifesciences is recognized for its expertise in vaccine development and
manufacturing. The company's advanced vaccine research center has been instrumental in
creating vaccines for various diseases, contributing significantly to public health initiatives in
India and other countries. Their dedication to vaccine innovation has played a crucial role in
disease prevention and community health.
Zydus Lifesciences maintains stringent quality standards across its manufacturing processes.
The company's manufacturing facilities adhere to global regulatory requirements, ensuring the
production of safe, effective, and high-quality medicines. Zydus Lifesciences's commitment to
quality assurance and adherence to Good Manufacturing Practices (GMP) have garnered trust
from healthcare professionals and patients alike. Beyond business, Zydus Lifesciences actively
participates in corporate social responsibility (CSR) initiatives. The company invests in
community development programs, focusing on healthcare, education, and social welfare.
Zydus Lifesciences's CSR activities are designed to improve healthcare infrastructure, enhance
educational opportunities, and promote environmental sustainability, demonstrating a
commitment to societal well-being.
Zydus Lifesciences continues to expand its horizons through strategic collaborations, research
breakthroughs, and a commitment to ethical business practices. As the global healthcare
landscape evolves, Zydus Lifesciences remains at the forefront of innovation, poised to
introduce transformative healthcare solutions that improve the quality of life for people
worldwide.
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CHAPTER 4: DATA ANALYSIS AND INTERPRETATION
TOOLS USED FOR THE ANALYSIS OF DATA
Return: Return of the Historical Data collected is calculated by using the basic formula of
Return Calculation.
Risk: Risk or Standard Deviation of the Stocks and the Index is calculated by
Value at Risk: Value at Risk is calculated by applying the method of Monte Carlo Simulation.
Generate a large number of random scenarios for future asset prices based on a normal
distribution with the mean and standard deviation calculated. Determine the VaR at a specific
confidence level (e.g., 95%, 99%) by finding the portfolio value at the corresponding percentile
in the sorted list.
VaR (T days) = VaR (1 day) x SQRT(T)
RETURN AND RISK ANALYSIS – TRADITIONAL METHOD
Return Risk
NSE Nifty Pharma 0.0451 3.3539
Sun Pharmaceutical Industries 0.1260 4.9392
Dr.Reddys Laboratories 0.1260 4.4100
Cipla Ltd 0.1008 4.3596
Torrent Pharmaceuticals 0.1764 4.5612
Zydus Lifesciences Ltd 0.0756 5.0148
TABLE 4.1 RETURN AND RISK ANALYSIS – TRADITIONAL METHOD
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1. NSE Nifty Pharma: This provides the benchmark or Index values for the pharmaceutical
sector in the NSE (National Stock Exchange).
Return (0.0451): This number (0.0451 or 4.51%) represents the average return of the
Nifty Pharma index or portfolio.
Risk (3.3539): This number (3.3539) represents the standard deviation of the returns of
the Nifty Pharma index. It indicates the volatility or riskiness of the index. A higher standard
deviation means higher volatility.
2. Sun Pharmaceutical Industries:
Return (0.1260): This number (0.1260 or 12.60%) represents the average return of Sun
Pharmaceutical Industries.
Sun Pharmaceutical Industries. It indicates the volatility or riskiness of this specific stock.
3. Dr. Reddy's Laboratories:
Return (0.1260): Similar to Sun Pharmaceutical Industries, this number (0.1260 or

12.60%) represents the average return of Dr. Reddy's Laboratories.
Dr. Reddy's Laboratories. It measures the volatility or risk associated with this specific stock.
4. Cipla Ltd:
Return (0.1008): This number (0.1008 or 10.08%) represents the average return of
Cipla Ltd.
Cipla Ltd. It shows the volatility or risk associated with this specific stock.
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5. Torrent Pharmaceuticals:
Torrent Pharmaceuticals.
Torrent Pharmaceuticals. It indicates the volatility or riskiness of this specific stock.
6. Zydus Lifesciences Ltd:
Zydus Lifesciences Ltd.
Zydus Lifesciences Ltd. It measures the volatility or risk associated with this specific stock.
Interpretation:
Return: Return percentages indicate how much profit an investment has earned relative to its
cost. Higher returns suggest better performance in terms of profitability.
Risk: Standard deviation is a measure of the dispersion or spread of a set of values. In this
context, it represents the volatility of the stock or index. Higher standard deviation values
indicate higher price volatility and, consequently, higher risk.
Comparing the return and risk values across these pharmaceutical companies allows investors
to assess the trade-off between potential profitability (return) and risk. A stock with higher
returns might be attractive, but it also comes with higher volatility (risk). Investors often look
for a balance between these factors based on their risk tolerance and investment goals.
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HYPOTHESIS TESTING – ANOVA
Anova: Single Factor
SUMMARY
Groups Count Sum Average Variance
Return 6 0.649916 0.108319 0.002076
Risk 6 26.63874 4.43979 0.356235
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 56.28492 1 56.28492 314.1678 6.96E-09 4.964603
Within Groups 1.791556 10 0.179156
Total 58.07647 11
TABLE 4.2 ANOVA TABLE – TRADITIONAL METHOD
Summary Table:
Return: There are 6 data points in this group, with a total sum of 0.6499, an average (mean)
of 0.1083, and a variance of approximately 0.0021.
Risk: There are also 6 data points in this group, with a total sum of 26.6387, an average of
4.4398, and a larger variance of approximately 0.3562.
ANOVA Table:
Between Groups: This row represents the variation between the Return and Risk. The Sum of
Squares (SS) is 56.2849, degrees of freedom (df) is 1, Mean Square (MS) is 56.2849, F-statistic
is 314.1678, and the p-value is very close to zero (6.96482 * 10-9). The low p-value indicates
that there is a significant impact of Risk on Return of the top five pharmaceutical companies
and Index.
Within Groups: This row represents the variation within the Return and Risk. The Sum of
Squares (SS) is 1.7916, degrees of freedom (df) is 10, and Mean Square (MS) is 0.1792.
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Interpretation:
The p-value (6.96482 * 10-9) in the ANOVA table indicates that p-value is less than 0.05
which allows us to reject the null hypothesis and accept the alternate hypothesis which
states that there is a significant impact of Risk on Return of the top five pharmaceutical
companies and Index.
Group Differences: The large F-statistic (314.1678) suggests that the variation between the
Return and Risk is much larger than the variation within the groups. In other words, the
difference in the means of Return and Risk is statistically significant.
RETURN AND RISK ANALYSIS – VALUE AT RISK
NSE NIFTY PHARMA
Results for Monte Carlo Simulation:
Monte Carlo Simulation

Mean 0.03%
Standard Deviation 1.27%
Minimum -3.60%
Maximum 3.82%
MP as on 01-04-2023 12067.95
TABLE 4.3 NSE NIFTY PHARMA – MONTE CARLO SIMULATION
Mean (0.03%): The average return from the Monte Carlo simulation is 0.03%, indicating the
expected average outcome based on the simulation.
Standard Deviation (1.27%): The standard deviation of 1.27% represents the volatility or the
degree of variation of returns from the mean return. A higher standard deviation indicates
higher volatility and, consequently, higher risk.
Minimum (-3.60%) and Maximum (3.82%): These values represent the minimum and
maximum simulated returns from the Monte Carlo simulation, showing the range of possible
outcomes.
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MP as on 01-04-2023 (Rs.12067.95): This shows us that the trading price of the Index is
Rs.12067.95 as of April 1st, 2023.
Percentile ConfidenceVAR % Stock PriceVAR (INR)

5% 95.0% -2.07% 12318.19 -250.24
TABLE 4.4 NSE NIFTY PHARMA – VAR CALCULATION
At 95% Confidence: This indicates that the Value at Risk (VAR) is calculated at a 95%
confidence level.
VAR% (-2.07%): The VAR% represents the maximum expected loss at a 95% confidence
level. In this case, it's -2.07%, indicating a potential loss.
VAR Days -2.07%

Days 252
VAR Year -32.92%
VAR Year (INR) 16040.42
Risk 3.197747
Return 0.329175
TABLE 4.5 NSE NIFTY PHARMA – VAR, RISK AND RETURN
VAR Year (-32.92%): This indicates the Value at Risk over a year, suggesting that there's a
95% confidence that the maximum loss over a year would not exceed 34.54%.
Risk (3.19): This value seems to represent the overall risk associated with the simulation. The
specific context of this number would depend on the units and the scale used in the simulation.
Return (0.32): This value likely represents the expected return generated from the simulation.
Again, the context of this number depends on the units used in the simulation.
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Distribution of Simulated Returns:
GRAPH 4.1 NSE NIFTY PHARMA – SIMULATED RETURNS DISTRIBUTION CURVE
Frequency Table of Simulated Returns:
Simulated Returns Frequency

<-5 0
(-5,-4] 2
(-4,-3] 14
(-3,-2] 83
(-2,-1] 236
(-1,0] 376
(0,1] 408
(1,2] 252
(2,3] 97
(3,4] 18
(4,5] 1
>5 0
TABLE 4.6 NSE NIFTY PHARMA – FREQUENCY TABLE OF SIMULATED RETURNS
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GRAPH 4.2 NSE NIFTY PHARMA – FREQUENCY OF SIMULATED RETURNS
SUN PHARMACEUTICAL INDUSTRIES LTD

Mean 0.07%
Minimum -8.25%
Maximum 6.43%
MP as on 01-04-2023 979.05
TABLE 4.7 SUN PHARMACEUTICAL INDUSTRIES LTD – MONTE CARLO

SIMULATION
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outcomes.
Rs.979.05 as of April 1st, 2023.
Percentile Confidence VAR % Stock Price VAR (INR)

5% 95.0% -3.05% 1008.92 -29.87
TABLE 4.8 SUN PHARMACEUTICAL INDUSTRIES LTD – VAR CALCULATION
confidence level.
VAR Days -3.05%

Days 252
VAR Year -48.43%
Risk 4.850178
Return 0.484315
TABLE 4.9 SUN PHARMACEUTICAL INDUSTRIES LTD – VAR, RISK AND RETURN
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GRAPH 4.3 SUN PHARMACEUTICAL INDUSTRIES LTD – SIMULATED RETURNS

DISTRIBUTION CURVE
Returns Frequency
<-5 7
(-5,-4] 21
(-4,-3] 52
(-3,-2] 136
(-2,-1] 200
(-1,0] 292
(0,1] 314
(1,2] 226
(2,3] 143
(3,4] 58
(4,5] 26
>5 7
TABLE 4.10 SUN PHARMACEUTICAL INDUSTRIES LTD – FREQUENCY TABLE OF
SIMULATED RETURNS
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GRAPH 4.4 SUN PHARMACEUTICAL INDUSTRIES LTD – FREQUENCY OF

SIMULATED RETURNS
DR. REDDY’S LABORATORIES LTD

Mean 0.06%
Minimum -5.48%
Maximum 5.85%
MP as on 01-04-2023 4656.5
TABLE 4.11 DR. REDDY’S LABORATORIES LTD – MONTE CARLO SIMULATION
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outcomes.
Rs.4656.50 as of April 1st, 2023.
Percentile ConfidenceVAR % Stock Price VAR (INR)

5% 95.0% -2.86% 4789.47 -132.97
TABLE 4.12 DR. REDDY’S LABORATORIES LTD – VAR CALCULATION
confidence level.
VAR Days -2.86%

Days 252
VAR Year -45.33%
Risk 4.313024
Return 0.453315
TABLE 4.13 DR. REDDY’S LABORATORIES LTD – VAR, RISK AND RETURN
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GRAPH 4.5 DR. REDDY’S LABORATORIES LTD – SIMULATED RETURNS

DISTRIBUTION CURVE
Returns Frequency
<-5 2
(-5,-4] 12
(-4,-3] 44
(-3,-2] 109
(-2,-1] 215
(-1,0] 346
(0,1] 322
(1,2] 250
(2,3] 123
(3,4] 44
(4,5] 11
>5 5
TABLE 4.14 DR. REDDY’S LABORATORIES LTD – FREQUENCY TABLE OF
SIMULATED RETURNS
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GRAPH 4.6 DR. REDDY’S LABORATORIES LTD – FREQUENCY OF SIMULATED

RETURNS
CIPLA LTD

Mean 0.04%
Minimum -5.27%
Maximum 5.44%
MP as on 01-04-2023 891.45
TABLE 4.15 CIPLA LTD – MONTE CARLO SIMULATION
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Risk
outcomes.

5% 95.0% -2.74% 915.86 -24.41
TABLE 4.16 CIPLA LTD – VAR CALCULATION
confidence level.
VAR Days -2.74%

Days 252
VAR Year -43.46%
Risk 4.30849
Return 0.434627
TABLE 4.17 CIPLA LTD – VAR, RISK AND RETURN
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GRAPH 4.7 CIPLA LTD – SIMULATED RETURNS DISTRIBUTION CURVE
Returns Frequency
<-5 3
(-5,-4] 13
(-4,-3] 42
(-3,-2] 100
(-2,-1] 239
(-1,0] 340
(0,1] 311
(1,2] 255
(2,3] 122
(3,4] 43
(4,5] 9
>5 6
TABLE 4.18 CIPLA LTD – FREQUENCY TABLE OF SIMULATED RETURNS
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GRAPH 4.8 CIPLA LTD – FREQUENCY OF SIMULATED RETURNS
TORRENT PHARMACEUTICALS LTD

Mean 0.06%
Minimum -5.44%
Maximum 6.42%
MP as on 01-04-2023 1545.3
TABLE 4.19 TORRENT PHARMACEUTICALS LTD – MONTE CARLO SIMULATION
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outcomes.
Rs.1545.30 as of April 1st, 2023.

5% 95.0% -2.73% 1587.42 -42.12
TABLE 4.20 TORRENT PHARMACEUTICALS LTD – VAR CALCULATION
confidence level.
VAR Days -2.73%

Days 252
VAR Year -43.27%
Risk 4.495741
Return 0.432701
TABLE 4.21 TORRENT PHARMACEUTICALS LTD – VAR, RISK AND RETURN
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GRAPH 4.9 TORRENT PHARMACEUTICALS LTD – SIMULATED RETURNS

DISTRIBUTION CURVE
Returns Frequency
<-5 1
(-5,-4] 7
(-4,-3] 40
(-3,-2] 132
(-2,-1] 264
(-1,0] 299
(0,1] 306
(1,2] 222
(2,3] 130
(3,4] 56
(4,5] 20
>5 6
TABLE 4.22 TORRENT PHARMACEUTICALS LTD – FREQUENCY TABLE OF
SIMULATED RETURNS
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GRAPH 4.10 TORRENT PHARMACEUTICALS LTD – FREQUENCY OF SIMULATED

RETURNS
ZYDUS LIFESCIENCES LTD

Mean 0.03%
Minimum -8.01%
Maximum 5.80%
MP as on 01-04-2023 492.4
TABLE 4.23 ZYDUS LIFESCIENCES LTD – MONTE CARLO SIMULATION
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outcomes.

5% 95.0% -3.31% 508.68 -16.28
TABLE 4.24 ZYDUS LIFESCIENCES LTD – VAR CALCULATION
confidence level.
VAR Days -3.31%

Days 252
VAR Year -52.49%
Risk 4.997396
Return 0.524933
TABLE 4.25 ZYDUS LIFESCIENCES LTD – VAR, RISK AND RETURN
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GRAPH 4.11 ZYDUS LIFESCIENCES LTD – SIMULATED RETURNS DISTRIBUTION

CURVE
Returns Frequency
<-5 9
(-5,-4] 26
(-4,-3] 58
(-3,-2] 124
(-2,-1] 216
(-1,0] 293
(0,1] 304
(1,2] 228
(2,3] 120
(3,4] 68
(4,5] 26
>5 11
TABLE 4.26 ZYDUS LIFESCIENCES LTD – FREQUENCY TABLE OF SIMULATED
RETURNS
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GRAPH 4.12 ZYDUS LIFESCIENCES LTD – FREQUENCY OF SIMULATED

RETURNS
HYPOTHESIS TESTING – ANOVA
Anova: Single Factor
SUMMARY
Groups Count Sum Average Variance
Return 6 2.659066 0.443178 0.004332
Risk 6 26.16258 4.360429 0.404133
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 46.03458 1 46.03458 225.403 3.47E-08 4.964603
Within Groups 2.042323 10 0.204232
Total 48.07691 11
TABLE 4.27 ANOVA TABLE – VALUE AT RISK APPROACH
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Summary Table:
Return: There are 6 data points in this group, with a total sum of 2.66, an average (mean) of
0.4432, and a variance of approximately 0.0043.
Risk: There are also 6 data points in this group, with a total sum of 26.1626, an average of
4.3604, and a larger variance of approximately 0.4041.
ANOVA Table:
Between Groups: This row represents the variation between the Return and Risk. The Sum of
Squares (SS) is 46.0346, degrees of freedom (df) is 1, Mean Square (MS) is 46.0346, F-statistic
is 225.403, and the p-value is very close to zero (3.47 * 10-8). The low p-value indicates that
there is a significant impact of Risk on Return of the top five pharmaceutical companies and
Index.
Within Groups: This row represents the variation within the Return and Risk. The Sum of
Squares (SS) is 2.0423, degrees of freedom (df) is 10, and Mean Square (MS) is 0.2042.
Interpretation:
The p-value (3.47 * 10-8) in the ANOVA table indicates that p-value is less than 0.05 which
allows us to reject the null hypothesis and accept the alternate hypothesis which states
that there is a significant impact of Risk on Return of the top five pharmaceutical
companies and Index.
Group Differences: The large F-statistic (225.403) suggests that the variation between the
Return and Risk is much larger than the variation within the groups. In other words, the
difference in the means of Return and Risk is statistically significant.
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DATA ANALYSIS – CONCLUSION
The analysis conducted on the Traditional approach and Value at Risk approach has provided
valuable insights into the relationship between risk and return for the top five pharmaceutical
companies and Index. The Summary Tables and ANOVA results clearly indicate that there is a
significant impact of risk on return for the top five pharmaceutical companies and Index.
On examining the Traditional approach analysis, it is evident that the variance in return and
risk data is relatively smaller compared to the Value at Risk approach. Despite the smaller
variances, the ANOVA results for both methods consistently reveal low p-values, significantly
below the 0.05 threshold limit. This indicates a strong statistical significance, allowing the
rejection of the null hypothesis and the acceptance of the alternate hypothesis. In simpler terms,
there is a robust and significant impact of risk on return for these pharmaceutical companies
and the Index, regardless of the method used for analysis.
The substantial F-statistics in both cases emphasize that the differences in means between
return and risk are noteworthy and not merely due to chance. This reinforces the argument that
the relationship between risk and return in this context is not coincidental but a fundamental
characteristic that should be considered seriously by investors and decision-makers.
This analysis underscores the importance of understanding and managing risks effectively to
optimize returns. Investors in the pharmaceutical sector, as well as those considering broader
market investments, should take these findings into account. Acknowledging the substantial
impact of risk on return can guide investment strategies, inform decision-making processes,
and ultimately contribute to more informed and potentially profitable choices in the dynamic
world of finance.
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CHAPTER 5: FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
Impact of Risk on Return in Pharmaceutical Companies and Index
Traditional Approach Analysis:
In the traditional method analysis, we examined the relationship between Return and Risk in
the top five pharmaceutical companies and the Index. The summary table showed that the
average Return was 0.1083 with a variance of approximately 0.0021, while the average Risk
was 4.4398 with a larger variance of approximately 0.3562.
ANOVA Analysis (Traditional Approach):
The ANOVA table revealed significant insights. Between Groups analysis demonstrated a
substantial impact of Risk on Return (F-statistic: 314.1678, p-value: 6.96482 * 10-9). This low
p-value indicated that Risk significantly influenced Return among the pharmaceutical
companies and the Index. Moreover, the F-statistic being considerably large indicated that the
variation between Return and Risk was statistically significant, far exceeding the variation
within the groups.
Value at Risk Analysis:
In the Value at Risk analysis, similar patterns emerged. The summary table displayed an
average Return of 0.4432 with a variance of approximately 0.0043, while Risk had an average
of 4.3604 and a larger variance of approximately 0.4041.
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ANOVA Analysis (Value at Risk):
The ANOVA table in the Value at Risk analysis corroborated the findings. The Between Groups
analysis demonstrated a significant impact of Risk on Return (F-statistic: 225.403, p-value:
3.47 * 10-8). The small p-value indicated a rejection of the null hypothesis, supporting the
presence of a substantial relationship between Risk and Return. Furthermore, the high F-
statistic emphasized that the difference in means between Return and Risk was statistically
significant, underlining the practical importance of these findings.
Interpretation:
Both analyses consistently showed that Risk significantly influenced Return in the top five
pharmaceutical companies and the Index. The p-values, being considerably lower than the
significance level of 0.05, allowed us to reject the null hypothesis and accept the alternate
hypothesis. These results suggest that understanding and managing Risk are critical factors
affecting the Returns of pharmaceutical companies and the broader market Index. The large F-
statistics in both analyses further emphasized the practical significance of these findings,
indicating that the variation in Return attributed to Risk was substantial compared to the
variation within the groups.
SUGGESTIONS
The depth of the analysis will greatly depend on the availability of data and the specific
objectives of the study. Here are some suggestions to enhance and expand the benefits of the
study:
1. Diversify Data Sources:

Consider incorporating data from various sources or multiple periods to enhance the
robustness of the analysis. This could include historical data, different pharmaceutical
sectors, or global pharmaceutical markets.
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2. Incorporate Qualitative Data:

Integrate qualitative data such as industry reports, expert opinions, or company
strategies to provide a comprehensive view. Qualitative insights can offer context to the
quantitative results.
3. Time Series Analysis:

If one has access to time-series data, conduct a time-series analysis to observe how the
relationship between risk and return has evolved over time. This can provide valuable
insights into trends and patterns.
4. Correlation Analysis:
Perform correlation analysis to quantify the strength and direction of the relationship
between risk and return. This can help in understanding the degree to which changes in
risk correlate with changes in returns.
5. Regression Analysis:
Consider regression analysis to identify and quantify the specific factors within the
'Risk' category that most significantly impact returns. This can provide a more nuanced
understanding of the relationship.
6. Stress Testing:
Conduct stress testing on the data to assess how the pharmaceutical companies and
Index perform under adverse conditions. This can provide insights into the resilience
of the entities in your study.
7. Comparative Analysis:
Compare the pharmaceutical industry's performance with other industries or sectors.
Understanding how risk impacts pharmaceuticals relative to other sectors can offer
valuable comparative insights.
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8. Longitudinal Study:
If feasible, consider conducting a longitudinal study that tracks the performance of these
pharmaceutical companies and Index over an extended period. Long-term data analysis
can reveal unique insights that short-term studies might miss.
9. Sensitivity Analysis:
Perform sensitivity analysis to assess how changes in various risk factors affect the
outcomes. This can provide a more nuanced understanding of the impact of different
types of risks on returns.
10. Future Predictions:

Use predictive modelling techniques to forecast future returns based on current risk
factors. Machine learning algorithms or time series forecasting methods can be
employed for this purpose.
11. Peer Group Analysis:

Compare the performance of these pharmaceutical companies with their peers in the
industry. Understanding how similar companies are affected by risk can provide
valuable benchmarking information.
12. Ethical and Environmental Factors:

Consider incorporating ethical and environmental factors into your analysis. For
instance, analyse how pharmaceutical companies environmental practices or ethical
considerations impact their returns and risk profiles.
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CONCLUSION
In this comprehensive study on risk and return analysis of pharmaceutical companies in India
using the Value at Risk (VaR) methodology, we have delved deeply into understanding the
intricate relationship between risk factors and financial returns within the pharmaceutical
industry. By employing statistical methods, including ANOVA, summary tables, and
sophisticated data analysis techniques, we have gained valuable insights into the dynamics of
risk and return in this sector.
Our findings underscore the significance of risk management strategies within pharmaceutical
companies. The meticulous analysis of return and risk data has illuminated several key points:
Statistical Significance: Through rigorous statistical analysis, we have established a strong

statistical significance between risk factors and financial returns. The low p-values obtained
from the ANOVA tests confirm that the impact of risk on returns is substantial and cannot be
attributed to chance alone.
VaR as a Tool: The application of Value at Risk (VaR) has proven instrumental in quantifying
and managing risk within the context of financial investments. By employing VaR,
pharmaceutical companies can better understand the potential losses they might face under
adverse market conditions, enabling them to make informed decisions and implement risk
mitigation strategies.
Risk Diversification: The analysis suggests that diversification of risk factors is essential for
optimizing returns. Companies that strategically diversify their risk exposures across various
areas, such as regulatory compliance, market volatility, and operational challenges, are better
positioned to weather uncertainties and fluctuations in the market.
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Strategic Implications: Pharmaceutical companies in India should consider our research

findings in their strategic planning. A nuanced understanding of risk-return dynamics can guide
investment decisions, capital allocation, and the development of risk management policies,
ultimately enhancing the resilience and sustainability of these companies in the face of market
uncertainties.
Policy and Regulatory Considerations: Policymakers and regulatory bodies can leverage the
insights from this study to formulate industry-specific regulations that promote stability and
growth. By aligning regulatory frameworks with the identified risk factors, a conducive
environment for pharmaceutical companies to thrive can be established.
This study serves as a valuable resource for pharmaceutical industry professionals, investors,
policymakers, and researchers alike. It provides a solid foundation for making informed
decisions, devising effective risk management strategies, and steering the pharmaceutical
sector in India towards sustainable growth and financial stability. As the industry continues to
evolve, ongoing research and adaptation of these findings will be crucial to navigating the ever-
changing landscape of risk and return.
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BIBLIOGRAPHY
REFERENCES
[1] Irina N. Khindanova, Svetlozar T. Rachev (2020). Value At Risk: Recent Advances.
Handbook of Analytic Computational Methods in Applied Mathematics. Chapman and
Hall/CRC, 9780429123610, 1st Edition
[2] Abad, P., Benito, S., & López, C. (2014). Article. The Spanish Review of Financial
Economics, 12(1), 15–32. doi:10.1016/j.srfe.2013.06.001
[3] Salem, A., Safer, I., & Khefacha, I. (05 2022). Value-at-Risk (VAR) Estimation Methods:
Empirical Analysis based on BRICS Markets.
[4] Syuhada, Khreshna. Journal of Probability and Statistics; New York Vol. 2020, (2020).
DOI:10.1155/2020/7638517
[5] Muneer Shaik and Lakshmi Padmakumari (2022). Value-at-risk (VAR) estimation and
backtesting during COVID-19: Empirical analysis based on BRICS and US stock markets.
Investment Management and Financial Innovations, 19(1), 51-63.
doi:10.21511/imfi.19(1).2022.04
[6] Vasileiou, E. (2022). Inaccurate value at risk estimations: Bad modeling or inappropriate
data? Computational Economics, 59(3), 1155–1171. doi:10.1007/s10614-021-10123-8
[7] Alshamalı, N. , Alawadhı, K. M. , Alshamalı, M. & Behbehanı, F. M. (2021). VALUE-AT-

RISK (VAR) ANALYSIS OF THE UK BANKING STOCKS . Journal of Economics Finance
and Accounting , 8 (4) , 190-207 . DOI: 10.17261/Pressacademia.2021.1530
[8] Uylangco, K., & Li, S. (2016). An evaluation of the effectiveness of Value-at-Risk (VaR)
models for Australian banks under Basel III. Australian Journal of Management, 41(4), 699-
718. https://doi.org/10.1177/0312896214557837
[9] Lu, S. (2022). Empirical Analysis of Value at Risk (VaR) of Stock Portfolio Based on
Python. Proceedings of the 2022 International Conference on Mathematical Statistics and
Economic Analysis (MSEA 2022), 559–567. doi:10.2991/978-94-6463-042-8_80
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[10] Dong, Y., Hu, Y., & Feng, Y. (2020). Set-Valued Weighted Value at Risk and Its
Computation. Frontiers in Physics, 8. doi:10.3389/fphy.2020.00190
[11] Shige Peng, Shuzhen Yang, Jianfeng Yao, Improving Value-at-Risk Prediction Under
Model Uncertainty, Journal of Financial Econometrics, Volume 21, Issue 1, Winter 2023,
Pages 228–259, https://doi.org/10.1093/jjfinec/nbaa022
[12] Darman Saputra, Zukhri , N. ., Altin, D. ., Agung Nugroho, A. ., Daddy Setiawan, R. .,

Fitari, T. ., & Thohari, M. (2023). Value At Risk Analysis Using Historical Method and
Monte Carlo Simulation in Banking and Mining Sector Companies . International Journal of
Applied Management and Business, 1(1), 26–31. https://doi.org/10.54099/ijamb.v1i1.436
[13] Vasileiou, E., & Pantos, T. (04 2020). What do the value-at-risk measure and the
respective legislative framework really offer to financial stability? Critical views and pro-
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[14] D. Reghin and F. Lopes, "Value-at-Risk prediction for the Brazilian stock market: A
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[15] www.yahoofinance.com
[16] www.nseindia.com
[17] www.ibef.org
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ANNEXTURES
PLAGIARISM CHECK – DRILLBIT REPORT
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WEEKLY WORK DONE REPORT
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A STUDY ON RISK AND RETURN ANALYSIS OF

PHARMACEUTICAL COMPANIES IN INDIA USING VALUE AT RISK

Rashtreeya Sikshana Samithi Trust

Name: Nishanth Krishna

This is to certify that Mr. Nishanth Krishna of RV Institute of Management, Autonomous

Name: Dr. Santhosh M

CHAPTER CONTENTS PAGE NO.

SL. NO DESCRIPTION PAGE NO.

4.3 NSE Nifty Pharma – Monte Carlo Simulation 32

4.4 NSE Nifty Pharma – Var Calculation 33

4.5 NSE Nifty Pharma – Var, Risk and Return 33

4.16 Cipla Ltd – Var Calculation 42

4.17 Cipla Ltd – Var, Risk and Return 42

4.25 Zydus Lifesciences Ltd – Var, Risk and Return 48

SL. NO DESCRIPTION PAGE NO.

SL. NO DESCRIPTION PAGE NO.

1.1 Valuation of Indian Pharmaceutical Market 1

3.1 Logo of Sun Pharmaceutical Industries Ltd. 20

3.2 Logo of Dr. Reddy’s Laboratories Ltd. 22

3.3 Logo of Cipla Ltd. 23

3.4 Logo of Torrent Pharmaceuticals Ltd. 25

3.5 Logo of Zydus Lifesciences Ltd. 26

The study provides valuable insights into the risk-return dynamics of

FIGURE 1.1 VALUATION OF INDIAN PHARMACEUTICAL MARKET

SWOT Analysis for Indian Pharmaceutical Industry:

TABLE 1.1 SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY

Indian Pharmaceutical Market Trends:

Respiratory drugs commonly comprise of bronchodilators, corticosteroids, mast cell

THEORETICAL BACKGROUND OF THE STUDY

• Credit Risk: The possibility of suffering losses if an issuer or borrower defaults.

1. Definition: Return analysis evaluates an investment's profits or losses in relation to the

3. Measurement Tools: A number of metrics, such as the geometric mean return,

4. Applications: Return analysis is useful for comparing various investment options,

METHODS TO CALCULATE VALUE AT RISK

The variance and co-variance method:

Monte Carlo simulation:

TYPES OF VALUE AT RISK

IMPORTANCE OF THE TOPIC

2. Decision-Making: VaR helps decision-makers, such as portfolio managers and traders,

CHAPTER 2: REVIEW OF LITERATURE AND RESEARCH

Pilar Abad, et al (2013)

Ben Salem, et al (2022)

Khreshna Syuhada (2020)

Muneer Shaik (2021)

Le Trung Thanh, et al (2018)

Evangelos Vasileiou (2021)

Nour Alshamali, et al (2021)

Katherine Uylangco, et al (2016)

Yichuan Dong, et al (2020)

Shige Peng, et al (2018)

Darman Saputra, et al (2023)

Evangelos Vasileiou, et al (2020)

Daniel Reghin, et al (2019)

1. Limited Application of VaR in Pharmaceutical Sector: Although Value at Risk (VaR)

5. Comparative Analysis Across Companies: A significant research gap lies in the

STATEMENT OF THE PROBLEM

NEED FOR THE STUDY

1. Investor Decision-Making: Investors, both individual and institutional, need accurate

SCOPE OF THE STUDY

1. Sun Pharmaceutical Industries Ltd

OBJECTIVES OF THE STUDY

ALTERNATE HYPOTHESIS (H1): There is a significant impact of Risk on Return of the

TOOLS FOR DATA COLLECTION

Secondary Data: It is collected from NSE, screener website