SECURITY ANALYSIS.doc

8/19/2019 SECURITY ANALYSIS.doc

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Project Report

On

SECURITY ANALYSIS

A

STUDY ON SELECTED INDUSTRIES

A Project Report Submitted to

in the partial fulfillment for the award of the degree in

Master of Business Administration.

CERTIFICATE ! T"E #$I%E

Thi& to certif' that the (..A Project Report titled )SECURITYANALYSIS –A STUDY ON SELECTED INDUSTRIES* &ubmitted in partial

fulfillment for the award of po&t+graduate %egree in )Master of Business

Administration* from ,,,- "'derabad wa& carried out b' ,,,, under m'guidance- during the academic 'ear //0+/1.


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Signature of the "ead Signature of the #uide

ACKNOWLEDEMENT

I ta2e thi& opportunit' to e3pre&& m' gratitude to all- who ha4e made it po&&ible for me to accompli&h thi& project wor2.


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I e3pre&& m' &incere than2& to m' guide ,,,, for gi4ing me 4aluable

guidance through out the project. The ad4ice and &ugge&tion& gi4en b' him- had

immen&el' helped me to gain wor2ing 2nowledge on the a&&ignment under ta2en-

and he ha& al&o ta2en per&onal care in helping me through out the project wor2. Atthe &ame time I than2 all m' friend& who encouraged and helped bringing out m'

project &ucce&&full'.

(' parent& ha4e been a con&tant &ource of the &upport through out m' life.

Thi& wor2 would not ha4e been complete but for the &olace the' pro4ide to mewhene4er- I ran into difficultie&. 5o word& can e3plain m' gratitude to them.

DECLARATION

I hereb' declare that the project entitled )SECURITY ANALYSIS!ASTUDY ON SELECTED INDUSTRIES* i& m' original wor2 &ubmitted to thedepartment of u&ine&& (anagement of """- from """ i& a bonafide wor2

underta2en b' me and i& not &ubmitted to an' other $ni4er&it' or In&titution for

the award of an' degree diploma6certificate or publi&hed an' time before.


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,,,,

TABLE O# CONTENTS

SL$NO %ARTICULARS %AE

&$ INTRODUCTION '!&(

• Im)ortan*e of in+estment

• Meanin,

• A+enues of in+estment

• Dri+in, for*es of in+estment

•O-.e*ti+e of t/e stud0

• S*o)e of t/e stud0

• Limitations of t/e stud0

• Assum)tions of t/e stud0

• Resear*/ met/odo1o,0


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2$ ANALYSIS O# DATA &(!3&

• Return

• Measurement of return

• Returns for Ban45 Auto5 I$T 6 %/arma

Industries

• #1u*tuations in t/e )ri*es of t/e se1e*ted

s/ares in res)e*ted industries

• Constru*tion of inde7 for Ban45 Auto5 I$T

6 %/arma Industries

• Co!effi*ient of +ariation• Com)arison on t/e -asis of C$8 Ban45 Auto5

I$T5 %/arma Industries 6 Industr0 9ise

:$ CONCLUSIONS AND RECOMMENDATIONS 32!33

BIBILORA%;Y 3<

INTRODUCTION

IM%ORTANCE O# IN8ESTMENT= !

An in4e&tor ha& 4ariou& alternati4e option& 7a4enue&8 of in4e&tment for hi& &a4ing& to flow to. Sa4ing& 2ept a& ca&h are barren and do not

earn an'thing. "ence &a4ing& are in4e&ted in a&&et& depending on their ri&2 and

return characteri&tic&. The objecti4e of the in4e&tor i& to minimi9e the ri&2

in4ol4ed in in4e&tment and ma3imi9e the return from the in4e&tment.

Our &a4ing& 2ept a& ca&h are not onl' barren becau&e the' do

not earn an'thing- but al&o lo&e& it& 4alue to the e3tent of ri&e in price&6 thu& ri&ein price& or inflation erode& the 4alue of mone'. Sa4ing& are in4e&ted to pro4ide a

hedge or protection again&t inflation. If the in4e&tment cannot earn a& much a& the

ri&e in price&- the real rate of return would be negati4e. Thu&- if inflation it at an


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a4erage annual rate of:/percent- then the return from an in4e&tment &hould be

abo4e :/ percent to induce &a4ing& to flow into in4e&tment.

MEANIN=!

In4e&tment mean& )po&tponed pre&ent con&umption*

)it ma' mean man' thing& to man' per&on&. If one per&on ha& ad4anced&ome mone' to another- he ma' con&ider hi& loan a& a n in4e&tment. "e e3pect& to

get bac2 the mone' along with intere&t at a future date.*

)Another per&on ma' ha4e purcha&ed one 2g of gold for the purpo&e of priceappreciation and ma' con&ider it a& an in4e&tment.*

)a 'oung couple ma2e& a down pa'ment on their fir&t hou&e. Thi& i&

al&o an in4e&tment 7&uppo&e the' paid ;///6+. 5ow the' are &ta'ing in rent hou&e per 'ear 0///6+

If the' &pend that ;//6+ for rent the' ma' get better hou&e than it for rent. So it i&al&o po&tponement of con&umption8

elow diagram e3plain& the perfect mean how an in4e&tment i& po&tponement of con&umption

:/<

7"r ha& a opportunit' of getting :.

O 0/ :// Co


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Co i& the current 'ear con&umption a3e& he can con&ume high a&

:// low a& /.

C: i& the ne3t 'ear con&umption high a& :/


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• A4oidance of ta3ation

• Tempting high rate& of intere&t

• "igh inflation and re&ultant e3pectation of increa&e in the monetar'

return

• "i2e in income

• A4ailabilit' of a large number of in4e&tment a4enue&

• @egal &afeguard&

• E3i&tence of financial in&titution& to encourage &a4ing& etc..

T;E %ROCESS O# IN8ESTMENT=

The in4e&tment proce&& in4ol4e& a &erie& of acti4itie& leading to the purcha&e of &ecuritie& or other in4e&tment alternati4e&. The in4e&tment proce&& can be di4ided

into fi4e &tage&.

:8 Farming of in4e&tment polic'

8 In4e&tment anal'&i&8 Portfolio con&truction

;8 Portfolio e4aluation

In+estment %ro*ess

In4e&tmentPolic'

Anal'&i& aluation Portfolio

Con&tructionPortfolio

E4aluation

+In4e&tible

fund

+Objecti4e&+Bnowledge

+Fundamental

+Technical

+Efficient(ar2et

"'pothe&i&

+Intrin&ic

4alue+Future

alue

+%i4er&ification

+Selection?

Allocation

+Apprai&al

+Re4i&ion


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IN8ESTMENT %OLICY

The go4ernment or the in4e&tor before proceeding into in4e&tment formulate& the

polic' for the &'&tematic functioning. The e&&ential ingredient& of the polic' are

the In4e&tible fund&- objecti4e& and the 2nowledge about the in4e&tment

alternati4e& and mar2et.

In+esti-1e funds The entire in4e&tment procedure re4ol4e& around the a4ailabilit'of in4e&tible fund&. The fund ma' be generated through &a4ing& or from

borrowing&. If the fund& are borrowed- the in4e&tor ha& to be e3tra careful in the

&election of in4e&tment alternati4e&. The return &hould be higher than the intere&the pa'&. (utual fund& in4e&t their owner& mone' in &ecuritie&.

O-.e*ti+e s The objecti4e& are framed on the premi&e& of the reDuired rate of

return- need for regularit' of income- ri&2 perception and the need for liDuidit'.

The ri&2 ta2er& objecti4e i& to earn high rate of return in the form of capitalappreciation- wherea& the primar' objecti4e of the ri&2 a4er&e i& the &afet' of the principle.

Kno91ed,e The 2nowledge about the in4e&tment alternati4e& and mar2et& pla'& a

2e' role in the polic' formulation- the in4e&tment alternati4e& range from &ecurit'

to real e&tate- the ri&2 and return a&&ociated with in4e&tment alternati4e& differ from each other. In4e&tment in eDuit' i& high 'ielding but ha& more ri&2 than the

fi3ed income &ecuritie&. The ta3 &heltered &cheme& offer ta3 benefit& to the

in4e&tor&.

The in4e&tor &hould be aware of the &toc2 mar2et &tructure and the function& of

the bro2er&. The mode of operation 4arie& among SE- 5SE- and OTCEI.


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ro2erage charge& are al&o different. The 2nowledge about the &toc2 e3change&

enable& him to trade the &toc2 intelligentl'.

SECURITY ANALYSIS

After formulating the in4e&tment polic'- the &ecuritie& to be bought ha4e to be

&crutini9ed through either Fundamental anal'&i& or Technical anal'&i& or Efficient(ar2et "'pothe&i& theor'.

#undamenta1 Ana10sis= Fundamental anal'&i& i& reall' a logical and &'&tematicapproach to e&timating the future di4idend& and &hare price. It i& ba&ed on the

ba&ic premi&e that &hare price i& determined b' a number of fundamental factor&

relating to the econom'- indu&tr' and compan'.

Te*/ni*a1 Ana10sis: According to technical anal'&i& the in4e&tor& belie4e that

&hare price& are determined b' the demand and &uppl' force& operating in themar2et. The&e demand and &uppl' force& in turn are influenced b' a number of

fundamental factor& a& well a& certain p&'chological or emotional factor&. (an'

of the&e factor& cannot be Duantified. The technical anal'&t therefore concentrate&

on the mo4ement of &hare price&. "e claim& that b' e3amining pa&t &hare pricemo4ement& future &hare price& can be

Accuratel' predicted. Technical anal'&i& i& the name gi4en to foreca&ting

techniDue& that utili9e hi&torical &hare price data.

The rationale behind technical anal'&i& i& that &hare price beha4ior repeat&

it&elf o4er time and the anal'&t attempt& to dri4e method& to predict thi& repetition.

Random Wa14 T/eor0= Stoc2 price& are determined b' a number of factor& &uch

a& fundamental factor&- technical factor& and p&'chological factor&. The beha4ior

of &toc2 price& i& &tudied with the help of different method& &uch a& fundamental

anal'&i& and technical anal'&i&. Fundamental anal'&i& &ee2& to e4aluate the


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intrin&ic 4alue of &ecuritie& b' &tud'ing the fundamental factor& affecting the

performance of the econom'- indu&tr' and companie&. Technical anal'&i& belie4e&

that the pa&t beha4iour of &toc2 price& gi4e& an indication of the future beha4iour.

It trie& to &tud' the pattern& in &toc2 price beha4iour through chart& and predict thefuture mo4ement in price&. There i& a third theor' on &toc2 price beha4iour- which

Due&tion& the a&&umption& of technical anal'&i&.

The ba&ic a&&umption in technical anal'&i& i& that &toc2 price mo4ement i&

Duite orderl' and not random. The new theor' Due&tion& thi& a&&umption. Fromthe re&ult& of &e4eral empirical &tudie& on &toc2 price mo4ement&- the ad4ocate&

of the new theor' a&&ert that &hare price mo4ement& are random. The new theor'

came to be 2nown a& Random al2 Theor' becau&e of it& principal contention

that &hare price mo4ement& repre&ent a random wal2 rather than an orderl'

mo4ement.

8ALUATION

The 4aluation help& the in4e&tor to determine the return the return and ri&2 e3pected from an in4e&tment in the common &toc2. The intrin&ic 4alue of the

&hare i& mea&ured through the boo2 4alue of the &hare and price earning ratio.

Simple di&counting model& al&o can be adopted to 4alue the &hare&. The &toc2 mar2et anal'&t& ha4e de4eloped man' ad4anced model& to 4alue the &hare&. Thereal worth of the &hare i& compared with the mar2et price and then the in4e&tment

deci&ion& and made.

#uture +a1ue Future 4alue of the &ecuritie& could be e&timated b' u&ing a &imple

&tatical techniDue li2e rend anal'&i&. The anal'&i& of the hi&torical beha4iour of the price enable& the in4e&tor to predict the future 4alue.

CONSTRUCTION O# %ORT#OLIO

A portfolio i& a combination of &ecuritie&. The portfolio i& con&tructed in &uch amanner to meet the in4e&tor& goal& and objecti4e&. The in4e&tor &hould decide


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how be&t to reach the goal& with the &ecuritie& a4ailable. The in4e&tor trie& to

attain ma3imum ri&2. Toward& thi& end he di4er&ifie& hi& portfolio and allocate&

fund& among the &ecuritie&.

Di+ersifi*ation The main objecti4e of di4er&ification i& the reduction of ri&2 in

the lo&& of capital and income. A di4er&ified portfolio i& comparati4el' le&& ri&2'

than holding a &ingle portfolio. There are &e4eral wa'& to di4er&if' the portfolio.

%ebt and eDuit' di4er&ification %ebt in&trument& pro4ide a&&ured return withlimited capital appreciation. Common &toc2& pro4ide income and capital gain but

with the fla4our of uncertaint'. oth debt in&trument& and eDuit' are combined to

complement each other.

Indu&tr' di4er&ification Indu&trie& growth and their reaction to go4ernment

policie& differ from each other. an2ing indu&tr' &hare& ma' pro4ide regular return& but with limited capital appreciation. The information technolog' &toc2

'ield& high return and capital appreciation but their growth potential after the

'ear// i& not predictable. Thu&- indu&tr' di4er&ification i& needed and it reduce&

ri&2.

Compan' di4er&ification Securitie& from different companie& are purcha&ed toreduce ri&2. Technical anal'&t& &ugge&t the in4e&tor& to bu' &ecuritie& ba&ed on the

price mo4ement. Fundamental anal'&t& &ugge&t the &election of financiall' &ound

and in4e&tor friendl' companie&.

Se1e*tion a&ed on the di4er&ification le4el- indu&tr' and compan' anal'&e& the

&ecuritie& ha4e to be &elected. Fund& are allocated for the &elected &ecuritie&.Selection of &ecuritie& and the allocation of fund& and &ale& the con&truction of

portfolio.

E8ALUATION


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The portfolio ha& to be managed efficientl'. The efficient management call& for

e4aluation of the portfolio thi& proce&& con&i&t& of portfolio apprai&al and re4i&ion.

A))raisa1 The return and ri&2 performance of the &ecurit' 4ar' from time to time.The 4ariabilit' in return of the &ecuritie& i& mea&ured and compared. The

de4elopment& in the econom'- indu&tr' and rele4ant companie& from which the

&toc2& are bought ha4e to/ be apprai&ed. The apprai&al warn& the lo&& and &tep&cab be ta2en to a4oid &uch lo&&e&.

Re+ision depend& on the re&ult& of the apprai&al. The low 'ielding &ecuritie& with

high ri&2 are replaced with high 'ielding &ecuritie& with low ri&2 factor. To 2eep

the return at a particular le4el nece&&itate& the in4e&tor to re4i&e the component&

of the portfolio periodicall'.

OB>ECTI8ES O# T;E STUDY= !

• To a&certain the return both firm wi&e and indu&tr' wi&e a& a whole

• To Bnow the ri&2 factor in the firm and Indu&tr' a& a whole

• To 2now the fluctuation& of the &ecurit' price& of the &elected

firm&.

• To compare Indu&tr' inde3 with SE+// Inde3 in 4ariou& a&pect&.

SCO%E O# T;E STUDY= !

Thi& &cope of &tud' i& limited to few &elected indu&trie&. Tho&e are

Pharmaceutical- Information Technologie&- Automobile- ? an2ing

Indu&tr'.


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In tho&e indu&trie&- onl' &ome are &elected. The' are 0companie& each

from pharmaceutical- I.T.- Automobile indu&tr' and : companie&from ban2ing indu&tr'.

Thi& &tud' i& anal'&i& of pre4iou& twel4e month& 7Gan+/0 to %ec+/08data relating to price& of &hare& in omba' Stoc2 E3change onl'.

LIMITATIONS O# STUDY= !

• Thi& &tud' i& limited to &ome &elected indu&trie&

7Pharmaceutical- an2ing- Information technologie& ?Automobile8

• %i4idend i& not con&idered in the calculation of Return. Price

change i& onl' ta2en into con&ideration.

• Situation& in &toc2 mar2et are alwa'& &ubject to change.

ASSUM%TIONS O# T;E STUDY=

• Thi& &tud' a&&ume& than an in4e&tor purcha&e& the &hare at the

beginning of the month and he &ell& the &hare at the end of themonth.

• In4e&tor& ma2e the deci&ion on the ba&i& of pre4iou& return&

and ri&2& that are un&'&tematic ri&2&.

• For calculating the return& of each indu&tr' thi& &tud' a&&ume&that the inde3e& are ta2en in to con&ideration.

• The in4e&tor& gi4e preference to the &ecuritie& that ha4e gi4en

po&iti4e return& pre4iou&l'.


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RESEARC; MET;ODOLOY

Data Co11e*tion= !

Since the primar' data i& not a4ailable within the time permitted- and &o&econdar' data ha& been generated from &econdar' &ource&- i.e.- from web &ource&

and periodic in4e&tment journal&.

%eriod of stud0= !

Thi& &tud' i& conducted for twel4e month&- i.e.- from Ganuar' //0 to

%ecember //0.

Too1s for e+a1uation= !

Stati&tical tool& for e4aluation&

Standard de4iation 7δ87Ri&28

ariation δ 7$n&'&tematic Ri&28

Co+efficient of 4ariation 7C8

A4erage

Inde3 7&imple a4g. method8

Sam)1e se1e*tion= !

Sample& &elected are li&ted in SE+// SE5SE,.

The total indu&trie& in4ol4ed in SE+// are :1 Indu&trie&. Randoml' four

Indu&trie& are &elected for thi& &tud'. Of four &elected indu&trie& 0/= of companie& are &elected in each indu&tr'.

@ISTE% SE@ECTE% PERCE5TA#E

Pharmaceutical + :/ 0 0/


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Information Tec + :/ 0 0/

Automobile + :/ 0 0/

an2ing + / : 0/

ANALAYSIS O# DATA

RETURN= !

A major purpo&e of in4e&tment i& to get a return or income on the

fund& in4e&ted. On a bond an in4e&tor e3pect& to recei4e intere&t. On a

&toc2- di4idend& ma' be anticipated. The in4e&tor ma' e3pect capital gain&

from &ome in4e&tment& and rental income from &ome in4e&tment& andrental income from hou&e propert'. Return ma' ta2e &e4eral form&.

Measurement or Returns=!


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The purpo&e of in4e&tment i& to get a return or income on the fund&

in4e&ted in different financial a&&et&. The mo&t important characteri&tic& of financial a&&et& are the &i9e and 4ariabilit' of their future return&. Since the return

on 'ear& man' method& were adopted for Duantif'ing return&.

In thi& &tud' I con&idered onl' price& but not di4idend in the

calculation return becau&e the in4e&tor& main moti4e to in4e&t in &hare& i& ma2ethe profit from change& in price& of &hare&. That& wh' I calculated return from the

price& of the &hare& onl'.

Return H 7P: P/86P/

here P: H Clo&ing price of the &hare

P/ H Opening price of the &hare

In thi& Chapter I &how the return& for each unit wi&e and indu&tr' wi&e.

Returns for -an4in, industr0= !

TABLE NO$&

And/ra Ban4 ;D#C Ban4 Ltd$

ORIENTAL BANK O

COMMERCE

Date O%EN CLOSE Return O%EN CLOSE Return O%EN CLOSE Return

Gan+/0 J< J.1; +/.:0 K:/.J K0.;; K.K K:.; ;/.>; +K.K;

Feb+/0 J/.J +>./0(ar+/0 1K.J 1/.1 +1./1 K/ K0; 10.0 1./;


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Aug+/0 K>.> 1K.: KJ/./; 1;/ J0 :/.> :J> K:.0; >/./<

Oct+/0 J>.; J./; :/./J K/ ;K +>.1:

5o4+/0 J.:; 1J.>; +.J< :-/:K.// :-::1.>/ J.JK ;1.J; >;.; +;.:J

%ec+/0 J/ 10.0 +.00 >K 0.; +1.


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(a'+/0 ;0.< J.; +:/.;; ;.11 J:.>/ :/./; ::.0;

Aug+/0 :J1.; :. ::.>> > >K./; :./ :/.;/ ::0.J/ :>./;

Sep+/0 < 1>.:; K.> >K.;; ;0.K :J.> ::K.1/ :AB NB BANK O# BARODA

O%EN CLOSEReturn O%EN CLOSE Return O%EN CLOSE Return

Gan+/0 J>.// :::.1; :1.JJ >01.1 >0;.;; +/.0J :1.; :J.K; /.JK

Feb+/0 ::>.// :/:.1; +:/.00 >00 >>:.< +;.K:. 0.1; :/ .;< >K >/ >-K0J.1K +J.:J

Gun+/0 >-KK.>: >-1.KJ +1.11

Gul+/0 >--K1:.:> :/.1J


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Aug+/0 >-KK.10.0> K-:KJ.K: :/.01

%ec+/0 K-:1


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A5BE, a4erage return. Totall' eight ban2& are noted le&& a4erage return than

A5BE, and remaining Four ban2& are noted high a4erage return than it.

Returns for Automo-i1e Industr0= !

TA@E 5O.0

As/o4 Le01and Ltd$ Ba.a. Auto Ltd$ Ma/indra6Ma/indra L

Date O%EN CLOSE Returns O%EN CLOSE Returns O%EN CLOSE Retu

Gan+/0 .; 0.J: ;: ;;1.; J./1

Feb+/0 / :J.0.1; >.0> ;J/.:; 0K.: 0.0

Apr+/0 >/.K ;.:; 1.:< -K1;.// /;.> +K.<Gun+/0 K1/ KJ:.; :.>K KJ>.>; KJ>.>; / >:>.J; .;; 1. 1;/ 10./; :.> >0; ;0. :


22/45

Oct+/0 KK1.; K;0.:; +.1K 10K.: 1K.J; +>.; ;K ;:1.>; +:.0

5o4+/0 K0 K>.0; +.;> 1 +.K ;>.1 ;>>.K; / K0.-;:.JK >-;/0.;< ;.JJ

Feb+/0 >-;:;.;: >-JJ1.01 :/.K/(ar+/0 ;-/:;.:> ;- re&pecti4el'.


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hen it come& to the a4erage performance i.e. a4erage return&

(ahendra?(ahendra 7>.:8

hold the lowe&t.

. "ighe&t return of thi& indu&tr' for the ta2en period wa& in the month of Februar' //0 7:/.K/8 and the lowe&t return wa& in the month of (a' //0 7+

:


24/45

NIIT Wi)ro Infos0ste*/$1td$

Date O%EN CLOSE Return O%EN CLOSE Return O%EN CLOSE Return

Gan+/0 J.1 J/.J; +/.0< >0> ;J.J :>./ ./:

Feb+/0 JK ;.:; +:;.:/ ; -1J/.// -11.0/ +.:

(ar+/0 ;/.; J0.> :1.: -1;.// -J1/.1; ;.;

Apr+/0 JJ.> .1; :.1 ;0< ;.0 :;;.; +;.:1 ::: 1;.J; +.;K K0.J 0J:.:; +J.>/

Gun+/0 :;1 :.; J1. /.;; :00 :J.: +::.;0 ::1.; :>/.;; +>0.0K

5o4+/0 :J. :0>.>; K.1 :>: >;J.; >.:>

%ec+/0 :0>.>; :;J. +/.;J >0/ >1


25/45

S M S

;.;: .1 J./ /.:<

Feb+/0 J.0.0K.

"ighe&t return of thi& indu&tr' for the ta2en period wa& in the month of

October //0 7J.


26/45

In the abo4e table 5o.:/ &how that Polari& a4erage return i& clo&el' related to the

a4erage return of IT I5%$STR!. O4er all onl' TO companie& are more than

the Indu&tr' a4g. return&.

%/arma*euti*a1 Industr0= !

TABLE NO$&2

CI%LA Ltd$ RANBA"YAUROBINDO %;ARLtd$

Date O%EN CLOSE Return O%EN CLOSE Return O%EN CLOSE Retu

Gan+/0 >>; >>:.< +/.1< .> :< ;; : ;;:.J ;.:; >// >J.> K./ ;;>.>; .01

(ar+/0 ;; 00:.J; :J.J > ;0/ 01.K; :.J

Apr+/0 00; 0/.1 +0/.K1 >K.;; 1.>/ 01.; K;/.// :-/ +0.>0


27/45

Sep+/0 K< K1 :::.:; :>;..1


28/45

"ighe&t return of thi& indu&tr' for the ta2en period wa& in the month of

Au,ust //0 7J.>/8 and the lowe&t wa& in the month of Ma0 2' 7+:>.K.;> and Wo*4/ardt wa& noted lowe&t return a&+.:<

#LUCTUATIONS IN T;E %RICES O# T;E SELECTED S;ARES IN

RES%ECTED INDUSTRIES= !

(ar2et inde3e& ha4e alwa'& been of great importance in the worldof &ecurit' anal'&i& and portfolio management. People from different wal2& of life

u&e and are affected b' mar2et indicator&. In4e&tor&- both indi4idual andin&titutional- u&e the mar2et inde3 a& a benchmar2 again&t which the' e4aluate the

performance of their own or In&titutional portfolio. The technician& or the

charti&t& often ba&e their deci&ion& to bu' and &ell on the pattern& emerging out of the time &erie& data of mar2et inde3e&. E4en the economi&t& and &tati&tician& u&e

&toc2 mar2et inde3e& to &tud' the trend of growth pattern& in the econom'- to

anal'&e& a& well a& foreca&t bu&ine&& c'cle& and to correlate &toc2 mar2et inde3e&to economic acti4itie&.

The inde3 i& ju&t an indicator of mar2et and did nothing to the formationof deci&ion of &electing the in4e&tment or portfolio. So the in4e&tor &hould ha4e

the highe&t degree in anal'9ing thi& inde3. The' &impl' not onl' tell the

mo4ement of &hare price& but al&o reflected b' the weight of tho&e &hare&. So- ahigh increa&e in &hare price of a minor &hare with a &mall &hare holding will not

affect the mar2et.

In thi& &tud' to anal'&e& the fluctuation& in the price& of &hare&

for &elected companie& in the &elected indu&trie& inde3 ha& prepared in the &imple

a4erage method with the &elected companie& for the period of thirteen month&.

In general &toc2 e3change& are u&ing &ome method& to con&truct inde3e&.

Tho&e are


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• Simple a4erage method

• (ar2et capitali9ation (ethod

• Free+float Capitali9ation (ethod

T/e *onstru*tion of inde7 in sim)1e a+era,e met/od=!

H 7Simple a4erage on the da' of con&. 6&imple a4erage on ba&e da'8L://E3ample %GIA

Securitie& %a': %a' %a'< %a'>

?Rs$@ ?Rs$@ ?Rs$@ ?Rs$@

A & &


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7iii8 I.T.Indu&tr' Inde3

7i48 Pharma Indu&tr' Inde3

Constru*tion of Inde7 for Ban4in, Industr0=!

The a&e period of an2ing inde3 Gan+//0

The ba&e point& of ban2ing indu&tr' inde3 are ://

The an2& in4ol4ed in the ban2 indu&tr' inde3 are thirteenrandoml' &elected ban2& from SE// inde3.

TA@E 5O.:;

Date AND;RA ;D#C OBC SBI ICICI UTI CANARA

>an!' J.J; K0./K;

#e-!' 0/.JK; K;:.JK; >0 11:./K; ;J:.:; .; 11.0

Date

8I>AYA

IOB %NB UNION BOB A8

INDE"%O

$

>an!' 0:.0K.:K; :0.K; ;.K: ://

#e-!' ;J.K :/K.J; >;; .0; 1;./; >.;; J: >>.1K; :/J.K


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O*t!' ;K.: ::>./K; ;.K; :.;J

No+!' ;>.:; ::1.>:.0J :.<

De*!' >J.KK; ::>.1; ;J.>K; :;.1; ;:.1; >;:.; :


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The a&e period of Automobile Indu&tr' inde3 Gan+//0

The a&e point& of Automobile Indu&tr' inde3 are :// The Companie& in4ol4ed in the

Automobile indu&tr' inde3 are &i3 randoml' &elected companie& from

SE// inde3.

Automo-i1e Inde7= !

TA@E 5O.:0

DATE A$L$L

BA>A

>

M6M

Ltd$

;$;$M

$ T8S

%UN>AB

T$ A8$ Inde7 %o$

Gan+/0 .0 ;0K 0KJ.0; KK0 ://

Feb+/0 .>1 ;> K0.:K; 1>J :/J.>

(ar+/0 < 1J1.J 0 >;< J>


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In the diagram &hown abo4e month& are 7Gan+/0 to %ec+/08

&hown on the 3+a3i&. Inde3 point& are &hown on the '+a3i&.

%uring the initial period of the &tud' that i& Gan+/0 to Apr+/0the inde3 point& mo4ed in upward trend at the le4el of :;.0< point&- though there

i& a &light change. "owe4er during the period of (a'+/0 to Gul'/0 there i& a

down ward trend decrea&e in the inde3 point& the' reached the lowe&t le4el of ::/.:/. Soon there i& an upturn in the inde3 point& b' ri&ing to the le4el of ::/.J>

point& and that ha& been followed b' the ne3t month&.

Constru*tion of Inde7 for I$T$ Industr0= !

The a&e period of I.T. Indu&tr' inde3 Gan+//0

The a&e point& of I.T. Indu&tr' inde3 are ://

The Companie& in4ol4ed in the I.T. indu&tr' inde3 are &i3

randoml' &elected companie& from SE// SE5SE,

TA@E 5O.:K

DATE NIIT WI%RO IN#OSYS;CL %OLARIESSATYAM A8

Inde7

%o$

Gan+/0 J:.1K; K1.J; >>


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5o4+/0 ;0:.J 1K; ; 0K/.0; :J.KK; J>0./ ://.J0

%ec+/0 K/1.>K; J/>.K; ./; K/:.JK; /J..K :/K.0

In the diagram &hown abo4e month& are 7Gan+/0 to %ec+/08 &hown

on the 3+a3i&. A4erage point& are &hown on the '+a3i&.

From the &tating to Gune the' were &tandard and there i& not

that much fluctuation in the inde3 point& the' were mo4ed in the range of J0 to:/;. In the month of Gul' the inde3 point& were decrea&ed to J.JK and in the

month of Augu&t the' reached the lowe&t range 1/.K>.

@ater there wa& a huge increa&e in the point& and reached to

:/;.:K.

Constru*tion of Inde7 for %/arma Industr0= !

The a&e period of Pharma Indu&tr' inde3 Gan+//0

The a&e point& of Pharma Indu&tr' inde3 are :// The Companie& in4ol4ed in the Pharma inde3 are &i3

randoml' &elected companie& from SE// SE5SE,

Index Points of IT Ind"st#$

0

50

100

150

1 2 3 4 5 6 7 8 9 10 11 12

M%NT&S (J'n-06 to Dec-06

I N D ( )

P % I N T S


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Constru*tion

TA@E 5O.:1

DATE Ci)1a Ran-a70 1a7o smit/ Auro-indo Dr$REDDYS A+enties A8$ INDE" %

Gan+/0 >>.0; >0>.K; >J/.J0.>; >:>.K ;>K.; ::J.>J ::./;

(ar+/0 0/0.JK; >


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In the abo4e diagram &hown month& are 7Gan+/0 to %ec+/08&hown on the 3+a3i&. A4erage point& are &hown on the '+a3i&.

%uring the initial period of the &tud' that i& Gan+/0 to Apr+/0

the inde3 point& mo4ed at the le4el around :// point&- though there i& a &light

change. "owe4er there i& a dra&tic decrea&e in the month of (a'+/0- that i& 1J.J1.And increa&e in Gune and Gul'/0 reached to JJ.;;.

Again decrea&ed in the month of augu&t and increa&ed in the month

of October. It mo4ed in the &ame range in the la&t three month& i.e. October- 5o4ember and %ecember.

Coeffi*ient of +ariation= !

The &tandard de4iation di&cu&&ed &o far i& an ab&olute mea&ureof 4ariation. The corre&ponding relati4e mea&ure i& 2nown a& the coefficient of 4ariation. Thi& mea&ure de4eloped b' Barl Pear&on i& the mo&t commonl' u&ed

mea&ure of relati4e 4ariation. It i& u&ed in &uch problem& where we want to

compare the 4ariabilit' of two or more than two &erie&. That &erie& or group for which the coefficient of 4ariation i&

greater i& &aid to be more 4ariable or con4er&el' le&& con&i&tent- le&& uniform- le&&

&table or le&& homogeneou&. On the other hand- the &erie& for which coefficient of 4ariation i& le&& i& &aid to be le&& 4ariable or more con&i&tent- more uniform- more

&table or more homogeneou& coefficient of 4ariation denoted b' C.. i& obtained

a& follow&.

C$8$ F ? GA+,$@H&


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COM%ARISON O# UNSYSTEMATIC RISK AND RETURN #OR T;E

BANKIN INDUSTRY=!

To compare the ban2ing indu&tr' return and ri&2 thi& &tud' i&

u&ed coefficient of 4ariance.

It help& u& to 2now how much return we are getting for the baring of thatmuch ri&2. On the ba&i& of that thi& &tud' gi4e& ran2& for the &elected ban2ing

firm&. It help& to the in4e&tor& to anal'9e the ri&2& and return& in4ol4ed in the

ban2ing indu&tr'.

TABLE NO$&

AB OBC ;D#C SBI ICICI UTI CANARA 8I>AYA IOB BOB UB

A+era,e +/.J; +/.;; >.0

S$D J.1K :>.00 K./1 :/.K> J.0> :/.01 ::.K; :/.J1 ::./< J. :>.K ;/./1 ::;.< J.J; ::>.: :; ::.0 11./< J;.K: :

Coeffi*ient

of 8ariation +:/. :.0: :.:+:.


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To compare the Automobile indu&tr' return and ri&2 thi& &tud' i&

u&ed coefficient of 4ariance.

It help& u& to 2now how much return we are getting for the baring of that

much ri&2. On the ba&i& of that thi& &tud' gi4e& ran2& for the &elected Automobilefirm&. It help& to the in4e&tor& to anal'9e the ri&2& and return& in4ol4ed in the

Automobile indu&tr'.

TABLE NO$2

AS;O

K

BA>A

> M 6 M

;ERO

;ONDA

%AN>A

B

TATA

MOTORS

A+era,e >.:< +:.>/ /.1> .1:

Stde+ :>.1: J.>0 0./1 ;.K :.>; :/.:1

8arian*e :J.>; 1J.;; ;.:; :.>K +>./1 :>.1K


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To compare the I.T. indu&tr' return and ri&2 thi& &tud' i& u&ed coefficient

of 4ariance.It help& u& to 2now how much return we are getting for the baring of that

gi4en ri&2. On the ba&i& of Co+efficient of 4ariance- thi& &tud' gi4e& ran2& for the

&elected I.T. companie&. It help& to the in4e&tor& to anal'9e the ri&2& and return&in4ol4ed in the I.T. indu&tr'.

TABLE NO$ 2&

The abo4e table &how& the un&'&tematic ri&2 and the return for eachcompan'. And it al&o tell& that what i& the coefficient of 4ariance for each

compan'. In the abo4e table ran2& ha& gi4en on the ba&i& of coefficient of 4ariance for each compan'. According to the ba&i& of ran2ing NIIT ha& got first

ran4 for it& be&t performance. %o1aris Soft9are Ltd ha& got 1ast ran4 in the&elected companie& for it& lea&t performance.

COM%ARISION O# UNSYSTEMATIC RISK AND RETURN #OR T;E

%;ARMA INDUSTRY

To compare the Pharma indu&tr' return and ri&2 thi& &tud' i& u&edcoefficient of 4ariance.

It help& u& to 2now how much return we are getting for the baring of that

much ri&2. On the ba&i& of that thi& &tud' gi4e& ran2& for the &elected Pharmafirm&. It help& to the in4e&tor& to anal'9e the ri&2& and return& in4ol4ed in the

Pharma indu&tr'.

%ARTI NIIT

WI%R

O

INO#SY

S ;CL

SATYA

M

%OLARI

S

A+era,e ;.;: . :;.1 :;.

8arian*e :0K.>J KJ.KJ


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TABLE NO$22

CI%LA

LTD$

RANBA"

Y AURO

DR$REDD

YS

STERL

BIOTEC

WOCK;ARDT

LT

A+era,e +:.J1 /. >.;> /. >.:1 +.; J.K> :.J :0.K; :;.K0 J.:0

8arian*e >0/./0 J>.1 :00.J: 1/.;J >1.


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TABLE NO$2:

BSE!2 Ban4 IT Auto %/arma

A+era,e


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In the area of Automo-i1e industr0- onl' t/ree *om)anies wa& noted morea+era,e return than the indu&tr' return 7Calculated on the ba&i& of the auto inde3

maintaining b' SE8 from the &elected si7 *om)anies. Remaining threecompanie& were noted le&& than a4erage return&. ;ero ;onda motors confined a

negati4e return- a& the a4erage return for the period of pre4iou& twel4e month& of

the automobile indu&tr' wa& 2$&$

In the area of I$T$ Industr0- it can be concluded that onl' three companie& were

regi&tered po&iti4e a4erage return& form the &elected &i3 companie&. In thereaming one& ;CL wa& e3pre&&ed the high negati4e return in the &elected

companie& a& !:$


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The inde3 point& of Automo-i1es industr0 mo4ed from around & to

&2u10 and then the

inde3 were mo4ed in upward trend till Se)tem-er. In the la&t three month& therewere not that much change in the point&.

The Inde3 point& of I$T$ Industr0 are mo4ed around from $(3 to &($2'. The point& are not maintaining a trend. The&e indu&tr' inde3 point& are mo4ing

upward and downward. There are not that much fluctuation in the inde3 point&.

The&e point& reached in the month of De*em-er 2' at higher le4el of &($2'and noted lower le4el in the month of Au,ust at $(3$

The inde3 point& of %/arma*euti*a1 Industr0 mo4ed around from

$to&&2$.1 in la&t month. In4e&tor cannot a&&ume

the trend of thi& indu&tr'. In thi& indu&tr' the inde3 point& are not following thetrend. The' are fluctuating with out an' trend. Reached lowe&t le4el in the month

of (a' and higher le4el in the month of Februar'.

RECOMMENDATIONS=!

Thi& &tud' recommended &ome companie& and indu&trie& on the ba&i& of *oeffi*ient of +ariation. In the ca&e of indu&trie& in4e&tor better to go for IT

industr0 followed b' Ban4in, Industr0 and if he want to di+ersif0 t/e ris4 he

can go for automo-i1e industr0 then la&t preference &hall gi4en to

%/arma*euti*a1 Industr0$

In the ca&e of companie& in4e&tor want& to in4e&t in more indu&trie& and dont

want to gi4e preference for the &pecific indu&tr'. The in4e&tor need& to gi4e the preference to the companie& on the ba&i& of *oeffi*ient of +ariation$ #irst ran4

9i11 -e Ma/indra and Ma/indra from Auto industr0 and ne3t ;D#C from

Ban4in, Industr0. Then gi4e the preference to UTI5 NIIT 5 ICICI5 Auro-indo5

SBI5 TATA5 WI%RO- and &o on.


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BIBLIORA%;Y

• RUSSELL >$#ULLER 6 L$#ARELL5 >R )(O%ER5

I5EST(E5TS A5% SEC$RIT! A5A@!SIS*

!INTERNATIONAL EDITION &(

• 8$K$B;ALLA )I5EST(E5T (A5A#E(E5T 7SEC$RIT!

A5A@!SIS A5% PORTFO@IO (A5A#E(E5T8*

t/ EDITION$

• %REETI SIN; )I5EST(E5T (A5A#E(E5T*

Re)rinted Edition in &$


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• S$KE8IN )PORTFO@IO (A5A#E(E5T*

Se*ond %rint #e- 2&$

• %UNIT;A8AT;Y %ANDIAN )SEC$TIT! A5A@!SIS A5%

PORTFO@IO (A5#E(E5T*

WEBSITE=! www.b&eindia.com

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