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TABLE OF CONTENTS
Introduction I.
Company profile II.
Methodology III.
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ABSTRACT
Risk, in simple wont, is an uncertainly, Risk and uncertainties are the .facts of life so to the
common stockholders. Technically, their meaning' are different. Risk, simply in investment,
means a chance of happening some unfavorable event or danger of losing some value. Risk
suggests that a decision maker known the possible consequences of a decision and their
relative livelihoods at the limes he makes decision. In other, uncertainty is simple a lack of
definite outcomes, its anything that could happen-any unknown event, which may be
favorable, or unfavorable on the other hand. Uncertainty involves a situation about which the
likelihood of the possible outcomes is not known.
The trouble arises from the fact that despite different interpretation of uncertainty and risk,
people often use them interchangeably. Although it is quite clear what precisely these two
terms mean, authorities in the field of finance do agree that the risk is the product of
uncertainty. Return better known or reward from an investment includes both current income
and capital gain or loss that arises by the increase or decrease of the security price. Return is
the income received on an investment plus any change in market price. Usually expressed as a
percent of beginning price of the investment, the overall rate of return can be decomposed into
two parts as capital appreciation and dividend.
Capital appreciation is the difference between ending value and beginning value of an
investment. Return is defined as the dividend yield plus the gain or loss. The relationship
between different levels of return on their relative frequencies is called a probability
distribution. The findings and results will be helpful to evaluate the strength and weakness of
the sampled banks and industry. The recommendation is made to take a corrective action and
decisions.
INTRODUCTION
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Company Profile
In the present situation where stock exchange is high volatile, it is necessary to invest
consciously in the market. As we have witnessed many millennial generation
investors are hoping to the market with their investment and expecting a high return
from the stock market .it is very necessary to have a better understanding about the
statistical tools and their measures for better decision making. Here the study had
been carried on measurement of Risk and Return of various stocks with their
benchmark indices to understand the behavior of movements of the stocks with
respect to market.
The Sole Objective of any investor in the market is to maximize the profit and reduce
the risk. In this regard the paper helps the investor to understand the snapshot of
various statistical tools to be used to analysis the risk and return of the stocks. The
study had focused on collection of daily data such as Closing price of stock for the
last ten years i.e. from year 2012-2022 from the stock market.
The daily return of the stock is calculated and Standard Deviation is measured for
mainly following broad categories of sectors such as Auto mobile, Banking, Finance,
FMCG and IT sector, which are directly representing the economic condition of the
country. Later further Studies have been carried out with the help of beta and
Regression Analysis for better analysis of the Risk involved with the Indices formed
compared to that of market Indices such as NIFTY AUTOMOBILE, BANK NIFTY,
NIFTY FINANCE, NIFTY FMCG and NIFTY IT Service to understand how well the
indices are reflecting for the data of market to make better decision for an investor.
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The authorized place for trading securities can be called as stock exchange. The
securities can be furnished by companies, public sector undertakings, government
bodies and semi government bodies for raising stake and getting resources. Securities
are defined as monetary claims and also includes shares , bond’s and debentures etc.
Indian stock markets are one ancient one in Asia. It is having a history of nearly 200
years.east india company was principal foundation in the ones early and house in its
credit secutities which was transacted at 18th century . Towards the top of American
civilized war the merchants who flourished out civilized war in 1874, found a space
in a road where people would advantageously gather and execute business. Now this
road is popularly known as Dalal Street. In 1887, they erewhile familiarized Bombay,
the established brokers and native experience society which is now referred to as
Bombay stock exchange. In 1895, the exchange gained a explanation why in the same
road and it was introduced in 1899 and stock exchange at Bombay was mediatised .
Prem Chand and Roy Chand was a dominant speculator at during those time, and he
well known help in starting up traditions, procedures and conventions for transacting
stocks at Bombay stock exchange and that’s soul choke followed.
In 1956 the govt of India ratified and perceived the Bombay exchange as the first
stock exchange in India under securities contracts act. Bombay stock exchange is
Asia’s earliest stock exchange and it claims impending world’s fastest stock bourse.
Bombay stock exchange is now spanning 133 years of existence.
Over the period of 133 years, Bombay stock exchange has an uptrend growth in
corporate sector of India by providing an effective and valuable get right of entry to
resource. Today, Bombay stock exchange is the world's number 1 when it comes to
the main variety of companies listed and stands 5 th on the earth in agreement
numbers.
The index of Bombay exchange is sensex. It is Indian earliest stock exchange hand
which enjoys an recognizable preeminence, its also tailed worldwide. This index
contains 30 stocks personifying 12 crucial sectors. Apart of your SENSEX, BSE
offers 21 indices, in conjunction with 12 sectoral indices.
The group panel of amalgamated control has allotted Bombay stock exchange as the
golden peacock global award for its initiatives in collative common responsibility.
The anniversary accounts and reports of the year ending Mar 2006 and Mar 2007 of
Bombay stock exchange have been awarded for excellence in financial reporting.
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National Stock Exchange of India Limited (NSE) is the leading stock exchange under
the ownership of various group of domestic and global financial institutions, public
and privately owned entities and individuals. It is located in Mumbai, Maharashtra. It
is the world’s largest derivatives exchange in 2021 by number of contracts traded
based on the statistics maintained by Futures Industry Association (FIA),
a derivatives trade body.
NSE is ranked 4th in the world in cash equities by number of trades as per the
statistics maintained by the World Federation of Exchanges (WFE) for the calendar
year 2021. It is under the ownership of some leading financial institutions, banks, and
insurance companies. NSE was established in 1992 as the
first dematerialized electronic exchange in the country.
NSE was the first exchange in the country to provide a modern, fully automated
screen-based electronic trading system that offered easy trading facilities to investors
spread across the length and breadth of the country. Ashishkumar Chauhan is the
Managing Director and Chief Executive Officer of NSE.
National Stock Exchange personality being the largest stock exchange in India and
triennial biggest inside the world. At hand out, In India you will discover 23 approved
and accepted stock exchanges. The stock exchanges are as follows:
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On 9th of July 2007 SEBI has withdrawn its license from Saurashtra stock exchange, Rajkot
due to its deedless working. It is said that Gujrat has highest number of traders in India. In
India there are 20 million Demat accout holders and only 4.288 million active users which is
less than of the figure. The Indian stock exchange BSE and NSE has been engulfed in series
of corruption scandals such as 1992 Indian stock market scam and others.
Industry Profile
Introduction
Banking is a backbone for economic progress of any country, India is not an exception. After
Nationalization till liberalization the progress of banking industry mainly focused on public
sector banks. After liberalization private sector banks has played an important role for the
progress of Indian economy. Banks play an important role in building the economy as well
changes the lives of many individuals. In India banking sector reforms are lifeline of
economic activity for both rural and urban areas. So, any changes in stock price of banks will
be definitely affect the investment pattern of investor and also affects the economy. Indian
banking industry, the backbone of the country’s economy has always played a positive and
key role in prevention of economic disaster in the country.
There are 9 Banking Stocks in bench mark NIFTY 50 which contributes 18.56% weightage
to NIFTY 50 index. Moreover, according to experts, the revival of Indian Economy is not
possible without the participation of banking sector. As mentioned, that most of the analysts
are extremely bullish on private sector banking stocks because competition among banks is
one of the key reasons which will put pressure on the bottom line of the banking stocks.
State Bank of India (SBI) is that country's largest commercial bank. The government-
controlled bank--the Indian government maintains a stake of nearly 60 percent in SBI
through the central Reserve Bank of India--also operates the world's largest branch network,
with more than 13,500 branch offices throughout India, staffed by nearly 220,000
employees. SBI is also present worldwide, with seven international subsidiaries in the United
States, Canada, Nepal, Bhutan, Nigeria, Mauritius, and the United Kingdom, and more than
50 branch offices in 30 countries. Long an arm of the Indian government's infrastructure,
agricultural, and industrial development policies, SBI has been forced to revamp its
operations since competition was introduced into the country's commercial banking system.
As part of that effort, SBI has been rolling out its own network of automated teller machines,
as well as developing anytime-anywhere banking services through Internet and other
technologies. SBI also has taken advantage of the deregulation of the Indian banking sector
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to enter the bancassurance, assets management, and securities brokering sectors. In addition,
SBI has been working on reigning in its branch network, reducing its payroll, and
strengthening its loan portfolio. In 2003, SBI reported revenue of $10.36 billion and total
assets of $104.81 billion.
The charters backing the establishment of the presidency banks granted them the right to
establish branch offices. Into the second half of the century, however, the banks remained
single-office concerns. It was only after the passage of the Paper Currency Act in 1861 that
the banks began their first expansion effort. That legislation had taken away the presidency
banks' authority to issue currency, instead placing the issuing of paper currency under direct
control of the British government in India, starting in 1862.
Yet that same legislation included two key features that stimulated the growth of a national
banking network. On the one hand, the presidency banks were given the responsibility for
the new currency's management and circulation. On the other, the government agreed to
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transfer treasury capital backing the currency to the banks--and especially to their branch
offices. This latter feature encouraged the three banks to begin building the country's first
banking network. The three banks then launched an expansion effort, establishing a system
of branch offices, agencies, and sub-agencies throughout the most populated regions of the
Indian coast, and into the inland areas as well. By the end of the 1870s, the three presidency
banks operated nearly 50 branches among them.
BANK OF BARODA
Bank of Baroda is one of the leading commercial public sector banks in India. The Bank's
solutions includes personal banking which includes deposits gen-next services retail loans
credit cards debit cards services and lockers; business banking which includes deposits loans
and advances services and lockers; corporate banking which includes wholesale banking
deposits loans and advances and services and international business which includes non-
resident Indian (NRI) services foreign currency credits ECB offshore banking export finance
import finance correspondent banking trade finance and international treasury. The Bank
offers services such as domestic operations and For-ex operations. They also offer rural
banking services which include deposits priority sector advances remittance collection
services pension and lockers. They also offer fee-based services such as cash management
and remittance services.
The Bank is having their head office located at Baroda and their corporate office is located at
Mumbai. Bank of Baroda is one of India's largest banks and as on December 2020 the bank
has a strong domestic presence spanning 8246 domestic branches and 11553 ATMs & Cash
Recyclers supported by self-service channels. The bank has a significant international
presence with a network of 99 overseas branches/offices subsidiaries spanning 21 countries.
The bank has wholly owned subsidiaries including BOB Financial Solutions Limited
(erstwhile BOB Cards Ltd.) and BOB Capital Markets. Bank of Baroda also has a joint
venture for life insurance business with India First Life Insurance. The bank owns 98.57% in
The Nainital Bank. The bank has also sponsored three Regional Rural Banks namely Baroda
Uttar Pradesh Gramin Bank Baroda Rajasthan Gramin Bank and Baroda Gujarat Gramin
Bank.Bank of Baroda was incorporated on July 20 1908 as a as a private bank with the name
The Bank of Baroda Ltd.
The Bank was established with a paid up capital of Rs 1 million and was founded by
Maharaja Sayajirao III of Baroda. In the year 1910 the Bank opened their first branch in the
city of Ahmedabad. In the year 1919 they opened their first branch in Mumbai City.
In the year 2002 The Benares State Bank Ltd merged with the Bank. They launched Debit
Card project in affiliation with VISA. In the year 2004 The South Gujarat Local Area Bank
amalgamated with the Bank. In June 1 2004 the Bank signed a MoU with National Insurance
Company Ltd for selling their non life insurance products under corporate agency
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arrangement The Bank opened 13 new domestic branches and merged 1281 branches with
existing branches during FY 2021.As on 31 March 2022 the bank's distribution network
stood at 8168 domestic branches 94 overseas branches 11633 ATMs & cash recyclers.The
Bank opened new 9 domestic branches and merged 55 branches with existing branches
during FY 2022.
CANARA BANK
Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Subba
Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port
town in Karnataka. The Bank has gone through the various phases of its growth trajectory
over hundred years of its existence. Growth of Canara Bank was phenomenal, especially
after nationalization in the year 1969, attaining the status of a national level player in terms
of geographical reach and clientele segments. Eighties was characterized by business
diversification for the Bank. In June 2006, the Bank completed a century of operation in the
Indian banking industry. The eventful journey of the Bank has been characterized by several
memorable milestones. Today, Canara Bank occupies a premier position in the comity of
Indian banks.
Canara Bank was established in 1906 at Mangaluru, then a small port town in South India.
Canara Bank’s founder, Shri Ammembal Subba Rao Pai, was an eminent lawyer,
educationist, social reformer and a visionary par excellence, who had sown the seeds for the
present success of the organisation. His firm belief was that:
“A good bank is not only the financial heart of the Community, but one with an
obligation of helping in every manner possible to improve the economic condition of the
common people”.
Canara Bank, one of the 14 banks nationalised on July 19, 1969, saw major expansion in
terms of branch network and business during the 70s. These years of growth were also
characterized by several innovative initiatives in the realm of rural development and mass
banking.
Canara Bank has several firsts to its credit. These include:
Launching of Inter-City ATM Network
Obtaining ISO Certification for a Branch
Articulation of Good Banking – Banks Citizen Charter
Commissioning of Exclusive Mahila Banking Branch
Launching of Exclusive Subsidiary for IT Consultancy
Issuing credit card for farmers
Providing Agricultural Consultancy Services
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Over the years, the Bank has been scaling up its market position to emerge as a major
Financial Conglomerate with as many as ten subsidiaries/sponsored institutions/joint
ventures in India and abroad. As at June 2022, Canara Bank services over 10.4 crore
customers through a network of 9,732 branches and 12,201 ATMs/Recycler spread across all
Indian states and Union Territories.
As at Sep 2021, the total business of the bank increased to ₹ 17.19 lakh crore.
Canara Bank is the third largest Public Sector Bank in India, with a domestic network of
9800 branches comprising 3037 rural, 2796 semi-urban, 1971 urban, 1996 metropolitan
branches and 12360 ATMs/Recyclers covering 28 states and 8 union territories as at Sep
2021. The rural/semi-urban branches constitute 59.52% of the total number of branches.
Besides elaborate domestic presence, the Bank has 4 overseas branches, one each at New
York, London, Hong Kong and DIFC (Dubai).
MISSION
To provide State-of-the-Art Banking solutions, leveraging technology, aiding Ease of Doing
business and enhancing value for all stakeholders through inclusive growth.
AXIS BANK
Axis Bank is the third largest private sector bank in India. The Bank offers the entire
spectrum of financial services to customer segments covering Large and Mid-Corporates,
MSME, Agriculture and Retail Businesses.
Axis Bank Limited offers a wide range of financial services to customer segments covering
Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. The company
provides corporate, retail, and business banking products and services in India. Axis Bank
deposit products include demand, savings bank, current account, and term deposits. The
company also provides home loans, car loans, personal loans, loan against shares and
security, loan against property, education and consumer loans, structured finance and
microfinance products, short-term loans, loans for small and medium enterprises, agriculture
loans, as well as credit and debit cards, and insurance services. In addition, Axis Bank
engages in investing in sovereign and corporate debt, equity, and mutual funds; trading
operations; derivative trading and foreign exchange operations; and central funding
operations. The company begun its operations in the year 1994 and its registered office is
based in Ahmedabad.
Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an
Indian banking and financial services company headquartered in Mumbai, Maharashtra. It
sells financial services to large and mid-size companies, SMEs and retail businesses.
As of 30 June 2016, 30.81% shares are owned by the promoters and the promoter group
(United India Insurance Company Limited, Oriental Insurance Company Limited, National
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Insurance Company Limited, New India Assurance Company Ltd, GIC, LIC and UTI). The
remaining 69.19% shares are owned by mutual funds, FIIs, banks, insurance companies,
corporate bodies and individual investors.
The bank was founded on 3 December 1993 as UTI Bank, opening its registered office
in Ahmedabad and a corporate office in Mumbai. The bank was promoted jointly by the
Administrator of the Unit Trust of India (UTI), Life Insurance Corporation of India (LIC),
General Insurance Corporation, National Insurance Company, The New India Assurance
Company, The Oriental Insurance Corporation and United India Insurance Company. The
first branch was inaugurated on 2 April 1994 in Ahmedabad by Manmohan Singh, then
finance minister of India.
In 2001 UTI Bank agreed to merge with Global Trust Bank, but the Reserve Bank of
India (RBI) withheld approval and the merger did not take place. In 2004, the RBI put
Global Trust under moratorium and supervised its merger with Oriental Bank of Commerce.
The following year, UTI bank was listed on the London Stock Exchange. In the year 2006,
UTI Bank opened its first overseas branch in Singapore. The same year it opened an office
in Shanghai, China. In 2007, it opened a branch in the Dubai International Financial
Centre and branches in Hong Kong.
On 30 July 2007, UTI Bank changed its name to Axis Bank.
In 2009, Shikha Sharma was appointed as the MD and CEO of Axis Bank.
In 2013, Axis Bank's subsidiary, Axis Bank UK commenced banking operations.
On 1 January 2019, Amitabh Chaudhry took over as MD and CEO.
In year 2021,the Bank had reduced its stake in Yes Bank from 2.39 per cent to 1.96
per cent.
Axis Bank Ltd., the first bank to begin operations as new private banks in 1994
afire the
Government of India allowed new private banks to be established. Axis Bank was
jointly
promoted by the Administrator of the specified undertaking of the
Axis Bank is one of the first new generation private sector banks to have begun operations in
1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of
India (SUUTI) (then known as Unit Trust of India), Life Insurance Corporation of India
(LIC), General Insurance Corporation of India (GIC), National Insurance Company Ltd., The
New India Assurance Company Ltd., The Oriental Insurance Company Ltd., and United
India Insurance Company Ltd. The shareholding of Unit Trust of India was subsequently
transferred to SUUTI, an entity established in 2003.
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With a balance sheet size of Rs. 11,75,178 crores as on 31st March 2022, Axis Bank has
achieved consistent growth and with a 5-year CAGR (2016-17 to 2021-22) of 14% each in
Total Assets & Advances and 15% in Deposits.
ICICI BANK
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of
ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial
Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of
Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, were integrated in a single
entity.
The Industrial Credit and Investment Corporation of India (ICICI) was established on 5
January 1955 and Sir Arcot Ramasamy Mudaliar was elected as the first Chairman of ICICI
Ltd. It was structured as a joint-venture of the World Bank, India's public-sector banks and
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public-sector insurance companies to provide project financing to Indian industry. ICICI
Bank was established by ICICI, as a wholly owned subsidiary in 1994 in Vadodara. The
bank was founded as the Industrial Credit and Investment Corporation of India Bank, before
it changed its name to ICICI Bank. The parent company was later merged with the bank.
In March 2020, the board of ICICI Bank Ltd. approved an investment of ₹10
billion (US$130 million) in Yes Bank, resulting in a 5% ownership interest in Yes.
The National Stock Exchange was promoted by India's leading financial institutions
(including ICICI Ltd.) in 1992 on behalf of the Government of India with the
objective of establishing a nationwide trading facility for equities, debt instruments
and hybrids, by ensuring equal access to investors all over the country through an
appropriate communication network.
In 1987, ICICI Ltd along with UTI set up CRISIL as India's first professional credit
rating agency.
NCDEX (National Commodities and Derivatives EXchange) was set up in 2003, by
ICICI Bank Ltd, LIC, NABARD, NSE, Canara Bank, CRISIL, Goldman
Sachs, Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Punjab National
Bank.
ICICI Bank facilitated the setting up of "FINO Cross Link to Case Link Study" in
2006, as a company that would provide technology solutions and services to reach the
underserved and underbanked population of the country. Using technologies
like smart cards, biometrics and a basket of support services, FINO enables financial
institutions to conceptualise, develop and operationalize projects to support sector
initiatives in microfinance and livelihoods.
Entrepreneurship Development Institute of India (EDII), was set up in 1983, by the
erstwhile apex financial institutions like IDBI, ICICI, IFCI and SBI with the support
of the Government of Gujarat as a national resource organization committed to
entrepreneurship development, education, training and research.
Eastern Development Finance Corporation (NEDFI) was promoted by national level
financial institutions like ICICI Ltd in 1995 at Guwahati, Assam for the development
of industries, infrastructure, animal husbandry, agri-horticulture plantation, medicinal
plants, sericulture, aquaculture, poultry and dairy in the North Eastern states of India.
Following the enactment of the Securitisation Act in 2002, ICICI Bank, together with
other institutions, set up Asset Reconstruction Company India Limited (ARCIL) in
2003. ARCIL was established to acquire non-performing assets (NPAs) from
financial institutions and banks with a view to enhance the management of these
assets and help in the maximisation of recovery.
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ICICI Bank has helped in setting up Credit Information Bureau of India
Limited (CIBIL), India's first national credit bureau in 2000. CIBIL provides a
repository of information (which contains the credit history of commercial and
consumer borrowers) to its members in the form of credit information reports.
HDFC BANK
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significant decrease in global and local economic activity which may persist. While there has
been a gradual pickup in economic activity since the easing of lockdown measures the
continued slowdown led to a decrease in loan originations the sale of third party products the
use of credit and debit cards by customers and the efficiency in collection efforts.
Products and services:
HDFC Bank provides a number of products and services including wholesale banking, retail
banking, treasury, auto loans, two-wheeler loans, personal loans, loans against property,
consumer durable loan, lifestyle loan and credit cards. Along with this various digital
products are Pays app and Smart BUY.
Mergers and Acquisitions:
HDFC Bank merged with Times Bank in February 2000. This was the first merger of two
private banks in the New Generation private sector banks category. Times Bank was
established by Bennett, Coleman and Co. Ltd., commonly known as The Times Group,
India's largest media conglomerate.
In 2008, Centurion Bank of Punjab (CBoP) was acquired by HDFC Bank. HDFC Bank's
board approved the acquisition of CBoP for ₹95.1 billion in one of the largest mergers in the
financial sector in India. In 2021, the bank acquired a 9.99% stake in FERBINE, an entity
promoted by Tata Group, to operate a Pan-India umbrella entity for retail payment systems,
similar to National Payments Corporation of India. In September 2021, the bank partnered
with Paytm to launch a range of credit cards powered by the global card network Visa. On
April 4, 2022, HDFC Bank announced merger with HDFC Limited.
Return:
The formula for the total stock return is the appreciation in the price plus any
dividends paid, divided by the original price of the stock. The income sources from a
stock are dividends and its increase in value.
Total stock Return= P1-Po+D/Po
Po= Initial stock Price
P1= Ending stock price
D= Dividends
Average return:
The average return tells an investor what the returns for a stock have been in the past
or what the returns of a portfolio of companies are.
Average return = Σ R/n.
Probably the most generally utilized threat determine in account is the difference or
root rectangular which is the typical deviation. Contrasts and in vogue deviations of
chronicled come back arrangement are launched. The variety believes about all
deviations, negative as large. Financial backers, be that as it may, do at this time don't
see amazing deviation - an excellent reality, they pleasant. Consequently a few of
specialists say that lone negative deviations must be looked at while estimating risk.
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VARIANCE: Variance is the expectation of the squared deviation of a random
variable from its mean.
Variance = Σ(x-X) 2/N
S.D = ∑ 𝑹𝒊−𝑹
Hazard proposes a variable scattering. It really is ordinarily estimated with the guide
of variation or change of best. The particular distinction of the probability
dissemination is the amount of the squared deviations of the original come back from
the expected return, weighed towards the linked possibilities.
𝝈 = ∑𝒑ⅈ 𝑷;−𝑬( 𝑹 )2
STANDARD DEVIATION: Standard deviation is a number used to tell how
measurements for a group are spread out from the average (mean), or expected value.
SD = √variance
6. COEFFICIENT OF CORRELATION:
Covariance and relationship are applied with the performance in this the two of them
demonstrate the recognition of co - movement between the 2 factors.
7. RISK OF PORTFOLIO:
The return qualification and the typical deviation of return are opportunity factual
measures used to degree subsidizing possibility. These realities measure the degree at
which usefulness can go as the years progressed. Figuring portfolio forms might be
somewhat more hard than deciding anticipated income.
Covariance is a flat out level of the intelligent risk among protections. To look at the
offices can be normalized. Isolating the covariance between two protections by the
standard, worn out deviation result of each security bears the cost of a normalized
degree. This degree is alluded to as the relationship percentage. This can similarly be
composed as
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𝒓𝒙𝒚 = 𝐜𝐨𝐯𝒙𝒚 /𝝈𝒙𝝈y
8. Beta (β):
It measures the market risk or systematic risk. Beta is commonly computed by the
under given formula.
β= (Cov (Ra, Rm))/(Var (Rm))
Where, Ra is the return of a stock and
Rm is benchmark index return.
Analysis and Interpretation
The methods of analysis and presentation are applied as simple as possible. Proper financial
and statistical tools are used and results are presented in table and also shown in diagram.
Interpretation is made in very simple way detail of calculation which cannot be shown in the
main body part, are presented in appendices at the end, summary, conclusion and
recommendation are presented finally.
Pre-Consideration
In this section raw form of data about selected banks, which were collected from
various sources, are changed to an understandable form using tools as mentioned in
the previous chapter i.e. research methodology. This chapter is core of this study that
is fully related to analysis and interprets various outcomes. The analysis of data
consists of organizing; tabulating and performing risk return analysis of a common
stock.
The relationship among systematic, unsystematic and total risk are shown below.
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Relationship between Risk and Return
Investors are generally risk averse. This implies that risky investment must offer higher
expected return than less risky investment in order to make the people buy and hold them.
The risk aversion attitude of investors portfolio theory was developed and being very
important subject in the field of finance. Any individual investment may differ substantially
from the adverse risk and return statistics. That is why it is prudent to investigate any assets
before investing.
The relationship between the risk and return is described by investors' perception about risk
and their demand for compensation. No investors will like to invest in risky assets unless he
is assured of adequate compensation for the assumption of risk. Therefore it is the investors
required risk premiums that establish a link between risk and return. In a market dominated
by rational investor higher risk will command by rational premium and the trade- off
between the two assumptions, a linear relationship between risk and risk premium. The
observe difference in both the levels and variability of the rates of return across securities are
indicative of the underlying risk return relation in the market.
The figure represents a higher premium for higher risk in a linear fashion indicating a
premium of (R1 – R1) for Q1 degree of risk (R2 – R1) for Q2 degree of risk and so on. The
assumption of linear relationship states the risk premium increases in decrease in proportion
to change in level of risk. Rf stands for return on risk free security. The partial interest is the
difference in rates of return across securities, since they provide valuable clues to the
market's trade- off between risks and return scientific progress in any field depends on
accrued measurement. Many measurement are interesting in them, by their most important
scientific role is to test the validity of theory. Since most financial theory is focused on an
explanation of the level, structure and behavior of rates of return, their accurate measurement
is essential if the theory is to be tested and improved.
Rational investors would agree that an investment's required return should increase as the
risk of investment increase. Most investors would also agree how the expected rate of return
should be calculated. But, when the discussion turns to risk the debate begins.
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The expected return from any investment proposal will be linked in fundamental relationship
to the degree of risk in the proposal. In order to be acceptable a higher risk proposal must
offer a higher forecast return than lower risk proposal (Hampton, 1996). "The observe
difference in both the levels and variability of the rate of return across securities are
indicative of the underlying risk and relation in the market" (Loric, Dodd and Kempton,
1985).
Generally, there is a positive relationship between rate or return and risk. It means an
investor can usually attain more return by selecting dominant assets that involve more risk.
While it is not always true that a riskier asset will pay a higher average rate of return, it is
usually. The reason is that investors are risk averse.
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The Axis bank has equal return to market return. The risk has more as compare to
market return. The correlation between Axis bank and sensex is 0.566295661 .
Both risk and return of ICICI Bank is more than market return. The
correlation between ICICI Bank and sensex is 0.590244524.
4.3.8 RISK AND RETURN OF HDFC BANK IN COMPARISON WITH SENSEX
Particular HDFC Bank Sensex
Mean 0.058446 0.05744
Standard Deviation 2.674655 1.064323
Variance 7.153784 1.132784
Correlation 0.590244524 ***
The return of HDFC Bank is same with market return. The risk of Bank and
Sensex is 0.590244524.
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SBI Bank 1.039800812 1
Axis Bank 1.482123939 1
ICICI Bank 1.482137412 1
HDFC Bank 1.787137412 1
Analysis : From the above tabular representation we have to analyze that, beta value is
more than sensex value. It means it signifies higher velocity of risk.
FINDINGS :
1. There are some banks which have Less return as compared to market return. Such
banks are Canara Bank and Bank of Baroda.
2. There are one banl like Axis Bank which return is equal with market return.
3. Rest of five banks, which return are high as compare to market return. Such as,
Punjab National Bank, SBI Bank, Kotak Mahindra Bank, ICICI Bank and HDFC
Bank.
4. Risk signifies BETA VALUE. It means when the value of Beta high or more than 1 ,
its high risk. When its less than 1 its less risk.
5. Here taken every banks has high risk as compare to market return. And its value of
Beta is also high. So point 4 is justified, that is, “ Risk signifies Beta value”.
CONCLUSION
The conclusion is that there are some banks have higher returns and some banks have
high risk. The investor always needs to find a combination of higher return with low
risk. The Beta is useful to judge Systematic Risk . Thus, the investor to arrive at a
conclusion and also provide information about the performance of various banking
securities in the market in terms of return and risk.
Appendix
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