Future option anlysis

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COMPARATIVE STUDY OF RETURNS OF

STOCK WITH SECTORAL INDEX, MARKET

INDEX and RISK FREE BOND

January 04, 2016

Adarsh Chhajed (411)Apoorva Sharma (422)Anoop Kumar Sharma (420)Arpit Somani(423)ushi!esh Chinder!er (4"#)



Agenda

2

$% $ndustry overvie&

'ethodooy *i+ty $% per+ormanes - hoies o+ sto!s

'ethodooy

Correations - $n+erenes



Overve!

*i+ty "0 The CNX Nifty is a well diversied 50 stock index accounting

for 22 sectors of the economy.

t is used for a variety of !ur!oses such as "enchmarkingfund !ortfolios# index "ased derivatives and index funds.

.overnment Seurity

$overnment security %$&'ec( means a security created andissued "y the $overnment for the !ur!ose of raising a!u"lic loan or any other !ur!ose as notied "y the$overnment in the )*cial $a+ette and having one of thefollowing forms.

o a $overnment ,romissory Note %$,N( !aya"le to or to

the order of a certain !erson- oro a "earer "ond !aya"le to a "earer- or

o a stock- oro a "ond held in a ond /edger ccount %/(.



1

The Nifty IT index is computed using free float market capitalization

method with a base date of Jan 1, 199 indexed to a base !alue of1""" wherein the le!el of the index reflects total free float market !alue

of all the stocks in the index relati!e to a particular base market

capitalization !alue# The base !alue of the index was re!ised from

1""" to 1"" with effect from $ay %&, %""'# The method also takes into

account constituent changes in the index and importantly corporate

actions such as stock splits, rights, new issue of shares etc# withoutaffecting the index !alue#

(ffecti!e $ay %9, %"1), the index is computed with 1" companies and

weights of each company in the index are capped at %)*# +t the time

of rebalancing of shares change in index constituents change in

in!estable weight factors -I./s0, the weightage of the index

constituent -where applicable0 is capped at %)*# .eightage of such

stock may increase beyond %)* between the rebalancing periods#

Me"#$d$%$g&



5

Company *ame /eiht ()

nfosys /td. 21.

Tata Consultancy 'ervices /td. 21.2

3C/ Technologies /td. 4.64

7i!ro /td. 42.68

Tech 9ahindra /td. 44.8

%he onstituents (sto!s) have een hosen ased on the&eihtae



Pr$'ed(re

Step 1 .et vaue o+ sto!s, a $nde

Step 2 Cauate daiy returns +rom ompany sto!prie, *i+ty "0, *i+ty $% and .Se

Step 3 %o otain oreation et&een sto! prieand various indees(*i+ty "0, .Se)

Step 4 Cauate desriptive statistis o+ a thereturns and ompare the 5aiy, Annua and "yearmean

Step " $n+erenes &ere enerated y usinstatisti too i!e t%est



De)'r*"ve Ana%&))

5aiy Annua " 7ears

Averae *i+ty $% &0.0: &4.2: &6.54:

Averae *i+ty "0 &0.01: &40.02: &14.2;:

Averae . se 0.04: 4.6: .81:

Averae %CS &0.06: &20.06: &62.:

Averae %eh 'ahindra 0.02: 5.20: 24.11:

Averae /ipro &0.01: &44.40: &15.6:

Averae $n+y 0.06: 4;.0: 64.28:

Averae 8C9 &0.0: &46.04: &1.2:



-5.0000% 0.0000% 5.0000% 10.0000%

-15.0000%

-10.0000%

-5.0000%

0.0000%

5.0000%

10.0000%

15.0000%

f(x) = 0.55xR² = 0.13

Return TCS- Nifty 50

-10.0000% -5.0000% 0.0000% 5.0000% 10.0000%

-15.0000%

-10.0000%

-5.0000%

0.0000%

5.0000%

10.0000%

15.0000%

f(x) = - 0.08xR² = 0

Return TCS- G sec

TCS

:artiuars :vaue $n+erene

*i+ty "0 0;406<100<" %he is no sini=ant di>erene et&eenmean o+ returns o+ *$?%7 "0 and %CS

*i+ty $% 0;6#2##@2#" %he is no sini=ant di>erene et&eenmean o+ returns o+ *$?%7 "0 and %CS

.Se 0;10#<30<@" %he mean o+ returns o+ *$?%7 $% and %CSare eua


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TCS Return Nifty IT Return TCS

9ean &0.0005;121 &0.000;8

<ariance 0.00045146 0.00021;48

)"servations 408 408df 408 408

= 0.025;;6

= Critical one&tail

0.;02600;

= value is less than = critical so null hy!othesis isacce!ted# there isnt any signicant di?erence

"etween the variances on returns in Nifty T and TC' returns

Return Nifty 50 Return TCS

9ean &0.0008;18 &0.000;8

<ariance 0.00040;1 0.00021;48

)"servations 408 408

df 408 408

= 0.1865128;

= Critical one&tail 0.;02600;

= value is less than = critical so null hy!othesis isacce!ted# there is not any signicant di?erence

"etween the variances on returns in Nifty 50 and TC'returns

?%est

t %est

Return Nifty IT Return TCS


,ooled <ariance 0.000242545

df 202

t 'tat 0.241821144

,%T@At( one&tail 0.1454556

t Critical one&tail 4.1556;86,%T@At( two&tail 0.68084542

t Critical two&tail 4.;440;54

! value is 0.68 which is greater than al!ha 0.05 sonull hy!othesis acce!ted which im!lies that "oth

mean are eBual

Return Nifty 50 Return TCS


,ooled <ariance 0.0004;58;

df 202

t 'tat 0.68;6018

,%T@At( one&tail 0.216;558

t Critical one&tail 4.1556;86,%T@At( two&tail 0.1;5;540


aily returns of "oth N=TD 50 and TC' are eBualwhich means whether we invest in N=TD 50 or TC'

for a day the returns are same or similar.



-10.0000% -5.0000% 0.0000% 5.0000% 10.0000%

-20.0000%

0.0000%

20.0000%

0.0000%

!0.0000%

80.0000%

100.0000%

120.0000%

10.0000%

1!0.0000%

f(x) = 0.12xR² = 0

Return Tec" #$"inr$- G sec

-5.0000% 0.0000% 5.0000% 10.0000%

-20.0000%

0.0000%

20.0000%

0.0000%

!0.0000%

80.0000%

100.0000%

120.0000%

10.0000%

1!0.0000%

f(x) = 0.58xR² = 0.02

Return Tec" #$"inr$- Nifty 50

Te'# Ma#ndra


*i+ty "0 0;6#1064##1 %he mean o+ returns o+ eturn *i+ty "0 and%eh 'ahindra are eua

*i+ty $% 0;""324#32# %he mean o+ returns o+ *$?%7 $% and %eh'ahindra are eua

.Se 0;@2<24#4"1 %he mean o+ returns o+ eturn . Se and%eh 'ahindra are eua



Te'# Ma#ndra Return Nifty IT

Return TechMahindra

9ean &0.0005;121 0.00020854

<ariance 0.00045146 0.0022554;4)"servations 408 408

df 408 408

= 0.068;



"etween the variances on returns in Nifty T and Tech

9ahindra returns

Return Nifty IT Return Tech Mahindra



df 202

t 'tat &0.5550542

,%T@At( one&tail 0.2656;588

t Critical one&tail 4.1556;86

,%T@At( two&tail 0.54;41


! value is 0.5 which is greater than al!ha 0.05 so nullhy!othesis acce!ted which im!lies that "oth mean are

eBual

Return Nifty 50 Return HCL

9ean &0.0008;18 &0.0004164

<ariance 0.00040;1 0.0006165


df 408 408

= 0.426;05;4



"etween the variances on returns in Nifty 50 and

3C/ returns

Return Nifty 50Return Tech

Mahindra


,ooled <ariance 0.00446282;

df 202

t 'tat &0.8;;6126

,%T@At( one&tail 0.8115606t Critical one&tail 4.1556;86

,%T@At( two&tail 0.6;8484


aily returns of "oth N=TD 50 and Tech 9ah are eBualwhich means whether we invest in N=TD 50 or T9 for a

day the returns are same or similar.

?%est

t %est



-5.0000% 0.0000% 5.0000% 10.0000%

-10.0000%

-5.0000%

0.0000%

5.0000%

10.0000%

15.0000%

f(x) = 0.5xR² = 0.1

Return &i'r- Nifty 50

-10.0000% -5.0000% 0.0000% 5.0000% 10.0000%

-10.0000%

-5.0000%

0.0000%

5.0000%

10.0000%

15.0000%

f(x) = 0.02x

R² = 0

Return &i'r- G Sec

W*r$


*i+ty "0 0;@33"##<"6 %he mean o+ returns o+ eturn *i+ty "0 and

/ipro are eua

*i+ty $% 0;60@0431<< %he mean o+ returns o+ *$?%7 $% and /iproare eua

.Se 0;3"@3#<0<3 %he mean o+ returns o+ eturn . Se and/ipro are eua



W*r$

Return NiftyIT

Return Wipro

9ean &0.0005;121 &0.00011056

<ariance 0.00045146 0.0002682)"servations 408 408

df 408 408

= 0.2;814828



"etween the variances on returns in Nifty T and 7i!roreturns

Return Nifty 50 Return Wipro

9ean &0.0008;18 &0.00011056

<ariance 0.00040;1 0.0002682


df 408 408

= 0.8;22028




7i!ro returns

Return Nifty IT Return Wipro



df 202

t 'tat &0.880;41;

,%T@At( one&tail 0.80155168

t Critical one&tail 4.1556;86,%T@At( two&tail 0.10;40;


! value is 0.1 which is greater than al!ha 0.05 sonull hy!othesis acce!ted which im!lies that "oth

mean are eBual

Return Nifty

50 Return Wipro


,ooled <ariance 0.0004;10;;

df 202

t 'tat 0.0054542

,%T@At( one&tail 0.146;5245


,%T@At( two&tail 0.;18;018


aily returns of "oth N=TD 50 and 7i!ro areeBual which means whether we invest in N=TD50 or 7i!ro for a day the returns are same or

similar.

?%est

t %est



-10.0000% -5.0000% 0.0000% 5.0000% 10.0000%

-20.0000%

-10.0000%

0.0000%

10.0000%

20.0000%

30.0000%

0.0000%

50.0000%

!0.0000%0.0000%

80.0000%

f(x) = 0.15x

R² = 0

Return *nfy- G sec

-5.0000% 0.0000% 5.0000% 10.0000%

-20.0000%

-10.0000%

0.0000%

10.0000%

20.0000%

30.0000%

0.0000%

50.0000%

!0.0000%0.0000%

80.0000%

f(x) = 0.!3x

R² = 0.03

Return *nfy- Nifty 50

In+$)&)


*i+ty "0 0;2##010""" %he mean o+ returns o+ *$?%7 "0 and $n+osys areeua

*i+ty $% 0;14<"23"3# %he mean o+ returns o+ *$?%7 $% and $n+osys are

eua.Se 0;"313<#012 %he mean o+ returns o+ *$?%7 $% and $n+osys are

eua



$n+osys Return Nifty IT Return Infy

9ean &0.0005;121 0.0006461

<ariance 0.00045146 0.0048051)"servations 408 408

df 408 408

= 0.481858214



"etween the variances on returns in Nifty T and nfy

returns

Return Nifty 50 Return Infy

9ean &0.0008;18 0.0006461

<ariance 0.00040;1 0.0048051)"servations 408 408

df 408 408

= 0.06861028




nfy returns

Return Nifty IT Return Infy



df 202

t 'tat &4.205;1;24

,%T@At( one&tail 0.448;686t Critical one&tail 4.1556;86

,%T@At( two&tail 0.22;15;


! value is 0.226 which is greater than al!ha 0.05 sonull hy!othesis acce!ted which im!lies that "oth mean

are eBual

Return Nifty 50 Return Infy



df 202

t 'tat &4.00;15;565

,%T@At( one&tail 0.45180


,%T@At( two&tail 0.84262414


aily returns of "oth N=TD 50 and nfy are eBualwhich means whether we invest in N=TD 50 or nfy

for a day the returns are same or similar.

?%est

t %est



-5.0000% 0.0000% 5.0000% 10.0000%

-20.0000%

-10.0000%

0.0000%

10.0000%

20.0000%

30.0000%

0.0000%

50.0000%

!0.0000%

0.0000%

80.0000%

f(x) = 0.!xR² = 0.05

Return +C, Nifty 50

-10.0000% -5.0000% 0.0000% 5.0000% 10.0000%

-20.0000%

-10.0000%

0.0000%

10.0000%

20.0000%

30.0000%

0.0000%

50.0000%

!0.0000%

0.0000%

80.0000%

f(x) = 0.11x

R² = 0

Return +C, G sec

HCL


*i+ty "0 0;<2103#<<4 %he mean o+ returns o+ *$?%7 "0 and 8C9 are eua

*i+ty $% 0;@4<311@01 %he mean o+ returns o+ *$?%7 $% and 8C9 are eua

.Se 0;3@"123164 %he mean o+ returns o+ *$?%7 $% and 8C9 are eua



4

HCL Return Nifty IT Return HCL

9ean &0.0005;121 &0.0004164

<ariance 0.00045146 0.0006165


df 408 408

= 0.20141



"etween the variances on returns in Nifty T and 3C/

returns

Return Nifty

50 Return HCL

9ean &0.0008;18 &0.0004164

<ariance 0.00040;1 0.0006165)"servations 408 408

df 408 408

= 0.426;05;4




3C/ returns

Return Nifty IT Return HCL


,ooled <ariance 0.0005420;4

df 202

t 'tat 0.05585

,%T@At( one&tail 0.16428t Critical one&tail 4.1556;86

,%T@At( two&tail 0.;555521


! value is 0.;5 which is greater than al!ha 0.05 sonull hy!othesis acce!ted which im!lies that "oth

mean are eBual

Return Nifty

50Return HCL


,ooled <ariance0.0001;44

5

df 202

t 'tat 0.8804165

,%T@At( one&tail0.8058

8

t Critical one&tail4.1556;8

6

,%T@At( two&tail0.148051

t Critical two&tail

4.;440;5

4 aily returns of "oth N=TD 50 and 3C/ are eBual

?%est

t %est



%han! you

Future option anlysis

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