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A Presentation of The Summer Internship Project on Analysis of Risk and Return between Equity and Gold

Presented By: Rahul D. Movaliya( 118050592040.) Guided By: Ms.Delnaz Dastoor INSTITUTE: S.R.Luthra Institute of Management,Surat

Introduction about study


This topic related to Equity and gold. At the time of investing the money people were very confused about whether to invest money into Equity or in Gold. So for that I have taken different parameter to know which one is better for the investment. The present study titled, Analysis of Risk and Return between Equity and Gold has following objectives: To know the relationship between the Equity and Gold. To know which one is better for investor to invest. To know the how much risk involve in Equity and Gold. To know the equity and gold are dependable on each other or not. To know which one is beneficial for long time.

Company profile

Founder DHIRUBHAI H. AMBANI RELIANCE GROUP OF COMPANIES

Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani Group, and is
ranked among the 25 most valuable private companies in India. Reliance Capital is one of India's leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking groups, in terms of net worth.

Services Provided by Reliance Securities Limited


EQUITY IPO INSURANCE NRI OFFERINGS DERIVATIVES MUTUAL FUNDS RELIANCE COMMODITIES

Vision of Reliance Securities:


To achieve & sustain market leadership, Reliance Securities shall aim for complete customer satisfaction, by combining its human and technological resources, to

provide world class quality services. In the process Reliance Securities shall strive
to meet and exceed customer's satisfaction and set industry standards. Mission statement:

Our mission is to be a leading and preferred service provider to our customers,


and we aim to achieve this leadership position by building an innovative, enterprising , and technology driven organization which will set the highest

standards of service and business ethics.

Strengths: The company have their strong reputation (Brand name) in the market. The company give the security token to their customer for the trading so it very safe for customer.

Price competitiveness (E.g. low brokerage, annual maintenance charge are least) Reliance give the very good customer care services and even back office also help to customer query. Varieties of product range are available for the customer.

Opportunities:

The share market expanding with many features opportunity for success. The competitors may slow to adopt new technologies. Expand the business more in rural areas.

Organization Structure
Executive Director

National Head

Zone Head

Regional Head

Branch Head/ Cluster Head

Relationship Manager

Dealer

Centre Manager

Life Insurance Manager

Services Manager

Approach Customer

Follow up Customer

Broking

Acqusition

Few Major competitors are: India bulls Anand Rathi securities ICICI Securities.

Sharekhan
Kotak Securities

India Infoline

Research Methodology
Problem define:
Analysis of risk and return between equity and gold

Objectives:
To know the relationship between the Equity and Gold. To know which one is better for investor to invest. To know the how much risk involve in Equity and Gold. To know the equity and gold are dependable on each other or not. To know which one is beneficial for long time.

Research Design:
Descriptive Research Design

Sources of data collection:


Secondary data

Data analysis:
Average return Standard deviation Correlation

Sample period:
The sample period for both BSE and MCX Commodities (GOLD) is from Jan. 2006 to Dec. 2011

Limitation of study
In this study I collected data for analysis only from January 2006 to December 2011, because time period is limited i.e., only two months. As the data of the study is on secondary type so we cant tell about the reliability of the data and cant forecast the future of equity and gold and also in addition other external factors also affect the study.

Data Analysis & Interpretation


EQUITY RETURN OF 2006
MONTH 2006 JAN. FEB. MARCH OPEN 9422.49 9959.24 10368.75 CLOSE 9919.89 10370.24 11279.96 RETURN 5.28 4.13 8.79

APRIL.
MAY JUN. JULY. AUG. SEPT. OCT. NOV.

11342.96
12103.78 10472.46 10616.97 10737.50 11699.57 12473.79 12992.62 13729.67

12042.56
10398.66 10609.05 10743.88 11699.05 12454.42 12961.90 13969.31 13786.91

6.17
-14.09 1.30 1.20 8.96 6.45 3.91 7.52 0.42

FORMULA

DEC.

Return = Current value-Previous value/previous value*100 For Jan return= 9919.89-9422.49/9422.49*100

GOLD RETURN OF 2006


MONTH 2006 JAN. OPEN 7774.00 CLOSE 8212.00 RETURN 5.63

FEB. MARCH.
APRIL. MAY. JUN. JULY. AUG. SEPT. OCT. NOV. DEC.

8172.00 8152.00
8489.00 9630.00 9500.00 9435.00 9860.00 9735.00 9149.00 8904.00 9250.00

8158.00 8472.00
9609.00 9526.00 9413.00 9850.00 9692.00 9144.00 8894.00 9269.00 9265.00

-0.17 3.93
13.19 -1.08 -0.92 4.40 -1.70 -6.07 -2.79 4.10 0.16

FORMULA Return = Current value-Previous value/previous value*100 For Jan return= 8212-7774/7774*100 = 5.63

Calculation of Standard Deviation (2006)


X=Equity return
Month Jan. Feb. March April. May Jun. July. Aug. Sept. Oct. Nov. Dec X 5.28 4.13 8.79 6.17 -14.09 1.30 1.20 8.96 6.45 3.91 7.52 0.42 (x-x ) 1.94 0.79 5.45 2.83 -17.42 -2.03 -2.14 5.62 3.12 0.58 4.18 -2.92

Y= Gold return
(x-x )2 3.78 0.63 29.73 8.02 303.57 4.13 4.58 31.58 9.71 0.33 17.49 8.52 422.05 Y
5.63 -0.17 3.93 13.19 -1.08 -0.92 4.40 -1.70 -6.07 -2.79 4.10 0.16

(y- y) 4.08 -1.73 2.37 11.64 -2.64 -2.47 2.84 -3.26 -7.63 -4.34 2.54 -1.39

(y- y)2 16.62 2.99 5.61 135.41 6.95 6.11 8.07 10.63 58.18 18.87 6.46 1.95 277.87

x=

3.34

y=

1.56

SD= (x-x) 2/n-1 = 422.05/12-1

SD= (y- y) 2/n-1 = 277.87/12.1

= 6.19422

= 5.026

Average return of Equity and Gold (2006-2011)

YEAR 2006 2007 2008 2009 2010 2011

EQUITY 3.34 3.23 -4.73 5.28 1.30 -1.35

GOLD 1.56 1.16 2.46 1.77 1.63 2.36

Interpretation: From the data analysis I found that return of equity is fluctuated, the return of gold is stable over period of time except the year 2008 and 2011.

Standard Deviation (SD) for Equity and Gold (2006-2011)

YEAR 2006 2007 2008 2009 2010 2011

EQUITY 6.19 6.41 10.90 9.67 4.90 2.78

GOLD 5.03 4.22 7.84 5.17 3.99 6.79

Interpretation: From the chart its clear that risk of equity is more than gold from the year 2006 to 2010.but in year of 2011 the risk of gold is 6.79 which is more than than equity.

Co relationship between gold and equity


X 3.34 3.23 -4.73 5.28 1.3 -1.35
7.07

Y 1.56 1.16 2.46 1.77 1.63 2.36


10.94

Y2 2.43 1.35 6.05 3.13 2.66 5.57


21.19

X2 11.16 10.43 22.37 27.88 1.69 1.82


75.35

XY 5.21 3.75 -11.64 9.35 2.12 -3.19


5.60

X=Equity return Y=Gold return

Form the above calculation I interpret that r is equal to -0.02, which show that there is miner inverse relationship between equity and gold

CONCLUSION
From the data analysis I found that the Equity is more risky then the Gold. Because in Equity Fluctuation in price occurs then the Gold, but in 2011 gold is more risky than equity. I also found the relationship between Equity and Gold. They both have inverse relationships. There are no direct relationships between them. So between them linear relation is not possible.

I also found that Equity and Gold both are not dependent on each other.
From the analysis gold is better than equity because there is stable return of gold over period of 2006 to 2011and risk is less during the same period of time.

For the longer period of time gold is better instrument than equity because return
and risk are more fluctuated in long run.

RECOMMENDATION
The main objective of some investors is getting maximum return. So these investors should invest their money in to Gold. Because average return on Gold is much higher than the equity. If investor want to show off their prestige and want to uphold their status in their society then they preferably go on to buy Gold instead of Equity. Because Gold is consider as a prestigious commodity in world. Some investors are high risk taker. They like to take high risk. So these investors should go for Equity shares. Equity shares are more risky then gold. Because in Equity shares fluctuations in price occur more than gold.

Some investors want to regular income from their investment. So the investor who
wants regular income from their investment, then they should invest into gold.