Risk and Return Analysis of Banking Sector Stocks

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RISK AND RETURN ANALYSIS OF EQUITY
SHARES IN BANKING SECTOR
Project Report Submitted to University of Pune
In Partial Fulfillment of Requirement
For the Award of Degree of
MASTER OF BUSINESS ADMINISTRATION
By
HAWALE AMOL ADINATH
Under the guidance of
Prof .Mr. RAHUL JADHAV
Shrinath Shikshan Prasarak Mandal’s
SINHGAD MANAGEMENT SCHOOL
2011-2013
Shrinath Shikshan prasarak mandal’s, Sinhgad
Management School, kondhapuri.

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CERTIFICATE
This is to certify that Mr. HAWALE AMOL ADINATH student of Sinhgad
Management School, Kondhapuri has completed his field work report at Kotak
Securities Ltd on the topic of “RISK AND RETURN ANALYSIS OF EQUITY
SHARES IN BANKING SECTOR” and has submitted the field work report in partial
fulfillment of MASTER OF BUSSINESS ADMINISTRATION of the university of
Pune for the academic year 2011-2013.
He has worked under our guidance and direction. The said report is based on
bonafide information.
Project guide name Director
Date: - Date:-
Place: - KONDHAPURI Place: - KONDHAPURI

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DECLARATION
I hereby declare that the project titled “RISK AND RETURN ANALYSIS OF
EQUITY SHARES IN THE BANKING SECTOR” is an original piece of research
work carried out by me under the guidance and supervision of PROF. RAHUL
JADHAV. The information has been collected from genuine & authentic sources. The
work has been submitted in partial fulfillment of the requirement of MASTER OF
BUSSINESS ADMINISTRATION to Pune University.
Place: Signature:
Date: Name of the Student

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ACKNOWLEDGEMENT
I take immense pleasure in completing this project and submitting the final project
report. This project has provided me a platform to acquire a deep understanding of
one of the analysis of equity share performance; I am deeply indebted to my institute -
Shrinath Shikshan Prasarak Mandal, Sinhgad Management School, Kondhapuri. To
provide me an opportunity to undergo my project, which give me through insight and
experience of the corporate culture that will act as stepping stone in my career.
.
I express my sincere thanks to my project guide Mr. KOSTUB KURVA (branch
manager- Kotak securities ltd.) for guiding me through my project, as well as for
being my motivator and mentor throughout the project period at Kotak securities. He
helped me with all the resources and information required for the project and provided
me with the practical industrial experience, which will be of immense help for me in
my future.
I am also thankful to our director prof. Dr. SHARAD INAMDAR and my project
guide prof. RAHUL JADHAV for helping me to complete the project.
I am grateful to my parents and friends for their consistent guidance, support and
encouragement throughout my work.
Last but not the least, I express my gratitude towards all those people who directly or
indirectly helped me to complete this project.

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Executive Summary
The project of risk and return analysis of equity shares in banking has been
carried out at Kotak securities Pvt. Ltd. The objectives behind that evaluate
investment in equity shares of banking sector Banks are selected which is top in NSE.
The NSE is a national stock exchange of India located at Mumbai. There are main
three indices In national stock exchange that is major indices – S &P CNX nifty, CNX
nifty junior and nifty midcap 50. Another is sectoral indices -bank nifty, CNX auto,
CNX commodities, and CNX metal like that 25 indices in the NSE.
In all these indices select one index that is bank nifty. There are twelve banks
in the NSE bank nifty.
The main aim of this project is evaluate the risk and return using the technique
of standard deviation, beta, correlation, co-variance, net asset value, rate of return,
arithmetic mean, and geometric mean return. In this project shows that rate of equity
shares of particular bank.
The main function of this project is to analyze risk of equity shares compare
to return for evaluate the performance of equity shares fund which make investment
decision in future regarding shares , funds for individual and corporate .
In this project also helpful to equity shares investors as well as help to measure
character line of shares related to market portfolio , evaluate the efficiency of
management and shares performance through the different model which is use to
give rank and star to equity shares of particular bank .

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Table of Contents
SR. No. TITLE PAGE NO.
1 INTRODUCTION
2 OBJECTIVE OF THE PROJECT
3 INDUSTRYPROFILE
4 COMPANYPROFILE
5 RESEARCH DESIGN & METHODOLOGY
6 THEORTICAL BACKGROUND
Concept ofequity share and their types
Introduction ofNSE, nifty 50 bank nifty
Measurement technique ofrisk and return
7 DATA ANALYSIS AND INTERPRITATION
Data collection
data Analysis
8 CONCLUSION
9 Limitation future scope
10 SUGGESTIONS
11 Bibliography

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The Risk and return analysis is important to equity shares investors in the share
market. The need of equity shares at the time of preliminary stage of company or
bank to raising fund for establish company and starting a business. The equity share
holder is an actual owner of company or bank.
The risk and return analysis is main function of this project. The meaning risk
and return as follows:
Risk - risk refers to the possibility that the actual outcome of an investment will differ
from expected outcome. More specifically, most investors are concerned about the
actual outcome being less than the expected outcome.
There are many sources of risk i.e. business risk, market risk, interest rate of
risk.
Return – return is representing the reward for undertaking investment. The returns of
an investment consist of two components as under:-
1) Current return
2) Capital return
In this project risk and return calculated using various techniques. The return is
calculate using net asset value, rate return, dividend, geographical mean and risk is
calculate using co-variance, geometric mean, beta, standard deviation,
correlation(using statistical methods).The rate of equity shares has not fixed. The rate
of equity shares of particular company or bank is change at every time. The equity
share holder either can earn profit or can take risk. This situation is not fixed and
hence, here need of risk and return analysis project.
In this project selected one sector that is banking (BANK NIFTY) from National Stock
Exchange of India (NSE). NSE is the third ranked in the world located at Mumbai.
Bank nifty is a one type of indices of national stock exchange. There are more than
twenty indices in the national stock exchange. The rate equity shares of top twelve
banks has been consider and calculated in bank nifty. Top twelve banks are as under:
ICICI Bank, Yes Bank, Bank of India, Bank of Baroda, Union Bank, Punjab
National Bank, Kotak Mahindra Bank, State Bank of India, HDFC Bank, Axis
Bank, Canara Bank, Induslnd Bank.

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CHAPTER-2
Objective of the Project

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Saving money is not enough. Each of us also need to invest one’s savings intelligently
in order to have enough money available for funding the higher education of one’s
children, for buying a house, or for one’s own golden years. But the rapidly growing
number of investment avenues often led to confusion. Objectives of the study are to
provide information to individual as well as corporate investors regarding their risk,
and choosing the best investment options to match their goals and attitude to risk.
The Risk and return analysis of equity shares project is helpful to equity shares
holders or investors. Equity share holder is a actual owner of the bank or company.
The main aim of this project is give perfect suggestion to equity share holders.
 Objective of this project is analysis the risk and return of equity shares.
 To find out rate of return, dividend this has given to equity
shareholders.
 To compare price of equity shares between two banks in respect of
their risk & return.
 Analyze the performance of equity shares in banking sector.
 To find out weight of various banks in banking sector.
 To discover the fundamental analysis tool to estimate the true value of
equity share. This value of equity share will be compared to market
portfolio, as it is overvalue or undervalue.
 Give suggestion to equity shareholders in banking sector which
security held and how many money should be allocate to each.

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Chapter No. 3
Industry Profile

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History of the Stock Broking Industry:
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago.
In 1887, they formally established in Bombay, the "Native Share and Stock
Brokers Association" (which is alternatively known as "The Stock Exchange").
In1895, the Stock Exchange acquired a premise in the same street and it was
inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated. Thus in
the same way, gradually with the passage of time numbers of exchanges were
increased and at currently it reached to the figure of 24 stock exchanges.
This was followed by the formation of associations /exchanges in Ahmadabad (1894),
Calcutta (1908), and Madras (1937).
In order to check such aberrations and promote a more orderly development of
the stock market, the central government introduced a legislation called the securities
contracts (Regulation) Act, 1956. Under this legislation, it is mandatory on the part of
stock exchanges to seek government recognition. As of January 2002 there were 23
stock exchanges recognized by the central Government. They are located at
Ahmadabad, Bangalore, Baroda, Bhubaneswar, Calcutta, Chennai, (the Madras stock
Exchanges), Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Indore, Jaipur,
Kanpur, Ludhiana, Mangalore, Mumbai (the National Stock Exchange or NSE),
Mumbai. The stock exchange, popularly called the Bombay Stock Exchange, Mumbai
(OTC Exchange of India), Mumbai (The Inter-connected stock exchange of India),
Patna, Pune, and Rajkot. Of course the principle bourses are the National Stock
Exchange and The Bombay Stock Exchange, accounting for the bulk of the business
done on the Indian stock market.

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BSE(BOMBAY STOCK EXCHANGE)
The Stock Exchange, Mumbai, popularly known as “BSE” was established in1875. “The Native
Share and Stock Brokers Association”. It is the oldest one in Asia, even the Tokyo
Stock Exchange, which was established in 1878. It is the first Stock exchange in the
country to have obtained permanent recognition in 1956 from the Govt. of India under
the Securities Contracts (Regulation) Act, 1956.
A Governing Board having 20 directors is the apex body, which decides the policies
and regulates the affairs of the Exchange. The Governing Board consists of 9 elected
Directors, who are from the broking community.
NSE(NATIONAL STOCK EXCHANGE)
NSE was incorporated in 1992 and was given recognition as a stock exchange in
April 1993.It started operations in June 1994, with trading on the Wholesale Debt
Market Segment. Subsequently it launched the Capital Market Segment in November
1994 as a trading platform for equity and the futures and Options Segment in June
2000 for various derivatives instruments.
MCX(MULTI COMMODITY EXCHANGE)
“MULTI COMMODITY EXCHANGE” of India Limited is a new order exchange
with a mandate for setting up a nationwide , online multi-commodity market place,
offering unlimited growth opportunities to commodities market participants. As a true
natural market, MCX has taken several initiatives for users in a new generation
commodities futures markets in the process, become the country’s premier exchange.
MCX an independent and a de-mutualized exchange since inception is all set up to
introduce a state of the art , online digital exchange for commodities futures trading in
the country and has accordingly initiated several steps to translate this into reality.

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NCDEX (NATIONAL COMMODITIESAND DERIVATIVES EXCHANGE)
NCDEX started working on 15th December 2003. This exchange provides facilities to
their trading and clearing member at different 130 centers for contract. In commodity
market the main participants are speculators, hedgers and arbitrageurs.
Facilities Provided by NCDEX:-
 NCDEX has developed facility for checking of commodity and also provides a
ware house facility.
 By collaborating with industrial partners, industrial companies, news agencies,
banks and developers of kiosk network ncdex is able to provide current rates
and contracts rate.
 To prepare guidelines related to special products of securitization NCDEX
works with bank.
 To avail farmers from risk of fluctuation in prices NCDEX provides special
services for agricultural.
 NCDEX is working with tax officer to make clear different types of sales and
service taxes.
 NCDEX is providing attractive products like “weather derivatives”
DERIVATIVES MARKET:-
Derivatives trading commenced in India in June 2000. The derivatives market is
the financial market for derivatives, financial instruments like futures contracts or
options, which are derived from other forms of assets.
The Derivative Market is meant as the market where exchange of derivatives takes
place. Derivatives are one type of security whose price is derived from the underlying
assets.

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Chapter No: 4
Company Profile

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KOTAK SECURITIES:
Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking
and distribution arm of the Kotak Mahindra Group. One of the oldest broking houses
in India, its operations include stock broking and distribution of various financial
products. It is a corporate member of both the Bombay Stock Exchange and the
National Stock Exchange of India. Kotak Securities was founded in 1994 and is
headquartered in Mumbai, India.
Kotak securities has founded in Kotak Mahindra is one of India's leading
banking and financial services organizations, offering a wide range of financial
services that encompass every sphere of life. From commercial banking, to stock
broking, to mutual funds, to life insurance, to investment banking, the group caters to
the diverse financial needs of individuals and corporate sector.
The Group has a net worth of over Rs. 129 billion and has a distribution network of
branches, franchisees, representative offices and satellite offices across cities and
towns in India. It has offices in London, New York, California, Dubai, Abu Dhabi,
Bahrain, Mauritius, & Singapore and is servicing around 10 million customer
accounts.As of June 30, 2010, Kotak Securities has Rs. 2250 crore of "assets under
management" (AUM). The company also has a research division involved in
macroeconomic studies, sectoral research and company-specific equity research; this
regularly publishes stock market analysis.
Kotak Securities is one of the largest broking houses in India with a wide
geographical reach. Kotak Securities operations include stock broking and distribution
of various financial products including private and secondary placement of debt,
equity and mutual funds.
Kotak Securities operate in five main areas of business:
o Stock Broking (retail and institutional)
o Depository Services
o Portfolio Management Services
o Distribution of Mutual Funds

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Fortune investment (sub broker of kotak securities):
Fortune investment has established in 2001 by kostub kurva. Kostubh kurva is a
owner of fortune investment. Fortune investment is a sub- broker of kotak securities.
Fortune investment has located in opposite of bank of india, samrat chouk,solapur.
Fortune investment has given all facilities and services which has given by kotak
securities.
They were one of the early entrants registered as Depository Participant with
NSDL (National Securities Depository Limited), the first Depository in the country
and then with CDSL (Central Depository Services Limited). Today, It service over 1
Lack customer accounts in this business spread across in Sholapur city/town in India
and are ranked amongst the largest Depository Participants in the Sholapur. With a
growing secondary market presence. It has transferred this business to KOTAK
SECURITIES PRIVATE LIMITED their associate and a member of NSE, BSE, and
MCX & NCDEX.
Business Focus:
The focus of the businesses the Customer service, Customer education, Customer
support, Customer relations and last but not the least Customer acquisition. Trade
execution transparency, timely settlements, risk monitoring and superior service shall
have topmost priority, in the best interests of all concerned.

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PRODUCT AND SERVICES:
PRODUCTS:
Mutual fund schemes
Portfolio Management System
Shares-online and offline
Bonds
Fixed Deposits
Commodities
Currency
SERVICES:
 Equities and Derivatives trading on the National Stock Exchange of India Ltd.
(NSE), and Bombay Stock Exchange Ltd. (BSE).
 Commodities trading on National Commodity and Derivatives Exchange India
(NCDEX) and Multi Commodity Exchange of India Ltd. (MCX).
 Depository services.
 Online trading services.
 IPO Services.
 Dial-n-Trade.
 Portfolio management services.
 Fundamental and Technical Research services.
 In addition to this they also provide advisory services and distributions for
mutual funds.
 Daily research reports and market review (High Noon & Eagle Eye)
 Pre-market Report.
 Daily trading calls based on Technical Analysis.
 Personalized Advice.
 Live Market Information.

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Explanation of above products as follows:
MUTUAL FUNDS:-
Mutual Funds is a process of pools the money of many investors and invests it in
Stocks, Bonds, Short-term Money Market & others securities.
A mutual fund is a pool of money that is invested according to a common investment
objective by assets Managements Company. The asset management company offers
to invest the money of hundreds of investors according to a certain objective to keep
money liquid or give a regular or income or grow the money long term. Investors pay
a small fraction of their total funds to the assets managements company each year as
investment management fees.
Mutual funds Categories:-
 Larger/Small/Mid-cap Mutual Fund
 Index Mutual Funds
 Sector Specific Mutual Fund
COMMODITY:-
Commodity markets are markets where Raw or Primary products are exchanged.
These raw (materials) commodities are traded on regulated commodities exchanges in
which they are bought and sold in standardized contracts.
There are three National level commodity exchanges. They are
 National Commodity & Derivatives Exchange Limited(NCDEX)
 Multi Commodity Exchange of India Limited (MCX).
 National Multi Commodity Exchange of India Limited (NMCE).
These are the some example of commodity markets in India:-
Gold, Silver, Copper, Aluminum, Rice, wheat, Coal, Kerosene, Petroleum etc.

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EQUITY: -
Equity is another name for Shares or Stocks. Denotes the person who controls all of
the benefits and privileges associated with a life insurance policy. The title of owner
may belong to someone other than the insured and may be transferred by the owner's
written request
IPO:-
Initial Public Offer (IPO).
The first sale of stock by a company to public. An IPO is the first sale of
shares in a company to the public. Once an IPO occurs a company will be listed on a
major stock exchange, and shares will begin to trade immediately. When
managements say it plans to take a company public, it means that an eventual IPO is
planned. A successful IPO can raise a large amount of capital for the newly public
company and create substantial wealth for insiders who owned prior to the IPO.
CURRENCY:-
A generally accepted from of money , included coins and paper notes ,which
is issued by a government and circulated within an economy used as a medium of
exchange for goods and services , currency is the basis for trade. A system of money
in general use in a particular country.
These are some currency:-
Swiss Franc, yen, euro, rupee, dollar etc.

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Chapter – 5
RESEARCH DESIGN &
METHODOLOGY

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Research:
Research is a careful investigation or inquiry specially through search for new
fact in any branch of knowledge. Once can also define research as a scientific and
systematic search for pertinent information on a specific topic.
Researchmethodology:
Research methodology is a collective term for the structured process of
conducting research. There are many different methodology used in various type of
research and the term is usually considered to include research design, data gathering
and data analysis.
Defining Problem
In the current economic scenario interest rates are falling and fluctuation in the
Capital market has put investors in confusion. One finds it difficult to take decision on
investment. This is primarily, because of investments are risky in nature and investors
have to consider various factors before investing in investment avenues. These factors
include risk, return, volatility of shares and liquidity.
ResearchDesign
Project is totally based on descriptive and diagnostic research. It is prepared
on structured, way to find out problem under such descriptive/diagnostic research. I
have gone through secondary data for technical analysis, calculative study of risk and
return equity shares in banking sector.

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Sample design:
 Universe: universe is the first step of sample design. I have selected bank
nifty for analysis of risk and return.
 Method of sampling: there are 8 method of sample design. But I have
selected deliberate sampling method because the meaning of deliberate sample
is select particular unit and I have selected banking sector in National Stock
Exchange of India.
 Sampling frame: sampling frame is also known as ‘source list’ from which
sample is to be drown. It contains of all items of a universe but here, only one
universe i.e. bank nifty.
 Sample size: top twelve banks in National Stock Exchange (bank nifty) are
selected to analysis the risk and return analysis of equity shares.
These top twelve banks are as follows:
 ICICI BANK
 KOTAK MAHINDRA BANK
 STATE BANK OF INDIA
 PANJAB NATIONAL BANK
 BANK OF INDIA
 HDFC BANK
 UNION BANK
 YES BANK
 INDUSLAND BANK
 CANRA BANK
 AXIS BANK
 BANK OF BARODA
Types of data:
There are two types of data these are follows
1. Primary Data:
Primary data can collect through observation or through direct communication
with respondents in one form or through personnel interview.

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2. Secondary Data:
The secondary data related to market portfolio collected through the value
research, and NSE website. The secondary data has collected from reference books,
company website & various financial websites and newspaper and magazines.
Note: this project is totally depending upon three years historical data.
Meaning and Measurement techniques:
The Performance of risk and return of equity shares in banking sector (bank nifty)
has been evaluated by using the Following techniques:
 Holding period Return: - HPR is the percentage by which the value of a
portfolio (or asset) has grown for a particular period. It is the sum of income
and capital gains divided by the initial period value (asset value at the
beginning of the period).
HPR = ((Present Value, or face Value, End-Of-Period Value) + (Any
Intermediate Gains e.g. Dividends) - (Initial Value)) / (Initial Value)
 Risk: - Risk refers to the possibility that the actual outcome of an investment
will differ from its expected outcome. More specifically, most investors are
concerned about the actual outcome being less than the expected outcome.
Beta, standard deviation is the technique of calculation of risk.
 Return on market portfolio: In this project has bank nifty considered as
market portfolio.
 Variance: - Variance approach assumes that returns of the portfolio are
particular distributed such as following a normal distribution, and should be
applied for a portfolio which is linear.
Formula –

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 Beta:- 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.
Formula-
Following techniques is measure by data analysis method in Microsoft excel.
First historical data put up in excel sheet then calculate return on daily basis
and select data analysis method from data menu. In data analysis method
select descriptive statistics.
 Standard deviation: - standard deviation (represented by the symbol sigma,
σ) shows how much variation or "dispersion" exists from the average (mean,
or expected value). A low standard deviation indicates that the data points
tend to be very close to the mean, whereas high standard deviation indicates
that the data points are spread out over a large range of values.
Formula –
 Sharpe ratio: - A ratio developed by Nobel laureate William F. Sharpe to
measure risk-adjusted performance. The Sharpe ratio is calculated by
subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond -
from the rate of return for a portfolio and dividing the result by the standard
deviation of the portfolio returns. The Sharpe ratio formula is:
p
fp rr




 Kurtosis:- Kurtosis, of Greek origin meaning "bulging" or "swelling", is a
measurement used to determine the peakedness of a data distribution. It
essentially measures a bell curve. In other words, Kurtosis measures whether
the data is sharp or flat relative to a normal distribution. Since Kurtosis
measures the shape of the distribution (the fatness of the tails), it focuses on

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how returns are ranged around the mean. A Kurtosis coefficient of three
indicates a normal distribution.
 Skewness: - skewness is a measure of the asymmetry of the probability
distribution of a real-valued random variable. The skewness value can be
positive or negative, or even undefined. Qualitatively, a negative skew
indicates that the tail on the left side of the probability density function is
longer than the right side and the bulk of the values (possibly including the
median) lie to the right of the mean.
Following steps are used to measurement of above techniques in Microsoft excel:
Daily mean return: - firstly I have calculated return on daily basis then select
all data and click on data menu – data analysis button. In data analysis dialog
box select input and output range and marked on all the check boxes. Then
click on the ok button.
For Standard deviation, kurtosis, skewness are applied same steps as
above.
Beta: for calculation of beta firstly calculate return on bank nifty (market
portfolio) and particular stock. Then select all data and click on formula menu
and choose slope formula. Then fill up input and output range.

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Chapter no – 6
Theoretical Background

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Concept of equity shares:
Shares that carry no preferential or special right in respect of annual dividend and in
the repayment of capital at the time of liquidation of the company are called equity
shares. These shares carry no preferential rights; therefore, these are also known as
common stock or ordinary shares.
Dividend on such shares is payable only when there are profit after the
payment of preferences dividend. But, the rate of dividend of these shares is not fixed.
Board of directors, depending upon the dividend policy as well as the availability of
profit after dividend on preference shares, declare dividend. No dividend will be paid
on these shares, if there are no profits or insufficient profit in a particular year. The
value of these shares in stock exchange fluctuates on the basis of rate of dividend
declared.
Similarly, these shares are redeemed only after the redemption of preference
shares at the time of liquidation of the company. Equity share holders enjoy full
voting rights in all market of the company. They have right to elect directors and
participate in the management and control of the company. They also share residual
profits.
Types of equity shares:
An equity share, commonly referred to as ordinary share also represents the
form of fractional ownership in which a shareholder, as a fractional owner, undertakes
the maximum entrepreneurial risk associated with a business venture.
The holders of such shares are members of the company and have voting rights. A
company may issue such shares with differential rights as to voting, payment of
dividend, etc.
The various kinds of equity shares are as follows –
• Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at
a ratio to those already held.

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• Bonus Shares: Shares issued by the companies to their shareholders free of cost by
capitalization of accumulated reserves from the profits earned in the earlier years.
• Preferred Stock/ Preference shares: Owners of these kinds of shares are entitled to
a fixed dividend or dividend calculated at a fixed rate to be paid regularly before
dividend can be paid in respect of equity share.
They also enjoy priority over the equity shareholders in payment of surplus. But in the
event of liquidation, their claims rank below the claims of the company’s creditors,
bondholders / debenture holders.
• Cumulative Preference Shares: A type of preference shares on which dividend
accumulates if remains unpaid. All arrears of preference dividend have to be paid out
before paying dividend on equity shares.
• Cumulative Convertible Preference Shares: A type of preference shares where
the dividend payable on the same accumulates, if not paid. After a specified date,
these shares will be converted into equity capital of the company.
• Participating Preference Share: The right of certain preference shareholders to
participate in profits after a specified fixed dividend contracted for is paid.
Participation right is linked with the quantum of dividend paid on the equity shares
over and above a particular specified level.
Government securities (G-Secs): These are sovereign (credit risk-free) coupon
bearing instruments which are issued by the Reserve Bank of India on behalf of
Government of India, in lieu of the Central Government's market borrowing program.
These securities have a fixed coupon that is paid on specific dates on half-yearly
basis. These securities are available in wide range of maturity dates, from short dated
(less than one year) to long date (up to twenty years).
Debentures: Bonds issued by a company bearing a fixed rate of interest usually
payable half yearly on specific dates and principal amount repayable on particular
date on redemption of the debentures. Debentures are normally secured/ charged
against the asset of the company in favor of debenture holders.

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Introductionof NSE and nifty 50
The National Stock Exchange is a stock exchange located at Mumbai, India. It is the
3rd largest stock exchange in world by market capitalization and largest in India by
daily turnover and number of trades, for both equities and derivates trading. NSE is
mutually owned by a set of leading financial institution, banks, insurance companies
and other financial intermediates in India.
History of NSE:
Capital market reforms in India and the launch of the Securities and Exchange Board
of India (SEBI) accelerated the incorporation of the second Indian stock exchange
called the National Stock Exchange (NSE) in 1992. After a few years of operations,
the NSE has become the largest stock exchange in India.
Three segments of the NSE trading platform were established one after
another. The Wholesale Debt Market (WDM) commenced operations in June 1994
and the Capital Market (CM) segment was opened at the end of 1994. Finally, the
Futures and Options segment began operating in 2000. Today the NSE takes the 14th
position in the top 40 futures exchanges in the world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and
CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a
diversified index of 50 stocks from 25 different economy sectors. The Indices are
owned and managed by India Index Services and Products Ltd (IISL) that has a
consulting and licensing agreement with Standard & Poor's.
In 1998, the National Stock Exchange of India launched its web-site and was
the first exchange in India that started trading stock on the Internet in 2000. The NSE
has also proved its leadership in the Indian financial market by gaining many awards
such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and
CHIP Web Award by CHIP magazine (1999).

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NSE Markets:
Currently, NSE has the following major segments of the capital market:
 Equity
 Futures and options
 Retail debt market
 Wholesale debt market
 Currency futures
 Mutual fund
 Stocks lending and borrowing
NSE Certifications:
NSE also conducts online examination and awards certification, under its
programmers of NSE's Certification in Financial Markets (NCFM). Currently,
certifications are available in 32 modules, covering different sectors of financial and
capital markets, both at beginner and advanced levels. The list of the various modules
can be found at the following official site of NSE India. Branches of the NSE are
located throughout India. NSE, in collaboration with reputed colleges and institutes in
India, has been offering a short-term course called NSE Certified Capital Market
Professional (NCCMP) since August 2009, in the campuses of the respective colleges/
institutes.
Introduction of NSE Nifty 50:
NIFTY is an Index computed from performance of top stocks from different
sectors listed on NSE (National stock exchange). NIFTY consists of 50 companies
from 24 different sectors. NIFTY stands for National Stock Exchange’s fifty. The
companies which form index of NIFTY may vary from time to time based on many
factors considered by NSE. NIFTY is for NSE similarly SENSEX is for BSE
The S&P CNX Nifty (Nifty 50 or simply Nifty) is a composite of the top 50 stocks
listed on the National Stock Exchange (NSE), representing 24 different sectors of the
economy. It is a simplified tool that helps investors and ordinary people alike, to
understand what is happening in the stock market and by extension, the economy.

32
Bank nifty and calculation of bank nifty:
Bank nifty is the bank index traded in the f & o segment of NSE. It comprises of most
liquid banking stock listing on NSE. This is index provides investors and market
intermediaries with a benchmark that captures the capital market performance of
Indian bank. The index has 12 stocks from the banking sector which trade on the
NSE.
Bank nifty is the one type of index that is called to CNX BANK INDEX. The
base year of bank nifty is 01 Jan 2000. The base value of bank nifty is 1000.
There are twelve numbers of scripts that is Bank of India, bank of Baroda,
state bank of India, union bank, Kotak Mahindra bank, Punjab national bank, Induslnd
bank, Canara bank, hdfc bank, icici bank, axis bank and yes bank.
Calculation frequency of bank nifty is six seconds and calculated by India Index
Services & Products Ltd. (IISL).
Calculation of methodology:
The index is a free float market capitalization weighted index with base year of Jan 1,
2000, Indexed to a base value of 1000.
Formula for BANK NIFTY
BANK NIFTY = (Sum of free flow market cap of 12 major stocks of NSE) X Index
value in 2000/market cap value in 2000.
Market Capitalization and free float market capital is needed to calculation of bank
nifty.
Market capitalization:
Market capitalization is the total worth of all outstanding (issued) shares of a
company. It represents the total worth of a company.
Market capitalization= No of shares outstanding x market price of share Free Float
Market

33
Free float market capital:
Capitalization Free float concept is an index construction methodology which
makes use of free float shares in the market. Free float market capitalization is the
total worth of all shares of a company which are available for trading in the open
market. These shares are called free float shares and are available for trading by
anyone.
Example:
Company ‘X’ issues 1000 shares, Out of which 200 shares held by
government, 500shares by directors of the company and remaining 300 shares are
available in the open market for trading. Market price of share is 10 Rs.
Here; Total Shares = 1000
Shares Held by Government= 200
Shares Held by Directors = 500
Shares available in the Open Market= 300
Market price of share = 10
Here, total market capitalization of the company is 1000 X 10 = 10000 and
Free float market capitalization of the company is 300 X 10 = 3000.
According to the rules of NSE any shares which do not fall under the following
categories are considered as free float (open market) shares.
 Government holding shares as promoters
 Holdings by Directors/ Founders
 Holdings through the FDI route
 Stakes held by private corporate bodies or individuals
 Any cross holdings i.e. equity held by associate or group companies.
 Equity held by employee welfare trust.
Calculation of the free float factors periodically, every listed company has to submit
holdings information i.e. who all are holding the shares of the company, to the
exchange. Based on this free float factor for each company is calculated.

34
Free float factor = No of shares available for trading in the open market / Total
No of outstanding shares of the company
Free float factor of each company has to be rounded off to the higher multiple of 5
and company is considered among one of the free float range. Free Float ranges
To calculate NSE bank nifty:
BANK NIFTY = (Sum of free flow market cap of 12 major stocks of NSE) X Index
value in 2000/market cap value in 2000.
For Example:
suppose NSE index (BANK NIFTY) consist of only two stocks such as ‘X’ and ‘Y’
Company ‘X’ has 1000 outstanding shares out of which only 500 are available for
trading in open market. Market price of share is Rs.100. Company ‘Y’ has 2000
outstanding shares out of which 1000 shares are held by promoters and remaining
1000 are free float shares (open market shares). Market price of share is Rs.50.
Calculation of market capitalization:
Stock Issued stock Market price Market cap.
X 1000 100 100000
Y 2000 50 100000
Calculation of free float market capitalization:
Stock Open market stock Market price Market cap.
X 500 100 50000
Y 100 50 50000
Here;
Sum of free float market cap of company X and company Y is 50000+50000 =
100000.Assume market cap during 1978-79 is 25000.
Now Apply formula; 100000*100/25000 = 400.

35
Concept of Risk and Return of equity shares:
Eighty-two year old Harry Markowitz, 1990 Nobel Prize winner, is best known for his
creation of Modern Portfolio Theory (MPT) in the 1950s. MPT elegantly combines
mathematical variables such that investors can theoretically maximize returns while
minimizing risk with the aid of diversification. Markowitz’s Efficient Frontier
research eventually led to the future breakthrough of the Capital Asset Pricing Model
(CAPM).
Modern portfolio theory (MPT) is a theory of investment which attempts to
maximize portfolio expected return for a given amount of portfolio risk, or
equivalently minimize risk for a given level of expected return, by carefully choosing
the proportions of various assets. Although MPT is widely used in practice in the
financial industry and several of its creators won a Nobel memorial prize[1] for the
theory, in recent years the basic assumptions of MPT have been widely challenged by
fields such as behavioral economics.
A set of portfolios with returns that are maximized for a given level of risk
based on mean-variance portfolio construction. The efficient "solution set" to a given
set of mean-variance parameters (a given riskless asset and a given risky basket of
assets) can be graphed into what is called the Markowitz efficient frontier.
In portfolio management there is always a tradeoff between risk and return, we
generally assume standard deviation or variance as a measure of risk in normal
practice.

36
Introduction to Risk and Return Analysis of equity share –Two sides
of the Investment Coin
People have many motives for investing. Some people investing in order to gain a
sense of power or prestige. Often the control of corporate empires is a driving motive.
For most investors, However, their interest in investments is largely pecuniary- to
earn to return on their money. However, selecting stocks exclusively on the basis of
maximization of return is not enough.
The fact that most investors do not place available funds into the one, two, or
even three stocks promising the greatest return suggest that other factor must be
considered besides return in the selection process. Investors not only like return, they
dislike risk. Their holding of an assortment of securities attest to that fact.
To say that investors like return and dislike risk is, however, simplistic. To facilitate
our job of analyzing securities and portfolios within a return- risk context, we must
begin with a clear understanding of risk and return.
In the current economic scenario dividend (earning) rates are falling and
fluctuation in the capital market has put investors in confusion. One finds it difficult
to take decision on investment. This is primarily, because of investments are risky in
nature and investors have to consider various factors before investing in investment
avenues. These factors include risk, return, volatility of shares and liquidity. The main
objective of comparing investment in different equity share prices is to analyze the
performance of equity share by using risk, return as a parameter. Historical data were
taken for calculating risk, return. Analysis has done on percentage method for
comparing equity share prices.
Financial markets are often hard to understand. Stock prices are highly volatile
and difficult to predict, requiring that market participants and researchers devote
significant Resources to understanding the behavior of expected returns relative to the
risk of stock Market investment.

37
RETURN:
Return is primary motivating force that drives investment. It represents the reward for
undertaking investment. Since the game of investing is about returns (after allowing
for risk), measurement of realized (historical) returns (ex post facto) is necessary to
access how well the investment manager has done. In addition, historical returns are
often used as a important input in estimating future (prospective) returns.
The amount of net income returned as a percentage of shareholders
equity. Return on equity measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders have invested.
The future is uncertain. Investors do not know with certainty whether the economy
will be growing rapidly or be in recession. Investors do not know what rate of return
their investments will yield. Therefore, they base their decisions on their expectations
concerning the future. The expected rate of return on a stock represents the mean of a
probability distribution of possible future returns on the stock.
The objective of any investor is to maximize expected returns from his
investments, subject to various constraints, primary risk. Return is the motivating
force, inspiring the investor in the form of rewards, for undertaking the investment.
The importance of return of any investment decision can be traced to the following
factor:
1. It enables investors to compare alternative investments in terms of what they
have to offer the investor.
2. Measurement of historical returns enables the investors to access how well
they have done.
3. Measurement of historical returns also helps in estimation of future returns.

38
Portfolio Management - Return Objectives and Investment Constraints
Return objectives can be divided into the following needs:
1. Capital Preservation - Capital preservation is the need to maintain capital. To
accomplish this objective, the return objective should, at a minimum, be equal
to the inflation rate. In other words, nominal rate of return would equal the
inflation rate. With this objective, an investor simply wants to preserve his
existing capital.
2. Capital Appreciation -Capital appreciation is the need to grow, rather than
simply preserve, capital. To accomplish this objective, the return objective
should be equal to a return that exceeds the expected inflation. With this
objective, an investor's intention is to grow his existing capital base.
3. Current Income -Current income is the need to create income from the
investor's capital base. With this objective, an investor needs to generate
income from his investments. This is frequently seen with retired investors
who no longer have income from work and need to generate income off of
their investments to meet living expenses and other spending needs.
4. Total Return - Total return is the need to grow the capital base through both
capital appreciation and reinvestment of that appreciation.
Investment Constraints
when creating a policy statement, it is important to consider an investor's constraints.
There are five types of constraints that need to be considered when creating a policy
statement. They are as follows:
1. Liquidity Constraints - Liquidity constraints identify an investor's need for
liquidity, or cash. For example, within the next year, an investor needs
$50,000 for the purchase of a new home. The $50,000 would be considered a
liquidity constraint because it needs to be set aside (be liquid) for the investor.
2. Time Horizon - A time horizon constraint develops a timeline of an investor's
various financial needs. The time horizon also affects an investor's ability to
accept risk. If an investor has a long time horizon, the investor may have a

39
greater ability to accept risk because he would have a longer time period to
recoup any losses. This is unlike an investor with a shorter time horizon whose
ability to accept risk may be lower because he would not have the ability to
recoup any losses.
3. Tax Concerns - After-tax returns are the returns investors are focused on
when creating an investment portfolio. If an investor is currently in a high tax
bracket as a result of his income, it may be important to focus on investments
that would not make the investor's situation worse, like investing more heavily
in tax-deferred investments.
4. Legal and Regulatory - Legal and regulatory factors can act as an investment
constraint and must be considered. An example of this would occur in a trust.
A trust could require that no more than 10% of the trust be distributed each
year. Legal and regulatory constraints such as this one often can't be changed
and must not be overlooked.
5. Unique Circumstances - Any special needs or constraints not recognized in
any of the constraints listed above would fall in this category. An example of a
unique circumstance would be the constraint an investor might place on
investing in any company that is not socially responsible, such as a tobacco
company.

40
Type of return:
There are two types return .these are follows
1. Realized return
2. Expected return
1. RealizedReturn:
This is ex-post (after the return) or return that was or could have been earned.
For example -
A deposit of 1000 in a bank on Jan 1, at stated annual interest rate of 10%will
be worth .1100 exactly a year later. The historical or realized return in this case is
10%.
2. ExpectedReturn:
This is return from an asset that investors anticipate or expect to earn over future
some period. The expected return is subject to uncertainty, or risk, and may or may
not occur. The investors compensates for the uncertainty in returns and the timing of
those returns by requiring an expected return that is sufficiently high to offset the risk
or uncertainty.
Types of Return
Expected
Return
1. Realized
Return

41
Component of return:
There are two components of return. These are followings:
1. Yield/ current
2. Capital Gain
1. Yield/ current:
Periodic cash flow (income) such as dividend or interest which is generated
by the investment in various instruments. Current return is measured as the
periodic income in relation to the beginning price of the investment.
2. Capital Gain:
Capital gain means earn income from particular asset-Like equity stock. It is
simply measured as price appreciation or depreciation divided by beginning
price of the particular security. The capital return can be positive or zero or
negative.
The periodic (the period may be one month, one week) rate of return on equity
shares prices is calculated as follow.
priceBeginning
IncomeCurrent
ldReturn/YieCurrent 
0
01
P
PP
PriceBeginning
PriceBeginning-PriceEnding
YieldGain/LossCapitalReturn/Capital



Component of return
Current / yield return Capital return

42
Risk:
The dictionary meaning of risk is the possibility of loss or injury, the degree or
probability of such loss. Risk is the composed of the demand that bring in variations
in return of income. The main forces contributing to risk are price and interest.
“RISK” as uncertainties resulting in adverse outcome, adverse in relation to
planned objective or expansions. Uncertainties associated with risk element impact
the net cash flow or any business or investment. Under the impact of uncertainties,
variation in net cash flow takes place. This could be favorable s well as unfavorable.
The possible is the unfavorable impact is the “RISK” of the business.
Definition of Risk –
Risk is, “the variability of return around the expected average is thus a
quantitative description of risk”.
–FISCHER AND JORDON
COUSES OF RISK:
1. Wrong decision
2. Wrong timing
3. Nature of instruments
4. Creditworthiness of issuer
5. Maturity period or length of investment
6. Amount of investment
7. Method of investment
8. Terms of leading
9. Nature of industry
10. National and international factor

43
Classification of Risk:
Following are the two broad type risks:
1. Systematic Risk
2. Unsystematic Risk
There are classified two type of risk systematic and unsystematic risk .the chart of
these major two risks and portfolio. In following figure have compare portfolio and
systematic risk and unsystematic risk:
RISK
1. Systematic Risk
2. Unsystematic Risk
Market Risk
Interest Rate Risk Purchasing
power Risk
Business Risk
Financial Risk
Internal Risk External Risk

44
Explanation of above risks as follows:
I. Systematic risk:
The risk inherent to the entire market or entire market segment Also known as "un-
diversifiable risk" or "market risk."
Systematic risk is also referred as uncontrollable risk. Systematic is non
diversifiable and is associated with the securities market as well as economic,
sociological, political and legal considerations of the prices of all securities.
Interest rates, recession and wars all represent sources of systematic risk
because they affect the entire market and cannot be avoided through diversification.
Whereas this type of risk affects a broad range of securities, unsystematic risk affects
a very specific group of securities or an individual security. Systematic risk can be
mitigated only by being hedged.
Even a portfolio of well-diversified assets cannot escape all risk.
There are three type of systematic risk:
1. Market Risk:
2. Interest rate risk
3. Purchasing power risk
1. Market risk:
Market risk as that portion of total variability of return caused by the alternating
forces of bull and bear markets. When the security index moves upward haltingly for
a significant period of time, it is known as bull market, the index moves from a down
level to the peak. Bear market is just is a reverse to the bull market, the index decline
haltingly from the peak to a market low point called through for a significant period
of time.
During the bull and bear market more than 80% of the security prices rise or
fall along with the stock market indices.

45
2. Interest rate risk:
Interest rate risk is the variation in the single period rates of return caused by
the fluctuation in the market interest rate. Most commonly interest rate risk affects the
price of bounds, debentures and stocks. The fluctuations in the interest rates are
caused by the changes in the government monetary policy and the changes that occur
in the interest rates of treasury bills and the government bonds. The bonds issued by
the government and quasi government are considered to be risk free. If higher interest
rates are offered, investors would like to switch his investments from private sector
bounds to public sector bounds.
3. Purchasing power risk:
Variations in the returns are caused also by the loss of purchasing power of
currency. Inflation is the reason behind the loss of purchasing power. The level of
inflation proceeds faster than the increase in capital value. Purchasing power risk is
the probable loss in purchasing power of the return to be received. The rise in price
penalizes the returns to the investor, and every potential rise in price is a risk to the
investor.
II. Unsystematic Risk:
There are two type unsystematic risks as follows:
1. Business risk
2. Financial risk

46
1. Business risk:
Definition:
Risk associated with the unique circumstances of a particular company, as they might
affect the price of that company's securities.
The possibility that a company will have lower than anticipated profits, or that it
will experience a loss rather than a profit. Business risk is influenced by numerous
factors, including sales volume, per-unit price, input costs, competition, and overall
economic climate and government regulations. A company with a higher business risk
should choose a capital structure that has a lower debt ratio to ensure that it can meet
its financial obligations at all times.
Business risk can be divided can be divided into external business risk and internal
business risk.
1. Internal business risk :
Internal business risk associated with the operational efficiency of the firm.
The operational efficiency differs from company to company.
2. External business risk:
External risk is the result of operating conditions imposed in the firm by
circumstances beyond its control. The external environments in which it operates
exert some pressure on the firm.
2. Financial risk:
Financial risk is the amount of chance that is present with any type of financial
investment. Typically, the goal is to secure investments that appear to have a low
amount of risk since these are more likely to earn a return. Both individual and
corporate investors access the degree of risk present before executing an order to buy
shares on any investment market.
Shareholders usually investigate the degree of financial risk present in any
investment deal by exploring both the current and past performance of the stock
option. The shareholder will also consider any changes in the current financial climate

47
that could either cause the option to increase dramatically in value or cause the option
to drop. Knowing this detail will help the investor determine how owning the option
will affect his or her overall financial stability.
Corporations also engage in the process of assessing financial risk. In terms of
property purchases, there is attention given to the ability to build up equity in the
acquisitions, or how to make the most of equity financing strategies. The company
will also want to maintain an adequate cash flow, so that even if the acquisition does
not appreciate as quickly as projected, the finances of the business remain stable.
Financial risk can be divided into:
1. Credit risk:
The possibility that a bond issuer will default, by failing to repay principal and
interest in a timely manner. Bonds issued by the federal government, for the most
part, are immune from default (if the government needs money it can just print more).
Bonds issued by corporations are more likely to be defaulted on, since companies
often go bankrupt. Municipalities occasionally default as well, although it is much
less common. also called default risk. The risk of loss of principal or loss of a
financial reward stemming from a borrower's failure to repay a loan or otherwise meet
a contractual obligation. Credit risk arises whenever a borrower is expecting to use
future cash flows to pay a current debt.
2. Currency risk: Currency Risk, sometimes referred to as exchange rate risk, is the
possibility that currency depreciation will negatively affect the value of one's assets,
investments, and their related interest and dividend payment streams, especially those
securities denominated in foreign currency.
Foreign exchange risk (also known as exchange rate risk or currency risk) is a
financial risk posed by an exposure to unanticipated changes in the exchange rate
between two currencies. Investors and multinational businesses exporting or
importing goods and services or making foreign investments throughout the global
economy are faced with an exchange rate risk which can have severe financial
consequences if not managed appropriately.

48
3. Country risk:
Country risk arises from an adverse change in the financial conditions of a country in
which a business operates. There are three type of country risk:
1. Political risk
2. Regulatory risk
3. Economic risk
4. Liquidity risk:
The risk is that arises from the difficulty of selling an asset. An investment may
sometimes need to be sold quickly. Unfortunately, an insufficient secondary market
may prevent the liquidation or limit the funds that can be generated from the asset.
Some assets are highly liquid and have low liquidity risk (such as stock of a publicly
traded company), while other assets are highly illiquid and have high liquidity risk
(such as a house).
Liquidity risk arises from situations in which a party interested in trading an
asset cannot do it because nobody in the market wants to trade for that asset. Liquidity
risk becomes particularly important to parties who are about to hold or currently hold
an asset, since it affects their ability to trade.

49
Techniques of Measuring Return and Risk
 Calculationof return
In the present study for the estimation of return on assets, the method of continuous
compounding has been used. The continuous compounding returns are also known as
log returns of an asset for time period ‘t’ ,defined to be the natural logarithms of its
gross return (1 + Rt):
In the present study, the actual daily logs returns have been used to predict the
daily variance using excel. The daily standard deviation is based on the average of the
daily SD of the 36 months (April-2009 march 2012). Then this daily standard
deviation has been converted into monthly standard deviation by multiplying the
square root of the actual number of trading day.
The SD so calculated has been used to calculate risk and further the margins
required for the equity portfolio during the April-2009 March 2012 share prices.
Hence, in the present study, the daily data for actual trading days have been used to
measure volatility and days when the exchange is closed have been ignored. However,
the standard deviation for the various portfolios used in the present study is based on
the monthly log returns of the portfolio in question.

50
Risk Adjusted Portfolio Performance:
Sharpe Ratio William Sharpe (1966)
Sharpe’s ratio to measure excess return per unit of risk undertaken has been used
to measure the performance of equity e based portfolio on bank Nifty. The
measure is the ratio of the risk premium of the portfolio, divided by the standard
deviation of the portfolio’s return:
"The excess return of a portfolio over the risk free rate divides, by the total risk of
the portfolio."
p
fp rr




rp = rate of return of the portfolio,
rf = risk free rate of return over the same interval
We are going to use Sharpe ratio for our study purpose and we are going to use
8% rate of interest as risk free rate (though it is highest rate for relative 36 month
period).
For calculation of holding period return for three years:
The periodic (the period may be one month, one week) rate of return
On equity shares prices is calculated as follow.
Dividend Paid (If any) + [price (Ending)-price (Beginning)]
Rate of Return=
Price (Beginning)
R = D + (PE- PB)
PB
R= Rate of Return
D= Dividend received during the period
PE=Ending price
PB=Beginning price
 Variance Co-variance(VCV)Variance Co-variance (VCV) approach assumes
that returns of the portfolio are particular distributed such as following a normal
distribution, and should be applied for a portfolio which is linear.

51
 Skewness: indicator used in distribution analysis as a sign of asymmetry and
deviation from normal distribution
Interpretation:
Skewness> 0 - Right skewed distribution - most values are concentrated on left of the
mean, with extreme values to the right.
Skewness< 0 - Left skewed distribution - most values are concentrated on the right of
the mean, with extreme values to the left.
Skewness = 0 - mean = median, the distribution is symmetrical around the mean.
 Kurtosis - indicator used in distribution analysis as a sign of flattening or
"peakedness" of a distribution.
Interpretation:
Kurtosis > 3 - Leptokurtic distribution, sharper than a normal distribution, with values
concentrated around the mean and thicker tails. This means high probability for
extreme values.
Kurtosis < 3 - Platykurtic distribution, flatter than a normal distribution with a wider
peak. The probability for extreme values is less than for a normal distribution, and the
values are wider spread around the mean.
Kurtosis = 3 - Mesokurtic distribution - normal distribution for example.
Standard deviation
The most commonly used measure of risk in finance is variance or its square root the
standard deviation. The variance and standard of historical return series are defined as
follows

52
Coefficient of variation
It is a measure of risk per unit of expected return. The actual
dispersion/variation as determined by standard deviation is called absolute dispersion.
The coefficient of variation (cv) is computed by dividing the standard deviation of
return, 𝜎r,for an asset by its expected value, Ṝ. Symbolically,
CV= 𝜎r ÷ R
Beta:
The risk of a well diversified portfolio, as we have seen, it represented by it
market risk of the securities included in the portfolio. The market risk of a security
reflects it sensitivity to market movement. Such sensitivity of market risk is called as
beta (β). As mentioned earlier, the beta for market portfolio is equal to ‘1’ by
definition. Beta =1, it indicates that volatility of return on security is same as the
market or index; beta more than one indicates that the security has more unavoidable
risk or is more volatile than market as a whole, and beta less than one indicates that
the security has less systematic risk or is less volatile than market. A measure of risk
commonly advocated is beta. . It should be in range of 0.85 to 1.05.
Where,
where ra measures the rate of return of the asset, rp measures the rate of return of the
portfolio, and cov (ra,rp) is the covariance between the rates of return.

53
Chapter no. 7-
Data Analysis and Interpretation

54
6.1 Data collection & analysis
Risk and return analysis and collected data of those banks which is top twelve in NSE
bank nifty. These are follows:
 ICICI BANK
ICICI Bank was established in 1994 by the Industrial Credit and Investment
Corporation of India, an Indian financial institution, as a wholly owned subsidiary.
The bank was initially known as the Industrial Credit and Investment Corporation of
India Bank, before it changed its name to the abbreviated ICICI Bank. The parent
company was later merged into ICICI Bank.
The ICICI bank has issued 1152671363 shares of Rs 10 face value. Free float
market capital is Rs. 96014.13 cr. The weight age of ICICI bank is 16.44 in overall
banking sector. The total Rs. 37 dividend has given from ICICI bank to his
shareholders in past three years.
Finding
The ICICI BANK is second largest bank on the basis of ROE i.e. 18.7. ICICI
bank has allotted 12900 equity shares each under the employee stock option scheme
2000. The share holding pattern of this bank is as govt. holding 0.8 shares (0%),
domestic institution(bank + FI + MF +UTI) 319.13 shares (27.7%), foreign holding
722.96(62.7%) shares, Non promoter corporate holding 40.71 (3.5%) shares, public &
others (individual + HUF+ Clearing members) 69.99 (6.2%)shares.
PE Ratio of this bank is March 2010 – (27.10), march 2011 – (25.90), march
2012-(16.38) and EPS in March 2010- (34.6), march 2011- (43.0), march 2012-
(54.2). EPS is increased in March 2012 than other two years.

55
Return calculated using simple method
Factor Amount ,number –%
Holding period Return (in three years) 165.407%
Beta (Risk) 1.419395261
Covariance 0.743655492
% Of annual return 47.5053027
Return calculated using data analysis method in Microsoft excel
Daily mean return 0.001555985
Standard Deviation 0.026443073
Kurtosis 8.037322622
Skewness 1.160282382
Minimum -0.09967545
Maximum 0.230381068
Confidence Level (95.0%) 0.001901906
349.15
952.65
1102.9
809.2
0
500
1000
1500
01-Apr-09 1 APRIL
2010
01-Apr-11 31-Mar-12
Shares price
Shares price

56
 State Bank of India
State Bank of India (SBI) is the largest banking and financial services company in
India by revenue, assets and market capitalization. It is a state-owned corporation with
its headquarters in Mumbai, Maharashtra The bank traces its ancestry to British
India, through the Imperial Bank of India, to the founding in 1806 of the Bank of
Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of
Madras merged into the other two presidencies banks—Bank of Calcutta and Bank of
Bombay—to form the Imperial Bank of India, which in turn became the State Bank of
India in Jul 1, 1955
The SBI bank has issued 671044838 shares of Rs 10 face value. Free float
market capital is Rs. 127552.20 cr. The weight age of this bank is 24.89 in overall
banking sector. The total Rs. 79 dividend has given from SBI bank to his shareholders
in past three years.
The share holding pattern of SBI bank is as promoter holding 61.6% shares,
govt. holding 0.18% shares, domestic institution(bank + FI + MF +UTI) 17.3%
shares, foreign holding 11.2% shares, Non promoter corporate holding (3.7%) shares,
public & others (individual + HUF+ Clearing members) 6.2% shares. PE Ratio of SBI
bank is March 2010 – (14.78), march 2011 – (21.92), march 2012-(12.32) and EPS
in March 2010- (140.7), march 2011- (126.3), march 2012- (170.1). EPS is increased
in March 2012 than other two years.
Return calculated by using simple method
Factor Amount , %, number
% annual rate return 33.83800158
Beta (Risk) 0.80629166
Holding period Return (in three years ) 101.897
Covariance
0.422435693

57
Return calculated by data analysis method in Microsoft excel
Factor Amount, number, %
Daily Mean return 0.00116652
Maximum 0.200266464
Minimum -0.086287404
 CANARA BANK
Ammembal Subba Rao Pai, a philanthropist, established the Canara Hindu Permanent
Fund in Mangalore, India, on 1 July 1906. The bank changed its name to Canara Bank
Limited in 1910 when it incorporated.
The CANARA bank has issued 443000000 shares of Rs 10 face value. Free
float market capital is Rs. 18014.60 cr. The weight age of CANARA bank is 3.16 in
overall banking sector. The total Rs. 21 dividend has given from CANARA bank to
his shareholders in past three years.
1077.45
2102.6
27 19.55
2096.35
0
500
1000
1500
2000
2500
3000
AxisTitle
price of shares
price of shares

58
Finding
The share holding pattern of CANARA bank is as promoter holding 67.7% shares,
govt. holding 0.0% shares, domestic institution(bank + FI + MF +UTI) 11.1% shares,
foreign holding 14.8% shares, Non promoter corporate holding 1.5% shares, public &
others (individual + HUF+ Clearing members) 4.9% shares. PE Ratio of CANARA
bank is March 2010 – (5.70), march 2011 – (7.03), march 2012-(6.55) and EPS in
March 2010- (72.0), march 2011- (89.1), march 2012- (72.3). EPS is increased in
March 2011 than other two years.
Using simple method
Beta (Risk) 1.214566594
Holding period Return (in three years ) 204.03
Co variance 0.636340801
Return calculated by data analysis method in Microsoft excel
Factor Amount ,number %
Minimum -0.100981502
Maximum 0.151733159

59
 AXIS BANK:
Axis Bank Limited is an Indian financial services firm that had begun operations in
1994, after the Government of India allowed new private banks to be established.
The AXIS bank has issued 414368048 shares of Rs 10 face value. Free float
market capital is Rs. 46160.60 cr. The weight age of AXIS bank is 7.21 in overall
banking sector. The total Rs. 27 dividend has given from AXIS bank to his
shareholders in past three years.
Finding
The share holding pattern of AXIS bank is as promoter holding 37.3 %
shares, govt. holding 0.0% shares, domestic institution(bank + FI + MF +UTI) 3.9%
shares, foreign holding 36.1% shares, Non promoter corporate holding 1.3% shares,
public & others (individual + HUF+ Clearing members) 11.5% shares. PE Ratio of
AIXS bank is March 2010 – (19.47), march 2011 – (17.50), march 2012-(11.46) and
EPS in March 2010- (60.1), march 2011- (80.2), march 2012- (100). EPS is increased
in March 2012 than other two years. Axis bank allotted new 77228 equity shares of
10 each under ESOP scheme of the bank.
163.4
413.05
629.35
47 5.8
0
100
200
300
400
500
600
700
AxisTitle
price of shares
price of shares

60
Data find by using method
Holding period return 180.33
Beta (Risk) -0.806189418
Covariance -0.422382126
annual return % 51.96747562
Data find by using data analysis method in Microsoft excels.
Minimum -0.090399038
Maximum 0.180109157
418.15
1173.55
1407.75
1146.2
0
200
400
600
800
1000
1200
1400
1600
01.04.2009 01.04.2010 01.04.2012 31.03.2012
price of shares
price of shares

61
 Punjab national bank:
PNB was founded in the year 1895 at Lahore (presently in Pakistan) as an off-shoot of
the Swadeshi Movement. Among the inspired founders were Sardar Dayal Singh
Majithia, Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C.
Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, Lala Dholan Dass.
The K.R. KAMATH is the chairman of PNB. Headquarter of PNB is in the
New Delhi, India. The PNB total revenue of is Rs. 36428 Cr ,total Asset is Rs.
373786 Cr, net income 4884 Cr and more than 56928 employee has working in axis
bank. The PNB bank has issued 339178683 shares of Rs 10 face value. Free float
market capital is Rs25836.94 cr.
The weight age of PNB bank is 4.50 in overall banking sector. The total Rs. 64
dividend has given from PNB bank to his shareholders in past three years.
Finding
The share holding pattern of PNB bank is as promoter holding 56.1 % shares, govt.
holding 0.0% shares, domestic institution(bank + FI + MF +UTI) 21% shares,
others (individual + HUF+ Clearing members) 4.1% shares. PE Ratio of PNB bank is
March 2010 – (8.43), march 2011 – (8.95), march 2012-(6.59) and EPS in March
2010- (120.2), march 2011- (136.4), march 2012- (140.4).
Data find by using method
Beta (Risk) 1.27889643
annualized return %
38.65212856

62
Data find by using data analysis method in Microsoft excels.
Maximum 0.144410613
Minimum -0.097964255
Skewness 0.19910171
 Union Bank:
Union Bank of India (UBI) was registered on 11 November 1919 as a limited
company in Mumbai and was inaugurated by Mahatma Gandhi. At the time of India's
Independence in 1947, UBI still only had four branches - three in Mumbai and one in
Saurashtra, all concentrated in key trade centers. After Independence UBI accelerated
its growth and by the time the government nationalized it in 1969, it had grown to 240
branches in 28 states.
The D.SARKAR is the chairman of UBI. Headquarter of UBI is in the Mumbai,
India.The UBI total revenue of is Rs. 21144 Cr, net income 1787 Cr and more than
27746 employee has working in axis bank. The weight age of UBI bank is 1.97 in
overall banking sector. The total Rs. 18.50 dividend has given from UBI bank to his
shareholders in past three years. . The UBI bank has issued 550549035 shares of Rs
10 face value. Free float market capital is Rs. 10972.44 cr.
405.75
1015.9
1179.5
925
0
500
1000
1500
PRICE OF SHARES
PRICE OF
SHARES

63
Finding
The share holding pattern of UBI bank is as promoter holding 54.4% shares, govt.
holding 0.0% shares, domestic institution(bank + FI + MF +UTI) 19.6% shares,
others (individual + HUF+ Clearing members) 8.8% shares. PE Ratio of UBI bank is
2010- (40.1), march 2011- (38.3), march 2012- (30.9).
By using simple method
Beta (Risk 0.590137693
% annual return 25.70128008
By using data analysis in Microsoft excel
Minimum -0.114381131
Maximum 0.145678306
Confidence Level(95.0%) 0.001716537

64
 BANK OF INDIA
Bank of India was founded on September 7, 1906 by a group of eminent businessmen
from Mumbai. In July 1969 Bank of India was nationalized along with 13 other
banks. The weight age of BOI bank is 1.97 in overall banking sector. The total Rs. 19
dividend has given from BOI to his shareholders in past three years. The BOI bank
has issued 573780370 shares of Rs 10 face value. Free float market capital is Rs.
19301.97 cr.
Finding
The share holding pattern of BOI bank is as promoter holding 62.7% shares,
others (individual + HUF+ Clearing members) 5.3% shares. PE Ratio of BOI bank is
2010- (32), march 2011- (44.4), march 2012- (45.5).
By using simple method:
Beta (Risk 0.481526634
147.25
305.95
343.95
235.8
0
100
200
300
400
price 0f shares
price 0f shares

65
By using data analysis method in Microsoft excel:
Skewness 0.33896296
Minimum -0.123544552
Maximum 0.175197249
 KOTAK MAHINDRA BANK
Kotak Mahindra Bank is an Indian financial service firm established in 1985. It was
previously known as Kotak Mahindra Finance Limited, a non-banking financial
company. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship
company was given the license to carry on banking business by the Reserve Bank of
India (RBI).
Mr. Uday Kotak is Executive Vice Chairman & Managing Director of Kotak
Mahindra Bank Ltd. The Bank has its registered office at Nariman Bhavan, Nariman
Point, Mumbai. The Kotak Mahindra Bank total revenue of is Rs. 10963 Cr, net
income 1569 Cr. The weight age of KMB bank is 7.27 in overall banking sector.
220.3
346.4
480.15
362.65
0
200
400
600
price 0f shares
price 0f shares

66
The total Rs. 2.2 dividend has given from KMB bank to his shareholders in past three years.
The KMB bank has issued 741318752 shares of Rs 10 face value. Free float market
capital is Rs. 41977.17 cr.
Finding
The share holding pattern of KMB bank is as promoter holding 45.2% shares, govt.
others (individual + HUF+ Clearing members) 512.7% shares. PE Ratio of BOI bank
is March 2010 – (46.29), march 2011 – (41.38), march 2012-(37.28) and EPS in
March 2010- (16.2), march 2011- (11), march 2012- (14.6).
Holding period Return 82.73
Beta (Risk 1.127164786
Daily main return 0.001362244
Skewness -4.182872239
Minimum -0.474092066
Maximum 0.191384251

67
 YES BANK
Yes Bank is a private bank in India established in Dec 24, 1944. It was founded by
Ashok Kapur and Rana Kapur. India's No. 1 New Private Sector Bank in the
Financial Express-E&Y Best Banks Survey 2010, India's Fastest Growing Bank of
the Year at the Bloomberg UTV Financial Leadership Awards 2011. YES Bank has
become the first Indian Bank, and the third one globally in the banking industry to
receive certification for its 'Complaints Management System by the British Standard's
Institution (BSI) as on August 25, 2010.
Mr. Ranna Kapur is a chairman of yes bank and headquarters in Mumbai,
India. Yes bank Deposits is Rs. 150000 Cr, advances Rs. 100000 and more than 750
branches. The weight age of YES bank is 2.01 in overall banking sector. The total Rs.
4 dividend has given from YES bank to his shareholders in past three years. The YES
bank has issued 353859174 shares of Rs 10 face value. Free float market capital is Rs.
11944.52 cr.
Finding
The share holding pattern of YES bank is as promoter holding 26.1% shares, govt.
others (individual + HUF+ Clearing members) 14.7% shares. PE Ratio of YES bank
March 2010- (13.8), march 2011- (20.5), march 2012- (27).
299.45
7 46.85
451
545
0
200
400
600
800
price 0f shares
price 0f shares

68
Beta (Risk 2.911566091
Minimum -0.084575026
Maximum 0.252488214
51.65
258.05
312.05
368.8
0
200
400
01.04.2009 01.04.2010 01.04.2011 31.03.2012
price 0f shares
price 0f shares

69
 INDUSLAND BANK
Induslnd Bank Limited is a Mumbai based India new generation bank established in
1994. The bank offers commercial, transactional and electronic banking products and
services. Indusind Bank was incorporated in April 1994 by Dr. Manmohan Singh the
then Union Finance Minister.
HINDUJA GROUP is a owner of INDUSLAND bank and headquarters in
Mumbai, India. The INDUSLAND bank total revenue of is Rs. 3260.47 Cr, net
income 1569 Cr.The weight age of INDUS bank is 2.01 in overall banking sector. The
total Rs. 5 dividend has given from INDUS bank to his shareholders in past three
years. The INDUS bank has issued 468697800 shares of Rs 10 face value. Free float
market capital is Rs. 14843.66cr.
Finding
The share holding pattern of INDUS bank is as promoter holding 19.4% shares,
foreign holding 49.4% shares, Non promoter corporate holding 13.5% shares, public
& others (individual + HUF+ Clearing members) 9.1% shares. PE Ratio of INDUS
bank is March 2010 – (20.74), march 2011 – (21.85), march 2012-(19.10) and EPS
in March 2010- (8.2), march 2011- (12.1), march 2012- (16.8).
Beta (Risk 3.627904537

70
Minimum
-0.117439812
Maximum
0.173076923
 BANK OF BARODA
The Maharajah of Baroda, Sir Sayajirao Gaekwad III, Peshwa of the Maratha Empire,
founded the bank on 20 July 1908 in the princely state of Baroda, in Gujarat. The
bank, along with 13 other major commercial banks of India, was nationalised on 19
July 1969, by the government of India. The tagline of Bank of Baroda is "India's
International Bank".
M.D.MALLYA is a chairman and of MD of BOB and headquarters in
VARODARA, India. The BOB total revenue of Rs. 29673 Cr, net income 5006 Cr
and total asset 355826 Cr. The weight age of BOB bank is 2.014.93 in overall banking
sector. The total Rs. 40.5 dividend has given from BOB bank to his shareholders in
past three years. The INDUS bank has issued 411123383 shares of Rs 10 face value.
Free float market capital is Rs. 28661.23cr.
28.6
177.2
265.55
321.65
0
200
400
01.04.2009 01.04.2010 01.04.2011 31.03.2012
price 0f shares
price 0f shares

71
Finding
The share holding pattern of BOB bank is as promoter holding 54.3% shares,
others (individual + HUF+ Clearing members) 5.0% shares. PE Ratio of BOB bank is
2010- (81.2), march 2011- (105.3), march 2012- (118.7).
Beta (Risk 0.316461993
% annual return -5.794854586
Kurtosis -1.003351644
Minimum
-0.038107128
Maximum
0.034834601
232.5
649.6
945.8
7 96.15
0
200
400
600
800
1000
price 0f shares
price 0f shares

72
 HDFC BANK
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation
Limited (HDFC), India's largest housing finance company. It was among the first
companies to receive an 'in principle' approval from the Reserve Bank of India (RBI)
to set up a bank in the private sector.
ADITYA PURI is and of MD of HDFC and headquarters in Mumbai, Maharashtra,
India.
The weight age of HDFC 21.64 bank is in overall banking sector. The total Rs.
38.5 dividend has given from HDFC bank to his shareholders in past three years. The
HDFC bank has issued 2353772335 shares of Rs 10 face value. Free float market
capital is Rs. 125879.74cr.
Finding
The share holding pattern of HDFC bank is as promoter holding 23.1% shares, govt.
foreign holding 49% shares, Non promoter corporate holding 8.6% shares, public &
others (individual + HUF+ Clearing members) 8.7% shares. PE Ratio of HDFC bank
March 2010- (62.4), march 2011- (81.7), march 2012- (21.3).
Holding period return 44.16%
Beta (Risk) 1.111363894

73
Skewness -17.0413256
Minimum -0.799202286
Maximum 0.163002658
1000
1939.25
2333.75
519.85
0
1000
2000
3000
01.04.2009 01.04.2010 01.04.2011 31.03.2012
price 0f shares
price 0f shares

75
On the basis of Sharpe ratio, the INDUSLND Bank investment is better investment
than other all banks in bank nifty because, Sharpe ratio is indicate that, the asset with

76
the higher Sharpe ratio gives more return for the same risk. Investors are often
advised to pick investments with high Sharpe ratios. Hence, here in last three years
INDUSLND bank has given more return than other banks i.e. 11.75%. If share price
of INDUSLND bank is low still INDUSLND bank has givenbetter return than other
banks. In starting of financial year 2009 share price of INDUS bank is 28.6 and in
ending 2012 share price is 321.65. That means Investment in INDUS bank is better.
The share price of INDUS bank has continuous increase from 2009.
The chart of holding period return has given below:
On the basis of holding period return of INDUS bank is higher i.e.1042.10%. The
beta (systematic risk) is 3.6379 higher than other banks. The beta is indicating that
High-beta stocks are supposed to be riskier but provide a potential for higher returns;
low-beta stocks pose less risk but also lower returns. In last three year maximum daily
return is 0.0348 and minimum daily return -0.03811.
Risk and return of INDUS bank is high than other banks in last three years.
Because INDUS bank has given more return in last three years. If return is high then
risk automatically high. Second best bank is yes bank because yes bank holding
period return is 621.78%. And Sharpe ratio is 9.60%. The beta of yes bank is 1.2790.
So yes bank is second biggest risky but yes bank is better for investment because yes
bank has given second rank high return.
The share price of yes bank has continuous increase from 2009. BOBis best bank for
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
sharp ratio
sharp ratio

77
earning return because BOB holding period return has given Rs. 259.80.and Sharpe
ratio is 7.82%. The beta of BOB bank is 0.6040. CANARA bank is third better bank
for investment because Sharpe ratio of CAN bank is 6.20% and beta is 1.2146.
Holding period return is 204.03 of can bank.
The holding period return of Axis bank is Rs.180.33% and Sharpe ratio is
5.77%.the beta of same bank is -0.8062.and daily mean return is 0.0017. These all
techniques are indicating that axis bank is better for the investment. the another bank
is ICICI is better for investment because holding period return of ICICI bank is
165.41% and Sharpe ratio 5.13%. To ICICI bank has high weighted than other banks.
The ICICI bank has daily mean return is good i.e.0.0016.
The chart of Sharpe ratio has given below:
The holding period return of PNB bank is Rs.143.51% and Sharpe ratio is 5.40%.the
beta of same bank is 0.0015.and daily mean return is 0.0013. These all techniques are
indicating that PNB bank is better for the investment. In ending 2012 share price of
PNB has decrease. The state bank India has high share price and in the financial year
ending of 2012 share price of SBI has felled. The state bank of India has given high
dividend in last here year. For investment SBI is good bank but share price of SBI is
very high compare to other banks.
0
0.05
0.1
0.15
BOB
KMB
INDUS
HDFC
BOI
AXIS
ICICI
SBI
YES
UBI
CAN
PNB
sharp ratio
sharp ratio

78
The KOTAK Mahindra bank is biggest bank in India. The holding period return of
KMB is 82.73% and Sharpe ratio is 3.72%. The beta of KMB is 1.1272 and daily
means return 0.0014. at the starting financial year 2009 share price graph of KMB is
indicates is high price and going to upward direction but in 2010 it indicate that share
price of KMB has decrease and in the year of 2011-2012 it indicate that share price of
KMB is going to upward direction.
Union bank of India is best bank in India. The share price of UBI has decrease
in financial year 2011-2012. The holding period return of UBI 72.699 and annual
return is 25.70%.the beta of UBI is 0.5913 and Sharpe ratio is 3.00. So, UBI is
medium level for earning profit or return.
The share price of bank of India has decrease in the financial year 2011-
2012.the Sharpe ratio of BOI is 3.09 and beta is 0.4815. The annual return of BOI is
28.79 and holding period return is 73.24%. The HDFC bank is biggest bank in India
but the share price graph of HDFC bank is totally going to downward direction. The
annual return of HDFC bank is very less than other banks i.e.9.3186% and holding
period return is 44.16. The equity share holder of HDFC bank has suffered from loss
in the financial year of 2011-2012. The beta of HDFC bank is 1.1138 and Sharpe ratio
is 0.46%.
In this project, bank nifty has considered as portfolio and return on market
portfolio has considered as return of bank nifty for calculation of beta (risk). Return
on market portfolio is 1.392902 and standard deviation of market portfolio is
0.523924175.
The best banks for earning more return are Indus bank, yes bank, BOB, CAN
bank, PNB, Axis bank and ICICI bank.

80
I found that return of INDUSLND is very high than other banks in bank nifty script. I
found that any security has given high return, these securities is very risky. So, here I
found that the INDUS bank has given high return as well as high risky compare to
other banks in bank nifty script. The share price of INDUS bank has been continuous
increase. So, INDUSLND bank is better than other banks for investment for those
shareholders who wants to high profit.
HDFC bank has given minimum returns compare to other banks in bank nifty
script. The starting financial year 2009 return of HDFC bank was very high compare
to other banks but from 2011 return of HDFC bank is very low.
In this project suggestion has given to only equity shareholder investor. If
equity shareholder doing long term investment and depend upon the dividend as well
as which shareholder cannot take risk those shareholder can invest his money in
CANARA bank & PNB. Because these banks have given more dividends and may be
give high dividend to his shareholders.
If shareholders have ability to take risk and earn profit those shareholder can
invest his investment in INDUSLND bank, CANARA bank, YES bank, PNB and
BOB.

82
Investor should consider his return objective & investment Constraints before
investing.
This whole project depends upon historical data and in this project risk and return
depend upon historical data but this return not necessary happens in future.
Investment advisor should make investment policy statement according to risk
appetite earning of investor this need.

83
Chapter no: 10
Limitation / Future scope

84
Scope of the study
The project primarily deals with equity shares; the study is limited to compare
different banks equity shares in respect of their risk, & return. The study covers only
twelve banks which are listed in bank nifty. The analysis is strictly based on unit price
and benchmark information. In this project has studied (analysis) risk and return
analysis of equity shares only twelve banks. This project is helpful to banking sector
equity share investors in banking sector.
Limitations of the study
 The time period of project is limited only two months. In that period project
can not done successfully.
 The study of project is limited only twelve national banks are included but
other national banks are not included in this project. Like bank of
Maharashtra, UCO Bank, FEDERAL Bank.
 Risk of equity shares are calculated only using beta and standard deviation
technique, Sharpe ratio but not analysis by other financial technique.
 The studies of this project depend upon only three years historical data.

85
Chapter no: 11
Bibliography

86
Books
Dealercapital market module (advance) – NSE
Financial management- M.Y. KHAN& P.K. JAIN
Website
www.nseindia.com
www.moneycontrol.com
www.indiainfoline.com
www.rediffmail/money.com

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