CHAPTER 1

INTRODUCTION
1.1 BACKGROUND OF THE STUDY

Risk is the possibility of loss or injury and the degree or probability of such loss and
return is the yield generated by an investment. Risk and return are the two sides of the
Investment Coin. Return and risk is a complex topic. Investment decisions are influenced
by various motives. Most investors are largely guided by the pecuniary motives of
earning return on their investment. Since risk and return are pivotal to every investment
decisions, a trade-off between both is necessary.

1.2 TITLE OF THE STUDY

A STUDY ON RISK AND RETURN ASSOCIATED WITH BLUE
CHIP SECURITIES IN INDIAN STOCK MARKET.

1.3 STATEMENT OF THE PROBLEM

Blue chip stocks are being considered as blind investments. The general understanding of
this is not sufficient to make appropriate returns. Often blue chip stocks have
underperformed the market and rendered negative returns. So it is relevant to study the
risk and return associated with blue chip companies to make investment accordingly.

1.4 SIGNIFICANCE OF THE STUDY

 To assess whether the top valued companies are consistent in stock market
performance.
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  Periodic rejig of companies included in the index makes investors difficult to
identify blue chips.
 The study gives some suggestions and recommendations for strengthening the
investment decisions of genuine investors.
 The study is beneficial for the investors to decide risk and return associated with
blue chip shares.

1.5 OBJECTIVES OF THE STUDY

 To evaluate the performance of blue chip securities in Indian stock market.

 To study the actual and expected return of blue chip securities.
 To understand the price volatility of blue chip securities.
 To evaluate trend and pattern of the stock returns of blue chip securities.
 To compare the stock returns and index returns.

1.6 SCOPE OF THE STUDY

 The study is confined to the top ten blue chip companies which are being part of
the core index consistently for the last five years.
 Study has explored the relationship between return of securities and market
returns and also the stability of beta for a variety of stocks that forms the part of
BSE SENSEX.
 The study threw light on the various factors which constitute the appropriate
selection of securities.

1.7 OPERATIONAL DEFENITIONS

1.7.1 Blue chip:

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 Blue chip in the study refers to the companies which are being included in the BSE
SENSEX index consistently for five years and have got market capitalization above
one trillion.
1.7.2 Securities:

Securities in this study refers to Blue Chip Shares

1.8 METHODOLOGY

The project is designed in descriptive cum analytical nature to know and familiarize with
risk and return associated with blue chip shares to Indian investors and its related
implications in the share market.

1.8.1 DATA SOURCE

Since primary data is not available, secondary data are taken.
1.8.2 SOURCES OF DATA
Secondary data involves the existing information available for the study. This comprises
of:
 Various published books, journals and business daily
 Web pages of NSE, BSE
1.8.3 POPULATION OF THE STUDY
30 companies included in BSE Sensex during the period, from March 2016 to March
2018
1.8.4 SAMPLE SIZE
One-third blue chip Securities from the Sensex are being selected on the basis of
Market Capitalization.

3
 30
Companies
included in 10 Basis
Companie
Sensex M-Cap
s

selected

Population Sample
HDFC
HDFC BANK
30 Companies HUL
ITC
included in
SBI
Sensex TCS
TECH MAHINDRA
MARUTI SUZUKI
INFOSYS
RELIANCE

1.8.5 SAMPLING TECHNIQUE

Judgmental sampling technique has been adopted for this study. The trillion market
cap companies selected represents the entire blue chip companies in the market.

1.8.6 TOOLS USED

 TREND RATIO
 STANDARD DEVIATION
 BETA
 CAPM
 COEFFICIENT OF VARIATION
 VARIANCE

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  PERCENTAGE
 ARITHMETIC MEAN

1.8.7 PERIOD OF THE STUDY

The study is conducted for a period of 30 days commencing from 1stApril 2018 to 1st
May 2018. The study covers a period of two years from March 2016 to March 2018.

1.8.8 VARIABLES USED FOR STUDY

1.8.8.1 OPENING SHARE PRICE

1.8.8.2 CLOSING SHARE PRICE
1.8.8.3 STOCK RETURN
1.8.8.4 MARKET RETURN
1.8.8.5 INDICES

1.9 LIMITATIONS OF THE STUDY

 The area of study is limited to a few stocks.

 The study is limited to data of the last two years only.
 Time constraint.
 Dividend during the intervening period has not been taken into account.
 Volatility in market
 Return on risk free securities is taken as 7.5% (appx) which is the average
Government Bond Yield for the last two years.

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1.10 CHAPTERISATION

Chapter 1- Introduction
Chapter 2- Literature Review
Chapter 3- Theoretical framework
Chapter 4- Analysis and Interpretations
Chapter 5- Findings, Suggestions, Conclusion and Scope for further study.

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 CHAPTER 2

REVIEW OF LITERATURE

David L. Scott in the Wall Street Word (2003),Blue Chip is a very high quality
investment involving a lower-than-average risk of loss of principal or reduction in
income. The term is generally used to refer to securities of companies having a
long history of sustained earnings and dividend payments.

Combell R. Harvey Dictionary of Financial Terms (2011),Blue Chip Company

used in the context of general equities. Large and creditworthy company.
Company renowned for the quality and wide acceptance of its products or
services, and for its ability to make money and pay dividends.

The Farlex Financial Dictionary (2009), Blue Chip Stock is a well-known and
highly respected publicly-traded company. Blue chip companies are
usually financially sound and are thought to be relatively low-risk investments.
They tend to be less volatile than other companies and to provide solid growth to
portfolios.

The Farlex Financial Dictionary (2009), Blue Chip Index is index that
predominately or exclusively tracks stocks in well-known and highly
respected publicly-traded companies. Blue chip indices track companies that are
usually financially sound and are thought to be relatively low-risk investments.
These indices tend to be less volatile and are used sometimes as indicators of
wider economic performance. A prominent example of a blue chip index is
the Dow Jones Industrial Average.
Joshua Kennon in About.com, The term blue chip originates from poker. High-
quality stocks have been called "blue chips" for decades. The term comes from
poker where the highest chip denomination is colored blue.

7
Joshua Kennon in About.com, A "blue chip" is the nickname for a stock that is
thought to be safe, in excellent financial shape and firmly entrenched as a leader
in its field. Blue chips generally pay dividends and are favorably regarded by
investors. A few examples of blue chips are Wal-Mart, Coca-Cola, Gillette,
Berkshire Hathaway and Exxon-Mobile. Blue chip stocks are sometimes referred
to as bellwether issues.

Ippolito in the Journal of Low and Economics (1992), says that Investment
selection by investors is based on past performance of the funds and money flows
into winning funds more rapidly than they flow out of losing funds.

Syed Tabassum Sultana in the Global Journal of Finance and Management

(2010), Indian investors today have to endure a sluggish economy, the steep
market declines prompted by deteriorating revenues, alarming reports of scandals
ranging from illegal corporate accounting practices like that of Satyam to insider
trading to make investment decisions. Stock market’s performance is not simply
the result of intelligible characteristics but also due to the emotions that are still
baffling to the analysis. Despite loads of information bombarding from all
directions, it is the cold calculations of financial wizards, or company’s
performance or widely accepted criterion of stock performance but the investor’s
irrational emotions like overconfidence, fear, risk aversion, etc., seem to
decisively drive and dictate the fortunes of the market. This paper while
discussing the characteristics of the India individual investors along makes an
attempt to discover the relationship between a dependent variable i.e., Risk
Tolerance level and independent variables such as Age, Gender of an individual
investor on the basis of the survey. Indian investors are high income, well
educated, salaried and independent in making investment decisions and
conservative investors. From the empirical study it was found that irrespective of
gender, most of the investors (41%) are found have low risk tolerance level and
many others (34%) have high risk tolerance level rather than moderate risk
tolerance level. It is also found that there is a strong negative correlation between

8
Age and Risk tolerance level of the investor. Television is the media that is
largely influencing the investor’s decisions. Hence, this study can facilitate the
investment product designers to design products which can cater to the investors
who are low risk tolerant.

Goetz man in the Journal of Low and Economics (1997), states that there is
evidence that investor’s psychology affect investment selection and switching.
In India, one of the earliest attempts was made by NCAER when a survey of
households was undertaken to understand the attitude towards and motivation for
saving of individuals. Another NCAER study analyzed the structure of the capital
market and presented the views and attitudes of individual shareholders. SEBI –
NCAER Survey (2000) was carried out to estimate the number of households and
the populations of individual investors, their economic and demographic profile,
portfolio size, and investment preference for equity as well as other savings
instruments. This is a unique and comprehensive study of Indian investors, for;
data was collected from 30,00,000 geographically dispersed for instruments
match their risk perception; Bank Deposit has an appeal across all income class;
43% of the non-investor households equivalent to around 60 million households
(estimated) apparently lack awareness about stock markets; and compared with
low income groups, the higher income groups have higher share of investment in
mutual funds, signifying that MFs have still not become truly the investment
vehicle for small investors. Nevertheless, the study predicts that in the next two
years (i.e., 2000 hence) the investment of household’s in MFs is likely to increase.
We have to wait and watch the investors’ reactions to the July 2nd 2001, great fall

Shanmugham in the Indian Journal of Finance and Research(2009) ,conducted a

survey of 201 individual investors to study the information sourcing by investors,
their perceptions of various investment strategy dimensions and the factors
motivating share investment decisions, and reports that among the various factors,
psychological and sociological factors dominated the economic factors in share
investment decisions.

9
 Madusudan V Jombodekar in the article Marketing Strategies of Mutual Funds
(1996) – Current Practices and Future Directions conducted a study to assess the
awareness of MFs among investors, to identify the information sources
influencing the buying decision and the factors influencing the choice of a
particular fund. The study reveals among other things that income schemes and
open ended schemes are more preferred than Growth Schemes and Close Ended
Schemes during the then prevalent market conditions. Investors look for safety of
Principal, Liquidity and Capital appreciate on in the order of importance;
Newspapers and Magazines are the first source of information through which
investors get to know about MFs/Schemes and investor service is a major
differentiating factor in the selection of Mutual Fund Schemes.

According to Joshua Kennon in About.com,the benefits of owning blue chip

shares are;
 An established record of stable earning power over several decades
 An equally long record of uninterrupted dividend payments to common stock
holders
 A history of regular increases in the dividends payable to each share
 Strong balance sheets with a moderate debt burden
 High credit ratings in the bond and commercial paper markets
 Large size relative to American businesses as a whole in terms of revenue and
market capitalization
 Diversified product lines (e.g., General Electric) and / or geographic location
(e.g., Coca-Cola).
 A competitive advantage in the market place due to cost efficiencies, franchise
value or distribution control.

Joshua Kennon in About.com, Investing in blue chips is such a fundamental part

of Wall Street that several of the major financial institutions have created ways
for average investors to invest in them without a lot of hassle or work. Now,

10
instead of trying to pick and choose a single company to invest in, you can put
your money into several different companies at once - saving time and money.

Sujit Sikidar and Amrit Pal Sing in the article Financial Services: Investment in
Equity and Mutual Funds (1996) – A Behavioral study carried out a survey with
an objective to understand the behavioral aspects of the investors of the North
Eastern region towards equity and mutual funds investment portfolio. The survey
revealed that the salaried and self-employed formed the major investors in mutual
fund primarily due to tax concessions. UTI and SBI schemes were popular in that
part of the country then and other funds had not proved to be a big hit during the
time when survey was done.

Syama Sunder in the article “Growth Prospects of Mutual Funds and Investor
Perception with the special reference to Kothari Pioneer Mutual Funds (1998)”
conducted a survey to get an insight into the mutual fund operations of private
institutions with special reference to Kothari Pioneer. The survey revealed that
awareness about Mutual Fund concept was poor during that time in cities like
Visakhapatnam. Agents play a vital role in spreading the Mutual Fund culture;
open-ended schemes were munch preferred then; a gained income are the two
important determinants in the selection of the fund/scheme; brand image and
return are the prime consideration while investing in any Mutual Fund.

Joshua Kennon in About.com, report about when buy and hold of shares doesn’t
work?, Value investors often select great businesses at attractive prices and
holding them for long periods of time. Many new investors make the mistake of
thinking that means never selling your holdings. Instead, the focus must be on the
underlying health of the business – the actual enterprise in which the shareholders
and management are engaged to make money. If you’re talking about a carpet
company, what is the outlook for the future profitability of the carpet industry
(both in terms of sales and cost inputs – carpet, for instance, is almost entirely
processed petroleum so rises in crude prices are going to hurt profits). As long as

11
the underlying business still has a good long-term outlook, drops in the stock
prices should be viewed as potentially attractive opportunities to increase your
ownership in the corporation.

Joshua Kennon in the Wall street Journal (2010), The pharmaceutical company is
one of the best returning investments of all-time and currently sports a roughly
7.5% dividend yield, yet the stock is trading at a 10 to 11 year low. Why? Among
other things, some analysts and shareholders appear to be worried that much of
the firm’s available cash is held overseas and was generated from international
operations, meaning that if they had to ship it back home to pay the high dividend;
it would suffer massive tax levies as the money was repatriated to the United
States. As this would destroy wealth, rational management should never allow
that to happen to the only wise course of action would be to lower the dividend
until domestic operations were able to grow sufficiently.

Anjan Chakarabarti and Harsh Runta in the ICFAI Journal of Applied Finance
(2000) stressed the importance of Brand effect in determining the competitive
position of the AMCs. Their study reveals that brand image factor, though cannot
be easily captured by computable performance measures, influences the investor’s
perception and hence his fund/scheme selection.

Raja Rajan in the article “Chennai Investors is conservative (1997)”, Business

Line, Feb. 23 Investor’s Characteristics on the basis of their investment size and
the relationship between stage in life cycle of the investors and their investment
pattern was studied.

Jason Zweig in the article published by the Wall Street Journal (2011 April),
some of the selected baskets of the biggest stocks -- produced an annual average
total return of 4.7% and 2.1%, respectively. Small and midsize companies
provided an annualized total return of roughly 9% over the same span. One
major reason is the Federal Reserve's drive to keep interest rates near zero has

12
"made borrowing cheaper than it should be," says Jeremy Grantham, the chief
investment strategist at GMO, an investment company in Boston. "The world is
an easier place for companies skating on thin ice, while the great companies don't
have much debt, so it hasn't benefited them."

Maura Lockwood, Cabot Headline News of theWall Street Journal (2011

June),Anxious investors were wary of the stock market, due to the Greek-debt
situation and a mixed batch of U.S. economic data on housing, jobless claims and
manufacturing.Investors who continue to put money into equities are buying
defensive Blue Chip stocks, the Journal reported. Undervalued Blue Chip stocks
are the focus of Cabot Benjamin Graham Value Letter.

By J. Royden Ward, Editor Write in the Wall Street Journal, about the Cabot
Benjamin Graham Value Letter, it uses a time-tested system to bring investors the
best undervalued stocks in the market--and they’re selling at bargain prices right
now. The system, laid out by the father of value investing and followed by
billionaire investor Warren Buffett, has brought investors returns of 20% annually
since its inception 80 years ago. If you want to safeguard your money then
patiently wait for solid stocks to climb higher in price.

Ken Kurson, writing inMoney Magazine, A "blue chip" is the stock of a well-
established, financially sound, and historically secure corporation. The term itself
comes from the early 20th century and was borrowed from the game of poker:
blue chips had the highest value. In the investment world, however, blue chip
companies are far from being a gamble. They are companies with a history of
posting earnings and paying dividends, all while continuing to increase profits.
While markets always fluctuate and all companies go though occasional
downturns, blue chips are known for strong executive management teams that
make intelligent growth decisions and for their high-quality products and services.
Blue chip stocks, also known as large cap stocks (because the companies have a

13
 high market capitalization of $1 billion or more), tend to rise and fall in
conjunction with the stock market in general.

Bellman Eric in the Wall Street Journal (New York), (2005 April 15) ,says that
Despite expected rising profits at many Indian companies, some international
analysis suggest Indian stocks are relatively pricey right now, compared with
other Asian stock market. Adrian Mowat, chief equity strategist for J.P Morgan
Securities in Hong Kong, says, for example, that India’s blue chip shares are
trading at an average ratio of about 12 times earnings for the current calendar
year. While that is in line with India’s historical average, most Asian markets
currently boast P/E ratios much lower than their historical averages. Taiwan, for
example, is trading at about 12 times 2005 prospective earnings, while it
historically trades at a P/E of about 20. The Singapore market’s P/E ratio for this
calendar year is almost 14, compared with a historical average of 17.

Robert A. Strong from the book Portfolio Construction, Management, and

Protection (fifth edition), published by cenagage learning (2009), says that; of all
categories of stock, the blue chips might be the best known. The firms in this
category are among the most familiar to the investment community given this; it
is odd that the tear blue chip lacks precise meaning. Investment professional all
believe that they know what a blue chip stock is, but most cannot come up with
affluent definition wit out using examples.
 One common definition of a blue chip is a company with a long, uninterrupted
history of dividend payments. This is probably not a perfect definition, but it fits a
great many of the consensus blue chips.
 Blue chip has become a colloquial meaning “high quality”. Although high quality
it itself a difficult term to define in the investment business, many high quality
stocks do not meet the criterion of uninterrupted dividend history.

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 CHAPTER-3
THEROTICAL FRAME WORK

Stock Exchange

According to the Securities Contracts (Regulation) act, 1956, which is the main law
governing stock exchanges in India. “stock exchange means any body of individuals,
whether incorporated or not, constituted for the purpose of assisting, regulating or
controlling the business of buying, selling or dealing in securities”.

BSE

A small group of stock brokers in Bombay joined together in 1875 to form an association
called Native Share and Stock Brokers Association. The association drew up codes of
conduct for brokerage business and mobilized private funds for investment in the
corporate sector. It was this association which later became the Bombay Stock Exchange,
which is the oldest stock exchange in Asia. This exchange is now known as the Stock
Exchange, Mumbai, or BSE.

Stock Market Index

A stock market index is created by selecting a group of stocks that are capable of
representing the whole market or a specified sector or segment of the market. BSE came
out with a stock index in 1986, which is known as BSE SENSEX. The base year of BSE
SENSEX is 1978-79 and the base value is 100.

Risk

Risk is the possibility of variation of the actual return from the expected return. Risk is
the potential for variability in returns. Risk can be broadly classified into systematic and
unsystematic risk.

Total risk = Systematic risk + Unsystematic risk

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Types of risks:
Systematic Risk – It is also known as market risk or economic risk or non- diversifiable
risk & it impacts full economy or share market. Systematic risk is further sub divided into
market risk, interest rate risk and purchasing power risk. Beta can be helpful in
understanding systematic risk.
Unsystematic Risk – It affects a small part of economy or sometime even single
company. Bad management or low demand in some particular sector will impact a single
company or a single sector – such risks can be reduced by diversifying once investments.
So this is also called Diversifiable Risk or Unique Risk. This risk arises from two
sources: a) Operating environment b) Financial structure.

Systematic risk

1. Interest Rate Risk

Interest rate risk is the variation in the return caused by fluctuations in the market interest
rate. Most commonly, interest rate risk affects the following:
 Bond return
 Cost of borrowing
2. Market risk
Jack Clark Francis has defined market risk as that portion of total variability of return that
is caused by the alternating forces of bull and bear phases. Both tangible and intangible
events can affect the market. During the bull and bear phases more than 80% of security
prices rise of all along with the stock market indices.

3. Inflation Risk (Purchasing Power Risk)

Inflation risk is the loss of purchasing power due to the effects of inflation. When
inflation is present, the currency loses its value due to the rising price level in the
economy. The higher the inflation rate, the faster the money loses its value.

16
Unsystematic risk

1. Business risk
The uncertainty associated with a business firm's operating environment and reflected in
the variability of earnings before interest and taxes (EBIT). Business risk is concerned
with the difference between revenue and EBIT
2. Financial risk
Financial risk is a function of financial leverage which is the use of debt in the capital
structure. The variability in EPS due to the presence of debt in the capital structureof a
company is referred to as financial risk.
Total Risk
While there are many different types of specific risk, we said earlier that in the most
general sense, risk is the possibility of experiencing an outcome that is different from
what is expected. If we focus on this definition of risk, we can define what is referred to
as total risk. In financial terms, this total risk reflects the variability of returns from some
type of financial investment.
Measures of Total Risk
The standard deviation is often referred to as a "measure of total risk" because it captures
the variation of possible outcomes about the expected value (or mean). In financial asset
pricing theory the Capital Asset Pricing Model (CAPM) separates this "total risk" into two
different types of risk (systematic risk and unsystematic risk). Another related measure of
total risk is the "Coefficient of Variation" which is calculated as the standard deviation
divided by the expected value. It is often referred to as a scaled measure of total risk or a
relative measure of total risk.

Risk Analysis

Risk in investment exists because of the inability to make perfect or accurate forecasts.
Risk in investment is defined as the variability that is likely to occur in future cash flows
from an investment. The greater variability of these cash flows indicates greater risk.

17
Variance or standard deviation measures the deviation about expected cash flows of each
of the possible cash flows and is known as the absolute measure of risk; while co-
efficient of variation is a relative measure of risk.

Measurement of risks
The most popular measures of risk are Variance and Standard Deviation. The variance and
standard deviation measure the extent of variability of possible returns from the expected return.
Several other measures such as Range, Semi Variance and Mean Absolute Deviation have been
used to measure risk, but standard deviation has been the most popularly accepted measure.

Variance = (Standard Deviation)2

σ = ……………………………………………………………………………………………

Measurement of Systematic Risk

Systematic risk is the variability in security returns caused by changes in the economy
over the market. The systematic risk of a security is measured by statistical measure
called Beta.
β= nxy - (x . y)
nx2 – (x)2

Return
Return is the primary motivating force that drives investment. It represents the reward for
undertaking investment. The return of an investment consists of two components viz,
Current return and Capital return.

Current Return

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Current return is measured as the periodic income in relation to the beginning price of
investment.

Capital Return
The second component of return is reflected in the price change called capital return. It is
simply the price appreciation or depreciation divided by beginning price of the asset.

Total Return = Current Return + Capital Return

Total Return = Cash payment received + Price change x 100

Price of investment at the beginning

TOOLS USED

Trend Ratio
Trend signifies tendency. Therefore, review and appraisal of tendency in accounting
variables is simply called trend analysis. It can be calculated with the formula
P1- P0 x 100
P0

 STANDARD DEVIATION
Standard deviation (represented by the symbol σ) shows how much variation or
"dispersion" exists from the average (mean, or expected value). It can be calculate
with the formula

x2 x 2

= n n

 BETA

19
 Beta is a statistical tool which measures the systematic risk associated with a security.
This can be done with the formula

β= nxy - (x . y)

nx2 – (x)2
 ABNORMAL RETURN
The abnormal rate of return on a security or portfolio in excess of what would be
predicted by an equilibrium model like the capital asset pricing model (CAPM).
Abnormal Return = Actual Return – CAPM Return

 COEFFICIENT OF VARIATION
The coefficient of variation represents the ratio of the standard deviation to the mean, and
it is a useful statistic for comparing the degree of variation from one data series to
another, even if the means are drastically different from each other.
Standard Deviation
CV = x 100
Arithmetic Mean
 Variance

Variance is a statistical measure of how much a set of observations differ from each
other.

Variance = (Standard Deviation)2

 CAPM
Capital Asset Pricing Model was developed by 3 researchers William Sharpe,
John Linter and Jan Mossin independently. Consequently, the model is often
referred to Sharp-Linter-Mossain Capital Asset Pricing Model. The expected
return of an asset is given by the formula

R = R + β (R – R )
p f m f

20
Graph showing relationship between Risk and Return

Understanding the risks pertaining to the different investments is of little consequence

unless you’re aware of your attitude toward risk. How much risk you can tolerate
depends on many factors, such as the type of person you are, your investment objectives,
the dollar amount of your total assets, the size of your portfolio, and the time horizon for
your investments.

Continuum of Risk Tolerance

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 CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION
(i) HDFC

Table 4.1

Table showing the market return and stock return of HDFC for eight quarters

STOCK
SENSEX PRICE STOCK PRICE MARKET RETURN
RETURN
YEAR
(B)-
OPENING OPENING CLOSING (A)/(A)×100 (B)-
CLOSING (B)
(A) (A) (B) (A)/(A)×100

1/3/2016 1105.55 1252.7

23,153.32 25,341.86 9.452 13.310
3/6/2016 1252.7 1393.05
25341.86 26,999.72 6.542 11.204
1/9/2016 1393.05 1262.45
26999.72 27,865.96 3.208 -9.375
5/12/2016 1262.45 1502.4
27865.96 26,626.46 -4.448 19.007
3/3/2017 1502.4 1616.35
26626.46 29,620.50 11.245 7.585
5/6/2017 1616.35 1740.7
29620.5 30,921.61 4.393 7.693
19/9/2017 1740.7 1710.4
30921.61 31,283.72 1.171 -1.741
7/12/2017 1710.4 1824.4
31283.72 34,056.83 8.864 6.665
5/3/2018
34056.83 33,567.34 -1.437 -2.763
1824.4 1774

Average Average
Beta 0.186 Quarterly Market 4.33% Annualized 17.32%
Return Market
Return
Average
Standard Average
8.86 Quarterly Stock 5.73%
Deviation Annualized
Return
Stock Return 22.92%
Source: Secondary

22
 Chart 4. 1

Chart showing the association between SENSEX and HDFC

25

20
19.007

15
13.310
11.204 11.245
10 9.452 8.864 MARKET RETURN (B)-
7.585
6.542 6.665 (A)/(A)×100
5 7.693
4.393 STOCK RETURN (B)-(A)/(A)×100
3.208
1.171
0
-1.741 -1.437
3/1/2016

5/1/2016

7/1/2016

9/1/2016

11/1/2016

1/1/2017

3/1/2017

5/1/2017

7/1/2017

9/1/2017

1/1/2018

3/1/2018
11/1/2017

-2.762
-5 -4.448

-10 -9.375

-15

Interpretation

The standard deviation (i.e. total risk associated with stock) is 8.86, whereas the beta
value is 0.186. Here the beta is less than one which indicates that the stock is less volatile.
HDFC has given an annual return of 22.92% compared with 17.32% return of index
during the same period. It can be inferred that HDFC outperformed the index.

23
 (ii) HDFC BANK

Table 4. 2

Table showing market return and stock return of HDFC Bank for 8 Quarters

YEAR STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
(B)-
OPENING CLOSING OPENING CLOSING (A)/(A)×100 (B)-
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 1034.23 1053.7 9.452 1.883

3/6/2016 25341.86 26,999.72 1053.7 1158.05 6.542 9.903

1/9/2016 26999.72 27,865.96 1158.05 1297.7 3.208 12.059

5/12/2016 27865.96 26,626.46 1297.7 1185.4 -4.448 -8.654

3/3/2017 26626.46 29,620.50 1185.4 1411.45 11.245 19.07

5/6/2017 29620.5 30,921.61 1411.45 1667.9 4.393 18.169

19/9/2017 30921.61 31,283.72 1667.9 1775.65 1.1711 6.460

7/12/2017 31283.72 34,056.83 1775.65 1857.85 8.864 4.629

5/3/2018 34056.83 33,567.34 1857.85 1893.2 -1.437 1.903

Average Average
Quarterly Annualised
Market Market
Beta 0.357 Return 4.332% Return 17.32%

Average
Average Annualised
Standard Quarterly Stock
Deviation 8.71 Stock Return 7.27% Return 29.07%

24
Source: Secondary

Chart 4. 2

Chart showing the relationship between SENSEX and HDFC Bank

25

20
19.07 18.169
15
12.059
10 9.903
6.460 MARKET RETURN
5 4.629
STOCK RETURN
1.883 1.903
0
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017

-5
-8.654
-10

-15

Interpretation

The standard deviation (i.e. total risk associated with stock) is 8.71, whereas the beta
value is 0.357. Here the beta is less than one which indicate less volatility. HDFC bank
has given an average annual return of 29.07% compared with 17.32% return rendered by
the index during the same period. It implies that HDFC bank has outperformed the index.

25
 (iii) ITC
Table 4.3
Table showing the market return and stock return of ITC for 8 Quarters
STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
YEAR (B)-
OPENING CLOSING OPENING CLOSING (B)-
(A)/(A)×100
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 219.56 215.78 9.452 -1.722

3/6/2016 25341.86 26,999.72 215.78 236.34 6.542 9.528

1/9/2016 26999.72 27,865.96 236.34 255.2 3.208 7.980

5/12/2016 27865.96 26,626.46 255.2 227.25 -4.448 -10.952

3/3/2017 26626.46 29,620.50 227.25 279.75 11.245 23.102

5/6/2017 29620.5 30,921.61 279.75 310.7 4.393 11.063

19/9/2017 30921.61 31,283.72 310.7 268.25 1.171 -13.663

7/12/2017 31283.72 34,056.83 268.25 263.35 8.864 -1.827

5/3/2018 34056.83 33,567.34 263.35 258.1 -1.437 -1.994

Average
Average Annualised
Quarterly Market
Beta 0.284 Market Return 4.332% Return 17.32%

Average Average
Standard Quarterly Annualised
deviation 11.60 Stock Return 2.391% Stock Return 9.56%

Source: Secondary

26
 Chart 4.3

Chart showing the association between Index and ITC

25
23.102
20

15

10 11.063
9.528
7.980
5 MARKET RETURN
-1.994 STOCK RETURN
0
-1.722
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017
-5 -1.827

-10 -10.952
-13.663
-15

-20

Interpretation

The standard deviation (i.e. total risk associated with stock) is 11.60, whereas the beta
value is 0.285. ITC has given an annual return of 9.56% compared with 17.32% return of
the index during the same period. It is evident that ITC has drastically underperformed
the index.

27
 (iv) SBI
Table 4.4
Table showing the market return and stock return of SBI for 8 Quarters
STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
YEAR (B)-
OPENING CLOSING OPENING CLOSING (B)-
(A)/(A)×100
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 187.34 197.4 9.452 5.370

3/6/2016 25341.86 26,999.72 215.78 212.8 6.542 -1.381

1/9/2016 26999.72 27,865.96 236.34 257.35 3.208 8.890

5/12/2016 27865.96 26,626.46 255.2 249.75 -4.448 -2.136

3/3/2017 26626.46 29,620.50 227.25 267.65 11.245 17.778

5/6/2017 29620.5 30,921.61 279.75 288.85 4.393 3.251

19/9/2017 30921.61 31,283.72 310.7 261.9 1.1711 -15.706

7/12/2017 31283.72 34,056.83 268.25 319.85 8.864 19.236

5/3/2018 34056.83 33,567.34 263.35 241.6 -1.437 -8.259

Average Average
Quarterly Annualised
Market Market
Beta 0.326 Return 4.332% Return 17.32%

Average Average
Standard Quarterly Annualised
Deviation 11.427 Stock Return 3.005% Stock Return 12.01%

Source: Secondary

28
 Chart 4.4

Chart showing the association between Index and SBI

25

20 19.236
17.778
15

10
8.89
5 5.37 MARKET RETURN
3.253
0 STOCK RETURN
-1.381 -2.136
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017
-5
-8.259
-10

-15 -15.706
-20

Interpretation

The standard deviation (i.e. total risk associated with stock) is 11.427, whereas the beta
value is 0.326. SBI has given an average annual return of 12.01% compared to the index
return of 17.32%. This implies that SBI has underperformed the index.

29
 (v) MARUTI SUZUKI
Table 4.5
Table showing the market return and stock return of Maruti Suzuki for 8 Quarters
STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
YEAR (B)-
OPENING CLOSING OPENING CLOSING (B)-
(A)/(A)×100
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 3567.45 3699.4 9.452 3.699

3/6/2016 25341.86 26,999.72 3699.4 4149.4 6.542 12.164

1/9/2016 26999.72 27,865.96 4149.4 5594.75 3.208 34.833

5/12/2016 27865.96 26,626.46 5594.75 5084.25 -4.448 -9.125

3/3/2017 26626.46 29,620.50 5084.25 6009.9 11.245 18.206

5/6/2017 29620.5 30,921.61 6009.9 7315.25 4.393 21.720

19/9/2017 30921.61 31,283.72 7315.25 8074.55 1.171 10.380

7/12/2017 31283.72 34,056.83 8074.55 9700.25 8.864 20.134

5/3/2018 34056.83 33,567.34 9700.25 8699 -1.437 -10.322

Average Average
Quarterly Annualised
Market Market
Beta 0.192 Return 4.332% Return 17.32%

Average Average
Standard Quarterly Annualised
Deviation 14.715 Stock Return 11.299% Stock Return 45.19%

Source: Secondary

30
 Chart 3.5

Chart showing the association between Index and Maruti Suzuki

40
35 34.832
30
25
21.72
20 20.134
18.206
15 MARKET RETURN
12.164
10 10.380 STOCK RETURN
5
3.699
0
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

-5 11/1/2017

-10 -9.125 -10.322

-15

Interpretation

The standard deviation (i.e. total risk associated with stock) is 14.715, whereas the beta
value is 0.192. Maruti Suzuki has given an average annual return of 45.19% compared
with 17.32% return of index during the same period. Maruti has given manifold return
compared to the Index.

31
 (vi) INFOSYS
Table 4.6
Table showing the market return and stock return of INFOSYS for 8 Quarters
STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
YEAR (B)-
OPENING CLOSING OPENING CLOSING (B)-
(A)/(A)×100
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 1087.43 1189.9 9.452 9.423

3/6/2016 25341.86 26,999.72 1189.9 1198.55 6.542 0.727

1/9/2016 26999.72 27,865.96 1198.55 1058.5 3.208 -11.685

5/12/2016 27865.96 26,626.46 1058.5 1003.7 -4.448 -5.177

3/3/2017 26626.46 29,620.50 1003.7 1027.8 11.245 2.401

5/6/2017 29620.5 30,921.61 1027.8 940.3 4.395 -8.513

19/9/2017 30921.61 31,283.72 940.3 898.05 1.1711 -4.493

7/12/2017 31283.72 34,056.83 898.05 1038.4 8.864 15.628

5/3/2018 34056.83 33,567.34 1038.4 1158.8 -1.437 11.595

Average Average
Quarterly Annualised
Market Market
Beta 0.198 Return 4.332% Return 17.32%

Average Average
Standard Quarterly Annualised
Deviation 9.479 Stock Return 1.10% Stock Return 4.4%

Source: Secondary

32
 Chart 4.6

Chart showing the association between Index and INFOSYS

20

15

11.245
10 9.452 8.864
6.542
5 4.393 MARKET RETURN
3.208
1.171 STOCK RETURN
0
-1.437
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017
-5 -4.448

-10

-15

Interpretation

The standard deviation (i.e. total risk associated with stock) is 9.479, whereas the beta
value is 0.198. INFOSYS has given an average annual return of 4.4% compared to
17.32% return of index during the same period. INFOSYS has underperformed the
market by hefty margin.

(vii) RELIANCE
Table 4.7

33
 Table showing the market return and stock return of Reliance for 8 Quarters
STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
YEAR (B)-
OPENING CLOSING OPENING CLOSING (B)-
(A)/(A)×100
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 519.05 524.25 9.452 1.002

3/6/2016 25341.86 26,999.72 524.25 490.25 6.542 -6.485

1/9/2016 26999.72 27,865.96 490.25 543.83 3.208 10.929

5/12/2016 27865.96 26,626.46 543.83 526.98 -4.448 -3.098

3/3/2017 26626.46 29,620.50 526.98 629.75 11.245 19.502

5/6/2017 29620.5 30,921.61 629.75 716.58 4.393 13.788

19/9/2017 30921.61 31,283.72 716.58 817.5 1.171 14.084

7/12/2017 31283.72 34,056.83 817.5 918.5 8.864 12.355

5/3/2018 34056.83 33,567.34 918.5 907.3 -1.437 -1.219

Average Average
Quarterly Annualised
Market Market
Beta 0.234 Return 4.332% Return 17.32%

Average Average
Standard Quarterly Annualised
Deviation 9.243 Stock Return 6.762% Stock Return 27.04%

Source: Secondary

34
 Chart 4.7

Chart showing the relationship between Index and Reliance

25

20 19.502
13.7880
15
14.084
12.355
10 10.929
MARKET RETURN

5 STOCK RETURN

1.002
0
-1.219
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017
-3.098
-5
-6.485
-10

Interpretation

The standard deviation (i.e. total risk associated with stock) is 9.243, whereas the beta
value is 0.234. Here the beta is less than one which shows that the stock is less volatile.
Reliance has given an annual return of 27.04% compared with index return of 17.32%
during the same period. Reliance has beaten the Index.

(viii) TCS
Table 4.8
Table showing the market return and stock return of TCS for 8 Quarters

35
 STOCK
SENSEX PRICE STOCK PRICE
MARKET RETURN
RETURN
YEAR
(B)-
OPENING OPENING CLOSING (A)/(A)×100 (B)-
CLOSING (B)
(A) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 1,260.15 1,276.55 9.452 1.301

3/6/2016 25341.86 26,999.72 1276.55 1,215.40 6.542 -4.790
1/9/2016 26999.72 27,865.96 1215.4 1,182.78 3.208 -2.684
5/12/2016 27865.96 26,626.46 1182.78 1,215.90 -4.448 2.800
3/3/2017 26626.46 29,620.50 1215.9 1,181.17 11.245 -2.856
5/6/2017 29620.5 30,921.61 1181.17 1,217.97 4.393 3.116
19/9/2017 30921.61 31,283.72 1217.97 1,350.60 1.1711 10.889
7/12/2017 31283.72 34,056.83 1350.6 1,424.58 8.864 5.478
5/3/2018 34056.83 33,567.34 1424.58 1,390.78 -1.437 -2.373
Average
Average Annualised
Beta -0.185 Quarterly 4.332% Market 17.32%
Market Return Return

Average
Standard
4.983 Average 1.209% Annualised
Deviation
Quarterly Stock Stock
Return Return
4.83%

Source: Secondary

36
 Chart 4.8

Chart showing the association between Index and TCS

14
12
11.245 10.889
10
8.864
8
MARKET RETURN (B)-
6 6.542 (A)/(A)×100
5.478 9.45238091
4 4.393
3.208 2.800 3.116 STOCK RETURN (B)-
2 (A)/(A)×100
1.171
1.30143237
0
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017
11/1/2016

11/1/2017
-2 -1.437
-2.684 -2.856 -2.373
-4 -4.448
-4.790
-6

Interpretation

The standard deviation (i.e. total risk associated with stock) is 4.983, whereas the beta
value is -0.185. The beta is negative which indicates that TCS does not move in tandem
with the index. TCS has given average return of 4.83% compared with Index return of
17.32% during the same period. TCS has underperformed the Index.

37
 (ix) HINDUSTAN UNILEVER
Table 4.9
Table showing market return and stock return of HUL for 8 Quarters

STOCK
SENSEX PRICE STOCK PRICE MARKET RETURN
RETURN
YEAR
(B)-
OPENING CLOSING OPENING CLOSING (A)/(A)×100 (B)-
(A) (B) (A) (B) (A)/(A)×100
1/3/2016 23,153.32 25,341.86 869.5 898.55 9.452 3.341
3/6/2016 25341.86 26,999.72 898.55 867.85 6.542 -3.42
1/9/2016 26999.72 27,865.96 867.85 826.35 3.208 -4.782
5/12/2016 27865.96 26,626.46 826.35 911.75 -4.448 10.335
3/3/2017 26626.46 29,620.50 911.75 1,079.60 11.245 18.410
5/6/2017 29620.5 30,921.61 1079.6 1,173.90 4.393 8.735
19/9/2017 30921.61 31,283.72 1173.9 1,367.85 1.171 16.522
7/12/2017 31283.72 34,056.83 1367.85 1,333.35 8.864 -2.522
5/3/2018 34056.83 33,567.34 1333.35 1,340.00 -1.437 0.499
Average
Average Annualised
Beta -0.066 Quarterly 4.332% Market 17.32%
Market Return Return

Average
Average Annualised
Standard
8.665 Quarterly 5.828% Stock
Deviation
Stock Return Return
23.30%

Source: Secondary

38
 Chart 4.9

Chart showing the association between Index and HUL

20
18.410
16.522
15

11.245
10 10.335
9.452 8.735 8.864 MARKET RETURN (B)-
6.542 (A)/(A)×100
5 4.393
3.341 3.208 STOCK RETURN (B)-
1.171 (A)/(A)×100
0 0.499
-1.437
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017

-2.522
-3.417
-5 -4.781-4.448

-10

Interpretation

The standard deviation (i.e. total risk associated with stock) is 8.665, whereas the beta
value is -0659. The beta is negative which indicates that HUL moves in opposite
direction to the market. HUL has given an annual return of 23.3% compared to
benchmark, SENSEX of 17.32%. HUL has beaten the Index.

39
 (x) TECH MAHINDRA
Table 4.10
Table showing the market return and stock return of Tech Mahindra for 8 Quarters
STOCK
SENSEX PRICE STOCK PRICE MARKET
RETURN
RETURN
YEAR (B)-
OPENING CLOSING OPENING CLOSING (B)-
(A)/(A)×100
(A) (B) (A) (B) (A)/(A)×100

1/3/2016 23,153.32 25,341.86 396.98 484.35 9.452 22.009

3/6/2016 25341.86 26,999.72 484.35 532.2 6.542 9.879

1/9/2016 26999.72 27,865.96 532.2 454.75 3.208 -14.553

5/12/2016 27865.96 26,626.46 454.75 474.1 -4.448 4.255

3/3/2017 26626.46 29,620.50 474.1 475.4 11.245 0.274

5/6/2017 29620.5 30,921.61 475.4 387.05 4.393 -18.584

19/9/2017 30921.61 31,283.72 387.05 458.45 1.171 18.447

7/12/2017 31283.72 34,056.83 458.45 492.55 8.864 7.4381

5/3/2018 34056.83 33,567.34 492.55 619.8 -1.437 25.835

Average Average
Quarterly Annualised
Market Market
Beta -0.032 Return 4.332% Return 17.32%

Average
Average Annualised
Standard Quarterly Stock
Deviation 15.347 Stock Return 6.111% Return 24.44%

40
Source: Secondary

Chart 4.10

Chart showing the association between index ana Tech Mahindra

30
25 25.835
22.009
20
18.447
15
10 9.879
7.438
5 4.255 MARKET RETURN
0 0.274 STOCK RETURN
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
11/1/2016

11/1/2017

-5
-10
-15 -14.553
-20 -18.584

-25

Interpretation

The standard deviation (i.e. total risk associated with stock) is 15.347, whereas the beta
value is -0.032. Beta is negative which depicts that Tech Mahindra is negatively
correlated with the market. Tech Mahindra has given an annual return of 24.44%
compared to 17.32% return of the Index during the same period. Tech Mahindra has
outperformed the Index.

41
 TREND INDICES

Trend signifies tendency. Therefore, review and appraisal of tendency in accounting

variables is simply called trend analysis. Trend ratios are also an important tool of
horizontal financial analysis. Under this technique of financial analysis, the ratios of
different items for various periods are calculated and then a comparison is made. An
analysis of the ratios over the past few years may well suggest the trend of direction in
which the concern is going upwards or downwards. The method of trend percentages is a
useful analytical device for the management since by substituting percentages for large
amounts; the brevity and readability are achieved.

(i) HDFC
Table 4.11
Table showing the Trend of HDFC for 8 Quarters
Period Stock return Indices
1/3/2016 13.310 100
3/6/2016 11.204 84.175
1/9/2016 -9.375 -70.436
5/12/2016 19.007
142.799
3/3/2017 7.585
56.983
5/6/2017 7.693 57.800
19/9/2017 -1.741 -13.078
7/12/2017 6.665 50.076
5/3/2018 -2.763 -20.755

Source: Secondary

Chart 4.11

Chart showing the Trend of HDFC

42
 200
142.799
100 100 84.175
56.983 57.800 50.076
0 -13.078 -20.755
-70.436
-100

Interpretation

It can be seen from the above that the trend indices of HDFC shows a fluctuating trend.
On 6/3/2016 the trend increased by 84.17 points and the succeeding Quarter the trend
declined by 17.43 points.

(ii) HDFC BANK

Table 4.12
Table showing the trend of HDFC Bank for 8 Quarters

PERIOD STOCK RETURN INDICES

1/3/2016 0.0852 100

3/6/2016 15.164 17802.31

1/9/2016 6.1596 7231.345

5/12/2016 -7.083 -8315.51

3/3/2017 10.131 11893.68

5/6/2017 8.299 9743.387

19/9/2017 4.083 4793.335

7/12/2017 2.323 2727.757

5/3/2018 3.214 3773.69

Source: Secondary

43
 Chart 4.12

Chart showing the Trend of HDFC Bank

20000
17802.31
15000
11893.68
10000 9743.387
7231.345
5000 4793.335 3773.69
2727.757
0 100
-5000
-8315.51
-10000

Interpretation

It can be seen from the above that the trend indices of HDFC Bank shows a fluctuating
trend. On 3/6/2016 the trend had been increased by 17802.31 and on 5/12/2016 the same
had been declined sharply by 8315.15 points.

44
 (iii) HUL
Table 4.13
Table showing the Trend of HUL
STOCK RETURN INDICES
PERIOD
1/3/2016 3.34 100
3/6/2016 -3.42 -102.26
1/9/2016 -4.78 -143.13
5/12/2016 10.33
309.33
3/3/2017 18.41
551.02
5/6/2017 8.73 261.44
19/9/2017 16.52 494.52
7/12/2017 -2.52 -75.49
5/3/2018 0.50 14.93

Source: Secondary

Chart 4.13

Trend graph of HUL

600
551.02
494.52
400
309.33 261.44
200
100
0 14.93
-102.26 -143.13 -75.49
-200

Interpretation

45
It can be seen from the above that the trend indices of HUL shows a fluctuating trend. On
1/9/2016 the trend had been decreased by 143.12 and on 3/03/2016 the same had been
increased by 551 points.

(iv) ITC
Table 4.14
Table showing the Trend of ITC for 8 Quarters
STOCK RETURN INDICES
PERIOD
1/3/2016 1.30 100
3/6/2016 -4.79 -368.08
1/9/2016 -2.68 -206.23
5/12/2016 2.80
215.16
3/3/2017 -2.86
-219.48
5/6/2017 3.12 239.39
19/9/2017 10.89 836.73
7/12/2017 5.48 420.89
5/3/2018 -2.37 -182.31

Source: Secondary

Chart 4.14

Trend graph of ITC

1000
836.73
500 420.89
215.16 239.39
0 100
-206.23 -219.48 -182.31
-500 -368.08

46
Interpretation

It can be seen from the above that the trend indices of ITC shows a fluctuating trend. On
3/6/2016 the trend had been decreased by -368.08 and on 19/9/2017 the same had been
increased by 836.72 points.

(v) SBI
Table 4.15
Table showing the Trend of SBI for 8 Quarters
STOCK RETURN INDICES
PERIOD
1/3/2016 5.37 100

3/6/2016 -1.38 -25.72

1/9/2016 8.89 165.55

5/12/2016 -2.14 -39.77

3/3/2017 17.78 331.06

5/6/2017 3.25 60.58

19/9/2017 -15.70 -292.49

7/12/2017 19.24 358.21

5/3/2018 -8.26 -153.80

Source: Secondary

Chart 4.15

Trend graph of SBI

47
 400
331.06 358.21

200
165.55
100
60.58
0 -25.72 -39.7693
-153.80
-200
-292.49
-400

Interpretation

It can be seen from the above that the trend indices of SBI follows a zig-zag trend. On
7/12/2017 the trend value increased by 358.21 points and the consecutive Quarter it
declined by 153.8 points.

(vi) TCS
Table 4.16
Table showing Trend of TCS for 8 Quarters

PERIOD STOCK RETURN TREND INDICES

1/3/2016
3.34 100
3/6/2016
-3.42 -102.26
1/9/2016
-4.78 -143.13
5/12/2016
10.33 309.33
3/3/2017
18.41 551.02
5/6/2017
8.73 261.44
19/9/2017
16.52 494.52
7/12/2017
-2.52 -75.49
5/3/2018
0.50 14.93

Source: Secondary

Chart 4.16

48
 Trend graph of TCS`

600
551.02
494.52
400
309.33
261.44
200
100
0 -102.26 14.93
-75.49
-143.13
-200

Interpretation

The trend indices of TCS show a fluctuating trend. On 1/9/2016 the trend declined by
143.12 points and 3/3/2017 the trend increased by 551.02 points.

(vii) TECH MAHINDRA

Table 4.17
Table showing the Trend of Tech Mahindra for 8 Quarters
STOCK RETURN INDICES
PERIOD
1/3/2016 22.01 100

3/6/2016 9.88 44.89

1/9/2016 -14.55 -66.12

5/12/2016 4.26 19.33

3/3/2017 0.27 1.25

5/6/2017 -18.58 -84.44

19/9/2017 18.44 83.82

7/12/2017 7.44 33.80

5/3/2018 25.83 117.39

49
 Source: Secondary

Chart 4.17

Trend graph of Tech Mahindra

150
117.39
100 100
83.82
50 44.89
33.80
19.33
0 1.24

-50
-66.123
-84.44
-100

Interpretation

The trend indices of Tech Mahindra show a fluctuating trend. On 5/6/2017 the trend
declined by 84.44 points and on 5/3/2018 the trend increased by 117.38 points.

(viii) MARUTI SUZUKI

Table 4.18
Table showing the Trend of Maruti Suzuki for 8 Quarters
STOCK RETURN INDICES
PERIOD
1/3/2016 3.70 100

3/6/2016 12.16 328.87

1/9/2016 34.83 941.75

5/12/2016 -9.12 -246.70

3/3/2017 18.21 492.23

5/6/2017 21.72 587.23

19/9/2017 10.38 280.63

20.13 544.34
12/7/2017

3/5/2018 -10.32 -279.07

50
 Source: Secondary

Chart 4.18
Trend graph of Maruti Suzuki
1200
1000 941.75
800
600 587.23 544.34
492.23
400
328.87 280.63
200
100
0
-200 -246.70 -279.07
-400

Interpretation

It can be seen from the above that the trend indices of stock return of MARUTI SUZUKI
shows an increasing trend except for 12/5/2016 and 3/5/2018. On 1/9/2016 the trend had
been increased by 941.75 points and on 5/3/2018 the trend declined by 279 points.

(ix) INFOSYS
Table 4.19
Table showing the Trend of Infosys for 8 Quarters
STOCK RETURN INDICES
PERIOD
1/3/2016 9.42 100

3/6/2016 0.73 7.71

1/9/2016 -11.69 -124.00

5/12/2016 -5.18 -54.94

3/3/2017 2.40 25.48

5/6/2017 -8.51 -90.35

19/9/2017 -4.49 -47.68

7/12/2017 15.63 165.85

51
 5/3/2018 11.59 123.05

Source: Secondary

Chart 4.19

200
150 165.85
123.05
100 100
50
25.48
0 7.71
-50 -54.94 -47.68
-100 -90.35
-124.00
-150

Interpretation

It can be seen from the above that the trend indices of INFOSYS shows a decreasing
trend except for 3/3/2017, 12/7/2017 and 3/5/2018. The highest trend gain was on
7/12/2017 by 165.85 points and highest decline was on 1/9/2016 by 124 points.

(x) RELIANCE
Table 4. 20
Table showing the Trend of Reliance for 8 Quarters
STOCK RETURN INDICES
PERIOD
1/3/2016 1.00 100

3/6/2016 -6.49 -647.36

1/9/2016 10.93 1090.92

5/12/2016 -3.10 -309.27

3/3/2017 19.50 1946.61

5/6/2017 13.79 1376.28

19/9/2017 14.08 1405.78

52
 7/12/2017 12.35 1233.22

5/3/2018 -1.22 -121.72

Source: Secondary

Chart 4. 20

Graph showing the Trend of Reliance

2500
2000 1946.61
1500 1376.28 1405.78 1233.22
1000 1090.92
500
0 100
-121.72
-309.27
-500
-647.36
-1000

Interpretation

Reliance shows fluctuating trend during the 8 Quarters. The highest trend gain was on
3/3/2017 by 1946.6 points and highest trend fall was on 3/6/2016 by 647.36 point

RANKING OF THE SHARES ACCORDING TO ACTUAL RETURN

Table 4.21
ANNUAL QUARTERLY
COMPANY NAME RETURN RETURN RANK
HDFC 22.92% 5.73 6
HDFC BANK 29.07% 7.27 2
HUL 23.30% 5.83 5
ITC 9.56% 2.39 8
SBI 12.01% 3.00 7
TCS 4.83% 1.2 9
TECH MAHINDRA 24.44% 6.11 4
MARUTI SUZUKI 45.19% 11.29 1
INFOSYS 4.4% 1.1 10
RELIANCE 27.04% 6.76 3

53
 Source: Secondary

Chart 4.21
Graph showing the Average Quarterly Return of Blue Chip Shares
12 11.30
10
10 9
8
8 7.27 7 6.76
5.736 5.83 6.11
6 5
4
4 3.00 3 ACTUAL RETURN
2 2.39
1.21 RANK
2 1 1.10

Interpretation

Actual return refers to the actual gain or loss an investor experience on investment. Based
on actual return, Maruti Suzuki gave the highest annualized return of 45.19% whereas
least average return was given by Infosys(4.4%)
RANKING OF THE SHARES ACCORDING TO CAPM RETURN
Table 4.22
Table showing CAPM return and rank of Blue chip shares
COMPANY NAME CAPM RETURN RANK
HDFC 9.34 7
HDFC BANK 11.0 1
HUL 6.85 9
ITC 10.29 3
SBI 10.7 2
TCS 5.68 10
TECH MAHINDRA 7.19 8

54
 MARUTI SUZUKI 9.38 6
INFOYS 9.44 5
RELIANCE 9.79 4

Source: Secondary

Chart 4.22 8888888888888888888888888888888888888888888

10
10 9 5.455
9 8 5.609
8 5.524 6.052 5.668 7
7 5.689 6.110 5.690 5.679 6
6 5.404 5
5 4
4 3 CAPM RETURN
3 2
2 1 RANK
1
0

Interpretation

CAPM return shows the expected return of the security adjusted for risk free return, risk
premium and beta. CAPM return analysis of securities reveals that HDFC bank gave the
highest return of 11% and the least CAPM return was rendered by TCS(5.68%)

Table 4.23
RANKING OF THE SHARES ACCORDING TO ABNORMAL RETURN

COMPANY NAME ABNORMAL RETURN RANK

HDFC 13.58 5
HDFC BANK 11.07 6
HUL 16.45 4
ITC -0.73 8
SBI 1.31 7
TCS -0.84 9

55
 TECH MAHINDRA 17.25 3
MARUTI SUZUKI 35.81 1
INFOYS -5.04 10
RELIANCE 17.33 2
Source: Secondary

Chart 4.23 8888888888888888888888888888888888

10
10 9
8
8 7
6 5.62
6 5
4
4 3
2
1.86 ABNORMAL RETURN
2 0.04 1 1.15
0.06
RANK
0
-2 -0.28

-4 -2.45
-3.13
-6 -4.48 -4.57

Interpretation

Abnormal return is the excess of actual return over CAPM return. By analyzing abnormal
returns it is found that Maruti Suzuki has got the highest return of 35.8% and the security
with least abnormal return is Infosys with 5.04%

Table 4.24

RANKING OF THE SHARES ACCORDING TO STANDARD DEVIATION

STANDARD
COMPANY NAME RANK
DEVIATION
HDFC 8.86 7
HDFC BANK 8.71 5
HUL 8.66 6
ITC 11.60 9
SBI 11.43 8
TCS 4.98 1

56
 TECH MAHINDRA 4.982 2
MARUTI SUZUKI 14.71 10
INFOYS 9.48 4
RELIANCE 9.24 3

Source: Secondary
Chart 4.24
Chart showing the Rank and Standard Deviation of Blue Chip shares

16 14.71
14 11.60
11.43
12 9.48
8.71 10
9 9.24
10 8.86 8.66
8
8 7
6 4.982
6 5 4.98
4 STANDARD DEVIATION
4 3
2 RANK
2 1
0

Interpretation

A stock with high risk generally has a high standard deviation, while the deviation of
stable blue chip is usually low. From this chart it can be inferred that TCS is less risky
stock with standard deviation of 4.98 whereas Maruti with 14.71 standard deviation is
highly risky.

Table: 4.25
RANKING OF THE SHARES ACCORDING TO COEFFICIENT OF
VARIATION

COEFFICIENT OF
COMPANY NAME RANK
VARIATION
HDFC 154.57 5
HDFC BANK 119.82 1
HUL 148.68 4
ITC 485.09 9

57
 SBI 380.28 7
TCS 412.11 8
TECH MAHINDRA 251.13 6
MARUTI SUZUKI 130.23 2
INFOYS 861.28 10
RELIANCE 136.70 3

Source: Secondary

Chart 4.25 888888888888888888888888888888888888

861.28
900
800
700 412.11
600 485.09
500 380.28
400 154.57 148.68 COEFFICIENT OF
300 136.70
200 119.82 81.53130.23 VARIATION
100 6 2 5 9 7 8 1 3 10 4
0 RANK

Interpretation
Coefficient of variation (CV) is a measure of relative variability. By analyzing the CV of
the securities, HDFC bank has come in the first position with least CV of 119.82 whereas
Infosys with CV of 861.27 is relatively volatile compared to others.

TABLE 4.26

RANKING OF THE SHARES ACCORDING TO SYSTEMATIC RISK

COMPANY NAME SYSTEMATIC RISK RANK

HDFC 0.185 4
HDFC BANK 0.356 10

58
 HUL -0.065 2
ITC 0.284 8
SBI 0.326 9
TCS -0.185 1
TECH MAHINDRA -0.0315 3
MARUTI SUZUKI 0.191 5
INFOYS 0.198 6
RELIANCE 0.233 7

Source: Secondary

Chart 4.27 888888888888888888888888888888888888888888????

10
10 9
9 8
8 7
7 6
6 5
5 4
3.513864978
4 2.9405072713
2.236592856 SYSTEMATIC RISK
3 2
1.511553131 RANK
2
0.954951184 1 1.088305588
1.01475918
0.947773053
1 0.119952763 0.027435899
0

Interpretation

Systematic risk is denoted by beta. It measures the risk of the market as a whole. TCS,
HUL and Tech Mahindra have negative beta value which indicates that the stock moves
in opposite direction to the market. All other blue chip companies have got positive beta
which indicates that the stock moves in tandem with the market.

59
CHAPTER-V,

SUGGESTIONS AND CONCLUSION

FINDINGS

The major findings of the study are the following.

1. All the selected top blue chip companies have rendered positive return during the
last two years.
2. Lion share (60%) of the selected companies have outperformed the benchmark
index i.e, SENSEX.
3. All the selected blue chip companies have got beta value less than one which
indicates that the stock are less volatile.
4. TCS, HUL, Tech Mahindra have got negative beta which means stock moves in
opposite direction to the market.
5. All the selected blue chip companies follow a fluctuating trend which reflects the
zig zag movement of share price.
6. Maruti Suzuki has rendered 2.6 times return than that of index(145% vs 17%).
7. HDFC bank delivered the highest expected return (CAPM) of 11%.
8. Maruti Suzuki is the most risky stock with standard deviation of 14.7
9. TCS has got the least systematic risk with beta value -0.185.
10. Highest rate of abnormal return is provided by Maruti.
11. No security selected are fairly priced (CAPM Return ~ Actual Return).

SUGGESTIONS

60
 1. Pay heed to blue chip shares.
2. Since blue chip stocks have got low beta, they can be
considered for investment.
3. Since most of the blue chip index stocks being the leaders
in niche segment or industry, they can create phenomenal
wealth over a fairly longer period of time.
4. A portfolio kind of investment in blue chip securities is
more preferable
5. Diverse adequately to reduce unsystematic risk.
6. Investors should give ample weightage to blue chip shares.

CONCLUSION

SCOPE FOR FURTHER STUDY

1) Nifty Junior 50 can be considered for the study

2) Sectorial indices can be considered

3) Blue chip stocks outside the index can also be taken for the study

4) Non F&O blue chips can also be considered

61
BIBLIOGRAPHY

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62
 Syama Sunder in the article “Growth Prospects of Mutual Funds and Investor
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 Business Line

63
 Annual Report of Company

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 www.knowledge.com

 www.moneycontrol.com

64