A STUDY ON RISK RETURN ANALYSIS IN EQUITIES WITH REFERENCE TO

INDIAINFOLINE LTD
Introduction of the study: Over the decades, investors have been presented
with a number of products and a good equity portfolio can have a combination
of all of them. When one thinks of aggressive investment option, equity is
bound to top the list for many. While some think that equity allows them to
earn quick returns in a short period of time, the reward is always higher over
the long term. No doubt, markets do offer opportunities of doubling the capital
at regular intervals as was the case in 2008-09, but it was a not a planned
exercise for many.
In fact, the turnaround in quick time was beyond everyone's expectation but it
only proved the fact that equity has the ability to bounce back in quick time. As
a matter of fact, the turnaround for most assets has come down in recent times
and with economies getting globalised at a faster pace, the cycles are likely to
get shorter going forward.
For those looking at equity allocation in their portfolio, trading in stocks is not
the only option. Today, there is a larger basket of products which allows
investors to have equity allocation. These include direct stocks, mutual funds,
futures and options, insurance and pension plans etc.
The present study on the equity and portfolio management in INDIAINFOLINE
Ltd. brings into surface the risk and return involved and the options for the
various investments for the efficient management of the portfolio.
1

Need for the study:

Companies need to invest in diverse areas in order to minimize their risk and
get optimum returns. However, a company cannot blindly invest in everything
in order to reduce its risk since it involves huge money and effort. So, it is
important for a company to properly decide its portfolio and invest carefully.
The present study gives an insight into this issue by analyzing the Risk and
Return analysis of the INDIAINFOLINE LTD.
Objectives of the Study
To observe the rate of fluctuations of INDIAINFOLINE LTD.
The amount of risk involved in the securities of INDIAINFOLINE LTD.
To observe the degree of volatility in INDIAINFOLINE LTD.
To understand the price fluctuations & the factors influencing the
fluctuations of INDIAINFOLINE LTD
Scope of the Study
The study covers all the information related to the Equities it also covers the
risk and returns in INDIAINFOLINE LTD. The study is confined only one
company and the entire study is based upon their Stock prices for a period of
last five years.

RESEARCH METHODOLOGY
Method of data collection:
The data that is used in this project is of secondary nature. The data is to be
collected from secondary sources such as Company reports and Annual
records and various websites, journals, newspapers, books, etc., the analysis
used in this project has been done using selective technical tools. In Equity
market, risk is analyzed and trading decisions are taken on basis of technical
analysis. It is collecting share prices of the company for a period of five years.
LIMITATIONS OF THE STUDY
The present project work has been undertaken to provide information
regarding risk return on equities. The following are the limitations of the study.
The study is based on the secondary data which is available from
various.
The study is limited to only one Company.
The time taken to undertaken the project work is very short; hence only
One Company was chosen for the study.

CHAPTER II
LITERATURE REVIEW
According to Kevin Return and risk are two important characteristics of every
investment. Investors base their investment decision on the expected return
and risk of investments. Risk is measured by the variability in returns.
Investors attempt to reduce the variability of returns through diversification of
investment. This results in the creation of a portfolio. With a given set of
securities, any number of portfolios may be created by altering the proportion
of funds invested in each security. Among these portfolios some dominate
others or some are more efficient than the vast majority of portfolios because of
lower risk or higher returns.
Diversification helps to reduce risk, but even a well diversified portfolio does
not become risk free. If we construct a portfolio including all the securities in
the stock market, that would be the most diversified portfolio. Even such a
portfolio would be subject to considerable variability. This variability is
undiversifiable and is known as the market risk or systematic risk because it
affects all he securities in the market.
The real risk of a security is the market risk which cannot be eliminated
through diversification. This is indicated by the sensitivity of a security to the
movements of the market and is measured by the beta coefficient of the
security.

A rational investor would expect the return on a security to be commensurate

with its risk. The higher the risk of security, the higher would be the return
expected from it. And since the relevant risk of a security is its market risk or
systematic risk, the return is correlated with this risk only. The capital asset
pricing model gives the nature of the relationship between the expected return
and the systematic risk of a security.
According to Charles investment of funds in various assets is only part of the
overall financial decision making and planning that most individuals must do.
Before investing, each individual should develop an overall financial plan. Such
a plan should include the decision on whether to purchase a house, which for
most individuals represents a major investment.
Investors should expect a risk premium for buying a risky asset such as a
stock. The greater the riskiness of that stock, the higher the risk premium
should be. If investors hold well-diversified portfolios, they should be interested
in portfolio risk rather than individual security risk. Different stocks will affect
a well diversified portfolio differently. The relevant risk for an individual stock
is its contribution to the riskiness of a well diversified portfolio is market risk,
or systematic risk, which is non diversifiable.

CONCEPTUAL FRAME WORK

Investment is the activity, which is made with the objective of earning some
sort of positive returns in the future. It is the commitment of the funds to earn
future returns and it involves sacrificing the present investment for the future
return. Every person makes the investment so that the funds he has increases
as keeping cash with himself is not going to help as it will not generate any
returns and also with the passage of time the time value of the money will
come down. As the inflation will rise the purchasing power of the money will
come down and this will result that the investor who does not invest will
become more

poor as he will not have any funds whose value have been

increased. Thus every person whether he is a businessman or a common man

will make the investment with the objective of getting future returns.
Types of Investments:There are basically three types of investments from which the investors can
choose. The three kinds of investment have their own risk and return profile
and investor will decide to invest taking into account his own risk appetite. The
main types of investments are: Economic investments:These investments refer to the net addition to the capital stock of the society.
The capital stock of the society refers to the investments made in plant,
building, land and machinery which are used for the further production of the
goods. This type of investments are very important for the development of the
6

economy because if the investment are not made in the plant and machinery
the industrial production will come down and which will bring down the overall
growth of the economy.
Financial Investments:This type of investments refers to the investments made in the marketable
securities which are of tradable nature. It includes the shares, debentures,
bonds and units of the mutual funds and any other securities which is covered
under the ambit of the Securities Contract Regulations Act definition of the
word security. The investments made in the capital market instruments are of
vital important for the country economic growth as the stock market index is
called as the barometer of the economy.
General Investments:These investments refer to the investments made by the common investor in
his own small assets like the television, car, house, motor cycle. These types of
investments are termed as the household investments. Such types of
investment are important for the domestic economy of the country. When the
demand in the domestic economy boost the over all productions and the
manufacturing in the industrial sectors also goes up and this causes rise in the
employment activity and thus boost up the GDP growth rate of the country.
The organizations like the Central Statistical Organization (CSO) regularly
takes the study of the investments made in the household sector which shows
that the level of consumptions in the domestic markets.
7

Characteristics of Investment
Certain features characterize all investments. The following are the main
characteristic features if investments: 1. Return: All investments are characterized by the expectation of a return. In fact,
investments are made with the primary objective of deriving a return.
The return may be received in the form of yield plus capital appreciation.
The difference between the sale price & the purchase price is capital
appreciation. The dividend or interest received from the investment is the
yield. Different types of investments promise different rates of return. The
return from an investment depends upon the nature of investment,
the maturity period & a host of other factors.
2. Risk: Risk is inherent in any investment. The risk may relate to loss of capital,
delay in repayment of capital, nonpayment of interest, or variability of
returns. While some investments like government securities & bank
deposits are almost risk less, others are more risky. The risk of an
investment depends on the following factors.

The longer the maturity period, the longer is the risk.

The lower the creditworthiness of the borrower, the higher is the

risk.
8

The risk varies with the nature of investment. Investments in ownership

securities like equity share carry higher risk compared to investments in
debt instrument like debentures & bonds.
3. Safety: The safety of an investment implies the certainty of return of capital
without loss of money or time. Safety is another features which an
investors desire for his investments. Every investor expects to get back
his capital on maturity without loss & without delay.
4. Liquidity: An investment, which is easily saleable, or marketable without loss of
money & without loss of time is said to possess liquidity. Some
investments like company deposits, bank deposits, P.O. deposits, NSC,
NSS etc. are not marketable. Some investment instrument like
preference shares & debentures are marketable, but there are no buyers
in many cases & hence their liquidity is negligible. Equity shares of
companies listed on stock exchanges are easily marketable through the
stock exchanges.
An investor generally prefers liquidity for his investment, safety of his funds, a
good return with minimum risk or minimization of risk & maximization of
return.

IMPORTANCE
In the current situation, investment is becomes necessary for everyone & it is
important & useful in the following ways:
1. Retirement planning: Investment decision has become significant as people retire between the
ages of 55 & 60. Also, the trend shows longer life expectancy. The
earning from employment should, therefore, be calculated in such a
manner that a portion should be put away as a savings. Savings by
themselves do not increase wealth; these must be invested in such a way
that the principal & income will be adequate for a greater number of
retirement years. Increase in working population, proper planning for life
span & longevity have ensured the need for balanced investments.
2. Increasing rates of taxation: Taxation is one of the crucial factors in any country, which introduce an
element of compulsion, in a persons saving. In the form investments,
there are various forms of saving outlets in our country, which help in
bringing down the tax level by offering deductions in personal income.
For examples:

Unit linked insurance plan,

Life insurance,

National saving certificates,

10

Development bonds,

Post office cumulative deposit schemes etc.

3. Rates of interest: It is also an important aspect for sound investment plan. It varies
between investment & another. This may vary between risky & safe
investment, they may also differ due different benefits schemes offered by
the investments. These aspects must be considered before actually
investing. The investor has to include in his portfolio several kinds of
investments stability of interest is as important as receiving high rate of
interest.
4. Inflation: Since the last decade, now a days inflation becomes a continuous
problem. In these years of rising prices, several problems are associated
coupled with a falling standard of living. Before funds are invested,
erosion of the resource will have to be carefully considered in order to
make the right choice of investments. The investor will try & search
outlets, which gives him a high rate of return in form of interest to cover
any decrease due to inflation. He will also have to judge whether the
interest or return will be continuous or there is a likelihood of
irregularity. Coupled with high rate of interest, he will have to find an
outlet, which will ensure safety of principal. Beside high rate of interest
& safety of principal an investor also has to always bear in mind the
11

taxation angle, the interest earned through investment should not

unduly increase his taxation burden otherwise; the benefit derived from
interest will be compensated by an increase in taxation.
5. Income: For increasing in employment opportunities in India., investment
decisions have assumed importance. After independence with the stage
of development in the country a number of organization & services came
into being.
For example:

The Indian administrative services.

Banking recruitment services.

Expansion in private corporate sector.

Public sector enterprises.

Establishing of financial institutions, tourism, hotels, and

education.

More avenues for investment have led to the ability & willingness of
working people to save & invest their funds.
6. Investment channels: The growth & development of country leading to greater economic activity
has led to the introduction of a vast array of investment outlays. Apart
from putting aside saving in savings banks where interest is low, investor
12

have the choice of a variety of instruments. The question to reason out is

which is the most suitable channel? Which media will give a balanced
growth & stability of return? The investor in his choice of investment will
give a balanced growth & stability of return? The investor in his choice of
investment will have try & achieve a proper mix between high rates of
return to reap the benefits of both.
For example: Fixed deposit in corporate sector
Unit trust schemes.

RISK RETURN OF VARIOUS INVESTMENT AVENUES

The risk/return relationship is a fundamental concept in not only financial
analysis, but in every aspect of life. If decisions are to lead to benefit
13

maximization, it is necessary that individuals/institutions consider the

combined influence on expected (future) return or benefit as well as on
risk/cost. The requirement that expected return/benefit be commensurate with
risk/cost is known as the "risk/return trade-off" in finance.
This session discusses the trade-off and, using conventional statistical tools,
provides a method for quantifying risk. Two categories of risk borne by the
firm's stockholders, business risk and financial risk, are discussed and
demonstrated, as is the concept of leverage. The session also examines risk
reduction via portfolio diversification and what requirements need to be met for
firms to experience the benefits of diversification. The Capital Asset Pricing
Model (CAPM) is used to demonstrate the risk/return trade-off by relating the
required return on the firm's investments to its beta (or market) risk.
Every investment is characterized by return & risk. Investors intuitively
understand the concept of risk. A person making an investment expects to get
some return from the investment in the future. But, as future is uncertain, so
is the future expected return. It is this uncertainty associated with the returns
from an investment that introduces risk into an investment. Risk arises where
there is a possibility of variation between expectation and realization with
regard to an investment.
Meaning of Risk
Risk & uncertainty are an integrate part of an investment decision. Technically
risk can be defined as situation where the possible consequences of the
14

decision that is to be taken are known. Uncertainty is generally defined to

apply to situations where the probabilities cannot be estimated. However, risk
& uncertainty are used interchangeably.
Types of risks
1. Systematic risk: Systematic risk is non diversifiable & is associated with the securities market
as well as the economic, sociological, political, & legal considerations of prices
of all securities in the economy. The affect of these factors is to put pressure on
all securities in such a way that the prices of all stocks will more in the same
direction.
Example: During a boom period prices of all securities will rise & indicate that the
economy is moving towards prosperity. Market risk, interest rate risk &
purchasing power risk are grouped under systematic risk.
RISK

SYSTEMATIC

UNSYSTEMATIC

i. Market Risk

i. Business Risk

ii. Interest Rate Risk

ii. Financial Risk

iii. Purchasing power Risk

15

1. Systematic Risk
(A) Market risk
Market risk is referred to as stock variability due to changes in investors
attitudes & expectations. The investor reaction towards tangible and intangible
events is the chief cause affecting market risk.
(B) Interest rate risk
There are four types of movements in prices of stocks in the markets. These
may termed as (1) long term, (2) cyclical (bull and bear markets), (3)
intermediate or within the cycle, and (4) short term. The prices of all securities
rise or fall depending on the change in interest rates. The longer the maturity
period of a security the higher the yield on an investment & lower the
fluctuations in prices.
(C) Purchasing Power risk
Purchasing power risk is also known as inflation risk. This risk arises out of
change in the prices of goods & services and technically it covers both inflation
and deflation periods. During the last two decades it has been seen that
inflationary pressures have been continuously affecting the Indian economy.
Therefore, in India purchasing power risk is associated with inflation and rising
prices in the economy.

16

2. Unsystematic Risk: The importance of unsystematic risk arises out of the uncertainty surrounding
of particular firm or industry due to factors like labour strike, consumer
preferences and management policies. These uncertainties directly affect the
financing and operating environment of the firm. Unsystematic risks can owing
to these considerations be said to complement the systematic risk forces.
(A) Business risk
Every corporate organization has its own objectives and goals and aims at a
particular gross profit & operating income & also accepts to provide a certain
level of dividend income to its shareholders. It also hopes to plough back some
profits. Once it identifies its operating level of earnings, the degree of variation
from this operating level would measure business risk.
(B) Financial Risk: Financial risk in a company is associated with the method through which it
plans its financial structure. If the capital structure of a company tends to
make earning unstable, the company may fail financially. How a company
raises funds to finance its needs and growth will have an impact on its future
earnings and consequently on the stability of earnings. Debt financing provides
a low cost source of funds to a company, at the same time providing financial
leverage for the common stock holders. As long as the earnings of the company
are higher than the cost of borrowed funds, the earning per share of common
stock is increased. Unfortunately, a large amount of debt financing also
17

increases the variability of the returns of the common stock holder & thus
increases their risk. It is found that variation in returns for shareholders in
levered firms (borrowed funds company) is higher than in unlevered firms. The
variance in returns is the financial risk.
PHASES OF PORTFOLIO MANAGEMENT
Five phases can be identified in this process:
1. Security analysis
2. Portfolio analysis
3. Portfolio selection
4. Portfolio revision
5. Portfolio evaluation
Phase I: Security Analysis
An examination and evaluation of the various factors affecting the value of a
security. Security Analysis stands for the proposition that a well-disciplined
investor can determine a rough value for a company from all of its financial
statements, make purchases when the market inevitably under-prices some of
them, earn a satisfactory return, and never be in real danger of permanent
loss.
Phase II: Portfolio Analysis
Analysis phase of portfolio management consists of identifying the range of
possible portfolios that can be constituted from a given set of securities and
calculating their return and risk for further analysis.
18

Phase III: Portfolio Selection

The proper goal of portfolio construction is to generate a portfolio that provides
the highest returns at a given level of risk. A portfolio having this characteristic
is known as an efficient portfolio. The inputs from portfolio analysis can be
used to identify the set of efficient portfolios. From this set of efficient
portfolios, the optimal portfolio has to be selected for investment. Harry
Markowitz portfolio theory provides both the conceptual framework and
analytical tools for determining the optimal portfolio in a disciplined and
objective way.
Phase IV: Portfolio Revision
Having constructed the optimal portfolio, the investor has to constantly
monitor the portfolio to ensure that it continues to be optimal. Portfolio revision
is as important as portfolio analysis and selection.
Phase V: Portfolio Evaluation
It is the process, which is concerned with assessing the performance of the
portfolio over a selected period of time in terms of returns and risk. This
involves quantitative measurement of actual return realized and the risk born
by the portfolio over the period of investment. It provides a feedback
mechanism for improving the entire portfolio management process.
MODELS
Some of the financial models used in the process of Valuation, stock selection,
and management of portfolios include:
19

Maximizing return, given an acceptable level of risk.

Modern portfolio theorya model proposed by Harry Markowitz among

others.

The single-index model of portfolio variance.

Capital asset pricing model.

Arbitrage pricing theory.

The Jensen Index.

The Treynor Index.

The Sharpe Diagonal (or Index) model.

Value at risk model.

BETA:
The Beta coefficient, in terms of finance and investing, is a measure of a stock
(or portfolio)s volatility in relation to the rest of the market. Beta is calculated
for individual companies using regression analysis.
The beta coefficient is a key parameter in the capital asset pricing model
(CAPM). It measures the part of the asset's statistical variance that cannot be
mitigated by the diversification provided by the portfolio of many risky assets,
because it is correlated with the return of the other assets that are in the
portfolio.
For example, if every stock in the New York Stock Exchange was uncorrelated
with every other stock, then every stock would have a Beta of zero, and it would
20

be possible to create a portfolio that was nearly risk free, simply by diversifying
it sufficiently so that the variations in the individual stocks' prices averaged
out. In reality, investments tend to be correlated, more so within an industry,
or when considering a single asset class (such as equities). This correlated risk,
measured by Beta, is what actually creates almost all of the risk in a diversified
portfolio.
The formula for the Beta of an asset within a portfolio is

Where
ra measures the rate of return of the asset,
rp measures the rate of return of the portfolio of which the asset is a part
And Cov (ra, rp) is the covariance between the rates of return.

Formulas:
1.

2.

3.

( )

( )

= Square root ((mean return -expected return)^2/N)

4. Covariance: COV (X, Y)=1/N[(RX-RX)(RY-RY)]
21

CHAPTER III
COMPANY PROFILE
The IIFL (India Infoline) group, comprising the holding company, India Infoline
Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading
players in the Indian financial services space. IIFL offers advice and execution
platform for the entire range of financial services covering products ranging
from Equities and derivatives, Commodities, Wealth management, Asset
management, Insurance, Fixed deposits, Loans, Investment Banking, GoI
bonds and other small savings instruments. IIFL recently received an inprinciple approval for Securities Trading and Clearing memberships from
Singapore Exchange (SGX) paving the way for IIFL to become the first Indian
brokerage to get a membership of the SGX. IIFL also received membership of
the Colombo Stock Exchange becoming the first foreign broker to enter Sri
Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is
one of Indias leading online destinations for personal finance, stock markets,
economy and business.
IIFL has been awarded the Best Broker, India by Finance Asia and the Most
improved brokerage, India in the Asia Money polls. India Infoline was also
adjudged as Fastest Growing Equity Broking House - Large firms by Dun &
Bradstreet. A forerunner in the field of equity research, IIFLs research is
acknowledged by none other than Forbes as Best of the Web and a must
read for investors in Asia. Our research is available not just over the Internet
22

but also on international wire services like Bloomberg, Thomson First Call and
Internet Securities where it is amongst one of the most read Indian brokers.
A network of over 2,500 business locations spread over more than 500 cities
and towns across India facilitates the smooth acquisition and servicing of a
large customer base. All our offices are connected with the corporate office in
Mumbai with cutting edge networking technology. The group caters to a
customer base of about a million customers, over a variety of mediums viz.
online, over the phone and at our branches.
History and milestones
1995 - Commenced operations as an Equity Research firm
1997 - Launched research products of leading Indian companies, key sectors
and the economy Client included leading FIIs, banks and companies.
1999 - Launched www.indiainfoline.com
2000 - Launched online trading through www.5paisa.com Started distribution
of life insurance and mutual fund
2003 - Launched proprietary trading platform Trader Terminal for retail
customers
2004

Acquired

commodities

broking

license

and

launched

Portfolio

Management Service
2005 - Maiden IPO and listed on NSE, BSE
2006 - Acquired membership of DGCX and commenced the lending business
23

2007 - Commenced institutional equities business under IIFL, Formed

Singapore subsidiary, IIFL (Asia) Pte Ltd
2008 - Launched IIFL Wealth, Transitioned to insurance broking model
2009 - Acquired registration for Housing Finance, SEBI in-principle approval
for Mutual Fund, Obtained Venture Capital license
2010 - Received in-principle approval for membership of the Singapore Stock
Exchange, Received membership of the Colombo Stock Exchange

Products and services:

We are a one-stop financial services shop, most respected for quality of its
advice, personalized service and cutting-edge technology.

Equities
IIFL is a member of BSE and NSE registered with NSDL and CDSL as a
depository participant and provides broking services in the cash, derivatives
and currency segments, online and offline. IIFL is a dominant player in the
retail as well as institutional segments of the market. It recently became the
first Indian broker to get a membership of the Colombo Stock Exchange and is
also the first Indian broker to have received an in-principle approval for
membership of the Singapore Stock Exchange. IIFLs Trader Terminal, its
proprietary trading platform, is widely acknowledged as one of the best
available for retail investors. Investors opt for IIFL given its unique combination
24

of superior Service, cutting-edge proprietary Technology, Advice powered by

world-acclaimed research and its unparalleled Reach owing to its over 2500
business locations across over 500 cities in India.
IIFL received the BQ1 broker grading (highest grading) from CRISIL. The
assigned grading reflects an effective external interface, robust systems
framework and strong risk management. The grading also reflects IIFLs
healthy regulatory compliance track record and adequate credit risk profile.
IIFLs analyst team won Zee Business Indias best market analysts awards
2009 for being the best in the Oil and Gas and Commodities sectors and a
finalist in the Banking and IT sectors.
IIFL has rapidly emerged as one of the premier institutional equities houses in
India with a team of over 25 research analysts, a full-fledged sales and trading
team coupled with an experienced investment banking team.
The Institutional equities business conducted a very successful Enterprising
India global investors conference in Mumbai in March 2010, which was
attended by funds with aggregate AUM over US$5 trillion and CEOs and other
executives representing corporates with a combined market capitalization of
over US$500 billion. The Discover Sri Lanka global investors conference, held
in Colombo in July 2010, was attended by more than 50 leading global and
major local investors and 25 Sri Lankan corporates, along with senior
Government officials.

25

Commodities
IIFL offers commodities trading to its customers vide its membership of the
MCX and the NCDEX. Our domain knowledge and data based on in depth
research of complex paradigms of commodity kinetics, offers our customers a
unique insight into behavioral patterns of these markets. Our customers are
ideally positioned to make informed investment decisions with a high
probability of success.

Credit and finance

IIFL offers a wide array of secured loan products. Currently, secured loans
(mortgage loans, margin funding, and loans against shares) comprise 94% of
the loan book. The Company has discontinued its unsecured products. It has
robust credit processes and collections mechanism resulting in overall NPAs of
less than 1%. The Company has deployed proprietary loan-processing software
to enable stringent credit checks while ensuring fast application processing.
Recently the company has also launched Loans against Gold.

Insurance
IIFL entered the insurance distribution business in 2000 as ICICI Prudential
Life Insurance Co. Ltds corporate agent. Later, it became an Insurance broker
in October 2008 in line with its strategy to have an open architecture model.
The Company now distributes products of major insurance companies through
26

its subsidiary India Infoline Insurance Brokers Ltd. Customers can choose
from a wide bouquet of products from several insurance companies including
Max New York Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz
Life, Birla Sunlife, Life Insurance Corporation, Kotak Life Insurance and others.

Wealth Management Service

IIFL offers private wealth advisory services to high-net-worth individuals (HNI)
and corporate clients under the IIFL Private Wealth brand. IIFL Private Wealth
is managed by a qualified team of MBAs from IIMs and premier institutes with
relevant industry experience. The team advises clients across asset classes like
sovereign and quasi-sovereign debt, corporate and collateralised debt, direct
equity, ETFs and mutual funds, third party PMS, derivative strategies, real
estate and private equity. It has developed innovative products structured on
the fixed income side.
It also has tied up with Interactive Brokers LLC to strengthen its execution
platform and provide investors with a global investment platform.

Investment Banking
IIFLs investment banking division was launched in 2006. The business
leverages upon its strength of research and placement capabilities of the
institutional and retail sales teams. Our experienced investment banking team
possesses the skill-set to manage all kinds of investment banking transactions.
27

Our close interaction with investors as well as corporates helps us understand

and offer tailor-made solutions to fulfill requirements.
The Company possesses strong placement capabilities across institutional, HNI
and retail investors. This makes it possible for the team to place large issues
with marquee investors.
INDUSTRY OVERVIEW:
Stock Market
The term the stock market is a concept for the mechanism that enables the
trading of company stocks (collective shares) and other securities. The size of
the 'stock market' is estimated at about $51 trillion. The stocks are listed and
traded on stock exchanges which are entities specialized in the business of
bringing buyers and sellers of stocks and securities together.
Participants in the stock market range from small individual stock investors to
large hedge fund traders, who can be based anywhere. Their orders usually end
up with a professional at a stock exchange, who executes the order.
Some exchanges are physical locations where transactions are carried out on a
trading floor, by a method known as open outcry (e.g.: -New York stock
exchange). This type of auction is used in stock exchanges and commodity
exchanges where traders may enter "verbal" bids and offers simultaneously.
The other type of exchange is a virtual kind, composed of a network of

28

computers where trades are made electronically via traders at computer

terminals.
Actual trades are based on an auction market paradigm where a potential
buyer bids a specific price for a stock and a potential seller asks a specific price
for the stock. (Buying or selling at market means you will accept any bid price
or ask price for the stock.) When the bid and ask prices match, a sale takes
place on a first come first served basis if there are multiple bidders or askers at
a given price.
The purpose of a stock exchange is to facilitate the exchange of securities
between buyers and sellers, thus providing a market place (virtual or real). The
exchanges provide real-time trading information on the listed securities,
facilitating price discovery.
Market participants
Many years ago, worldwide, buyers and sellers were individual investors, such
as wealthy businessmen, with long family histories (and emotional ties) to
particular

corporations.

Over

time,

markets

have

become

more

institutionalized"; buyers and sellers are largely institutions (e.g., pension

funds, insurance companies, mutual funds, hedge funds, investor groups, and
banks). The rise of the institutional investor has brought with it some
improvements in market operations.

29

The First Stock Market

The Dutch started joint stock companies, which let shareholders invest in
business ventures and get a share of their profits - or losses. In 1602,The
Dutch East India Company issued the first shares on the Amsterdam Stock
Exchange It was the first company to issue stocks and bonds. Amsterdam
Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock
exchange to introduce continuous trade. The Dutch "pioneered short selling,
option trading, debt-equity, merchant banking, unit trusts and other
speculative instruments ". There are now stock markets in virtually every
developed and most developing economy, with the world's biggest markets
being in the United States, Canada, China, India, UK, Germany, France and
Japan
In general, the financial market divided into two parts, Money market and
capital market. Securities market is an important, organized capital market
where transaction of capital is facilitated by means of direct financing using
securities as a commodity. Securities market can be divided into a primary
market and secondary market.

Primary Market
The primary market is an intermittent and discrete market where the initially
listed shares are traded first time, changing hands from the listed company to
the investors. It refers to the process through which the companies, the issuers
30

of stocks, acquire capital by offering their stocks to investors who supply the
capital. In other words primary market is that part of the capital markets that
deals with the issuance of new securities. Companies, governments or public
sector institutions can obtain funding through the sale of a new stock or bond
issue. This is typically done through a syndicate of securities dealers. The
process of selling new issues to investors is called underwriting. In the case of
a new stock issue, this sale is called an initial public offering (IPO). Dealers
earn a commission that is built into the price of the security offering, though it
can be found in the prospectus.
Secondary Market
The secondary market is an on-going market, which is equipped and organized
with a place, facilities and other resources required for trading securities after
their initial offering. It refers to a specific place where securities transaction
among many and unspecified persons is carried out through intermediation of
the securities firms, i.e., a licensed broker, and the exchanges, a specialized
trading organization, in accordance with the rules and regulations established
by the exchanges.
A bit about history of stock exchange they say it was under a tree that it all
started in 1875.Bombay Stock Exchange (BSE) was the major exchange in
India till 1994.National Stock Exchange (NSE) started operations in 1994.
NSE was floated by major banks and financial institutions. It came as a result
of Harshad Mehta scam of 1992. Contrary to popular belief the scam was more
31

of a banking scam than a stock market scam. The old methods of trading in
BSE were people assembling on what as called a ring in the BSE building. They
had a unique sign language to communicate apart from all the shouting.
Investors weren't allowed access and the system was opaque and misused by
brokers. The shares were in physical form and prone to duplication and fraud.
NSE was the first to introduce electronic screen based trading. BSE was forced
to follow suit. The present day trading platform is transparent and gives
investors prices on a real time basis. With the introduction of depository and
mandatory dematerialization of shares chances of fraud reduced further. The
trading screen gives you top 5 buy and sell quotes on every scrip.
A typical trading day starts at 10 ending at 3.30. Monday to Friday. BSE has
30 stocks which make up the Sensex .NSE has 50 stocks in its index called
Nifty. FII s Banks, financial institutions mutual funds are biggest players in the
market. Then there are the retail investors and speculators. The last ones are
the ones who follow the market morning to evening; Market can be very
addictive like blogging though stakes are higher in the former.
Origin of Indian Stock Market
The origin of the stock market in India goes back to the end of the eighteenth
century when long-term negotiable securities were first issued. However, for all
practical purposes, the real beginning occurred in the middle of the nineteenth
century after the enactment of the companies Act in 1850, which introduced

32

the features of limited liability and generated investor interest in corporate

securities.
An important early event in the development of the stock market in India was
the formation of the native share and stock brokers 'Association at Bombay in
1875, the precursor of the present day Bombay Stock Exchange. This was
followed by the formation of associations/exchanges in Ahmedabad (1894),
Calcutta (1908), and Madras (1937). In addition, a large number of ephemeral
exchanges emerged mainly in buoyant periods to recede into oblivion during
depressing times subsequently.
Stock exchanges are intricacy inter-woven in the fabric of a nation's economic
life. Without a stock exchange, the saving of the community- the sinews of
economic progress and productive efficiency- would remain underutilized. The
task of mobilization and allocation of savings could be attempted in the old
days by a much less specialized institution than the stock exchanges. But as
business and industry expanded and the economy assumed more complex
nature, the need for 'permanent finance' arose. Entrepreneurs needed money
for long term whereas investors demanded liquidity the facility to convert
their investment into cash at any given time. The answer was a ready market
for investments and this was how the stock exchange came into being.
Stock exchange means anybody of individuals, whether incorporated or not,
constituted for the purpose of regulating or controlling the business of buying,
selling or dealing in securities. These securities include:
33

i. Shares, scrip, stocks, bonds, debentures stock or other marketable

securities of a like nature in or of any incorporated company or other
body corporate;
ii. Government securities; and
iii. Rights or interest in securities.
The Bombay Stock Exchange (BSE) and the National Stock Exchange of India
Ltd (NSE) are the two primary exchanges in India. In addition, there are 22
Regional Stock Exchanges. However, the BSE and NSE have established
themselves as the two leading exchanges and account for about 80 per cent of
the equity volume traded in India. The NSE and BSE are equal in size in terms
of daily traded volume. The average daily turnover at the exchanges has
increased from Rs 851 crore in 1997-98 to Rs 1,284 crore in 1998-99 and
further to Rs 2,273 crore in 1999-2000 (April - August 1999). NSE has around
1500 shares listed with a total market capitalization of around Rs 9, 21,500
crore.
The BSE has over 6000 stocks listed and has a market capitalization of around
Rs 9, 68,000 crore. Most key stocks are traded on both the exchanges and
hence the investor could buy them on either exchange. Both exchanges have a
different settlement cycle, which allows investors to shift their positions on the
bourses. The primary index of BSE is BSE Sensex comprising 30 stocks. NSE
has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. The BSE
Sensex is the older and more widely followed index.

34

Both these indices are calculated on the basis of market capitalization and
contain the heavily traded shares from key sectors. The markets are closed on
Saturdays and Sundays. Both the exchanges have switched over from the open
outcry trading system to a fully automated computerized mode of trading
known as BOLT (BSE on Line Trading) and NEAT (National Exchange
Automated Trading) System.
It facilitates more efficient processing, automatic order matching, faster
execution of trades and transparency; the scrip's traded on the BSE have been
classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A' group shares
represent those, which are in the carry forward system (Badla). The 'F' group
represents the debt market (fixed income securities) segment. The 'Z' group
scrip's are the blacklisted companies. The 'C' group covers the odd lot
securities in 'A', 'B1' & 'B2' groups and Rights renunciations. The key regulator
governing Stock Exchanges, Brokers, Depositories, Depository participants,
Mutual Funds, FIIs and other participants in Indian secondary and primary
market is the Securities and Exchange Board of India (SEBI) Ltd.
Brief History of Stock Exchanges
The world's foremost marketplace New York Stock Exchange (NYSE), started its
trading under a tree (now known as 68 Wall Street) over 200 years ago?
Similarly, India's premier stock exchange Bombay Stock Exchange (BSE) can
also trace back its origin to as far as 125 years when it started as a voluntary
non-profit making association.
35

News on the stock market appears in different media every day. You hear about
it any time it reaches a new high or a new low, and you also hear about it daily
in statements like 'The BSE Sensitive Index rose 5% today'. Obviously, stocks
and stock markets are important. Stocks of public limited companies are
bought and sold at a stock exchange. But what really are stock exchanges?
Known also as the stock market or bourse, a stock exchange is an organized
marketplace for securities (like stocks, bonds, options) featured by the
centralization of supply and demand for the transaction of orders by member
brokers, for institutional and individual investors.
The exchange makes buying and selling easy. For example, you don't have to
actually go to a stock exchange, say, BSE - you can contact a broker, who does
business with the BSE, and he or she will buy or sell your stock on your
behalf.
Market Basics
Electronic trading: Electronic trading eliminates the need for physical trading
floors. Brokers can trade from their offices, using fully automated screen-based
processes. Their workstations are connected to a Stock Exchange's central
computer via satellite using Very Small Aperture Terminus (VSATs). The orders
placed by brokers reach the Exchange's central computer and are matched
electronically.
Exchanges in India: The Stock Exchange, Mumbai (BSE) and the National
Stock Exchange (NSE) are the country's two leading Exchanges. There are 20
36

other regional Exchanges, connected via the Inter-Connected Stock Exchange

(ICSE). The BSE and NSE allow nationwide trading via their VSAT systems.

BSE INDICES
INDEX:
An Index is used to summarize the price movements of a unique set of goods in
the financial, commodity, forex or any other market place. Financial indices are
created to measure price movements of stocks, bonds, T-bills and other type of
financial securities. More specifically, a stock index is created to provide
investors with the information regarding the average share price in the stock
market. Broad indices are expected to capture the overall behavior of equity
market and need to represent the return obtained by typical portfolios in the
country
SENSEX:
SENSEX is India's first Index compiled in 1986. It is a basket of 30 constituent
stocks representing a sample of large, liquid and representative companies.
The base year of BSE-SENSEX is 1978-79 and the base value is 100. The index
is widely reported in both domestic and international markets through print as
well as electronic media. Due to its wide acceptance amongst the investors,
SENSEX is regarded to be the pulse of the Indian stock market. All leading

37

business newspapers and the business channels report SENSEX, as it is the

language that all investors understand.
As the oldest index in the country, it provides the time series data over a fairly
long period of time (from 1979 onwards) to be used for various research
purposes. The Index Cell of the exchange is responsible for the day-to-day
maintenance of the index within the broad index policy set by the Index
Committee. The Index Cell ensures that the SENSEX and all other BSE indices
maintain their benchmark properties by striking a delicate balance between
frequent replacements in index and maintaining its historical continuity.
SENSEX is calculated using a market capitalization weighted method. As per
this methodology, the level of the index reflects the total market value of all 30component stocks from different industries related to particular base period.
The total market value of a company is determined by multiplying the price of
the stock by the number of shares outstanding Statisticians call the index of a
set of combined variables (such as price and No. of shares) a composite index.
An indexed number is used to represent the results of this calculation in order
to make the value easier to work with and track over a time. It is much easier
to graph a chart based on indexed values than one used on actual values.
World over majority of the well known indices are constructed using Market
Capitalization Weighted Method.
In practice, the daily calculation of SENSEX is done by dividing the aggregate
market value of the 30 Companies in the index by a number called the Index
38

Divisor. The Divisor is the only link to the original based period value of the
SENSEX. The Divisor keeps the Index comparable over a period of time and the
reference point for the entire index maintenance adjustments. SENSEX is
widely used to describe the mood in the Indian Stock Markets.

39

CHAPTER IV
ANALYSIS & INTERPRETATION
INDIAINFOLINE STOCK PRICES AS ON 2007
Series Month

Open

High

Low

Close

No.

of Total Turnover

Price

Price

Price

Price

Shares

(Rs.)

EQ

Jan-07

306

399

304.15 315.85

6744678

2347990466

EQ

Feb-07

320

398

294.85 295.9

4510814

1562295689

EQ

Mar-07

299

368

255.1

1425054

441676003

EQ

Apr-07

330

477.8

321.55 427.4

2708724

1124922540

EQ

May07

434.4

676

403

660.4

9637724

5647122429

EQ

Jun-07

665

793.8

583

713

15044910

10513550602

EQ

Jul-07

719.8

853

698

751.85

15269898

11928987905

EQ

Aug-07

749

752

508.1

678.7

9761943

6060595210

EQ

Sep-07

689.9

888.75 660

838.55

8539837

6755557814

EQ

Oct-07

846.8

1150.5 791

1100.1

6497107

6176334340

EQ

Nov-07

1135.65 1318

910

1241.9

2096500

2416961018

EQ

Dec-07

1255

1251

1927.9

2272256

3482516223

1967

333.55

40

Closed price
2500
2000
1500
1000
500
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

DETEMINATION OF RISK AND RETURNS (2007)

Month

BSE-500

Indiainfoline

Index returns

Indiainfoline returns

Jan

5,408.71

315.85

0.095306

0.067421

Feb

4,938.08

295.9

-0.00349

-0.11288

Mar

4,955.39

333.55

-0.06696

-0.21958

Apr

5,311.03

427.40

-0.05948

-0.35282

May

5,646.90

660.40

-0.02326

-0.07377

Jun

5,781.37

713.00

-0.04648

-0.05167

Jul

6,063.20

751.85

0.019006

0.10778

Aug

5,950.11

678.70

-0.12157

-0.19063

Sep

6,773.54

838.55

-0.12995

-0.23775

Oct

7,785.22

1,100.10

-0.01027

-0.11418

Nov

7,865.98

1,241.90

-0.08455

-0.35583

Dec

8,592.43

1,927.90

41

Index

Indiainfoline

variance

Variance

0.004

0.022

Systematic risk
0.01

Covariance

0.006

Beta

1.59

Unsystematic risk
0.01

Sdx

0.06

Sdy

0.15

Total risk
0.02

Alpha

Co. of

Co. of

correlation

determination

-1.5

0.752

0.56

Returns
-1.5

Interpretation: From the above table, it is understood that the - value of

INDIAINFOLINE is around 1.59 and that explains high volatility in the stock
price. This high volatility in the stock price indicates the high risk in the
investments. Also the risk and returns values of INDIA INFOLINE are 0.02 and
-1.5respectively.

42

INDIAINFOLINE STOCK PRICES AS ON 2008

Series Month

Open

High

Low

Close

No. of

Total

Price

Price

Price

Price

Shares

Turnover
(Rs.)

EQ

Jan-08

1931

1974.9

1000

1178.7

2206055

3291932426

EQ

Feb-08

1180

1282.4

970.25 1117.05 1298409

1464432233

EQ

Mar-08

1071

1071

660

770.15

2606405

2192487858

EQ

Apr-08

780

1063.15 730

944.85

2947070

2553850505

EQ

May-08

972.35 1009.9

705

723.8

1781274

1547397736

EQ

Jun-08

727

740

496.1

502

2001036

1259639084

EQ

Jul-08

490

738

475

647.4

3259187

1975462006

EQ

Aug-08

640

767.7

124.3

128.6

4865307

1158213376

EQ

Sep-08

127.65 143.25

85.35

97.35

7214924

808381025

EQ

Oct-08

100

105

35.6

56.75

14868180

889680490

EQ

Nov-08

59

66

34.4

35.9

10285699

520827263

EQ

Dec-08

37

54.2

35

51.1

21913727

1007657685

43

Closed price
1400
1200
1000
800
600
400
200
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

DETEMINATION OF RISK AND RETURNS (2008)

Month

BSE-500

Indiainfoline

Index returns

Indiainfoline returns

Jan

6,124.82

1,178.70

-0.0725

0.05519

Feb

6,603.60

1,117.05

0.143776

0.450432

Mar

5,773.51

770.15

-0.04161

-0.1849

Apr

6,024.18

944.85

-0.06271

0.305402

May

6,427.23

723.80

0.236089

0.441833

Jun

5,199.65

502.00

0.069381

-0.22459

Jul

4,862.30

647.40

-0.10364

4.034215

Aug

5,424.47

128.60

0.16646

0.321007

Sep

4,650.37

97.35

0.603974

0.715419

Oct

2,899.28

56.75

-0.06412

0.58078

Nov

3,097.91

35.90

-0.00179

-0.29746

Dec

3,103.47

51.10

44

Index

Indiainfoline Covariance Beta Sdx

Sdy Alpha Co. of

variance variance
0.043

1.44

Co. of

correlation determination
-0.029

0.20

1.2

6.19

-0.12

0.016

0.68

Systematic Risk
0.020

Unsystematic Risk
1.420

Total Risk
1.440

Returns
6.19

Interpretation:
From the above table, it is understood that the - value of INDIAINFOLINE is
around -0.06 8 and that explains low volatility in the stock price. This low
volatility in the stock price indicates the low risk in the investments. Also the
risk and returns values of INDIAINFOLINE are 1.44 and 6.19 respectively.

45

INDIAINFOLINE STOCK PRICES AS ON 2009

Series

Month

Open

High

Low

Close

No.

of

Total

Price

Price

Price

Price

Shares

(Rs.)

Turnover

EQ

Jan-09

51.95

71.4

41

45.45

30649444

1657960895

EQ

Feb-09

45.5

56.3

41.05

49.55

15405999

758279267

EQ

Mar-09

48.5

65.6

40

58.8

11826215

648940547

EQ

Apr-09

59.9

88.75

56.8

76.4

28258634

2125643358

EQ

May-09 77.2

166.75 77.2

151.8

29789157

3375182642

EQ

Jun-09

156

173.25 110.25 121.8

28111339

3784513881

EQ

Jul-09

123

142.45 107.5

136.5

36258412

4709355349

EQ

Aug-09

138.25 148.7

121

135.8

43220131

5820964292

EQ

Sep-09

137.3

155.9

129

148.7

23847938

3411929079

EQ

Oct-09

149.4

163.7

126.2

128.9

14734394

2175912513

EQ

Nov-09

130

159

121

131.9

11564471

1586111799

EQ

Dec-09

132.8

142.25 111.6

129.8

9440101

1261479239

Closed Price
160
140
120
100
80
60
40
20
0
Jan Feb Mar Apr MayJun Jul Aug Sep Oct Nov Dec

46

DETEMINATION OF RISK AND RETURNS (2009)

Month

BSE-500

Jan

3,426.76

45.45

0.060224

-0.08274

Feb

3,232.11

49.55

-0.08271

-0.15731

Mar

3,523.53

58.8

-0.14899

-0.23037

Apr

4,140.42

76.40

-0.24996

-0.49671

May

5,520.25

151.80

0.005138

0.246305

Jun

5,492.03

121.80

-0.07547

-0.10769

Jul

5,940.38

136.50

-0.01724

0.005155

Aug

6,044.61

135.80

-0.07755

-0.08675

Sep

6,552.75

148.70

0.066801

0.153607

Oct

6,142.43

128.90

-0.06721

-0.02274

Nov

6,584.98

131.90

-0.0376

0.016179

Dec

6,842.25

129.80

Index

Indiainfoline

variance

variance

0.008

0.038

Indiainfoline

Covariance

0.013

Beta

1.6

Index returns

Sdx

Sdy

Indiainfoline returns

Alpha

0.09 0.19 -0.76

Co. of

Co. of

correlation

determination

0.84

0.71

47

Systematic risk

Unsystematic risk

Total risk

Returns

0.022

0.015

0.037

-0.76

Interpretation:
From the above table, it is understood that the - value of INDIAINFOLINE is
around 1.6 and that explains high volatility in the stock price. This high
volatility in the stock price indicates the high risk in the investments. Also the
risk and returns values of INDIAINFOLINE are 0.037 and -0.76 respectively.

48

INDIAINFOLINE STOCK PRICES AS ON 2010

Series

Month

Open

High

Low

Close

No.

Price

Price

Price

Price

Shares

of

Total
Turnover (Rs.)

EQ

Jan-10

130.15 146.4

111.1

45.45

11230886 1523534881

EQ

Feb-10

117.7

121.7

107

49.55

5248605

600231859

EQ

Mar-10

114.8

124.8

113.2

58.8

4993102

595359981

EQ

Apr-10

115.7

123.1

106.25 76.4

4722627

538461534

EQ

May-10

108.4

112.2

94

151.8

8264856

844019513

EQ

Jun-10

96

101.9

90.1

121.8

7177462

694150248

EQ

Jul-10

97.6

104.4

89

136.5

8363662

817371295

EQ

Aug-10

90.45

109.9

90

135.8

17652200 1764582527

EQ

Sep-10

93.6

117.5

92.3

148.7

13199021 1413271938

EQ

Oct-10

113

129.6

110

128.9

6419323

EQ

Nov-10

117.45 123.95 72.55

131.9

14640660 1414731487

EQ

Dec-10

83

129.8

18495077 1507657062

92

74.1

772364913

Closed price
140
120
100
80
60
40
20
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

49

DETEMINATION OF RISK AND RETURNS (2010)

Month

BSE-500

Indiainfoline

Index returns

Indiainfoline returns

Jan

6,509.90

41

-0.0013

-0.00122

Feb

6,518.38

41.05

-0.05798

0.02625

Mar

6,919.55

40

-0.01748

-0.29577

Apr

7,042.68

56.8

0.03838

-0.26425

May

6,782.37

77.2

-0.04369

-0.29977

Jun

7,092.20

110.25

-0.01569

0.025581

Jul

7,205.22

107.5

-0.01159

-0.11157

Aug

7,289.74

121

-0.08701

-0.06202

Sep

7,984.45

129

-0.00652

0.022187

Oct

8,036.88

126.2

0.04077

0.042975

Nov

7,722.05

121

-0.03002

0.084229

Dec

7,961.06

111.6

Index

Indiainfoline

variance

variance

0.001

0.021

Covariance

-0.00023

-0.83

Beta

-0.16

Sdx

Sdy

Alpha

0.03 0.14 -0.83

Co. of

Co. of

correlation

determination

-0.047

0.002

50

Systematic risk

Unsystematic risk Total risk

Returns

3.87E-05

0.021072

-0.83

0.021

Interpretation:
From the above table, it is understood that the - value of INDIAINFOLINE is
around -0.16 and that explains low volatility in the stock price. This high
volatility in the stock price indicates the low risk in the investments. Also the
risk and returns values of INDIAINFOLINE are 0.021 and -0.83 respectively.

51

INDIAINFOLINE STOCK PRICES AS ON 2011

Series

Month

Open

High

Low

Close

No. of

Price

Price

Price

Price

Shares

Total Turnover (Rs.)

EQ

Jan-11

83.5

85.85

72.4

76.05 11860777

931410257

EQ

Feb-11

76.65 79.75

62.1

74.25 6646853

476384682

EQ

Mar-11

74.75 83.2

66.8

74.05 3821781

276560096

EQ

Apr-11

74.5

70.9

72.15 2048515

157869563

EQ

May-11

72.05 80.3

66.7

78.55 5559249

421713237

EQ

Jun-11

78.15 91.2

74

88.05 7406521

633160447

EQ

Jul-11

89.15 90.75

79.65

83.55 1190763

103127864

EQ

Aug-11

83

83

66.5

73.9

2394961

178042623

EQ

Sep-11

74

78.7

67.9

69.75 3256252

246760888

EQ

Oct-11

69

77.85

67

74.25 1996690

140174296

EQ

Nov-11

73.35 74

53.5

59.5

EQ

Dec-11

61

42.9

43.55 712507

84

62.35

1339032

81874271
37670405

Closed price
100
80
60
40
20
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

52

DETEMINATION OF RISK AND RETURNS (2011)

Month

Bse-500

Indiainfoline

Index returns

Indiainfoline returns

Jan

7,128.29

76.05

0.040566

0.024242

Feb

6,850.40

74.25

-0.07891

0.002701

Mar

7,437.26

74.05

0.001363

0.026334

Apr

7,427.14

72.15

0.02672

-0.08148

May

7,233.85

78.55

-0.00433

-0.10789

Jun

7,265.32

88.05

0.021657

0.05386

Jul

7,111.31

83.55

0.096203

0.130582

Aug

6,487.22

73.9

0.015888

0.059498

Sep

6,385.76

69.75

-0.05582

-0.06061

Oct

6,763.26

74.25

0.10565

0.247899

Nov

6,117.00

59.5

0.058546

0.366246

Dec

5,778.68

43.55

Index

Indiainfoline

Co-

variance

variance

variance

0.003

0.020

0.004

Beta

Sdx

Sdy

Alpha

1.47 0.056 0.142 0.66

Co. of

Co. of

correlation

determination

0.63

0.408

53

Systematic risk

Unsystematic risk

Total risk

Returns

0.006

0.013

0.019

0.66

Interpretation:
From the above table, it is understood that the - value of INDIAINFOLINE is
around 1.47 and that explains high volatility in the stock price. This high
volatility in the stock price indicates the high risk in the investments. Also the
risk and returns values of INDIAINFOLINE are 0.019 and 0.66 respectively.

54

CHAPTER V
FINDINGS & SUGGESTIONS
Findings:
The values of Beta, Risk and Returns of INDIAINFOLINE in the following table
Year

Beta

Risk

Returns

2007

1.59

0.02

-1.5

2008

-0.68

1.44

6.19

2009

1.6

0.03

-0.76

2010

-0.16

0.02

-0.83

2011

1.47

0.019 0.66

Suggestions:
The Company showed a beta value of 1.47. This indicates low volatility in the
stock price. Hence, investors who seek high returns with less risk will invest in
this company. Each and every investor wants high return with minimum risk,
so the company needs to maintain the beta value in the same manner i.e.,
constant in order to attract more number of investors.
The company shows negative returns in the last two years. This shows that
investors who want to have safe return must think twice before selecting sector
portfolio for a long term investment.

55

CHAPTER VI
CONCLUSION
The study on Risk and Return analysis in Equities at Indiainfoline was
undertaken with an objective of getting an insight into the concept of
investments, the risks and the returns involved. The study aims to determine
the risk involved in the investment and the factors affecting the risk. The study
is confined to only one company.
The study is done using the NIFTY values and other related data from the
Stock Exchanges. The data of the Indiainfoline is collected. The entire study is
based on the secondary data only. The analytical tools used for the study are
risk and return analysis. The study is done at Hyderabad for a period of
60days. The study had few limitations which were taken care of.
The information collected was analyzed using appropriate technique risk and
return analysis. Form the analysis; it was found that the company showed low
level of risk and negative returns in the years 2007, 09 and 10. Later on, the
risk increased greatly and so the returns. In 2008, the company showed high
return of 6.19 with a risk of 1.44.
Finally, it is suggested to the company to maintain a low beta value around 1
in order to attract more number of the investors. It should also see that the
stock prices do not fluctuate a lot which may cause suspicion in the investors
and reduce their interest to invest in the company. The company should also
go for frequent portfolio checking to maintain the higher returns.
56

CHAPTER VII
Bibliography
1. S. Kelvin, Security analysis and portfolio management, Prentice-Hall of
India, 1st edition, 2009.
2. Rohini singh, Security analysis and portfolio management, Excel books,
1st edition, 2009
3. Dr. Maheswari S.N, Management Accounting and Financial control,
sultan chand and sons, 1992.
Webliography
1. www.indiainfoline.com
2. www.bse.com
3. www.nse.com
4. www.moneycontrol.com
5. www.wikipedia.com
6. www.investopedia.com

57