A STUDY ON RISK ANALYSIS AND PORFOLIO MANAGEMENT [IL&FS INVESTSMART] HSBC GROUP

In partial fulfillment for the Course in MBA (International Business) [2008-2010]

Submitted by: REGD NO: 1224108167

Under the esteemed guidance of

Shamshuddin Khan Area Sales Manager

(IL&FS Investmart Securities Ltd.)

Dr.Kameshwara Rao Assistant Professor

(GIIB)

GITAM INSTITUTE OF INTERNATIONAL BUSINESS

DECLERATION

I hereby declare that this project title RISK ANALYSIS AND PORTFOLIO MANAGEMENT is prepared by me under the guidance of Mr. Shamshuddin Khan, Area Sales Manager, IL&FS Investsmart Securities Ltd., Viskhapatnam and Dr. Kameshwara Rao, Asst. professor, GITAM Institute of International Business (GIIB) Visakhapatnam, in partial fulfilment of requirement for the award of the degree of Master of Business Administration (International Business). I further declare that the primary information and secondary information accumulated in the report is subject to time terms and conditions and may change with the same. All interpretation, research and suggestions made in the report are my personal views.

DATE: PLACE: VISAKHAPATNAM

G. NARESH

CERTIFICATE

This is to certify that Mr. GOPALAM NARESH, a student of MBA session 20082010 has completed her project titled RISK ANALYSIS AND PORTFOLIO MANAGEMENT during her summer internship at IL&FS Investsmart, Visakhapatnam under my guidance and supervision. He has worked with all honesty and sincerity.

DATE: PLACE: VISAKHAPATNAM

Dr.K.KAMESHWARA RAO (Asst. PROFESSOR)

ACKNOWLEDGEMENTS

I take this privilege to thank PROF. V.K. KUMAR, Director, GITAM INSTITUTE of INTERNATIONAL BUSINESS for giving me this opportunity for Summer Training at IL&FS Investsmart., Hyderabad. I owe a great intellectual debt to Mr. KAMESHWAR RAO, Associate Asst. Professor for his kind co- operation, valuable guidance and encouragement during this project. I express my sincere thanks to Mr. SHAMSHUDDIN KHAN, Area Sales Manager, IL&FS Investsmart, Hyderabad for his experienced guidance to complete my project.

DATE: PLACE: VISAKHAPATNAM

GOPALAM NARESH

CONTENTS

S.NO. NO.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

PARTICULARS

PAGE NO.
6-7 9 11-15 17-24 26-34 36-38 40 42-43 45 46-55 56

EXECUTIVE SUMMARY INTRODUCTION COMPANY PROFILE RISK ANALYSIS RISK RETURN PERFORMANCE OF CHOSEN SECURITIES PORTFOLIO PERFORMANCE OF THE SECURITIES - Under Traditional Hypothesis RETURNS ON BUY AND HOLD STRATEGY PORTFOLIO PERFORMANCE OF THE SECURITIES - Under Markowitz ModeL LIMITATIONS AND RECOMMENDATIONS ANNEXURES REFERENCES

EXECUTIVE SUMMARY
Investment involves making of a sacrifice in the present with the hope of deriving future benefits. Two most important features of an investment are current sacrifice and future benefit. Investment is the sacrifice of certain present values for the uncertain future reward. Investment may be defined as an activity that commits funds in any financial/physical form in the present with an expectation of receiving additional return in the future. The expectation brings with it a probability that the quantum of return may vary from a minimum to a maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk. Risk is explained theoretically as the fluctuation in returns from a security. A security that yields consistent returns over a period of time is termed as risk less security or risk free security . Risk is inherent in all walks of life. An investor cannot foresee the future definitely; hence, risk will always exist for an investor. Risk is in fact the watchword for all investors who enter capital markets. Portfolios are combinations of assets. Portfolios consist of collections of securities. Traditional portfolio planning emphasizes on the character and the risk bearing capacity of the investor. For example, a young, aggressive, single adult would be advised to buy stocks in newer, dynamic, rapidly growing firms. A retired widow would be advised to purchase stocks and bonds in old-line, established, stable firms, such as utilities. Modern portfolio theory suggests that the traditional approach to portfolio analysis, selection, and management may yield less than optimum results. Hence a more scientific approach is needed, based on estimates of risk and return of the portfolio and the attitudes of the investor toward a risk-return trade-off stemming from the analysis of the individual securities. In this study 10 securities are selected which are ACC Ltd., Bharti Airtel, BHEL, Grasim, ONGC, Infosys, Maruti Suzuki, Reliance infrastructure, SBI and Sun Pharma

and risk analysis of each security is done and a portfolio is constructed under traditional hypothesis and also modern hypothesis Markowitz theory. The objective of the study is to analyse risk of the chosen 10 securities during the period Jan 2007 to June 2009, to study the behavior of portfolio constructed under traditional hypothesis and the Markowitz model, to find the benefits/losses of adopting a buy and hold strategies for individual securities as well as a portfolio The main findings of the study are If the portfolio is composed of only one security, then it is prone to two kinds of risks 1.) systematic risk - risk emanating from conditions of the general economy such as the business cycle, inflation, interest rates and exchange rates and 2.) Unsystematic risk, which is firm-specific and can be related to Research and Development or personnel changes. As per the traditional hypothesis, it is observed that as the securities are added to the portfolio, to the extent that the firm-specific influences on the stocks differ, diversification should reduce portfolio risk, but systematic risk cannot be totally reduced. But as per the modern portfolio theory i.e., Markowitz theory, we can choose an appropriate complete portfolio with the optimal risky portfolio. The variances and the co variances between the securities can be calculated for the targeted expected return. Under the Buy and Hold strategy, if the securities are purchased on Jan 2007 and are held till July 2009, without trading during the period, the return yielded is better than the average return yielded through regular trading. We can infer that during the recession period, it is better to hold the securities instead of indulging in regular trading and exposing to high volatility that prevail during that period.

INTRODUCTION

OBJECTIVES OF THE STUDY

To analyze the risk of chosen 10 securities during the period Jan 2007 to June 2009. To study the risk return performance of the chosen 10 securities To examine the Risk Return performance of the portfolio of 10 securities. To study the behavior of portfolio constructed under traditional hypothesis. To study the behavior of portfolio under the Markowitz model. To find the benefits/losses of adopting a buy and hold strategies for individual securities as well as a portfolio

METHODOLOGIES
Selection of 10 securities from BSE 30 Sensex Regression - To find out the beta value - the sensitivity of the security with respect to the market Correlation Matrix For finding the co variances between the securities

COMPANY PROFILE

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IL&FS INVESTSMART
IL&FS Investsmart Limited (IIL) is one of Indias leading financial services organizations providing individuals and corporates with customised financial management solutions. IL&FS Investsmart is one of India's prime financial services company and is committed to creating a differentiated financial services organisation by leveraging technology to deliver the most compelling combination of product, service and price to a value driven consumer. Hsbcs stake in IL&FS Investsmart HSBC has announced the acquisition of 93.86 per cent stake in leading Indian brokerage, IL&FS Investsmart for a sum of Rs 1,311 crore (around USD 296.4 million) on September 30th 2008. It had acquired a 73.21 per cent stake in Investsmart in May the same year, which included a 43.85 per cent stake previously held by E*Trade Mauritius and 29.36 per cent stake holding of IL&FS. It later acquired an additional 20.65 per cent through an open offer taking its total shareholding in Investsmart to 93.86 per cent. IL&FS INVESTSMART OFFERINGS Retail Offerings Advisory products Trading products NRI Services Institutional Offerings Investment Banking Institutional Equity Institutional Debts

ADVISORY PRODUCTS: Mutual Fund Advisory Services - As a part of its Mutual Fund Advisory Services, the team of experts across India helps one in selecting the right scheme from over 500 offerings, matching his needs, goals and risks. In addition to this, it also helps in

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constantly monitoring ones MF portfolio, making changes according to the changing needs as per the market scenario, in order to make money work for oneself. Portfolio Management Services - Its solutions include anticipating market trends, assessing the impact of socio-economic changes on ones investments, keeping abreast of latest corporate developments and financial analysis in the context where managing ones investments has become nearly a full-time affair that requires considerable time and expertise. It offers a choice of two types of PMS Schemes i Preserve It is a discretionary portfolio management scheme, which invests in a mix of various mutual fund schemes. It is ideal for investors who wish to invest in maximizing returns from mutual funds but cannot make the right choices. The primary objective of iPreserve is to manage investments in Mutual funds, encompassing both debt as well as equity schemes. iPreserve takes care of complete execution of the investment and monitoring on clients behalf. iGrowth - is a discretionary portfolio management scheme, focused on equities. It aims at creating long-term wealth through judicious stock selection and asset allocation. Sub-schemes are based on investors risk profile. IPO Advisory & Distribution Services IL&FS Investsmart (IIL) is one of the India's leading companies engaged in the activity IPO Advisory and Distribution. Its primary markets division does a comprehensive research before recommending issues to clients. Its pan India reach helps in mobilising large number of applications across India during public offerings, this has ensured that it constantly figures amongst the top ranking performers in the primary market distribution space. As a part of its online offering, customers can invest in IPO's not only through its branches but also through their website, which also provides one with regular updates on the IPO scenario. The primary markets distribution division works in conjunction with the retail and wholesale distribution networks, as well as its private client group. Insurance Advisory Services

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IIL is one stop shop for all Insurance & Retirement needs. It is a composite insurance broker providing comprehensive risk management solutions, both for corporates as well as individuals. Its solutions include identification, measurement and assessment of the risk and handling of the risk, of which insurance is an integral part. It deals into both life insurance and general insurance products for all insurance companies across India. TRADING PRODUCTS: Equities and Derivatives Investsmart is a full service broking house offering services across both the Cash and F&O segments. Investsmart is a member with National Stock Exchange (NSE) as well as the Bombay Stock Exchange (BSE). It also offers comprehensive trading solutions through its website www.investsmart.in which is equipped with host of unique features to cater to customer trading needs. Its offerings include 3 different trading platforms to suit ones individual needs, depending upon his profile. NRI PRODUCTS Investsmart is committed to creating a differentiated financial services organisation by leveraging technology
to deliver the most compelling combination of product, service and price to a value driven consumer.

It offers its investment solutions to meet the financial objectives of NRIs. Its end-toend investment solutions guide one at every step of ones investment in India right from PAN Card Assistance to formulating & executing investment plans based on NRI requirements, robust trading platforms till the assistance on accounting & income tax returns filing in India. NRI Product Offerings NREquity NRI Portfolio Management Services

INSTITUTIONAL OFFERINGS: INVESTMENT BANKING

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It offers an extensive range of Investment Banking Services for equity related products and instruments. It advises on transactions like business structuring and capital raising opportunities based on ones corporate needs and state of capital markets. Services specialized in include Management of:

Initial Public Offering (IPOs) Follow-on Offerings Qualified Institutional Placements (QIPs) Buyback of Equities Open Offers Mergers & Acquisitions Private Equity Placements ESOPs

It identifies analyses and responds instantly to customer needs. Since inception, it has been structuring and delivering financial solutions geared towards its clients needs. This is implemented through an understanding of clients business needs and investor preferences. INSTITUTIONAL EQUITY BROKING SERVICES It focuses on identifying undiscovered value stocks to investors. Through its gamut of services, this division is well-suited to corporate investors, banks, financial institutions, insurance companies and FIIs. Its Institutional Equity Business (IEB) is well positioned to offer support for a complete range of investment banking service to corporates. It offers a wide array of products and services, specifically aimed at improving market capitalization of forward looking companies. It works closely with institutional investors, private equity investors and corporates. It conducts activities like organising of road shows, enabling the senior management to interact with FIIs, regular conference calls for institutional Investors etc. This works as a pre-requisite to investing in stocks. Its expertise in this area also extends to international investors from Singapore, Hong Kong, USA and the UK.

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INSTITUTIONAL DEBT BROKING SERVICES Its institutional debt broking division includes secondary market broking, primary market debt placement & distribution and provident fund advisory services. Secondary debt broking is the principle service provided by this division. The clients mainly comprise of institutional debt players, such as banks, primary dealers, mutual funds, large provident funds and in some cases corporate treasuries. The division empanelled with almost all banks, primary dealers and mutual funds, on whose behalf it acts either on the buying or selling side. All types of debt papers are covered, including government securities, treasury bills, public sector bonds, corporate bonds etc. This desk also provides transacting and advisory services to various provident funds and HNI clients. The primary market services cover placement of debt paper issued by corporates, with institutional segments covering banks, mutual funds etc. These services cover various activities :

Advising the clients on the issuance including the instrument, quantum, timing, other instrument specific structuring such as put / call option, conversion option and rating. Assisting in the rating exercise and suggesting various means and options to improve rating if so desired, through Structured Obligations or other mechanisms.

Pre marketing the placement / issuance Selling / placing the issuance Assisting in any related documentation for the issuance Assisting in all other steps to complete the issuance for draw down funds

The debt instrument covered by this division cover both short term as well as longer term instruments. Commercial paper and MIBOR Linked Bonds are popular among the short-term instruments. The division uses a proprietary online platform called DebtonNet for online book building of debt issuances

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RISK ANALYSIS

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INVESTMENT Investment involves making of a sacrifice in the present with the hope of deriving future benefits. Two most important features of an investment are current sacrifice and future benefit. Investment is the sacrifice of certain present values for the uncertain future reward. Investment may be defined as an activity that commits funds in any financial/physical form in the present with an expectation of receiving additional return in the future. The expectation brings with it a probability that the quantum of return may vary from a minimum to a maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk. INVESTMENT PROCESS An organized view of the investment process involves analyzing the basic nature of investment decisions and organizing the activities in the decision process. Investment process is governed by the two important facets of investment they are risk and return. Therefore, we first consider these two basic parameters that are of critical importance to all investors and the trade off that exists between expected return and risk. Given the foundation for making investment decisions the trade off between expected return and risk- we next consider the decision process in investments as it is typically practiced today. Although numerous separate decisions must be made, for organizational purposes, this decision process has traditionally been divided into a two step process: security analysis and portfolio management. Security analysis involves the valuation of securities, portfolio management involves the management of an investors investment selections as a portfolio (package of assets), with its own unique characteristics.

Characteristics of Investment
The characteristics of investment can be understood in terms of as - return, - risk, - safety, - liquidity etc.

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Return: All investments are characterized by the expectation of a return. In fact, investments are made with the primary objective of deriving return. The expectation of a return may be from income (yield) as well as through capital appreciation. Capital appreciation is the difference between the sale price and the purchase price. The expectation of return from an investment depends upon the nature of investment, maturity period, market demand and so on. Risk: Risk is inherent in any investment. Risk may relate to loss of capital, delay in repayment of capital, non payment of return or variability of returns. The risk of an investment is determined by the investments, maturity period, repayment capacity, nature of return commitment and so on. Risk and expected return of an investment are related. Theoretically, the higher the risk, higher is the expected return. The higher return is a compensation expected by investors for their willingness to bear the higher risk. Safety: The safety of investment is identified with the certainty of return of capital without loss of time or money. Safety is another feature that an investor desires from investments. Every investor expects to get back the initial capital on maturity without loss and without delay. Liquidity: An investment that is easily saleable without loss of money or time is said to be liquid. A well developed secondary market for security increases the liquidity of the investment. An investor tends to prefer maximization of expected return, minimization of risk, safety of funds and liquidity of investment. Investment avenues can be broadly categorized under the following heads: 1. Corporate securities . Equity shares . Preference shares . Debentures/Bonds . GDRs /ADRs . Warrants . Derivatives 2. Deposits in banks and non banking companies 3. Post office deposits and certificates 4. Life insurance policies 5. Provident fund schemes 6. Government and semi government securities 18

7. Mutual fund schemes 8. Real assets RETURN AND RISK THE BASIS OF INVESTMENT DECISIONS: An organized view of the investment process involves analyzing the basic nature of investment decisions and organizing the activities in the decision process. Common stocks have produced, on average, significantly larger returns over the years than savings accounts or bonds. To pursue higher returns investors must assume larger risks. Underlying all investment decisions is the trade off between expected return and risk. Therefore, we first consider these two basic parameters that are of critical importance to all investors and the trade- off that exists between expected return and risk. Given the foundation for making investment decisions the trade off between expected return and risk we next consider the decision process in investments as it is typically practiced today. Although numerous separate decisions must be made, for organizational purposes, this decision process has traditionally been divided into a two step process: security analysis and portfolio management. Security analysis involves the valuation of securities, whereas portfolio management involves the management of an investors investment selections as a portfolio (package of assets), with its own unique characteristics. Return: Why invest? Stated in simplest terms, investors wish to earn a return on their money. Cash has an opportunity cost: By holding cash, you forego the opportunity to earn a return on that cash. Furthermore, in an inflationary environment, the purchasing power of cash diminishes, with high rates of inflation bringing a relatively rapid decline in purchasing power. In investments it is critical to distinguish between an expected return (the anticipated return for some future period) and a realized return (the actual return over some past period). Investors invest for the future for the returns they expect to earn but when the investing period is over, they are left with their realized returns. What investors actually earn from their holdings may turn out to be more or less than what they expected to earn when they initiated the investment. This point is the essence of the investments process; Investors must always consider the risk involved in investing. Risk: Risk is explained theoretically as the fluctuation in returns from a security. A security that yields consistent returns over a period of time is termed as risk less

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security or risk free security . Risk is inherent in all walks of life. An investor cannot foresee the future definitely; hence, risk will always exist for an investor. Risk is in fact the watchword for all investors who enter capital markets. Investment risk can be an extraordinary stress for many investors. When the secondary market does not respond to rational expectations, the risk component of such markets is relatively high and most investors fail to recognize the real risk involved in the investment process. Risk aversion is the criteria commonly associated with many small investors in the secondary market. Many small investors look upon the market for a definite return and when their expectations are not met, the effect on the small investors morale is negative. Hence these investors prefer to lock up their funds in securities that would rather give them back their investment with small returns than those securities that yield high returns on an average but are subject to wild fluctuations. There are different types and therefore different definition of risk. Risk is defined as the uncertainty about the actual return that will earn on an investment. When one invest, expects some particular return, but there is a risk that he ends up with a different return when he terminates the investment. The more the difference between the expected and the actual the more is the risk. Thus the investment decision involves a trade-off between the two, return and risk. Factors influence risk. Traditionally, investors have talked about several factors causing risk such as business failure, market fluctuations, change in the interest rate inflation in the economy, fluctuations in exchange rates changes in the political situation etc. Based on the factors affecting the risk the risk can be understood in following manners Interest rate risk: The variability in a security return resulting from changes in the level of interest rates is referred to as interest rate risk. Such changes generally affect securities inversely, that is other things being equal, security price move inversely to interest rate. Market risk: The variability in returns resulting from fluctuations in overall market that is, the agree get stock market is referred to as market risk. Market risk includes a wide range of factors exogenous to securities them selves, like recession, wars, structural changes in the economy, and changes in consumer preference. The risk of going down with the market movement is known as market risk. Inflation risk: Inflation in the economy also influences the risk inherent in investment. It may also result in the return from investment not matching the rate of 20

increase in general price level (inflation). The change in the inflation rate also changes the consumption pattern and hence investment return carries an additional risk. This risk is related to interest rate risk, since interest rate generally rises as inflation increases, because lenders demands additional inflation premium to compensate for the loss of purchasing power. Business risk: The changes that take place in an industry and the environment causes risk for the company in earning the operational revenue creates business risk. For example the traditional telephone industry faces major changes today in the rapidly changing telecommunication industry and the mobile phones. When a company fails to earn through its operations due to changes in the business situations leading to erosion of capital, there by faces the business risk. Financial risk: The use of debt financing by the company to finance a larger proportion of assets causes larger variability in returns to the investors in the faces of different business situation. During prosperity the investors get higher return than the average return the company earns, but during distress investors faces possibility of vary low return or in the worst case erosion of capital which causes the financial risk. The larger the proportion of assets finance by debt (as opposed to equity) the larger the variability of returns thus lager the financial risk. Liquidity risk: An investment that can be bought or sold quickly without significant price concession is considered to be liquid. The more uncertainty about the time element and the price concession the greater the liquidity risk. The liquidity risk is the risk associated with the particular secondary market in which a security trades. Exchange rate risk: The change in the exchange rate causes a change in the value of foreign holdings, foreign trade, and the profitability of the firms, there by returns to the investors. The exchange rate risk is applicable mainly to the companies who operate oversees. The exchange rate risk is nothing but the variability in the return on security caused by currencies fluctuation. Political risk: Political risk also referred, as country risk is the risk caused due to change in government policies that affects business prospects there by return to the investors. Policy changes in the tax structure, concession and levy of duty to products, relaxation or tightening of foreign trade relations etc. carry a risk component that changes the return pattern of the business.

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TYPES OF RISK Modern investment analysis categorizes the traditional sources of risk identified previously as causing variability in returns into two general types: those that are pervasive in nature, such as market risk or interest rate risk, and those that are specific to a particular security issue, such as business or financial risk. Therefore, we must consider these two categories of total risk. The following discussion introduces these terms. Dividing total risk in to its two components, a general (market) component and a specific (issue) component, we have systematic risk and unsystematic risk which are additive: Total risk = general risk + specific risk = market risk + issuer risk = systematic risk + non systematic risk Systematic risk: Variability in a securities total return that is directly associated with overall moment in the general market or economy is called as systematic risk. This risk cannot be avoided or eliminated by diversifying the investment. Normally diversification eliminates a part of the total risk the left over after diversification is the non-diversifiable portion of the total risk or market risk. Virtually all securities have some systematic risk because systematic risk directly encompasses the interest rate, market and inflation risk. The investor cannot escape this part of the risk, because no matter how well he or she diversifies, the risk of the overall market cannot be avoided. If the stock market declines sharply, most stock will be adversely affected, if it rises strongly, most stocks will appreciate in value. Clearly mark risk is critical to all investors. Non-systematic risk: Variability in a security total return not related to overall market variability is called unsystematic (non market) risk. This risk is unique to a particular security and is associated with such factors as business, and financial risk, as well as liquidity risk. Although all securities tend to have some non systematic risk, it is generally connected with common stocks. Beta and its Significance in the Portfolio Beta is a measure which has been used for reducing risk or determining the risk and return for stocks and portfolios. A number of research studies have been made to give indications of beta coefficient for selection of stock. When beta is used significantly

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for stock selection it is to be compared with the market. The investor can construct his portfolio by drawing the relationship of beta coefficient with the prices prevailing in the market. When there is buoyancy in the market, then beta coefficient which are large can be selected. These betas would also carry with them a high risk but during the boom period, high risk is expected. These betas would also carry with them a high risk but during the boom period, high risk is expected to give a maximum of return. If the market is bear market and the prices are falling, then it is possible to sell short stocks which have high positive beta coefficient. The stocks which have a negative beta would withstand the tag in the prices in the market. For example, when the beta is + 1.0, the volatility which is relative to the market would indicate an average stock. But when the beta changes to +2.0, it is excluding the value which is provided by alpha, the stock would be estimated to show a return of 20% when the market return is forecasted at 10%. This is in the case of a rising market. But when the prices show a decline and the future is expected to provide a decline of 10%, then a beta which shows + 2.0 would show that it is providing a negative return of 20% if the stock is held by the investor for very long. But if the investor sells short stock, then he can plan to gain 20%. But if the beta is negatives 1.0, then there would be a gain of a positives 10%, i.e., (-1.0 x .10) Although betas help in selecting stock, care should be taken to select the stock with the beta approach because selection of portfolio with beta is followed only when the following assumptions are considered: (a) The market movement in positives and negatives directions haves to be carefully analyzed and (b) The past historical considerations of beta must be analyzed for future prediction of beta. If portfolios selection is not made by and accurate reading of the movement of markets, then the portfolios selection will be incorrect and will not determine the preferences of the investor. The market movements explain between 15 and 65% of the movement of the individual securities. The variability of returns is explained further between 75 and 95% in the measurement of betas. The technique of beta, therefore, although it is useful, has to be conducted with precision. Also, betas in order to be useful have to be predictive and cannot be upward looking. A well diversified portfolio is linked with securities with the market movement. But 23

the market movement can be considered only when a survey of fundamental factors is taken into consideration. The fundamental factors are the following: (a) the earning of a firm; (b) the movements of the market; (c) continuous valuation of stock; (d) survey of stock, whether it represents large or small firms, old and established and new firms; (e) growth of firms historically and (f) The capital structure of the firm. These factors are to be projected with the movements of the stock by assigning probabilities for the occurrence of the particular factors. There fundamental factors would also represent the changes in the returns of securities over the years, the variability in their structure of earnings and the kind of success that is made by each stock. When the stock is valued, a firm which has continuous high market valuation will be considered as a good stock. The small firm is risky or safe and the financial structure will be a means of finding out the kind of operations of a firm relating to its liquidity position and the coverage of fixed charges. Rosenberg found that these fundamental factors help in making and optimum portfolio. According to him, risks are not only systematic and unsystematic but the latter one can be also sub-divided as specific risk and extra market co-variance Specific risk which is a unique risk, is independent to particular firm. It comprises the risk and uncertainty of only one particular firm in isolation. The extra market co-variance is independent of the market and it shows a tendency of the stock to move together. It also shows the co-variance of a homogenous group of the finance group. It is in-between the systematic and specific risk. The specific risk covers about 50% of the total risk and the covariance and systematic risk together comprise the other half of 50%. While systematic risk covers all the firms, the extra market co-variance is in-between and covers one group classification of industries. A portfolio which is properly selected and is well diversified usually consists of 80-90% of the systematic risk out of the total risk involved in those securities.

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RISK RETURN PERFORMANCE OF SECURITIES

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Risk Analysis of each security is shown below:

Monthly Returns of ACC

20.00 10.00 0.00 Return -10.00 -20.00 -30.00 -40.00 Month & Year
Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Series1

Analysis: From the above table, the return arrived at is -1.69% and the risk is 13.39%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.006611 and the unsystematic risk is 0.01134. The beta value, the sensitivity of the security with respect to the market is 0.73. From the above chart, there is much volatility that can be observed from the period Jan 2007 to July 2009. When the recession hit in October 2008, it showed a downward trend and immediately reached the peak by December 2008. Bharti Airtel

Monthly Returns of Bharti Airtel

20.00 15.00 10.00 5.00 Return 0.00 -10.00 -15.00 -20.00 -25.00 Month & Year
Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

-5.00

Series1

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Analysis From the above table, the return arrived at is 0.013% and the risk is 8.845%. If an investor puts all his money in this security he gets a positive return. The systematic risk, the undiversifiable risk as per the calculations is 0.005242 and the unsystematic risk is 0.002582. The beta value, the sensitivity of the security with respect to the market is 0.65. From the above chart, it can be observed that the security is highly volatile. When the recession hit in October 2008, it showed a downward trend and regained its positive value. It reached its peak in the month of May. BHEL

Monthly Returns of BHEL

40.00 20.00 0.00 Return
Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

-20.00 -40.00 -60.00 -80.00

Series1

-100.00 Month & Year

Analysis From the above table, the return arrived at is -2.16% and the risk is 18.97%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.007550 and the unsystematic risk is 0.028436. The beta value, the sensitivity of the security with respect to the market is 0.78. From the above chart, there is not much volatility that can be observed from the period Jan 2007 to July 2009. We can see that BHEL is not affected by recession.

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Grasim
Monthly Returns of Grasim
40.00 20.00 0.00 Return -20.00 -40.00 -60.00 -80.00 Month & Year
Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Series1

Analysis From the above table, the return arrived at is -1.73% and the risk is 17.339%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.019391 and the unsystematic risk is 0.010674. The beta value, the sensitivity of the security with respect to the market is 1.25. From the above chart, there is not much volatility that can be observed from the period Jan 2007 to July 2009. Grasim is seriously hit by recession. Investors should not have traded during that period instead should adopt Buy and Hold strategy.

ONGC

ONGC Monthly Returns

40.00 30.00 20.00 10.00 0.00 -10.00 -20.00 -30.00 -40.00 -50.00 -60.00

Return

Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Series1

Month & Year

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Analysis From the above table, the return arrived at is -0.36% and the risk is 15.066%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.004320 and the unsystematic risk is 0.018379. The beta value, the sensitivity of the security with respect to the market is 0.59. From the above chart, it can be inferred that during the period Jan 2007 to July 2009, there was a steep decline in the returns in October 2008, which shows that ONGC is severely by the recession since it is volatile with respect to the world markets.

Infosys
Monthly Returns of Infosys
25.00 20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 -15.00 -20.00 -25.00 -30.00

Return

Series1

Analysis From the above table, the return arrived at is -0.02% and the risk is 10.738%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.004468 and the unsystematic risk is 0.007063. The beta value, the sensitivity of the security with respect to the market is 0.6. From the above chart, there is much volatility that can be observed from the period Jan 2007 to July 2009. The highest low during the period is observed only when the recession hit in October 2008, it showed a downward trend.

Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Month & Year

29

Maruti Suzuki
Monthly Returns of Maruti Suzuki
25.00 20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 -15.00 -20.00 -25.00 -30.00

Return

Series1

Analysis From the above table, the return arrived at is -1.49% and the risk is 10.321%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.002622 and the unsystematic risk is 0.008030. The beta value, the sensitivity of the security with respect to the market is 0.45. From the above chart, it can be observed that there was a rise before recession hit signalling that there would be a decline in the return. This is the period when the investor should have held the securities without indulging in the regular trading. Reliance Infrastructure

60.00 40.00 20.00 Return 0.00

Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Month & Year

Monthly Returns of Reliance Infrastructure

-20.00 -40.00 -60.00 -80.00

Series1

Month & Year

30

Analysis From the above table, the return arrived at is -0.42% and the risk is 25.27%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.052663 and the unsystematic risk is 0.011194. The beta value, the sensitivity of the security with respect to the market is 2.06, which is the highest of all the securities selected. From the above chart, there is much volatility that can be observed from the period Jan 2007 to July 2009. When the recession hit in October 2008, the return value decline and was low till December 2008. SBI
Monthly Returns of SBI
40.00 30.00 20.00 Return 10.00 0.00 -20.00 -30.00 -40.00 Month & Year
Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Series1

-10.00

Analysis From the above table, the return arrived at is -0.07% and the risk is 15.857%. If an investor puts all his money in this security he incurs a loss. The systematic risk as per the calculations is 0.017280 and the unsystematic risk is 0.007843. The beta value, the sensitivity of the security with respect to the market is 1.18; hence high volatility. From the above chart, there is much volatility that can be observed from the period Jan 2007 to July 2009. There is a double top and double bottom that is observed from the period April to August and when the recession hit, the return value declined but in the month of May it reached its peak, post June it dropped.

31

Sun Pharma

Monthly Returns of Sun Pharma

20.00 10.00 0.00 Return -10.00 -20.00 -30.00 -40.00 Month & Year
Fe b0 Ap 7 r- 0 Ju 7 n0 Au 7 g0 O 7 ct -0 De 7 c0 Fe 7 b0 Ap 8 r- 0 Ju 8 n0 Au 8 g0 O 8 ct -0 De 8 c0 Fe 8 b0 Ap 9 r- 0 Ju 9 n09

Series1

Analysis From the above table, the return arrived at is 0.04% and the risk is 9.251%. If an investor puts all his money in this security he gets a positive return. The systematic risk as per the calculations is 0.002741 and the unsystematic risk is 0.005815. The beta value, the sensitivity of the security with respect to the market is 0.47. From the above chart, we can infer that there is no much volatility from the period Jan 2007 to July 2009. When the recession hit in October 2008, it showed a downward trend and immediately regained its normal position by December 2008.

See Annexures: The calculation of returns and risks of the individual securities

32

RISK ANALYSIS OF 10 SECURITIES RETURN Unsys (%) RISK(%) Sys Risk Risk -1.69 0.013 -2.16 -1.73 13.396 8.845 18.97 17.339 15.066 10.321 10.738 25.274 15.857 9.251

COMPANY ACC Ltd Bharti Airtel BHEL Grasim ONGC Maruti Suzuki Infosys Reliance Infrastructure Ltd SBI Sun Pharma

SECTOR Cement Major Telecommunications Service Engineering Heavy Diversified

Beta

0.006611 0.011334 0.73 0.005242 0.002582 0.65 0.007550 0.028436 0.78 0.019391 0.010674 1.25 0.004320 0.018379 0.59 0.002622 0.008030 0.45 0.004468 0.007063 0.6 0.052663 0.011194 2.06 0.017280 0.007843 1.18 0.002741 0.005815 0.47

Oil Drilling And Exploration -0.36 Auto - Cars & Jeeps Computer Software Power Generation/Distribution Banks - Public Sector Pharmaceuticals -1.49 -0.02 -0.42 -0.07 0.04

SHAREHOLDER PATTERN

Companies ACC Ltd Bharti Airtel BHEL Grasim ONGC Maruti Suzuki Infosys Reliance Infra SBI Sun Pharma

Variance 0.01795 0.00782 0.03599 0.03006 0.02270 0.01065 0.01153 0.06386 0.02512 0.00856

Foreign Promoters 0.3 22 0 0 0 54 0 0 0 0

Indian Promoters Institutional 46 45 67 25 74 0 16 38 59 64 32 27 26 44 12 39 44 45 25 24

Non Institutional 21.2 5 6 21 13 6 21 17 12 12

Interpretation:

33

The shareholder pattern has an effect on the risk and volatility of the returns. The more is the shareholder ownership by the Institutional promoters, the more are the chances that they can sell them off at any point of time making such securities more risky. The best instance was when at the time of closure of their Balance sheets and at the same time recession hit, they sold off their investments, which largely affected our markets. It can be inferred from the above table that Bharti Airtel and Sun Pharma companies show less variance when compared to other companies. Their shareholder pattern is dominated by the Indian promoters with above 65%. Reliance Infrastructure shows the highest variance indicating high volatility because of dominance of the Institutional promoters, where the FIIs are also included.

34

PROTFOLIO PERFORMANCE OF SECURITIES Under Traditional Hypothesis

TRADITIONAL HYPOTHESIS:

35

The traditional hypothesis gives a normative approach to investors to make decisions to invest their wealth in assets or securities under risk. It implies that the investors should hold diversified portfolios instead of investing their entire wealth in a single or a few assets. If the securities are mindlessly selected and construct a portfolio, the unsystematic risk can be minimized or totally can be reduced. This can be well illustrated with the help of the 10 selected securities from BSE 30. PORTFOLIO PERFORMANCE OF 10 SECURITIES TRADITIONAL HYPOTHESIS Systematic Portfolios Returns Variance Portfolio Beta 1 2 3 4 5 6 7 8 9 10 -1.6900 0.017945 -0.1677 0.000090 -0.3839 0.000131 -0.5569 0.000184 -4.1916 0.000191 -4.3406 0.000117 -4.3426 0.000103 -4.3846 0.000171 -4.3916 0.000170 -4.3876 0.000139 0.73 0.6900 0.7193 0.8525 0.8000 0.7413 0.7222 0.8888 0.9119 0.876 Risk 0.0066 0.0059 0.0064 0.0090 0.0079 0.0068 0.0065 0.0098 0.0103 0.0095 Unsystematic Risk 0.0113 -0.0058 -0.0063 -0.0088 -0.0077 -0.0067 -0.0064 -0.0096 -0.0101 -0.0094

Interpretation: In the first portfolio, only ACC Ltd. Company is considered, where the variance is 0.017945 and the systematic risk is 0.0066 and unsystematic risk is 0.0113. It is risky to invest the entire wealth in one security. In the second portfolio, ACC and Bharti Airtel are included in the portfolio, where it can be observed that as the second security Bharti Airtel is added, the negative return i.e., the loss is decreased and variance has come down to 0.000090, which shows that as we keep on increasing the number of securities to the portfolio, the risk would be diversified, and an optimum portfolio return can be obtained.

36

Graphical Representation of Portfolio Returns and Risks

Interpretation: As per the Portfolio return graph, after the inclusion of ONGC to the portfolio, the portfolio return dropped down. Since the portfolio is constructed by taking the securities randomly for inclusion. The portfolio risk graph shows that as the securities are included in the portfolio, the risk can be diversified.

37

Performance of Portfolios pre and post crisis

During Pre-crisis, when the market sensed that the economic downturn in the US would have an effect our country, the returns of the various securities declined. The above graph shows the value of the returns of the 10 portfolios constructed.

Post crisis, it is observed that the market is revived leading to positive returns on all the portfolios.

38

RETURNS ON BUY AND HOLD STRATEGY

BUY AND HOLD STRATEGY

39

Buy and Hold strategy is usually adopted by long term investors. They put their wealth in the securities and leave it for a good number of years. They attend the Annual General Meetings of the Companies and check the performance of the companies regularly. This strategy can also be adopted by those who do not want to involve in trading when there is a signal that the market is going to be bad for a certain period. The economic downturn which had affected our markets and economy at large for the entire year of 2008 created a lot of volatility in the market. This could have been avoided by adopting this strategy. One can play safe and yield better returns when this strategy is adopted. Table showing the returns under Buy and Hold Strategy. SECURITIES ACC Bharti Airtel BHEL Grasim ONGC Infosys Maruti Suzuki Reliance Infrastructure SBI Sun Pharma Average RETURNS -0.122 0.058 -0.104 -0.067 0.100 -0.136 0.082 0.464 0.186 0.067 0.053

It can be inferred that if the securities are bought in Jan, 2007 and are sold in the month of June, 2009 the yields are as above. This strategy Bharti Airtel, ONGC, Maruti Suzuki, Reliance Infrastructure, SBI and Sun Pharma yielded positive returns as against those under regular trading. The highest return of all is obtained from Reliance Infrastructure. The average return that could be obtained under Buy and Hold Strategy is 0.053%.

40

PORTFOLIO PERFORMANCE OF SECURITIES Under Markowitz model

MARKOWITZ MODEL

41

Modern Portfolio theory proposes how rational investors will use diversification to optimize their portfolios. This models an assets return as a random variable, and models a portfolio as a weighted combination of assets so that the return of a portfolio is the weighted combination of the assets returns. The model assumes that investors are risk averse, meaning that given two assets that offer the same expected return, investors will prefer the less risky one. Thus, an investor will take on increased risk only if compensated by higher expected returns. Conversely, an investor who wants higher returns must accept more risk. The exact trade-off will differ by investor based in individual risk aversion characteristics. The implication is that a rational investor will not invest in a portfolio if a second portfolio exists with a more favourable risk-return profile i.e., if for that level of risk an alternative portfolio exists which has better expected returns. Under the model: Portfolio return is the proportion- weighted combination of the constituent assets returns. Portfolio volatility is a function of the correlation of the component assets. The change in volatility is non-linear as the weighting of the component assets changes. The below is the matrix showing the correlations between 10 securities

ACC Bharti Airtel BHEL Grasim ONGC Infosys Maruti Suzuki Reliance Infrastructure SBI Sun Pharma

ACC 1.00 0.52 0.37 0.73 0.52 0.18 0.63 0.48 0.62 0.18

Bharti 1.00 0.37 0.64 0.70 0.32 0.49 0.81 0.69 0.48

BHEL

Grasim

ONGC

Infosys

Maruti

Rel

SBI

Sun

1.00 0.43 0.51 0.21 0.40 0.44 0.31 0.09

1.00 0.72 0.27 0.70 0.70 0.65 0.49

1.00 0.16 0.59 0.74 0.66 0.68

1.00 0.34 0.32 0.11 0.22

1.00 0.55 0.41 0.27 1.00 0.81 0.45 1.00 0.38

1.00

42

Under the traditional hypothesis, the co variances between the securities are ignored. In reality there are industries and the companies which are affected by one anothers performances. Thus the correlations calculated in order to see the association among the 10 securities. From the above matrix, five companies having low correlation among them are taken. They are: 1. ACC 2. Bharti Airtel 3. Infosys 4. Reliance 5. Sun Pharma Equal weights are given to each of the security i.e., 20% each. The return obtained from the portfolio that is constructed is -0.00709. The risk calculated amounted to 0.0103. The portfolio return of 10 securities under the traditional hypothesis has been -0.0439 and the risk has been 0.0118. The principal amount that is invested could be gained back if the wealth is diversified as per the Markowitz theory.

43

LIMITATIONS AND RECOMMENDATIONS

44

LIMITATIONS

The period chosen for the study is from Jan 2007 to July 2009, which includes the economic downturn time and hence the study cannot be used to reflect the chosen portfolios performance during normal times.

The basis of assigning the weights to each of the securities in the portfolio is subjective. Equal weights have been given to the securities in the portfolio, due to which the variations in the portfolio return subject to changes in the weights have not been observed.

RECOMMENDATIONS For long term investors, it is recommended during recession period, to follow buy and hold strategy, which yielded better results As per the Markowirz model, the investors should include those securities which are negatively correlated or less correlated to each other so that the optimum returns are achieved and the risk is well diversified

45

ANNEXURES
Tables showing the calculations of Monthly security and market returns and risks TABLE I
ACC Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 1020.25 900.05 734.65 838.85 855.6 933.8 1059.95 1065.9 1194.9 1077.5 1089.45 1024.5 782.65 792.7 826.1 758.65 660.65 522.5 584.3 561.65 611.65 493.4 406.25 477.9 504.85 539.8 576.65 653 783 768.9 786 Mean Return Std Deviation Return (%) -13.35 -22.51 12.42 1.96 8.37 11.90 0.56 10.80 -10.90 1.10 -6.34 -30.90 1.27 4.04 -8.89 -14.83 -26.44 10.58 -4.03 8.17 -23.97 -21.45 14.99 5.34 6.47 6.39 11.69 16.60 -1.83 2.18 -1.69 -1.69 13.396 Market Return -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = -1.2, minimum return earned irrespective of the markets behaviour = .73, the sensitivity of ACC with respect to the market (Sensex)

46

TABLE 2
Bharti Airtel Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 707.5 718.75 763.2 812.05 847.8 835.95 903.45 879.9 941.2 1006.6 939.45 994.55 864.45 825.6 826.1 898.8 876.45 721.65 799.15 837.2 785.05 649 671.05 715.1 633.85 636.65 625.8 749.3 819.65 802.1 792.25 Return (%) 1.57 5.82 6.02 4.22 -1.42 7.47 -2.68 6.51 6.50 -7.15 5.54 -15.05 -4.71 0.06 8.09 -2.55 -21.45 9.70 4.54 -6.64 -20.96 3.29 6.16 -12.82 0.44 -1.73 16.48 8.58 -2.19 -1.24 0.01 0.013 8.845 Market Return -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

Return Std Deviation

As per the regression table, = .44, minimum return earned irrespective of the markets behaviour = .65, the sensitivity of ACC with respect to the market (Sensex)

47

TABLE 3
BHEL Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 2517.25 2176.8 2260.75 2487.25 1398.9 1538.25 1731.7 1889.15 2032.75 2613.35 2680.25 2584.25 2064.1 2282 2056.55 1897 1662.15 1380.6 1679.05 1706.55 1586 1281.6 1361.3 1362.4 1320.45 1396.3 1504.35 1651.75 2174.9 2204.35 2021.25 Mean Return Std Dev Return (%) -15.64 3.71 9.11 -77.80 9.06 11.17 8.33 7.06 22.22 2.50 -3.71 -25.20 9.55 -10.96 -8.41 -14.13 -20.39 17.77 1.61 -7.60 -23.75 5.85 0.08 -3.18 5.43 7.18 8.92 24.05 1.34 -9.06 -2.16 -2.16 18.97 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.14

As per the regression table, = -1.65, minimum return earned irrespective of the markets behaviour = .78, the sensitivity of ACC with respect to the market (Sensex)

48

TABLE 4
Grasim Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 2778.55 2212.6 2091.25 2442.35 2501.8 2637.95 2957.6 2935.6 3513.45 3704.05 3792.95 3651.6 2948.75 2888.45 2574.7 2402.75 2220.3 1846.45 1800.45 1937.45 1687.6 1026.25 889.25 1217.95 1197.3 1371.5 1576.8 1778.4 2105.95 2310.25 2418.8 Mean Return Std Dev Return (%) -25.58 -5.80 14.38 2.38 5.16 10.81 -0.75 16.45 5.15 2.34 -3.87 -23.84 -2.09 -12.19 -7.16 -8.22 -20.25 -2.55 7.07 -14.81 -64.44 -15.41 26.99 -1.72 12.70 13.02 11.34 15.55 8.84 4.49 -1.73 -1.73 17.339 Market Return -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = -0.9, minimum return earned irrespective of the markets behaviour = 1.25, the sensitivity of ACC with respect to the market (Sensex)

49

TABLE 5
ONGC Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 903.4 790.6 878.15 911.9 914.6 902.15 914 857.55 957.9 1247.9 1170.75 1236.5 988.4 1012.35 981.35 1033.4 864.3 814.7 996.05 1023.3 1035.55 669.8 695.35 667.65 658.2 691.15 779.7 865.5 1175.9 1067.1 1092.85 Mean Return Std Dev Return (%) -14.27 9.97 3.70 0.30 -1.38 1.30 -6.58 10.48 23.24 -6.59 5.32 -25.10 2.37 -3.16 5.04 -19.56 -6.09 18.21 2.66 1.18 -54.61 3.67 -4.15 -1.44 4.77 11.36 9.91 26.40 -10.20 2.36 -0.36 -0.36 15.066 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = -0.45, minimum return earned irrespective of the markets behaviour = 0.59, the sensitivity of ACC with respect to the market (Sensex)

50

TABLE 6
Infosys Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 2244.45 2078.35 2012.6 2049.35 1920.25 1929.2 1977.25 1855.05 1896.75 1839.1 1604.05 1768.4 1503.9 1546.85 1430.15 1753.75 1957.55 1734.75 1583.3 1748.5 1397.55 1381.65 1240.6 1117.85 1305.5 1231.3 1324.1 1507.3 1602 1776.9 1676.75 Mean Return Std Dev Return (%) -7.99 -3.27 1.79 -6.72 0.46 2.43 -6.59 2.20 -3.13 -14.65 9.29 -17.59 2.78 -8.16 18.45 10.41 -12.84 -9.57 9.45 -25.11 -1.15 -11.37 -10.98 14.37 -6.03 7.01 12.15 5.91 9.84 -5.97 -1.49 -1.49 10.321 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = -1.19, minimum return earned irrespective of the markets behaviour = 0.45, the sensitivity of ACC with respect to the market (Sensex)

51

TABLE 7
Maruti Suzuki Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 936.6 839.7 819.7 803.1 817.65 743.1 843.15 868.2 999.55 1073.55 1012.35 990.05 848.7 867.2 829.55 741.9 764.5 617.75 574.9 650.4 687.15 564.45 535.85 520.1 571 677.6 775.1 815.7 1021.55 1065.45 1097.05 Mean Return Std Dev Return (%) -11.54 -2.44 -2.07 1.78 -10.03 11.87 2.89 13.14 6.89 -6.05 -2.25 -16.65 2.13 -4.54 -11.81 2.96 -23.76 -7.45 11.61 5.35 -21.74 -5.34 -3.03 8.91 15.73 12.58 4.98 20.15 4.12 2.88 -0.02 -0.02 10.738 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = 0.37, minimum return earned irrespective of the markets behaviour = 0.6, the sensitivity of ACC with respect to the market (Sensex)

52

TABLE 8
Reliance Infrastructure Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 513.6 479.35 495.15 508.4 539.65 614.1 793.45 779.75 1205.5 1866.8 1738.1 2134.6 1984.1 1567.75 1251.15 1425.65 1230.75 784.8 965.15 991.15 790.3 456.75 502.55 579.6 582.3 490.6 515.35 695.2 1276.85 1197.5 1101 Mean Return Std Dev Return (%) -7.15 3.19 2.61 5.79 12.12 22.60 -1.76 35.32 35.42 -7.40 18.57 -7.59 -26.56 -25.30 12.24 -15.84 -56.82 18.69 2.62 -25.41 -73.03 9.11 13.29 0.46 -18.69 4.80 25.87 45.55 -6.63 -8.76 -0.42 -0.42 25.274 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = 0.94, minimum return earned irrespective of the markets behaviour = 2.06, the sensitivity of ACC with respect to the market (Sensex)

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TABLE 9
SBI Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 1138.05 1039.15 992.9 1105.25 1352.4 1525.3 1624.5 1599.5 1950.7 2068.15 2300.3 2371 2162.25 2109.7 1598.85 1776.35 1443.35 1111.45 1414.75 1403.6 1465.65 1109.5 1086.85 1288.25 1152.2 1027.1 1066.55 1277.7 1869.1 1742.05 1601.95 Mean Return Std Dev Return (%) -9.52 -4.66 10.17 18.27 11.34 6.11 -1.56 18.00 5.68 10.09 2.98 -9.65 -2.49 -31.95 9.99 -23.07 -29.86 21.44 -0.79 4.23 -32.10 -2.08 15.63 -11.81 -12.18 3.70 16.53 31.64 -7.29 -8.75 -0.07 -0.07 15.857 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = 0.72, minimum return earned irrespective of the markets behaviour = 1.18, the sensitivity of ACC with respect to the market (Sensex)

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TABLE 10
Sun Pharma Month Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Share Price 1027.75 927.55 1054 1026.95 1108.3 1022.1 930.5 931.05 965.5 1054.2 1102.5 1222.05 1138.45 1225.9 1231.4 1449.2 1402.9 1392.55 1410.1 1475.75 1467.9 1122.9 1080.2 1064.95 1073.45 1014.45 1112.35 1275.25 1209.7 1090.95 1169.6 Mean Return Std Dev Return (%) -10.80 12.00 -2.63 7.34 -8.43 -9.84 0.06 3.57 8.41 4.38 9.78 -7.34 7.13 0.45 15.03 -3.30 -0.74 1.24 4.45 -0.53 -30.72 -3.95 -1.43 0.79 -5.82 8.80 12.77 -5.42 -10.89 6.72 0.04 0.04 9.251 Market Return(%) -8.91 1.03 5.77 4.62 0.72 5.79 -1.52 11.41 12.84 -2.45 4.55 -14.95 -0.40 -12.36 9.50 -5.31 -21.94 6.23 1.43 -13.25 -31.39 -7.65 5.75 -2.37 -5.99 8.41 14.86 22.03 -0.91 -5.35 -0.66 -0.66 11.138

As per the regression table, = 0.34, minimum return earned irrespective of the markets behaviour = 0.47, the sensitivity of ACC with respect to the market (Sensex)

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REFERENCES

www.investopidi.com www.bseindia.com www.nseindia.com www.capitaline.com www.investsmartonline.com www.yahoofinance.com Guidelines issued by SEBI Information provided by IL&FS

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