“A STUDY ON SECURITY MARKET RISK AND RETURN FROM INVESTORS PERSPECTIVE”

Synopsis submitted in partial fulfillment of requirement for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Of

BANGALORE UNIVERSITY

By

GAUTAM KUMAR

12KXCMA016

Under the guidance of

Prof. PRASHANTH P.B

Assistant Professor

SURANA COLLEGECENTRE FOR POST GRADUATE STUDIES

#17 KENGERI SATELLITE TOWN, BANGALORE – 560060

Bangalore University

2013-2014

INTRODUCTION:

Securities market a place or places where securities are bought and sold, the facilities and people

engaged in such transactions, the demand for and availability of securities to be traded, and the

willingness of buyers and sellers to reach agreement on sales. Securities markets include over-

the-counter markets, the New York Stock Exchange, the Bombay stock exchange.

Risk is a complex topic. There are many types of risk, and many ways to evaluate and measure

risk. In the theory and practice of investing, a widely used definition of risk is:

“Risk is the uncertainty that an investment will earn its expected rate of return.” 

Typically, individual investors think of risk as the possibility that their investments could lose

money. They are likely to be quite happy with an investment return that is greater than expected -

a “positive surprise.” However, since risky assets generate negative surprises as well as positive

ones, defining risk as the uncertainty of the rate of return is reasonable. Greater uncertainty

results in greater likelihood that the investment will generate larger gains, as well as greater

likelihood that the investment will generate larger losses (in the short term) and in higher or

lower accumulated value (in the long term.)

L IT E R A T U R E R E V I E W:

Grewal S.S and Navjot Grewall (1984) revealed some basic investment rules and rules for selling

shares. They warned the investors not to buy unlisted shares, as Stock Exchanges do not permit

trading in unlisted shares.

Jack Clark Francis (1986) revealed the importance of the rate of return in investments and

reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain world,

investors cannot predict exactly what rate of return an investment will yield.

Preethi Singh(1986) disclosed the basic rules for selecting the company to invest in. She opined

that understanding and measuring return and risk is fundamental to the investment process.

According to her, most investors are 'risk averse'. To have a higher return the investor has to face

greater risks.

David.L.Scott and William Edward4 (1990) reviewed the important risks of owning common

stocks and the ways to minimize these risks. They commented that the severity of financial risk

depends on how heavily a business relies on debt. Financial risk is relatively easy to minimize if

an investor sticks to the common stocks of companies that employ small amounts of debt.

Nabhi Kumar Jain (1992) specified certain tips for buying shares for holding and also for selling

shares. He advised the investors to buy shares of a growing company of a growing industry. Buy

shares by diversifying in a number of growth companies operating in a different but equally fast

growing sector of the economy.

NEED FOR STUDY:

To know investors satisfaction with return from security market.

To know what are the main risk factors in security market.

OBJECTIVES:

To know what are the main risk factors in secondary market.

To determine the necessary rate of return on the amount of money you will be investing

to reach your goals.

To understand the depth about different investment avenues available in market.

To find out the factors that investor consider before investment.

HYPOTHESIS:

H0: An increase in alternative target allocation will not reduce the portfolio’s risk.

H1: An increase in alternative target allocation will reduce the portfolio’s risk.

SCOPE OF THE STUDY:

Selections of companies are restricted to nifty index and nifty junior index only. The companies

are chosen and analyzed based on their performance in the past three years. No other factor other

than the share price movements, index movement, rate of return on government securities and

beta values for the securities for the past three years are taken for analysis.

METHODOLOGY:

Research is an organized enquiry designed and carried to provide its information to solve the

problem. The project includes findings of primary and secondary data. The research is done with

the aid of the annual reports, the company data base text books. The study is conducted based on

“exploratory research” because the problem has not been clearly defined as yet.

DATA COLLECTION:

PRIMARY DATA:

Company’s finance manager.

Books

SECONDARY DATA:

Journals,

Magazines and

NSE website.

TOOLS AND TECHNIQUES USED FOR ANALYSIS:

There are three important methods to analyze the data. They are

1. Capital Asset Pricing Model(CAPM)

2. Beta coefficient

3. Arbitrage pricing Theory

CHAPTER SCHEME:

- CHAPTER ONE : INTRODUCTION

- CHAPTER TWO : PROFILE OF THE GENESIS FINANCIAL SOLUTIONS.

- CHAPTER THREE : RESEARCH DESIGN

- CHAPTER FOUR : DATA ANALYSIS AND INTERPRETATION

- CHAPTER FIVE : SUMMARY OF FINDINGS, CONCLUSION AND

SUGGESTIONS

- BIBLIOGRAPHY

- APPENDICES, ANNEXURE

BIBLIOGRAPHY

- Grewal S.S and Navjot Grewall (1984), Study on security market risk and return from

investors prospective,International Journal of innovative research & studies,

ISSN 2319-9725 Vol-2 Issue4, April (2013)

- Francis, J. C. (1993). Management of investments (Ed.). McGraw-Hill Book Co.

- Rachna Bajaj, Investor's perception towards the capital market International

Multidisciplinary Research Journal, ISSN No : 2230-7850, Vol 4 Issue 2 March 2014.

- Srivastava, Rajendra K., Tasadduq A. Shervani, and Liam Fahey (1998), “Market-Based

Assets and Shareholder Value: A Framework for Analysis,” Journal of Marketing, 62

(January), 2–18.

- John Y. Campbell, Understanding Risk and Return, , The Journal of Political Economy, Vol. 104, No. 2. (Apr., 1996), pp. 298-345.

- HUI GUO and ROBERT F. WHITELAW, Uncovering the Risk–Return Relation in the

Stock, THE JOURNAL OF FINANCE VOL. LXI, NO. 3 JUNE 2006.

WEB SITES:

Responsible investment, accessed on 05/06/2014

http://www.bseindia.com/static/about/responsible_investment.aspx?expandable=4

Companies by market capitalization, viewed on 05/06/2014

http://www.bseindia.com/markets/equity/eqreports/topmarketcapitalization.aspx?expandable=3

Securities Information, viewed on 05/06/2014

http://www.nseindia.com/corporates/content/securities_info.htm

Risk Management, viewed on 02/06/2014

http://www.nseindia.com/int_invest/content/risk_management.htm

Financial Results, accessed on 29/05/2014 http://www.bseindia.com/static/about/financials.aspx?

expandable=2

Security Lending and Borrowing Scheme (SLBS), viewed on 04/06/2014http://www.nseindia.com/products/content/equities/slbs/slbs.htm