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A Comparative Study on Risk & Return Analysis of Selected Stocks in India

Article · May 2018

DOI: 10.31142/ijmei/v4i5.03

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 Available online at www.rajournals.in
International
International Journal of Management and Economics Open Access
Invention
ICV: 72.76
ISSN: 2395-7220
DOI:10.31142/ijmei/v4i5.03 Page no.-
Volume: 04 Issue: 05 May, 2018 1730-1736

A Comparative Study on Risk & Return Analysis of Selected Stocks in India

Dr. S. GAUTAMI1, Dr. NALLA BALA KALYAN2
1,2
Associate Professor Department of Management Studies Sri Venkateswara College of Engineering Karakambadi Road,
Tirupati-517507

ARTICLE INFO ABSTRACT

Published Online: Stock market is a market where a number of securities are traded such as equity shares, debentures,
07 May 2018 bonds, insurance products, mutual funds etc. mostly the existing securities are traded in this
market. India has one of the oldest stock markets in Asia and this stock exchange is the Bombay
Stock Exchange which was established in 1875. It was started under the banner of “The Native
Stock and Share Brokers Association”. The main aim of this article is to study the fluctuations in
share prices of selected companies in India. The Stock exchange is a market for old securities
which have been already issued and listed on a stock exchange. These Securities are purchased and
sold continuously among investors without involvement of companies. The Stock exchange
provides not only free transferability of shares but also makes continuous evaluation of securities
traded in the market. The present study is deliberate to examine the Risk & Return Analysis of
Corresponding Author:
Selected Stocks in India. Risk may be defined as the chance of variations in actual return. Return is
Dr. NALLA BALA
KALYAN defined as the gain in the value of investment. The return on an investment portfolio helps an
investor to evaluate the financial performance of the investment.
KEYWORDS: India, Risk & Return, Stocks, Stock Market

1. INTRODUCTION Exchange in 1957. During the 1980s, however, many stock

Stock Market is a place where shares of pubic listed exchanges were established. Some of them were:
companies are traded. The primary market is where 1. Cochin Stock Exchange (1978)
companies float shares to the general public in an initial 2. Uttar Pradesh Stock Exchange (at Kanpur,1982)
public offering (IPO) to raise capital. Once new securities 3. Pune Stock Exchange(1982)
have been sold in the primary market, they are traded in the 4. Ludhiana Stock Exchange (1983)
secondary market—where one investor buys shares from 5. Jaipur Stock Exchange (1989)
another investor at the prevailing market price or at 6. Bhubaneswar Stock Exchange(1989)
whatever prices both the buyer and seller agree upon. The 7. Vadodara Stock Exchange (at Baroda,1990)
secondary market or the stock exchanges are regulated by
the regulatory authority. In India, the secondary and primary 2. NEED FOR THE STUDY
markets are governed by the Security and Exchange Board Stock Markets have existed in India for a very long time .yet
of India (SEBI). A stock exchange facilitates stock brokers the professionals in the field of finance talking negatively
to trade company stocks and other securities. A stock may about these instruments. Very important to understand what
be bought or sold only if it is listed on an exchange. Thus, it the old system was verse the new and the old system were
is the meeting place of the stock buyers and sellers. India's based on trust. They were closed group systems and hence
premier stock exchanges are the Bombay Stock Exchange deviation from truly competitive markets. Such closed
and the National Stock Exchange. The Indian securities groups are vulnerable to problem when the demand of the
market has become one of the most dynamic and efficient economy reaches beyond the capacity of the group and
securities markets in Asia today. The Indian market now group has expended without open and transparent criteria
conforms to international standards in terms of operating for entry, the net work of trust gets disrupted, with the result
efficiency. In this context, it would be informative to that the system is disrupted by frauds. On the other hand, the
understand the origin and growth of the Indian stock market. modern market place of Stock Markets, having well
The number of stock exchanges virtually remained developed risk management, transparent rules for entry and
unchanged for nearly three decades from 1947 to 1977, stringent regulation, is faceless. The old type system had to
except for the establishment of the Bangalore Stock transform into a new is definitely clear that they have played
1730 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018
 “A Comparative Study on Risk & Return Analysis of Selected Stocks in India”
a very important role in the past. That merely had to modern decisions. The methodology may include publication
markets to keep up with the demand of the times. research, interviews, surveys and other research techniques,
and could include both present and historical information.
3. OBJECTIVES OF THE STUDY The process used to collect information and data for the
 To study the fluctuations in share prices of selected purpose of making business decisions
companies
Research Design: Based on the objectives of the study,
 To study the Risk involved in the securities of
descriptive research has adopted. Descriptive research is one
selected companies
which largely used to draw inferences about the possible
 To make comparative study of Risk and Return of
relationships between variables. It is designed to gather
Bharati Airtel, Dabur India Panyam, Asian Paint
descriptive information and provides information for
formulating more sophisticated studies. It involves
4. RESEARCH METHODOLOGY
formulation of more specific hypothesis and testing them
Research methodology is the process used to collect
through statistical inference.
information and data for the purpose of making business

5. DATA ANALYSIS AND INTERPRETATION

Table 1. Calculation of Average Return of Asian Paints in (%)

Opening share Price Closing Share Price

Year (p1-p0) (p1-p0)/p0*100
(p0) (p1)
2010 173.8 287.49 113.69 65.414
2011 289.8 259.5 -30.3 -10.455
2012 258 442.03 184.03 71.329
2013 442 490.75 48.75 11.029
2014 493.75 751.75 258 52.253
2015 750 821 71 9.467
Total Return 199.037
Average Return (∑R/N) 33.173
Source: Data Collected from India bulls and Internet from the period of 2010-2015

Graph 1.
Calculation of Average Return of Asian Paints in (%)

(p1-p0)/p0*100
80
60
40
20
0
20.3

Return(∑R/N)
-30.4

-57.25

-25.15

-0.45

Total Return

-20 (p1-p0)/p0*100
Average

-40
-60
-80
89.35 37.15 57.5 32 33 41.45
119.75 94.4 37.2 57.15 33.45 34.45
2010 2011 2012 2013 2014 2015

Interpretation: In the year 2010 the returns were 65.414 and in the year 2015 the returns were 9.467.The average return of the
Asian Paints is 33.173.

1731 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018

 “A Comparative Study on Risk & Return Analysis of Selected Stocks in India”
Table 2. Calculation of Average Return of Bharti Airtel in (%)

Opening share Closing share

Year (p1-p0) (p1-p0)/p0*100
Price(p0) Price(p1)
2010 330 358.4 28.4 8.606
2011 358.4 342.9 -15.5 -4.325
2012 346 316.8 -29.2 -8.439
2013 317.8 330.45 12.65 3.980
2014 332 352.85 20.85 6.280
2015 358 417.3 59.3 16.564
Total Return 22.667
Average
3.778
Return(∑R/N)
Source: Data collected from India bulls and Internet from 2010-2015

Graph 2.
Calculation of Average Return of Bharti Airtel in (%)

(p1-p0)/p0*100
80
60
40
20
0
-20
7
-30.4

-57.25

-0.45
-25.15
20.3

Total Return

Average Return(∑R/N)
-40
-60
-80
(p1-p0)/p0*100

89.35 37.15 57.5 32 33 41.45

119.75 94.4 37.2 57.15 33.45 34.45
2010 2011 2012 2013 2014 2015

Interpretation: In the year 2010 the returns were 8.606 and in the year 2015 the returns were 6.280.The average return of the
Bharti Airtel is 3.778.

Table 3. Calculation of Average Return of Dabur India in (%)

Opening Share Closing Share
Year (p1-p0) (p1-p0)/p0*100
Price(p0) Price(p1)
2010 79.05 100.25 21.2 26.818
2011 100.4 99.75 -0.65 -0.647
2012 100.15 128.75 28.6 28.557
2013 129.4 170.2 40.8 31.530
2014 171 233.55 62.55 36.579
2015 234.75 275.75 41 17.465
Total Return 140.303
Average Return(∑R/N) 23.384
Source: Data collected from India bulls and Internet from 2010-2015

1732 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018

 “A Comparative Study on Risk & Return Analysis of Selected Stocks in India”
Graph 3.
Calculation of Average Return of Dabur India in (%)

(p1-p0)/p0*100
80
60
40
20
0
-20

7
-30.4

-57.25

-25.15

-0.45
20.3

Return(∑R/N)
Total Return
-40
-60

Average
-80
(p1-p0)/p0*100

89.35 37.15 57.5 32 33 41.45

119.75 94.4 37.2 57.15 33.45 34.45
2010 2011 2012 2013 2014 2015

Interpretation: In the year 2010 the returns were 26.818 and in the year 2015 the returns were 17.465.The average return of the
Dabur India is 23.384.

Table 4. Calculation of Average Return of Panyam Cements in (%)

Year Opening Share Price(p0) Closing Share Price(p1) (p1-p0) (p1-p0)/p0*100

2010 119.75 89.35 -30.4 -25.386
2011 94.4 37.15 -57.25 -60.646
2012 37.2 57.5 20.3 54.570
2013 57.15 32 -25.15 -44.007
2014 33.45 33 -0.45 -1.345
2015 34.45 41.45 7 20.319
Total Return -56.496
Average Return(∑R/N) -9.416
Source: Data collected from India bulls and Internet from 2010-2015

Graph 4.
Calculation of Average Return of Panyam Cements in (%)

(p1-p0)/p0*100

60
40
20
0
-57.25

-25.15
-30.4

-0.45

7
20.3

Average Return(∑R/N)
Total Return

-20
-40 (p1-p0)/p0*100
-60
-80

89.35 37.15 57.5 32 33 41.45

119.75 94.4 37.2 57.15 33.45 34.45
2010 2011 2012 2013 2014 2015
Interpretation: In the year 2010 the returns were 25.386 and in the year 2015 the returns were20.319 .The average return of the
Panyam cement is -9.416

1733 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018

 “A Comparative Study on Risk & Return Analysis of Selected Stocks in India”
CALCULATION OF STANDARD DEVIATION
Table 5. Calculation of Standard deviation of Asian Paints in (%)
Year Return( R ) Average Return (R-) d=( R-R-) D2
2010 65.414 33.173 32.241 1039.499
2011 -10.455 33.173 -43.628 1903.445
2012 71.329 33.173 38.156 1455.915
2013 11.029 33.173 -22.144 490.338
2014 52.253 33.173 19.080 364.053
2015 9.467 33.173 -23.706 561.990
TOTAL ∑d2=5815.241
Source: Data collected from India bulls and Internet from 2010-2015

Calculation: Average Return = 33.173

Standard Deviation (Risk) = Variance = 1∕n-1(∑d²)
=1/6-1(5815.241) =1163.048
Standard Deviation (Risk) = = = 34.103
Interpretation: The Standard deviation of the Asian Paints is 34.103 and its variance is 1163.048

Table 6. Calculation of Standard deviation of Bharti Airtel in (%)

Year Return( R ) Average Return (R-) d=( R-R-) D2

2010 8.606 3.778 4.828 23.310
2011 -4.325 3.778 -8.103 65.655
2012 -8.439 3.778 -12.217 149.263
2013 3.980 3.778 0.202 0.041
2014 6.280 3.778 2.502 6.261
2015 16.564 3.778 12.786 163.488
TOTAL ∑d2= 408.017
Source: Data collected from India bulls and Internet from 2010-2015.

Calculation: Average Return = 3.778

Standard Deviation (Risk) = Variance = 1∕n-1(∑d²)
=1/6-1(408.017) =81.603
Standard Deviation (Risk) = = = 9.033
Interpretation: The Standard deviation of the Bharti Airtel is 9.033 and its variance is 81.603

Table 7. Calculation of Standard Deviation of Dabur India in (%)

Year Return( R ) Average Return (R-) d=( R-R-) D2

2010 26.818 23.384 3.434 11.796
2011 -0.647 23.384 -24.031 577.509
2012 28.557 23.384 5.173 26.762
2013 31.530 23.384 8.146 66.360
2014 36.579 23.384 13.195 174.107
2015 17.465 23.384 -5.919 35.030
Total ∑d2=891.562
Source: Data collected from India bulls and Internet from 2010-2015.

Calculation: Average Return = 23.384

Standard Deviation (Risk) = Variance = 1∕n-1(∑d²)
=1/6-1(891.562) =178.312
Standard Deviation (Risk) = = = 13.353
Interpretation: The Standard deviation of the Dabur India is 13.353 and its variance is 178.312

1734 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018

 “A Comparative Study on Risk & Return Analysis of Selected Stocks in India”
Table 8. Calculation of Standard deviation of Panyam Cements in (%)

Year Return( R ) Average Return (R-) d=( R-R-) D2

2010 -25.386 -9.416 -15.970 255.048
2011 -60.646 -9.416 -51.230 2624.532
2012 54.570 -9.416 63.986 4094.194
2013 -44.007 -9.416 -34.591 1196.537
2014 -1.345 -9.416 8.071 65.136
2015 20.319 -9.416 29.735 884.188
Total ∑d2=9119.636
Source: Data collected from India bulls and Internet from 2010-2015.

Calculation: Average Return = -9.416

Standard Deviation (Risk) = Variance = 1∕n-1(∑d²)
= 1/6-1(9119.636) =1823.927
Standard Deviation (Risk) = = = 42.707
Interpretation: The Standard deviation of the Panyam Cement is 42.707 and its variance is 1823.927.

Table 9. Depicting all Calculated Values

Asian Paints Bharati Airtel Dabur India Panyam Cement

Average Returns 33.173 3.778 23.384 -9.416
Standard Deviations 34.103 9.033 13.353 42.707
Covariance 1.028 2.391 0.571 -4.536
Coefficient of Correlation 0.405 0.405 -0.141 -0.141
Beta -1.291 0.629 -0.091 -1.139

6. FINDINGS  The company Bharti Airtel has a coefficient of 2.391

 The firm “Asian Paints” Company has an average and Dabur India has a coefficient of 0.571 and when
return of 33.173, risk is 34.103 and coefficient of a comparison is made between these firms, the
variation is 1.028. The highest market price is 750 in investor has an option to invest in Dabur India.
the year 2015; the lowest market price is 173.8 in the  The company Dabur India has a coefficient of 0.571
year 2010. and Panyam Cements has a coefficient of -4.536 and
 The firm “Bharti Airtel” Company has an average when a comparison is made between these firms, the
return of 3.778; risk is 9.033 and coefficient of investor has an option to invest in Panyam Cements.
variation is 2.391. The highest market price is 358.4
in the year 2011; the lowest market price is 317.8 in 8. CONCLUSION
the year 2013. India Bulls Financial Services is an integrated financial
 The firm “Dabur India” Company has an average services powerhouse providing Consumer Finance, Housing
return of 23.384, risk is 13.353 and coefficient of Finance, Commercial Loans, Life Insurance, Asset
variation is 0.571. The highest market price is 234.75 Management and Advisory services. India Bulls Financial
in the year 2015; the lowest market price is 79.05 in Services Ltd is amongst 68 companies constituting MSCI -
the year 2010. Morgan Stanley India Index. India Bulls Financial is also
 The firm “Panyam Cements” Company has an part of CLSA’s model portfolio of 30 Best Companies in
average return of -9.416, risk is 42.707 and Asia. India Bulls Financial Services in partnership with
coefficient of variation is -4.536. The highest market MMTC Limited, the largest commodity trading company in
price is 119.75 in the year2014, the lowest market India, has set up India’s 4th Multi-Commodities Exchange.
price is33.45 in the year 2014. This article emphasizes on the market fluctuations relations
to the prices of Scrip’s though it is difficult to observe a
7. SUGGESTIONS pattern for the price movements but efforts have been taken
 The company Asian Paints has a coefficient of 1.028 using fundamental analysis and technical analysis. Using
and Bharti Airtel has a coefficient of 2.391 and when fundamental analysis, it is observed that the financial
a comparison is made between these firms, the position and performance of the firms are in correlation with
investor has an option to invest in Asian Paints. present market prices. According to technical analysis, the

1735 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018

 “A Comparative Study on Risk & Return Analysis of Selected Stocks in India”
historical data taken is used to observe the trends followed International Journal of Applied Economics and
by the Scrip’s. However, we cannot say that any one Finance, 6(2), 37-52.
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1736 Dr. S. GAUTAMI1, IJMEI Volume 04 Issue 05 May 2018

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