INVESTMENT PERFOMANCE OF SELECTED STOCKS TRADED IN NSE

PROJECT REPORT Submitted by

SRIDHAR K Register No: 098001125050

In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT in

SRI RAMAKRISHNA INSTITUTE OF TECHNOLOGY COIMBATORE - 641010

JUNE 2011

SRI RAMAKRISHNA INSTITUTE OF TECHNOLOGY Coimbatore - 10

DEPARTMENT OF MANAGEMENT
PROJECT WORK JUNE 2011

This is to certify that the project entitled

INVESTMENT PERFORMANCE OF SELECTED STOCKS TRADED IN NSE

is the bonafide record of project work done by SRIDHAR K Register No: 98001125050
of Master of Business Administration during the year 2010-2011.

__________________ Mrs.D.Sangeetha (Project guide)

____________________ Dr.R.Rajendran (Head of the Department)

Submitted for the Project Viva-Voce examination held on _____________

_________________ Internal Examiner

___________________ External Examiner

DECLARATION

I affirm that the project work titled INVESTMENT PERFORMANCE OF SELECTED STOCKS TRADED IN NSE being submitted in partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me. It has not formed the part of any other project work submitted for award of any degree or diploma, either in this or any other University.

--------------------------------SRIDHAR K Register No: 098001125050

I certify that the declaration made above by the candidate is true.

Signature of the Guide

------------------------------Mrs.D.SANGEETHA Assistant Professor

ACKNOWLEDGEMENT

I would like to take this opportunity to express my sincere gratitude to all those who have helped me throughout this final year project. It gives me immense pleasure to acknowledge all those who have rendered encouragement and support for the successful completion of this work. I am highly indebted and grateful to Dr. R. JOSEPH XAVIER, Principal of Sri Ramakrishna Institute of Technology, for his encouragement given to me in carrying out the Institutional Training. I wish to acknowledge my deep sense of gratitude to Dr.R.RAJENDRAN, Head of the Department, Sri Ramakrishna Institute of Technology for giving this opportunity to complete this project in a good atmosphere. I express my heartfelt thanks to my respected guide Mrs.D.SANGEETHA, Assistant Professor, for her constant encouragement and support during the entire project work. I also extend my sincere gratitude to Mr.P.BALAMUTHU, Branch Manager, NBSL, Karur, whose advice and guidance helped me in the successful completion of this project. Sincere gratitude and thanks to God ,my family and friends who has been my guiding light and constant protector in all that we have done and making things possible for me.

SRIDHAR.K

Register No: 098001125050

CONTENT CHAPTER Abstract List of tables List of Charts PARTICULAR Pg.No vii viii x

1.

Introduction 1.1 About the Study 1.2 About the Industry 1.3 About the Company 1.4 Review of Literature 1 7 14 17

2.

Main Theme of the Project 2.1 Objective of the Study 2.2 Scope and Limitations 2.3 Methodology 19 19 20

3.

Analysis & Interpretation

21

4.

Findings, Recommendations and Conclusion 4.1 Findings 4.2 Recommendations 4.3 Conclusion 55 60 61

Appendix Bibliography

62 64

ABSTRACT

This project work was undertaken with a view to study and analyzes the Investment performance of selected stock traded in National Stock Exchange with reference to Northeast Broking Services Limited, Karur. The main objective of the study is to identify the investable companies stocks for higher return than the guaranteed market return during the months of March, April and May 2011. This study is used to anticipate the Risk and Return for the stocks of selective companies with their market price. The Risk and Return for the selected stock of the companies were calculated using the Alpha, Beta, and Variance analysis. The choice of the investment pattern of the investor were identified through the Risk and Return value of the different sectors like Automobile, cement, Information Technology, Pharmaceuticals and Power sectors that are listed in the National Stock Exchange.

LIST OF TABLES

Table No 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5 3.4.1

Table Title Calculation of Beta for TVS Motors Beta and Alpha Value of Automobile sector Beta and Alpha Value of Cement Sector Beta and Alpha Value of IT Sector Beta and Alpha Value of Pharmaceutical Sector Beta and Alpha Value of Power Sector Expected Market Return of Automobile sector Expected Market Return of Cement Sector Expected Market Return of IT Sector Expected Market Return of Pharmaceutical Sector Expected Market Return of Power Sector Variance of Automobile sector Variance of Cement Sector Variance of IT Sector Variance of Pharmaceutical Sector Variance of Power Sector Systematic & Unsystematic Risk Value of Automobile sector

Pg.No 22 25 26 27 28 29 31 32 33 34 35 37 38 39 40 41 42

3.4.2 3.4.3 3.4.4 3.4.5 3.5.1 3.5.2 3.5.3 3.5.4 3.5.5

Systematic & Unsystematic Risk Value of Cement Sector Systematic & Unsystematic Risk Value of IT Sector Systematic & Unsystematic Risk Value of Pharmaceutical Sector Systematic & Unsystematic Risk Value of Power Sector Risk and Return Values of Automobile sector Risk and Return Values of Cement Sector Risk and Return Values of IT Sector Risk and Return Values of Pharmaceutical Sector Risk and Return Values of Power Sector

43 43 44 44 45 46 47 48 49

LIST OF CHARTS

Chart No 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5

Chart Title Beta and Alpha Value of Automobile sector Beta and Alpha Value of Cement Sector Beta and Alpha Value of IT Sector Beta and Alpha Value of Pharmaceutical Sector Beta and Alpha Value of Power Sector Expected Market Return of Automobile sector Expected Market Return of Cement Sector Expected Market Return of IT Sector Expected Market Return of Pharmaceutical Sector Expected Market Return of Power Sector Variance of Automobile sector Variance of Cement Sector Variance of IT Sector Variance of Pharmaceutical Sector Variance of Power Sector

Pg.No 25 26 27 28 29 31 32 33 34 35 37 38 39 40 41

Chapter - 1 INTRODUCTION

1.1 ABOUT THE STUDY 1.1.1 INVESTMENT PERFORMANCE The capital market plays a vital role in promoting economic growth through the mobilization of long term savings and the savings get investment in the economy for production purpose. India has a well developed capital market system, by far one of the best in the developing world. The capital market in India is a well integrated structured and its components include stock exchanges, development banks, investments trust and unit trust, Insurance Corporation and provident fund organization. It caters to varied needs for capital of agricultural, industrial and trading sector of economy. In an economy all the savings neither nor invested in the stock market. Certain portion of the money is invested as bank deposits. When people invest money directly in the stock market they have to bear the risk involved. Investing in stock market may you more return than the risk less return, but it also involves high risk. When money is deposited in bank, the bank takes the responsibility of the risk involves. Bank invested in comp0anies after detailed analysis and charge higher interest. The bank gives guaranteed return to the investors. Since banks take the responsibility of risk, it charges high interest rate to the companies and pays less interest to deposits.

The present study shows the company scripts listed in NSE. They are classified as five sectors: 1. Automobile Sector 2. Cement Sector 3. Information Technology Sector 4. Pharmaceutical Sector 5. Power Sector Under each Sector five companies have been selected for the study. To evaluate the performance of the fund, different tools like Beta, Alpha, and Variance are used. Beta The beta factor describes the movement in a stocks or a portfolios returns in relation to that of the market return. For all practical purposes, the market returns are measured by the returns on the index, since the index is a good reflector of the market. The stocks with more than 1 beta value are considered to be risky. Beta = +1.0 One percent changes in market index return causes exactly one percent change in the stock return. It indicates that the stock moves in random with the market. Beta = +0.5 One percent changes in market index return causes 0.5 percent changes in the stock return. The stock is less volatile compared to the market. Beta = + 2.0 One percent changes in market index return causes 2 percent changes in the stock return. The stock is more volatile. Negative beta value indicated that the stock return moves in the opposite direction.

The formula for the Beta N xy (x) (y) Beta = N x2 (x) 2 Where, x = market return, y = stock return, n = no. of days

Alpha A positive value of alpha is healthy sign. Positive alpha values would yield profitable return. According, in a well diversified portfolio the average value of all stocks turns out to be zero. The formula for the alpha A here x y (x) arket return beta value y average value of stock return

1.1.2 THEORY OF INVESTMENT Risk Analysis

Risk in holding securities is generally associated with the possibility that realized returns will be less than were expected. The source of such disappointed is the failure of dividends and the securities price to materialize as expected. Forces that contribute to variations in (Return Price) or (Dividend Constitute elements of risk). Some influence are external to the firm that cannot be controlled and affect large number of securities risk. Other influences are internal to the firm and are controllable to a large degree. The force that is not controllable and affects the price of all securities is called systematic risk. Systematic Risk Systematic risk refers to that portion of total variability in return caused by factors affecting the prices of all securities risk. Their effect is to cause prices of all securities risk. Their effect is to cause prices of nearly-individuals common stocks to move together in the same manner. Market Risk Variability in return on most common stocks that are due to basic changes in investor expectations is referred to as market risk. Market risk is caused by investor reaction to tangible events. Expectations of lower corporate profits in general might cause the larger body of common stocks to fall in price. Intangible events are related to market psychology. Market risk is usually touched off by a reaction of real events, but the emotional instability of investors acting collectively leads to a snow balling over reaction.

Interest-Rate Risk Interest-rate refers to the uncertainty of future market values and of the size of future income, caused by fluctuations in the general level of interest rates. Suppose the

Reserve Bank of India increases the interest rate, than it will send negative signal to stock market. Purchasing power Risk Purchasing power risk is the uncertainty of the purchasing power of the amounts to be received. In more every day terms, purchasing-power risk refers to the impact of inflation or deflation on an investment. Unsystematic Risk Unsystematic risk is the proportion of total risk that is unique to a firm or industry. Factors such as management capability, consumer preferences, and labour strikes cause systematic variability of returns in a firm. Unsystematic factors are largely independent of factors affect one firm must be examined for each firm. Financial Risk Financial risk is associated with the way in which a company finaces its activities. We usually gauge financial risk by looking at the capital structure of a firm. The presence of borrowed money of debt in the capital structures creates fixed payments in the form of interest that must be sustained by the firm. With no debt financing has no financial risk. Environmental Analysis Environmental analysis is the first stage in the security analysis process. It centers on tow important activities. 1) Estimating the long-run economic growth in the economy and 2) Predicating the turning points in the business cycle. Returns on most securities closely follow the performance of the general economy. Interest rate movements are tied to the growth of the economy. High interest rates normally occur during boom periods, and low interest rates are more often associated with low or negative rages of economic growth.

The level of market interest rates is a primary determinant of bond prices for any given quality bond. To analyze the growth factors for a specific common stock, investors need to go beyond the general economic outlook and focus on industry and markets segments that have growth rats differing form overall economy. Investors often examine post growth rates for several of the more important economic variables to arrive of reasonable expectations regarding future stock market growth rates. An investigation of economic growth generally includes at a minimum of the following three factors. 1. The expected changes in the current population and its age distribution. 2. The role of the government in fostering economic growth and 3. The behavior of corporations with regard to expenditures on plants, equipment, and inventories. Components of GNP Investors interested in forecasting future economic growth need to look at major components of GNP (Gross National Product). GNP figures show performance of an economy. These are 1) Personal consumption expenditures. 2) Gross private domestic investment. 3) Government purchase of goods and services and 4) Net exports of goods and services. Influences of GNP Gross National Product is influenced in three basic ways. Two of these, fiscal and monetary policies, involve government action or intervention in various reforms. The

third one is changes in population, labour force and productivity, all these factors are important for investor to consider. Influences of World Economy Despite like good economic growth and a favorable investment environment, caution needs to be exercised. Circumstances exist which have the potential to alter this growth picture. International trade imbalances could bring about a series of political and economic changes that would affect the level and composition of domestic activities. Measurement of Risk Understanding the nature of the risk is not adequate unless the investor is capable of expressing it in some quantitative terms, expressing the risk of stock in quantitative terms makes it comparable with the other stocks or market.

1.2 ABOUT THE INDUSTRY 1.2.1 STOCK MARKET India has a well developed capital market system. The capital market has an important role in promoting economic growth through the mobilization of long term savings and the savings get invested in the economy for the production purpose. The capital market is the market for securities, where companies and the government can raise long term funds. The capital market in India is a well integrated structure and its component includes stock exchanges, development banks, investment trust and unit trust, insurance corporations and provident fund organizations. The capital market includes the stock market and the bond market. The capital consists of the primary market, where new issues are distributed to investors and the secondary market, where existing securities are traded.

Investing in stock market may give more return than the risk less return but it also involves high risk. In an economy all the savings are not invested in the stock market. Certain portion of the money is invested as bank deposits when people invests money directly in the stock market they have to bear the risk. The major functions performed by a capital markets are:

Mobilization of financial resources on a nationwide scale. Securing the foreign capital for rapid economic growth. Effective allocation of the mobilized financial resources. The stock market and other capital market allow investors to buy and sell stock

continuously. The stock prices provide instant feedback to corporate executives about how investors judge their performance Stock values reflect investor reaction to government policy as well. If the government adopts policies that investors believe will hurt the economy and company profits the market declines; if investors believe policies will help the economy the market.

1.2.2 STOCK MARKET SCENARIO DURING MARCH - MAY2011 This study includes automobiles, cement, information technology, power, pharmaceuticals sectors as the prime sectors for analyzing the risk and return of the companies listed in NSE. Automobile sector The Indian automotive industry has witnessed an unprecedented boom in recent years, owing to the improvement in living standards of the middle class, and a significant increase in their disposable incomes. The size of the Indian automotive industry is estimated between US$ 120.09 billion and US$ 155.2 billion by 2016. The industry is expected to touch the 10 million mark, to which the commercial vehicle segment will be a major contributor. Industry experts project the Indian automobile sales growth at a compounded annual growth rate (CAGR) of 10.5 per cent 14009million vehicles by 2011 The government spending on infrastructure in roads and airports and higher GDP growth in the future will benefit the auto sector in general. In the 2-wheeler segment, motorcycles are expected to witness a flurry of new model launches. Though the market size is expected to grow by 10% to 12%, competitive pressure could keep prices and margins under control. TVS, Honda and Hero Honda are poised to benefit from higher demand for un-geared scooters in the urban and rural markets. With an estimated 40% of CVs plying on the roads 10 years old, demand for HCVs is expected to grow by 7% to 8% over the long term. While the industry is going through cyclical hiccups currently, we expect this factor to weaken in the future on account of strong structural tailwinds. The privatization of select state transport undertakings bodes well for the bus segment.

Cement sector India is the worlds second largest producer of cement The recent boom in infrastructure and the housing market has only boosted the cement industry. Adding to that an increasing global demand and a flurry of activity in infrastructure projects highways roads, bridges, ports and houses has sparked off a spate of mergers and acquisitions in the sector. The cement industry is likely to maintain its growth momentum and continue growing at around 8% to 9% in the medium to long term. Government initiatives in the infrastructure sector and the housing sector are likely to be the main growth drivers. During the first half of FY11, a series of huge capacity expansions (through the brown field or Greenfield route) against a corresponding poor off take in cement demand due to subdued construction activity created excess supply, thus putting downward pressure on realizations. This has been coupled with significant rises in input costs, especially prices of coal and petroleum products. As a result, both the top line and bottom-line have been badly hit. Though an excess supply scenario may prevail for some time to come, the worst seems to be over following the good monsoon witnessed across most parts of the country. Good agricultural income will support demand for the commodity despite slowdown in the real estate sector. The importance of the housing sector in cement demand can be gauged from the fact that it consumes almost 60%-70% of the country's cement. If this support wanes, it would impact the growth in consumption of cement, leading to demand supply mismatch.

Information technology sector The Indian information technology sector has been instrumental in driving the nations economy onto the rapid growth curve According to the Nasscom-Deloitte study, the IT industrys contribution to the countrys GDP has increased to a share of 8 2 per cent in 2010 as against 5.1 per cent in 2008. Indias IT growth in the world is primarily dominated by IT software and services such as custom Application Development and Maintenance (CADM), system Integration, IT consulting, Application Management, Infrastructure Management services, software testing, service-oriented architecture and web services. The global IT services market is expected to grow by 4.2% in 2011 as companies coming out of recession harness the need for IT to create competitive advantage. With the government planning to invest Rs 400 billion on better technology enabled delivery mechanisms the addressable market for technology and business outsourcing services in India is expected to expand five-fold by 2020 to US$ 90-100 billion. The integration of IT-BPO contracts is expected to become more common, as clients look out for end-to-end service providers. Companies like Infosys, TCS, Wipro, Mahindra Satyam, HCL Technologies and Emphasis, all of which are also into BPO, will benefit from this trend. Billing rates will remain stressed in short term; companies are expected to preserve their margins through effective cost containment. Lessons learnt during the crisis can benefit in the long run. Rupee's volatility against the US dollar and other major currencies is expected to remain a major concern for Indian IT companies.

Pharmaceuticals sector The Indian pharmaceutical sector is witnessing tremendous growth with the contract research and clinical trials businesses taking wings, and the new patent regime opening new avenues for players in the country. The pharmaceutical companies in India have carved a place for themselves globally-consistently striving to innovate and make healthcare affordable across all sections of society, with a focus on people who are most deprived of it, causing the industry to grow faster and at the same time giving people longer and healthier lives. The Indian pharmaceutical industry ranks 4th in terms of volume (with an 8 per cent share in global sales) globally. In terms of value it ranks 13th (with a share of 3 per cent in global sales) and produces 20-24 per cent of the worlds generic drugs (in terms of value) The Indian pharmaceutical industry ranks 17th with respect to exports value of bulk actives and dosage. The product patents regime heralds an era of innovation and research resulting in the launch of new patented product launches. In the longer run, domestic companies would face fresh competition from MNCs, as they would make aggressive new launches. However, the latter would most likely be subject to price negotiation Drugs having estimated sales of over US$ 108 billion are expected to go off patent between CY09 and CY13. With the governments in the developed markets looking to cut down healthcare costs by facilitating a speedy introduction of generic drugs into the market, domestic pharmacy companies will stand to benefit. However, despite this huge promise, intense competition and consequent price erosion would continue to remain a cause for concern. The life style segments such as cardiovascular, anti-diabetes and anti-depressants will continue to be lucrative and fast growing owing to increased urbanization and

change in lifestyles. Growth in domestic sales in the future will depend on the ability of companies to align their product portfolio towards the chronic segment. Contract manufacturing and research (CRAMS) is expected to gain momentum going forward. India's competitive strengths in research services include Englishlanguage competency, availability of low cost skilled doctors and scientists, large patient population with diverse disease characteristics and adherence to international quality standards. As for contract manufacturing, both global innovators and generic majors are finding it profitable to outsource production. Although there has been a considerable slowdown in this area, the scenario is expected to improve going forward as the pressure to prune costs increases.

Power sector The power sector has been in the forefront of lightning up the India growth story. As the economy continues to surge ahead, electrification and electricity services have been expanding concomitantly to support the growth rate. Today, the Indian power system with its extensive regional grids-fast maturing in to an integrated national grid and its millions of kilometers of transmission and distribution lines crises-crossing the country, are truly symbolic of the successes of Indias economic growth Indias electricity generation capacity has been increasing

continuously to meet the needs of the rapidly growing economic activity of the country. Source wise, thermal power plants accounted for an overwhelming 64.6 per cent of the total installed capacity. Within this group, coal, gas and oil based thermal power plants accounted for 53.3 per cent, 10.5 per and 0.9 per cent, respectively. Recognizing that electricity is one of the key drivers for rapid economic growth and poverty alleviation, the industry has set itself the target of providing access to all households over the next few years. As per government reports, about 44% of the

households did not have access to electricity. Hence, meeting the target of providing universal access is a daunting task requiring significant addition to generation capacity and expansion of the transmission and distribution network. Restoration of the financial health of SEBs and improvement in their operating performance continue to remain a critical issue in the power sector. On an overall basis, power distribution has been loss-making business in India. But with the privatization coming in, the investment in transmission and distribution networking is expected to improve

1.3 ABOUT THE COMPANY 1.3.1 NORTHEAST BROKING SERVICES LIMITED Mission vision: Our aim is to provide you with a reliable, secure, fast and most importantly cost effective stock broking and demat services to enable you to gain better returns on your investment. We wish to work together with you to maximize your assets and secure your future. Integrity: a company honoring commitment with highest ethical and business practices. Team work: Attaining goals collectively and collaboratively. Meritocracy: Performance gets differentiated, recognized and rewarded in a political environment. Passion & Attitude: High energy and self motivated with a Do It attitude amnd entrepreneurial spirit. Excellence in Execution: Time bound results within the framework of the companys value system

Overview Northeast Broking Services Ltd, founded in 1995, is one of the largest Investment companies based in Andhra Pradesh, with 75 Professionals, 150 support staff and extensive network in Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra, Tamilnadu and rapidly entering into all over India. Northeast is a premier broking, trading and clearing member of BSE CASH AND F&O, NSE CASH, NSE CURRANCY SEGMENT AND F&O, and HSE and as well as the two leading commodity exchanges in the country NCDEX and MCX. And it is also registered as a Depository Participant (DP) with NSDL and CDSL. With nearly 10 years in business, Northeast is known for its financial strength and stability, superior customer service, and continued operation excellence. Product and services Northeast offers its clients most competitive brokerage with wide choice of products and services Stock Broking: Northeast offers trading in equities in NSE and BSE cash market segment. Northeast provides offline facilities like excellent trading atmosphere, individual terminal and instant execution and confirmation. Derivatives Broking: Northeast provides facility to trade in futures and options in NSE F&O and BSE F&O market. Our efficient risk management takes adequate care and precaution in monitoring the margin positions of the clients. Commodities Broking: You can buy and sell commodities in both the leading MCX and NCDEX commodity exchanges through our subsidiary Northeast commodities private limited. Mutual Funds: Northeast offers a wealth of mutual fund choices along with the competitive advice to help you invest wisely.

Depository Services: Northeast as a Depository participant of NSDL and CDSL offers effective demat services at all times, with economic fee structure for Individuals, traders and sub brokers. IPOs: Northeast enables you to invest prudently in the prospective and lucrative public issues. Our research team would guide you to choose appropriate IPO that suit your objective. Internet Trading: A new value added product from Northeast designed for Traders and Investors enabling to operate from any location, by using the state of art of internet trading by logging on to www.northeastltd.com. Research and Advisory Service: Northeast has well qualified and experienced research team, who would constantly keep informing the Investors with wise investment decisions. The information would be provided free of cost to our clients, who can access the information using the user name and password that is given to them

1.4 Review of literature Giewosz. G (1996) describes the use of accounting and other information in the share investment decision process of an institutional investor. The focus is on qualitative data, as revealed in the report as in the directors speech. Rather than on qualitative data. He has concluded that the significance of qualitative data as an information source to serving in a confirmatory role. Furthermore, rather than a source of information the annual report also acts as a stimulus for identifying specific questions. Warner J.B and Wruchk K.H (1998) re-iterate the influence of management change on stock prices. The scrutiny of management reputation should consider whether the management is strong, growth oriented, professional, the nature of its goal and principles and so on the past behavior pattern of management actions are a food clue to assess these qualities of the management. Each company would have faced adverse situations at one time or the other. A strong, professional team would have faced the adversity better. The market position of the company should be analyzed in terms of the product or service that it gives or provides to the community The companys goals and values will be revealed through an analysis of the image the these products and service carry to the customer. Good customer reputation automatically implies that the company is doing also. Malkiel and Cragg (1998) studied the effect of historical growth of earnings dividend payout ratio and the stocks rate of return relative to the market in determining P/E earnings growth was found to have a positive effect on the P/E the closer a stocks return followed that of the market; the more negative the P/E effect. The dividend payout effect was not clear in some years, the higher the payout the higher the P/E, but this was not true for all years.

Bernard V and Stober T (1991) have reported empirical evidence on the use of these statements in predicting stock market returns. These performance indicators are also linked to the shares through ratio analysis to evaluate performance for investment purposes. The important measures are earnings per share, dividend per share, yield pm share, piece earnings multiples and so on. Earnings per share are the net profit divided by the total number of shares. Dividing the dividend distributed by the total number of shares. The actual earnings per share paid to the investor are arrived at through this ratio. Yield on shares (Yield) is dividend per share divided by market price per share. This is a measure of return on shares in terms of capital appreciation. Price earrings ratio(P/E) is defined as the closing market price of the share divided by the reported earnings per share for the latest period. Low P/E s is typically associated with low earnings growth and cyclical businesses, and high P/E ratio is associated with the high earnings growth and non cyclical businesses. White beck and kisor (2001) studied a number of stocks over the same time span. They speculated the difference in P/E ratios between stocks could be explained by (1) projected earnings growth, (2) expected dividend payout and (3) the variation in the rate of earnings growth, or growth risk. They applied their statistical technique to a cross section of 135 stocks to explain difference in individual P/E ratios. They concluded that P/E is an increasing function of growth and payout and inversely related to the variation in the growth rate. Bower and Bower (2002) used the same approach for a different time period with another sample of firms. They used earnings growth and payout as variables but dividend risk into subcomponents including marketability of the stock, its price variability and its conformity with the market.

Chapter 2 MAIN THEME OF THE PROJECT 2.1 Objective of the study 2.1.1 Primary objective To identify investable companies stocks for higher returns than the guaranteed market return. 2.1.2 Secondary objective To assess the risk associated in the selected stocks for investment. 2.2 Scope of the study The present study shows the company scripts listed in NSE. They are classified as five sectors, under each sector five companies have been selected for the study. The study may be an effective tool for selecting the best companies for the investors to invest their funds for higher and safe returns. 2.2.1 Need of the study To guide the investors in selecting the high return companies for their investment To know the performance of selected companies. To got knowledge about the practical functioning of the stock market. 2.2.2 Limitations of the study

The present performance of the funds studied may not be sustained in future. The figure taken from the financial statement for analysis is historical in nature. The study is confined to a short period of three months for five sectors. This would not give the exact performance of the securities

2.3 Methodology Research Purpose The research purpose revealed that this study was descriptive in nature. The study aimed in assessing the market return of selected stocks of companies listed among the automobiles, cement, information technology, power, pharmaceutical sectors. Research design The researcher has undertaken a descriptive type of research. In this design the researcher has no control over the variables. The researcher can only report what has happened earlier or what exists Data collection The collection of data is based on primary and secondary method. The primary data has been collected through discussions with the officials of the share trading institutions. Sample size is twenty five company form five sectors. Period of Study The daily NSE scripts price for the period of 18th march 2011 to 18th May 2011 has been used. Sampling method Non probability convenience sampling method is adopted. Tools for analysis

Beta Alpha Variance

Chapter - 3 ANALYSIS AND INTERPRETATION

Methodology of calculating risk: Share price movements of selected companies, traded in national stock exchange during the year 18th March 2011 to 18th May 2011 were taken for calculating risk and return. Total of five sectors, a total of twenty five companies were selected for the study. The five sectors are automobile, cement, information technology, pharmaceuticals and power sector. Share price movements for Three months trading were taken for each company.

3.1 Calculation of Alpha and Beta First, the value of beta is calculated for every company by applying the formula

N xy (x) (y) Beta = N x2 (x) 2

Where, x = market return, y = stock return, N = no. of days Let us take the example of the company TVS Motors

Table 3.1.1 Calculation of Beta for TVS Motors

Date 17-Mar-11 18-Mar-11 21-Mar-11 22-Mar-11 23-Mar-11 24-Mar-11 25-Mar-11 28-Mar-11 29-Mar-11 30-Mar-11 31-Mar-11 1-Apr-11 ............ 27-Apr-11 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 sum Average

NSE Index 5446.65 5373.7 5364.75 5413.85 5480.25 5522.4 5654.25 5687.25 5736.35 5787.65 5833.75 5826.05 ............ 5833.9 5785.45 5749.5 5701.3 5565.25 5537.15 5459.85 5551.45 5551.1 5541.25 5565.05 5486.15 5544.75 5499 5438.95 5420.6

Share Price 58.5 57.35 56.5 55.65 55.75 57.55 58 59.95 58.55 59.05 59.85 61.8 ............ 60.2 59.75 56.35 56.5 55.4 53.3 51.45 55.05 54.2 53.4 53.8 52.8 54.1 54.2 53.8 52.35

Market Return(X) -1.33936 -0.16655 0.915234 1.226484 0.769125 2.387549 0.583632 0.863335 0.894297 0.796524 -0.13199 ............ -0.58789 -0.83049 -0.62139 -0.83833 -2.3863 -0.50492 -1.39603 1.677702 -0.0063 -0.17744 0.429506 -1.41778 1.068144 -0.825104 -1.09201 -0.337381 -0.237349 -0.005789

Stock Return(Y) -1.96581 -1.48213 -1.50442 0.179695 3.2287 0.781929 3.362069 -2.33528 0.853971 1.354784 3.258145 ............ -1.3923 -0.74751 -5.69038 0.266193 -1.9469 -3.79061 -3.47092 6.997085 -1.54405 -1.47601 0.749064 -1.85874 2.462121 0.184884 -0.738007 -0.738007 -9.860585 -0.240502079

XY

X2

2.632921 0.246851 -1.3769 0.220392 2.483275 1.866893 1.96221 -2.01613 0.763704 1.079118 -0.43004 ............ 0.818526 0.620799 3.535923 -0.22316 4.64589 1.913953 4.84549 11.73902 0.009735 0.261907 0.321727 2.635273 2.629901 -0.15251 0.805916 0.909299 57.91949

1.793872844 0.027739539 0.837652728 1.504262819 0.591554029 5.700389711 0.340626056 0.745346721 0.799766938 0.634449897 0.017421511 ............ 0.345619926 0.68971489 0.386121069 0.702803507 5.694417486 0.254943112 1.948885887 2.814683224 0.00003974 0.031485773 0.184475385 2.010091676 1.14093230 0.68079798 1.19250054 0.11382614 48.48161

Sum of Market Return(X) and Stock Return(Y) is calculated. The value of X is calculated by applying the formula. Current day index Previous day index X= Previous day index X 100

5373.7 - 5446.65 = 5446.65 X 100 = 1.33936

The value of Y is calculated by applying the formula Current day Price Previous day Price Y= Previous day Price X 100

57.35 - 58.5 = 58.5 In this example we have got the value of X = 1.33936 and Y = 1.96581, for the period of 18th March 2011 to 18th May, 2011 same formula is applied to calculate the value of X and Y. Then we have to calculate the sum of XY and X2. Let us take the example of TVS Motors. X 100 = 1.96581

The calculated values are x -0.237349 y 9.860585 xy 57.91949 x2 = 48.48161, N = 41 By substituting these values in the formula of Beta we get the value of

41 (57.91949) (0.237349X 9.860585) Beta = 41 (48.48161) (0.237349) 2 = 1.193525688

Beta describes the relationship between the stocks return and the market return. In the above example, Beta indicated that one percent change in NSE index return would cause 1.1935 percent changes in the TVS Stock return.

Then the value of Alpha is calculated by applying the formula. A Where x y (x) arket return beta value y Average value of tock return

Average of

The calculated value is x 0.005789 y 0.240502079 1.193525688

By substituting we get the alpha value for TVS Motors = (0.240502079) (1.193525688X0.005789) = 0.2335972

Table 3.1.2 Beta and Alpha Value of Automobile Sector Name of the Company TVS Motors TATA Motors Hero Honda M&M Ashok Leyland Beta 1.194 1.530 0.659 1.359 1.130 Alpha -0.234 0.051 0.523 0.081 -0.293

Chart Title

1.5

1 Beta 0.5 Alpha

0 TVS Motors TATA Motors Hero Honda M&M Ashok leyland

-0.5

Chart 3.1.2 Beta and Alpha Value of Automobile Sector

Table 3.1.3 Beta and Alpha Value of Cement Sector Name of the company ACC Ramco Ambuja Dalmia India cement Beta 0.773 0.380 1.185 0.460 0.973 Alpha -0.061 -0.124 0.085 -0.234 -0.206

1.4 1.2 1 0.8 0.6 0.4 0.2 0 ACC -0.2 -0.4 Ramco Ambuja Dalmia India cement

Beta Alpha

Chart 3.1.3 Beta and Alpha Value of Cement Sector

Table 3.1.4 Beta and Alpha Value of IT Sector Name of the company HCL Infosys HCL Tech Infosys Tech TCS Tech Mahindra Beta 0.693 1.138 1.142 1.242 0.737 Alpha 0.083 0.264 -0.087 0.147 -0.250

1.4 1.2 1 0.8 0.6 0.4 0.2 0 HCL Infosys -0.2 -0.4 HCL Tech Infosys Tech TCS Tech Mahindra

Beta Alpha

Chart 3.1.4 Beta and Alpha Value of IT Sector

Table 3.1.5 Beta and Alpha Value of Pharmaceutical Sector Name of the company Biocon CIPLA JB Chemicals Orchid Ranbaxy Beta 0.564 0.695 0.712 1.204 0.749 Alpha 0.121 0.072 0.359 0.075 0.193

1.4

1.2

0.8 Beta 0.6 Alpha

0.4

0.2

0 Biocon CIPLA JB Chemicals Orchid Ranbaxy

Chart 3.1.5 Beta and Alpha Value of Pharmaceutical Sector

Table 3.1.6 Beta and Alpha Value of Power Sector Name of the company CESC Neyvelli lignite NTPC Rpower Tata power Beta 0.792 0.801 0.836 1.056 0.529 Alpha -0.299 0.054 -0.048 -0.275 0.057

1.2 1 0.8 0.6 0.4 0.2 0 CESC -0.2 -0.4

Chart Title

Beta Alpha

Neyveli lignite

NTPC

Rpower

Tata power

Chart 3.1.6 Beta and Alpha Value of Power Sector

3.2 Calculation of Expected Market Return After calculating the value of Alpha and Beta, expected market return for every company is calculated. The formula is Ex ected M rket Return (R) Where, x is risk less return. Here the value of x is taken as 6.25., since State Bank of India gives 6.25% interest for 180days fixed deposit. By substituting we get, + (x)

Table 3.2.1 Expected Market Return of Automobile Sector Expected Market Return 7.225 9.612 4.644 8.575 6.774

Name of the company TVS Motors TATA Motors Hero Honda M&M Ashok Leyland

Expected Market Return 9.612 8.575 7.225 6.774 4.644

TVS Motors

TATA Motors

Hero Honda

M&M

Ashok Leyland

Chart 3.2.1 Expected Market Return of Automobile Sector

Table 3.2.2 Expected Market Return of Cement Sector Name of the company ACC Ramco Ambuja Dalmia India cement Expected Market Return 4.773 2.254 7.495 2.645 5.878

Expected Market Return

7.495

5.878 4.773

2.645 2.254

ACC

Ramco

Ambuja

Dalmia

India cement

Chart 3.2.2 Expected Market Return of Cement Sector

Table 3.2.3 Expected Market Return of IT Sector

Name of the company HCL Infosys HCL Tech Infosys Tech TCS Tech Mahindra

Expected Market Return 4.417 7.379 7.052 7.912 4.356

Expected Market Return 7.912 7.379 7.052

4.417

4.356

HCL Infosys

HCL Tech

Infosys Tech

TCS

Tech Mahindra

Chart 3.2.3 Expected Market Return of IT Sector

Table 3.2.4 Expected Market Return of Pharmaceutical Sector Name of the company Biocon CIPLA JB Chemicals Orchid Ranbaxy Expected Market Return 3.643 4.421 4.808 7.601 4.88

Expected Market Return

7.601

4.808 4.421 3.643

4.88

Biocon

CIPLA

JB Chemicals

Orchid

Ranbaxy

Chart 3.2.4 Expected Market Return of Pharmaceutical Sector

Table 3.2.5 Expected Market Return of Power Sector Name of the company CESC Neyvelli lignite NTPC Rpower Tata power Expected Market Return 4.653 5.062 5.181 6.329 3.367

Expected Market Return

6.329 4.653 5.062 5.181 3.367

CESC

Neyvelli lignite

NTPC

Rpower

Tata power

Chart 3.2.5 Expected Market Return of Power Sector

3.3 Variance Variance measures the dispersion of a return distribution. It is the sum of the squares of a returns deviation from the mean divided by n. The value will always be>=0, with larger values corresponding to data that is more spread out. Market index (x-x) 2 N here x Stock (y-y) 2 N here y tock return y = Avg of Stock return, N = No. of days arket return x Avg of arket return N No of days

Table 3.3.1 Variance of Automobile Sector Name of the company TVS Motors TATA Motors Hero Honda M&M Ashok Leyland Variance of stock return 6.047 4.441 6.812 4.271 3.888 variance of Market return 1.182 1.182 1.182 1.182 1.182

Variance of stock return

variance of Market return

6.812 6.047

4.441

4.271 3.888

1.182

1.182

1.182

1.182

1.182

TVS Motors

TATA Motors

Hero Honda

M&M

Ashok Leyland

Chart 3.3.1 Variance of Automobile Sector

Table 3.3.2 Variance of Cement Sector Name of the company ACC Ramco Ambuja Dalmia India cement Variance of stock return 2.262 4.389 6.416 3.006 3.427 variance of Market return 1.182 1.182 1.182 1.182 1.182

Variance of stock return 6.416

variance of Market return

4.389 3.427 3.006 2.262 1.182 1.182 1.182 1.182 1.182

ACC

Ramco

Ambuja

Dalmia

India cement

Chart 3.3.2 Variance of Cement Sector

Table 3.3.3 Variance of IT Sector Name of the company HCL Infosys HCL Tech Infosys Tech TCS Tech Mahindra Variance of stock return 2.011 4.643 3.963 3.32 3.665 variance of Market return 1.182 1.182 1.182 1.182 1.182

Variance of stock return 4.643 3.963

variance of Market return

3.665 3.32

2.011

1.182

1.182

1.182

1.182

1.182

HCL Infosys

HCL Tech

Infosys Tech

TCS

Tech Mahindra

Chart 3.3.3 Variance of IT Sector

Table 3.3.4 Variance of Pharmaceutical Sector Name of the company Biocon CIPLA JB Chemicals Orchid Ranbaxy Variance of stock return 2.419 2.228 7.935 5.067 5.707 variance of Market return 1.182 1.182 1.182 1.182 1.182

Variance of stock return

variance of Market return

7.935

5.707 5.067

2.419 1.182

2.228 1.182 1.182 1.182 1.182

Biocon

CIPLA

JB Chemicals

Orchid

Ranbaxy

Chart 3.3.4 Variance of Pharmaceutical Sector

Table 3.3.5 Variance of Power Sector

Name of the company CESC Neyvelli lignite NTPC Rpower Tata power

Variance of stock return 2.428 3.292 2.43 3.24 2.023

variance of Market return 1.182 1.182 1.182 1.182 1.182

Variance of stock return 3.292

variance of Market return 3.24

2.428

2.43 2.023

1.182

1.182

1.182

1.182

1.182

CESC

Neyvelli lignite

NTPC

Rpower

Tata power

Chart 3.3.5 Variance of Power Sector

3.4 Calculation of Systematic risk and Unsystematic risk After calculating the variance has to calculate systematic risk and unsystematic risk. The formula for systematic risk is as follows: System tic risk
2

* Variance of Market index

For example TVS Motors = (1.194)2 * 1.182 =1.684

Unsystematic risk = Total risk Systematic risk = 6.048 - 1.684 = 4.363

Table 3.4.1 Systematic & Unsystematic Risk value of Automobile Sector Uncontrollable (%) Name of the company Value TVS Motors TATA Motors Hero Honda M&M Ashok Leyland 1.684 2.767 0.514 2.184 1.512 (%) 28 62 7.5 51 39 Value 4.363 1.673 6.298 2.088 2.376 (%) 72 38 92.5 49 61 Value 6.047 4.440 6.812 4.272 3.888 (%) 100 100 100 100 100 Systematic Risk Controllable (%) Unsystematic Risk

Total Risk

Table 3.4.2 Systematic & Unsystematic Risk value of Cement Sector Uncontrollable (%) Name of the company Value ACC Ramco Ambuja Dalmia India cement 0.707 0.171 1.662 0.251 1.121 (%) 31 4 26 8 33 Value 1.555 4.218 4.754 2.755 2.307 (%) 69 96 74 92 67 Value 2.262 4.389 6.416 3.006 3.428 (%) 100 100 100 100 100 Systematic Risk Controllable (%) Unsystematic Risk Total Risk

Table 3.4.3 Systematic & Unsystematic Risk value of IT Sector Uncontrollable (%) Name of the company Value HCL Infosys HCL Tech Infosys Tech TCS Tech Mahindra 0.568 1.533 1.543 1.825 0.642 (%) 28 33 39 55 18 Value 1.443 3.110 2.420 1.495 3.023 (%) 72 67 61 45 82 Value 2.011 4.643 3.963 3.320 3.665 (%) 100 100 100 100 100 Systematic Risk Controllable (%) Unsystematic Risk

Total Risk

Table 3.4.4 Systematic & Unsystematic Risk value of Pharmaceutical Sector Uncontrollable (%) Name of the company Value Biocon CIPLA JB Chemicals Orchid Ranbaxy 0.375 0.573 0.599 1.174 0.664 (%) 15.5 26 7.5 34 12 Value 2.044 1.656 7.335 3.353 5.042 (%) 84.5 74 92.5 66 88 Value 2.419 2.228 7.935 5.067 5.707 (%) 100 100 100 100 100 Systematic Risk Controllable (%) Unsystematic Risk

Total Risk

Table 3.4.5 Systematic & Unsystematic Risk value of Power Sector Uncontrollable (%) Name of the company Value CESC Neyvelli lignite NTPC Rpower Tata power 0.743 0.759 0.828 1.321 0.332 (%) 31 33 34 41 16 Value 1.685 2.533 1.602 1.920 1.692 (%) 69 77 66 59 84 Value 2.428 3.292 2.430 3.240 2.023 (%) 100 100 100 100 100 Systematic Risk Controllable (%) Unsystematic Risk

Total Risk

3.5 Interpretation Table 3.5.1 Risk and Return Values of the Automobile Sector

Table 3.5.2 Risk and Return Values of the Cement Sector

Table 3.5.3 Risk and Return Values of the IT Sector

Table 3.5.4 Risk and Return Values of the Pharmaceutical Sector

Table 3.5.5 Risk and Return Values of the Power Sector

Interpretation of Automobile Sector This section describes the risk and return analysis made for the stocks in the automobile sector. The calculation of risk and return for the company TVS Motors presented as a sample in appendix. Inference were made based on the ranks secured for the market return, uncontrollable risk, Alpha and overall rank secured by the stock based on the above three rank. Rank 1: Hero Honda secured the Return of 4.121% with Uncontrollable risk of 7.5%, and Alpha of 0.523 which suits both Low Return and Low risk takers. Rank 2: M&M secured the Return of 8.494% with Uncontrollable risk of 51% and Alpha of 0.081 which suits both High Return and Moderate risk takers. Rank 3: Tata Motors secured the Return of 9.562% with Uncontrollable risk of 62% and Alpha of 0.051, which suits both Higher Return and High risk takers. Rank 4: TVS Motors secured the Return of 7.459% with Uncontrollable risk of 28% and Alpha of -0.234, which suits both Moderate Return and High risk takers. Rank 5: Ashok Leyland secured the Return of 7.068% with Uncontrollable risk of 39% and Alpha of -0.293, which suits both Moderate Return and High risk takers.

Interpretation of Cement Sector This section describes the risk and return analysis made for the stocks in the cement sector. Inference were made based on the ranks secured for the market return, uncontrollable risk, Alpha and overall rank secured by the stock based on the above three rank. Rank 1: Ambuja cements secured the Return of 7.495% with Uncontrollable risk of 26% and Alpha of 0.085, which suits both Higher Return and Moderate risk takers. Rank 2: Ramco cements secured the Return of 2.254% with Uncontrollable risk of 4% and Alpha of -0.124, which suits both Low Return and Low risk takers. Rank 3: ACC cements secured the Return of 4.773% with Uncontrollable risk of 31% and Alpha of -0.061, which suits both Moderate Return and Moderate risk takers. Rank 3: India cements secured the Return of 5.878% with Uncontrollable risk of 33% and Alpha of -0.206, which suits both Moderate Return and Moderate risk takers. Rank 5: Dalmia cements secured the Return of 2.645% with Uncontrollable risk of 8% and Alpha of -0.234, which suits both Low Return and Low risk takers.

Interpretation of IT Sector This section describes the risk and return analysis made for the stocks in the IT sector. Inference were made based on the ranks secured for the market return, uncontrollable risk, Alpha and overall rank secured by the stock based on the above three rank. Rank 1: HCL Tech secured the Return of 7.379% with Uncontrollable risk of 33% and Alpha of 0.264, which suits both Higher Return and Moderate risk takers. Rank 2: TCS secured the Return of 7.912% with Uncontrollable risk of 55% and Alpha of 0.147, which suits both Higher Return and High risk takers. Rank 3: HCL Infosys secured the Return of 4.417% with Uncontrollable risk of 28% and Alpha of 0.083, which suits both Low Return and Low risk takers. Rank 4: Infosys Tech secured the Return of 7.052% with Uncontrollable risk of 39% and Alpha of -0.087, which suits both Higher Return and High risk takers. Rank 5: Tech Mahindra secured the Return of 4.356% with Uncontrollable risk of 18% and Alpha of -0.250, which suits both Low Return and Low risk takers.

Interpretation of Pharmaceutical Sector

This section describes the risk and return analysis made for the stocks in the Pharmaceutical sector. Inference were made based on the ranks secured for the market return, uncontrollable risk, Alpha and overall rank secured by the stock based on the above three rank. Rank 1: JB Chemicals secured the Return of 4.808% with Uncontrollable risk of 7.5% and Alpha of 0.359, which suits both Moderate Return and Low risk takers. Rank 2: Ranbaxy secured the Return of 4.880% with Uncontrollable risk of 12% and Alpha of 0.193, which suits both Moderate Return and Low risk takers. Rank 3: Orchid secured the Return of 7.601% with Uncontrollable risk of 34% and Alpha of 0.075, which suits both Higher Return and High risk takers. Rank 4: Biocon secured the Return of 3.643% with Uncontrollable risk of 15.5% and Alpha of 0.121, which suits both Low Return and Low risk takers. Rank 5: CIPLA secured the Return of 4.421% with Uncontrollable risk of 26% and Alpha of 0.072, which suits both Moderate Return and High risk takers.

Interpretation of Power Sector This section describes the risk and return analysis made for the stocks in the Power sector. Inference were made based on the ranks secured for the market return, uncontrollable risk, Alpha and overall rank secured by the stock based on the above three rank. Rank 1: Tata Power secured the Return of 3.367% with Uncontrollable risk of 16% and Alpha of 0.057, which suits both Low Return and Low risk takers. Rank 2: Neyvelli Lignite secured the Return of 5.062% with Uncontrollable risk of 33% and Alpha of 0.054, which suits both High Return and High risk takers. Rank 3: NTPC secured the Return of 5.181% with Uncontrollable risk of 34% and Alpha of -0.048, which suits both High Return and High risk takers. Rank 4: Reliance Power secured the Return of 6.329% with Uncontrollable risk of 41% and Alpha of -0.275, which suits both High Return and High risk takers. Rank 5: CESC secured the Return of 4.653% with Uncontrollable risk of 31% and Alpha of -0.299, which suits both Moderate Return and High risk takers.

Chapter 4 Findings, Recommendations and Conclusion 4.1 Findings This study focused in identifying the risk and return of the stocks of the companies in the Automobile, Cement, Information Technology, Pharmaceutical and Power sectors.

Automobile Sector High Return and High Risk Tata Motors secured the Return of 9.562% with Uncontrollable risk of 62% and Alpha of 0.051, which suits both Higher Return and High risk takers. High Return and Moderate Risk M&M secured the Return of 8.494% with Uncontrollable risk of 51% and Alpha of 0.081 which suits both High Return and Moderate risk takers. Moderate Return and High Risk TVS Motors secured the Return of 7.459% with Uncontrollable risk of 28% and Alpha of -0.234, which suits both Moderate Return and High risk takers. Ashok Leyland secured the Return of 7.068% with Uncontrollable risk of 39% and Alpha of -0.293, which suits both Moderate Return and High risk takers. Low Return and Low Risk Hero Honda secured the Return of 4.121% with Uncontrollable risk of 7.5%, and Alpha of 0.523 which suits both Low Return and Low risk takers.

Cement Sector High Return and Moderate Risk Ambuja cements secured the Return of 7.495% with Uncontrollable risk of 26% and Alpha of 0.085, which suits both Higher Return and Moderate risk takers. Low Return and Low Risk Ramco cements secured the Return of 2.254% with Uncontrollable risk of 4% and Alpha of -0.124, which suits both Low Return and Low risk takers. Dalmia cements secured the Return of 2.645% with Uncontrollable risk of 8% and Alpha of -0.234, which suits both Low Return and Low risk takers. Moderate Return and Moderate Risk ACC cements secured the Return of 4.773% with Uncontrollable risk of 31% and Alpha of -0.061, which suits both Moderate Return and Moderate risk takers. India cements secured the Return of 5.878% with Uncontrollable risk of 33% and Alpha of -0.206, which suits both Moderate Return and Moderate risk takers. Information Technology Sector High Return and Moderate Risk HCL Tech secured the Return of 7.379% with Uncontrollable risk of 33% and Alpha of 0.264, which suits both Higher Return and Moderate risk takers. High Return and High Risk TCS secured the Return of 7.912% with Uncontrollable risk of 55% and Alpha of 0.147, which suits both Higher Return and High risk takers.

 Infosys Tech secured the Return of 7.052% with Uncontrollable risk of 39% and Alpha of -0.087, which suits both Higher Return and High risk takers. Low Return and Low Risk HCL Infosys secured the Return of 4.417% with Uncontrollable risk of 28% and Alpha of 0.083, which suits both Low Return and Low risk takers. Tech Mahindra secured the Return of 4.356% with Uncontrollable risk of 18% and Alpha of -0.250, which suits both Low Return and Low risk takers.

Pharmaceutical Sector Moderate Return and Low Risk JB Chemicals secured the Return of 4.808% with Uncontrollable risk of 7.5% and Alpha of 0.359, which suits both Moderate Return and Low risk takers. Ranbaxy secured the Return of 4.880% with Uncontrollable risk of 12% and Alpha of 0.193, which suits both Moderate Return and Low risk takers. High Return and High Risk Orchid secured the Return of 7.601% with Uncontrollable risk of 34% and Alpha of 0.075, which suits both Higher Return and High risk takers. Moderate Return and High Risk CIPLA secured the Return of 4.421% with Uncontrollable risk of 26% and Alpha of 0.072, which suits both Moderate Return and High risk takers. Low Return and Low Risk Biocon secured the Return of 3.643% with Uncontrollable risk of 15.5% and Alpha of 0.121, which suits both Low Return and Low risk takers.

Power Sector Low Return and Low Risk Tata Power secured the Return of 3.367% with Uncontrollable risk of 16% and Alpha of 0.057, which suits both Low Return and Low risk takers. High Return and High Risk Neyvelli Lignite secured the Return of 5.062% with Uncontrollable risk of 33% and Alpha of 0.054, which suits both High Return and High risk takers. NTPC secured the Return of 5.181% with Uncontrollable risk of 34% and Alpha of -0.048, which suits both High Return and High risk takers. Reliance Power secured the Return of 6.329% with Uncontrollable risk of 41% and Alpha of -0.275, which suits both High Return and High risk takers. Moderate Return and Moderate Risk CESC secured the Return of 4.653% with Uncontrollable risk of 31% and Alpha of -0.299, which suits both Moderate Return and High risk takers.

4.2 Recommendations This analysis would facilitate investor make their choice of company among the above sector to invest based on their perception of the risk and return of the stocks. Among the 25 companies the most profitable company is Tata Motors which earns the Return of 9.562% but it involves high risk. So investors who are willing to take more risk can go for Tata Motors and get the maximum return. The moderate risk takers can opt to M&M, Ambuja cements and HCL Tech which yields High returns more than the risk taken by the Investors.

 The Low risk takers can go for Tata Power, Biocon, JB Chemicals and HCL Infosys because these companies returns are higher when compared to the risk taken. Investors who like to have higher returns when compared to the risk taken can go for Pharmaceutical Sectors where all the companies have positive Alpha. The high risk takers can opt to Automobile sector where the risk is high and as well as the returns are also high. Investors can opt to the companies where the Alpha value is positive like Tata Motors, Hero Honda, M&M, Ambuja Cements, HCL Infosys, HCL Tech, TCS and Neyvelli lignite where whatever the risk taken by them will have high returns than the risk taken. The safest companies are Hero Honda, JB Chemicals, Ranbaxy, Biocon and Tata Power because these companies are low risky when compared to other companies. 4.3 Conclusion From this study, the researcher has identified the risk and return for the stocks of Automobiles, Cement, Information Technology, Pharmaceutical and Power Sectors listed in National Stock Exchange (NSE). The stock market during the period of study was not highly fluctuating and overall there was a bearish trend. The NSE index on March 18th 2011 was 5446.65 and on the end of May 18th were 5420.60. The study would help the future investors to make their choice of stock for investment based on the expected Market Return and Risk taking ability.

Appendix
Annexure Data for TVS Motors - EQ from 18-03-2011 to 18-05-2011 Stock Avg Index Avg Price Market Return(X) Return(Y) 5446.65 58.5 -1.339355384 -1.965811966 5373.7 57.35 -0.16655191 -1.482127289 5364.75 56.5 0.915233701 -1.504424779 5413.85 55.65 1.226483925 0.179694519 5480.25 55.75 0.769125496 3.228699552 5522.4 57.55 2.387548892 0.781928758 5654.25 58 0.583631781 3.362068966 5687.25 59.95 0.863334652 -2.335279399 5736.35 58.55 0.894296896 0.853970965 5787.65 59.05 0.796523632 1.354784081 5833.75 59.85 -0.131990572 3.258145363 5826.05 61.8 1.41433733 0.485436893 5908.45 62.1 0.02707986 -0.724637681 5910.05 61.65 -0.30964205 -1.703163017 5891.75 60.6 -0.102685959 -0.99009901 5885.7 60 -0.74247753 -1.666666667 5842 59 -0.963711058 -2.881355932 5785.7 57.3 2.174326356 2.617801047 5911.5 58.8 -1.470861879 1.955782313 5824.55 59.95 -1.638753208 -2.919099249 5729.1 58.2 0.203347821 1.546391753 5740.75 59.1 1.931803336 1.607445008 5851.65 60.05 0.564797963 -1.582014988 5884.7 59.1 -0.173330841 -1.184433164 5874.5 58.4 -0.103838625 4.537671233 5868.4 61.05 -0.587894486 -1.392301392 5833.9 60.2 -0.830490752 -0.747508306 5785.45 59.75 -0.621386409 -5.690376569 5749.5 56.35 -0.838333768 0.266193434 5701.3 56.5 -2.386297862 -1.946902655 5565.25 55.4 -0.504918916 -3.790613718 5537.15 53.3 -1.396025031 -3.470919325 5459.85 51.45 1.677701768 6.997084548 5551.45 55.05 -0.006304659 -1.544050863 5551.1 54.2 -0.177442309 -1.47601476 5541.25 53.4 0.429505978 0.74906367 5565.05 53.8 -1.417777019 -1.858736059 5486.15 52.8 1.068144327 2.462121212 5544.75 54.1 -0.825104829 0.184842884 5499 54.2 -1.09201673 -0.73800738 5438.95 53.8 -0.337381296 -2.695167286 5420.6 52.35 -0.237349368 -9.860585255 -0.005789008 -0.24050207

Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Sum AVG

Date 17-Mar-11 18-Mar-11 21-Mar-11 22-Mar-11 23-Mar-11 24-Mar-11 25-Mar-11 28-Mar-11 29-Mar-11 30-Mar-11 31-Mar-11 1-Apr-11 4-Apr-11 5-Apr-11 6-Apr-11 7-Apr-11 8-Apr-11 11-Apr-11 13-Apr-11 15-Apr-11 18-Apr-11 19-Apr-11 20-Apr-11 21-Apr-11 25-Apr-11 26-Apr-11 27-Apr-11 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11

XY 2.63292084 0.246851131 -1.376900259 0.220392439 2.483275144 1.866893139 1.9622103 -2.016127628 0.763703583 1.079117537 -0.430044471 0.686571519 -0.019623087 0.527370889 0.101669267 1.23746255 2.776794573 5.691953812 -2.876685648 4.783683261 0.314455393 3.105267629 -0.893518842 0.205298796 -0.47118554 0.818526311 0.620798735 3.535922662 -0.223158944 4.645889643 1.913952572 4.845490257 11.73902112 0.009734714 0.261907467 0.321727324 2.63527327 2.629900805 -0.152514756 0.805916406 0.909299032 57.91949125

X2 1.793872844 0.027739539 0.837652728 1.504262819 0.591554029 5.700389711 0.340626056 0.745346721 0.799766938 0.634449897 0.017421511 2.000350082 0.000733319 0.095878199 0.010544406 0.551272883 0.928739003 4.727695104 2.163434668 2.685512078 0.041350336 3.731864128 0.318996739 0.03004358 0.01078246 0.345619926 0.68971489 0.386121069 0.702803507 5.694417486 0.254943112 1.948885887 2.814683224 0.00003974 0.031485773 0.184475385 2.010091676 1.140932303 0.680797979 1.192500539 0.113826139 48.48161245

Automobile Sector TVS Motors 41 (57.91949) (0.237349X 9.860585) = 41 (48.48161) (0.237349) 2 = 1.193 = (0.240502079) (1.193525688X0.005789) = 0.234

Expected Market Return

+ (x) = 0.234 + 1.193(6.25) = 7.225

Variance Market Index (x-x) 2 N Market Index = 1.182 Stock (y-y) 2 N Stock = 6.047

Systematic risk

* Variance of Market index

= (1.194)2 * 1.182 =1.684 Unsystematic risk = Total risk Systematic risk = 6.048 - 1.684 = 4.363

BIBLIOGRAPHY 1. Bhalla V.K (1999), Financial Management, Eighth edition, Vikas Publishing House Private Limited, New Delhi, India. 2. Stanley B.B and Geoffrey A.H, Foundation of Financial Management, Sixth edition, Irwin, New York. 3. Pandy I.M (1999) Financial Management, Eighth edition Vikas Publishing House Private Limited, New Delhi, India. 4. Jack C.F (1996), Investment Analysis and Management, Fifth edition, Mc Graw Hill, inc., New York. 5. Business Line News Papers, March, April, May of 2011. 6. Websites www.moneycontrol.com www.equitymaster.com www.nseindia.com www.northeastltd.com