A study on empherical testing of capital asset pricing model

“EMPHERICAL TESTING OF CAPM”

“A STUDY ON EMPHERICAL TESTING OF CAPITAL ASSET
PRICING MODEL ”
(Conducted at Asit C. Mehta Investment Intermediates Ltd, Hassan)
Project report Submitted to the University of Mysore, Mysore.
In partial fulfillment of the requirement for the award of the
Degree in Master of Business Administration.

by

SHABRIN TAJ ASMA
Reg.No.08MB3746

Guide
Mr. Subramanya P R

HARANAHALLI RAMASWAMY
INSTITUTE OF HIGHER EDUCATION, HASSAN
2008-10

HRIHE, HASSAN Page 1


DECLARATION

I hereby declare that this project report entitled “A STUDY ON EMPHERICAL
TESTING OF CAPITAL ASSET PRICING MODEL” AT ASIT C MEHTA
INVESTMENT INTERMEDIATES LTD, HASSAN” has been prepared by me

under the guidance of Mr. P.K. Subramanya Lecturer, Department of
Business Administration, Haranahalli Ramaswamy Institute of Higher
Education, Hassan.

I further declare that this project report is prepared from the information

collected from the ASIT C MEHTA INVESTMENT INTERMEDIATES LTD and

that the same is purely for academic purpose and that the report has not been

submitted to any other institution of higher learning for the award of any

degree, diploma or other similar title.

Date: SHABRIN TAJ ASMA
Place: Hassan Reg. No. 08MB3746



ACKNOWLEDGEMENT
I, express my deep sense of gratitude and sincere thanks to, Mr.

Santhish P Unit manager of Asit C. Mehta Investment and

Interrmediates Ltd, Hassan, who gave me an opportunity to conduct this

Research Project. I state with great pleasure this report would not have been

possible without the wonderful help from various quarters, the list of which

is quite too long.

I will take this opportunity to express my deep sense of gratitude to Dr.

S R Jayaram, Administrator, HRIHE Hassan for his continuous

encouragement at every stage of the Project.

I will take this opportunity to express my deep sense of gratitude to

Mr. Subramanya P.R, Lecturer, HRIHE, Hassan for his guidance,

continuous encouragement and valuable suggestions at every stage of the

Project.

I would also like to extend my deep sense of gratitude to my parents

and all my family members, friends, who have directly or indirectly

supported and helped me in the completion of my project successfully

Last, but not the least I would like to extend my thanks to all the unseen

hands that have made this project possible.

Date: SHABRIN TAJ ASMA
Place: Hassan Reg.No.08MB3746



CONTENTS

Sl. No Particulars Page.No
Executive Summary
Chapter - 1 INTRODUCTION
1.01 Statement of the Problem
1.02 Objective of Study
1.03 Scope of the Study
1.04 Methodology
1.05 Limitations of Study
Chapter - 2 REVIEW OF LITERATURE
Chapter - 3 COMPANY AND INDUSTRY PROFILE
3.01 Industry Profile
3.02 Company Profile
3.03 Organization Structure
3.04 Achievements
3.05 SWOT Analysis
Chapter - 4 DATA COLLECTION AND INTERPRETATION

Chapter - 5 SUMMARY OF FINDINS, SUGGESSIONS AND
CONCLUSION
BIBLIOGRAPHY



LIST OF
TABLES
Sl. No Particulars Page. No
Market Return of Nifty
4.01 For the year- 2005
4.06 Market Return
Wipro Technology Limited
Infosys Technology Limited
HCL Technology Limited
Tata Consultancy Service Limited




LIST OF GRAPHS

Sl.No Particulars Page. No
4.01 Wipro Technology limited

4.02. Infosys Technology limited

4.03 HCL Technology Limited

4.04 Tata Consultancy Services Limited



CHAPTER – 1
INTRODUCTION

1.1 EXECUTIVE SUMMARY:

A portfolio is a bundle or a combination of individual assets or securities. The
portfolio theory provides a normative approach to investors to make decisions to invest
their wealth in assets or securities under risk. It is based after the assumption that
investors are risk-averse. This implies that investors hold well diversified portfolio



instead of investing their entire wealth in a single or a few assets. One important
conclusion of the portfolio theory is that if the investor of the portfolio theory is that if
the investor holds a well-diversified portfolio of assets then their concerns should be the
expected rate of return and risk of the portfolio, rather than individual assets and the
contribution of individual asset to the portfolio risk. The second assumption of the
portfolio theory is that the returns of assets are normally distributed. This means that the
mean and variance analysis is the foundation of the portfolio decisions. Further, we can
extend the portfolio theory to derive a framework for valuing risk assets. This framework
is referred to as CAPM.
The CAPM is a model that provides a framework to determine the required rate of
return on an asset and indicates the relationship between return and risk of the asset. The
required rate of return specified by CAPM help in valuing an asset. Once can also
compare the expected return and determine whether the asset is fairly valued. As we
exemplifies the relationship between an asset’s required rate of return.
Risk is of many kinds, they can be classified as systematic or unsystematic risk.
Systematic risk covers the risks of market, interest rate risk and purchasing power risk
and unsystematic risk consist of business and financial risk. The systematic risk is
therefore, effecting the total environment and is outside the control of one firm on
individual. Unsystematic risk is inherent to the system. It may be due to bad financial
planning or wrong management decisions. These risks are internal and can be avoided or
controlled.

Risk is fundamental to the process of investment. Every investor should have an
understanding of the various pitfalls of investment. For the convenience of the investors,
analysts measure risks to able to combine securities and to reach that portfolio which
suit’s the individual needs of an investor risk is measured through beta test.

1.2 PROBLEM STATEMENT:
Earning maximum returns on investments is definitely the motto for any investor.
Selecting stocks however, exclusively on the basis of maximization of return is not
enough. The fact that most investors do not place their available funds in few stocks
promising higher returns suggest that other factors must be considered besides returns in



selection process. Investor wants to maximize expected return subject to their assessment
and capacity to take risk. The risk associated with the holdings is that the return the study
of risk vis-à-vis reruns always holds a great significance, which immensely helps in key
decision-making process than the return that was expected. Hence, the study of risk vis-à-
vis reruns always holds a great significance which immensely helps in key decision-
making process.

Investors thus need to make decisions as to what securities should be held.
Estimates need to be prepared of the return and risk associated with the securities for a
certain period of time. This is known as security analysis is built around the idea that
investors are concerned with expected return and risk, the two principal properties
inherent in securities.
Thus the return and risk arid their measurement using Capital Asset Pricing
Model (CAPM) will be the core of to study undertaken. The attachment of the paramount
importance these two principal properties; return and risk, Inherent in securities with the
analysis of any investment decision makes the study significant.

1.2 OBJECTIVE OF STUDY:
• To measure the return on securities selected HCL Technologies, Wipro, Infosys,
and Tata consultancy Services Limited
• To measure the systematic risk of the security by using beta as a measure of risk.
• To calculate expected rate of expected by investors on security for any level of
risk.
• To evaluate with performance of stock using CAPM model.



1.03 SCOPE OF THE STUDY:
• The study is confined to the statistics of the four leading companies in IT
industries.
• The BETA is calculated based on the returns for limited period as share prices for
the period of 60 months.
• Only secondary sources data is used for 'the study, which limits with scope, of the
research work.
• The index selected is Standard & Poor CNX NIFTY changes the index could
resu1t in discrepancies in the result obtained.
• The firms selected for analysis have to be listed on NIFTY (since NIFTY is
considered as the index).



1.04 METHODOLOGY:

RESEARCH DESIGN:
This study is an empirical one. Empirical research methods are a class of research
methods in which data are collected in order to answer research question.

STUDY DESIGN:
In this study an attempt has been made to experiment the “Seasonality in Indian
Stock Market” closing value of S&P Nifty Index as the sample.

TYPES OF DATA:
Secondary data has been used for the analysis purpose.



STUDY TYPE:
The study type is analytical, quantitative and historical. Analytical because facts
and existing information is used for the analysis, Quantitative as relationship is
examined by expressing variables in measurable terms and also Historical as the
historical information is used for analysis and interpretation.

SAMPLING FRAME:
Sampling frame includes the closing value of S&P Nifty Index. Sample includes
historical closing values of S&P Nifty index value for the period of five years from
3rd March 2005 to 3rd March 2010 Sample Technique.

SAMPLE TECHNIQUE:

The sampling technique used is the convenient sampling. As the name implies, the sample
is selected because they are convenient. S&P CNX Nifty is a benchmark stock index
based on the selected stocks traded at National Stock Exchange (NSE).

DATA GATHERING PROCEDURE:

The major data relevant for this research is secondary data which has been collected from
Bangalore Stock Exchange ( BGSE ).

DATA AND SAMPLE :

 The study is based on BSE Sensex companies that were part of the index
from the beginning up to 30th June 2005.

 The list of 66 companies is drawn based on two criteria:-

 The companies selected should have been constituents of BSE Sensex

 Traded for a minimum time of six months in a year during the study period

 The data was collected from the CMIE (Prowess package), BSE, NSE, RBI,
DCA, SEBI websites, etc.



CONVENIENT SAMPLING
Selection of Companies: The economy was classified into segments as shown. In
each, of these segments a leading firm as selected. This firm is considered as a
representative of the top performing firms in the segments.

SEGMENT FIRMS
Wipro Technologies ltd

Infosys technologies ltd
Information Technologies HCL Technologies ltd
TCS

METHOD OF CALCULATION OF RETURNS-
STEP: 1
Daily share price of the stock is collected from the website of National stock
exchange.

STEP: 2
The Daily index Value (NIIFTY) is downloaded from the National Stock
Exchange Website (www.nseindia.com) the composition of NIFTY is subjected to
scrutiny on a periodic basis. Any change in the composition of the NIFTY could impact
all the index value.

STEP: .3
The Daily return (in percentage terms) of the stock and the index is calculated.

STEP: 4
These daily returns can be annualized in two ways:
(a) Arithmetic mean (b) Geometric mean
Geometric method is always a better option since compounding is taken into
account thought returns could be annualized using natural logarithm. The geometric
method of annualizing the return (by compounding) was preferred for its simplicity.



NOTE:
The data has been analyzed from 1st January 2005 to 31st December 2010(i.e.,
for a period of 5 years). Even stock splits are considered over a period of time.

STEP: 5
To find Beta Value of the stock is calculated using SPSS software. Beta is the only
measure in the CAPM concept.

STEP: 6
Expected return calculation needs the risk free rate Rf is treasury bill. So, we have
assumed it as 6%.

STEP: 7
Expected Return by CAP M
E(R) =Rf+ β(Rm- Rf)
Where, Rm = Market Return of NIFTY
β= Beta Value (Return of Scripts and return of index) ,

STEP: 8
Construction of “security market line” keeping Beta is the only measure scrutiny
market line was constructed for each firm's in order to identify the undervaluation and
over valuation of stock.

STEP: 9
An detail analysis has been made with various sector stocks that the performance
of the stock could indicate that the expected return forecasted for a stock is more or less
than its "fair" return given its risk and it is also analyzed that this model helps us to make
an educated guess as the expected return on asset that have not yet been traded in the
market place. Although the CAPM does no fully with stand empirical tests. It is widely
used because the insight it offers and because its accuracy suffices for important
application.



1.05 LIMITATIONS
• As we consider Beta only, the bonus shares issued is not considered.
• The dividends issued on the shares are also not taken into account, since the effect
on the return on the share would be minimal.
• Since the study concentrates on data from 1st January 2001 the effect if the
change in NIFTY values would not have an impact on the study.



• Since the returns the calculated on yearly vise the Risk free Rate (Rf) was
assumed as 6%, which would not give us a realistic picture of; the expected return.
• Since it is an academic exercise it may not have totally practical study.
• Unfortunately procedure is not very practical 'since information on investor
expectation is very sketchy
• There may be a variation in calculation because we have tested the CAPM using
ex post data, than ex ante data.



CHAPTER- 2
REVIEW OF LITERATURE

2.01 AN OVERVIEW OF CAPITAL ASSET PRICING
MODEL CONCEPT
The capital Asset pricing model is based on two, Parameter portfolio analysis
model developed by Markowitz (1952). This model was simultaneously independently
developed by John Linter (1965), Jan Mossion (1966) and William Sharpe (1964). In



equation form the mode can be expressed as follows:

E(R)=Rf+ β(Rm- Rf)
Where: E (Rj) is expected return on asset))
Rm- Rf)
Rf is Risk free rate of return

E (Rm) is expected return on market,

B is a measure of risk specific to asset.

This relationship between expected return on asset and expected return on market
portfolio is called as security market line. If Capital Asset Pricing Model (CAPM) is valid
all securities will lie on the straight line called the security market line in the E (Rj) P
frontiers. The security market line implies that return is a linearly increasing function of
risk. Moreover only the market risk affects the return and the investors receive no extra
return for diversifiable (residual risk).
The market reward-to-risk ratio is effectively the market risk premium and by
rearranging the above equation and solving for E(Ri), we obtain the Capital Asset Pricing
Model (CAPM).

The capital asset pricing model which is referred as CAPM is a centerpiece of
modem financial economics. The model gives us a precise prediction of the relationship
that we should observe between the risk of an asset and its expected return. This
relationship serves two vita functions.
It provides benchmark rate of return for evaluating possible investments. it helps
us to make, education guess as to the expected return on asset that has not been traded in
the market place. For eg: how do we price initial public offering of stock? How will a
major new investment project affect the return investors require on a company stock?
Although the CAPM does not fully withstand empirical test, it is widely used because of
the insight it offers and because its accuracy suffices for important application.
The CAPM Model uses topic concept of Beta to risk for the study, firm were short
listed in each category of the industry such as IT, & Antitragi's FMCG, Pharmaceuticals.
The performance of stock is analyzed ones a time period of 5 years l st January 2004
to31st December 2008.



2.02 WHAT IS RISK?
Risk and uncertainty are in integral part of an investment decision. Technically
'risk' can be defined as a situation where the possible consequences of the decision that is
to be taken are known. Uncertainty is generally defined to apply to situations where the
probabilities cannot be estimated. However, risk and uncertainty are used inter
changeably.
Risk is composed of the demands that bring in variations in return of income. The
main Forces contributing to risk are Price and interest. Risk is also influenced by external
and internal. External risks are uncontrollable and broadly affect investments. These
external risks are called systematic risk. Risk due to internal environment of a firm or that
affecting a particular industry is referred to as unsystematic risk.

2.03 DEFINING RISK:
Risk in holding securities is generally associated with the possibility that realized
returns will be less that the returns that were expected in the most basic sense risk is the'
chance and financial loss.
Forces that contribute to variation is return, in return - price or in dividend
contribute demeans of risks, some influences are external to the firm that cannot be
controlled and affect coverage number of securities and other influences are internal to
time firm and are controlled to a large degree.

2.04 TYPES OF RISK:
1) SYSTEMATIC RISK: Systematic risk is non-diversifiable and is associated with
the securities market as well as the economic, sociological, political and legal
considerations of the prices of all securities in the economy. The affect of all stocks will
move in the same direction. For example, during a boom period prices of all securities
will rise and indicate that the economy is moving towards prosperity.

2) UNSYSTEMATIC RISK: Unsystematic risk is unique to a firm or industry. It
does not affect an average investor. Unsystematic risk is caused by factors like labor
strike, irregular disorganized management policies and, consumer preferences. These
factors are independent of the price mechanism operating in the securities market. The


problems of both systematic and unsystematic risk are inherent in industries dealing with
basic raw-materials as well as in consumer goods industries.

TYPES OF RISK
Systematic and Unsystematic risks can be further classified. Systematic risk covers
market risk, interest rate and unsystematic risk contains business and financial risk. Every
industry and its shareholders face both systematic and unsystematic risk. The systematic
portion results from overall market influences and the unsystematic portion results from
company and industry influences Systematic and unsystematic risk can be sub-divided
and analyzed separately.

SYSTAMATIC RISK
Market risk, interest rate risk and purchasing power risk are grouped under systematic
risk.
a) MARKET RISK: Market risk triggers off through real events comprising political,
social and economical reasons. The initial decline of 'rise' in market price will create an
emotional instability of investors and cause a fear of loss or create an under confidence,
relating to the possibility of profit. The gain will bring in the activity of active buying of
securities. However, investors are more receive towards decline in prices rather than
increase in prices.
Investors can try and eliminate market risk by being conservative in farming their
portfolios. They any time their stock purchases and also choose growth stocks only.
These methods will reduce their risk to some degree but as explained earlier, market risk
will not be completely eliminated because falling markets would bring down the prices of
all stocks.

b) INTEREST RATE RISK: Interest rate risk can also be reduced by analyzing the
different kind’s securities available for investment. A government bond or a bond issued
by the financial institution like IDBI is a risk less bond. Even if government bonds give a
slightly lower rate of interest in the long run are better for a conservative investor because
he/she is assured of return. Moreover, government bonds are made more attractive by
additional advantages of tax benefits. Therefore, one way to avert interest rate risk would
be to purchase government securities.



c) PURCHASING POWER RISK: Purchasing power risk is also known as
inflation risk. This risk arises out of change in the prices of goods and services and
technically it cover both inflation and deflation periods. During the last two decades, it
has been seen that inflationary pressures have been continuously affecting the Indian
economy. Therefore, in India, purchasing power risk is associated with inflation and
rising prices in the economy.
Inflation in India has been either 'cost push' or 'demand pull'. This type of
inflation has been seen when cost pf production rise or when there is a demand for
product but there is no smooth supply' and consequently prices rise. In India, the cost-
push inflation has led to enormous problems as the rise in prices of raw materials has
greatly' increased cost of production. The increases in costs of production have shown a
rising trend in 'wholesale price index and consumer price index'. A rising trend is price
index reflects a price, spiral in the economy.

UNSYSTEMATIC RISK
Unsystematic Risk is specific to a particular company or an industry.
Unsystematic risk is that portion of total, risk that arises due to the factors which affects
the internal working of the firm. Factors like, management capability, consumer
preferences, labor strikes and stages in product life cycle can affect the firm's variability
in return. Two main sources of systematic risks are" Business Risk and Financial Risk.
Unsystematic risk be eliminated through diversification and proper asset allocation. An
investor gets no reward for taking unneeded unsystematic risk as this risk can be easily
eliminated by diversification.

a) BUSINESS RISK: Business risk is faced by the, firm due to the operating
conditions prevailing within a firm and also the extent to which these conditions affects
the operating income and expected dividend variability of the firm. Business risk can be
divided into two categories Internal and External.
Internal Business Risk signifies the internal competency or efficiency of the firm to
effectively operate in the environment imposed on it. Every business firm is faced with
internal risks and the degree to which these risk are minimized are reduced depends on
the efficiency of the firm. For example, the firm can minimize the chances of labor
strikes by efficiently managing the management -labor relationship.
External Business Risk arises from the circumstances imposed by the operating



environment, which are beyond the control of the firm. Every firm faced certain external
risk, which arises as the result of operating in the specific industry. For example sales in
steel and auto industries move in accordance to the businesscyc1e. 'Demographic
considerations also affect the, revenue of a firm also the political policies, which include
monetary and fiscal policies effect are an important part of external business risk.

b) FINANCIAL RISK: The ways and means by which company finances their
activity constitutes Financial Risk. The degree of financial risk can be interred from the
capital structure of a firm. The amount of debt or borrowed capital in the financial
structure signifies interest payment by the firm to the debt holders or preference
shareholders. As a result of which the, earning left for equity shareholders keep varying
depending on the interest and principal, payment Financial, risk can be avoidable to the
extent to which the management has the freedom to decide whether to borrow money or
not. A debt free firm has no financial risk.

c) DIVERSIFICATION OF PORTFOLIO: Unsystematic risk diversifiable risk
can be eliminated though diversification in portfolio. Diversification means dividing the
portfolio into different stocks and not investing the money in one particular stock. This
will provide the investor with better return and better risk management, as this will
distribute the risks. This is due to the fact that the returns on money invested in different
securities indifferent industries are negatively co-related so their risk will rise and fall
without any relation to each other. For example, as investor has bought the stocks of an
umbrella company and company manufacturing sunglasses which are negatively
correlated. So, the fall in return on umbrella, stocks will be offset with the increase of
return in sunglasses stocks during summer. The explanation of the ingredients of
systematic risks show that market interest rate risk and purchasing power risk are the
principal sources of systematic risk in securities the unsystematic rise which affects the
internal environment of a firm or industry although peculiar to a particular industry also
causes variability of returns for a company's stock. The two kinds of unsystematic risks in
a business organization are 'Business Risk and Financial Risk'. The characteristics of
these firms of risks are broadly described.

2.05 RISK MEASUREMENTS:
Risk of an asset can be measured using statistics, the two statistics being the



standard deviation and the co-efficient of variation that can be used to measure the
variability of asset returns.

2.06 STANDARD DEVIATION
The most common statistical indicator of an asset risk is the standard deviation,
which measures the dispersion around the expected value. The greater the magnitude of
deviation and the greater the probability of its occurrence, the greater is said to be risk of
the security. Although, many people concerned only with downside risk, or the possibility
of a negative return as these consider only returns below the expected value are
nevertheless the common approach is to view risk as determined by the variability on
either side of the expected value because the greater variability, the less confident one can
be of the outcomes associated with an investment. The expected value of a return R is the
most likely return on 'an asset that is, calc u1ate d as

Expected Return = ∑ Rj Pri

Where, Rj = return for the outcome
Pri = Probability of occurrence of the I the outcome
N = No. of outcomes considered.
The expression for the standard deviation of returns

In general, higher the standard deviation, the greater the risk.

2.07 CO-EFFICIENT OF VARIATION
The co-efficient of variation, is a measure of relative dispersion that is useful in
comparing the risk of assets with differing returns. The following equation gives the
expression for the co-efficient of variation.

∑j
CV = __________
ji


The higher the co-efficient of variation, the greater.
The real utility of the coefficient of variation come in comparing the risk of assets
that have different expected returns.

2.08 CO-VARIANCE
While standard deviation is an excellent measure for calculation of risk of
individual stocks, it has its limitations as a measure of a total portfolio. With the
correlation, the covariance approach should also be considered while there ate two or
three stocks on the portfolio. Co-variance can be used to achieve the highest portfolio
expected return for a pre-determined portfolio variance level or the lowest portfolio
return. An individual security' expected return and variance express return and risk for
portfolios of stocks; the expected return is the weighted according to each securities
rupee proportion in the portfolio. Since stocks tend to cover or move together, portfolio
risk cannot expressed for an individual stock. The formula for calculation of co-variance I
and J and the covariance of stocks with beta co-efficient is shown.

2.09 RETURN MEASUREMENT
The returns incorporate both income and price, change into a total return. Return
across the time or from different securities can be measured and compared using the total
return concept. The total return for a given ,holding period relates all the cash flows
received by an investor during any designated time period to the amount it of money
Inverted in asset. It is defined as

TOTALRETURN=Cash Payment Received + Price Change Over the Period.
Purchase Price of the Asset

The price change ones the period' is the difference between the beginning (or
purchase) price and the ending price (or sales) price. Symbolically it can be define as



Pt- Pt-l + Ct
Rt =
Pt-l

Where, Rt = Actual return during period '1'
Pt = Price of asset at time '1'
Pt-l = Price of asset at time '1'
Ct = Cash flow received from the asset in the time period (t-l) to l
GEOMETRIC MEAN = n√(1+Rt) (1+R2)………..(1+Rn) -1

2.10 CAPITAL ASSET PRICING MODEL (CAPM)
The capital asset pricing model is a set or predictions concerning equilibrium
expected returns on risky assets. Harry Markowitz laid down, the foundation of modem
portfolio management in 1952. The CAPM was developed 12 years later in articles by
William Sharpe, John Linter, and Jan Mission. The time for this generation indicates that
the leap from Markowitz’s portfolio selection model to the CAPM is not trivial.
We will approach the CAPM by' posing the, question "what if', where the "if' part
refers to a simplified world. Positing' an, admittedly unrealistic world allows a relatively
easy leap to the "then" part. Once was accomplish this, we can add complexity to the
hypothesized environment one step at, a time and, see how the conclusions must be
amended. This process allows us to derive a reasonably-realistic and comprehensible
model. We summarize 'the simplifying assumptions that lead to the basic version of the
CAPM in the following list. The thrust of these assumptions is that we try to ensure
those individuals are as alike as possible, with the notable exceptions of initial wealth and
risk aversion. We will see that conformity of investor behavior vastly our analysis.

1. There are many investors, each with an endowment (wealth) that is small compared to
the total endowment of all investors. Investors ate price-takers, in that they act as though
security prices are unaffected by their own trades this is the usual perfect competition
assumption of microeconomics.

2. All investors plan' for one identical holding period. This behavior is myopic (short
sighted) in that it ignores everything that might happen after the end of the single period


horizon myopic behavior is in genera, suboptimal.

3. Investments are limited to a universe of publicly traded financial assets, such as stocks
and bonds, and too risk-free borrowing by lending arrangements. This assumption rules
out investment in non-traded assets such as education (human capital), private enterprises
and governmentally funded assets such as town halls and internationally airports. It is
assume also that investor's may borrow or lend any amount at a fixed, risk-free rate.

4. Investors pay no taxes on returns and no transaction costs (commissions and service
charges) on trades in securities. In reality of course, we know that, investors are in
different, tax brackets and that this may govern the type of assets in which they invest for
example, fax implications may differ depending on whether the income is from interest,
dividends, and capital gains. Furthermore, actual trading is costly, and commissions and
fees depend on the size of the trade and the good standing of the individual investor.

5. All investors are rational mean-variance optimizers, meaning that they all use the
Markowitz portfolio selection model.

6. All investors analyze securities in the same way and share the same economic view of
the world. The result is identical estimates of the probability distribution of future cash
flows from investing in the available securities that is for any stock of security prices,
they all derive the same input list to feed into the Markowitz model. Given a set of
security prices and the risk-free interest rate, all investors’ use the same expected returns
d covariance matrix of security returns to generate the, unique optimal risky portfolio.
This assumption is, often referred to as homogeneous expectations or beliefs.

CAPITAL ASSET PRICING MODEL
Formula



E (Ri) =Rf+ β (E (Rm) - Rf) ,

Where,E (Ri) is expected return on Asset,
Rf is Risk free rate of return
E (Rm) is expected Return on Market
β is a measure of risk specific to asset.
The performance of stock is evaluated by the Actual Returns experienced
versus the Expected Returns. The capital Asset pricing model issued to identify the
expected return. The CAP - Model uses the concept of, Beta to Risk adjust the
performance of the market ones and above the risk free rate of return.

2.11 BETA ESTIMATION:
The, most important part of the equation is B or Beta. It is used to describe the
relationship between the stock return and, market index's returns. If the regression line is
at an exact 45 degree angle beta will be equal to 1.0. A 1% change in market index shows
it is on the average accompanied by a 1%, change in the stock of the vertical axis. The
percentage changes in the prices of the stock are regressed against the percentage changes
in the price of a market index. Usually in the S & P CNX NIFTY price index, ** Beta
may be positive or negative. Usually betas are found to be positive. We rarely find a'
negative beta, which reflects a movement, contrary to the market. 4:5 beta, indicates that
the market index change of 1 % was whatever the market index rose or fell by 1 %, the
stock could rise and fall by 1.5%. Beta is referred to a systematic risk to the market, and a
+ E is the unsystematic risk. Beta is a useful price of information both for individual
stock as well as portfolios but as a measure of risk, it is better used in the analysis of
portfolios. Also beta measures satisfactorily for diversified efficient portfolios but
inefficient portfolios. For the presence it may be said that beta is a satisfactory measure
for portfolios, because risk other than that reflected by beta is diversified. Beta has
certain limitation within which it must be considered. While calculating past betas, the
length of time will affect beta size. When estimating future betas, the market expected
return should also be estimated. If high beta is accurately predicted and the market also
goes up predicted the relationship will work. On the contrary, high beta estimation and
low market or downward market will show that beta will drop much faster than the
market. Finally its shortcoming as a measure for individual stock as already explained
should be realized while' calculating stock.



ADVANTAGES OF BETA
To followers of CAPM, beta is a useful measure. A stock's price variability is
important to consider when assessing risk. Indeed, if you think about risk as the
possibility of a stock losing its value, beta has appeal as a proxy for risk. Intuitively, it
makes plenty of sense. Think of an early stage technology stock with a price that bounces
up and down more than the market. It's hard not to think that stock will be riskier than,
say a safe-haven utility industry stock with a low beta. Besides, beta offers a clear,
quantifiable measure, which makes it easy to work with Sure, there are variations on beta
depending on things such as the market index used and the time period measured, but
broadly speaking, the notion of beta is fairly straight forward to understand. It's a
convenient measure that can be used to calculate the costs of equity used in a valuation
method that discounts cash flows.

DISADVANTAGES OF BETA
However, if you are investing in a stock's fundamentals. Beta has plenty of
shortcomings. For starters beta doesn't incorporate new information. Consider the
electrical utility company American Electric Power (AEP). Historically, AEP has been
considered a defensive stock with a low beta. But when it entered the merchant energy
business and assumed high debt levels, AEP's historic beta no longer captured the
substantial risks the company took on. At the same time many technology stocks such as,
Google, are so new to the market they have insufficient price history to establish a
reliable beta. Another troubling factor is that past price movements are very poor
predictors of the future. Betas are merely rear-view mirrors, reflecting very little of what
lies ahead. Furthermore, the beta measure on a single stock tends to flip around over
time, which makes it unreliable. Granted, for traders looking to buy and sell stocks within
short periods, beta is a fairly good risk metric. But for investors with long-term horizons,
it's less useful.



CHAPTER – 3

COMPANY PROFILE



3.01 INDUSTRY SCENARIO:

A. INTRODUCTION:

Basically, Securities markets provide a channel for allocation of savings by an individual
or an organization to those who have a productive need for them. So, a security market
can be said a location where the savers meet the real investors who need the fund. The
savers and investors are constrained by the economy’s abilities to invest and save
respectively which thus helps market in enhancing savings and investment in the
economy. Stock Market is therefore affected by the dynamics of the economic, political,
cultural and environmental activities within the country and rest of the world.

A stock market is a public market for the trading of company stock and derivatives at
an agreed price; these are securities listed on a stock exchange as well as those only
traded privately. The size of the world stock market was estimated at about $36.6 trillion
[1]
US at the beginning of October 2008. The total world derivatives market has been
[2]
estimated at about $791 trillion face or nominal value, 11 times the size of the entire
[3]
world economy. The value of the derivatives market, because it is stated in terms of
notional values, cannot be directly compared to a stock or a fixed income security, which
traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel'
each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable
derivative 'bet' on the event not occurring.). Many such relatively illiquid securities are
valued as marked to model, rather than an actual market price.

B. BRIEF HISTORY:



Indian Share Market is the oldest Asian stock market incorporated in 1875. The name of
the first share trading association in India was Native Share and Stock Broker'Association
which later came to be known as Bombay Stock Exchange. This association started with
318 members.

The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history
to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai's
Town Hall. The location of these meetings changed many times, as the number of brokers
constantly increased. The group eventually moved to Dallas Street in 1874 and in 1875
became an official organization known as 'The Native Share & Stock Brokers
Association'. In 1956, the BSE became the first stock exchange to be recognized by the
Indian Government under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a
means to measure overall performance of the exchange. In 2000 the BSE used this index
to open its derivatives market, trading Sensex futures contracts. The development of
Sensex options along with equity derivatives followed in 2001 and 2002, expanding the
BSE's trading platform.

Today, BSE is the world's number 1 exchange in terms of the number of listed companies
and the world's 5th in transaction numbers. The market capitalization as on December 31,
2007 stood at USD 1.79 trillion . An investor can choose from more than 4,700 listed
companies, which for easy reference, are classified into A, B, S, T and Z groups.

The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature,
and is tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The
SENSEX is constructed on a 'free-float' methodology, and is sensitive to market
sentiments and market realities. Apart from the SENSEX, BSE offers 21 indices,
including 12 sect oral indices.

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).

The past decade has been quite remarkable for the Securities market in India with the
boom in the economy fuelled by better banking system. It has grown exponentially and
the market has also witnessed fundamental institutional changes. There have also been
significant improvements in efficiency, transparency and safety.

However global economic activity decelerated towards the end of the calendar year
resulting in investment concerns on account of the sub-prime crisis in the US and other
developed nations. Naturally the effects of this slowdown spilled over into developing
economies also and we are looking ahead with some degree of concern over the prospects
in the near future.
In recent days economic collapsed in variation of the foreign investors fund main effect of
the Indian economy in 2008-2009 the Bombay Stock Exchange (BSE) the sensex was
13,400 in the month of 8th July 2009. In other side National Stock Exchange (NSE) 3,974
is in the same month of 2009.
Since the markets has taken up word moment from 9th July 2009 from the low of 3,974 to
4,578 on 24th July 2009 due to the Sharpe recovery in global economy as well as the 1 st
quarter Results of all major company which has been announced better than expectations,
Hence Indian markets are one of the fastest emerging markets in world and attracted by
many Foreign intuitional investors.

C. THE REGULATORY AUTHORITY: SEBI The rise in number of investors
was also leading to an increase in malpractices on part of the companies, brokers,
merchant bankers, investment consultants and various other agencies involved in new
issues. This led to erosion of investor confidence. The Government and the stock
exchanges Realizing this, Securities Exchange Board of India (SEBI) was constituted


were helpless as the existing legal framework was just not enough. by the
Government of India in 1992

THE MAJOR FUNCTIONS OF SEBI:

 To promote fair dealings by the issuers of securities and ensure a market place
where funds can be raised at relatively low costs.

 To provide protection to the investors and safeguard their rights and interests such
that there is steady flow of savings into the market.

 Registration and regulation of stock brokers, sub-brokers, registrar to all issue,
merchant bankers, underwriters, portfolio managers and such other intermediaries
who are associated with securities market

 Prohibit insider trading in securities.

 To regulate and develop a code of conduct and fair practices by the intermediaries
involved in the stock market etc.

Outlook 2009-10
The Indian markets traded in a very narrow range during April amidst mixed cues coming
from global and domestic markets. While the markets were hurt by the sovereign debt
default concerns of Greece and SECs allegations against Goldman Sachs, it found some
comfort from good set of FY 2009-2010earnings numbers declared by India Inc...
India’s industrial output, as measured by the Index of Industrial Production (IIP), grew
by 15.1% as against an annual gain of 16.7% in January 2010, and17.6% in December
2009. Industrial production grew by a mere 0.2% in the same month last year.
Manufacturing output rose by 16% as against a mere 0.2% in February 2009, while
Mining production was at 12.2% versus (-) 0.2% in the year-ago period. Electricity sector
output expanded by 6.7%compared to just 0.7% in the same month a year Consumer
Durables production expanded by 29.9%in February 2010 as against 6% in the same
period in 2009. Output in Capital Goods grew by 44.4% in February 2010 as against
11.8% for the same month of 2009. The growth rate in Basic Goods category stood at
8.4% versus a contraction of 0.1% in the year-ago period. Intermediate Goods' output rose
by15.6% in the month under review versus (-) 3% in the year-ago period. As many as 14


out of the 17 industry groups showed a positive growth during February 2010 compared
to the corresponding month of the previous year.

3.02 COMPANY PROFILE:

Company History & Background
Asit C. Mehta Investment Intermediates Ltd. (ACMIIL) was established in the year 1986
with a view to offer a one-stop solution to Indian entities for their needs in financial
services. Over the last two decades it has achieved the distinction of being amongst the
most trusted and reputed brokerage houses in India. It provides a complete bouquet of
products in equity, debt, commodities, forex, depository, derivatives and allied services in


India.
Asit C. Mehta Investment Intermediates Ltd. (ACMIIL) is the most trusted and reputed
brokerage house for providing investment-related services in the capital market and
money market and depository services in India.
The company is jointly promoted by noted stock market professionals, Mr. Asit C. Mehta
and Mrs. Deena A. Mehta, and is a part of the Mumbai-based Nucleus Group of
Companies. The other group companies are engaged in IT and IT related services such as
development of databases, back-office applications for banks, corporate document
management solutions and geographical information systems (GIS).

ACMIIL has pan-India presence through its branches, business associates, and marketing
agents. You can also become a part of this growing business and assist us in increasing
investor base, spreading investor education, and providing capital market services to
clients.

VISION, MISSION & QUALITY:
Envisioned to be the “Trusted Financial Intermediary”, the group has etched out a very
specific corporate purpose – “To reach appropriate financial products, services and
solutions to every Indian entity.”

PURPOSE
To reach appropriate financial products, services and solutions to every Indian entity.

Our Belief
 That every household can, should, and will need to participate in the financial
markets directly or indirectly to protect their financial interests
 That regulatory/legal compliance ensures economic sustainability.
 That transparency and fairness are the cornerstones of all dealings.
 That knowledge rather than capital is the key driver of this business.
 That product, process, and technology led innovations are necessary preconditions
for continuously adding value for all our constituents.

THE FIRSTS TO OUR CREDIT:



 First limited liability Company to acquire membership on Bombay Stock
Exchange.
 First multiple seat holder and multiple exchange members.
 First to achieve the ISO quality certification for business processes.
 First to receive a CRISIL grading for quality of operations and services.
 Company Managing Director Mrs. Deena Mehta was the first lady to be elected to
the governing board of the Stock Exchange Mumbai and first and only lady to be
the President of Stock Exchange, Mumbai.

Values, Relationship…core to our business

We are currently expanding our business in the retail and institutional segments on the
domestic and overseas (NRI/FII) fronts. We have select positions open for marketing,
sales, research, back office operations, and business development activities.

At Asit C. Mehta, we aim to select a candidate whose goals are aligned with ours.
Knowledge about the product, a conceptual understanding of the financial markets, a
thirst to innovate, desire to grow within the company, meticulousness towards the task on
hand, an ability to design and follow process are all qualities valued in the company.

We foster a culture that rewards talent, initiative, hard work, and accountability and
nurtures teamwork.

Shareholders
Asit C Mehta Investment Intermediates Ltd. (ACMIIL) is incorporated as a publicly held
limited liability company in India under the Indian Companies Act, 1956. The company
was incorporated in the year 1993 under the new enabling provisions for limited liability
stock broking companies framed by the Government to encourage limited liability
company in this area. ACMIIL was first such company on the Bombay Stock Exchange.

Currently, the company is mostly held by its founder shareholders as follows:

 Mr.Asit C Mehta

 Mrs.Deena Asit Mehta

 Mr.Kirit H Vora



 Nucleus Net soft & GIS (India) Ltd.

COMPANY BACKGROUND

Asit C Mehta Financial Services ltd

Computers Software - Medium / Small
ISIN Demat INE041B01014
Book Value 22.75
NSE Symbol NA
Div & Yield % 1.487
Market Cap (Rs. Cr) 23.53725
P/E 108.06818
EPS 0.44
Face Value 10
Incorporation Year 1984
Registered Office Nucleus House Saki Vihar Road,
Opp L&T Gate No 7,Andheri (E),
Mumbai, Maharashtra-40007

Telephone 91-22-28570781
Fax 91-22-28578352
Chairman and Managing Director Asit C Mehta
Company Secretary Tushar Kapadia

Auditor Manek & Associates

Face Value 10
Market Lot Listing Mumbai 1
Registrar Link Intime India Pvt Ltd,
C-13 Pannalal Silk, Mills Cmpd LBS
Road, Bhandup West, Mumbai – 400 078

SERVICE STANDARDS & COMPLIANCE:
In order to institutionalize business processes, our company has moved to a
documented customer-centric quality management system. This has ensured that the
entire organization is driven by the common objective of delivering quality brokerage
services that would create a unique brand and top-of-the-mind recall. We are the first
brokerage house to be certified under ISO 9001:2000 for the Equity and Debt segments.
We are also first stock brokerage house to be graded under the Broker Grading service by
Credit Rating & Information Services of India Ltd. (CRISIL) for our quality of operations
and services provided to clients.



MEMBERSHIP:
• Cash Market: BSE, NSE
• Derivatives: BSE, NSE
• Debt: NSE
• Foreign Exchange: Accredited by FEDAI
• PMS under SEBI License
• Merchant Banking: Approved by SEBI under Category I
• Commodities: NCDEX MCX, DGCX, EAST INDIA

Clearing Bank: State Bank of India
Reach and Access (as on July 01, 2009)
Investment Centre’s: 665 (branches, franchisee, etc.)
States & UT covered: 26
Employees: 1002

PRODUCTS AND SERVICES:

• Equity – Initial Public Offering (IPO)

• Equity – Secondary trading (cash and derivative)

• Equity – PMS

• Equity – Online Trading

• Equity – Depository Services

• Equity – Investment Advisory (fundamental and technical)

• Equity – Mutual Fund

• Equity - Arbitrage

• Commodity - Derivatives

• Debt – Government Securities

• Debt – Primary Placements



• Debt – Advisory

• Debt – Mutual Funds

• Debt – Relief bonds, etc.

• Forex – Interbank broking

• Merchant Banking – Amalgamation & Mergers

• Merchant Banking – Private Equity Merchant Banking – Public Offering.

OUR SERVICES:

 Equity and Derivatives Trading:

Equity trading is offered to retail clients through different channels in the Bombay Stock
Exchange (BSE) & the National Stock Exchange of India (NSE), for the cash and the
derivatives segments. Investors are serviced through a PAN India network of over 650
associates / locations comprising of 585 franchisee and 65 company branches. (as on July
2009)
 Online Trading:

Investmentz.com is our trading portal that offers online trading to retail investors in the
BSE and NSE cash and derivatives segments. The investors can do their own trading
through a browser-based interface as well as a streamer-based solution called Live
exchange. This service is also available through an Interactive Voice Response (IVR)
facility for those clients who are unable to access the Internet service at any time. The
company has tied up with leading nationalized, private and co-operative banks to offer
share-trading services to the banks' customers. A seamless gateway has been established
between the banking and depository software of the bank.

Institutional Desk:
Equity trade execution services are provided to institutional investors both domestic and
FII by our institutional desk. Research and market.



 Investment Banking:

ACMIIL has been granted a Category I Merchant Banking license by SEBI. It offers
services in mergers, amalgamations, private equity, public offerings and a full gamut of
investment banking services.

 Commodity Trading Service are Provided Through Our Associate:

Asit C. Mehta Commodity Services Pvt. Ltd. The company is member of India’s premier
commodity exchanges, namely, the Multi Commodity Exchange of India Ltd. (MCX), the
National Commodity & Derivatives Exchange, India (NCDEX) and the East India Cotton
Exchange Association (EICA). The online trading portal also provides facility to trade on
NCDEX. One of the group company is a member of Dubai Gold & Commodity Exchange
(DGCX).

 Inter-Bank Forex Desk:

Our associate company, Asit C Mehta Forex Pvt. Ltd., undertakes inter-bank forex order
execution. Accredited by the Foreign Exchange Dealers’ Association of India (FEDAI),
the company is empanelled with approximately 60 banks and has a reasonable presence in
the market.

SUPPORT SERVICES

 Research:

Investors are provided with extensive information on markets and companies through
hourly market reviews, periodic market commentary and recommendations, which enable
them to make informed decisions. The company firmly believes that providing continuous
and accurate decision making tools can add substantial value to its investors.

 Advisory Services:

Advisory services are provided as a value-added service to all retail and institutional
clients. This service is delivered through the hourly, daily, weekly, fortnightly and
monthly publication of fundamental and technical research. Calls are made through



broadcast services on our private VSAT network, SMS and e-mail.

 Accounts Information:

Accounts information to the retail clients is provided through access on our website. This
assists clients in knowing details about their trading accounts and their resultant
obligations through various reports like Bill, Contract, Financial Ledger, Transaction
Register, Stock Register, Portfolio Tracker, Stock holding position, etc. E-contracts are
generated for investors giving trade details.

OTHER SERVICES:

 Price Ticker

ACMIIL, in association with Capital Market Publications, presents the
equity/derivative/commodity price ticker for easy desktop access to capital market
information. The prices reflected are generally delayed by five minutes, and any
additional delay (if any) depends on the user’s connectivity and computer system
configuration. You can customize the ticker as per your individual needs.

 Alertz

As our registered client, Investmentz.com provides you with ‘Alertz’ facility on your
email SMS and assists you in your investment decision, thus enriching your capital
market investment experience through us.
Investmentz.com’s Alertz service keeps you informed about stock prices through email
and SMS. You may activate the Email Alertz service and track your selected
stocks/indices without monitoring the trading terminal during market hours. It is now
very easy to track the prices of your selected stocks without deviating from normal
activities .The SMS Alertz service is available for trade confirmation, fund pay-in and
pay-out, market views/calls, etc, to clients who actively use our trade execution services.
As general information, Investmentz.com does not guarantee any accuracy of generation,
databases, and delivery timings, and does not make any claims of any nature in this
matter The critical components to avail the Alertz service are:



a) Internet connectivity / bandwidth speed at your end,
b) Information feed available from the exchange,
c) Computing speed of the Alertz, and
d) Speed of your Internet Service provider (ISP) and/or domain provider and/or Telecom
service provider (TSP).

 Advice Me

To service general retail investor and assistance them in systematic creation of wealth, we
could try to provide you with some basic / brief investment idea on stock of your interest.
You could ask us an investment question related to a particular stock or sector and we
would see that brief research (fundamental / technical) input could be provided on that
stock or sector.
Whatever may be our research input on your inquiry, still the final investment decision
would need to be taken by you as you know your investment profile & habits, risk
appetite, income – cash flow, person / family / social obligation, etc.

Potential Growth Areas:
India is amongst the least affected countries in the 2008 global meltdown. May 2009
general election in the country provided a fairly stable government. We see great potential
for the country in general and financial market in particular in the years to come. Investor
participation, product innovations, volume growth is likely to be in exponential
proportion.
Our company is well poised to build a great institution in India to service the Indian and
global investors for their financial services needs The company has created a strong
organization driven by processes to handle multifold volume growth.

Do not disturb:
To service our clients and aide them in wealth creation process, we at Asit C Mehta
Investment Interrmediates Ltd. keep on sending information about our products and
services, information related to capital market investment, etc. This information might be
sent / conveyed to you via letter, newsletter, email, phone; SMS, etc. based on our
assumption that you would need this information and benefit you in your wealth creation



process. But, at times, you might need privacy and wish us not to contact you for such
information. We would take the precaution and see not to disturb you by excluding your
contact details from our marketing list. Kindly provide your details so as to not disturb
you.

Message Board:
Welcome to our new website! We are pleased to announce some exciting new features, an
improved user-friendly design and services to benefit our esteemed customers. We have
also taken steps to ensure faster loading of pages.
 User-friendly design:

No part of the website is more than three clicks away. This ensures speedy access to
whatever information you may need.

 Easy Trading:

We have two options for trading: Quick Trade and Regular Trade. Quick Trade enables
you to transact in any share quickly by presenting only the most relevant information.
Regular Trade gives you full information about the share, enabling you to take an
informed decision.
 New features:

We've added some exciting new features like Advise Me and Online Purchase of Mutual
Funds and IPOs.

Knowledge Center:
Investor Education and Empowerment is essential for inculcating correct investment
habits. We undertake various initiatives to educate investors and enable them to make
informed investment decisions based on their investment profiles, risk appetites, and
return expectations. Three important parts of our Investor Education and Awareness
Program are: Market Wisdom series, Video broadcasts of Investment Education Topics,
and the Nucleus Investmentz newsletter. We also conduct activities such as seminars,
exhibitions, etc.

 Investor Education Topics


We have been conducting the Investor Education and Awareness program via video
broadcasts through our own network (branches and business associates), which is spread
over 600 locations across 25 states and union territories in India. Speakers with industry
expertise participate in video broadcasts from our head office in Mumbai, which is
accessible from any of our branches across the country.
The last session was on February 21, 2009; our expert in-house fundamental and technical
research team conducted an investor education program on crude oil market outlook.

 Nucleus Investments.

For the past seven years, we have been publishing a fortnightly newsletter, Nucleus
Investmentz. It includes analyses of current financial topics, insights on investment-
relevant topics, and performance score cards of various mutual funds. This is available in
English, Hindi & Gujarati.

Benefits of Trading With Us:

 Focus on wealth creation for the investors.

 Client Level Risk Management.

 Auto Pay-in / Payout of securities.

 Transfer of payout directly to the designated customer bank account.
.
 Account & Portfolio information through Internet 24x7, 365 days.

 Strong foundation of Technology, Compliance and Transparency First corporate member
of the Bombay Stock Exchange Proven track record for the last 25 years in the stock
broking industry First broking house to gain the ISO 9001:2000 certification Presence in
23 states and 650 locations.



3.03 ORGANISATION STRUCTURE:



DESIGNATION NAME
Chairman and Managing Director Mr. Asit C. Mehta
Chief Executive Officer Mrs. Deena Asit Mehta
Whole-Time Director Mr. Kirit H Vohra
Chief Operating Officer Mr. Kirit H Vohra
Chief Technological Officer Mr. Kamal Goel
Chief Officer Wealth centre Mr. T .S Netrajan
Chief Manager Co-operative commodities Mr. Vidia
Chief Financial Manager Mr. Veerendra Thakur
Chief Officer Human Resources Mr. V. Vishvanath
Senior Vp Operation Mr. T .S Netrajan
Unit Manager Mr. B.P Shanthish



3.04 ACHIEVEMENTS:

ACHIEVEMENTS OF ASIT C MEHTA INVESTMENT
INTERMEDIATES LIMITED.

 Having secured brokerage grading of BQ1 from CRISIL of India. (Top Most
Grading given to any Good Broking House) It has been marked as a very good
broking house as regards to all the criteria given by CRISIL of India. In previous
year it was in the BQ2 grade, but looking at the workings and very good Risk
management system of the company, it has been upgraded to BQ1

 It is an ISO 2000-9001 company.

 Making a very good turnover and giving directly and indirectly appointment for
more than 2500 people in India. It has got more than 600 branches network all
over India covering all most all states in India.

 To become the very old brokerage house in India and getting incorporated in the
year 1984 got the BSE membership card at the early stages.

 Having its leadership position in equity broking, equity research, forex and
commodity markets & mutual funds.

 Holding an equity brand of investments.

 Now serving around 2lakhs clients all over India and abroad. (NRIs).



3.05 SWOT ANALYSIS:

SWOT analysis refers to; analyzing the strength, weakness, opportunity and threat of the
organization SWOT is a compound of two factors namely external factors and Internal
factors. Strengths and weaknesses are the internal factors controlled by the technical and
personnel departments. Opportunities and threats are the external factors, which
cannot be controlled by the company. External factors may include
political factors, Socio –Cultural factors, Technical factors, demography, and
Environmental factors.



STRENGTHS:

 One of the fastest growing brokerage firms in India.

 Rich experience of wealth creation.

 Robust technology with online trading facility.

 Swift response to market dynamics.

 Customer first support team.

 Handheld/mobile feeds and SMS update.


 It has well experienced staff and good infrastructure.

WEAKNESS:
 Less number of branches in south India.

 Unable to compete with the brokerage rates of their competitors.

 Lack of efficient and effective strategies in attracting customers.

 Unable to market their products & services more efficiently.

OPPORTUNITIES:
 Growing India economy opens up huge market for stock broking companies.

 Increase the resource mobilization by mutual funds.

 Introduction of new technologies leads to trapping new markets.

 Company is committed to achieve profitable progress consistently.

 Targeting rural and sub urban areas.

THREAT:
 Facing Increased level of competition.

 Uncertainty in the market.

 Changes in government polices and regulation.

 Falling brokerage rates & the entry of several big players.



CHAPTER-4
DATA ANALYSIS AND
INTERPRETATION

CALUCLATION OF MARKET RETURN OF NIFTY

TABLE – 4.01

FOR THE YEAR 2005



DATE OPENING PRICE CLOSING PRICE MARKET
RETURN

JAN-05 1880.35 1809.75 -0.03755

FEB-05 1809.3 1800.3 -0.00497

MAR-05 1798.35 1771.9 -0.01471

APR-05 1771.45 1796.1 0.013915

MAY-05 1796.1 11483.6 -0.17399

JUN-05 1483.9 1505.6 0.014624

JUL-05 1506.65 1632.3 0.083397

AUG-05 1631.55 1631.75 0.000123

SEP-05 1631.1 1745.5 0.069743

OCT-05 1744.4 1786.9 0.024364

NOV-05 1787.3 1958.8 0.095955

DEC-05 1960.75 2080.0 0.061074

TABLE- 4.02

FOR THE YEAR 2006

DATE OPENING PRICE CLOSING MARKET RETURN
PRICE
JAN-06 2080 2057.6 -0.01077



FEB-06 2057.75 2103.25 0.022112
MAR-06 2103.1 2035.65 -0.03207
APR-06 2035.9 1902.5 -0.06552
MAY-06 1903.1 2087.55 0.096921

JUN-06 2087.8 2220.6 0.063608
JUL-06 2220.45 2312.3 0.041365
AUG-06 2312.5 2384.65 0.031401
SEP-06 2384.7 2601.4 0.090871
OCT-06 2601 2370.95 -0.08845
NOV-06 2366.8 2653.25 0.121028
DEC-06 2651.6 2836.55 0.06975



TABLE – 4.03

FOR THE YEAR 2007

DATE OPENING CLOSING MARKET RETURN
PRICE PRICE

JAN-07 2835.95 3001.1 0.058234

FEB-07 2971.55 3074.7 0.034713

MAR-07 3123.1 3402.55 0.089478

APR-07 3473.3 3557.6 0.024271

MAY-07 3605.45 3071.05 -0.14822

JUN-07 2962.25 3128.2 0.056022

JUL-07 3150.95 3143.2 -0.00246

AUG-07 3149.8 3413.2 0.083847

SEP-07 3435.15 3588.4 0.044612

OCT-07 3569.6 3744.1 0.048885

NOV-07 3767.05 3954.5 0.04976

DEC-07 3997.6 3966.4 -0.0078



TABLE -4.04

FOR THE YEAR 2008

DATE OPENING PRICE CLOSING PRICE MARKET RETURN

JAN-08 1058.85 1075.4 0.01563

FEB-08 1076.95 1142.05 0.060448

MAR-08 1142.05 1129.55 -0.01095

APR-08-08 1129.85 1084.5 -0.04014

MAY-08 1084.8 1028.8 -0.05162

JUN-08 1029.25 1057.8 0.02739

JUL-08 1058 958.9 -0.09367

AUG-08 959.2 101.6 0.053586

SEP-08 1010.9 963.15 -0.04724

OCT-08 961.15 951.4 -0.01014

NOV-08 951.45 1050.15 -0.103736

DEC-08 1050.15 1093.5 0.04128



TABLE -4 .05

FOR THE YEAR 2009

DATE OPENING PRICE CLOSING PRICE MARKET RETURN

JAN-09 1093.6 1041.85 -0.04732

FEB-09 1040.25 1063.4 0.022254

MAR-09 1063.55 978.2 -0.08025

APR-09 977.4 934.05 -0.04435

MAY-09 930.9 1066.8 0.145988

JUN-09 1006.85 1134.15 0.126434

JUL-09 1133.95 1185.85 0.045769

AUG-09 1185.8 1356.55 0.143996

SEP-09 1356.7 1417.1 0.04452

OCT-09 1416.6 1555.9 0.098334

NOV-09 1556.5 1615.25 0.037745

DEC-09 1615.85 1879.75 0.16332



TABLE – 4.06

MARKET RETURNS

YEAR RETURN RETURN+1

2005 0.106443 1.106443

2006 0.363726 1.363726

2007 0.3986 1.3986

2008 0.032724 1.032724

2009 0.718864 1.718864

RETURN = 1.3023 – 1

Therefore Expected Return On Market is = 30.23 or 30%



OVERVIEW OF WIPRO TECHNOLOGIES LTD:

An INDUSTRY (from Latin industries, "diligent, industrious") is the
manufacturing of a good or service within a category.[1] Although industry is a broad term
for any kind of economic production, in economics and urban planning industry is a
synonym for the secondary sector, which is a type of economic activity involved in the
manufacturing of raw materials into goods and products.[1]
There are four key industrial economic sectors: the primary sector, largely raw
material extraction industries such as mining and farming; the secondary sector,
involving refining, construction, and manufacturing; the tertiary sector, which deals with
services (such as law and medicine) and distribution of manufactured goods; and the
quaternary sector, a relatively new type of knowledge industry focusing on technological
research, design and development such as computer programming, and biochemistry. A
fifth quandary sector has been proposed encompassing nonprofit activities. The economy
is also broadly separated into public sector and private sector, with industry generally
categorized as private. Industries are also any business or manufacturing.
Industry in the sense of manufacturing became a key sector of production and
labor in European and North American countries during the Industrial Revolution, which
upset previous mercantile and feudal economies through many successive rapid advances
in technology, such as the steel and coal production. It is aided by technological
advances, and has continued to develop into new types and sectors to this day. Industrial
countries then assumed a capitalist economic policy. Railroads and steam-powered ships
began speedily establishing links with previously unreachable world markets, enabling
private companies to develop to then-unheard of size and wealth. Following the Industrial
Revolution, perhaps a third of the world's economic output is derived from manufacturing
industries—more than agriculture's share.
Many developed countries (for example the UK, the U.S., and Canada) and many
developing/semi-developed countries (People's Republic of China, India etc.) depend
significantly on industry. Industries, the countries they reside in, and the economies of
those countries are interlinked in a complex web of interdependence.



WIPRO TECHNOLOGIES LTD

TABLE – 4.07

FOR THE YEAR 2005

Date Opening price Closing price Returns Market returns
Jan-05 1752 1588.8 -0.110274 -0.03755
Feb-05 1558.8 1454.44 -0.066949 -0.00497
Mar-05 1480 1361.2 -0.080270 -0.01471
Apr-05 1358 1545.85 0.138328 0.013915
May-05 1600 1523.7 -0.047687 -0.17399
Jun-05 1541.65 532.1 -0.6548450 0.014624
Jul-05 534 546.85 0.024064 0.083397
Aug-05 548 578.5 0.055657 0.000123
Sep-05 577 596.8 0.034315 0.069743
Oct-05 600 657.5 0.095833 0.024364
Nov-05 660 766.4 0.277333 0.095955
Dec-05 766 748.8 -0.022454 0.061074




TABLE – 4.08
FOR THE YEAR 2006

Date Opening price Closing price returns Market returns
Jan-06 377.5 352.67 -0.065775 -0.01077
Feb-06 355 349.75 -0.014789 0.022112
Mar-06 350 335.98 -0.040057 -0.03207
Apr-6 337 315.4 -0.064095 -0.06552
May-6 319.5 357.88 0.120125 0.096921
Jun-06 358.5 383.15 0.068759 0.063608
Jul-06 375 368.17 -0.018213 0.041365
Aug-06 365 364.65 -0.000959 0.031401
Sep-06 369 371.45 0.00664 0.090871
Oct-06 375.2 364.6 -0.028252 -0.08845
Nov-06 369 423.25 0.147019 0.121028
Dec-06 424.8 463.35 0.090749 0.06975




TABLE – 4.09

FOR THE YEAR 2007

Jan-07 462 529.7 0.146537 0.058234
Feb-07 530 520.2 -0.018491 0.034713
Mar-07 520 559.7 0.076346 0.089478
Apr-07 565 538.55 -0.046814 0.024271
May-7 545 449.7 -0.174862 -0.01482
Jun-07 452 513.35 0.13573 0.056022
Jul-07 517.4 490.5 -0.051991 -0.00246
Aug-07 490 518.65 0.058469 0.083847
Sep-07 519 524.9 0.011368 0.044612
Oct-07 524.9 538.3 0.025529 0.048885
Nov-07 541 599.9 0.108872 0.04976
Dec-07 604.95 605.9 0.00157 -0.0078




TABLE- 4.10

FOR THE YEAR 2008

Jan-08 603 613.25 0.016001 0.01563
Feb-08 624.8 562.4 -0.099872 0.060448
Mar-08 577.7 559.4 -0.031677 -0.01095
Apr-08 559.6 571.6 0.021444 -0.04014
May-08 635 543.7 -0.143780 -0.05162
Jun-08 548.4 518.45 -0.054613 0.02739
Jul-08 515 497.35 -0.034272 -0.09367
Aug-08 491.1 482.35 -0.017817 0.053586
Sep-08 486 460.25 0.055948 -0.04724
Oct-08 462 507.15 0.097727 -0.01014
Nov-08 509.95 460.65 -0.220492 -0.103736
Dec-08 465 525.65 0.130430 0.04128




TABLE- 4.11

FOR THE YEAR 2009

Jan-09 529.05 422.75 -0.200926 -0.04732
Feb-09 430.05 437.05 0.016277 0.022254
Mar-09 429.85 432.1 0.005234 -0.08025
Apr-09 430 488.75 0.136628 -0.04435
May-09 490 509.25 0.039286 0.145988
Jun-09 509.25 439.95 -0.136082 0.126434
Jul-09 438 415.4 -0.051598 0.045769
Aug-09 410 432.4 0.054634 0.143996
Sep-09 430 339.9 -0.209535 0.04452
Oct-09 321.6 272.65 -0.152208 0.098334
Nov-09 284 242.65 -0.145598 0.037745
Dec-09 235.55 233.4 -0.009128 0.16332

OVERVIEWS OF INFOSYS TECHNOLOGIESLTD:



Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people
with US$ 250. Today, we are a global leader in the "next generation" of IT and consulting
with revenues of over US$ 4 billion.

Infosys defines designs and delivers technology-enabled business solutions that
help Global 2000 companies win in a Flat World. Infosys also provides a complete range
of services by leveraging our domain and business expertise and strategic alliances with
leading technology providers.

Infosys' offerings span business and technology consulting, application services,
systems integration, product engineering, custom software development, maintenance, re-
engineering, independent testing and validation services, IT infrastructure services and
business process outsourcing

Infosys pioneered the Global Delivery Model (GDM), which emerged as a
disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is
based on the principle of taking work to the location where the best talent is available,
where it makes the best economic sense, with the least amount of acceptable risk.

Infosys has a global footprint with over 50 offices and development centers in
India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys
has over 103,000 employees.

Infosys takes pride in building strategic long-term client relationships. Over 97%
of our revenues come from existing customers.



INFOSYS TECHNOLOGIES LTD

TABLE -4.12

FOR THE YEAR 2005

Date Opening price Closing price Returns Market
Returns
Jan-05 5598 5212.8 -0.069 -0.0375
Feb-05 5240 5062.5 -0.034 -0.005
Mar-05 5098 4938.2 -0.031 -0.0147
Apr-05 4951.1 5146.2 0.0394 0.031392
May-05 5071.1 5200.9 0.0256 -0.174
Jun-05 5201.6 5524.1 0.062 0.01462
Jul-05 1395 1553.5 0.1136 0.0834
Aug-05 1550 1575.5 0.0165 0.00012
Sep-05 1575 1695.5 0.0765 0.06974
Oct-05 1735 1096.4 0.0988 0.02436
Nov-05 1908 2149.2 0.1264 0.09596
Dec-05 2150 2091.7 -0.027 0.06107




TABLE -4. 13

FOR THE YEAR 2006

Returns
Jan-06 2119 2608.7 0.2311 -0.108
Feb-06 2070 2240.1 0.0822 0.0221
Mar-06 2240 2257.2 0.0077 -0.032
Apr-06 2259.6 1886.8 -0.165 -0.066
May-06 1987 2250.5 0.1326 0.0969
Jun-06 2255 2358.3 0.0458 0.0636
Jul-06 2345 2268.5 -0.033 0.0414
Aug-06 2202 2376.1 0.0791 0.0314
Sep-06 2402.1 2515.3 0.0471 0.0909
Oct-06 2525 2522 -0.001 -0.088
Nov-06 2550 2684.5 0.0527 0.121
Dec-06 2690 2996.9 0.1141 0.0698




TABLE – 4.14

FOR THE YEAR 2007

Returns
Jan-07 1503.5 1440.2 -0.042 0.0582
Feb-07 1443 1425.3 -0.012 0.0347
Mar-07 1409.5 1490.7 0.0576 0.0895
Apr-07 1500 1588.7 0.0591 0.0243
May-07 1588.5 1454.9 -0.084 -0.015
Jun-07 1474.5 1539.5 0.0441 0.056
Jul-07 1542.5 1655.6 0.0733 -0.002
Aug-07 1650 1806.4 0.0948 0.0838
Sep-07 1810 1849.7 0.0219 0.0446
Oct-07 1875 2095.5 0.1176 0.0489
Nov-07 2096 2179.7 0.0399 0.0498
Dec-07 2189 2241.5 0.024 -0.008




TABLE- 4.15

FOR THE YEAR 2008

Returns
Jan-08 4097 3877.7 -0.0535269 0.01563
Feb-08 3951.2 3533.3 -0.105765 0.060448
Mar-08 3510 3748.6 0.067977 -0.01095
Apr-08 3784 3684.1 -0.026414 -0.04014
May-08 3720 3388.6 -0.089086 -0.05162
Jun-08 3419 3280.5 -0.040524 0.02739
Jul-08 3300 3033.4 -0.080788 -0.09367
Aug-08 3060 3604.4 0.177908 0.053586
Sep-08 3645.3 3406.5 -0.065523 -0.04724
Oct-08 3388 3796.9 0.120691 -0.01014
Nov-08 3800 45558.3 0.199539 -0.103736
Dec-08 4584 4773.3 0.014296 0.04128



TABLE – 4.16

FOR THE YEAR 2009

Returns
Jan-09 4780 4300.2 -0.1 -0.04732
Feb-09 4220.3 4285.4 0.0154 0.022254
Mar-09 4306.2 4052.9 -0.059 -0.08025
Apr-09 4015 2786.6 -0.0306 -0.04435
Mar-09 2818.7 2674.2 -0.059 0.145988
Jun-09 2750 3274 0.0191 0.126434
Jul-09 3276.3 3602.2 0.0995 0.045769
Aug-09 3650 3925.9 0.0756 0.143996
Sep-09 4000 4528.1 0.132 0.04452
Oct-09 4499 4738.7 0.0533 0.098334
Nov-09 4755 4929 0.036 0.037745
Dec-09 4960 5564.7 0.1219 0.16332

OVERVIEW OF HCL THECHNOLOGIES LTD



HCL Technologies is a leading global IT services company, working with clients
in the areas that impact and redefine the core of their businesses. Since its inception into
the global landscape after its IPO in 1999, HCL focuses on 'transformational outsourcing',
underlined by innovation and value creation, and offers integrated portfolio of services
including software-led IT solutions, remote infrastructure management, engineering and
R&D services and BPO. HCL leverages its extensive global offshore infrastructure and
network of offices in 20 countries to provide holistic, multi-service delivery in key
industry verticals including Financial Services, Manufacturing, Aerospace & Defense,
Telecom, Retail & CPG, Life Sciences & Healthcare, Media & Entertainment, Travel,
Transportation & Logistics, Automotive, Government, Energy & Utilities. HCL takes
pride in its philosophy of 'Employee First' which empowers our 54,026 transformers to
create a real value for the customers. HCL Technologies, along with its subsidiaries, had
consolidated revenues of US$ 2.0 billion (Rs. 9,842 crores), as on 31st March 2009. For
more information, please visit http://www.hcltech.com/

HCL is a $5 billion leading global Technology and IT Enterprise that comprises
two companies listed in India - HCL Technologies & HCL Info systems. Founded in
1976, HCL is one of India's original IT garage start-ups, a pioneer of modern computing,
and a global transformational enterprise today. Its range of offerings spans Product
Engineering, Custom & Package Applications, BPO, IT Infrastructure Services, IT
Hardware, Systems Integration, and distribution of ICT products across a wide range of
focused industry verticals. The HCL team comprises over 60,000 professionals of diverse
nationalities, who operate from 23 countries including over 500 points of presence in
India. HCL has global partnerships with several leading Fortune 1000 firms, including
leading IT and Technology firms. For more information, please visit



HCL TECHNOLOGIES LTD

TABLE – 4.17

FOR THE YEAR -2005

Returns
Jan-05 333.95 311.25 -0.06797 -0.03755
Feb-05 312.5 306.56 -0.01901 -0.00497
Mar-05 307.95 308 0.000162 -0.01471
Apr-05 308.2 318.65 0.033907 0.013915
May-05 319.225 313.25 -0.018772 -0.17399
Jun-05 314.125 324.22 0.032137 0.014624
Jul-05 324.95 342.475 0.053931 0.083397
Aug-05 342.475 369 0.077451 0.000123
Sep-05 369 386.075 0.046274 0.069743
Oct-05 387.075 399 0.030808 0.024364
Nov-05 399.9 417.36 0.043661 0.095955
Dec-05 418 408.55 -0.02261 0.061074




TABLE-4. 18

FOR THE YEAR -2006

Jan-06 401.65 399 -0.0006 -0.01077
Feb-06 399.52 408.95 0.023603 0.022112
Mar-06 409.35 415.875 0.01594 -0.03207
Apr-06 415.875 430.55 0.035287 -0.06552
May-06 431.15 477.55 0.10755 0.096921
Jun-06 477.725 512 0.071746 0.063608
Jul-06 512.95 526.5 0.026416 0.041365
Aug-06 526.75 550.95 0.045942 0.031401
Sep-06 551.275 600 0.088386 0.090871
Oct-06 600.825 648.05 0.0786 -0.08845
Nov-06 648.175 695.26 0.072642 0.121028
Dec-06 695.35 737.25 0.060257 0.06975




TABLE- 4.19

FOR THE YEAR -2007

Jan-07 737.8 764.5 0.036189 0.0582
Feb-07 764.625 824.5 0.078306 0.0347
Mar-07 824.7 819.25 -0.00661 0.0895
Apr-07 819.7 790.25 0.03593 0.0243
May-07 790.25 587.3 -0.25682 -0.015
Jun-07 587.65 650.2 0.105876 0.056
Jul-07 650.8 739.5 0.136294 -0.002
Aug-07 739.9 807.68 0.091607 0.0838
Sep-07 808 685.02 -0.1522 0.0446
Oct-07 685.9 426.5 -0.37819 0.0489
Nov-07 426.8 465.69 0.09112 0.0498
Dec-07 466 467.25 0.002682 -0.008




TABLE- 4.20

FOR THE YEAR -2008

Jan-08 250.925 265.25 0.057089 0.01563
Feb-08 266.575 268.8 0.008347 0.060448
Mar-08 296.9 257.8 -0.04483 -0.01095
Apr-08 258.2 241.36 -0.06522 -0.04014
May-08 242.55 229.5 -0.0538 -0.05162
Jun-08 230.5 221.06 -0.04095 0.02739
Jul-08 222.2 217.9 -0.01935 -0.09367
Aug-08 2180975 222.36 0.015458 0.053586
Sep-08 223.2 222.2 -0.00448 -0.04724
Oct-08 222.8 265.25 0.19053 -0.01014
Nov-08 266.175 278.25 0.045365 -0.103736
Dec-08 278.45 251.65 -0.09625 0.04128




TABLE-4. 21

FOR THE YEAR -2009

Jan-09 257.75 224.675 -0.11108 -0.04732
Feb-09 224.675 195.2 -0.13119 0.022254
Mar-09 195.775 169 -0.13676 -0.08025
Apr-09 170.125 171.25 0.006613 -0.04435
May-09 171.725 182.4 0.062163 0.145988
Jun-09 182.425 196.85 0.079074 0.126434
Jul-09 197.55 222.625 0.12693 0.045769
Aug-09 222.625 248.2 0.114879 0.143996
Sep-09 248.4 287.65 0.158011 0.04452
Oct-09 288.25 343.2 0.190633 0.098334
Nov-09 343.55 361 0.050793 0.037745
Dec-09 362.1 333.95 -0.07774 0.16332

HCL LTD., BETA = 0.5289

OVERVIEW OF TATA CONSULTANCY SERVICES LTD:


Established in 1968, TCS is India's largest IT enterprise and Asia's largest independent;' II
software and services organization with over 62Q clients in over 55 countries

ABOUT THE COMPANY
TCS (Tata Consultancy Services Limited), with over 48,700 consultants, is the
world's I. leading information technology consulting, services, business process'
outsourcing and engineering services organization that envisioned pioneered the adoption
of the flexible, global business practices that today enable companies to operate more I
efficiently and produce more value. TCS achieved this by creating and perfecting a
unique method of global deployment and delivery of high quality, high value services and
products ip IT consulting and business. process outsourcing., Known as the "Global
Delivery Model," this strategic service delivery concept has reshaped the IT 'services
industry. rcs' total revenue in. the year ending on March 31,2005 was over $2.24 billion.:

TCS' dedicated Knowledge Management practice group offers the best - in-class
I Consulting, Implementation Migration and Maintenance and support service Its unique
approach to KM consulting and. implementation addresses the issues of people, processes
and technology in a holistic way to achieve a high degree of collaboration and efficiency
in the customer's workplace.

ABOUT THE PARTNERSHIP
In an effort to further leverage its span of industry and technology expertise, TCS
has joined forces with Documented, for its, superior technology in the Knowledge'
Management/Enterprise Content Management domain, to deliver the best-of-class
solutions in the areas of Docup1ent management and workflow systems, Web content
management systems, and collaborative applications. .



TCS

TABLE- 4.22

FOR THE YEAR 2005

Returns
Jan-05 -- -- -- --
Feb-05 -- -- -- --
Mar-05 -- -- -- --
Apr-05 -- -- -- --
May-05 -- -- -- --
Jun-05 -- -- -- --
Jul-05 -- -- -- --
Aug-05 987.95 1006.3 0.018574 0.000123
Sep-05 1007.45 1101 0.092858 0.069743
Oct-05 1101.3 1222 0.109598 0.024364
Nov-05 1222.275 1299.2 0.062936 0.095955
Dec-05 1299.525 1326.5 0.020758 0.061074



TCS

TABLE-4. 23

FOR THE YEAR 2006

Date Opening price Closing price RETURNS MARKET
RETURN
Jan-06 1326.925 1348 0.015883 -0.01077
Feb-06 1348.4 1394.1 0.033892 0.022112
Mar-06 1394.275 1288.2 -0.07608 -0.03207
Apr-06 1288.6 1232 -0.04392 -0.06553
May-06 1232.1 1327.5 0.077429 0.096921
Jun-06 1328 1311.5 -0.01242 0.063608
Jul-06 1311.625 1329.2 0.013399 0.041365
Aug-06 1329.225 1450 0.090861 0.031401
Sep-06 1450.25 1448.25 -0.00138 0.090871
Oct-06 1448.65 1463.25 0.010078 -0.08845
Nov-06 1463.95 1625.52 0.110366 0.121028
Dec-06 1625.725 1666.02 0.024786 0.06975



TCS
TABLE-4. 24

FOR THE YEAR 2007

Date Opening price Closing price Returns Market return
Jan-07 1666.175 1680.5 0.008598 0.058234
Feb-07 1680.875 1827.1 0.086993 0.034713
Mar-07 1827.275 1899.25 0.039389 0.089478
Apr-07 1900 2043 0.075263 0.024271
May-07 2044.4 1674.45 -0.18096 -0.14822
Jun-07 1674.45 1285.62 -0.23221 0.056022
Jul-07 1285.62 939.56 -0.26918 -0.00246
Aug-07 940 980.1 0.04266 0.083847
Sep-07 980.3 1050.05 0.071152 0.044521
Oct-07 1050.15 1065.6 0.014712 0.048885
Nov-07 1066.5 1171.9 0.098828 0.04976
Dec-07 1172.2 1188.5 0.013905 -0.0078



TCS
TABLE- 4.25

FOR THE YEAR 2008

Jan-08 1277.9 1229.4 0.037652 0.01563
Feb-08 1193.4 1289.95 0.080903 0.060448
Mar-08 1233.85 1254.8 0.016979 -0.01095
Apr-08 1266 1210 -0.044233 -0.04014
May-08 1208.35 1274.8 0.054992 -0.05162
Jun-08 1149.35 1229.1 0.069387 0.02739
Jul-08 1156.3 1153 -0.002853 -0.09367
Aug-08 1064.35 1140 0.071076 0.053586
Sep-08 1060.15 1070 0.009291 -0.04724
Oct-08 1038 1061 0.022157 -0.01014
Nov-08 1012.2 1055 0.042284 -0.103736
Dec-08 1077.4 1016 -0.056989 0.04128



TCS

TABLE- 4.26
FOR THE YEAR 2009

Jan-09 873.75 1077 0.232618 -0.04732
Feb-09 877.4 885 0.008662 0.022254
Mar-09 810.45 866 0.068542 -0.08025
Apr-09 921 820 -0.109663 -0.04435
May-09 1039.15 925 -0.109849 0.145988
Jun-09 858.2 1015 0.182707 0.126434
Jul-09 865 833.75 -0.036127 0.045769
Aug-09 825 812.2 -0.015515 0.143996
Sep-09 815 665.6 -0.183312 0.04452
Oct-09 669.6 537.5 -0.197282 0.098334
Nov-09 559.95 559.4 -0.000982 0.037745
Dec-09 559.4 477.9 -0.145692 0.16332



CALCULATIONS OF EXPECTED RETURN:

Rj = Rf + β ∗ [E(Rm) - Rf]
Rf = 6%
E(Rm) = 30%

A) WIPRO TECHNOLOGIES LIMITED:

Rj = Rf + β ∗ [E(Rm) - Rf]
= 6 + 0.4351 ∗ [30-6]
= 6 + 0.4351 ∗ [ 24]
= 6 + 10.4424
= 16.4424
Therefore, Wipro Expected Return = 16.4424

B) INFOSYS TECHNOLOGIES LTD:

Rj = Rf + β ∗ [E(Rm) - Rf]
= 6 + 0.5628 ∗ [30-6]
= 6 + 0.5628 ∗ [ 24]
= 6 + 13.5072
= 19.5072
Therefore, Infosys Expected Return = 19.5702

C) HCL TECHNOLOGIES LTD:

Rj = Rf + β ∗ [E(Rm) - Rf]
= 6 + 0.5289 ∗ [30-6]
= 6 + 0.5289 ∗ [ 24]
= 6 + 12.672
= 18.672
Therefore, HCL TECH Expected return = 18.67



D) TCS:

Rj = Rf + β ∗ [E(Rm) - Rf]
= 6 + 0.1452 ∗ [30-6]
= 6 + 0.1452 ∗ [ 24]
= 6 + 12.672
= 9.4848
Therefore, TCS Expected Return = 9.4848



SECURITY MARKET LINE OF VARIOUS FIRMS:

GRAPH – 4.01
SECURITY MARKET LINE OF

The Wipro stock has been over priced . Therefore it is perceived to buy security.

The expected return of Wipro is 16.44 and Beta is 0.4351 where it is more than market
Beta. Therefore it is said to be UNDER VALUATION OF STOCK.



SECURITY MARKET LINES OF
GRAPH – 4.02

Market Beta. Therefore it is said to be UNDER VALUATION OF STOCK.



GRAPH – 4.03

SECURITY MARKET LINE OF

The HCL stock has been priced. Therefore it is perceived to buy the security.

The expected, return of the HCL is 18.672 and Beta is 0.5289 where it is more than




GRAPH- 4. 04

The TCS stock has been priced. Therefore it is perceived to buy the security.

The expected, return of the TCS is 9.4848 and Beta is 0.1452 where it is more than




INTERPRETATION:

A] WIPRO TECHNOLOGIES LTD :

The data has been analysed by using Beta, Expected return, Security Market Line.
The Beta and Expected Return has been calculated on for 1st January And by taking of 12
months. The analysis has been done by taking exchange rate as independent variable and
company share price for 12 months. In the similar way, index is taken as independent
variable and its impact on exchange rate for 12 months.
From the above data Wipro Technologies Ltd, The stock has been over priced in
2005-2009. Therefore it is perceived as unfair to buy the security.
The expected return on Wipro technologies is 16.422 and the beta is 0.4351 , where
it is less than the market beta, therefore it is said to be “OVER VALUATION OF
STOCK”.
The Wipro stock has been priced. Therefore it is perceived by the security. The
expected return of the Wipro is 16.422 and the beta is 0.4351, where it is more than the
market beta, therefore it is said to be “ UNDER VALUATION OF STOCK”.

B] INFOSYS TECHNOLOGIES LTD:

The Beta and Expected Return has been calculated on for 1st January And by taking of 12
months. The analysis has been done by taking exchange rate as independent variable and
company share price for 12 months. In the similar way, index is taken as independent
From the above data of Infosys Technologies ltd, it is clear that, in the of
2005-2009 , the stock has been over priced. Therefore it is perceived as unfair to buy the
security.
The expected return on Infosys technologies is 19.5072 and the beta is 0.5628 ,
where it is less than the market beta, therefore it is said to be “OVER VALUATION OF
STOCK”.
The Infosys stock has been priced. Therefore it is perceived by the security. The
expected return of the Infosys is 19.5072 and the beta is 0.5628, where it is more than



the market beta, therefore it is said to be “ UNDER VALUATION OF STOCK”.

C] HCL TECHNOLOGIES LTD:

The Beta and Expected Return has been calculated on for 1st January And by taking of
12 months. The analysis has been done by taking exchange rate as independent variable
and company share price for 12 months. In the similar way, index is taken as independent

From the above data of HCL Technologies ltd, it is clear that, in the of 2005-2009 ,
the stock has been over priced. Therefore it is perceived as unfair to buy the security.
The expected return on HCL technologies is 18.672 and the beta is 0.5289, where
it is less than the market beta, therefore it is said to be “OVER VALUATION OF
STOCK”.
The HCL stock has been priced. Therefore it is perceived by the security. The
expected return of the HCL is 18.672 and the beta is 0.5289, where it is more than the

D] TATA CONSULTANCY SERVICE LTD:

The Beta and Expected Return has been calculated on for 1st January And by taking of
12 months. The analysis has been done by taking exchange rate as independent variable
and company share price for 12 months. In the similar way, index is taken as independent
From the above data of TCS ltd, it is clear that, in the of 2005-2009 , the stock has
been over priced. Therefore it is perceived as unfair to buy the security.
The expected return on TCS is 9.4848 and the beta is 0.1452, where it is less than
the market beta, therefore it is said to be “OVER VALUATION OF STOCK”.



The TCS stock has been priced. Therefore it is perceived by the security. The
expected return of the TCS is 9.4848 and the beta is 0.1452 , where it is more than the

FINDINGS:
FORMULA USED FOR CALCUTIONS

CALCULATION OF EXPECTED RETURN:
Rj = Rf + β ∗ [E(Rm) - Rf]

CALCULATION OF BETA

COV (RJ ∗ RM)
β= _______________
σM2

Beta is calculated by using SPSS Software

Firms Expected Return Beta
Wipro Technologies ltd 16.4424 0.4351
Infosys Technologies ltd 19.5072 0.5628

HCL Technologies ltd 18.672 0.5289
TCS 9.4848 0.1452

AGGRESSIVE COMPANY DEFENSIVE COMPANY



Wipro Technologies ltd
Infosys Technologies ltd
HCL Technologies ltd
TCS



CHAPTER – 5
SUMMARY OF FINDING
SUGGESTION
AND CONCLUSION



SUMMARY

Most investors are averse and attempt to maximize their wealth at the minimum
risk. It is established that risk can be reduced to minimum, but cannot be completely
erased or eliminated. Risk and return are related. The higher the risk higher the returns
and a person are willing to accept risk, the better the returns he is able to achieve.

Risk is of many kinds, they can be classified as systematic or unsystematic risk.
Systematic risk covers the risks of market, interest rate risk and purchasing power risk
and unsystematic risk consist of business and financial risk. The systematic risk is
therefore, effecting the total environment and is outside the control of one firm on
individual. Unsystematic risk is inherent to the system. It may be due to bad financial
planning or wrong management decisions. These risks are internal and can be avoided or
controlled.

Risk is fundamental to the process of investment. Every investor should have an
understanding of the various pitfalls of investment. For the convenience of the investors,
analysts measure risks to able to combine securities and to reach that portfolio which
suit’s the individual needs of an investor risk is measured through beta test.

The CAPM assumes the investors are single-period planners who agree a
common input list from security analysis and seek mean-variance optimal portfolios.

The CAPM implies that the risk premium on any individual asset or portfolio is
the product of the risk premium on the market portfolio and the beta. Where the beta is
the covariance of the asset with the market portfolio as a fraction of the variance of the
market portfolio.
The Wipro stock has been over priced. Therefore it is perceived as unfair to buy the
security.
The expected return of Wipro is 16.422 and beta is 0.4351 where it is less than
market beta. Therefore it is said to be over valuation of stock.
The Infosys stock has been over price. Therefore it is perceived as unfair to buy
the security.


The expected return of Infosys is 19.5072 and beta is 0.5628 where it is less than
market beta. Therefore it is said to be over valuation of stock.
The HCL TECH stock has been over priced. Therefore it is perceived as unfair to
buy the security.
The expected return of HCL TECH is 18.6272 and beta is 0.5289 where it is less
than market beta. Therefore it is said to be over valuation of stock.
The TCS stock has been over priced. Therefore it is perceived as unfair to buy the
security.
The expected return of TCS is 9.4848 and beta is 0.1452 where it is less than
market beta. Therefore it is said to be over valuation of stocks.



SUGGESTIONS

 Investors can eliminate some risks - such as the risk that workers will strike or,
that a Firm boss will quit, by diversifying across many regions and sectors.

 Some risks, such as that of a global recession, cannot be eliminated through
diversification. So even a basket of all of the stocks in a stock market will still be
risky.

 People must be rewarded for investing in such a risky basked by earning returns
above those that they can get on safer assets, such as Treasury, bills.

 The rewards on a specific, investment depend, only on the extent to which it
affects the market basket's risk.

 Conveniently, that contribution to the market basket's risk can be captured by a
single measure, - dubbed "beta" - which expresses the relationship between the
investment's risk and the markets.

 The Capital asset Pricing Model considers only Beta as the deciding factor in
evaluating the efficiency of the security. But in real world of investment, other
factors also influence the level of return and the risk of the security, as Tax rate,
Inflation, Size of the firm, Price earning ratio etc:

 Thus, the investor should not value any security merely by considering only the
Beta factor of the security. He should analyze the overall economic factors, which
affect the rate of return and the risk involved.



CONCLUSION

The model, known as the “Capital Asset Pricing model”, or CAPM, has come to
dominate modern finance. Almost any manager who wants to defend a project be it a
brand, a factory or a corporate merger - must justify his decision partly based on the
CAPM. The reasons are that the model tells a firm how to calculate the return that its
investor demands. If shareholders are to benefit, the returns from project must clear this
“hurdle rate “.

Beta is what makes the CAPM so powerful. Although an investment may face
many risks, diversified investors should are only about those that are related to the market
basket. Beta not only tells managers how to measure those risks, but it also allows them
to translate them directly into a hurdle rate. If the future profits from a project will not
exceed that rate, it is not worth shareholders money.

The diagram shows how the CAPM works. Safe investment, such as treasury
bills, have a beta is zero. Riskier investment should earn a premium over the risk-free
rate, which increases with beta. Those risks roughly match the markets have a beta of
one, by definition, and should earn the market return.

But there is one small problem with CAPM financial economists have found that
beta is not much use for explains these returns quite well.

That measure is the ratio of a firm’s book value (the value of its assets at the time



they entered in the balance sheet) to its market value. Several studies have found that, on
average, companies that have high book-to-market ratios tend to earn excess returns over
long periods, even after adjusting for that the are associated with beta.

The discovery of the book-to-market effect has sparked a fierce debate among
financial economists. All of them agree that some risks ought to carry greater rewards.
But they are now deeply divided over how risk should be measured. Some argue that
since investors are rational, the book-to market effect must be capturing an extra risk
factor. They, conclude therefore, that manager should incorporate the book-to- market
effect into their hurdle rates they have labelled this alternative hurdle rate the “New
Estimator of Expected Return”, or NEER.

Other financial economist, however dispute this approach. Since there is no
obvious extra risk associated with a high book-to-market ratio, they say investors must be
mistaken. Put simply they are under pricing high book-to-market stocks, causing them to
earn abnormally high returns. If managers of the such firms try to exceed those inflated
hurdle rates, they will forgo many profitable investment. With economists now at odds,
what is a conscientious manager to do?



BIBLIOGRAPHY

TEXT BOOK:
Security Analysis and Portfolio Management
-Donald E. Fischer
-Ronald J. Jordan
Security Analysis and Portfolio Management
-Punithavathy Pandian
Security Analysis and Portfolio Management- S.Kevin
Investment Management – V.K. Bhalla
Financial Management - I M Pandey
WEB SITES:
www.nseindia.com
www.financeyahoo.com
www. amfliindia.com
www.investmentz.com
www.google.com
www.bseindia.com
www.nseindia.com
www.rbi.org.in


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