final equity analysis project

8/10/2019 final equity analysis project

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INTRODUCTION

The risk/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 reuirement that expected return/benefit be

commensurate with risk/cost is known as the !risk/return trade"off! in finance.

This session discusses the trade"off and, usin# conventional statistical tools, provides a

method for uantifyin# risk. Two cate#ories of risk borne by the firm$s stockholders,

business risk and financial risk, are discussed and demonstrated, as is the concept of

levera#e. The session also examines risk reduction via portfolio diversification and what

reuirements need to be met for firms to experience the benefits of diversification. The

%apital &sset 'ricin# odel (%&') is used to demonstrate the risk/return trade"off by

relatin# the reuired return on the firm$s investments to its beta (or market) risk.

BENEFITS TO SHAREHOLDERS

*hy should you purchase shares of a company+ *hat are benefits that accrue to you as a

shareholder+ &part from the ri#ht to vote and decide the future course of action that a

company takes, the real benefit that you, as a shareholder have is in form of participation

that you #et in profit made by the company. &t the same time, your liability is limited

only to the face value of the shares held by you. The benefits distributed by the company

to its shareholders can be -) onetary enefits and ) 0on onetary enefits.

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Need of the study:

Investment decisions are influenced by various motives. 1ome people invest in a business

to acuire control and en2oy the presti#e associated with it. 1ome people invest in

expensive yachts and famous villas to display their wealth. ost investors however are

lar#ely #uided by the pecuniary motive of earnin# a return on their investment.

3eturn is the primary motivatin# force that drives investment. It represents the reward for

undertakin# investment. 1ince the #ame of investin# is about returns (after allowin# for

risk), measurement of realized (historical) returns is necessary to access how well the

investment mana#er has done. In addition, historical returns are often used as an

important input in estimatin# future (prospective) returns.

Scope of the study:

The study for risk return analysis is carried out by takin# -4 different companies of 5

different sectors viz. IT , Textile , Telecommunications , 'arma and 'etroleum.


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REASEARCH !ETHODOLO"#

Rese$%ch Desi&'

The data is based on the primary data and secondary data'rimary data There is no primary data for this pro2ect

1econdary data The present study is based on 1econdary data. The various source of

secondary data include

Internet

1hare prices of different 18 1ensex companies.

Information provided by &098T 1T:%; 3:;I09 '

a#azines

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LI!ITATIONS OF THE STUD#

The present pro2ect work has been undertaken to provide information

re#ardin# risk return on euities. The followin# are the limitations of the study.

The study is based on the secondary data which is available from various

websites.

The study is limited to only ten securities viz *ipro, ?%=, Tata otors, aruthi

1uzuki, harti &irtel, 3eliance %ommunication, iocon, %ipla, 9ail, :09%

The time taken to undertaken the pro2ect work is very short hence only ten

securities were chosen for the study.

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INDUSTR# (ROFILE

INDUSTR# O)ER)IE*

The securities market achieves one of the most important functions of channelin# idle

resources to productive resources or from less productive resources to more productive

resources. ?ence in the broader context the people who save and investors who invest

focus more towards the economy@s abilities to invest and save respectively. This

enhances savin#s and investments in the economy, the two pillars for economic #rowth.

The Indian %apital arket has come a lon# way in this process and with a stron#

re#ulator it has been able to usher an era of a modern capital market re#ime. The past

decade in many ways has been remarkable for securities market in India. It has #rown

exponentially as measured in terms of amount raised from the market, the number of

listed stocks, market capitalization, tradin# volumes and turnover on stock exchan#es,

and investor population. The market has witnessed fundamental institutional chan#es

resultin# in drastic reduction in transaction costs and si#nificant improvements in

efficiency, transparency and safety.

Stoc+ E,ch$'&e:

& stoc+ e,ch$'&e, sh$%e -$%+et or bou%se i s a corporation or mutual or#anization

which provides facilities for stock brokersand traders, to trade company stocksand other

securities. 1tock exchan#es also provide facilities for the issue and redemption of

securities, as well as, other financial instruments and capital events includin# the payment

of income and dividends. The securities traded on a stock exchan#e include sharesissued

by companies, unit trustsand other pooled investment products andbonds. To be able totrade a security on a certain stock exchan#e, it has to be listedthere. Asually there is a

central location at least for recordkeepin#, but trade is less and less linked to such a

physical place, as modern markets areelectronic networks, which #ives them advanta#es

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http://wiki/Corporationhttp://wiki/Mutual_organizationhttp://wiki/Stock_brokershttp://wiki/Trader_(finance)http://wiki/Stockhttp://wiki/Security_(finance)http://wiki/Security_(finance)http://wiki/Dividendhttp://wiki/Shareshttp://wiki/Unit_trusthttp://wiki/Unit_trusthttp://wiki/Bond_(finance)http://wiki/Electronic_networkshttp://wiki/Electronic_networkshttp://wiki/Mutual_organizationhttp://wiki/Stock_brokershttp://wiki/Trader_(finance)http://wiki/Stockhttp://wiki/Security_(finance)http://wiki/Dividendhttp://wiki/Shareshttp://wiki/Unit_trusthttp://wiki/Bond_(finance)http://wiki/Electronic_networkshttp://wiki/Corporation


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:f speed and cost of transactions. Trade on an exchan#e is by members only. The initial

offerin# of stocks and bonds to investorsis by definition done in theprimary marketand

subseuent tradin# is done in the secondary market. & stock exchan#e is often the most

important component of a stock market. 1upply and demand in stock a market is driven

by various factors which, as in all free markets, affect the price of stocks (see stock

valuation).

There is usually no compulsion to issue stock via the stock exchan#e itself, nor must

stock be subseuently traded on the exchan#e. 1uch tradin# is said to be off exchan#e or

over"the"counter. This is the usual way that bonds are traded. Increasin#ly, stock

exchan#es are part of a #lobal market for securities.

Histo%y of stoc+ e,ch$'&es:

In -th century Crance the courratiers de chan#e were concerned with mana#in# and

re#ulatin# the debts of a#ricultural communities on behalf of the banks. &s these men

also traded in debts, they could be called the first brokers.

1ome stories su##est that the ori#ins of the term !bourse! come from the =atin bursa

meanin# a bagbecause, in -6th century ru#es, the si#n of a purse (or perhaps three

purses), hun# on the front of the house where merchants met.

?owever, it is more likely that in the late -6th century commodity traders in ru#es

#athered inside the house of a man called


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The >utch later started2oint stock companies,which letshareholdersinvest in business

ventures and #et a share of their profits " or losses. In -B4, the >utch 8ast India

%ompany issued the first shares on the &msterdam 1tock 8xchan#e. It was the first

company to issue stocks andbonds. In -BFF, the tradin# of stocks be#an on a stock

exchan#e in =ondon. 1tock 8xchan#e

The %o.e of stoc+ e,ch$'&es:

1tock exchan#es have multiple roles in the economy,this may include the followin#

R$isi'& c$pit$. fo% busi'esses

The 1tock 8xchan#e provides companieswith the facility to raise capitalfor expansionthrou#h sellin# sharesto the investin#public.

!obi.i/i'& s$i'&s fo% i'est-e't

*hen people draw their savin#s and invest in shares, it leads to a more rational allocation

of resources because funds, which could have been consumed, or kept in idle deposits

withbanks, are mobilized and redirected to promotebusinessactivity with benefits for

several economic sectors such as a#riculture, commerce and industry, resultin# in a

stron#er economic #rowthand hi#herproductivitylevels.

F$ci.it$ti'& co-p$'y &%o0th

%ompanies view acuisitions as an opportunity to expand product lines, increase

distribution channels, hed#e a#ainst volatility, increase its market share, or acuire other

necessary business assets. & takeover bid or a mer#er a#reement throu#h the stock

exchan#e is one of the simplest and most common ways for a company to #row by

acuisition or fusion.

Redist%ibutio' of 0e$.th

1tocks exchan#es do not exist to redistribute wealth althou#h casual and professional

stock investors throu#h stock prices increases (that may result in capital #ains for the

Investor) and dividends #et a chance to share in the wealth of profitable shareholders and

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http://wiki/Joint_stock_companyhttp://wiki/Joint_stock_companyhttp://wiki/Shareholderhttp://wiki/Shareholderhttp://wiki/Shareholderhttp://wiki/Dutch_East_India_Companyhttp://wiki/Dutch_East_India_Companyhttp://wiki/Amsterdam_Stock_Exchangehttp://wiki/Stockhttp://wiki/Bond_(finance)http://wiki/Londonhttp://wiki/Economyhttp://wiki/Economyhttp://wiki/Company_(law)http://wiki/Capital_(economics)http://wiki/Shareshttp://wiki/Investinghttp://wiki/Deposit_accounthttp://wiki/Bankhttp://wiki/Businesshttp://wiki/Businesshttp://wiki/Economic_growthhttp://wiki/Productivity_(economics)http://wiki/Joint_stock_companyhttp://wiki/Shareholderhttp://wiki/Dutch_East_India_Companyhttp://wiki/Dutch_East_India_Companyhttp://wiki/Amsterdam_Stock_Exchangehttp://wiki/Stockhttp://wiki/Bond_(finance)http://wiki/Londonhttp://wiki/Economyhttp://wiki/Company_(law)http://wiki/Capital_(economics)http://wiki/Shareshttp://wiki/Investinghttp://wiki/Deposit_accounthttp://wiki/Bankhttp://wiki/Businesshttp://wiki/Economic_growthhttp://wiki/Productivity_(economics)


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the more strin#ent rules for public corporations imposed by public stock exchan#es and

the #overnment. %onseuently, it is alle#ed that public companies (companies that are

owned by shareholders who are members of the #eneral public and trade shares on public

exchan#es) tend to have better mana#ement records than privately held companies (those

companies where shares are not publicly traded, often owned by the company founders

and/or their families and heirs, or otherwise by a small #roup of investors). ?owever,

some well"documented cases are known where it is alle#ed that there has been

considerable slippa#e in corporate #overnance on the part of some public companies

(pets.com (444), 8nron corporation (44-), :ne.tel (44-), 1unbeam (44-), *ebvan

(44-), &delphia (44), ci world com (44), or paramalat(446), are amon# the most

widely scrutinized by the media).businesses.

Co%po%$te &oe%'$'ce

y havin# a wide and varied scope of owners, companies #enerally tend to improve on

their mana#ement standards and efficiency in order to satisfy the demands of these

C%e$ti'& i'est-e't oppo%tu'ities fo% s-$.. i'esto%s

&s opposed to other businesses that reuire hu#e capital outlay, investin# in shares is

open to both the lar#e and small stock investorsbecause a person buys the number of

shares they can afford. Therefore the 1tock 8xchan#e provides the opportunity for small

investors to own shares of the same companies as lar#e investors.

"oe%'-e't c$pit$.1%$isi'& fo% dee.op-e't p%ojects

9overnments at various levels may decide to borrow money in order to finance

infrastructure pro2ects such as sewa#e and water treatment works or housin# estates by

sellin# another cate#ory of securitiesknown asbonds. These bonds can be raised throu#h

the 1tock 8xchan#e whereby members of the public buy them, thus loanin# money to the

#overnment. The issuance of such municipal bonds can obviate the need to directly tax

the citizens in order to finance development, althou#h by securin# such bonds with the

full faith and credit of the #overnment instead of with collateral, the result is that the

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http://wiki/Stock_investorhttp://wiki/Securitieshttp://wiki/Bond_(finance)http://wiki/Stock_investorhttp://wiki/Securitieshttp://wiki/Bond_(finance)


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9overnment must tax the citizens or otherwise raise additional funds to make any re#ular

coupon payments and refund the principal when the bonds mature.

B$%o-ete% of the eco'o-y

&t the stock exchan#e, share prices rise and fall dependin#, lar#ely, on market forces.

1hare prices tend to rise or remain stable when companies and the economyin #eneral

show si#ns of stability and #rowth. &n economic recession, depression, or financial crisis

could eventually lead to a stock market crash. Therefore the movement of share prices

and in #eneral of the stock indexescan be an indicator of the #eneral trend in the

economy.

!$jo% stoc+ e,ch$'&es:

T0e'ty L$%&est Stoc+ E,ch$'&es by !$%+et C$pit$.i/$tio' $s of 2u.y 345 4667 8i'

t%i..io's of US do..$%s9

0G18 8uro next

Tokyo1tock 8xchan#e

0&1>&H

=ondon 1tock 8xchan#e

?on# ;on# 1tock 8xchan#e

Toronto 1tock 8xchan#e

Crankfurt 1tock 8xchan#e(>eutsche rose)

1han#hai 1tock 8xchan#e

adrid 1tock 8xchan#e(8 1panish 8xchan#es)

&ustralian 1ecurities 8xchan#e

1wiss 8xchan#e

0ordic 1tock 8xchan#e 9roup :(%openha#en, ?elsinki, Iceland,

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http://wiki/Market_(economics)http://wiki/Economyhttp://wiki/Economic_recessionhttp://wiki/Financial_crisishttp://wiki/Stock_market_crashhttp://wiki/Stock_indexhttp://wiki/NYSE_Euronexthttp://wiki/Tokyo_Stock_Exchangehttp://wiki/Tokyo_Stock_Exchangehttp://wiki/Frankfurt_Stock_Exchangehttp://wiki/Deutsche_B%C3%B6rsehttp://wiki/Shanghai_Stock_Exchangehttp://wiki/Madrid_Stock_Exchangehttp://wiki/Australian_Securities_Exchangehttp://wiki/Swiss_Exchangehttp://wiki/OMXhttp://wiki/Market_(economics)http://wiki/Economyhttp://wiki/Economic_recessionhttp://wiki/Financial_crisishttp://wiki/Stock_market_crashhttp://wiki/Stock_indexhttp://wiki/NYSE_Euronexthttp://wiki/Tokyo_Stock_Exchangehttp://wiki/Frankfurt_Stock_Exchangehttp://wiki/Deutsche_B%C3%B6rsehttp://wiki/Shanghai_Stock_Exchangehttp://wiki/Madrid_Stock_Exchangehttp://wiki/Australian_Securities_Exchangehttp://wiki/Swiss_Exchangehttp://wiki/OMX


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1tockholm, Tallinn, 3i#a and


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=istin# of shares, on a stock exchan#e, means, such shares can be bou#ht and sold, in

stock exchan#e.

& %ompany, which intends to issue shares, throu#h prospectus, shall have to apply to one

or more stock exchan#es, for #ettin# its shares listed.

The detailed and elaborate procedure of #ettin# the shares listed on a stock exchan#e is

monitored by 18I. The 18I, issues #uidelines and notifications, from time to time,

with re#ard to listin# of securities.

:nce the shares are listed, the are divided into two cate#ories

-. 93:A' K&L 1?&381

2. 93:A' !! 1?&381

"ROU( =A= SHARES: are referred to as K%leaned 1ecuritiesL or Kspecified

shares!. The facility for carryin# forward a transaction from one account period to

another is available for these shares. 9roup !&! shares represent companies, with hu#e

amount of capital, and eually a lar#e scope for investment. These shares are freuently

traded and command hi#her price earnin# multiples.

"ROU( =B= SHARES:are referred to as, none cleaned securities or non"specified

shares. Cor these #roups facility of carryin# forward is not available.

*henever a share is moved from 9roup !! to 9roup !&n! its market price rises

likewise, when a share is shifted from 9roup !&! to 9roup !!, its market price declines.

There are some criteria and #uide lines, laid down by stock exchan#e, for shiftin# stocks

from the non"specified list to the specified list.

(RI!AR# !ARET

1ince -DD-/D, the primary market has #rown fast as a result of the removal ofinvestment restrictions in the overall economy and a repeal of the restrictions imposed by

the %apital Issues %ontrol &ct. In -DD-/D, 3sB.-5 billion was raised in the primary

market. This fi#ure rose to 3sEB.- billion in -DD7/D5. 1ince -DD5/-DDB, however,

smaller amounts have been raised due to the overall downtrend in the marketand ti#hter

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entry barriers introduced by 18I for investor protection .18I has taken several

measures to improve the inte#rity of the secondary market. =e#islative and re#ulatory

chan#es have facilitated the corporatization of stockbrokers. %apital adeuacy norms

have been prescribed and are bein# enforced. & mark"to"market mar#in and intraday

tradin# limit have also been imposed. Curther, the stock exchan#es have put in place

circuit breakers, which are applied in times of excessive volatility. The disclosure of short

sales and lon# purchases is now reuired at the end of the day to reduce price volatility

and further enhance the inte#rity of the secondary market.

The primary is that part of the capital markets that deals with the issuance of new

securities. %ompanies, #overnments or public sector institutions can obtain fundin#

throu#h the sale of a new stock or bond issue. This is typically done throu#h a syndicate

of securities dealers. The process of sellin# new issues to investors is called underwritin#.In the case of a new stock issue, this sale is an initial public offerin# (I':). >ealers earn a

commission that is built into the price of the security offerin#, thou#h it can be found in

the prospectus.

FEATURES OF (RI!AR# !ARET ARE"

-. This is the market for new lon# term capital. The primary market is the market wherethe securities are sold for the first time. Therefore it is also called 0ew Issue arket

(0I).

. In a primary issue, the securities are issued by the company directly to investors.

6. The company receives the money and issue new security certificates to the investors

7. 'rimary issues are used by companies for the purpose of settin# up new business or for

expandin# or modernizin# the existin# business.

5. The primary market performs the crucial function of facilitatin# capital formation in

the economy.

B. The new issue market does not include certain other sources of new lon# term external

finance, such as loans from financial institutions. orrowers in the new issue market may

be raisin# capital for convertin# private capital into public capital this is known as M#oin#

public@.

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ethods of issuin# securities in the 'rimary arket

-. Initial 'ublic :ffer

. 3i#hts Issue (Cor existin# %ompanies) and

6. 'referential Issue

Seco'd$%y -$%+et:

The secondary market is the financial market for tradin# of securities that have already

been issued in an initial private or public offerin#. N-O &lternatively, secondary market

can refer to the market for any kind of used #oods. The market that exists in a new

security 2ust after the new issue, is often referred to as the aftermarket. :nce a newly

issued stock is listed on a stock exchan#e, investors and speculators can easily trade on

the exchan#e, as market makers provide bids and offers in the new stock.

Fu'ctio'

In the secondary market, securities are sold by and transferred from one investor or

speculator to another. It is therefore important that the secondary market be hi#hly liuid

(:ri#inally, the only way to create this liuidity was for investors and speculators to meet

at a fixed place re#ularly. This is how stock exchan#es ori#inated see ?istory of the

1tock 8xchan#e).

1econdary marketin# is vital to an efficient and modern capital market. Cundamentally,

secondary markets mesh the investor$s preference for liuidity (i.e., the investor$s desire

not to tie up his or her money for a lon# period of time, in case the investor needs it to

deal with unforeseen circumstances) with the capital user$s preference to be able to use

the capital for an extended period of time. Cor example, a traditional loan allows the

borrower to pay back the loan, with interest, over a certain period. Cor the len#th of that

period of time, the bulk of the lender$s investment is inaccessible to the lender, even incases of emer#encies. =ikewise, in an emer#ency, a partner in a traditional partnership is

only able to access his or her ori#inal investment if he or she finds another investor

willin# to buy out his or her interest in the partnership. *ith a securitized loan or euity

interest (such as bonds) or tradable stocks, the investor can sell, relatively easily, his or

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her interest in the investment, particularly if the loan or ownership euity has been

broken into relatively small parts. This sellin# and buyin# of small parts of a lar#er loan

:r ownership interest in a venture is called secondary market tradin#.

Ander traditional lendin# and partnership arran#ements, investors may be less likely to

put their money into lon#"term investments, and more likely to char#e a hi#her interest

rate (or demand a #reater share of the profits) if they do. *ith secondary markets,

however, investors know that they can recoup some of their investment uickly, if their

own circumstances chan#e.

(%i$te e>uity seco'd$%y -$%+et

In finance, the private euity secondary market (also often called private euity

secondary or secondary) refers to the buyin# and sellin# of pre"existin# investor

commitments to private euity and other alternative investment funds. 1ellers of private

euity investments sell not only the investments in the fund but also their remainin#

unfunded commitments to the funds. y its nature, the private euity asset class is

illiuid, intended to be a lon#"term investment for buy"and"hold investors. Cor the vast

a2ority of private euity investments, there is no listed public market however there is

a robust and maturin# secondary market available for sellers of private euity assets.

>riven by stron# demand for private euity exposure, a si#nificant amount of capital hasbeen committed to dedicated secondary market funds from investors lookin# to increase

and diversify their private euity exposure

L$0s &oe%'i'& c$pit$. -$%+et

The four main le#islations #overnin# the securities market are

(a) The 18I &ct, -DD which establishes 18I to protect investors and develop and

3e#ulate the arkets.

(b) The %ompanies &ct, -D5B, which sets out the code of conduct for the corporate sector

in relation to issue, allotment and transfer of securities, and disclosures to be made in

public issues.

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event that a company #oes. ankrupt and is liuidated. &lso known as

!shares! or !euity!.

& holder of stock (a shareholder) has a claim to a part of the corporation$s assets and

earnin#s. In other words, a shareholder is an owner of a company. :wnership is

determined by the number of shares a person owns relative to the number of outstandin#

shares. Cor example, if a company has -,444 shares of stock outstandin# and one person

owns -44 shares, that person would own and have. %laim to -4P of the company@s assets

1tocks are the foundation of nearly every portfolio. ?istorically, they have outperformed

most other investments over the lon# run.

Sh$%eho.de%

&ny person, company, or other institution that

6 own at least - share in a company. & shareholder may also be referred to as a

stockholder.

1hareholders are the owners of a company. They have the potential to profit if the

company does well, but that comes with the potential to lose if the company does poorly.

Sh$%e

& unit of ownership interest in a corporation or financial asset. *hile ownin# shares in

a business does not mean that the shareholder has direct control over the business$s day"

to"day operations, bein# a shareholder does entitle the possessor to an eual distribution

in any profits, if any are declared in the form of dividends. The two main types of shares

are common shares and preferred shares.

In the past, shareholders received a physical paper stock certificate that indicated that

they owned !x! shares in a company. Today, brokera#es have electronic records that show

ownership details. :wnin# a paperless share makes conductin# trades a simpler andmore streamlined process, which is a far cry from the days were stock certificates needed

to be taken to a. rokera#e before a trade could be conducted. *hile shares

are often used to refer to the stock of a corporation, shares can also represent ownership

of other classes of financial assets, such as mutual funds.

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BSE INDICES:1

INDE;

&n Index is used to summarize the price movements of a uniue set of #oods in thefinancial, commodity, forex or any other market place. Cinancial indices

are created to measure price movements of stocks, bonds, T"bills and

other type of financial securities. ore specifically, a stock index is

created to provide investors with the information re#ardin# the avera#e

share price in the stock market. road indices are expected to capture the

overall behavior of euity market and need to represent the return

obtained by typical portfolios in the country

SENSE;

18018 is India$s first Index compiled in -DFB. It is a basket of 64 constituent stocks

representin# a sample of lar#e, liuid and representative companies.

The base year of 18"18018 is -DEF"ED and the base value is -44. The index is

widely reported in both domestic and international markets throu#h print

as well as electronic media. >ue to its wide acceptance amon#st theinvestors, 18018 is re#arded to be the pulse of the Indian stock

market. &ll leadin# business newspapers and the business channels

report 18018, as it is the lan#ua#e that all investors understand.

&s the oldest index in the country, it provides the time series data over a fairly lon#

period of time (from -DED onwards) to be used for various research

purposes. The Index %ell of the exchan#e is responsible for the day"to"

day maintenance of the index within the broad index policy set by the

Index %ommittee. The Index %ell ensures that the 18018 and all other

18 indices maintain their benchmark properties by strikin# a delicate

balance between freuent replacements in index and maintainin# its

historical continuity.

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18018 is calculated usin# a market capitalization wei#hted method. &s per this

methodolo#y, the level of the index reflects the total market value of all

64" component stocks from different industries related to particular base

period. The total market value of a company is determined by

multiplyin# the price of the stock by the number of shares outstandin#

1tatisticians call the index of a set of combined variables (such as price

and 0o. of shares) a composite index. &n indexed number is used to

represent the results of this calculation in order to make the value easier

to work with and track over a time. It is much easier to #raph a chart

based on indexed values than one used on actual values.

*orld over ma2ority of the well known indices are constructed usin# Karket

%apitalization *ei#hted ethodL.

In practice, the daily calculation of 18018 is done by dividin# the a##re#ate market

value of the 64 %ompanies in the index by a number called the Index

>ivisor. The >ivisor is the only link to the ori#inal based period value of

the 18018. The >ivisor keeps the Index comparable over a period of

time and the reference point for the entire index maintenance

ad2ustments. 18018 is widely used to describe the mood in the Indian1tock arkets.

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CO!(AN# (ROFILE

&n#el rokin#$s tryst with excellence in customer relations be#an in -DFE. Today, &n#el

has emer#ed as one of the most respected 1tock"rokin# and *ealth ana#ement

%ompanies in India. *ith its uniue retail"focused stock tradin# business model, &n#el is

committed to providin# M3eal 8 Q

%. &n#el is also re#istered as a >epository 'articipant with %>1=.

Our Business

8uity Tradin#

%ommodities

'ortfolio ana#ement 1ervices

utual Cunds

=ife Insurance

I':

>epository 1ervices

Investment &dvisory

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Angel Group

&n#el rokin# =td.

&n#el %ommodities rokin# =td.

&n#el 1ecurities =td.

Our Vision

To provide best value for money to investors throu#h innovative products, tradin#/investments

strate#ies, state of the art technolo#y and personalized service.

:ur otto

To have complete harmony between uality"in"process and continuous improvement to deliver

exceptional service that will deli#ht our %ustomers and %lients.

:ur %3 'olicy %ustomer is ;in#

K& %ustomer is the most Important


22/75

0etwork$ and $est 3etail rokin# ?ouse$ at >un Q radstreet 8uity rokin# &wards

:ctober,44D

&n#el rokin# ba#s the coveted Ma2or river@ &ward by 18 for 44F"4D0ovember, 4-4&n#el rokin# ba#s the coveted Ma2or river@ &ward by 18 for 44D"-4arch,4--&n#el rokin# was awarded with $est in %ontribution Investor 8ducation Q %ate#ory

8nhancement of the year$ and $est %ommodity 3esearch of the year:ctober,4--

&n#el rokin# ba##ed the >un Q radstreet 8uity rokin# &wards 4-- for $est 3etail

rokin# ?ouse$ and $Castest 9rowin# 8uity rokin# ?ouse$ (=ar#e Cirms) at >un Q radstreet

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*o%+ Cu.tu%e

&t &n#el, we keep explorin# new paths to provide the best value to all our internal and

external customers. *e consider people as our bi##est asset and believe in creatin# lon#

term relationships by nurturin# talent from within. & fast"#rowin#, forward"lookin#

or#anization like ours, demands ?3 to be a key responsibility area of our core

mana#ement team.

:ur ?3 team constantly explores ways to enhance and au#ment the knowled#e base and

productivity of all &n#els by providin# various learnin# and development 'ro#rams. :ur

three tier =eadership >evelopment pro#ram helps all star performers to #row and develop

their mana#erial skills to become effective mentors for their teams and thereby take on

the next level of responsibility effectively.

:urs is a winnin# team of hi#hly determined, motivated, and adaptable people, allworkin# dili#ently to take &n#el$s excitin# success story forward.

Se%ices offe%ed

E>uity


23/75

nvestin# in shares or stock market is inar#uably the best route to lon#"term wealth

accumulation. ?owever, it can also be a very risky proposition due to hi#h risk"return

trade"off prevalent in the stock market. ?ence, it is more appropriate to take help of an

experienced and trustworthy expert who will #uide you as to when, where and how to

invest.

&n#el provides #uidance in the excitin# world of stock market with suitable tradin#

solutions and value"added tools and services to enhance your tradin# experience.

Online Equity Trading

Three different online products tailored for traders Q investors

%ustomized sin#le screen arket *atch for multiple exchan#es

3eal"time rates

Clash news Q intra"day calls

Intra"day Q historical charts with technical tools

:nline research

8"brokin# Q back"office software trainin#

Quality Research

*ide ran#e of daily, weekly and special 3esearch reports

8xpert 1ector &nalysts with professional industry experience

Advisory

3eal"time market information with 0ews updates

Investment &dvisory services

>edicated 3elationship ana#ers

'ortfolio ana#ement 1ervices

Support

7xE *eb"enabled ack :ffice

%entralized ?elp >esk

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6


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De%i$ties T%$di'&

The derivative se#ment is a hi#hly lucrative market that #ives investors an opportunity to

earn superlative profits (or losses) by payin# a nominal amount of mar#in. :ver past few

years, Cuture Q :ptions se#ment has emer#ed as a popular medium for tradin# infinancial markets. Cuture contracts are available on 8uities, Indices, %urrency and

%ommodities.

&n#el with its membership as Tradin# and %learin# ember of 018 CQ: 1e#ment and

18 >erivatives 1e#ment, provides you a #ateway to the excitin# world of derivative

market.

De%i$ties T%$di'&

%ommodities >erivative market has emer#ed as a new avenue for investors to create

wealth. Today, %ommodities have evolved as the next best option after stocks and bonds

for diversifyin# the portfolio. ased on the fundamentals of demand and supply,

%ommodities form a separate asset class offerin# investors, arbitra#eurs and speculators

immense potential to earn returns.

&n#el aims to harness the immense potential of the %ommodities market by providin#you a simple yet effective interface, research and knowled#e.

The Angel Advantage

&n#el provides user"friendly online platforms for commodity tradin# in the leadin#

commodity exchan#es.

Online Trading Three different online products tailored for traders Q investors

1in#le screen customized arket"*atch for % Q 0%>8 with 18 Q 018

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7


25/75

Top quality Research

In house research on more than 5 commodities

?i#hly skilled &nalysts with professional industry experience

>aily, *eekly and onthly 3esearch 3eports

Pro-active Relationship anage!ent

&ctive advisory desk

8fficient Q nationwide network

1eminars, workshops and investment camps for investors

Life I'su%$'ce

8nsure your family@s well"bein# by securin# their future with a life insurance policy. 0o

financial plannin# is complete without life insurance. &n#el offers an array of life

insurance products like Term 'lans, 8ndowment 'lans, oney back 'lans, %hildren =ife

Insurance 'lans and A=I' 'lans to meet your individual insurance reuirements.

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!utu$. fu'ds

Investin# in a utual fund is an excellent way of diversifyin# risk as well as portfolio.

&n#el presents its utual fund services that strive to meet all your mutual fundinvestment needs. *e have a wide spectrum of investment schemes from all top mutual

fund houses.

&n#el also provides recommendations based on in"depth research, mutual fund

performance and mutual fund ratin#s to help meet your investment #oals.

5


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The Angel Advantage

'an India presence

:nline and offline transaction facility

1chemes from all ma2or fund houses

=atest C 0ews and Cund ana#er views

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8n2oy the dual benefits of tradin# and depository services under one roof and experience

efficient, risk"free and prompt depository service. &n#el is re#istered as a >epository

'articipant with %>1=. *e are also a member of the ombay 1tock 8xchan#e (18),

0ational 1tock 8xchan#e (018) and the two leadin# %ommodity 8xchan#es in the

countryR0%>8 Q %.

Angel Advantage

&utomated pay"in facility

&ccess information R &nytime, &nywhere

Huarterly demat statements with valuation

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emat &/% statement online

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B


27/75

Instant disbursement of non"cash benefits like onus and 3i#hts

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Gou can avail of the $asic 1ervice >emat &ccount$ scheme introduced by 18I.

Cor details contact your bran

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:nline I': provides clients the facility to conveniently apply for the various I':@s

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T?8:38TI%&= &18 T: T?8 1TA>G

INTRODUCTION

The risk/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

E


28/75

benefit as well as on risk/cost. The reuirement that expected return/benefit be

commensurate with risk/cost is known as the !risk/return trade"off! in finance.

This session discusses the trade"off and, usin# conventional statistical tools, provides a

method for uantifyin# risk. Two cate#ories of risk borne by the firm$s stockholders,

business risk and financial risk, are discussed and demonstrated, as is the concept of

levera#e. The session also examines risk reduction via portfolio diversification and what

reuirements need to be met for firms to experience the benefits of diversification. The

%apital &sset 'ricin# odel (%&') is used to demonstrate the risk/return trade"off by

relatin# the reuired return on the firm$s investments to its beta (or market) risk.

Important =earnin# Terms

S 3isk S 1ystematic risk

S Ansystematic risk

S 3eturn

S 'ortfolio

S eta

S =evera#e

S >iversification

Syste-$tic Ris+

1ystematic 3isk, as the name su##ests is the risk inherent in the economic system. acro

factors such as domestic as well as international policies, employment rate, the rate and

momentum of inflation and #eneral level of consumer confidence etc. are what constitute

systematic risk. 9enerally, investors cannot hed#e or diversify a#ainst this risk as it

affects all kinds of asset classes and affects the entire economy as such.

U'syste-$tic Ris+

This is the risk inherent in a particular asset class. The best way to combat this risk is by

diversification. ?owever, one must remember that the diversification must be in the class

of asset and not the asset itself. &n example of the above is evenly distributin# your

portfolio in bank deposits, 3eserve ank of India (3I) bonds, real estate and euities.

F


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That way if a certain unsystematic risk affects let$s say the real estate market (say the

prices crashes), then the presence of other classes of assets in your portfolio saves you

from a total washout. ?owever, note that diversifyin# within the same asset class (buyin#

different euity shares) is not strictly combatin# unsystematic risk.

U'de%st$'di'& U'syste-$tic Ris+

The one thin# that almost all investors would a#ree upon is the fact that euity is

definitely more risky than debt. Irrational exuberance with a risin# market has left many

an investor losin# their shirts and in some cases even more sensitive #arments.

?owever, does this mean that investin# in debt instruments is entirely risk"free+

Anfortunately, the answer is in the ne#ative thou#h the volatility is much less. 1o first, let

us examine what kind of risks do debt instruments pose

I'te%est R$te Ris+

Interest rates and prices of fixed income instruments share an inverse relationship. In

other words, when the overall interest rates in the economy rise, the prices of fixed

income earnin# instruments fall and vice versa. Interest rates in the economy may

fluctuate due to several factors such as a chan#e in the 3I$s monetary policy, %ash

3eserve 3atio (%33) reuirements, forex reserves, the level of the fiscal deficit and the

conseuent inflation outlook etc. 8xtraneous factors such as ener#y price fluctuations,

commodity demand and supply and even capital flows may result in rates fluctuatin#.Then there are the event"based factors that affect interest rates. Cor example, the --/D

episode in the Anited 1tates of &merica and -6/- in India. If there is a war, interest rates

will rise. ?owever, typically such events are temporary in nature and in fact a #ood fund

mana#er can actually take advanta#e of such hiccups.

To illustrate how fluctuations in interest rates affect the returns, let us take the example of

mutual funds (Cs). &d2ustin# the portfolio to the market rate of returns is called

$markin# to market$.

*e assume that the current 0et &sset


30/75

stands invested at an avera#e return of -4P. If the fund sells the units to you at it$s

current 0&< of 3s. -4, you will be allotted -4,444 units. This will benefit you

immensely. Gou will be a partner in sharin# the benefit of the hi#her returns of -4P,

thou#h the fund will be forced to invest your 3s. - lakh at the lower rate of DP.

This is in2ustice to the existin# investors. Therefore, somethin# has #ot to be done to

protect their interest. ?ere comes the $mark to market$ concept. The fund raises its 0&< to

3s. --.--. Gou will be allotted only D,444 units and not -4,444. The returns on D,444

units at -4P would be identical with the returns on -4,444 units at DP. In other words,

the 0&< rises when the interest falls.

C%edit Ris+

This is the risk of default. *hat if the company whose fixed deposit you invested in #oes

bankrupt+ There have already been several such cases. >eposits with plantation

companies and time"share resorts are more cases in point. True, you have le#al

remedy...but everyone knows how much time our courts take.

The only factor, which dilutes this risk somewhat, is the credit ratin#. Cixed income

earnin# instruments #et rated for varyin# de#rees of safety. Investin# in a hi#hly rated

instrument is safe but not sufficient. Cirstly, the instrument may be down #raded you

have to be on the lookout for the same. Then there have been cases where the issuer has#ot rated by different a#encies but chooses to indicate only the hi#her ones.

E.i-i'$tio' of Ris+s

There is some #ood news thou#h. %redit risk can be simply eliminated by investin# in

soverei#n securities ""securities issued by the #overnment. There is simply no risk of

default. :r so we hope, for retail investors, Cs offer #ilt schemes, where almost the

entire corpus is invested in soverei#n securities thereby achievin# the same result.

Interest rate risk discussed earlier is always prevalent. ?owever, it comes into play only

when a transaction is undertaken durin# the pendancy of the fixed income instrument.

8r#o, it follows that if the investment is held till maturity, there would be no interest rate

risk.Investments such as 'ublic 'rovdent Cund (''C), 3elief onds etc. are normally

64


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held till maturity. These are examples where both the risks inherent in debt instruments

are at a bare minimum

"oe%'-e't Actio' Ris+

This is a uniue kind of risk, which has reared its u#ly head in recent times. In the

previous para#raph, it is mentioned that the interest rate risk is eliminated by simply

holdin# the instrument till maturity.

?owever, such principles of investment had not contended with unilateral #overnmental

action. Cor example, the rates of ''C over the past three years have been consistently

reduced by the authorities from -P p.a. to FP p.a. To add insult to in2ury these rates are

applicable on the entire corpus and not on additional investment. 3elief onds have come

down to FP. 3ates on other small savin# instruments have also been slashed across the

board. Anfortunately, there is no escape from this risk """ that of our #overnment

!e$su%i'& Ris+

1o far, we have acuainted ourselves with the kinds of risks inherent in investment

instruments. ?owever, merely knowin# this much may not be enou#h to take an informed

decision. The article be#an with the premise that return is

BENEFITS TO SHAREHOLDERS

*hy should you purchase shares of a company+ *hat are benefits that accrue to you as a

shareholder+ &part from the ri#ht to vote and decide the future course of action that a

company takes, the real benefit that you, as a shareholder have is in form of participation

that you #et in profit made by the company. &t the same time, your liability is limited

only to the face value of the shares held by you. The benefits distributed by the company

to its shareholders can be -) onetary enefits and ) 0on onetary enefits.

3? !o'et$%y Be'efits:

&. Diide'd:&n euity shareholder has a ri#ht on the profits #enerated by

the company. 'rofits are distributed in part or in full in the form of

6-


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dividends. >ividend is an earnin# on the investment made in shares, 2ust

like interest in case of bonds or debentures. & company can issue dividend

in two forms a) Interim >ividend and b) Cinal >ividend. *hile final

dividend is distributed only after closin# of financial year companies at

times declare an interim dividend durin# a financial year. ?ence if =td.

earns a profit of 3s 74 crore and decides to distribute 3s to each

shareholder, a holdin# of 44 shares of =td. would entitle you to 3s 744

as dividend. This is a return that you shall earn as a result of the

investment made by you by subscribin# to the shares of =td.

. C$pit$. App%eci$tio': & shareholder also benefits from capital

appreciation. 1imply put, this means an increase in the value of the

company usually reflected in its share price. %ompanies #enerally do not

distribute all their profits as dividend. &s the companies #row, profits are

re"invested in the business. This means an increase in net worth, which

results in appreciation in the value of shares. ?ence, if you purchase 44

shares of =td at 3s 4 per share and hold the same for two years, after

which the value of each share is 3s 65. This means that your capital has

appreciated by 3s 6444.

. No'1!o'et$%y Be'efits: &part from dividends and capital appreciation,investments in shares also fetch some type of non"monetary benefits to a

shareholder. onuses and ri#hts issues are two such noticeable benefits.

&. Bo'us: &n issue of bonus shares is the distribution free of cost to the

shareholders usually made when a company capitalises on profits made

over a period of time. 3ather than payin# dividends, companies #ive

additional shares in a pre"defined ratio. 'rima facie, it does not affect the

wealth of shareholders. ?owever, in practice, bonuses carry certain latent

advanta#es such as tax benefits, better future #rowth potential, an increase

in the floatin# stock of the company, etc. ?ence if =td decides to issue

bonus shares in a ration of --, every existin# shareholder of =td would

receive one additional share free for each share held by him. :f course,

takin# the bonus into account, the share price would also ideally fall by 54

6


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percent post bonus. ?owever, dependin# upon market expectations, the

share price may rise or fall on the bonus announcement.

. Ri&hts Issue:& ri#hts issue involves sellin# of ordinary shares to the

existin# shareholders of the company. & company wishin# to increase its

subscribed capital by allotment of further shares should first offer them to

its existin# shareholders. The benefit of a ri#hts issue is that existin#

shareholders maintain control of the company. &lso, this results in an

expanded capital base, after which the company is able to perform better.

This #ets reflected in the appreciation of share value.

Ris+s I' e>uity i'est-e't:

&lthou#h an euity investment is the most rewardin# in terms of returns #enerated,

certain risks are essential to understand before venturin# into the world of euity. These

can be described as follows

a. !$%+et@ Eco'o-y Ris+ The performance of any company depends on the

#rowth of an economy. &n economy, which continues to prosper, ensures that

companies operatin# in it benefit from its #rowth. ?owever, an euity shareholder

also runs the risk of any downturn in the economy affectin# the performance ofhis company. 8conomy related risks are usually reflected in the factors such as

9>' #rowth, inflation, balance of payment positions, interest rates, credit #rowth

etc. & slowdown in the economy pinches almost all sectors, especially

infrastructure, services and manufacturin# companies.

b. I'dust%y Ris+ &ll industries under#o some kind of cyclical #rowth.

1hareholders #et rewarded most durin# the expansion sta#e. Cor instance, the last

few years have been very rewardin# for investors in real estate. ?owever, oncethe industry reaches a maturity sta#e, the rewards from investment are limited.

Curther, companies belon#in# to industries where #rowth has retarded incur losses

or declinin# #ains. Industry specific #overnment re#ulations too impact returns

from investments made therein.

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c. !$'$&e-e't Ris+ The mana#ement is the face of an enterprise. It is the team

which #ives direction to the future course of action that a company will take.

Huality of mana#ement is hence paramount. ana#ement chan#es often have a

serious impact on policy matters of companies, thereby impactin# the share price.

& mana#ement which is unable to meet the challen#es posed by competition is

likely to suffer in performance.

d. Busi'ess Ris+ usiness risk is a function of the operatin# conditions faced by

a company and the variability that these conditions in2ect into operatin# income

and hence expected dividends. usiness risk can be classified into two broad

cate#ories external and internal. Internal business risk is lar#ely associated with

the efficiency with which a company conducts its operations within the broader

environment imposed upon it. 8xternal risk is the result of operatin# conditions

imposed upon the company by circumstances beyond its control.

e. Fi'$'ci$. Ris+ Cinancial risk is associated with the way in which a company

finances its activities. & company, borrowin# money for business, creates fixed

payment obli#ations in form of interest that must be sustained. eyond a specified

limit, the residual income left for shareholders #ets reduced, thereby affectin# the

returns on shares. ore importantly, it increases default risk, i.e, a heavily

levera#ed company, is at a #reater risk of not bein# able to meet its liabilities andhence #oin# bankrupt.

f. E,ch$'&e R$te Ris+%ompanies today earn sizeable revenues from outside

their parent country. ?ence, any appreciation in the currency, as was recently

witnessed with technolo#y companies, adversely affects earnin#s, which results in

fallin# or sta#nant share prices.

#. I'f.$tio' Ris+ 3isin# prices or inflation reduces purchasin# power for the

common man resultin# in a slowdown in the demand in the economy. This hasimplications for all the sectors in the economy. ?ence, in an inflationary

environment, share prices of most companies face a downturn as the expected fall

in demand reduces their future expected income.

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h. I'te%est R$te Ris+Interest rate risk refers to the uncertainty of future market

values and size of future income, caused by fluctuations in the #eneral level of

interest rates. 3isin# interest rates increase cost of borrowin#, which results in an

increase in the prices of products and a correspondin# slowdown in demand.

?ence, an interest rate hike affects share prices of companies cuttin# across the

board.

Ho0 to oe%co-e %is+s:

ost risks associated with investments in shares can be reduced by usin# the tool of

diversification. 'urchasin# shares of different companies and creatin# a diversified

portfolio has proven to be one of the most reliable tools of risk reduction.

The p%ocess of Die%sific$tio':

*hen you hold shares in a sin#le company, you run the risk of a lar#e ma#nitude. &s

your portfolio expands to include shares of more companies, the company specific risk

reduces. The benefits of creatin# a well diversified portfolio can be #au#ed from the fact

that as you add more shares to your portfolio, the wei#hta#e of each company@s share #ets

reduced. ?ence any adverse event related to any one company would not expose you to

immense risk. The same lo#ic can be extended to a sector or an industry. In fact,diversifyin# across sectors and industries reaps the real benefits of diversification. 1ector

specific risks #et minimized when shares of other sectors are added to the portfolio. This

is because a recession or a downtrend is not seen in all sectors to#ether at the same time.

Ho0ee% $.. %is+s c$''ot be %educed:

Thou#h it is possible to reduce risk, the process of euity investin# itself comes with

certain inherent risks, which cannot be reduced by strate#ies such as diversification.

These risks are called systematic risk as they arise from the system, such as interest rate

risk and inflation risk. &s these risks cannot be diversified, theoretically, investors are

reward for takin# systematic risk for euity investment .

"etti'& st$%ted:

?avin# analyzed all aspects of risk and return associated with euity investment, you are

now ready to take the plun#e.

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The c$se fo% .o'&1te%- i'est-e't i' e>uities

The movement durin# these fifteen years shows that it is rewardin# to stay invested in

euities for the lon# term. The followin# factors 2ustify this-. Industries and businesses, to which companies belon#, mature over a period of

time. &s industries #row, so do the profits of companies belon#in# to them. The

best example of this can be found in the Indian telecommunications industry.

?ence, investors start reapin# the benefit of their investment over a period of

time.

. *hile markets under#o cyclical phases, which follow a series of peaks and

trou#hs, over a period of time these factors #et ne#ated and returns from stocks

present a valid picture. 1o, althou#h you may incur some losses in the short term,

if you are lookin# to invest in euities you must always think lon#"term.

6. 8uities are the only investment asset, which are exempt from lon#"term capital

#ains tax, which means that you own all the returns #enerated. &ll other

investments, excludin# ''C and life insurance, are taxed for the #ains made. This

reduces the overall return in investment assets like 01%, bank deposits etc.

7. &n investor can ill"afford to i#nore that India is a fast #rowin# economy and it is

widely perceived that this robust #rowth would continue for many more years tocome. The bi##est beneficiary of this #rowth story would be the industries and

service sector. It is almost certain that the Index of Industrial 'roduction (II')

would #row at a rate of over -4 per cent in the next few years. This would

enhance profit #rowth of companies and it would #et reflected in the upward

movement of their share price.

The Ris+@Retu%' T%$de1off i' Fi'$'ci$. A'$.ysis

It is widely accepted that the ma2or determinant of the reuired return on the asset (or the

rate to be applied to a stream of receipts to capitalize its value) is its de#ree of risk. 3isk

refers to the probability that the return and therefore the value of an asset or security may

have alternative outcomes. 3isk is the uncertainty (today) surroundin# the eventual

6B


37/75

outcome of an event which will occur in the future. 8xample when tossin# a coin, some

one is not sure exactly what will be the outcome. The outcome may be to have a Tail or

the ?ead, so there is a concept of risk. In a football match, three outcomes can be

experienced win, lose or draw. In business, the same can happen re#ardin# the expected

return on the investments in various sectors.

In Cinancial &nalysis, therisk/return trade"off states that financial decisions that sub2ect

stockholders to more risk must offer a hi#her expected return. risk a version is the

tendency to try to avoid risky situations unless adeuate compensation is offered.

8xample The risk averse individual faced with two events each havin# the same

expected outcome will choose t he outcome with the lower level of risk.

C$te&o%ies of Ris+ $'d Lee%$&e F$ced by the Fi%- $'d by

Stoc+ho.de%s

This type of risk is ma#nified by the de#ree to which the firm relies on fixed

operatin# expenses in producin# sales.

In many cases there is not much the firm can do about this type of risk some

industries have more volatile sales and hi#her fixed operatin# expense than others.

:peratin# levera#e results when the firm has fixed operatin# expenses in its cost

structure.

These expenses do not disappear when sales drop, nor do they increase when sales

increase.

:peratin# levera#e tends to ma#nify any chan#e in sales on 8arnin#s efore

Interest and Taxes (8IT).

1tockholders are the ultimate bearers of the risk that results from levera#e and

they are the residual recipients of hi#her 8IT should sales increase.

B: Fi'$'ci$. %is+

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This type of risk arises primarily because of the fixed interest payments firms must make

to their lon#"term creditors (debt capital).

This type of risk is reflected in volatile 0et Income and 8arnin#s 'er 1hare.

Fi'$'ci$. .ee%$&e

3esults when the firm finances some portion of its assets with borrowed funds

Cinancial levera#e means that chan#es in 8IT will ma#nify chan#es in net

income and 8arnin#s 'er 1hare

&s a firm increases its de#ree of financial levera#e, its expected return (net

income and 8arnin#s 'er 1hare) increases as does its risk The financial mana#er has some discretion in determinin# the extent of financial

levera#e.

RIS DI)ERISIFICATION

>iversification occurs when different assets make up a portfolio.

The benefit of diversification is risk reduction the extent of this benefit depends upon

how the returns of various assets behave over time.

The market rewards diversification. *e can lower risk without sacrificin# expected

return, and/or we can increase expected return without havin# to assume more risk.

>iversifyin# amon# different kinds of assets is called asset allocation. 8.#. & telephone

operator with many physical assets such as houses can diversify by acuirin# financial

assets which in turn earns return to the company. %ompared to diversification within the

different asset classes, the benefits received are far #reater throu#h effective asset

allocation e.#. diversifyin# amon# different types of financial assets.

:ther ways to reduce risk include the use of the followin# strate#ies

ass advertisin# to reduce erratic sales and hence to increased profit

6F


39/75

8nterin# into lon#"term sales or purchase contracts

3ecapitalizin# toward more euity and less debt so as to reduce the burden of

fixed financial expenses

The use of temporary labor instead of permanent employees

RIS IN A (ORTFOLIO

& portfoliois a collection of risky assets. If we view individual assets as one bi# asset we

have a portfolio. ecause of risk reduction, the nature of risk is fundamentally different

when an asset is viewed as part of a portfolio instead of bein# viewed in isolation.

This euation #ives the theoretically correct reuired rate of return on a pro2ect based

upon its systematic (or beta) risk.

The formula is applicable only in situations where all diversifiable risk has been

eliminated.

The risk"free rate (3C3) is a base rate reflectin# the fact that the pro2ect should at a

minimum offer a return eual to what could be earned in the Treasury bill market. 8ven

risk less investments has a positive reuired rate of return.

The market risk premium, (km " 3C3), indicates the premium investors reuire over the

risk"free rate to invest in the #eneral market index.

The reuired return on a pro2ect is positively related to the pro2ect$s beta.

& very risky pro2ect (say a new expansion venture) will have a hi#h beta coefficient,

whereas low risk pro2ects (such as a replacement machine) will have a lower beta.

;nowin# a pro2ect$s beta (and thus its minimum reuired return) is important for #ood

financial mana#ement, because it indicates whether or not the expected rate of return is

above, eual to, or below the reuired rate of return and whether or not stockholders are

bein# properly compensated for the non"diversifiable risk they bear due to the pro2ect.

6D


40/75

>&T& &0&=G1I1 &0> I0T83'38T&TI:0*I(RO

%alculations of 3eturnsD$te Ope' (%ice C.ose (%ice 3eturn

"ay"-7 5-F. 5F.5 -.DD5"ay"-7 57 54.E5 "4.BB"ay"-7 5-D 5-7.F5 "4.FE"ay"-7 5-4.- 54B.- "4.EF

F"ay"-7 545.B5 5-4.D5 -.45D"ay"-7 54F 5-6.D5 -.-E-"ay"-7 5-6.65 5--.D5 "4.E-6"ay"-7 5-5 5D. .EB-7"ay"-7 56- 57.55 "-.--5"ay"-7 55.6 5-B.5 "-.BF-B"ay"-7 5- 54.F "6.7D-D"ay"-7 546.5 7F.45 "7.-4"ay"-7 7FB 7D7.B5 -.EF

74


41/75

-"ay"-7 7DB 7D6.- "4.5F"ay"-7 7D7.D 7F6.5 ".66"ay"-7 7F6.E 7D4 -.6B"ay"-7 7D6 54B .B7E"ay"-7 5--.E 54F. "4.BFF"ay"-7 5- 5-7.5 4.77

D"ay"-7 5-7 7DD.F ".EB64"ay"-7 544 54B. -.7"Jun"-7 54B.E 7DD.- "-.56"Jun"-7 546.D 7D7. "-.D7"Jun"-7 7DB 7D.45 "4.F5"Jun"-7 7D6.5 544.D5 -.5-B"Jun"-7 547 54D.-5 -.4D"Jun"-7 5-4 5--.E5 4.67-4"Jun"-7 5--.F 55 .5F--"Jun"-7 5B.7 5E.E 4.5-"Jun"-7 56.45 56.-5 4.4-6"Jun"-7 56.5 564.7 "4.65

-B"Jun"-7 56-.7 56B.- 4.FF-E"Jun"-7 56D 56B.- "4.57-F"Jun"-7 56E.F5 564.5 "-.6E-D"Jun"-7 5F 56E. -.E74"Jun"-7 574.5 56B.F "4.BF6"Jun"-7 567.- 56-.7 "4.5-7"Jun"-7 567 56-.6 "4.5-5"Jun"-7 56-.- 5D.-5 "4.6EB"Jun"-7 56- 565.75 4.F7E"Jun"-7 574 575.D5 -.-64"Jun"-7 57F.D5 57B.7 "4.7B

Total "6.EB

&vera#e "4.4D38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d-.DD "4.4D .4F 7.6"4.B "4.4D "4.56 4.F"4.F "4.4D "4.E- 4.5"4.EF "4.4D "4.BD 4.7F-.45 "4.4D -.-7 -.6-.-E "4.4D -.B -.5D"4.E "4.4D "4.-F 4.46

.EB "4.4D .F5 F.--"-.- "4.4D "-.- -.B"-.BF "4.4D "-.5D .5-"6.7D "4.4D "6.7 --.5F"7.- "4.4D "7.- -E-.EF "4.4D -.FE 6.5"4.5F "4.4D "4.7D 4.7".6 "4.4D ".- 7.D

7-


42/75

-.6 "4.4D -.6D -.D7.B7 "4.4D .E6 E.77"4.BF "4.4D "4.5D 4.654.77 "4.4D 4.56 4.F".EB "4.4D ".BE E.-7-.7 "4.4D -.66 -.EE

"-.5 "4.4D "-.7- -.DD"-.D "4.4D "-.F6 6.6E"4.F "4.4D "4.E- 4.5-.5- "4.4D -.B .5B-.4 "4.4D -.-- -.74.67 "4.4D 4.76 4.-D.5F "4.4D .BE E.-4.5 "4.4D 4.67 4.--4.4 "4.4D 4.-- 4.4-"4.65 "4.4D "4.B 4.4E4.FF "4.4D 4.DE 4.D5"4.57 "4.4D "4.75 4.

"-.6E "4.4D "-.F -.B6-.E7 "4.4D -.F6 6.6B"4.BF "4.4D "4.5D 4.65"4.5- "4.4D "4.7 4.-E"4.5- "4.4D "4.7 4.-E"4.6E "4.4D "4.F 4.4F4.F7 "4.4D 4.D6 4.FB-.- "4.4D -.-D -.7

"4.7B "4.4D "4.6E 4.-7 Vd -46.4-

1.>. (W) XVd/0

1.> X-46.4-

1.> -4.-7

RETURNS OF *I(RO

7


43/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of

*I'3: for a month of ay Q June 4-7. It has an avera#e return of "4.4D that is "DP

and risk is. -4.-7

HCL

%alculation of 3eturnsD$te Ope' (%ice C.ose (%ice 3eturn

"ay"-7 75.65 75.75 4.5"ay"-7 7B 76.5 "5.DF

B"ay"-7 76.B 77.B5 .7-E"ay"-7 77.E 76.F5 "-.DF"ay"-7 76.F 77.7 -.6ED"ay"-7 77.75 77.5 "4.75-"ay"-7 77 7.-5 "7.-6"ay"-7 7.B 75.45 5.E5-7"ay"-7 75. 7E.5 5.4D-5"ay"-7 7E.E 7B "6.5B-B"ay"-7 7B 75.-5 "-.F5

76


44/75

-D"ay"-7 75.75 77.D "-.-4"ay"-7 75.5 75.F -.-"ay"-7 7B.7 5 -.4E"ay"-7 5.F 5D.45 --.F76"ay"-7 B4.5 BF.F5 -6.FB"ay"-7 BD.5 B7.7 "E.67

E"ay"-7 B7.5 B7. "4.7EF"ay"-7 B7.D E4 E.FBD"ay"-7 E-.-5 BF.D5 "6.4D64"ay"-7 BD.B5 BF.- ".6"Jun"-7 BF.B BB.F ".B6"Jun"-7 BE.- E E.67"Jun"-7 E-.D5 E-.B5 "4.75"Jun"-7 E BD.E5 "6.-6B"Jun"-7 BD.75 E4.45 4.FBD"Jun"-7 BD.55 BD. "4.5-4"Jun"-7 BD.F BD.B "4.D--"Jun"-7 BD.E BB.45 "5.7

-"Jun"-7 BB.B BF.E 6.-5-6"Jun"-7 BD B5 "5.F-B"Jun"-7 B7.5 BB.D 6.E-E"Jun"-7 BB.5 BE.45 4.F6-F"Jun"-7 BB.5 B5. "-.D5-D"Jun"-7 B5 B7.7 "4.D4"Jun"-7 B7.F B-.D "7.7F6"Jun"-7 B-.E B6.5 .D7"Jun"-7 B6.D BD.B5 D5"Jun"-7 E4.E BD ".7B"Jun"-7 BD.7 BE.55 ".BEE"Jun"-7 BF.- E4.B 6.BE

64"Jun"-7 E4.F E5. B.- total 6B.B avera#e 4.FE

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d4. 4.FE "4.B5 4.7"5.DF 4.FE "B.F5 7B.D.7- 4.FE -.57 .6E"-.D 4.FE ".EE E.BF-.6E 4.FE 4.5 4.5

"4.75 4.FE "-.6 -.E7"7. 4.FE "5.4E 5.E55.E5 4.FE 7.FF 6.F65.4D 4.FE 7. -E.F"6.5B 4.FE "7.76 -D.BB"-.F5 4.FE ".E E.6D"-.- 4.FE ".4F 7.66-. 4.FE 4.65 4.-

77


45/75

-.4E 4.FE --. -5.7--.F7 4.FE -4.DE -4.F-6.F 4.FE -.D6 -BE.6"E.67 4.FE "F.- BE.6E"4.7E 4.FE "-.67 -.EFE.FB 4.FE B.DD 7F.F7

"6.4D 4.FE "6.DB -5.E".6 4.FE "6.- D.5F".B 4.FE "6.7D -.-E.6 4.FE B.76 7-.6F

"4.7 4.FE "-.D -.BB"6.-6 4.FE "7 -5.DB4.FB 4.FE "4.4- 4"4.5 4.FE "-.6E -.FD"4.D 4.FE "-.-B -.67"5.7 4.FE "B.-- 6E.D6.-5 4.FE .F 5.-"5.F 4.FE "B.BE 77.75

6.E 4.FE .F5 F.-64.F6 4.FE "4.47 4"-.D5 4.FE ".F E.DF"4.D 4.FE "-.ED 6."7.7F 4.FE "5.65 F.5E.D 4.FE .45 7.-D

D 4.FE F.-6 BB.4E".7 4.FE "6.E -4.E".BE 4.FE "6.57 -.56.BE 4.FE .F E.F5B.- 4.FE 5.67 F.5E

Vd -456.5D

1.>. (W) XVd/0

1.> X -456.5D 6.75RETURNS OF HCL

75


46/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of ?%= =T>

for a month of ay Q June 4-7. It has an avera#e return of 4.FE that is FEP and risk is

6.75

TATA !OTORS

%alculation of 3eturns

7B


47/75

D$te Ope' (%ice C.ose (%ice 3eturn"ay"-7 7-F 7-7.E5 "4.EF5"ay"-7 74F.55 7-7.75 -.77B"ay"-7 7-7.D 7-D.-5 -.4E"ay"-7 7-D 7-B.E "4.55F"ay"-7 7-D.D 76.45 4.E5

D"ay"-7 76.D5 7E.5 4.F7-"ay"-7 7E.7 775. 7.-B-6"ay"-7 77E.5 774.D5 "-.7--7"ay"-7 774 77.65 4.56-5"ay"-7 775 76D.B5 "-.-B"ay"-7 777.- 77D.F5 -.D-D"ay"-7 75B 777.7 ".574"ay"-7 77B.45 76D.F5 "-.6D-"ay"-7 77.6 76B.D5 "-.-"ay"-7 76E.5 764.F "-.566"ay"-7 7E.65 76-.6 4.DB"ay"-7 76F 777.45 -.6F

E"ay"-7 77E.65 76B.B ".7F"ay"-7 766 7F.E5 "4.DFD"ay"-7 77.75 77.6 "4.4764"ay"-7 7--.5 7-5.45 4.FB"Jun"-7 7-5 74.E5 -.6D6"Jun"-7 7-E.65 74.D 4.F57"Jun"-7 75 7.45 "4.BD5"Jun"-7 74 765 6.5EB"Jun"-7 76E 76D.- 4.7FD"Jun"-7 76D.5 77F.B .4E-4"Jun"-7 754.6 756.7 4.BD--"Jun"-7 75 775.E5 "-.6F

-"Jun"-7 775 77D.55 -.4-6"Jun"-7 77D.D5 76F.5 ".B-B"Jun"-7 76B.5 764.F5 "-.D-E"Jun"-7 767.- 774.D -.5E-F"Jun"-7 777.5 766.-5 ".55-D"Jun"-7 76F 76F.B 4.-74"Jun"-7 77-. 76F.45 "4.E-6"Jun"-7 76B.7 765.B "4.-F7"Jun"-7 767.- 77.-5 -.F55"Jun"-7 77-.45 776.5 4.5B"Jun"-7 776 76F "-.-6E"Jun"-7 76E.- 76.65 "-.4D64"Jun"-7 767 76-.6 "4.B

total -.45 avera#e 4.46

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d"4.EF 4.46 "4.F- 4.B5

7E


48/75

-.77 4.46 -.7- -.4 4.46 4.DD 4.DD"4.55 4.46 "4.5F 4.674.E5 4.46 4.E 4.54.F7 4.46 4.F- 4.B57.-B 4.46 7.-6 -E.-

"-.7- 4.46 "-.77 .4E4.56 4.46 4.5 4.5"-. 4.46 "-.6 -.5-.D 4.46 -.B -.B".57 4.46 ".5E B.B"-.6D 4.46 "-.7 .4"-.- 4.46 "-.7 -.57"-.56 4.46 "-.5B .774.D 4.46 4.FD 4.F-.6F 4.46 -.65 -.F6".7 4.46 ".76 5.D"4.DF 4.46 "-.4- -.4

"4.47 4.46 "4.4E 44.FB 4.46 4.F6 4.BD-.6D 4.46 -.6B -.F74.F5 4.46 4.F 4.BE"4.BD 4.46 "4.E 4.56.5E 4.46 6.57 -.574.7F 4.46 4.75 4..4E 4.46 .47 7.-B4.BD 4.46 4.BB 4.76"-.6F 4.46 "-.7- -.4 4.46 4.DD 4.DD".B 4.46 ".B6 B.D

"-.D 4.46 "-.6 -.E5-.5E 4.46 -.57 .6B".55 4.46 ".5F B.BE4.-7 4.46 4.-- 4.4-"4.E- 4.46 "4.E7 4.55"4.-F 4.46 "4.- 4.45-.F5 4.46 -.F 6.664.5 4.46 4.7E 4.

"-.-6 4.46 "-.-B -.67"-.4D 4.46 "-.- -.5"4.B 4.46 "4.B5 4.76

DF.F

1.>. (W) XVd/01.> XDF.F D.D6

RETURNS OF TATA !oto%s

7F


49/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of &3

I==1 =T> for a month of ay Q June 4-7. It has an avera#e return of 4.46 that is 6P

and risk is D.D6

!$%uthi Su/u+i


7D


50/75

"ay"-7 -,FD5.44 -,FF6.74 "4.B-5"ay"-7 -,FF6.44 -,FDE.F5 4.EDB"ay"-7 -,FDD.44 -,D-4.5 4.5DE"ay"-7 -,D45.4 -,FF-.5 "-.BF"ay"-7 -,FFF.44 -,FDB.B4 4.7BD"ay"-7 -,FF4.44 -,DE7.F5 5.45

-"ay"-7 -,DE5.44 ,47D.D4 6.ED-6"ay"-7 ,4F4.44 ,4D4.65 4.5-7"ay"-7 ,4D.44 ,4F5.4 "4.66-5"ay"-7 ,4F.44 ,--E.F5 -.E-B"ay"-7 ,44.44 ,-5.-5 ".-F-D"ay"-7 ,-D4.44 ,-7.B5 -.-64"ay"-7 ,.44 ,-D7.44 "-.B-"ay"-7 ,4-.44 ,-BD.4 "-.77"ay"-7 ,47.D5 ,B7.F4 .E-6"ay"-7 ,EF.E4 ,6F5.F5 7.EB"ay"-7 ,74E.54 ,67-.64 ".E5E"ay"-7 ,675.D5 ,64.45 "-.FE

F"ay"-7 ,D4.44 ,64D.D5 4.FED"ay"-7 ,646.-4 ,645.F5 4.-64"ay"-7 ,6-7.-5 ,E-.F4 "-.F6"Jun"-7 ,E4.44 ,67.64 .6D6"Jun"-7 ,677.E4 ,66B.F5 "4.667"Jun"-7 ,66D.64 ,6E.45 -.75"Jun"-7 ,7-4.44 ,6F-.4 "-.B"Jun"-7 ,74.44 ,6D.45 "4.7-D"Jun"-7 ,7-5.44 ,765.-5 4.F6-4"Jun"-7 ,7E5.44 ,7B7.64 "4.76--"Jun"-7 ,7E4.44 ,77F.55 "4.FE-"Jun"-7 ,74.44 ,7F4.F5 .5-

-6"Jun"-7 ,7F5.44 ,746.65 "6.D-B"Jun"-7 ,6DD.44 ,6F-.-5 "4.E7-E"Jun"-7 ,6FF.44 ,7-7.75 -.---F"Jun"-7 ,7-5.44 ,765.44 4.F6-D"Jun"-7 ,77-.44 ,6F4.45 ".54"Jun"-7 ,6B6.5 ,6BB.74 4.-66"Jun"-7 ,6D.44 ,6F4.64 "4.7D7"Jun"-7 ,6D4.44 ,7-7.B4 -.465"Jun"-7 ,7-7.D5 ,7E-.44 .6B"Jun"-7 ,7F5.44 ,7FB.D4 4.4FE"Jun"-7 ,7F4.45 ,757.E4 "-.464"Jun"-7 ,757.D5 ,76D.65 "4.B7

total D.B avera#e 4.6

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d"4.B- 4.6 "4.F7 4.E-4.ED 4.6 4.5B 4.6-

54


51/75

4.5D 4.6 4.6B 4.-6"-.B 4.6 "-.7D .-4.7B 4.6 4.6 4.455.45 4.6 7.F 6.-D6.ED 4.6 6.5B -.BD4.5 4.6 4.E 4.4E

"4.66 4.6 "4.5B 4.6--.E 4.6 -.7D .6".-F 4.6 ".7- 5.EF-.-6 4.6 4.D 4.F"-.B 4.6 "-.7D ."-.77 4.6 "-.BE .F.E- 4.6 .7F B.-E7.E 4.6 7.7E 4

".E5 4.6 ".DF F.FF"-.FE 4.6 ".- 7.74.FE 4.6 4.B7 4.7-4.- 4.6 "4.-- 4.4-

"-.F6 4.6 ".4B 7.7.6D 4.6 .-B 7.BE"4.66 4.6 "4.5B 4.6-.7 4.6 -.-E -.6E"-. 4.6 "-.76 .46"4.7- 4.6 "4.B7 4.74.F6 4.6 4.B 4.6E"4.76 4.6 "4.BB 4.77"4.FE 4.6 "-.- -.-.5- 4.6 .F 5."6.D 4.6 "6.5 -.6B"4.E7 4.6 "4.DE 4.D5

-.-- 4.6 4.FF 4.EE4.F6 4.6 4.B 4.6B".5 4.6 ".E6 E.774.-6 4.6 "4.- 4.4-"4.7D 4.6 "4.E 4.5-.46 4.6 4.F 4.B7.6 4.6 .4D 7.6E4.4F 4.6 "4.-5 4.4"-.4 4.6 "-.5 -.5E"4.B7 4.6 "4.FE 4.E5

Vd -76.76

1.>. (W) XVd

/01.> X-76.76 --.DE

RETURNS OF !$%uthi Su/u+i

5-


52/75


53/75


54/75


55/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of harathi

&irtel for a month of ay Q June 4-7. It has an avera#e return of "4.-E that is "-EP and

risk is. -4.FD

Re.i$'ce Co--u'ic$tio's

C$.cu.$tio' of Retu%'sD$te Ope' (%ice C.ose (%ice 3eturn

55


56/75

"ay"-7 -6 -.45 "4.EE5"ay"-7 --D.D --E. ".5B"ay"-7 --F --E.5 "4.B7E"ay"-7 --E.6 --B.E "4.5-F"ay"-7 --E.6 --5.F "-.FD"ay"-7 --5 --E.B .B

-"ay"-7 --B.F -.6 7.E--6"ay"-7 -6. -.F "4.6-7"ay"-7 -6. -E.F 6.E6-5"ay"-7 -F -6.B "6.77-B"ay"-7 -B.-5 -D.- .67-D"ay"-7 -6-.- -65.55 6.6D4"ay"-7 -6E.65 -6D.45 -.7-"ay"-7 -6D.7 -6F "-"ay"-7 -6D -6F.B5 "4.56"ay"-7 -7-.45 -77.5 .75B"ay"-7 -75.F5 -6F.F5 "7.FE"ay"-7 -6F -7-. .6

F"ay"-7 -7-.D5 -75.-5 .5D"ay"-7 -7B -6D.D "7.-F64"ay"-7 -74.F5 -6B.55 "6.45"Jun"-7 -6E.5 -6D.D5 -.DE6"Jun"-7 -74.5 -77 .7D7"Jun"-7 -76.- -76.7 4.-5"Jun"-7 -76.75 -7B.E .EB"Jun"-7 -7E.65 -5-.F 6.4D"Jun"-7 -56.5 -56.F5 4.6D

-4"Jun"-7 -55 -57.F "4.-6--"Jun"-7 -55.65 -7F.55 "7.6F-"Jun"-7 -7F -7B.6 "-.-5

-6"Jun"-7 -7B.B -76.5 ".---B"Jun"-7 -7. -75.5 .-7-E"Jun"-7 -7B.D5 -7F.E -.-D-F"Jun"-7 -7D.D5 -5-.75 --D"Jun"-7 -5.55 -7D.6 ".-64"Jun"-7 -7F.7 -7D. 4.576"Jun"-7 -7D.5 -54.- 4.77"Jun"-7 -5-. -5-.65 4.-5"Jun"-7 -7D -5-.75 -.B7B"Jun"-7 -5 -75.D5 "6.DFE"Jun"-7 -7E. -75.55 "-.-64"Jun"-7 -75.B -7B.6 4.7F

total 5.47 avera#e 4.-

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d"4.EE 4.- "4.FD 4.F".5 4.- ".6E 5.B6"4.B7 4.- "4.EB 4.5E

5B


57/75

"4.5- 4.- "4.B6 4.7"-.F 4.- "-.7 -.DB.B 4.- .-7 7.5F7.E- 4.- 7.5D -.4B"4.6 4.- "4.77 4.6.E6 4.- 6.B- -6.4B

"6.77 4.- "6.5B -.BB.67 4.- . 7.D6.6D 4.- 6.E -4.E-.7 4.- -.- -.5"- 4.- "-.- -.B

"4.5 4.- "4.6E 4.-7.75 4.- .66 5.7-"7.F 4.- "7.D 7..6 4.- . 7.F6.5 4.- .-6 7.5B"7.-F 4.- "7.6 -F.7E"6.45 4.- "6.-E -4.4E

-.DE 4.- -.F5 6.7-.7D 4.- .6E 5.B4.- 4.- 4.4D 4.4-.E 4.- .-5 7.B6.4 4.- .D F.7-4.6D 4.- 4.E 4.4E"4.-6 4.- "4.5 4.4B"7.6F 4.- "7.5 4."-.-5 4.- "-.E -.B-".-- 4.- ".6 7.DD.-7 4.- .4 7.--.-D 4.- -.4E -.-5

- 4.- 4.FF 4.EE".-6 4.- ".5 5.4B4.57 4.- 4.7 4.-F4.7 4.- 4.F 4.4F4.- 4.- "4.4 4-.B7 4.- -.5 .6"6.DF 4.- "7.- -B.F-"-.- 4.- "-.7 -.574.7F 4.- 4.6B 4.-65.47 Vd E.D-

1.>. (W) XVd/01.> XE.D- -5.4D

RETURNS OF Re.i$'ce Co--u'ic$tio's

5E


58/75


59/75


"ay"-7 7BF 7E5.5 -.B5"ay"-7 7E7.-5 7BF.D5 "-.-B"ay"-7 7E4 7E-.-5 4.7E"ay"-7 7BD.-5 7ED.6 .-BF"ay"-7 7F6.5 7F.55 "4.D"ay"-7 7F5.5 7E- ".DD-"ay"-7 7E4.D5 7B4.45 ".6--6"ay"-7 7B.-5 75E.7 "-.46-7"ay"-7 75D.D 75D.-5 "4.-B-5"ay"-7 7B-.7 77-.- "7.7-B"ay"-7 754 7F.D "7.BD-D"ay"-7 76-.D 765.7 4.F-4"ay"-7 765.- 77B.6 .5E-"ay"-7 754 75-.7 4.6-"ay"-7 75 76D.F5 ".BD6"ay"-7 774.D 775.D5 -.-5

B"ay"-7 77D.D5 76F ".BBE"ay"-7 77 76E.F5 "4.D7F"ay"-7 76D.D 76.B "-.BBD"ay"-7 76.5 7F.5 "4.DF64"ay"-7 7F.- 76E.6 .-5"Jun"-7 76F 77E.45 .4E6"Jun"-7 777.5 77.B "4.6E7"Jun"-7 775. 756.B5 -.D5"Jun"-7 75B.45 7B6.D5 -.E6B"Jun"-7 7B5.B5 7B5.F5 4.47D"Jun"-7 7BB.- 7B6.75 "4.5E-4"Jun"-7 7B5 7F7.5 7.-D

--"Jun"-7 7FE.B 7EB.-5 ".65-"Jun"-7 7EF 546.7 5.6--6"Jun"-7 54D.7 7F-.- "5.5B-B"Jun"-7 7F- 7D4 -.FE-E"Jun"-7 7D4 7FF.55 "4.6-F"Jun"-7 7D4 7D.D5 4.B-D"Jun"-7 7D5 7D7 "4.4"Jun"-7 7D5 7FD.7 "-.-66"Jun"-7 7D.55 7F6.B "-.F7"Jun"-7 7F-.6 7FB. -.45"Jun"-7 7FF 54E.D 7.4FB"Jun"-7 5--.F 54.6 -.BB

E"Jun"-7 5.F 57.5 4.F64"Jun"-7 5B.D 564.E5 4.E6 total "-.B avera#e "4.47

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d

5D


60/75

-.B "4.47 -.B7 .E"-.- "4.47 "-.4B -.-4.7 "4.47 4.F 4.4F.-B "4.47 . 7.FB"4. "4.47 "4.-B 4.4".DD "4.47 ".D5 F.BF

".6- "4.47 ".E 5.-E"-.46 "4.47 "4.DD 4.DF"4.-B "4.47 "4.- 4.4"7.7 "4.47 "7.6B -D.4-"7.BD "4.47 "7.B5 -.B-4.F- "4.47 4.F5 4.E.5E "4.47 .B- B.F64.6- "4.47 4.65 4.-".BD "4.47 ".B5 E.4--.-5 "4.47 -.-D -.7-".BB "4.47 ".B B.F7"4.D7 "4.47 "4.D 4.F-

"-.BB "4.47 "-.B .B"4.DF "4.47 "4.D7 4.FD.-5 "4.47 .-D 7.ED.4E "4.47 .-- 7.77"4.6E "4.47 "4.66 4.---.D "4.47 -.D7 6.EB-.E6 "4.47 -.EE 6.-74.47 "4.47 4.4F 4.4-"4.5E "4.47 "4.56 4.F7.-D "4.47 7.6 -E.D".65 "4.47 ".6- 5.665.6- "4.47 5.65 F.BB

"5.5B "4.47 "5.5 64.7-.FE "4.47 -.D- 6.B5"4.6 "4.47 "4.B 4.4E4.B "4.47 4.B7 4.7-"4. "4.47 "4.-B 4.46"-.-6 "4.47 "-.4D -.-D"-.F "4.47 "-.EF 6.-B-.4 "4.47 -.4B -.-7.4F "4.47 7.- -B.DB-.BB "4.47 -.E .FD4.F "4.47 4.6 4.-4.E6 "4.47 4.EE 4.5D"-.B Vd 4.56

1.>. (W) XVd/01.> X4.56 -7.F5

RETURNS OF BIOCON

B4


61/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of I:%:0 for

a month of ay Q June 4-7. It has an avera#e return of "4.47 that is "7P and risk is.

-7.F5

CI(LA


B-


62/75

"ay"-7 6DE.5 74.- -.-B5"ay"-7 74.45 6D.F ".6B"ay"-7 6D5.B5 6D4.D "-.E"ay"-7 6D-.-5 6F.B ".-DF"ay"-7 6D- 6FF.B5 "4.BD"ay"-7 6FF.65 6D.6 -.4

-"ay"-7 6D6.- 6FE.E5 "-.6B-6"ay"-7 6D- 6D4.B "4.--7"ay"-7 6D. 6D7.55 4.B-5"ay"-7 6D7.E 6DF.- 4.FB-B"ay"-7 74-.7 6FF.5 "6.F-D"ay"-7 6D4.-5 6F7.E5 "-.6F4"ay"-7 6F6 6FD.65 -.BB-"ay"-7 6D4 6FD.B5 "4.4D"ay"-7 6D-.7 6FE.F5 "4.D-6"ay"-7 6FF. 6FE.D "4.4FB"ay"-7 6FF.65 6F-.6 "-.FE"ay"-7 6F 6EF "-.45

F"ay"-7 6EF.B 6ED.F5 4.66D"ay"-7 6F4.- 6E.75 ".4-64"ay"-7 6E4 6F7.55 6.D6"Jun"-7 6FD 6FE. "4.7B6"Jun"-7 6FB.45 6FD 4.EB7"Jun"-7 6FE.65 6D4.F 4.FD5"Jun"-7 6D-. 6FE. "-.4B"Jun"-7 6FE.D5 6DB.-5 .--D"Jun"-7 6DF 6DB.55 "4.6B-4"Jun"-7 6DD 74E.B .-B--"Jun"-7 74F 7-6.-5 -.B-"Jun"-7 7-7 7-B.-5 4.5

-6"Jun"-7 7-5.5 7-7.- "4.67-B"Jun"-7 7-7.E5 7-6.B "4.F-E"Jun"-7 7-E 7-.D5 "4.DE-F"Jun"-7 74 75.- -.--D"Jun"-7 7D.D 75.D5 "4.D4"Jun"-7 7B.B 75.B5 "4.6"Jun"-7 7E. 76.D "4.EE7"Jun"-7 7E.F 7E.7 "4.4D5"Jun"-7 7E.F 7B.75 "4.6B"Jun"-7 7E 75.55 "4.67E"Jun"-7 76 76B.D 6.D64"Jun"-7 77.E 76F "-.4B

total "6.EB avera#e "4.4D

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d-.-B "4.4D -.5 -.5B".6 "4.4D ".- 7.FD

B


63/75


64/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of %I'=& for a

month of ay Q June 4-7. It has an avera#e return of "4.4D that is "DP and risk is. D.66

"AIL 8 I'di$9 Ltd

C$.cu.$tio' of Retu%'sD$te Ope' (%ice C.ose (%ice 3eturn

"ay"-7 6BB.B5 6E-. -.7

B7


65/75

5"ay"-7 6E4.- 6E 4.5-B"ay"-7 6E6.5 6BD.F "4.DDE"ay"-7 6BD.F 6BB.-5 "4.DDF"ay"-7 6B5 6B5.B5 4.-FD"ay"-7 6BB 6E- -.6E

-"ay"-7 6BD.5 6F6.F 6.FE

-6"ay"-7 6FB 6D6.75 -.D6-7"ay"-7 6D6.75 6D5.55 4.56-5"ay"-7 6D5 747.65 .6E-B"ay"-7 7-4 74D.E "4.4E-D"ay"-7 7--.- 7D.F5 7.5B4"ay"-7 766.5 7-.D5 ".B--"ay"-7 7 7-6.F5 "-.D6"ay"-7 7-7.6 75.B .E66"ay"-7 7B 75.7 "4.-7B"ay"-7 76E 7-4.-5 "B.-7E"ay"-7 74 6ED.5 "5.BBF"ay"-7 6F6 6E-.75 "6.4

D"ay"-7 6E6.7 6E-.55 "4.564"ay"-7 6E.-5 6EE.F -.5"Jun"-7 6EE.5 6D4.E5 6.5-6"Jun"-7 6FD.45 6F-.B "-.D-7"Jun"-7 6F-.5 6F-.45 "4.455"Jun"-7 6F4.- 6D-.45 .FFB"Jun"-7 6D7.75 7.- E.4-D"Jun"-7 7D.D 76-.E 4.7

-4"Jun"-7 766.- 7F.B "-.47--"Jun"-7 7F.E 76-.B5 4.BD-"Jun"-7 7F 76.45 4.D5-6"Jun"-7 764.-5 7-5.75 "6.7

-B"Jun"-7 7-B 766.6 7.-B-E"Jun"-7 765 777.D5 .D-F"Jun"-7 77F.5 75.B5 4.D6-D"Jun"-7 75B 776.B ".E4"Jun"-7 777.D 76D.- "-.66"Jun"-7 76E.5 76D.-5 4.767"Jun"-7 776.E 75D.5 6.5B5"Jun"-7 7B.5 7BE.5 -.4FB"Jun"-7 75B 7B4 4.FFE"Jun"-7 75B.45 75B.D 4.-D64"Jun"-7 75B.- 7B6.45 -.5

total -F.F avera#e 4.75

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d-.7 4.75 4.ED 4.B64.5- 4.75 4.4B 4"4.DD 4.75 "-.77 .4F

B5


66/75

"4.DD 4.75 "-.77 .4E4.-F 4.75 "4.E 4.4E-.6E 4.75 4.D 4.F76.FE 4.75 6.7 --.E-.D6 4.75 -.7F .-D4.56 4.75 4.4F 4.4-

.6E 4.75 -.D 6.BF"4.4E 4.75 "4.5 4.E7.5B 4.75 7.-- -B.D".B- 4.75 "6.4B D.65"-.D6 4.75 ".6F 5.BE.E6 4.75 .F 5.-D"4.-7 4.75 "4.5D 4.65"B.-7 4.75 "B.5D 76.7F"5.BB 4.75 "B.-- 6E.6"6.4 4.75 "6.7E -.4-"4.5 4.75 "4.D5 4.FD-.5 4.75 -.4E -.-7

6.5- 4.75 6.4B D.6B"-.D- 4.75 ".6B 5.5D"4.45 4.75 "4.5 4.5.FF 4.75 .76 5.D-E.4- 4.75 B.5B 76.464.7 4.75 "4.46 4"-.47 4.75 "-.7D .4.BD 4.75 4.7 4.4B4.D5 4.75 4.5 4.5"6.7 4.75 "6.FE -7.DB7.-B 4.75 6.E- -6.E5.D 4.75 -.F7 6.6F

4.D6 4.75 4.7F 4.6".E 4.75 "6.-E -4.47"-.6 4.75 "-.E5 6.4F4.76 4.75 "4.4 46.5B 4.75 6.-- D.BF-.4F 4.75 4.B6 4.74.FF 4.75 4.76 4.-F4.-D 4.75 "4.B 4.4E-.5 4.75 -.4E -.-5-F.F Vd ED.7

1.>. (W) XVd/0

1.> XED.7 -B.E-

RETURNS OF "AIL 8 I'di$9 Ltd

BB


67/75

INTER(RETATION

The above table shows return Q risk associated with the price movement of 9&I=(India) =td for a month of ay Q June 4-7. It has an avera#e return of 4.75 that is 75Pand risk is -B.E-

ON"C

C$.cu.$tio' of Retu%'s

BE


68/75

D$te Ope' (%ice C.ose (%ice 3eturn"ay"-7 6B.D5 6D.6 4.E5"ay"-7 6D.- 665.7 -.D-B"ay"-7 66B.45 66E. 4.67E"ay"-7 674 665.-5 "-.76F"ay"-7 66B 667 "4.B

D"ay"-7 666.5 67E.D5 7.66-"ay"-7 67E.-5 65F.B 6.6-6"ay"-7 6E6 6E.B "4.---7"ay"-7 6E7 6BF.- "-.5F-5"ay"-7 6BE.7 6EF.55 6.46-B"ay"-7 6D 6F7.-5 "-D"ay"-7 6D6.D5 7-B.E5 5.ED4"ay"-7 7-F.7 744.- "7.6E-"ay"-7 6DB.- 6DF.75 4.5D"ay"-7 744 6D.F "-.F6"ay"-7 6DF.75 74E.D5 .6FB"ay"-7 7- 745.6 "-.B6

E"ay"-7 745.5 6D5.45 ".5FF"ay"-7 6D5.5 6F7.5 ".F7D"ay"-7 6F5 6E7.-5 ".F64"ay"-7 6E5. 6EF.-5 4.ED"Jun"-7 6F4.B 6DD.55 7.DF6"Jun"-7 74-.75 7-B.E5 6.F-7"Jun"-7 7-B.-5 7-- "-.75"Jun"-7 74D.45 7-D.-5 .7EB"Jun"-7 75.F5 7B5.B5 D.65D"Jun"-7 7E4 756.-5 "6.5D

-4"Jun"-7 755 774.55 "6.-F--"Jun"-7 77 7E.6 "6.66

-"Jun"-7 7F.45 7F.B 4.-6-6"Jun"-7 764.55 7.B5 "-.F6-B"Jun"-7 74.55 7B.D -.5--E"Jun"-7 7E.5 775.- 7.--F"Jun"-7 775.6 77.E "4.5F-D"Jun"-7 765.5 74.E5 "6.664"Jun"-7 74.55 7-E.5 "4.E66"Jun"-7 7-.7 76E.B 6.F77"Jun"-7 775 77.D5 "4.7B5"Jun"-7 775 76B.F5 "-.F6B"Jun"-7 7-5 7--.65 "4.FFE"Jun"-7 7-B.75 7--. "-.B64"Jun"-7 7-E.D 77.F5 -.BB

total --.4F avera#e 4.B

38TA30 %=:1I09 '3I%8":'80I09 '3I%8 U-44 :'80I09 '3I%8

C$.cu.$tio' of Ris+:3eturn e,pected %etu%' d , 1 E, d4 d , d4.E 4.B 4.7B 4.--.D- 4.B -.B5 .E7

BF


69/75

4.67 4.B 4.4F 4.4-"-.76 4.B "-.BD .F7"4.B 4.B "4.FB 4.E67.66 4.B 7.4E -B.5D6.6 4.B 6.47 D.6

"4.-- 4.B "4.6E 4.-6

"-.5F 4.B "-.F7 6.6F6.46 4.B .EE E.E" 4.B ".B 5.-

5.ED 4.B 5.56 64.55"7.6E 4.B "7.B6 -.7E4.5D 4.B 4.66 4.--"-.F 4.B ".4B 7.7.6F 4.B .- 7.5-"-.B6 4.B "-.FD 6.5B".5F 4.B ".F7 F.45".F7 4.B "6.- D.B7".F 4.B "6.4F D.7F

4.ED 4.B 4.56 4.F7.DF 4.B 7.E .E6.F- 4.B 6.55 -.B-"-.7 4.B "-.5 .7.7E 4.B .- 7.FFD.65 4.B D.4D F.5B"6.5D 4.B "6.F5 -7.EF"6.-F 4.B "6.77 --.F"6.66 4.B "6.5D -.FB4.-6 4.B "4.-6 4.4"-.F6 4.B ".4D 7.6

Documents

final equity analysis project