RESEARCH REPORT

“STABILITY OF BETA OVER MARKET PHASES: AN EMPIRICAL STUDY ON INDIAN STOCK MARKET”

Project Guide:

Prof.,miss Sana moid

Submitted By:

RAVI SRIVASTAVARoll No: - 0928170042

MBA IV Semester

2009-2011

In Partial Fulfillment of the Requirement for Masters of Business Administration (M.B.A.)

Degree Programme

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of Gautam Buddh Technical University Lucknow

PREFACE

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PREFACE

The main motive behind carrying out this project is to study about the stability of

Beta over Market Phases.

The significant role played by beta in diverse aspects of financial decision making has

forced people from small investors to investment bankers to rethink on beta in the era of

globalization. In the present changing market condition, it is imperative to understand the

stability of beta which augments an efficient investment decisions with additional

information on beta. This study examined the stability of beta for India market for a four

year period from Feb, 2007 to Feb, 2011. The monthly return data of 15 selected stocks

are considered for examining the stability of beta in different market phases. This

stability of beta is tested using the Ordinary Least Square (OLS) technique. The results

obtained from this, that there are most of the stocks signal of beta instability over the

market phases.

I have tried to touch all the important points relevant to the project. I hope the

report will be appreciated by those who will go through it.

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ACKNOWLEDGEMENT

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ACKNOWLEDGEMENT

Any project is a collaborative effort. Many people helped me along the way to the

completion of this project. Of course there is not enough space to thank everyone who

contributed to this project. But certain people stand out as having made a difference and I

wish to thank the many individuals who made this project possible. First of all I would

like to express my sincere gratitude to Prof.,miss Sana moid my project guide for

putting me into a challenging project and I would like to thank him for his/her keen

interest, cogent observation and thought a minded comment that helps me to complete my

project. I especially want to thank my college faculty for giving his valuable guidance

and cooperation, which helped me a lot in the completion of my project.

I would like to present a deep bow of gratitude to my family and friends who have been

of great help directly and indirectly.

Thanks to you all.

(Ravi srivastava)

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STUDENT DECLARATION

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DECLARATION

I, Ravi srivastava Student of Master of Business Administration (M.B.A.), SHERWOOD COLLEGE OF ENGINEERING RESEARCH & TECHNOLOGY BARABANKI ,(U.P.), Batch 2009-2011 Roll No.-0928170042, hereby declare that this project work entitled “Stability Of Beta Over Market Phases: An Empirical Study On Indian Stock Market”. Submitted in the partial fulfillment for the degree of Master of Business Administration is the outcome of my work and the same has not been submitted for the award of any other degree, diploma, fellowship or other similar title of any other university.

Date : (Ravi srivastava)

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LIST OF CONTENTS

College Certificate 2

Preface 3

Acknowledgement 5

Student Declaration 7

Executive Summary 11

1. CHAPTER-I 14 Introduction 15

Capital Market 16

Significance, Role or Functions of Capital Market 17

Structure of Indian Capital Market with Diagram 19

Types of Securities Markets 21

Stock Exchange 24

Characteristics of the Stock Market

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Functions of the Stock Exchange Market

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Kinds of Speculators 29

Concept of Risk and Return 31

Types Of Risk  31 Systematic Risk 31

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Unsystematic Risk 32

Stock Beta and Volatility 33

Beta Values 33

Interpretation of Beta Value 35

CAPM Theory and Beta 37

Advantages and Disadvantages of Beta 38

Beta Calculations 39

Alpha Values 40

2. CHAPTER –II 41 Literature Review 42

3. CHAPTER – III 46 Research Methodology 47

Research Objective 48

Research Design 49

Data collection 49

Sample Design 50

Research Instrument/ Method 50

Analytical Tools 51

4. CHAPTER – IV 52 Data Analysis & Findings

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Identification of Market Phase 54

Beta Value of Individual Securities 57

Findings 59

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5. CHAPTER – V 60 Recommendation & Suggestion 61

5. CHAPTER – VI 62 Conclusions 63

Limitation of Research 64

Bibliography 65

Annexure 66-88

EXECUTIVE SUMMARY

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EXECUTIVE SUMMARY

Beta is the systematic relationship between the return on the portfolio and the

return on the market (Rosenberg and Marathe, 1979). It refers to the slope in a linear

relationship fitted to data on the rate of return on an investment and the rate of return of

the market (or market index). Beta is a technique of telling how volatile a stock is

compared with the rest of the market. When the return on the portfolio is more than the

return on the market, beta is greater than one and those portfolios are referred to as

aggressive portfolios. That means, in a booming market condition, aggressive portfolio

will achieve much better than the market performance. While in a bearish market

environment the fall of aggressive portfolios will also be much prominent. On the other

hand, when the return on portfolio is less than the market return, beta measure is less than

one and those portfolios are treated as defensive. In case of defensive portfolios, when the

market is rising, the performances associated with it will be less than the market

portfolio. However, when the market moves down, the fall in the defensive portfolios

would also be less than the market portfolio. In those situations where, the return of the

portfolio accurately matches the return of the market, beta is equal to one that rarely

happens in real life situations.

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Beta estimation is central to many financial decisions such as those relating to

stock selection, capital budgeting, and performance evaluation. It is significant for both

practitioners and academics. Practitioners use beta in financial decision making to

estimate cost of capital. Beta is also a key variable in the academic research; for example

it is used for testing asset pricing models and market efficiency. Given the importance of

this variable a pertinent question for both practitioners and academics is how to obtain an

efficient estimation. This study is aimed at testing the beta stability for India. Further the

stability of beta is of great concern as it is a vital tool for almost all investment decisions

and plays a significant role in the modern portfolio theory.

The estimation of beta for individual securities using a simple market model has

been widely evaluated as well as criticized in the finance literature. One important aspect

of this simple market model is the assumption of symmetry that propounds the estimated

beta is valid for all the market conditions. Many studies questioned this assumption and

examined the relationship between beta and market return in different market conditions,

but the results are mixed and inconclusive. In this Report, an attempt is made to

investigate the stability of beta in the Indian stock market during the last 4 years i.e. from

February 2007 to February, 2009. With this objective, the paper is divided into Six

Chapters. Chapter 1 includes Introduction, Section 2 reviews the existing literature

Section 3 describes the data sources and methodology. Section 4 outlines the results of

tests for investigating the stability of beta and its findings. Section 5 describes the

Recommendation & findings and Section 6 is dedicated to summary, conclusion,

Limitations and scope for further research in the area.

The main objective of my project was to test the stability of Beta over Market Phases.

The data related to the study is taken for 15 stocks from BSE-100 index.

Research helped peoples to know about the volatility of the Securities. And helps in

taking the right decisions related to the investment in the right securities.

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A firsthand experience was taken as to how the stock market works and what position

of the various securities in the market.

Learned the different Market Phases i.e. Bullish or Bearish in last 4 years period (Feb,

2007 to Feb, 2011).

Altogether it was a new learning experience for me in the field of market research and

Stock Market.

CHAPTER-I

INTRODUCTION 15

Capital Market 16

Significance, Role or Functions of Capital Market 17

Structure of Indian Capital Market with Diagram 19

Types of Securities Markets 21

Stock Exchange 24

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Characteristics of the Stock Market

24

Functions of the Stock Exchange Market

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Kinds of Speculators 29

Concept of Risk and Return 31

Types Of Risk  31

Systematic Risk 31 Unsystematic Risk 32

Stock Beta and Volatility 33

Beta Values 33

Interpretation of Beta Value 35

CAPM Theory and Beta 37

Advantages and Disadvantages of Beta 38

Beta Calculations 39

Alpha Values 40

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INTRODUCTION

CAPITAL MARKET

Sources from which long-term capital is raised

for the setting up the sustained growth of

companies. The stock exchange is a part of the

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capital market, not only because it readily provides money for new or existing ventures,

but also because it helps investors to trade in their shares and maintains the liquidity of

investments. Investment in further public and rights issues, convertible and non-

convertible debentures, therefore, become an attractive proposition and companies are

able to raise the resource they need. The capital market is distinct from money market –

banks and lending institutions – which provides short – term finance.

Meaning and Concept of Capital Market

Capital Market is one of the significant aspect of every financial market. Hence it is

necessary to study its correct meaning. Broadly speaking the capital market is a market

for financial assets which have a long or indefinite maturity. Unlike money market

instruments the capital market intruments become mature for the period above one year.

It is an institutional arrangement to borrow and lend money for a longer period of time. It

consists of financial institutions like IDBI, ICICI, UTI, LIC, etc. These institutions play

the role of lenders in the capital market. Business units and corporate are the borrowers in

the capital market. Capital market involves various instruments which can be used for

financial transactions. Capital market provides long term debt and equity finance for the

government and the corporate sector. Capital market can be classified into primary and

secondary markets. The primary market is a market for new shares, where as in the

secondary market the existing securities are traded. Capital market institutions provide

rupee loans, foreign exchange loans, consultancy services and underwriting.

SIGNIFICANCE, ROLE OR FUNCTIONS OF CAPITAL MARKET

Like the money market capital market is also very important. It plays a significant role in

the national economy. A developed, dynamic and vibrant capital market can immensely

contribute for speedy economic growth and development.

Let us get acquainted with the important functions and role of the capital market.

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1. Mobilization of Savings : Capital market is an important source for mobilizing idle

savings from the economy. It mobilizes funds from people for further investments in

the productive channels of an economy. In that sense it activate the ideal monetary

resources and puts them in proper investments.

2. Capital Formation : Capital market helps in capital formation. Capital formation is

net addition to the existing stock of capital in the economy. Through mobilization of

ideal resources it generates savings; the mobilized savings are made available to

various segments such as agriculture, industry, etc. This helps in increasing capital

formation.

3. Provision of Investment Avenue : Capital market raises resources for longer periods

of time. Thus it provides an investment avenue for people who wish to invest

resources for a long period of time. It provides suitable interest rate returns also to

investors. Instruments such as bonds, equities, units of mutual funds, insurance

policies, etc. definitely provides diverse investment avenue for the public.

4. Speed up Economic Growth and Development: Capital market enhances

production and productivity in the national economy. As it makes funds available for

long period of time, the financial requirements of business houses are met by the

capital market. It helps in research and development. This helps in, increasing

production and productivity in economy by generation of employment and

development of infrastructure.

5. Proper Regulation of Funds: Capital markets not only helps in fund mobilization,

but it also helps in proper allocation of these resources. It can have regulation over

the resources so that it can direct funds in a qualitative manner.

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6. Service Provision: As an important financial set up capital market provides various

types of services. It includes long term and medium term loans to industry,

underwriting services, consultancy services, export finance, etc. These services help

the manufacturing sector in a large spectrum.

7. Continuous Availability of Funds: Capital market is place where the investment

avenue is continuously available for long term investment. This is a liquid market as

it makes fund available on continues basis. Both buyers and seller can easily buy and

sell securities as they are continuously available. Basically capital market

transactions are related to the stock exchanges. Thus marketability in the capital

market becomes easy.

These are the important functions of the capital market.

Final Glance and Conclusion on Capital Market

The lack of an advanced and vibrant capital market can lead to underutilization of

financial resources. The developed capital market also provides access to the foreign

capital for domestic industry. Thus capital market definitely plays a constructive role in

the over all development of an economy.

STRUCTURE OF INDIAN CAPITAL MARKET WITH DIAGRAM

Broadly speaking the capital market is classified in to two categories. They are the

Primary market (New Issues Market) and the Secondary market (Old (Existing) Issues

Market). This classification is done on the basis of the nature of the instrument brought in

the market. However on the basis of the types of institutions involved in capital market, it

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can be classified into various categories such as the Government Securities market or

Gilt-edged market, Industrial Securities market, Development Financial Institutions

(DFIs) and Financial intermediaries. All of these components have specific features to

mention. The structure of the Indian capital market has its distinct features. These

different segments of the capital market help to develop the institution of capital market

in many dimensions. The primary market helps to raise fresh capital in the market. In the

secondary market, the buying and selling (trading) of capital market instruments takes

place. The following chart will help us in understanding the organizational structure of

the Indian Capital market.

1. Government Securities Market : This is also known as the Gilt-edged market. This

refers to the market for government and semi-government securities backed by the

Reserve Bank of India (RBI).

2. Industrial Securities Market : This is a market for industrial securities i.e. market

for shares and debentures of the existing and new corporate firms. Buying and

selling of such instruments take place in this market. This market is further classified

into two types such as the New Issues Market (Primary) and the Old (Existing)

Issues Market (secondary). In primary market fresh capital is raised by companies by

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issuing new shares, bonds, units of mutual funds and debentures. However in the

secondary market already existing i.e old shares and debentures are traded. This

trading takes place through the registered stock exchanges. In India we have three

prominent stock exchanges. They are the Bombay Stock Exchange (BSE), the

National Stock Exchange (NSE) and Over The Counter Exchange of India (OTCEI).

3. Development Financial Institutions (DFIs) : This is yet another important segment

of Indian capital market. This comprises various financial institutions. These can be

special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc. These

financial institutions provide long term finance for those purposes for which they are

set up.

4. Financial Intermediaries : The fourth important segment of the Indian capital

market is the financial intermediaries. This comprises various merchant banking

institutions, mutual funds, leasing finance companies, venture capital companies and

other financial institutions.

These are important institutions and segments in the Indian capital market.

SEBI Regulates Indian Capital MarketFor the smooth functioning of the capital market a proper coordination among above

organizations and segments is a prerequisite. In order to regulate, promote and direct the

progress of the Indian Capital Market, the government has set up 'Securities and

Exchange Board of India' (SEBI). SEBI is the supreme authority governing and

regulating the Capital Market of India.

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TYPES OF SECURITIES MARKETS

Securities markets are the markets in which securities, or financial assets, are traded.

There are two different types of securities markets. The first type is known as the primary

market: the primary market is used for trading newly issued securities. The second type

of securities market is known as the secondary market: the secondary market is used for

trading securities that have already been issued. Primary markets and secondary markets

are generally used for trading equity securities.

Primary Markets

Primary markets, or primary financial markets, are where new financial assets are issued.

There are two main types of primary-market issues. The first type of issue is known as an

initial public offering, or IPO. These issues are the very first shares a company offers to

the public. Investment bankers serve as underwriters for these issues: they facilitate the

process of selling these initial public offerings.

The second type of issue is known as a seasoned new issue. These issues are new shares

that are being issued by a company that already has publicly traded shares on existing

stock exchanges. A seasoned new issue is the way a company sells more shares to the

investing public.

Secondary Markets

Secondary markets, or secondary financial markets, trade existing securities (previously

owned shares of stocks, bonds, and other financial assets). Secondary markets consist of

both organized exchanges, such as the New York Stock Exchange, and over-the-counter

or electronic markets, such as NASDAQ: secondary markets consist of markets in which

existing securities are traded.

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Organized stock exchanges: Organized stock exchanges are markets that are used to

facilitate the trading of financial instruments. The main organized stock exchanges are

the New York Stock Exchange and the American Stock Exchange. There are also

regional stock exchanges, such as the Pacific, Chicago, Philadelphia, Cincinnati,

Intermountain, Spokane, and Boston Stock Exchanges, but these stock exchanges are

very small.

The largest stock exchange in the United States is the New York Stock Exchange. This

stock exchange is more than two hundred years old, and it is still limited to 1,366 seats:

the same number of seats it has had since 1953. The New York Stock Exchange includes

over 3,000 listed companies. Generally, 80 percent of the daily trading volume in the

United States is done on the New York Stock Exchange.

Over-the-counter (OTC) market: The OTC market is an electronic network of dealers

that allows investors to execute trades without going through specialists or

intermediaries. That is, there is no single physical location (exchange) where stocks are

traded, rather these trades are executed through the National Association of Securities

Dealer Automated Quotation System (NASDAQ) which links various dealers and brokers

through a computer or telephone based system. Usually the bigger companies are traded

on an exchange rather than an OTC.  These trades are also executed through the National

Market System, a system under the sponsorship of the National Association of Securities

Dealers (NASD), which trades stocks of specific sizes, profitability, and trading

requirements. NASD also trades “pink sheets,” or lists of small companies not listed on

any exchange; these stocks are traded by brokers through a network of phone and

computer systems and may be significantly more risky.

Secondary bond markets: An organized exchange for individual retail investors to trade

bonds does not exist. This may be because there is little demand for bonds among

individual investors; this may also be because the transaction costs to trade bonds are so

small. Generally, individuals must work with a broker who buys or sells bonds through a

bond dealer.

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Government bond trading: Government bond trading is dominated by investment

houses, commercial banks, and the Federal Reserve. Some bonds, such as Series EE and I

Bonds and some Treasury securities, can be purchased directly over the Internet at

www.treasurydirect.gov.

International stock markets: There are domestic stock exchanges in the developed

countries and in many of the emerging or developing countries.] Most nations have

securities exchanges; these markets  trade more than $25 trillion in assets. In the U.S.

stock markets  investors can often trade American Depository Receipts (ADRs), which

are receipts for -shares that are held on deposit by foreign banks and represent ownership

of companies which have their primary listing on exchanges outside the United States.-.

Buying an ADR is very similar to buying the underlying domestic share from their home

market, except you get your dividends in U.S. dollars and your annual report information

in English. Another way to invest in international shares is to invest in mutual funds:

many mutual funds invest internationally.

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STOCK EXCHANGE

Stock exchange market refers to an organized market where govt. Securities and shares,

bonds and debentures of the benefited trading units are regularly transacted. Its business

is carried on with in a particular building in which a person can easily convert his shares

into cash or new securities. Thus it is a market for the exchange of transfer able securities

by providing a continuous market.

The term stock exchange is referred by some people to stat Market. Therefore some

writer says, "It is a place to get rich quick while others regard as place of gambling.The

securities of public companies can be transacted in the exchange only if they have been

approved by the committee of the stock exchange.

A company desiring its shares to be approved must first satisfy very rigid rules

concerning the prospectus. It must also agree to abide by the regulations of the stock

exchange about any aspects of its conduct.

FEATURES OF STOCK EXCHANGE MARKET

1. Specialized market. Stock exchange is a specialized market for the purchase and sale

of industrial and financial securities.

2. Rigid rules. There are large number of buyers and sellers who conduct their activities

according to rigid rules.

3. Basis of formation. Its activities are controlled by the company ordinance in our

country. It can be formed as company limited by guarantee or company limited by shares

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CHARACTERISTICS OF THE STOCK MARKET

The stock market in the United States is made up of stock exchanges such as the New

York Stock Exchange (NYSE) and NASDAQ and self-regulating organizations such as

the Pink Sheets, where smaller companies trade over the counter. The NYSE has

acquired the American Stock Exchange, the Pacific Stock Exchange, the Philadelphia

Stock Exchange, and others.

Growth Capital

Issuing of stock is the cornerstone of capital formation for enterprise in capitalist

economic systems. The stock market provides a way for companies to issue stock

to the investing public.

Liquidity

The free and transparent trading that takes place in the stock market prices all

stocks according to demand and supply, bid and ask. In this way it provides

liquidity for investors seeking to transact sales of their holdings through this active

pricing mechanism.

Transparency

The public nature of trading maintains transparency in financial transactions.

Efficiency, growth, freedom and variety are all possible because of transparency

that allows all participants to access the bid and ask prices of all securities traded

on the market and because all participants have access to the same information.

Organization

The stock market provides a degree of protection to investors through oversight by

the SEC, FINRA and other legal regulatory and self-regulating bodies on state and

professional levels that serve to create an organized and liquid group of stock

exchanges and stock trading platforms.

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Economic Indicator

One of the ten components of the Leading Economic Indicators is made up of the

Standard & Poor's 500 Stock Index, one of the major stock market indexes. The

direction of trading activity in the stock market provides an indication of the state

of commerce and overall confidence in the economy

FUNCTIONS OF THE STOCK EXCHANGE MARKET

Although the stock exchange market has multiple functions, its main activities are two:

To promote the savings and for them to be canalized towards of carrying through

investment projects that otherwise wouldn’t   be possible you need that the issuing

institution of the securities to be admitted for quoting. The negotiations will be done on

the primary market.

To provide liquidity to the investors. The investor can   recuperate the money invested

when needed. For it, he has to go to the stock exchange market to sell the securities

previously acquired. This function of the stock market is done on the secondary market.

Other functions of the stock exchange market as an organization are:

To guarantee the legal and economic security of the agreed contracts.

To provide official information about the quantities that are negotiated and of the quoted

prices.

To fix the prices of the securities according to the fundamental law of the offer and the

demand.

Specifying a bit more and centering on the two main agents that intervene in the market,

investors and companies, we could do the following classification:

Functions done by the stock exchange market in favor of the investor:

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It permits him the access to the profitable activities of the big companies.

It offers liquidity to the security investments, through a place in which to sell or buy

securities.

It permits for the investor to have a political power in the companies in which he invests

its savings due that the acquisition of ordinary shares gives him the right (among other

things) to vote in the general shareholders meetings of the company in question.

It offers the possibility of diversifying   your portfolio by enlarging the field of strategy of

investments due to alternative options, as could be the derived market, the money market,

etc.

With respect to the function done by the stock exchange market in favor of the

companies:

It supplies them with the obtaining of long-term funds that permits the company to make

profitable activities or to do determine projects that otherwise wouldn’t be possible to

develop for lack of financing. Also, this funding signifies a less cost than if obtained at

other channels.

The securities quoted at the stock exchange market usually have more fiscal purpose

advantages for the companies.

It offers to the company’s free publicity, which in other way would suppose considerable

expenses. The institution is objecting of attention of the media (television, radio, etc.) in

case any important change in its owners (the share holders).

There also exists a constant following (newspapers) of the quotations.

Therefore we can see how the stock exchange market supposes a great advantage to the

companies, but there are also some inconveniences to have in mind:

First of all, they need of a series of conditions to be apt to enter to the quotations, not all

the companies that apply can do it.

The issuing of shares may suppose a loss of power for the founders of the company.

Anyway, this is very relative because it will depend on the grade of atomization on the

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participations of the new shareholders and of the percentage of shares that the founders

keep over the total capital of the company.

If for example a 49% of the share capital is in hands of the founders, these could loose

the control of in case the other 51% would be in hands of one main shareholder.

However, this rarely happens, due that the share capital that usually goes to the stock

market tends to be distributed between a great number of shareholders that acquire

modest participations in respect to that of the capital of the company the founders may

still keep control with share capital is distributed between a great number of participants.

Now then, the property of these shares implies the possession of certain rights over the

company in which you participate.

These are: political rights, among which appears the possibility of participating in the

general share holders meetings and in the administration of the company by means of the

execution of your rights to vote; and the economic right, which embraces the possibility

of receiving dividends, preferential rights of subscription, the transmission of shares

(selling) and the right to the liquidity value.

This last implies that at the moment in which the company is liquidated, what remains is

proportionally divided between the shareholders.

The possession of all these rights is what reduces the power of the founders.

The shares may pass to be property of unknown people to the founders. At the moment in

which they are object of quotations at the stock exchange market any supplier of capital

may have them. If it’s a company that previously knew all its shareholders, considering

this as an asset of value to the company. The stock market quotation may generate an

important change that will not always be positive.

The companies that are quoted at the stock market offer a better transparency, in a way

that the general public may have access to any information related to their evolution and

activities.

This makes them have a greater control and to supervise every movement done.

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KINDS OF SPECULATORS

“Four kinds of speculators operate in the Indian Stock Exchange. They are known

as bull, bear, stag and lame duck. A Bull also called as Tejiwala is an operator who

is hopeful of price rise in the near future.”

Four kinds of speculators operate in the Indian Stock Exchange. They are known as bull,

bear, stag and lame duck. A Bull also called as Tejiwala is an operator who is hopeful of

price rise in the near future. In anticipation of price rise he makes purchases of shares and

other securities with the intention of selling them at higher prices in future. He being a

speculator has no intention of taking delivery of securities but deals only in difference of

prices. Such as a speculator is called a Bull because of his resemblance of behaviour with

a bull. As a bull is famous for throwing up the opponent in the air, similarly a bull

speculator also takes the price of securities high up in the air. He does this by placing

high-value purchase orders.

A bear or a Mandiwala on the other hand is a speculator who is wary of fall in prices

and hence sells securities so that he may buy them at cheap price in future. A bear does

not have securities at present but sells them at higher prices in anticipation that he will

supply them business purchasing at lower prices in the future. If the prices move down as

per the expectations of the bear he will earn profits out of these transactions. 

Just as a bear presses his victims down to the ground, the bear speculator tends to force

down the prices of different securities. It so happens that when bearish operators are bent

upon selling securities, the prices also automatically come down. It is a usual practice that

a bear is not interested in taking the delivery of securities but he is desirous of getting the

variation in prices, provided the prices come down. In case prices rise then he will have

to pay the difference between the prices at which he purchased the securities and the

prevailing prices on the date of delivery.

Then comes a stag. A stag is that type of speculator who treads his path very carefully.

He applies for shares in new companies and expects to sell them at a premium if he gets

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an allotment. He selects those companies whose shares are most in demand and are likely

to carry a premium. He sells the shares before being called to pay the allotment money. A

stag does not indulge in purchase and sale of shares in the market like a bull and a bear. A

Lame Duck is nothing but a stressed bear. When a bear finds it difficult to complete his

promise he is labeled as a lame duck.

.

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CONCEPT OF RISK AND RETURN

An activity in which an entity puts some financial resources with an expectation of

amplified returns is known as investment activity. For any investment the major concern

for investors is always the “return”. But as we know that the return is a function of the

future and the future is always uncertain so one can never be sure about the returns

associated with some investment.

In practical world, some risk will always be associated with the

returns. Investors try their best to identify the exact risk

associated with some return in order to make a healthy decision

about the investment. Risk can simply be defined as the

uncertainty associated with any expected outcome. In finance,

there are two units of return—one is the “absolute rate of return”

and other one is the “real rate of return”

Absolute and real rate of return 

The absolute rate of return simply reflects the expected and theoretical return associated

with some investment; on the other hand, the real rate of return includes the concept of

time value of money and other risks associated with the investment activity. So, the real

rate of return is an effort to calculate the actual practical returns to be got out of an

investment. Financial management deals with efficient and proper risk assessment for

various theoretical returns.

TYPES OF RISK  

As major classification risks can broadly be classified into two categories—systematic

risk and unsystematic risk.

SYSTEMATIC RISK

Systematic risk is also known as uncontrollable risk, simply because this risk lies beyond

the possibility of regulation. It cannot be avoided due to certain factors. Various types of

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systematic risks are—market risk, purchasing power risk and bond rate risk.

Market risk: These are the risks associated with the demand and supply conditions. It

can’t be regulated by an individual.

Purchasing power risk: After investment, it may be possible that the inflation rate in

economy increases, and as a result, purchasing power of the investor decreases. The

theoretical return will lose some of its value under such conditions. This risk depends

upon the monetary policy of the government.

Bond rate risk: This risk is associated with the fluctuations of prevailing interest rates in

the economy. It depends upon the fiscal policy of the government. Actually, the return

given by the companies (dividend, interest etc) depends upon their performance and

companies possess huge amount of debt financing (loans). So, if interest rate increases in

the economy, the performance of the companies decreases, and as a result, returns also

decrease.

UNSYSTEMATIC RISK

Unsystematic risk is also known as controllable risk, because it can be avoided by the

proper management and decisions of top level management. Various types of

unsystematic risks are—business risk and financial risk.

Business risk: This risk is associated with the behaviour of the top level management of

the organization. Flexibility of management of the organization is required to be at

optimum level for managing this risk.

Financial risk: This risk is associated with the capital structure of the organization i.e.

managing the proper proportion of debt and equity financing. Higher the debt financing,

higher will be the financial risk.

32

STOCK BETA AND VOLATILITY

Perhaps the single most important measure of stock risk or volatility is a stock's beta. 

It's one of those at-a-glance measures that can provide serious stock analysts with insights

into the movements of a particular stock relative to market movements.

Beta Values

The concept of beta is fairly simple; it's a measure of

individual stock risk relative to the overall risk of the

stock market.  It's sometimes referred to as financial

elasticity.  The measure is just one of several values that

stock analysts use to get a better feel for a stock's risk

profile.  As we'll see later on in our discussion, the beta

value is calculated using price movements of the stock

we're analyzing.  Those movements are then compared

to the movements of an overall market indicator, such as a market index, over the same

period of time.

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

cov(ra,rp) is the covariance between the rates of return.

The portfolio of interest in the CAPM formulation is the market portfolio that contains all

risky assets, and so the rp terms in the formula are replaced by rm, the rate of return of the

market.

33

Beta is also referred to as financial elasticity or correlated relative volatility, and can be

referred to as a measure of the sensitivity of the asset's returns to market returns, its non-

diversifiable risk, its systematic risk, or market risk. On an individual asset level,

measuring beta can give clues to volatility and liquidity in the marketplace. In fund

management, measuring beta is thought to separate a manager's skill from his or her

willingness to take risk.

The beta coefficient was born out of linear regression analysis. It is linked to a regression

analysis of the returns of a portfolio (such as a stock index) (x-axis) in a specific period

versus the returns of an individual asset (y-axis) in a specific year. The regression line is

then called the Security characteristic Line (SCL).

αa is called the asset's alpha and βa is called the asset's beta coefficient. Both coefficients

have an important role in Modern portfolio theory.

For an example, in a year where the broad market or benchmark index returns 25% above

the risk free rate suppose two managers gain 50% above the risk free rate. Because this

higher return is theoretically possible merely by taking a leveraged position in the broad

market to double the beta so it is exactly 2.0, we would expect a skilled portfolio manager

to have built the outperforming portfolio with a beta somewhat less than 2, such that

the excess return not explained by the beta is positive. If one of the managers' portfolios

has an average beta of 3.0, and the other's has a beta of only 1.5, then the CAPM simply

states that the extra return of the first manager is not sufficient to compensate us for that

manager's risk, whereas the second manager has done more than expected given the risk.

Whether investors can expect the second manager to duplicate that performance in future

periods is of course a different question.

Security market line

The SML graphs the results from the capital asset

pricing model (CAPM) formula. The x-axis

represents the risk (beta), and the y-axis

34

represents the expected return. The market risk premium is determined from the slope of

the SML.

The relationship between β and required return is plotted on the security market

line (SML) which shows expected return as a function of β. The intercept is the nominal

risk-free rate available for the market, while the slope is E(Rm)− Rf. The security market

line can be regarded as representing a single-factor model of the asset price, where Beta

is exposure to changes in value of the Market. The equation of the SML is thus:

It is a useful tool in determining if an asset being considered for a portfolio offers a

reasonable expected return for risk. Individual securities are plotted on the SML graph. If

the security's risk versus expected return is plotted above the SML, it is undervalued

because the investor can expect a greater return for the inherent risk. A security plotted

below the SML is overvalued because the investor would be accepting a lower return for

the amount of risk assumed.

Beta Rules of Thumb

Beta values are fairly easy to interpret too.  If the stock's price experiences movements

that are greater - more volatile - than the stock market, then the beta value will be greater

than 1.  If a stock's price movements, or swings, are less than those of the market, then

the beta value will be less than 1.

Since increased volatility of stock price means more risk to the investor, we'd also expect

greater returns from stocks with betas over 1.  The reverse is true if a stock's beta is less

than 1.  We'd expect less volatility, lower risk, and therefore lower overall returns.

INTERPRETATION OF BETA VALUE: Beta measures the stock volatility to the

market i.e. the degree to which price fluctuates in relation to the overall market. It can

also be used to compare the different securities. The question is: How to interpret Beta?

When is beta considered low and when is it considered high? Different value of Beta can

be interpreted as follows:

35

β Less than 0 (Negative β): Although variances and standard deviations musty be equal

to or greater than zero, it is possible to have negative β. β value less than zero indicates a

negative (inverse) relationship between stock return and market return. It is possible but

quite unlikely. Negative β means that if market goes up, the prices of that security are

likely to go down.

β value Zero: If β value is zero, it means that there is no systematic risk and the share

prices have no relationship with the market. It is very unlikely.

β value between zero and 1: It shows that the particular stock has less volatility than the

market. In case of rise of fall, share price will show lesser fluctuations than market.

β value 1: It means that volatility in share price and market is equal. Share prices are

expected to move in tandem with the market index.

β value more than 1: It means that the stock has a higher volatility than the market.

Fluctuations in share price will be more than the fluctuations in the market index.

Raking Rm as the Market return and Rs as the Security return, the relationship of these

variables with beta has been shown in figure given below:

36

CAPM Theory and Beta

During our discussions of calculating stock prices, and our follow up discussion of the

capital asset pricing model, or CAPM, we explained how we could calculate the expected

return on an investment by examining risk-free investments, expectations of the stock

market, and stock betas.

For example, by using the following CAPM formula we can calculate the expected rate

of return on an investment as:

Expected Rate of Return = r = rf + B (rm - rf)

Where:

rf = The risk-free interest rate is the interest rate the investor would expect to

receive from a risk-free investment.  Typically, U.S. Treasury Bills are used for

U.S. dollars and German Government bills are used for the Euro.

37

B = A stock beta is used to mathematically describe the relationship between the

movements of an individual stock versus the market itself.  Investors can use a

stock's beta to measure the risk of a security versus the market.

rm = The expected market return is the return the investor would expect to

receive from a broad stock market indicator such as the S&P 500.  For example,

over the last 17 years or so, the S&P 500 has yielded investors an average

annual return of around 8.10%.

If we were to translate this CAPM formula into words, we'd say the following:

"The expected return on an investment is equal to the return on a risk-free investment

plus the risk premium that's associated with the stock market itself, adjusted for the

relative risk of the common stock we've chosen."

Stock beta values are a key element when using the CAPM.  If you'd like to work through

some examples to see how this theory works in practice then try our online CAPM

calculator.

ADVANTAGES AND DISADVANTAGES OF BETA

In the next two sections, we're going to discuss the advantages and disadvantages of beta

values.  The outcome of this discussion should be an overall understanding of how to use

this measure in practice.  For example, you may want to look at a stock's beta before

making a purchase decision.  That's a good step to take as part of your stock research, as

long as you understand what the value is telling you.

Advantages of Beta

The calculation of beta is based on extremely sound finance theory.  The CAPM pricing

theory is about as good as it gets when it comes to pricing stocks, and is far easier to put

into practice when compared to the Arbitrage Pricing Theory, or APT.  If you're thinking

about investing in a company's stock, then the beta allows you to understand if the price

38

of that security has been more or less volatile than the market itself.  That's certainly a

good factor to understand about a stock you're planning to add to your portfolio.

If we understand the theory behind beta, then it's easy to understand how emerging

technology stocks typically have beta values greater than 1, while 100 year-old utility

stocks typically have beta values less than 1.  In fact, in March 2007 Priceline.com had a

beta of 3.4 while Public Service Enterprise Group had a beta of 0.57.  It's nice when

theory seems to work in the real world.

Disadvantages of Beta

We're an advocate of value investing, which includes conducting stock research that

focuses on a company's fundamentals and an understanding of financial

ratios before investing in a stock.  Unfortunately, if you're calculating stock beta values

using price movements over the past three years, then you need to bear in mind that the

"past performance is no guarantee of future returns" rule applies to beta values.

Beta is calculated based on historical price movements, which may have little to do with

how a company's stock is poised to move in the future.  Because the measure relies on

historical prices, it's not even possible to accurately calculate the beta of newly issued

stocks.

Beta also doesn't tell us if the stock's movements were more volatile during bear markets

or bull markets.  It doesn't distinguish between large upswing or downswing movements. 

So while beta can tell us something about the past risk of a security, it tells us very little

about the attractiveness or the value of the investment today or in the future.

BETA CALCULATIONS

You'll find calculated values of beta on all of the major stock reporting websites:  Yahoo

Finance, MSN Money, and Google Finance all report stock beta values.  You can also

calculate beta yourself using a fairly straightforward linear regression technique that's

39

available in a spreadsheet application such as Microsoft's Excel or Open Office

Calculations.

In fact, to calculate a stock's beta you only need two sets of data:

Closing stock prices for the stock you're examining.

Closing prices for the index you're choosing as a proxy for the stock market.

Most of the time, beta values are calculated using the month-end stock price for the

security you're examining, and the month end closing price of the S&P 500 Index

($INX).

The formula for the beta can be written as:

Beta = Covariance (stock versus market returns) / Variance of the Stock Market

You can see the calculation of beta at work in our Stock Beta Calculation Spreadsheet. 

There you'll not only find a table that you can use to calculate the value of beta yourself,

but also two charts:  one for the market index and a second called the Security

Characteristic Line (SCL), which applies to the stock you're analyzing.

Alpha Values

Finally, in our spreadsheet we also included a calculation of alpha values.  Alpha is a

measure of excess returns on an investment, which has been adjusted for risk.  It's

commonly used to assess the performance of a portfolio manager (such as the case with

a mutual fund) as it's an indicator of their ability to provide returns in excess of a

benchmark such as the S&P 500.

For example:

If alpha < risk-free investment return, then the fund manager has destroyed value;

If alpha = risk-free investment return, then the fund manager has neither created nor

destroyed value; and

40

If alpha > risk-free investment return, then the fund manager has created value.

41

CHAPTER-II

LITERATURE REVIEW 42

42

LITERATURE REVIEW

Several studies are carried out to study the nature and the behavior of beta. Baesel

(1974) studied the impact of the length of the estimation interval on beta stability. Using

monthly data, betas were estimated using estimation intervals of one year, two years, four

years, six years and nine years. He concluded that the stability of beta increases

significantly as the length of the estimation interval increases. Levy (1971) and Levitz

(1974) have shown that portfolio betas are very stable whereas individual security betas

are highly unstable. Likewise Blume (1971) used monthly prices data and successive

seven-year periods and shown that the portfolio betas are very stable where as individual

security betas are highly unstable in nature. He shows that, the stability of individual beta

increases with increase in the time of estimation period. Similar results were also

obtained by Altman et al (1974). In both the cases, initial and succeeding estimation

periods are of the same length. Allen et al. (1994) have considered the subject of

comparative stability of beta coefficients for individual securities and portfolios. The

usual perception is that the portfolio betas are more stable than those for individual

securities. They argue that if the portfolio betas are more stable than those for individual

securities, the larger confidence can be placed in portfolio beta estimates over longer

periods of time. But, their study concludes that larger confidence in portfolio betas is not

justified.

Alexander and Chervany (1980) show empirically that extreme betas are less

stable compared to interior beta. They proved it by using mean absolute deviation as a

measure of stability. According to them, best estimation interval is generally four to six

years. They also showed that irrespective of the manner portfolios are formed,

magnitudes of inter-temporal changes in beta decreases as the number of securities in the

portfolios rise contradicting the work of Porter and Ezzell (1975). Chawla (2001)

investigated the stability of beta using monthly data on returns for the period April 1996

to March 2000. The stability of beta was tested using two alternative econometric

methods, including time variable in the regression and dummy variables for the slope

coefficient. Both the methods reject the stability of beta in majority of cases.

43

Many studies focused on the time varying beta using conditional CAPM

(Jagannathan and Wang (1996) Lewellen and Nagel (2003)). These studies concluded

that the fluctuations and events that influence the market might change the leverage of the

firm and the variance of the stock return which ultimately will change the beta. Haddad

(2007) examine the degree of return volatility persistence and time-varying nature of

systematic risk of two Egyptian stock portfolios. He used the Schwert and Sequin (1990)

market model to study the relationship between market capitalization and time varying

beta for a sample of investable Egyptian portfolios during the period January, 2001 to

June, 2004. According to Haddad, the small stocks portfolio exhibits difference in

volatility persistence and time variability. The study also suggests that the volatility

persistence of each portfolio and its systematic risk are significantly positively related.

Because of that, the systematic risks of different portfolios tend to move in a different

direction during the periods of increasing market volatility.

The stability of beta is also examined with reference to security market

conditions. For example, Fabozzi and Francis (1977) in their seminal paper considered

the differential effect of bull and bear market conditions for 700 individual securities

listed in NYSE. Using a Dual Beta Market Model (DBM), they established that estimated

betas of most of the securities are stable in both the market conditions. They experienced

it with three different set of bull and bear market definitions and concluded with the same

results for all these definitions.

Fama and French (1992, 1996), Jegadeesh (1992) and others revealed that betas

are not statistically related to returns. McNulty et al (2002) highlight the problems with

historical beta when computing the cost of capital, and suggest as an alternative- the

forward-looking market derived capital pricing model (MCPM), which uses option data

to evaluate equity risk. In the similar line, French et al. (1983) merge forward-looking

volatility with historical correlation to improve the measurement of betas. Siegel (1995)

notes the improvement of a beta based on forward-looking option data, and proceeds to

propose the creation of a new derivative, called an exchange option, which would allow

for the calculation of what he refers to as “implicit” betas. Unfortunately the exchange

44

options discussed by Siegel (1995) are not yet traded, and therefore his method cannot be

applied in practice to compute forward-looking betas.

A few studies are carried out to explore the reason for instability of beta. For

example, Scott & Brown (1980) show that when returns of the market are subjected to

measurement errors, the concurrent autocorrelated residuals and inter-temporal

correlation between market returns and residual results in biased and unstable estimates

of betas. This is so even when true values of betas are stable over time. They also derived

an expression for the instability in the estimated beta between two periods. Chen (1981)

investigates the connection between variability of beta coefficient and portfolio residual

risk. If beta coefficient changes over time, OLS method is not suitable to estimate

portfolio residual risk. It will lead to inaccurate conclusion that larger portfolio residual

risk is associated with higher variability in beta. A Bayesian approach is proposed to

estimate the time varying beta so as to provide a precise estimate of portfolio residual

risk. Bildersee and Roberts (1981) show that during the periods interest rates fluctuate,

betas would fluctuate systematically. The change would be in tune with their value

relative to the market and the pattern of changes in interest rate.

Few research studies are available in the Indian context to examine the factors

influencing systematic risk. For example, Vipul (1999) examines the effect of company

size, industry group and liquidity of the scrip on beta. He considered equity shares of 114

companies listed at Bombay Stock Exchange from July 1986 to June 1993 for his study.

He found that size of the company affects the value of betas and the beta of medium sized

companies is the lowest which increases with increase or decrease in the size of the

company. The study also concluded that industry group and liquidity of the scrip do not

affect beta. In another study, Gupta & Sehgal (1999) examine the relationship between

systematic risk and accounting variables for the period April 1984 to March 1993. There

is a confirmation of relationship in the expected direction between systematic risk and

variables such as debt equity ratio, current ratio and net sales. The association between

systematic risk and variables like profitability, payout ratio, earning growth and earnings

45

volatility measures is not in accordance with expected sign. The relationship was

investigated using correlation analysis in the study.

46

CHAPTER-III

Research Methodology 47

Research Objective 48

Research Design 49

Data collection 49

Sample Design 50

Research Instrument/ Method 50

Analytical Tools 51

47

RESEARCH METHODOLOGY

48

METHODOLOGY

It is a way to systematically solve the search problem i.e. it signifies how the research is

being carried out.

We collected the information from a sample size of 15 different Selected Stocks of Indian

Stock Market.

RESEARCH OBJECTIVES

This Research project work undertaken for the partial fulfillment of the MBA degree

programme fulfils the following objectives:

Primary Objective:

To Test the Stability of Beta in different market phases.

Secondary Objectives:

An Empirical Study on India Stock Market

To determine the Market Phases i.e. Bearish or Bullish.

To Estimate the beta value for different market phases as well as 4 year periods.

To find out the volatility of the Securities.

49

RESEARCH DESIGN

After formulating the research objective, the next step is to select the suitable research

design. It is a conceptual structure within which the research is conducted.

It constitutes of blue prints for collection, measurement & analysis of data. However the

research design has been classified into following categories.

Research type used Exploratory Research. In this exploratory research we have

used the stratified random sampling.

Collect Data from company’s last years Annual Reports, websites, booklets,

business magazines etc.

Analyzing the data using the graphs and tables.

Place of Research: Lucknow

RESEARCH HYPOTHESIS:

Null Hypothesis (H0): The beta is stable over the market phases.

Alternative Hypothesis (H1): Beta values are not stable and vary according to phases in

the market.

DATA COLLECTION

Data are collected from two sources that are primary and secondary sources. As in this

case data collection from primary source is very difficult and almost it is not possible. So

data is collected from Secondary sources that are from company’s last years Annual

Reports, websites, booklets, bushiness magazines and other theoretical and conceptual

books of Stock Market. Different other sources are been used so as to get the theoretical

aspect and to understand the analysis and to give interpretation.

50

SAMPLE DESIGN

Examining the entire sample accurately is rewarded but practically it is impossible

because of time & money constrains. In such a case sampling is the only technique.

Sample design includes:

Population: The samples used in the study include Bombay Stock Exchange, BSE-100

Index.

Size of the Sample: The data related to the study is taken for 15 stocks from BSE-100

index.

RESEARCH INSTRUMENTS/ METHODS:

The top 15 stocks are chosen on the basis of their market capitalization in BSE-100

index. These 15 stocks are selected from BSE- 100 stocks in such a way that the

continuous price data is available for the study period. The adjusted closing prices of

these 15 stocks were collected for the last 4 years period i.e. from February 2007 to

February 2011. The stock and market (BSE-100) data has been collected from BSE

website for the above period.

BSE-100 index is a broad-based index and follows globally accepted free-float

methodology. Scrip selection in the index is generally taken into account a balanced

sectoral representation of the listed companies in the universe of Bombay Stock

Exchange (BSE). As per the stock market guideline, the stocks inducted in the index are

on the basis of their final ranking. Where the final rank is arrived at by assigning 75

percent weightage to the rank on the basis of three-month average full market

capitalization and 25 percent weightage to the liquidity rank based on three-month

average daily turnover & three-month average impact cost.

51

The following method has been used to compute the monthly return on each of the stock.

P i,t – P i,t-1ri,t = –––––––––– P i, t-1

Where:

P i,t = Average price of stock “i” in the month t

Pi,t-1= Average price of stock “i” in the month t-1

r i,t= Return of ith stock in the month t.

The monthly market return is computed in the following way:

Bt – Bt-1mt = ––––––––––

B t-1Where:

Bt = BSE-100 Index at time period t

Bt-1 = BSE-100 Index at time period t-1

mt = Market return at time period t.

ANALYTICAL TOOLS

Table in Excel sheet

Percentage

Graph Chart

52

CHAPTER-IV

Data Analysis & Findings

53

Identification of Market Phase 54

Beta Value of Individual Securities 57

Findings 59

53

DATA ANALYSIS&

FINDINGS

54

DATA ANALYSIS

The following method has been used to compute the monthly return on each of the stock.

P i,t – P i,t-1ri,t = –––––––––– P i, t-1

Where:

P i,t = Average price of stock “i” in the month t

Pi,t-1= Average price of stock “i” in the month t-1

r i,t= Return of ith stock in the month t.

The monthly market return is computed in the following way:

Bt – Bt-1mt = ––––––––––

B t-1Where:

Bt = BSE-100 Index at time period t

Bt-1 = BSE-100 Index at time period t-1

mt = Market return at time period t.

IDENTIFICATION OF MARKET PHASE

Month Closing Price Return, Rm 1+RCumulative Wealth Index

Market Phases

Feb-07 6527.12        Mar-07 6587.21 0.0092 1.0092 1.0100 1Apr-07 7032.93 0.0677 1.0677 1.0777 1

May-07 7468.70 0.0620 1.0620 1.1396 1Jun-07 7605.37 0.0183 1.0183 1.1579 1Jul-07 8004.05 0.0524 1.0524 1.2103 1

Aug-07 7857.61 -0.0183 0.9817 1.1920 1Sep-07 8967.41 0.1412 1.1412 1.3333 1Oct-07 10391.19 0.1588 1.1588 1.4921 1Nov-07 10384.40 -0.0007 0.9993 1.4914 1Dec-07 11154.28 0.0741 1.0741 1.5655 1Jan-08 9440.94 -0.1536 0.8464 1.4119 2Feb-08 9404.98 -0.0038 0.9962 1.4081 2Mar-08 8232.82 -0.1246 0.8754 1.2835 2Apr-08 9199.46 0.1174 1.1174 1.4009 2

55

May-08 8683.27 -0.0561 0.9439 1.3448 2Jun-08 7029.74 -0.1904 0.8096 1.1544 2Jul-08 7488.48 0.0653 1.0653 1.2196 2

Aug-08 7621.40 0.0177 1.0177 1.2374 2Sep-08 6691.57 -0.1220 0.8780 1.1154 2Oct-08 4953.98 -0.2597 0.7403 0.8557 2Nov-08 4600.45 -0.0714 0.9286 0.7843 2Dec-08 4988.04 0.0843 1.0843 0.8686 2Jan-09 4790.32 -0.0396 0.9604 0.8290 2Feb-09 4516.38 -0.0572 0.9428 0.7718 2Mar-09 4942.51 0.0944 1.0944 0.8661 2Apr-09 5803.97 0.1743 1.1743 1.0404 3

May-09 7620.13 0.3129 1.3129 1.3533 3Jun-09 7571.49 -0.0064 0.9936 1.3470 3Jul-09 8176.54 0.0799 1.0799 1.4269 3

Aug-09 8225.50 0.0060 1.0060 1.4329 3Sep-09 8930.31 0.0857 1.0857 1.5185 3Oct-09 8333.18 -0.0669 0.9331 1.4517 3Nov-09 8914.77 0.0698 1.0698 1.5215 3Dec-09 9229.71 0.0353 1.0353 1.5568 3Jan-10 8707.82 -0.0565 0.9435 1.5003 3Feb-10 8758.51 0.0058 1.0058 1.5061 3Mar-10 9300.20 0.0618 1.0618 1.5679 3Apr-10 9379.04 0.0085 1.0085 1.5764 3

May-10 9041.23 -0.0360 0.9640 1.5404 3Jun-10 9442.58 0.0444 1.0444 1.5848 3Jul-10 9556.67 0.0121 1.0121 1.5969 3

Aug-10 9627.72 0.0074 1.0074 1.6043 3Sep-10 10627.35 0.1038 1.1038 1.7081 4Oct-10 10639.96 0.0012 1.0012 1.7093 4Nov-10 10280.81 -0.0338 0.9662 1.6755 4Dec-10 10675.02 0.0383 1.0383 1.7139 4Jan-11 9569.01 -0.1036 0.8964 1.6103 4Feb-11 9259.48 -0.0323 0.9677 1.5779 4

After the monthly stock and market returns are calculated as per the above formula, we

identified the different market phases to compute beta separately. The market phases are

identified, by creating a cumulative wealth index from the market returns. The

56

cumulative wealth index data is presented above table. As per the cumulative wealth

index, we identified five different market phases in BSE-100 index. We recognized that

there are two bullish phases (Feb-07 to Dec-07 and Apr-09 to Aug-10 and two bearish

phases (Jan -08 to Mar. - 09, Sep, 10 to Feb, 11). The summary of different market

phases is depicted in Table & figure below.

Table: Different Market Phases

Market PhasesMarket Phase Timing

Market TypeStart End

Phase I Feb-07 Dec-07 Bullish

Phase II Jan-08 Mar-09 Bearish

Phase III Apr-09 Aug-10 Bullish

Phase IV Sep-10 Feb-11 Bearish

Figure- Different Market Phases

0.000.200.400.600.801.001.201.401.601.80

Feb-

07

May

-07

Aug

-07

Nov

-07

Feb-

08

May

-08

Aug

-08

Nov

-08

Feb-

09

May

-09

Aug

-09

Nov

-09

Feb-

10

May

-10

Aug

-10

Nov

-10

Feb-

11

Months

Cum

ulat

ive

Wea

lth In

dex

BETA VALUES

57

Beta Value of Individual Securities Over All 4 PhasesS.No. Name of Company

Overallβ

Phase-I β

Phase-II β

Phase-III β

Phase-IV β

1 BHARTI AIRTEL LTD. 0.5755 0.5883 0.6332 0.4533 0.3823

2 HDFC BANK LTD. 0.9497 1.1223 0.9724 0.9069 0.8513

3 HERO HONDA MOTORS LTD. 0.5452 0.4776 0.8059 0.6026 1.3363

4 HUL 0.2386 -0.2239 0.4849 -0.0012 1.0450

5 ICICI BANK LTD. 1.4075 1.3391 1.2373 1.6976 0.9256

6 INFOSYS TECHNOLOGIES Ltd. 0.4650 0.4434 0.4753 0.3178 1.3756

7 ITC LTD. 0.2995 0.3686 0.4214 0.1002 0.4699

8 L&T Ltd. 1.6128 1.7877 1.5548 1.6131 1.3283

9 ONGC Ltd. 0.9680 1.4899 0.8423 0.9806 1.1413

10 SBI 1.1436 0.6357 1.1473 1.3520 0.0428

11 TCS Ltd. 0.6322 0.2049 0.6319 0.7138 0.8799

12 TATA MOTORS LTD 1.3281 0.5324 1.5191 1.4225 1.3067

13 WIPRO LTD 0.7931 0.5816 0.8149 0.5243 1.5608

14 NTPC LTD 0.6240 1.0049 0.5533 0.5268 0.7758

15 BHEL 0.7318 0.6308 0.6668 0.8563 0.7281On the Basis of Variance of the return of Market Portfolio (Annexure-1) and Covariance

between the return of various security, S, and the return on Market Portfolio, M,

( Annexure-2 to Annexure-16), the calculate value of beta for overall 4 year period and

for the four phases are as follows:

58

β value of Individual Securities for 4 year period

BAL, 0.58

HDFC , 0.95

HHM , 0.55

HUL, 0.24

ICICI, 1.41

INFOSYS., 0.47

ITC, 0.30

L&T, 1.61

O NGC, 0.97

SBI, 1.14

TCS, 0.63

TATA MO TO RS, 1.33

WIPRO , 0.79

NTPC, 0.62BHEL, 0.73

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

β va

lue

β value of Individual Securities for four Phases

-0.50

0.00

0.50

1.00

1.50

2.00

Phase-I, β Phase-II, β Phase-III,β Phase-IV, β

Phases

β va

lue

BAL HDFC HHM HULICICI INFOSYS. ITC L&TONGC SBI TCS TATA MOTORSWIPRO NTPC BHEL

59

FINDINGS

Initially the beta coefficient is calculated using the Ordinary Least Square (OLS)

technique. The estimation was carried out by using monthly return data for the 4 market

phases for each of the 15 stocks. To compare the phase wise beta estimation with the

entire 4 year period, the same estimation also carried out taking the whole 4 years for

each stock separately. Stock wise beta values over 4 market phases and the entire period

is reported in the above table (Beta Value of Individual Securities over All 4 Phases).

From Beta value table, it is revealed that there are 4 stocks beta value is greater

than 1 in phase I. This figure (beta value greater than 1) has reduced to 4, 4 and 7 for

phase-2 to phase-4 respectively. It is also illustrated that, there are 4 stocks whose beta

value is greater than 1 in respect to overall between Feb-07 to Feb-11 and highest being

for L&T of 1.61. The stocks having beta value more than 1 are considered to be volatile

securities. It is noticed that, as we increase the period of estimation to full four years

period, there are less number of stocks proved to be more volatile. Out of the total 15

stocks considered in the study, only one company i.e. L&T has beta more than 1 in all

phases including the overall period. But none of the company’s overall beta value is more

than the phase wise betas. There are four companies (BAL, ITC, TCS and BHEL) whose

beta values are less than 1 all through the phases including overall period. These stocks

are considered to be less volatile than the market. There is only one company (Hindustan

Unilever Ltd.) whose beta value is negative in Phase-I and Phase-III.

It is observed from Beta Value table that there are only one company i.e. HDFC

whose beta values are consistently declining over time and only one company i.e TCS

whose beta values are consistently increasing over time. However there are 3 stocks viz.

BAL, SBI and Tata Motors whose beta values are showing a decreasing trend from phase

II onwards, while ONGC is the only stock whose beta values are showing an increasing

trend during the same period.

60

CHAPTER-V

Recommendation & Suggestion 61

61

RECOMMENDATION & SUGGESTION

Companies are required to maintain the balance between demand and supply.

Small companies’ shares are relatively limited and were only given to the

financial institutions of the city via ‘placing’. Thus there was limited liquidity in

the market. So in boom companies required to issue more capital to increase

liquidity of the market for shares, making supply more elastic and slowing share

price growth.

Inflation also causes negative impact on the Beta value. In order to combat

inflation, the Fed usually uses short term interest rates. Since the interest rates are

increased, it becomes more expensive to borrow money. As a result borrowing is

discouraged, which leads to less money in circulation.

During the periods interest rates fluctuate, betas would fluctuate systematically.

The change would be in tune with their value relative to the market and the

pattern of changes in interest rate.

Analyses of the stock should consider the fundamental basis, i.e. ratio of market

price to asset value.

62

CHAPTER-VI

Conclusions 63

Limitation of Research 64

Bibliography 65

Annexure 66-88

63

CONCLUSIONS

The objective of the present study is to examine the stability of beta in different Indian

market phases. For the purpose of the study monthly return data of 15 stocks for the

period from Feb., 2007 to Feb., 2011 is considered. Considering the bullish and bearish

condition in the Indian market, we divided the whole 4 years into 4 different market

phases. Initially the beta has been estimated for different market phases and also taking

the whole 4 years period. The results show that the beta values are not showing any

particular pattern but in the overall phase almost all the stocks are statistically significant.

We can thus finally conclude that the results obtained from our study that the beta values

are stable or instable over the market phases. But there are number of stocks which give a

strong indication that their beta values are not stable over the market phases.

The instability of beta has its implications in taking sound corporate financial decisions.

Financial decisions should not be based on the overall beta of the company. Rather, the

company’s periodical beta should be relied upon for taking certain managerial decisions.

Considering the inconclusive results obtained from present study, it is suggested that the

future research on beta in Indian market may be investigated from:-

(a) Industry wise stability of beta in different market phases

(b) Stability of beta from portfolio point of view

(c) Optimal time limit for stability of beta

(d) Forward looking beta and its stability

(e) Impact of market and company specific factors and stability of beta and

(f) Market efficiency study using phase wise beta under the event study methodology.

64

LIMITATIONS OF RESEARCH

Although all efforts have been taken to make a result of research, accurate but the

research suffers from following limitations.

Data collection from primary source is very difficult and almost it is not possible,

so the whole data was collected from the secondary sources.

Beta is used only for short-term uses not for long-term ones, because it is more

likely to predict the price fluctuations over the short-term.

This Research was not carried out by direct interactions with the companies’

personnel’s.

I took only 15 companies from only BSE-100 Index.

Time & Money did not allow me to have a large sample.

Duration of study was limited.

This Research on beta in Indian market not investigates Industry wise stability of

beta in different market phases.

If beta coefficient changes over time, OLS method is not suitable to estimate

portfolio residual risk. It will lead to inaccurate conclusion that larger portfolio

residual risk is associated with higher variability in beta

Financial decisions of any company not depend only on the beta values.

65

BIBLIOGRAPHY

Financial Management by R.P. Rustagi

Research Methodology Method & Techniques by C.R. Kothari

www.nseindia.com

en.wikipedia.org

www.eurojournals.com

www.martialcapital.com

www.investopedia.com

www.statistics-help-online.com

www.financescholar.com

66

ANNEXURE

67

Annexure-1

Estimation of Variance of Return of Market PortfolioS.No. Month Index Return, Rm Deviation

(Rm-Mean Rm)Square of Deviation

1 Feb-07 6527.12      2 Mar-07 6587.21 0.0092 -0.0028 0.00003 Apr-07 7032.93 0.0677 0.0556 0.00314 May-07 7468.70 0.0620 0.0499 0.00255 Jun-07 7605.37 0.0183 0.0063 0.00006 Jul-07 8004.05 0.0524 0.0404 0.00167 Aug-07 7857.61 -0.0183 -0.0303 0.00098 Sep-07 8967.41 0.1412 0.1292 0.01679 Oct-07 10391.19 0.1588 0.1467 0.0215

10 Nov-07 10384.40 -0.0007 -0.0127 0.000211 Dec-07 11154.28 0.0741 0.0621 0.003912 Jan-08 9440.94 -0.1536 -0.1656 0.027413 Feb-08 9404.98 -0.0038 -0.0158 0.000314 Mar-08 8232.82 -0.1246 -0.1367 0.018715 Apr-08 9199.46 0.1174 0.1054 0.011116 May-08 8683.27 -0.0561 -0.0681 0.004617 Jun-08 7029.74 -0.1904 -0.2025 0.041018 Jul-08 7488.48 0.0653 0.0532 0.002819 Aug-08 7621.40 0.0177 0.0057 0.000020 Sep-08 6691.57 -0.1220 -0.1340 0.018021 Oct-08 4953.98 -0.2597 -0.2717 0.073822 Nov-08 4600.45 -0.0714 -0.0834 0.007023 Dec-08 4988.04 0.0843 0.0722 0.005224 Jan-09 4790.32 -0.0396 -0.0517 0.002725 Feb-09 4516.38 -0.0572 -0.0692 0.004826 Mar-09 4942.51 0.0944 0.0823 0.006827 Apr-09 5803.97 0.1743 0.1623 0.026328 May-09 7620.13 0.3129 0.3009 0.090529 Jun-09 7571.49 -0.0064 -0.0184 0.000330 Jul-09 8176.54 0.0799 0.0679 0.004631 Aug-09 8225.50 0.0060 -0.0060 0.000032 Sep-09 8930.31 0.0857 0.0737 0.005433 Oct-09 8333.18 -0.0669 -0.0789 0.006234 Nov-09 8914.77 0.0698 0.0578 0.003335 Dec-09 9229.71 0.0353 0.0233 0.000536 Jan-10 8707.82 -0.0565 -0.0686 0.004737 Feb-10 8758.51 0.0058 -0.0062 0.0000

68

38 Mar-10 9300.20 0.0618 0.0498 0.002539 Apr-10 9379.04 0.0085 -0.0035 0.000040 May-10 9041.23 -0.0360 -0.0480 0.002341 Jun-10 9442.58 0.0444 0.0324 0.001042 Jul-10 9556.67 0.0121 0.0001 0.000043 Aug-10 9627.72 0.0074 -0.0046 0.000044 Sep-10 10627.35 0.1038 0.0918 0.008445 Oct-10 10639.96 0.0012 -0.0108 0.000146 Nov-10 10280.81 -0.0338 -0.0458 0.002147 Dec-10 10675.02 0.0383 0.0263 0.000748 Jan-11 9569.01 -0.1036 -0.1156 0.013449 Feb-11 9259.48 -0.0323 -0.0444 0.0020      0.5771   0.4493               Mean Rm 0.0120                   Var-M 0.0094    

Annexure-2

69

Estimation of COV.(S,M) for BHARTI AIRTEL LTD. ( 532454 )S.No. Month Price

Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 718.75      2 Mar-07 763.2 0.0618 0.0694 -0.00023 Apr-07 812.05 0.0640 0.0716 0.00404 May-07 847.8 0.0440 0.0516 0.00265 Jun-07 835.95 -0.0140 -0.0064 0.00006 Jul-07 903.45 0.0807 0.0883 0.00367 Aug-07 879.9 -0.0261 -0.0185 0.00068 Sep-07 941.2 0.0697 0.0772 0.01009 Oct-07 1006.6 0.0695 0.0770 0.0113

10 Nov-07 939.45 -0.0667 -0.0592 0.000711 Dec-07 994.55 0.0587 0.0662 0.004112 Jan-08 864.45 -0.1308 -0.1233 0.020413 Feb-08 825.6 -0.0449 -0.0374 0.000614 Mar-08 826.1 0.0006 0.0082 -0.001115 Apr-08 898.8 0.0880 0.0956 0.010116 May-08 876.45 -0.0249 -0.0173 0.001217 Jun-08 721.65 -0.1766 -0.1691 0.034218 Jul-08 799.15 0.1074 0.1149 0.006119 Aug-08 837.2 0.0476 0.0552 0.000320 Sep-08 785.05 -0.0623 -0.0547 0.007321 Oct-08 649 -0.1733 -0.1657 0.045022 Nov-08 671.05 0.0340 0.0415 -0.003523 Dec-08 715.1 0.0656 0.0732 0.005324 Jan-09 633.85 -0.1136 -0.1061 0.005525 Feb-09 636.65 0.0044 0.0120 -0.000826 Mar-09 625.8 -0.0170 -0.0095 -0.000827 Apr-09 749.3 0.1973 0.2049 0.033228 May-09 819.65 0.0939 0.1014 0.030529 Jun-09 802.1 -0.0214 -0.0139 0.000330 Jul-09 410.55 -0.4882 -0.4806 -0.032631 Aug-09 424.7 0.0345 0.0420 -0.000332 Sep-09 418.55 -0.0145 -0.0069 -0.000533 Oct-09 292.15 -0.3020 -0.2944 0.023234 Nov-09 299.7 0.0258 0.0334 0.001935 Dec-09 328.8 0.0971 0.1046 0.002436 Jan-10 306.5 -0.0678 -0.0603 0.004137 Feb-10 279.25 -0.0889 -0.0814 0.000538 Mar-10 311.9 0.1169 0.1245 0.006239 Apr-10 298.4 -0.0433 -0.0357 0.000140 May-10 262.3 -0.1210 -0.1134 0.005441 Jun-10 263.25 0.0036 0.0112 0.000442 Jul-10 306.9 0.1658 0.1734 0.000043 Aug-10 327.15 0.0660 0.0735 -0.000344 Sep-10 365.9 0.1184 0.1260 0.011645 Oct-10 325.7 -0.1099 -0.1023 0.001146 Nov-10 360.4 0.1065 0.1141 -0.005247 Dec-10 358.4 -0.0055 0.0020 0.000148 Jan-11 318.55 -0.1112 -0.1036 0.012049 Feb-11 331.1 0.0394 0.0469 -0.0021      -0.3625   0.2586

70

Mean Rs -0.0076   

COV.( S,M) 0.0054   

Beta 0.5755

Annexure-3

71

Estimation of COV.(S,M) for HDFC BANK LTD. ( 500180 )   Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 932.6      2 Mar-07 949.4 0.0180 -0.0040 0.00003 Apr-07 1026.15 0.0808 0.0589 0.00334 May-07 1139.75 0.1107 0.0887 0.00445 Jun-07 1144.1 0.0038 -0.0181 -0.00016 Jul-07 1198.65 0.0477 0.0257 0.00107 Aug-07 1171.3 -0.0228 -0.0448 0.00148 Sep-07 1439.05 0.2286 0.2066 0.02679 Oct-07 1653.1 0.1487 0.1268 0.0186

10 Nov-07 1719 0.0399 0.0179 -0.000211 Dec-07 1727.8 0.0051 -0.0168 -0.001012 Jan-08 1568 -0.0925 -0.1145 0.019013 Feb-08 1453.45 -0.0731 -0.0950 0.001514 Mar-08 1319.95 -0.0919 -0.1138 0.015615 Apr-08 1514.85 0.1477 0.1257 0.013216 May-08 1357.85 -0.1036 -0.1256 0.008617 Jun-08 1002.3 -0.2618 -0.2838 0.057518 Jul-08 1095.25 0.0927 0.0708 0.003819 Aug-08 1277.25 0.1662 0.1442 0.000820 Sep-08 1229 -0.0378 -0.0597 0.008021 Oct-08 1023.65 -0.1671 -0.1891 0.051422 Nov-08 920.4 -0.1009 -0.1228 0.010223 Dec-08 997.6 0.0839 0.0619 0.004524 Jan-09 924.6 -0.0732 -0.0951 0.004925 Feb-09 884.85 -0.0430 -0.0650 0.004526 Mar-09 967.85 0.0938 0.0718 0.005927 Apr-09 1100.7 0.1373 0.1153 0.018728 May-09 1442.35 0.3104 0.2884 0.086829 Jun-09 1491.75 0.0342 0.0123 -0.000230 Jul-09 1499.6 0.0053 -0.0167 -0.001131 Aug-09 1469.35 -0.0202 -0.0421 0.000332 Sep-09 1642.25 0.1177 0.0957 0.007033 Oct-09 1621.3 -0.0128 -0.0347 0.002734 Nov-09 1772.55 0.0933 0.0713 0.004135 Dec-09 1700.4 -0.0407 -0.0627 -0.001536 Jan-10 1630.85 -0.0409 -0.0629 0.004337 Feb-10 1704.65 0.0453 0.0233 -0.000138 Mar-10 1932.5 0.1337 0.1117 0.005639 Apr-10 1991.6 0.0306 0.0086 0.000040 May-10 1885.4 -0.0533 -0.0753 0.003641 Jun-10 1914.65 0.0155 -0.0065 -0.000242 Jul-10 2127.45 0.1111 0.0892 0.000043 Aug-10 2132.45 0.0024 -0.0196 0.000144 Sep-10 2480.8 0.1634 0.1414 0.013045 Oct-10 2278.1 -0.0817 -0.1037 0.001146 Nov-10 2289.2 0.0049 -0.0171 0.000847 Dec-10 2346.5 0.0250 0.0031 0.000148 Jan-11 2042.85 -0.1294 -0.1514 0.0175

72

49 Feb-11 2049.7 0.0034 -0.0186 0.0008      1.0543   0.4267

Mean Rs 0.0220   COV.( S,M) 0.0089   Beta 0.9497

Annexure-4

Estimation of COV.(S,M) for HERO HONDA MOTORS LTD. ( 500182 )

73

S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 675.6      2 Mar-07 685.15 0.0141 -0.0062 0.00003 Apr-07 683.6 -0.0023 -0.0226 -0.00134 May-07 732.35 0.0713 0.0510 0.00255 Jun-07 688.9 -0.0593 -0.0796 -0.00056 Jul-07 673.65 -0.0221 -0.0424 -0.00177 Aug-07 648.6 -0.0372 -0.0575 0.00178 Sep-07 744.8 0.1483 0.1280 0.01659 Oct-07 726.85 -0.0241 -0.0444 -0.0065

10 Nov-07 722.7 -0.0057 -0.0260 0.000311 Dec-07 697.65 -0.0347 -0.0550 -0.003412 Jan-08 676.95 -0.0297 -0.0500 0.008313 Feb-08 764.45 0.1293 0.1090 -0.001714 Mar-08 690.2 -0.0971 -0.1174 0.016015 Apr-08 850.7 0.2325 0.2122 0.022416 May-08 746.7 -0.1223 -0.1425 0.009717 Jun-08 682.8 -0.0856 -0.1059 0.021418 Jul-08 804.65 0.1785 0.1582 0.008419 Aug-08 828.8 0.0300 0.0097 0.000120 Sep-08 868.9 0.0484 0.0281 -0.003821 Oct-08 748.3 -0.1388 -0.1591 0.043222 Nov-08 800.8 0.0702 0.0499 -0.004223 Dec-08 805.1 0.0054 -0.0149 -0.001124 Jan-09 876.95 0.0892 0.0690 -0.003625 Feb-09 926.55 0.0566 0.0363 -0.002526 Mar-09 1070.15 0.1550 0.1347 0.011127 Apr-09 1184.25 0.1066 0.0863 0.014028 May-09 1340.9 0.1323 0.1120 0.033729 Jun-09 1397.85 0.0425 0.0222 -0.000430 Jul-09 1605.5 0.1485 0.1283 0.008731 Aug-09 1511.35 -0.0586 -0.0789 0.000532 Sep-09 1669.65 0.1047 0.0844 0.006233 Oct-09 1565.8 -0.0622 -0.0825 0.006534 Nov-09 1720.9 0.0991 0.0788 0.004535 Dec-09 1716.45 -0.0026 -0.0229 -0.000536 Jan-10 1558.7 -0.0919 -0.1122 0.007737 Feb-10 1772.15 0.1369 0.1166 -0.000738 Mar-10 1942.55 0.0962 0.0759 0.003839 Apr-10 1904.95 -0.0194 -0.0396 0.000140 May-10 1937.8 0.0172 -0.0030 0.000141 Jun-10 2046.9 0.0563 0.0360 0.001242 Jul-10 1815.4 -0.1131 -0.1334 0.000043 Aug-10 1791.8 -0.0130 -0.0333 0.000244 Sep-10 1851.9 0.0335 0.0132 0.001245 Oct-10 1865.8 0.0075 -0.0128 0.000146 Nov-10 1973.4 0.0577 0.0374 -0.001747 Dec-10 1986.1 0.0064 -0.0139 -0.000448 Jan-11 1630.5 -0.1790 -0.1993 0.023049 Feb-11 1464.95 -0.1015 -0.1218 0.0054

74

      0.9741   0.2449

Mean Rs 0.0203   COV.( S,M) 0.0051   Beta 0.5452

Annexure-5

Estimation of COV.(S,M) for HINDUSTAN UNILEVER LTD. ( 500696 ) S.No.  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

75

1 Feb-07 176.15      2 Mar-07 205.25 0.1652 0.1525 -0.00043 Apr-07 199.4 -0.0285 -0.0412 -0.00234 May-07 203.5 0.0206 0.0079 0.00045 Jun-07 188.85 -0.0720 -0.0846 -0.00056 Jul-07 206.35 0.0927 0.0800 0.00327 Aug-07 208.6 0.0109 -0.0017 0.00018 Sep-07 219.35 0.0515 0.0389 0.00509 Oct-07 207.6 -0.0536 -0.0662 -0.0097

10 Nov-07 207.15 -0.0022 -0.0148 0.000211 Dec-07 213.9 0.0326 0.0199 0.001212 Jan-08 206.5 -0.0346 -0.0472 0.007813 Feb-08 227.35 0.1010 0.0883 -0.001414 Mar-08 228.7 0.0059 -0.0067 0.000915 Apr-08 249.5 0.0909 0.0783 0.008316 May-08 237.15 -0.0495 -0.0622 0.004217 Jun-08 206.1 -0.1309 -0.1436 0.029118 Jul-08 239.7 0.1630 0.1504 0.008019 Aug-08 245.4 0.0238 0.0111 0.000120 Sep-08 251.55 0.0251 0.0124 -0.001721 Oct-08 221.95 -0.1177 -0.1303 0.035422 Nov-08 236.2 0.0642 0.0516 -0.004323 Dec-08 250.25 0.0595 0.0468 0.003424 Jan-09 261.2 0.0438 0.0311 -0.001625 Feb-09 253.8 -0.0283 -0.0410 0.002826 Mar-09 238.2 -0.0615 -0.0741 -0.006127 Apr-09 234.55 -0.0153 -0.0280 -0.004528 May-09 231.1 -0.0147 -0.0274 -0.008229 Jun-09 267.1 0.1558 0.1431 -0.002630 Jul-09 291.2 0.0902 0.0776 0.005331 Aug-09 259.85 -0.1077 -0.1203 0.000732 Sep-09 262.85 0.0115 -0.0011 -0.000133 Oct-09 282.95 0.0765 0.0638 -0.005034 Nov-09 285.25 0.0081 -0.0045 -0.000335 Dec-09 264.75 -0.0719 -0.0845 -0.002036 Jan-10 244.1 -0.0780 -0.0907 0.006237 Feb-10 235.75 -0.0342 -0.0469 0.000338 Mar-10 238.7 0.0125 -0.0001 0.000039 Apr-10 239 0.0013 -0.0114 0.000040 May-10 236.75 -0.0094 -0.0221 0.001141 Jun-10 266.9 0.1273 0.1147 0.003742 Jul-10 251.1 -0.0592 -0.0719 0.000043 Aug-10 264.4 0.0530 0.0403 -0.000244 Sep-10 308 0.1649 0.1522 0.014045 Oct-10 294.1 -0.0451 -0.0578 0.000646 Nov-10 298.9 0.0163 0.0037 -0.000247 Dec-10 312.3 0.0448 0.0322 0.000848 Jan-11 271.15 -0.1318 -0.1444 0.016749 Feb-11 282.1 0.0404 0.0277 -0.0012      0.6073   0.1072     Mean Rs 0.0127         

76

  COV.( S,M) 0.0022             Beta 0.2386    

Annexure-6

77

Estimation of COV.(S,M) for ICICI BANK LTD. ( 532174 ) S.No  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 831.9      2 Mar-07 853.1 0.0255 0.0114 0.00003 Apr-07 865.9 0.0150 0.0009 0.00014 May-07 918.9 0.0612 0.0471 0.00245 Jun-07 955.3 0.0396 0.0255 0.00026 Jul-07 927.05 -0.0296 -0.0437 -0.00187 Aug-07 884.65 -0.0457 -0.0598 0.00188 Sep-07 1063.15 0.2018 0.1877 0.02439 Oct-07 1257 0.1823 0.1682 0.0247

10 Nov-07 1184.65 -0.0576 -0.0716 0.000911 Dec-07 1232.4 0.0403 0.0262 0.001612 Jan-08 1145.65 -0.0704 -0.0845 0.014013 Feb-08 1090.95 -0.0477 -0.0618 0.001014 Mar-08 770.1 -0.2941 -0.3082 0.042115 Apr-08 879.4 0.1419 0.1278 0.013516 May-08 788.3 -0.1036 -0.1177 0.008017 Jun-08 630.2 -0.2006 -0.2146 0.043518 Jul-08 634.85 0.0074 -0.0067 -0.000419 Aug-08 671.5 0.0577 0.0436 0.000220 Sep-08 534.85 -0.2035 -0.2176 0.029221 Oct-08 399.35 -0.2533 -0.2674 0.072722 Nov-08 351.4 -0.1201 -0.1342 0.011223 Dec-08 448.35 0.2759 0.2618 0.018924 Jan-09 416.3 -0.0715 -0.0856 0.004425 Feb-09 328.1 -0.2119 -0.2260 0.015626 Mar-09 332.6 0.0137 -0.0004 0.000027 Apr-09 477.75 0.4364 0.4223 0.068528 May-09 740.7 0.5504 0.5363 0.161429 Jun-09 722 -0.0252 -0.0393 0.000730 Jul-09 759.05 0.0513 0.0372 0.002531 Aug-09 749.5 -0.0126 -0.0267 0.000232 Sep-09 904.8 0.2072 0.1931 0.014233 Oct-09 789.6 -0.1273 -0.1414 0.011234 Nov-09 864.3 0.0946 0.0805 0.004735 Dec-09 875.7 0.0132 -0.0009 0.000036 Jan-10 830.4 -0.0517 -0.0658 0.004537 Feb-10 871.85 0.0499 0.0358 -0.000238 Mar-10 952.7 0.0927 0.0786 0.003939 Apr-10 950.5 -0.0023 -0.0164 0.000140 May-10 867.05 -0.0878 -0.1019 0.004941 Jun-10 862 -0.0058 -0.0199 -0.000642 Jul-10 904.45 0.0492 0.0352 0.000043 Aug-10 977.3 0.0805 0.0665 -0.000344 Sep-10 1110.35 0.1361 0.1220 0.011245 Oct-10 1161.65 0.0462 0.0321 -0.000346 Nov-10 1143.65 -0.0155 -0.0296 0.001447 Dec-10 1144.65 0.0009 -0.0132 -0.000348 Jan-11 1020 -0.1089 -0.1230 0.0142

78

49 Feb-11 971 -0.0480 -0.0621 0.0028      0.6764   0.6323

Mean Rs 0.0141   

COV.( S,M) 0.0132   

Beta 1.4075

Annexure-7

Estimation of COV.(S,M) for INFOSYS TECH. LTD. ( 500209 ) S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 2078.35      

79

2 Mar-07 2012.6 -0.0316 -0.0434 0.00013 Apr-07 2049.35 0.0183 0.0065 0.00044 May-07 1920.25 -0.0630 -0.0748 -0.00375 Jun-07 1929.2 0.0047 -0.0071 0.00006 Jul-07 1977.25 0.0249 0.0131 0.00057 Aug-07 1855.05 -0.0618 -0.0736 0.00228 Sep-07 1896.75 0.0225 0.0107 0.00149 Oct-07 1839.1 -0.0304 -0.0422 -0.0062

10 Nov-07 1604.05 -0.1278 -0.1396 0.001811 Dec-07 1768.4 0.1025 0.0907 0.005612 Jan-08 1503.9 -0.1496 -0.1614 0.026713 Feb-08 1546.85 0.0286 0.0168 -0.000314 Mar-08 1430.15 -0.0754 -0.0872 0.011915 Apr-08 1753.75 0.2263 0.2145 0.022616 May-08 1957.55 0.1162 0.1044 -0.007117 Jun-08 1734.75 -0.1138 -0.1256 0.025418 Jul-08 1583.3 -0.0873 -0.0991 -0.005319 Aug-08 1748.5 0.1043 0.0925 0.000520 Sep-08 1397.55 -0.2007 -0.2125 0.028521 Oct-08 1381.65 -0.0114 -0.0232 0.006322 Nov-08 1240.6 -0.1021 -0.1139 0.009523 Dec-08 1117.85 -0.0989 -0.1107 -0.008024 Jan-09 1305.5 0.1679 0.1561 -0.008125 Feb-09 1231.3 -0.0568 -0.0686 0.004726 Mar-09 1324.1 0.0754 0.0636 0.005227 Apr-09 1507.3 0.1384 0.1266 0.020528 May-09 1602 0.0628 0.0510 0.015429 Jun-09 1776.9 0.1092 0.0974 -0.001830 Jul-09 2063.9 0.1615 0.1497 0.010231 Aug-09 2132.3 0.0331 0.0213 -0.000132 Sep-09 2308.4 0.0826 0.0708 0.005233 Oct-09 2205.4 -0.0446 -0.0564 0.004534 Nov-09 2383.95 0.0810 0.0692 0.004035 Dec-09 2605.25 0.0928 0.0810 0.001936 Jan-10 2476.7 -0.0493 -0.0611 0.004237 Feb-10 2601.6 0.0504 0.0386 -0.000238 Mar-10 2615.1 0.0052 -0.0066 -0.000339 Apr-10 2736.15 0.0463 0.0345 -0.000140 May-10 2657.65 -0.0287 -0.0405 0.001941 Jun-10 2788.55 0.0493 0.0375 0.001242 Jul-10 2788.85 0.0001 -0.0117 0.000043 Aug-10 2707.1 -0.0293 -0.0411 0.000244 Sep-10 3041 0.1233 0.1115 0.010245 Oct-10 2969.6 -0.0235 -0.0353 0.000446 Nov-10 3049.45 0.0269 0.0151 -0.000747 Dec-10 3445 0.1297 0.1179 0.003148 Jan-11 3116.3 -0.0954 -0.1072 0.012449 Feb-11 3003.05 -0.0363 -0.0481 0.0021    3054.45 0.5661   0.2089

80

Mean Rs 0.0118   

COV.( S,M) 0.0044   

Beta 0.4650

Annexure-8

81

Estimation of COV.(S,M) for ITC LTD. ( 500875 )   Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 171.85      2 Mar-07 150.4 -0.1248 -0.1311 0.00043 Apr-07 160 0.0638 0.0575 0.0032

4May-

07 163.6 0.0225 0.0162 0.00085 Jun-07 154.7 -0.0544 -0.0607 -0.00046 Jul-07 170.7 0.1034 0.0971 0.00397 Aug-07 170.55 -0.0009 -0.0072 0.00028 Sep-07 189.7 0.1123 0.1060 0.01379 Oct-07 179.15 -0.0556 -0.0619 -0.009110 Nov-07 188.6 0.0527 0.0465 -0.000611 Dec-07 210.3 0.1151 0.1088 0.006812 Jan-08 195.2 -0.0718 -0.0781 0.012913 Feb-08 202.15 0.0356 0.0293 -0.000514 Mar-08 206.35 0.0208 0.0145 -0.002015 Apr-08 219.8 0.0652 0.0589 0.006216

May-08 217.65 -0.0098 -0.0161 0.0011

17 Jun-08 187 -0.1408 -0.1471 0.029818 Jul-08 187.8 0.0043 -0.0020 -0.000119 Aug-08 188.6 0.0043 -0.0020 0.000020 Sep-08 188 -0.0032 -0.0095 0.001321 Oct-08 153.9 -0.1814 -0.1877 0.051022 Nov-08 173.5 0.1274 0.1211 -0.010123 Dec-08 171.45 -0.0118 -0.0181 -0.001324 Jan-09 179.7 0.0481 0.0418 -0.002225 Feb-09 182.95 0.0181 0.0118 -0.000826 Mar-09 184.8 0.0101 0.0038 0.000327 Apr-09 189.1 0.0233 0.0170 0.002828

May-09 183.65 -0.0288 -0.0351 -0.0106

2 Jun-09 190.45 0.0370 0.0307 -0.0006

82

930 Jul-09 250.05 0.3129 0.3067 0.020831 Aug-09 231.2 -0.0754 -0.0817 0.000532 Sep-09 231.9 0.0030 -0.0033 -0.000233 Oct-09 255.15 0.1003 0.0940 -0.007434 Nov-09 257.8 0.0104 0.0041 0.000235 Dec-09 250.85 -0.0270 -0.0332 -0.000836 Jan-10 250.25 -0.0024 -0.0087 0.000637 Feb-10 232.05 -0.0727 -0.0790 0.000538 Mar-10 263.15 0.1340 0.1277 0.006439 Apr-10 265.05 0.0072 0.0009 0.000040

May-10 283.15 0.0683 0.0620 -0.0030

41 Jun-10 304.75 0.0763 0.0700 0.002342 Jul-10 308.75 0.0131 0.0068 0.000043 Aug-10 162.65 -0.4732 -0.4795 0.002244 Sep-10 178.05 0.0947 0.0884 0.008145 Oct-10 171.15 -0.0388 -0.0450 0.000546 Nov-10 171 -0.0009 -0.0072 0.000347 Dec-10 174.5 0.0205 0.0142 0.000448 Jan-11 162.95 -0.0662 -0.0725 0.008449 Feb-11 169 0.0371 0.0308 -0.0014      0.3020   0.1346

Mean Rs 0.0063   

COV.( S,M) 0.0028   

Beta 0.2995

83

Annexure-9

Estimation of COV.(S,M) for L&T Ltd. 500510S.No. Month Price

Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 1487.5      2 Mar-07 1619.15 0.0885 0.0688 -0.00023 Apr-07 1696.4 0.0477 0.0280 0.00164 May-07 1998.65 0.1782 0.1584 0.00795 Jun-07 2196.05 0.0988 0.0790 0.00056 Jul-07 2606.5 0.1869 0.1672 0.00687 Aug-07 2582.75 -0.0091 -0.0289 0.00098 Sep-07 2812.6 0.0890 0.0692 0.00899 Oct-07 4244.55 0.5091 0.4894 0.0718

10 Nov-07 4129 -0.0272 -0.0470 0.000611 Dec-07 4171.85 0.0104 -0.0094 -0.000612 Jan-08 3680.35 -0.1178 -0.1376 0.022813 Feb-08 3523.05 -0.0427 -0.0625 0.001014 Mar-08 3024.8 -0.1414 -0.1612 0.022015 Apr-08 3003.35 -0.0071 -0.0268 -0.002816 May-08 2981.35 -0.0073 -0.0271 0.001817 Jun-08 2183.2 -0.2677 -0.2875 0.058218 Jul-08 2602.7 0.1921 0.1724 0.009219 Aug-08 2589.85 -0.0049 -0.0247 -0.000120 Sep-08 2442.85 -0.0568 -0.0765 0.0103

84

21 Oct-08 805.45 -0.6703 -0.6900 0.187522 Nov-08 726.95 -0.0975 -0.1172 0.009823 Dec-08 774.4 0.0653 0.0455 0.003324 Jan-09 689.2 -0.1100 -0.1298 0.006725 Feb-09 611.45 -0.1128 -0.1326 0.009226 Mar-09 672.65 0.1001 0.0803 0.006627 Apr-09 879.55 0.3076 0.2878 0.046728 May-09 1405.6 0.5981 0.5783 0.174029 Jun-09 1568.3 0.1158 0.0960 -0.001830 Jul-09 1506.6 -0.0393 -0.0591 -0.004031 Aug-09 1567.6 0.0405 0.0207 -0.000132 Sep-09 1683.2 0.0737 0.0540 0.004033 Oct-09 1567.15 -0.0689 -0.0887 0.007034 Nov-09 1614.15 0.0300 0.0102 0.000635 Dec-09 1679.4 0.0404 0.0207 0.000536 Jan-10 1425.05 -0.1515 -0.1712 0.011737 Feb-10 1566.85 0.0995 0.0798 -0.000538 Mar-10 1626.35 0.0380 0.0182 0.000939 Apr-10 1608.35 -0.0111 -0.0308 0.000140 May-10 1628.6 0.0126 -0.0072 0.000341 Jun-10 1804.55 0.1080 0.0883 0.002942 Jul-10 1797.1 -0.0041 -0.0239 0.000043 Aug-10 1812.45 0.0085 -0.0112 0.000144 Sep-10 2044.7 0.1281 0.1084 0.010045 Oct-10 2021.85 -0.0112 -0.0309 0.000346 Nov-10 1949.85 -0.0356 -0.0554 0.002547 Dec-10 1979.05 0.0150 -0.0048 -0.000148 Jan-11 1641.15 -0.1707 -0.1905 0.022049 Feb-11 1528.05 -0.0689 -0.0887 0.0039      0.9478   0.7245

Mean Rs 0.0197   

COV.( S,M) 0.0151   

Beta 1.6128

85

Annexure-10

Estimation of COV.(S,M) for ONGC Ltd. 500312S.No. Month Price

Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 790.6      2 Mar-07 878.15 0.1107 0.1120 -0.00033 Apr-07 911.9 0.0384 0.0396 0.00224 May-07 914.6 0.0030 0.0042 0.00025 Jun-07 902.15 -0.0136 -0.0124 -0.00016 Jul-07 914 0.0131 0.0143 0.00067 Aug-07 857.55 -0.0618 -0.0605 0.00188 Sep-07 957.9 0.1170 0.1182 0.01539 Oct-07 1247.9 0.3027 0.3040 0.0446

10 Nov-07 1170.75 -0.0618 -0.0606 0.000811 Dec-07 1236.5 0.0562 0.0574 0.003612 Jan-08 988.4 -0.2006 -0.1994 0.033013 Feb-08 1012.35 0.0242 0.0254 -0.000414 Mar-08 981.35 -0.0306 -0.0294 0.004015 Apr-08 1033.4 0.0530 0.0543 0.005716 May-08 864.3 -0.1636 -0.1624 0.011117 Jun-08 814.7 -0.0574 -0.0562 0.011418 Jul-08 996.05 0.2226 0.2238 0.011919 Aug-08 1023.3 0.0274 0.0286 0.0002

86

20 Sep-08 1035.55 0.0120 0.0132 -0.001821 Oct-08 669.8 -0.3532 -0.3520 0.095622 Nov-08 695.35 0.0381 0.0394 -0.003323 Dec-08 667.65 -0.0398 -0.0386 -0.002824 Jan-09 658.2 -0.0142 -0.0129 0.000725 Feb-09 691.15 0.0501 0.0513 -0.003526 Mar-09 779.7 0.1281 0.1293 0.010627 Apr-09 865.5 0.1100 0.1113 0.018128 May-09 1175.9 0.3586 0.3599 0.108329 Jun-09 1067.1 -0.0925 -0.0913 0.001730 Jul-09 1164.5 0.0913 0.0925 0.006331 Aug-09 1185.2 0.0178 0.0190 -0.000132 Sep-09 1171.3 -0.0117 -0.0105 -0.000833 Oct-09 1132.7 -0.0330 -0.0317 0.002534 Nov-09 1199.05 0.0586 0.0598 0.003535 Dec-09 1177.55 -0.0179 -0.0167 -0.000436 Jan-10 1099.8 -0.0660 -0.0648 0.004437 Feb-10 1117.05 0.0157 0.0169 -0.000138 Mar-10 1098.5 -0.0166 -0.0154 -0.000839 Apr-10 1055.1 -0.0395 -0.0383 0.000140 May-10 1167.2 0.1062 0.1075 -0.005241 Jun-10 1320.4 0.1313 0.1325 0.004342 Jul-10 1242.55 -0.0590 -0.0577 0.000043 Aug-10 1338.75 0.0774 0.0786 -0.000444 Sep-10 1401.55 0.0469 0.0481 0.004445 Oct-10 1303.25 -0.0701 -0.0689 0.000746 Nov-10 1248.2 -0.0422 -0.0410 0.001947 Dec-10 1293.4 0.0362 0.0374 0.001048 Jan-11 1177.55 -0.0896 -0.0884 0.010249 Feb-11 270.65 -0.7702 -0.7689 0.0341

      -0.0583   0.4349

Mean Rs -0.0012   COV.( S,M) 0.0091   Beta 0.9680

87

Annexure-11

Estimation of COV.(S,M) for STATE BANK OF INDIA 500112  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 1039.15      2 Mar-07 992.9 -0.0445 -0.0729 0.00023 Apr-07 1105.25 0.1132 0.0848 0.00474 May-07 1352.4 0.2236 0.1952 0.00975 Jun-07 1525.3 0.1278 0.0995 0.00066 Jul-07 1624.5 0.0650 0.0367 0.00157 Aug-07 1599.5 -0.0154 -0.0438 0.00138 Sep-07 1950.7 0.2196 0.1912 0.02479 Oct-07 2068.15 0.0602 0.0318 0.004710 Nov-07 2300.3 0.1123 0.0839 -0.001111 Dec-07 2371 0.0307 0.0023 0.000112 Jan-08 2162.25 -0.0880 -0.1164 0.019313 Feb-08 2109.7 -0.0243 -0.0527 0.000814 Mar-08 1598.85 -0.2421 -0.2705 0.037015 Apr-08 1776.35 0.1110 0.0826 0.008716 May-08 1443.35 -0.1875 -0.2158 0.014717 Jun-08 1111.45 -0.2300 -0.2583 0.05231 Jul-08 1414.75 0.2729 0.2445 0.0130

88

819 Aug-08 1403.6 -0.0079 -0.0363 -0.000220 Sep-08 1465.65 0.0442 0.0158 -0.002121 Oct-08 1109.5 -0.2430 -0.2714 0.073722 Nov-08 1086.85 -0.0204 -0.0488 0.004123 Dec-08 1288.25 0.1853 0.1569 0.011324 Jan-09 1152.2 -0.1056 -0.1340 0.006925 Feb-09 1027.1 -0.1086 -0.1370 0.009526 Mar-09 1066.55 0.0384 0.0100 0.000827 Apr-09 1277.7 0.1980 0.1696 0.027528 May-09 1869.1 0.4629 0.4345 0.130729 Jun-09 1742.05 -0.0680 -0.0964 0.001830 Jul-09 1814 0.0413 0.0129 0.000931 Aug-09 1743.05 -0.0391 -0.0675 0.000432 Sep-09 2195.7 0.2597 0.2313 0.017033 Oct-09 2191 -0.0021 -0.0305 0.002434 Nov-09 2238.15 0.0215 -0.0069 -0.000435 Dec-09 2269.45 0.0140 -0.0144 -0.000336 Jan-10 2058 -0.0932 -0.1216 0.008337 Feb-10 1975.85 -0.0399 -0.0683 0.000438 Mar-10 2079 0.0522 0.0238 0.001239 Apr-10 2297.95 0.1053 0.0769 -0.000340 May-10 2268.35 -0.0129 -0.0413 0.002041 Jun-10 2302.1 0.0149 -0.0135 -0.000442 Jul-10 2503.8 0.0876 0.0592 0.000043 Aug-10 2764.85 0.1043 0.0759 -0.000344 Sep-10 3233.2 0.1694 0.1410 0.012945 Oct-10 3151.2 -0.0254 -0.0537 0.0006

89

46 Nov-10 2994.1 -0.0499 -0.0782 0.003647 Dec-10 2811.05 -0.0611 -0.0895 -0.002448 Jan-11 2641.05 -0.0605 -0.0889 0.010349 Feb-11 2632 -0.0034 -0.0318 0.0014      1.3625   0.5137

Mean Rs 0.0284   

COV.( S,M) 0.0107   

Beta 1.1436

90

Annexure-12

Estimation of COV.(S,M) for TCS Ltd. 532540  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 1188.45      2 Mar-07 1231.2 0.0360 0.0293 -0.00013 Apr-07 1265.7 0.0280 0.0213 0.00124 May-07 1208.6 -0.0451 -0.0518 -0.00265 Jun-07 1149.25 -0.0491 -0.0558 -0.00046 Jul-07 1158.45 0.0080 0.0013 0.00017 Aug-07 1065 -0.0807 -0.0873 0.00268 Sep-07 1056.75 -0.0077 -0.0144 -0.00199 Oct-07 1037.9 -0.0178 -0.0245 -0.003610 Nov-07 1013.95 -0.0231 -0.0298 0.000411 Dec-07 1083.35 0.0684 0.0618 0.003812 Jan-08 875.25 -0.1921 -0.1988 0.032913 Feb-08 874.3 -0.0011 -0.0078 0.000114 Mar-08 810.9 -0.0725 -0.0792 0.010815 Apr-08 919.55 0.1340 0.1273 0.013416 May-08 1029.25 0.1193 0.1126 -0.007717 Jun-08 858.8 -0.1656 -0.1723 0.034918 Jul-08 832.55 -0.0306 -0.0372 -0.002019 Aug-08 812.45 -0.0241 -0.0308 -0.000220 Sep-08 662.75 -0.1843 -0.1909 0.025621 Oct-08 537.45 -0.1891 -0.1957 0.053222 Nov-08 558.05 0.0383 0.0317 -0.002623 Dec-08 478.1 -0.1433 -0.1499 -0.010824 Jan-09 511.95 0.0708 0.0641 -0.003325 Feb-09 480.6 -0.0612 -0.0679 0.004726 Mar-09 540 0.1236 0.1169 0.009627 Apr-09 623.2 0.1541 0.1474 0.023928 May-09 699.75 0.1228 0.1162 0.0350

91

29 Jun-09 389.7 -0.4431 -0.4498 0.008330 Jul-09 526.4 0.3508 0.3441 0.023431 Aug-09 527 0.0011 -0.0055 0.000032 Sep-09 619.35 0.1752 0.1686 0.012433 Oct-09 626.2 0.0111 0.0044 -0.000334 Nov-09 687.2 0.0974 0.0907 0.005235 Dec-09 749.75 0.0910 0.0843 0.002036 Jan-10 735.45 -0.0191 -0.0257 0.001837 Feb-10 761 0.0347 0.0281 -0.000238 Mar-10 780.8 0.0260 0.0193 0.001039 Apr-10 766 -0.0190 -0.0256 0.000140 May-10 742 -0.0313 -0.0380 0.001841 Jun-10 751.15 0.0123 0.0057 0.000242 Jul-10 841.1 0.1197 0.1131 0.000043 Aug-10 843.85 0.0033 -0.0034 0.000044 Sep-10 922.55 0.0933 0.0866 0.007945 Oct-10 1051.8 0.1401 0.1334 -0.001446 Nov-10 1076.7 0.0237 0.0170 -0.000847 Dec-10 1165.05 0.0821 0.0754 0.002048 Jan-11 1157.15 -0.0068 -0.0135 0.001649 Feb-11 1112.95 -0.0382 -0.0449 0.0020      0.3204   0.2840

Mean Rs 0.0067   

COV.( S,M) 0.0059   

Beta 0.6322

92

Annexure-13

Estimation of COV.(S,M) for TATA MOTORS LTD 500570S.No

. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 783.95      2 Mar-07 727.75 -0.0717 -0.0928 0.00033 Apr-07 750.45 0.0312 0.0100 0.00064 May-07 757.5 0.0094 -0.0117 -0.00065 Jun-07 669.75 -0.1158 -0.1370 -0.00096 Jul-07 699.3 0.0441 0.0230 0.00097 Aug-07 701.85 0.0036 -0.0175 0.00058 Sep-07 778.15 0.1087 0.0876 0.01139 Oct-07 757.7 -0.0263 -0.0474 -0.0070

10 Nov-07 733.35 -0.0321 -0.0533 0.000711 Dec-07 742.1 0.0119 -0.0092 -0.0006

93

12 Jan-08 706.15 -0.0484 -0.0696 0.011513 Feb-08 700.25 -0.0084 -0.0295 0.000514 Mar-08 623.45 -0.1097 -0.1308 0.017915 Apr-08 662.2 0.0622 0.0410 0.004316 May-08 576.9 -0.1288 -0.1500 0.010217 Jun-08 426.5 -0.2607 -0.2818 0.057118 Jul-08 403.25 -0.0545 -0.0757 -0.004019 Aug-08 440.35 0.0920 0.0709 0.000420 Sep-08 344.2 -0.2183 -0.2395 0.032121 Oct-08 171.8 -0.5009 -0.5220 0.141822 Nov-08 136.35 -0.2063 -0.2275 0.019023 Dec-08 159.05 0.1665 0.1453 0.010524 Jan-09 149.65 -0.0591 -0.0802 0.004125 Feb-09 149.45 -0.0013 -0.0225 0.001626 Mar-09 180.3 0.2064 0.1853 0.015327 Apr-09 242.35 0.3441 0.3230 0.052428 May-09 336.7 0.3893 0.3682 0.110829 Jun-09 291.15 -0.1353 -0.1564 0.002930 Jul-09 421.55 0.4479 0.4267 0.029031 Aug-09 489.35 0.1608 0.1397 -0.000832 Sep-09 591.35 0.2084 0.1873 0.013833 Oct-09 565 -0.0446 -0.0657 0.005234 Nov-09 660.9 0.1697 0.1486 0.008635 Dec-09 792.6 0.1993 0.1781 0.004236 Jan-10 694.35 -0.1240 -0.1451 0.009937 Feb-10 711.05 0.0241 0.0029 0.000038 Mar-10 755.7 0.0628 0.0417 0.002139 Apr-10 872.85 0.1550 0.1339 -0.000540 May-10 754.65 -0.1354 -0.1566 0.007541 Jun-10 778.35 0.0314 0.0103 0.000342 Jul-10 846.15 0.0871 0.0660 0.000043 Aug-10 1007.45 0.1906 0.1695 -0.000844 Sep-10 1097.3 0.0892 0.0680 0.006245 Oct-10 1159.45 0.0566 0.0355 -0.000446 Nov-10 1237.1 0.0670 0.0458 -0.002147 Dec-10 1306.3 0.0559 0.0348 0.000948 Jan-11 1148.25 -0.1210 -0.1421 0.016449 Feb-11 1081.8 -0.0579 -0.0790 0.0035      1.0149   0.5966     Mean Rs 0.0211           COV.( S,M) 0.0124             Beta 1.3281    

94

Annexure-14

Estimation of COV.(S,M) for WIPRO LTD 507685S.No

. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 560.85      2 Mar-07 558.35 -0.0045 -0.0082 0.00003 Apr-07 571.25 0.0231 0.0194 0.00114 May-07 544.55 -0.0467 -0.0505 -0.00255 Jun-07 518.5 -0.0478 -0.0516 -0.00036 Jul-07 495.65 -0.0441 -0.0478 -0.00197 Aug-07 482.25 -0.0270 -0.0308 0.00098 Sep-07 459.85 -0.0464 -0.0502 -0.00659 Oct-07 504.8 0.0977 0.0940 0.0138

10 Nov-07 460.3 -0.0882 -0.0919 0.001211 Dec-07 525.6 0.1419 0.1381 0.0086

95

12 Jan-08 413.35 -0.2136 -0.2173 0.036013 Feb-08 434.65 0.0515 0.0478 -0.000814 Mar-08 425.3 -0.0215 -0.0253 0.003515 Apr-08 488.6 0.1488 0.1451 0.015316 May-08 508 0.0397 0.0360 -0.002417 Jun-08 437.95 -0.1379 -0.1416 0.028718 Jul-08 416 -0.0501 -0.0539 -0.002919 Aug-08 432.3 0.0392 0.0354 0.000220 Sep-08 339.65 -0.2143 -0.2181 0.029221 Oct-08 272.15 -0.1987 -0.2025 0.055022 Nov-08 243.3 -0.1060 -0.1098 0.009223 Dec-08 233.55 -0.0401 -0.0438 -0.003224 Jan-09 231.1 -0.0105 -0.0142 0.000725 Feb-09 207.35 -0.1028 -0.1065 0.007426 Mar-09 245.4 0.1835 0.1798 0.014827 Apr-09 330.5 0.3468 0.3430 0.055728 May-09 381.55 0.1545 0.1507 0.045329 Jun-09 377.65 -0.0102 -0.0140 0.000330 Jul-09 490.65 0.2992 0.2955 0.020131 Aug-09 550.75 0.1225 0.1187 -0.000732 Sep-09 601.75 0.0926 0.0889 0.006533 Oct-09 607.65 0.0098 0.0061 -0.000534 Nov-09 628.9 0.0350 0.0312 0.001835 Dec-09 679.4 0.0803 0.0766 0.001836 Jan-10 647.4 -0.0471 -0.0508 0.003537 Feb-10 676.7 0.0453 0.0415 -0.000338 Mar-10 706.8 0.0445 0.0407 0.002039 Apr-10 673.5 -0.0471 -0.0509 0.000240 May-10 668.35 -0.0076 -0.0114 0.000541 Jun-10 384.75 -0.4243 -0.4281 -0.013942 Jul-10 411.35 0.0691 0.0654 0.000043 Aug-10 399.8 -0.0281 -0.0318 0.000144 Sep-10 448.35 0.1214 0.1177 0.010845 Oct-10 419.6 -0.0641 -0.0679 0.000746 Nov-10 420.2 0.0014 -0.0023 0.000147 Dec-10 490.25 0.1667 0.1630 0.004348 Jan-11 438.45 -0.1057 -0.1094 0.012749 Feb-11 438.4 -0.0001 -0.0039 0.0002      0.1799   0.3563     Mean Rs 0.0037           COV.( S,M) 0.0074             Beta 0.7931    

96

Annexure-15Estimation of COV.(S,M) for NTPC LTD 532555

S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)1 Feb-07 139.95      2 Mar-07 149.75 0.0700 0.0621 -0.00023 Apr-07 159.2 0.0631 0.0552 0.00314 May-07 158.4 -0.0050 -0.0130 -0.00065 Jun-07 152.35 -0.0382 -0.0461 -0.00036 Jul-07 165.65 0.0873 0.0794 0.00327 Aug-07 173.3 0.0462 0.0383 -0.00128 Sep-07 193.45 0.1163 0.1083 0.01409 Oct-07 239.4 0.2375 0.2296 0.0337

10 Nov-07 236.65 -0.0115 -0.0194 0.000211 Dec-07 250.05 0.0566 0.0487 0.003012 Jan-08 197.9 -0.2086 -0.2165 0.035913 Feb-08 201.75 0.0195 0.0115 -0.000214 Mar-08 197 -0.0235 -0.0315 0.004315 Apr-08 196.75 -0.0013 -0.0092 -0.001016 May-08 172.25 -0.1245 -0.1324 0.0090

97

17 Jun-08 151.65 -0.1196 -0.1275 0.025818 Jul-08 170.45 0.1240 0.1160 0.006219 Aug-08 175.2 0.0279 0.0199 0.000120 Sep-08 171.75 -0.0197 -0.0276 0.003721 Oct-08 140.55 -0.1817 -0.1896 0.051522 Nov-08 159.6 0.1355 0.1276 -0.010623 Dec-08 181 0.1341 0.1262 0.009124 Jan-09 189.5 0.0470 0.0390 -0.002025 Feb-09 184.2 -0.0280 -0.0359 0.002526 Mar-09 180.2 -0.0217 -0.0296 -0.002427 Apr-09 190.15 0.0552 0.0473 0.007728 May-09 215.45 0.1331 0.1251 0.037629 Jun-09 195.05 -0.0947 -0.1026 0.001930 Jul-09 215.6 0.1054 0.0974 0.006631 Aug-09 212.65 -0.0137 -0.0216 0.000132 Sep-09 213.7 0.0049 -0.0030 -0.000233 Oct-09 211.4 -0.0108 -0.0187 0.001534 Nov-09 209.75 -0.0078 -0.0157 -0.000935 Dec-09 235.7 0.1237 0.1158 0.002736 Jan-10 214.25 -0.0910 -0.0989 0.006837 Feb-10 203 -0.0525 -0.0604 0.000438 Mar-10 207 0.0197 0.0118 0.000639 Apr-10 206.95 -0.0002 -0.0082 0.000040 May-10 202 -0.0239 -0.0318 0.001541 Jun-10 199.15 -0.0141 -0.0220 -0.000742 Jul-10 198.6 -0.0028 -0.0107 0.000043 Aug-10 195.75 -0.0144 -0.0223 0.000144 Sep-10 216.9 0.1080 0.1001 0.009245 Oct-10 194.95 -0.1012 -0.1091 0.001246 Nov-10 184.25 -0.0549 -0.0628 0.002947 Dec-10 200.6 0.0887 0.0808 0.002148 Jan-11 188.9 -0.0583 -0.0663 0.007749 Feb-11 170.05 -0.0998 -0.1077 0.0048      0.3804   0.2803     Mean Rs 0.0079           COV.( S,M) 0.0058             Beta 0.6240    

98

Annexure-16

Estimation of COV.(S,M) for BHEL (500103)S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)

1 Feb-07 2176.8      2 Mar-07 2260.75 0.0386 0.0324 -0.00013 Apr-07 2487.25 0.1002 0.0941 0.00524 May-07 1398.9 -0.4376 -0.4437 -0.02225 Jun-07 1538.25 0.0996 0.0935 0.00066 Jul-07 1731.7 0.1258 0.1196 0.00487 Aug-07 1889.15 0.0909 0.0848 -0.00268 Sep-07 2032.75 0.0760 0.0699 0.00909 Oct-07 2613.35 0.2856 0.2795 0.0410

10 Nov-07 2680.25 0.0256 0.0195 -0.000211 Dec-07 2584.25 -0.0358 -0.0419 -0.002612 Jan-08 2064.1 -0.2013 -0.2074 0.034413 Feb-08 2282 0.1056 0.0994 -0.001614 Mar-08 2056.55 -0.0988 -0.1049 0.014315 Apr-08 1897 -0.0776 -0.0837 -0.008816 May-08 1662.15 -0.1238 -0.1299 0.008917 Jun-08 1380.6 -0.1694 -0.1755 0.0355

99

18 Jul-08 1679.05 0.2162 0.2101 0.011219 Aug-08 1706.55 0.0164 0.0103 0.000120 Sep-08 1586 -0.0706 -0.0768 0.010321 Oct-08 1281.6 -0.1919 -0.1980 0.053822 Nov-08 1361.3 0.0622 0.0561 -0.004723 Dec-08 1362.4 0.0008 -0.0053 -0.000424 Jan-09 1320.45 -0.0308 -0.0369 0.001925 Feb-09 1396.3 0.0574 0.0513 -0.003626 Mar-09 1504.35 0.0774 0.0713 0.005927 Apr-09 1651.75 0.0980 0.0919 0.014928 May-09 2174.9 0.3167 0.3106 0.093529 Jun-09 2204.35 0.0135 0.0074 -0.000130 Jul-09 2228.05 0.0108 0.0046 0.000331 Aug-09 2314.7 0.0389 0.0328 -0.000232 Sep-09 2325.15 0.0045 -0.0016 -0.000133 Oct-09 2217.1 -0.0465 -0.0526 0.004134 Nov-09 2244.55 0.0124 0.0063 0.000435 Dec-09 2406.1 0.0720 0.0659 0.001536 Jan-10 2406.45 0.0001 -0.0060 0.000437 Feb-10 2352.15 -0.0226 -0.0287 0.000238 Mar-10 2385.45 0.0142 0.0080 0.000439 Apr-10 2492.1 0.0447 0.0386 -0.000140 May-10 2356.65 -0.0544 -0.0605 0.002941 Jun-10 2460.7 0.0442 0.0380 0.001242 Jul-10 2438.9 -0.0089 -0.0150 0.000043 Aug-10 2408.2 -0.0126 -0.0187 0.000144 Sep-10 2483.6 0.0313 0.0252 0.002345 Oct-10 2445.7 -0.0153 -0.0214 0.000246 Nov-10 2205.75 -0.0981 -0.1042 0.004847 Dec-10 2324.75 0.0539 0.0478 0.001348 Jan-11 2217.5 -0.0461 -0.0523 0.006049 Feb-11 2000.65 -0.0978 -0.1039 0.0046      0.2937   0.3288     Mean Rs 0.0061           COV.( S,M) 0.0068             Beta 0.7318    

100

101