A RESEARCH STUDY

On
LISTING OF SECURITIES IN A RECOGNIZED
STOCK EXCHANGE AND SIGNIFICANCE OF
BETA IN STOCK SELECTION

Submitted byGyandip Patra

Roll no.14

Introduction
The Gauhati Stock Exchange Ltd.
The Gauhati Stock Exchange (GSE) was incorporated on 29th of
November, 1983 as the 13th Stock Exchange of the country and it
was recognized by the Govt. of India on 1st of May, 1984. It is the
only stock exchange in the country which owns such a huge area
comprising of 8 states of the North Eastern Region. As per Govt.
of India notification 49% of shares will be in the hands of members
and 51% has to be disinvestments amongst the public other than
the trading members.
The Gauhati Stock Exchange ltd. along with 14 other regional
stock exchanges has formed ISE (Inter-connected Stock Exchange
of India ltd.) at Vashi Navi Mumbai. ISS (ISE Securities and
Services Ltd.) functions as a subsidiary organization of ISE.The
members of GSE access to these capital markets which provide
higher volume and liquidity.At present Guwahati have 134
members

Listing
Listing means admission of securities to dealings on a
recognized stock exchange. The securities may be of any public
limited company, central or state government, quasi
governmental and other financial governmental and other
financial institutions etc. Listing of securities on the recognized
stock exchange means that they are admitted on a recognized
stock exchange which provides a platform for purchase and
sale of securities. The shares of these listed companies are
traded in the stock exchange, thus getting liquidity. Besides, it is
one of the most important departments of a Stock exchange
because listing fee is one of the main sources of income for the
exchange. Currently the total no. of Listed Company in Gauhati
Stock Exchange Ltd. is 237.

The objectives of listing are mainly to:

Provide liquidity to securities
Mobilize savings for economic development
Protect interest of investors by ensuring full disclosures.

Listing Procedure
An issuer has to take various steps prior to making an application for
listing its securities in the stock exchanges. The various steps to be taken
include:

Approval of Memorandum and Articles of Association

Approval of draft prospectus
Submission of Application
Listing conditions and requirements

If the company fulfils the criteria, the following

information are required for further processing:

1. A brief note on the promoters and

management
2. Company profile
3. Copies of the Annual Report for last 3 years
4. Copies of Draft Offer Document
5. Memorandum & Article of Association

Eligibility criteria for listing

The basic requirements are given below:

Minimum Listing requirements of new companies.

Minimum Listing requirements of companies already
listed on the other stock exchanges.
Minimum requirements for companies delisted by the
Stock Exchange seeking relisting on the Stock Exchange.
Permission to use the name of the Stock Exchange in an
Issuer Companys Prospectus.

Eligibility criteria for listing

Submission of Letter of Application

Allotment of Securities
Trading Permission
Requirement of 1% Security

Listing fees
All listed companies have to pay annual listing fees by 30th April of every
financial year to the exchange as per schedule of listing fees prescribed
from time to time.
Schedule of listing fees for listed companies in Gauhati Stock
Exchange Ltd.

A. Initial fees

Rs.7,500

B. Annual listing fees

a) Companies with paid up share and/or Debenture

Capital up to Rs.3 crores
Rs.10, 000
b) Above Rs.3 crores and upto Rs.5 crores

Rs.15, 000

c) Above Rs.5 crores and upto Rs.10 crores

Rs.20, 000

d) Above Rs.10 crores and upto Rs.20 crores

Rs.35, 000

e) Above Rs.20 crores and upto Rs.50 crores

Rs.50, 000

f) Above Rs.50 crores

Rs.80, 000

Growth of listed companies (1985-2010)

year

Trend of listed companies in GSE

No. of listed company

listed company

2500
2000
1500
1000
500
0
1

11

13
year

15

17

19 21

23

25

Beta Analysis
Beta
Beta is the statistical measure of the risk of an investment. It
measures the volatility of, either a stock or a fund, in relation to
the overall market. Beta is used by investors to assess risk in
the stocks they buy or sell. The overall market has a beta of 1
and individual stocks are ranked according to how much they
deviate from the market.

The importance of Beta

High beta stocks are supposed to be riskier but provide a
potential for higher returns; low-beta stocks pose less risk but
also lower returns. Beta measures a stock's volatility, the
degree to which its price fluctuates in relation to the overall
market. In other words, it gives a sense of the stock's market
risk compared to the greater market.

Beta and Risk

Beta is known to be a great way to measure the risk of any
stock.
Of course, there is more to it than that. Risk also implies
return. Stocks with a high beta should have a higher return
than the market. If you are accepting more risk, you should
expect more reward. For example, if the market with a beta
of 1 is expected to return 8%, a stock with a beta of 1.5
should return 12%. If you dont see that level of return,
then the stock is not a good investment possibility. Stocks
with a beta below 1 may be a safer investment (at least by
this one measure) and you should expect a lower return.

Beta calculation
The systematic risk of a security is measured by a statistical
measure called Beta. The input data required for the calculation
of beta are the historical data of returns of the individual
security as well as the returns of a representative stock
market index. Two statistical methods may be used for the
calculation of Beta, namely the correlation method or the
regression method (y= a + bx).

Beta = Covariance (Rate of Return of Stock,

Rate of Return of Market) / Variance of Market

Monthly closing prices of Sensex & Stock (2008-10)

DATE

SENSEX

Stock( Reliance ind.)

Jan-08

17,648.71

2,495.00

Feb-08

17,578.72

2,433.80

Mar-08

15,644.44

2,252.70

Apr-08

17,287.31

2,608.00

May-08

16,415.57

2,401.10

Jun-08

13,461.60

2,083.00

Jul-08

14,355.75

2,214.00

Aug-08

14,564.53

2,125.30

Sep-08

12,860.43

1,945.10

Oct-08

9,788.06

1,365.00

Nov-08

9,092.72

1,135.00

Dec-08

9,647.31

1,232.55

Jan-09

9,424.24

1,329.80

Feb-09

8,891.61

1,255.50

Mar-09

9,708.50

1,522.10

Apr-09

11,403.25

1,810.20

May-09

14,625.25

2,258.00

Jun-09

14,493.84

2,029.00

Monthly closing prices of Sensex & Stock (2008-10)

Jul-09

15,670.31

1,974.00

Aug-09

15,666.64

1,998.70

Sep-09

17,126.84

2,199.00

Oct-09

15,896.28

1,927.00

Nov-09

16,926.22

1,058.00

Dec-09

17,464.81

1,093.35

Jan-10

16,357.96

1,085.90

Feb-10

16,429.55

979.3

Mar-10

17,527.77

1,074.50

Apr-10

17,558.71

1,031.55

May-10

16,944.63

1,046.50

Jun-10

17,700.90

1,089.15

Jul-10

17,868.29

1,009.00

Aug-10

17,971.12

915.9

Sep-10

20,069.12

987.3

Oct-10

20,032.34

1,097.15

Nov-10

19,521.25

986.4

Dec-10

20,509.09

989.5

Return on stock and market index (2008-2010)

SENSEX

Stock (Reliance Ind.)

Feb-08

-0.396572894

-2.452905812

Mar-08

-11.00353154

-7.441038705

Apr-08

10.5013027

15.77218449

May-08

-5.042658459

-7.933282209

Jun-08

-17.99492799

-13.24809462

Jul-08

6.642226778

6.289006241

Aug-08

1.454330146

-4.006323397

Sep-08

-11.70034323

-8.478802993

Oct-08

-23.89010321

-29.82365945

Nov-08

-7.103961357

-16.84981685

Dec-08

6.099275024

8.594713656

Jan-09

-2.312250772

7.890146444

Feb-09

-5.651702418

-5.587306362

Mar-09

9.187200068

21.2345679

Apr-09

17.45635268

18.92779712

May-09

28.25510271

24.73759806

Jun-09

-0.898514555

-10.14171833

Jul-09

8.117034547

-2.710694924

DATE

Jan-08

Return on stock and market index (2008-2010)

Aug-09

-0.023420085

1.251266464

Sep-09

9.320441396

10.02151398

Oct-09

-7.184979833

-12.36925875

Nov-09

6.479125934

-45.09600415

Dec-09

3.181986291

3.34120983

Jan-10

-6.337601153

-0.681392052

Feb-10

0.437646259

-9.816741873

Mar-10

6.684419232

9.72122945

Apr-10

0.176519888

-3.997208004

May-10

-3.497295644

1.449275362

Jun-10

4.463183911

4.075489728

Jul-10

0.94565813

-7.35894964

Aug-10

0.575488757

-9.226957384

Sep-10

11.6742863

7.795610875

Oct-10

-0.183266631

11.12630406

Nov-10

-2.551324508

-10.09433532

Dec-10

5.06033169

0.314274128

Reliance Beta Analysis

Reliance beta analysis

y = 0.9173x - 2.3758
2

R = 0.415
30
20

sensex

10
0
-30

-20

-10

-10 0

10

20

30

40

-20
-30
-40
-50
Reliance Industries

Beta () = 0.917
R square = 0.415
This Beta represents the stock that moves similar to the market but its less volatile. Similarly, the R
square indicates that the variance of the stock is highly correlated to the variance of the Sensex

Monthly closing prices of Sensex & Stock (2008-10)

DATE

SENSEX

Stock (Infosys)

8-Jan

17,648.71

1529.85

8-Feb

17,578.72

1521.76

8-Mar

15,644.44

1433.5

8-Apr

17,287.31

1754

8-May

16,415.57

1975

8-Jun

13,461.60

1726

8-Jul

14,355.75

1750

8-Aug

14,564.53

1404

8-Sep

12,860.43

1385.25

8-Oct

9,788.06

1321.2

8-Nov

9,092.72

1245

8-Dec

9,647.31

1306.4

9-Jan

9,424.24

1116.1

9-Feb

8,891.61

1227

9-Mar

9,708.50

1326

9-Apr

11,403.25

1,493.00

9-May

14,625.25

1,599.95

9-Jun

14,493.84

2,061.55

9-Jul

15,670.31

2,130.00

Monthly closing prices of Sensex & Stock (2008-10)

9-Aug

15,666.64

2,303.90

9-Sep

17,126.84

2,214.70

9-Oct

15,896.28

2289.24

9-Nov

16,926.22

2,384.25

9-Dec

17,464.81

2,604.70

10-Jan

16,357.96

2,635.00

10-Feb

16,429.55

2,600.00

10-Mar

17,527.77

2,615.00

10-Apr

17,558.71

2,728.50

10-May

16,944.63

2,668.80

10-Jun

17,700.90

2,760.65

10-Jul

17,868.29

2,710.00

10-Aug

17,971.12

3,042.95

10-Sep

20,069.12

2,967.05

10-Oct

20,032.34

3,040.05

10-Nov

19,521.25

3,052.20

10-Dec

20,509.09

3,435.10

Return on stock and market index (2008-2010)

DATE

SENSEX

Stock (Infosys)

8-Jan
8-Feb

-0.396572894

-0.528810014

8-Mar

-11.00353154

-5.799863316

8-Apr

10.5013027

22.35786536

8-May

-5.042658459

12.59977195

8-Jun

-17.99492799

-12.60759494

8-Jul

6.642226778

1.390498262

8-Aug

1.454330146

-19.77142857

8-Sep

-11.70034323

-1.335470085

8-Oct

-23.89010321

-4.623714131

8-Nov

-7.103961357

-5.767484105

8-Dec

6.099275024

4.931726908

9-Jan

-2.312250772

-14.56674832

9-Feb

-5.651702418

9.936385629

9-Mar

9.187200068

8.068459658

9-Apr

17.45635268

12.59426848

9-May

28.25510271

7.163429337

9-Jun

-0.898514555

28.85090159

9-Jul

8.117034547

3.320317237

Return on stock and market index (2008-2010)

9-Aug

-0.023420085

8.164319249

9-Sep

9.320441396

-3.87169582

9-Oct

-7.184979833

3.36569287

9-Nov

6.479125934

4.150285684

9-Dec

3.181986291

9.24609416

10-Jan

-6.337601153

1.16328176

10-Feb

0.437646259

-1.328273245

10-Mar

6.684419232

0.576923077

10-Apr

0.176519888

4.340344168

10-May

-3.497295644

-2.188015393

10-Jun

4.463183911

3.441621703

10-Jul

0.94565813

-1.834712839

10-Aug

0.575488757

12.28597786

10-Sep

11.6742863

-2.49429008

10-Oct

-0.183266631

2.460356246

10-Nov

-2.551324508

0.399664479

10-Dec

5.06033169

12.54504947

Infosys Beta Calculation

Infosys Beta Analysis

y = 0.8548x + 1.5462
R2 = 0.7167

40
20
0
-100

-80

-60

-40

sensex

-120

-20

-20

20

40

-40
-60
-80
-100
-120
Infosys

Beta () = 0.8548
R square = 0.7167
This Beta represents the stock that moves similar to the market but its less volatile.
Similarly, the R square indicates that the variance of the stock is highly correlated to
the variance of the Sensex.

Top ten ranking index stocks according to Beta and return of

stocks in 2005

Company

Return (%)

Beta

Rank

Jaiprakash

109.1129

1.1597

L&T

86.527764

0.8942

M&M

86.267734

0.9746

BHEL

79.800259

0.9723

Satyam

79.07767

1.32

Reliance Ind.

71.067383

1.0525

ITC

60.815402

0.7751

Bharti Airtel

57.925994

1.0845

Acc

57.279552

1.0433

HDFC

56.742523

0.4678

10

Top ten ranking index stocks according to Beta and return of

stocks in 2005

120
100
80
Return(%)

60

Beta

40
20

DF
C
H

Ac
c

Ai
rt e
l

IT
C

Bh
ar
ti

.
In
d
e

m
ty
a
Sa

EL

M
&M

T
L&

BH

el
ia
nc
R

Ja

ip
r

ak

as
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Top ten ranking of index stocks according to Beta and

return of stocks in 2006
company

Return (%)

Beta

Rank

Acc

101.77509

1.0429

Grasim

100.51042

1.21

Jaiprakash

87.216495

1.3876

Bharti Airtel

80.237891

0.84

M&M

76.923828

0.9867

Ambuja cement ltd

76.625

0.977

Reliance Ind.

74.8878

1.0399

BHEL

64.860832

1.08

Reliance com

62.517241

1.3041

L&T

56.417344

1.14

10

Top ten ranking of index stocks according to

Beta and return of stocks in 2006

120
100
80
Return(%)

60

Beta

40
20

Am

T
L&

EL
el
ia
nc
e
co
m

BH

lt d
el
ia
nc
e
In
d.

bu
ja

ce

en
t

&M
M

Ai
rt e
l
ar
ti

Bh

ip
r

ak

as
h

si
m
Ja

G
ra

Ac
c

Top ten ranking index stocks according to Beta and return on

stocks in year 2007

company

Return (%)

Beta

Rank

Reliance energy

308.14532

1.2519

L&T

197.98929

1.3115

Jaiprakash

192.43599

1.2

Reliance Ind.

130.01477

1.099

BHEL

124.52215

0.834

tata steel

118.53376

1.21

SBI

90.136583

1.188

DLF

84.364261

1.233

NTPC

81.854545

0.6241

HDFC

77.860681

1.099

10

Top ten ranking index stocks according to Beta and return on

stocks in year 2007

350
300
250
200

Return(%)

150

Beta

100
50

FC
D
H

TP
C
N

LF
D

I
SB

st
ee
l

ta
ta

BH

L&
T
Ja
ip
ra
ka
R
sh
el
ia
nc
e
In
d.

el
ia
nc
e

en
er
gy

Top ten ranking index stocks according to Beta and return on

stocks in year 2008

company

Return (%)

Beta

Rank

HUL

16.596639

0.6808

Ranbaxy

11.348837

0.6452

Cipla

4.3255814

0.5417

ITC

0.3537736

0.79

Satyam

-0.313901

0.738

Infosys

-4.069966

0.8109

HDFC

-7.897436

0.6924

Bharti Airtel

-8.386139

0.6216

Wipro

-10.68966

0.8

Reliance Ind.

-11.0339

1.1618

10

Top ten ranking index stocks according to Beta and return on

stocks in year 2008

20
15
10
5

Return(%)
Beta

ro
el
ia
nc
e
In
d.

W
ip

Bh

ar
ti

Ai
rt e
l

DF
C
H

In
fo
sy
s

Sa
ty
am

IT
C

a
ip
l
C

an
b
R

-5

UL

ax
y

-10
-15