Risk and Return Analysis of Equities listed in NSE Nifty with reference to Karvy Stock Exchange Limited

 

Mr. Jnaneshwar Pai Maroor, MBA(Finance), M.Phil (Mgmt.), PGDPM&IR

Assistant Professor & Ph.D Research Scholar

Justice K.S. Hegde Institute of Management

NMAMIT, Nitte                                            

Email ID: pai.jnan@gmail.com

 

Abstract

The risk and return relationship is a fundamental concept in not only financial analysis, but in every aspect of life. If decisions are to lead to benefit maximization, it is necessary that individuals/institutions consider the combined influence on expected (future) return or benefit as well as on risk/cost. The requirement that expected return/benefit is commensurate with risk/ cost is known as the “risk return trade-off in finance. A company which has a higher intrinsic worth, is not necessarily the best stock to buy. It may have no growth prospects or it may be overpriced. Similarly, a company that  performs well during any one year may not be the best to buy. On the contrary,a company which has been badly for sometime might have turn the corner and it may be the best to buy, as its shares may be under priced and it has good prospects of growth, hence an analysis of risk or return guides an investor in proper profitable investment. Return expressses the amount which an investor actually earned on an investment during a certain period . Return includes the interest,dividend and capital gains; while risk represents the uncertainity associated with a particular task. In financial terms, risk is the chance or probability that a certain investment may or may not deliver the actual expected return.

 

Key words: Risk, Return, NSE, Stock Market, Investor, Index, Beta

 

INTRODUCTION:

Stock market is the area where one will not be able to predict the future in a right way. A stock market may vary to either side due to a simple corporate decision. The investors are really worried with these variations in the market. Once he invests in stock market, a number of questions will arise in his mind. Will the stock price go up? Is it a good time to buy or sell the stock? What would be the risk and return of the stock? The line of questions goes on like this.

Normally an investor in stock market will be aware of the risk that he has to bear and the return for that. But up to what extent? To answer this question he has to get into the depth of trading of stocks. By analyzing and knowing the importance of these trading activities he will be more aware and will be able to control the risk and cope up with the volatility happening in the market. Security analysis is built around the idea that investors are concerned with two principal properties inherent in securities: the return that can be expected from building a security, and risk that the return achieved will be less than the return that was expected. The primary purpose of this study is to focus upon return and risk and how they are measured.

Investors want to maximize expected returns subjected to their tolerance for risk. Return is the motivating force and the principle reward in the investment process and it is the key method available to investors in comparing alternative investment. Measuring historical return allows investors to assess how well investment has been done and it plays a part in the estimation of future unknown returns.

 

Investment: Investment is the employment of funds on assets with the aim of earning income or capital appreciation. Investment has two attributes namely time and risk. Present consumption is sacrificed to get a return in the future. The risk is undertaken with a view to reap some return from the investment. Financial investment is the allocation of money to assets that are expected to yield some gain over a period of time. It is an exchange of financial claims such as stocks and bonds for money. They are expected to yield returns and experience capital growth over the years.The main investment objectives are increasing the rate of return and reducing the risk.

Return : Investors always expect a good rate of return from their investments. Rate of return could be defined as the total income the investor receives during the holding period stated as a perceentage of the purchasing price at the beginning of the holding period.

Risk: Risk of holding securities is related with the probability of actual return becoming less than the expected return. The word risk is synonymous with the phrase variability of return. Investment’s risk is just as important as measuring its expected rate of return because minimising risk and maximising the rate of return are interrelated objectives in the investment management. An investment whose rate of return varies widely from period to period is risky than whose return that does not change much. Every investor likes to reduce the risk of his investment by proper combination of different securities.  

 

NEED OF THE STUDY:

Investment decisions are influenced by various motives. Some people invest in a business to acquire control and enjoy the prestige associated with it. Some people invest in expensive yachts and famous villas to display their wealth. Most investors however are largely guided by the pecuniary motive of earning a return on their investment.

Return is the primary motivating force that drives investment. It represents the reward for undertaking investment. Since the game of investing is about returns (after allowing for risk), measurement of realized (historical) returns is necessary to access how well the investment manager has done. In addition, historical returns are often used as an important input in estimating future (prospective) returns. 

 

SCOPE OF THE STUDY:

The scope of the study is confined to only NSE Nifty 50 companies.

 

IMPORTANCE OF THE STUDY:

Stock market is unpredictable and its movement is influenced by number of factors. An investor can reduce unsystematic risk by investing in a number of securities rather than in a single security. This study helps to identify the stocks yielding maximum returns with minimum risk. It also helps in identifying the systematic risks involved in each stock. Industry wise analysis also helps to understand which industry is yielding higher returns.

 

 

 

 

OBJECTIVES OF THE STUDY:

·         To analyze the risk and return of the 50 companies from Nifty Index.

·         To measure the actual returns of these companies for 6 years (2008-2013).

·         To study volatality of companies in comparison with the market

·         To guide the investors of various investment opportunities.

·         To get good return on investement made in differen avenues by investors.

 

SOURCES OF DATA:

PRIMARY DATA:

For a study of this nature primary data is collected through interaction with manager and staff members.

SECONDARY DATA:

The secondary data which is collected from various secondary sources like internet, journals & other publications. The stock price & market index were collected from the National Stock Exchange official website (www.nseindia.com). Apart from that, data have been taken from different company websites.

 

TOOLS FOR ANALYSIS:

·         Beta is used to indicate percentage change in company’s stock return, when there is one percent change in NSE index return.

·         Beta is used to calculate the total risk.

·         MS Excel is used in order to calculate Return and Beta.

The other kinds of formulae used are:

Rate of return= [(closing price-opening price)/opening price]*100

Computation of Beta:

Stock Return (Ri) = [(closing price-opening price)/opening price]*100

Stock Return (Rm) = [(closing price-opening price)/opening price]*100

Beta (β) = [ ∑(Ri-`Ri)(Rm-`Rm) ] / [ ∑(Rm-`Rm)^2 ]

Where, `RI= (∑ RI)/5 &`Rm= (∑ Rm)/5

Computation of Alpha:

Alpha (α) = `RI – β`Rm

Beta (β) represents the Systematic Risk.

Alpha (α) represents the Unsystematic Risk.

 

METHODOLOGY:

·         Analysis of return and beta’s of 50 companies using SPSS and statistical tools in excel.

 

DATA ANALYSIS AND INTERPRETATION:

Risk is an important consideration in holding any portfolio. The risk in holding securities is generally associated with the possibility that realised returns will be less than the returns expected. Risks can be classified as Systematic risks and Unsystematic risks. The degree, to which different portfolios are affected by these systematic risks as compared to the effect on the market as a whole, is different and is measured by Beta. To put it differently, the systematic risks of various securities differ due to their relationships with the market. The Beta factor describes the movement in a stock's or a portfolio's returns in relation to that of the market return. For all practical purposes, the market returns are measured by the returns on the index (Nifty), since the index is a good reflector of the market.

 

In order to find out the movement in the stock return in relation to the Nifty Index, Beta’s of 50 companies are calculated and analysed.

In the following table

Y represents= Year     OP represents= Opening Price            CP= Closing Price

Rm= Return from Market       Ri= Return from particular stock

RI= Average of Ri      RM= Average of Rm  Ri-RI is denoted as A

Rm-RM is denoted as B

 

 

Table 1: Table showing calculation of Beta of Nifty Index

Year

OP

CP

Rm

RM

B

B^2

2008

6136.75

2959.15

-51.78

8.33

-60.11

3613.21

2009

2963.30

5201.05

75.52

8.33

67.19

4514.50

2010

5200.90

6134.50

17.95

8.33

9.62

92.54

2011

6177.45

4624.30

-25.14

8.33

-33.47

1120.24

2012

4640.20

5905.10

27.26

8.33

18.93

358.34

2013

5937.65

6304

6.17

8.33

-2.16

4.67

∑=

49.98

9703.5

 

Market Beta=β= +1.00

 

Table 2: Table showing calculation of Beta of ACC Ltd.

 

Year

 

OP

 

CP

 

Ri

 

Rm

 

A

 

B

 

(A*B)

 

(B) ^2

2008

1035.00

480.15

-53.61

-51.78

-71.5

-60.11

4297.87

3613.21

2009

480.15

872.45

81.70

75.52

63.81

 67.19

4287.39

4514.50

2010

870.00

1075.60

23.63

17.95

5.74

   9.62

55.22

92.54

2011

1078.00

1136.90

5.46

-25.14

-12.43

-33.47

 416.03

1120.24

2012

1145.00

1432.20

25.08

27.26

7.19

 18.93

  159.61

358.34

2013

1145

1432.20

25.08

6.17

7.19

-2.16

15.53

4.67

  =

107.34

49.98

9231.65

  9703.5

 

Average Stock Return =(107.34)/6 =17.89, β = 0.95   Beta = + 0.95

One percent change in NSE index return causes 0.95% change in ACC Ltd. stock return. The     stock moves along with the market index.

 

Table 5.3: Table showing calculation of Beta of Ambuja Cements Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

146.50

70.05

-52.18

-51.78

-62.16

-60.11

3736.48

3613.21

2009

70.25

104.25

48.40

75.52

38.82

 67.19

2608.32

4514.50

2010

105.40

143.20

35.86

17.95

25.88

   9.62

  248.97

    92.54

2011

143.20

155.35

8.48

-25.14

-1.5

-33.47

  50.21

1120.24

2012

156.00

200.90

28.78

27.26

18.8

 18.93

  355.88

358.34

2013

201.75

182.65

-9.47

6.17

-19.45

-2.16

42.01

4.67

∑ =

59.87

49.98

7041.87

9703.5

 

Average Stock Return=(59.87)/6= 9.98, β = 0.73  Beta = +0.73

One percent change in NSE index return causes 0.73% change in Ambuja Cements Ltd. stock return. The stock is less volatile compared to the market.

 

Table 4: Table showing calculation of Beta of Asian Paints Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

1139

894.95

-21.43

-51.78

-57.45

-60.11

3453.32

3613.21

2009

881.10

1797.20

103.97

75.52

67.95

 67.19

4565.56

4514.50

2010

1791

2878.70

60.73

17.95

24.71

   9.62

443.54

92.54

2011

2898

2592.35

-10.55

-25.14

-46.57

-33.47

1558.70

1120.24

2012

2560

4432.55

73.15

27.26

37.13

 18.93

702.87

358.34

2013

444.50

490

10.24

6.17

-25.78

-2.16

55.68

4.67

∑ =

216.11

49.98

10779.67

9703.5

 

Average Stock Return = (216.11)/6=36.02, β = 1.11 Beta = +1.11

One percent change in NSE index return causes 1.11% change in Asian Paints Ltd. stock return. The stock moves along with the market.

 

Table 5: Table showing calculation of Beta of Axis Bank Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

970.30

504.70

-47.99

-51.78

-65.31

-60.11

3925.78

3613.21

2009

508.50

989.20

94.53

75.52

77.21

 67.19

5187.74

4514.50

2010

993.90

1350.10

35.84

17.95

18.52

   9.62

178.16

    92.54

2011

1365.00

808.10

-40.80

-25.14

-58.12

-33.47

1945.28

1120.24

2012

810.00

1356.55

67.48

27.26

50.16

 18.93

949.53

358.34

2013

1369.70

1299.55

-5.12

6.17

-22.44

-2.16

48.47

4.67

  ∑ =

103.94

49.98

12234.96

9703.5

`

Average Stock Return=(103.94)/6=17.32 ,β=1.26 Beta = +1.26

One percent change in NSE index return causes 1.26% change in Axis Bank Ltd. stock return. The stock is more volatile compared to the market.

 

Table 6: Table showing calculation of Beta of Bajaj Auto Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

898.00

391.10

-56.45

-51.78

-104

-60.11

6262.86

3613.21

2009

407.00

1754.80

331.15

75.52

283.41

 67.19

19042.32

4514.50

2010

1765.00

1541.00

-12.69

17.95

-60.43

   9.62

-581.34

92.54

2011

1557.00

1591.40

2.21

-25.14

-45.53

-33.47

1523.89

1120.24

2012

1600.00

2131.15

33.20

27.26

-14.54

 18.93

-275.24

358.34

2013

2147

1910.85

-11

6.17

-58.74

-2.16

126.88

4.67

∑ =

286.42

49.98

26099.37

9703.5

 

Average Stock Return = (286.42)/6=47.74, β=2.69 Beta = +2.69

One percent change in NSE index return causes 2.69% change in Bajaj Auto Ltd. stock return. The stock is more volatile compared to the market. This stock is considered to be more risky because the Beta value is more than +2.00.

 

Table 7:Table showing calculation of Beta of  Bank of Baroda

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

459.60

280.00

-39.08

-51.78

57.73

-60.11

-3470.15

3613.21

2009

262.05

513.95

96.13

75.52

77.48

 67.19

5205.88

4514.50

2010

505.55

896.70

77.37

17.95

58.72

   9.62

564.88

    92.54

2011

897.20

665.35

-25.84

-25.14

-44.49

-33.47

1489.08

1120.24

2012

670.10

866.45

29.30

27.26

10.65

 18.93

201.60

358.34

2013

872

645.55

-25.96

6.17

-44.61

-2.16

96.36

4.67

∑ =

111.92

49.98

 

 

4087.65

9703.5

 

Average Stock Return= (111.92)/6=18.65, β=0.42Beta = +0.42

One percent change in NSE index return causes 0.42 change in Bank of Baroda stock return.

 

Table 8: Table showing calculation of Beta of Bharat Heavy Electricals Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

2580.00

1362.60

-47.19

-51.78

-31.64

-60.11

1901.88

3613.21

2009

1372.00

2403.30

75.17

75.52

90.72

 67.19

6095.48

4514.50

2010

2410.00

2323.70

-3.58

17.95

33.5

   9.62

322.27

    92.54

2011

2325.00

238.85

-89.73

-25.14

-74.18

-33.47

2482.80

1120.24

2012

239.70

228.25

-4.78

27.26

10.77

 18.93

203.88

358.34

2013

230.25

176.90

-23.17

6.17

-7.62

-2.16

16.46

4.67

∑ =

-93.28

49.98

 

 

11022.77

9703.5

`

Average Stock Return = (-93.28)/6=(-15.55), β=1.14 Beta = +1.14

One percent change in NSE index return causes 1.14% change in Bharat heavy Electricals Ltd. stock return. The stock is more volatile compared to the market.

 

Table 9: Table showing calculation of Beta of Bharat Petroleum Corporation Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

529.70

376.10

-29.00

-51.78

-34.61

-60.11

2080.41

3613.21

2009

377.00

635.55

68.58

75.52

62.97

 67.19

4230.95

4514.50

2010

635.55

658.40

3.60

17.95

-2.01

   9.62

-19.34

    92.54

2011

662.00

477.80

-27.82

-25.14

-33.43

-33.47

1118.90

1120.24

2012

484.90

356.35

-26.51

27.26

-32.12

 18.93

-608.03

358.34

2013

449

347.90

-22.52

6.17

-28.13

-2.16

60.76

4.67

∑ =

-33.67

49.98

 

 

6863.65

9703.5

 

Ri = (-33.67)/6 = (-5.61), β=0.71  Beta = + 0.71

One percent change in NSE index return causes 0.71% change in Bharat Petroleum Corporation Ltd. stock return. The stock is less volatile compared to the market.

 

 

 

 

 

Table 10: Table showing calculation of Beta of  Bharti Airtel Ltd

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

1000.00

715.50

-28.45

-51.78

-14.67

-60.11

881.81

3613.21

2009

715.00

329.75

-53.88

75.52

-40.10

 67.19

-2694.32

4514.50

2010

329.85

358.80

8.78

17.95

22.56

   9.62

217.03

92.54

2011

360.90

343.50

-4.82

-25.14

8.96

-33.47

-299.89

1120.24

2012

344.50

317.10

-7.95

27.26

5.83

 18.93

110.36

358.34

2013

318.55

330.25

3.67

6.17

17.45

-2.16

37.69

4.67

∑=

-82.65

49.98

 

 

-1747.32

9703.5

 

Average Stock Return= (-82.65)/6= (-13.78), β= (-0.18) Beta = -0.18

One percent change in NSE index return causes negative movement in Bharti Airtel Ltd. stock return. This indicates that the stock return moves in the opposite direction to the market return. Here the market return moves in the positive direction whereas stock return moves in the negative direction.

 

Table 11: Table showing calculation of Beta of Cairn India Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

259.90

172.05

-33.80

-51.78

-40.77

-60.11

2450.68

3613.21

2009

175.50

282.15

60.77

75.52

53.8

 67.19

3614.82

4514.50

2010

283.10

332.75

17.54

17.95

10.57

   9.62

101.77

    92.54

2011

333.50

314.25

-5.77

-25.14

-12.74

-33.47

426.41

1120.24

2012

315.00

319.10

1.30

27.26

-5.67

 18.93

-107.33

358.34

2013

318.10

323.75

1.78

6.17

-5.19

-2.16

11.21

4.67

∑ =

41.82

49.98

 

 

6497.56

9703.5

 

Average Stock Return=41.82/6=6.97, β=0.67Beta = + 0.67

One percent changes in NSE index return causes 0.67% change in Cairn India Ltd. stock return. The stock is less volatile compared to the market.

 

Table 12: Table showing calculation of Beta of Cipla Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

215.00

186.60

-13.21

-51.78

-27.72

-60.11

1666.25

3613.21

2009

187.00

335.05

79.17

75.52

64.66

 67.19

4344.51

4514.50

2010

338.00

369.80

9.41

17.95

-5.1

   9.62

-49.06

    92.54

2011

370.90

319.90

-13.75

-25.14

-28.26

-33.47

945.86

1120.24

2012

320.90

414.25

29.09

27.26

14.58

 18.93

276.00

358.34

2013

416

400.80

-3.65

6.17

-18.16

-2.16

39.23

4.67

∑=

87.06

49.98

 

 

7222.79

9703.5

 

Average Stock Return=87.06/6=14.51, β=0.74 Beta = + 0.74

One percent changes in NSE index return causes 0.74% change in Cipla Ltd. stock return. The stock is less volatile compared to the market.

 

 

 

 

Table 13: Table showing calculation of Beta of Coal India Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

0.00

0.00

0

0.00

0.00

0.00

0.00

0.00

2009

0.00

0.00

0

0.00

0.00

0.00

0.00

0.00

2010

291.00

314.75

8.16

17.95

3.07

13.58

41.69

184.42

2011

315.50

300.65

-4.71

-25.14

-9.8

-29.51

289.20

870.84

2012

303.00

354.80

17.10

27.26

12.01

22.89

274.91

523.95

2013

356.05

290.00

-0.19

6.17

-5.28

1.8

9.50

3.24

 

∑=

20.36

26.24

 

 

615.3

1582.45

 

Average Stock Return=20.36/4=5.09, β=0.39Beta = + 0.39

One percent changes in NSE index return causes 0.39% change in Coal India Ltd. stock return. The stock is less volatile compared to the market.

 

Table 14: Table showing calculation of Beta of DLF Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

1076.00

282.15

-73.78

-51.78

-60.91

-60.11

3661.30

3613.21

2009

279.85

361.20

29.07

75.52

41.94

 67.19

2817.95

4514.50

2010

361.00

291.95

-19.13

17.95

-6.26

   9.62

-60.22

    92.54

2011

295.00

183.10

-37.93

-25.14

-25.06

-33.47

838.76

1120.24

2012

184.70

230.60

24.85

27.26

37.72

 18.93

714.04

358.34

2013

233.65

166.70

-0.29

6.17

12.58

-2.16

-27.17

4.67

∑=

-77.21

49.98

 

 

7944.66

9703.5

 

Average Stock Return= (-77.21)/6= (-12.87), β=0.82 Beta = + 0.82

One percent changes in NSE index return causes 0.82% change in DLF Ltd. stock return. The stock is less volatile compared to the market.

 

Table 15:Table showing calculation of Beta of  Dr. Reddy's Laboratories Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

720.00

468.65

-34.91

-51.78

-68.44

-60.11

4113.93

3613.21

2009

473.90

1146.60

141.95

75.52

108.42

 67.19

7284.74

4514.50

2010

1140.00

1662.85

45.86

17.95

12.33

   9.62

118.61

92.54

2011

1671.00

1577.95

-5.57

-25.14

-39.1

-33.47

1308.68

1120.24

2012

1584.95

1829.75

15.45

27.26

-18.08

 18.93

342.25

358.34

2013

1831.60

2534.60

38.38

6.17

4.85

-2.16

-10.48

4.67

∑=

201.16

49.98

 

 

13157.73

9703.5

 

Average Stock Return=201.16/6=33.53, β=1.36Beta = +1.36

One percent changes in NSE index return causes 1.36% change in Dr. Reddy’s Laboratories Ltd. stock return. The stock is more volatile compared to the market.

 

Table 16: Table showing calculation of Beta of GAIL (India) Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

536.05

206.25

-61.52

-51.78

-65.52

-60.11

3938.41

3613.21

2009

208.50

413.30

98.23

75.52

94.23

 67.19

6331.31

4514.50

2010

413.00

512.65

24.13

17.95

20.13

   9.62

193.65

    92.54

2011

512.05

383.65

-25.08

-25.14

-29.08

-33.47

973.30

1120.24

2012

384.00

356.75

-7.10

27.26

-11.10

 18.93

-210.12

358.34

2013

359

342.30

-4.65

6.17

-8.65

-2.16

18.68

4.67

∑=

24.01

49.98

 

 

11245.23

9703.5

 

Average Stock Return=24.01/6=4.00, β=1.16 Beta = +1.16

One percent changes in NSE index return causes 1.16% change in GAIL (India) Ltd. stock return. The stock is more volatile compared to the market.

 

Table 17: Table showing calculation of Beta of Grasim Industries Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

3630.00

1219.85

-66.40

-51.78

-74.83

-60.11

4498.03

3613.21

2009

1220.00

2475.05

102.87

75.52

94.44

 67.19

6345.42

4514.50

2010

2487.05

2342.70

-5.80

17.95

-14.23

   9.62

-136.89

    92.54

2011

2342.70

2488.75

6.23

-25.14

-2.2

-33.47

73.63

1120.24

2012

2474.00

3169.50

28.11

27.26

19.68

 18.93

372.54

358.34

2013

3173.50

2714.60

-14.46

6.17

-22.89

-2.16

49.44

4.67

∑=

50.55

49.98

 

 

11202.17

9703.5

 

Average Stock Return=50.55/6=8.43, β=1.15Beta = +1.15

One percent changes in NSE index return causes 1.15% change in Grasim Industries Ltd. stock return. The stock is more volatile compared to the market.

 

Table 18: Table showing calculation of Beta of HCL Technologies Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

332.00

115.30

-65.27

-51.78

-118.73

-60.11

7136.86

3613.21

2009

116.50

371.30

218.71

75.52

165.25

 67.19

11103.15

4514.50

2010

374.25

456.25

21.91

17.95

-31.55

   9.62

-303.22

    92.54

2011

460.00

387.95

-15.66

-25.14

-69.12

-33.47

2313.45

1120.24

2012

389.00

618.70

59.05

27.26

5.59

 18.93

105.82

358.34

2013

624.90

1262.55

102.04

6.17

48.58

-2.16

-104.93

4.67

∑=

320.78

49.98

 

 

20251.13

9703.5

 

Average Stock Return = 320.78/6=53.46, β = 2.09 Beta = +2.09

One percent change in NSE index return causes 2.09% change in HCL Technologies Ltd. stock return. The stock is more volatile compared to the market. This stock is considered to be more risky because the Beta value is more than +2.00.

 

Table 19: Table showing calculation of Beta of HDFC Bank Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

1730.00

998.35

-42.29

-51.78

-49.04

-60.11

2947.79

3613.21

2009

996.00

1702.25

70.91

75.52

64.16

 67.19

4310.91

4514.50

2010

1700.00

2346.35

38.02

17.95

31.27

   9.62

300.82

    92.54

2011

2370.00

426.85

-81.99

-25.14

-88.74

-33.47

2970.13

1120.24

2012

428.90

678.60

58.22

27.26

51.47

 18.93

974.33

358.34

2013

682.10

665.85

-2.38

6.17

-9.13

-2.16

19.72

4.67

∑=

40.49

49.98

 

 

11523.7

9703.5

 

Average Stock Return=40.49/6=6.75, β=1.19 Beta = +1.19

One percent changes in NSE index return causes 1.19% change in HDFC Bank Ltd. stock return. The stock is more volatile compared to the market.

 

Table 20: Table showing calculation of Beta of Hero MotoCorp Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

697.70

803.65

15.19

-51.78

-9.32

-60.11

560.23

3613.21

2009

801.40

1717.70

114.34

75.52

89.83

 67.19

6035.68

4514.50

2010

1732.90

1988.15

14.73

17.95

-9.78

   9.62

-94.08

    92.54

2011

2014.00

1905.15

-5.40

-25.14

-29.91

-33.47

1001.09

1120.24

2012

1914.80

1900.60

-0.74

27.26

-25.25

 18.93

-477.98

358.34

2013

1905.35

2075.30

8.92

6.17

-15.59

-2.16

33.67

4.67

∑=

147.04

49.98

 

 

7058.61

9703.5

 

Average Stock Return=147.04/6=24.51, β=0.73Beta = + 0.73

One percent changes in NSE index return causes 0.73% change in Hero MotoCorp Ltd. stock return. The stock is less volatile compared to the market.

Table 21: Table showing calculation of Beta of Hindalco Industries Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

216.00

51.40

-76.20

-51.78

-98.85

-60.11

5941.87

3613.21

2009

52.40

160.85

206.97

75.52

184.52

 67.19

12397.90

4514.50

2010

162.00

247.00

52.47

17.95

30.02

   9.62

288.79

    92.54

2011

248.00

115.85

-53.29

-25.14

-75.74

-33.47

2535.02

1120.24

2012

117.00

130.50

11.54

27.26

-10.91

 18.93

-206.53

358.34

2013

131.50

122.60

-6.77

6.17

-29.22

-2.16

63.12

4.67

∑=

134.72

49.98

 

 

21020.17

9703.5

 

Average Stock Return=134.72/6=22.45, β=2.17Beta = +2.17

One percent change in NSE index return causes 2.17% change in Hindalco Industries Ltd. stock return. The stock is more volatile compared to the market. This stock is considered to be more risky because the Beta value is more than +2.00.

 

Table 22: Table showing calculation of Beta of Hindustan Unilever Ltd.

Y

OP

CP

Ri

Rm

A

B

A*B

B^2

2008

213.25

250.30

17.37

-51.78

-0.90

-60.11

54.10

3613.21

2009

251.00

264.80

5.50

75.52

-12.77

 67.19

-858.02

4514.50

2010

264.80

312.90

18.16

17.95

-0.11

   9.62

-1.06

    92.54

2011

310.05

407.40

31.40