Performance of Selected Securities in Comparison With Market Index-Vishwas HK-04120

8/7/2019 Performance of Selected Securities in Comparison With Market Index-Vishwas HK-04120

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DECLARATION

This is to certify that the project titled The performance of selected

securities in comparison with market index submitted by me in partial

fulfillment of the requirement of Master of Business Management course, is

based on research work done by me under the guidance of Prof. Santhanam ,

M. P. Birla Institute of Management. This project has not previously formed

the basis for the award of any degree or diploma.

Place: Bangalore Vishwas H.K.

Date:


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PRINCIPAL CERTIFICATE

I hereby certify that this dissertation is an offshoot of the research work undertaken

and completed by Vishwas H.K. under the guidance of Prof. Santhanam, faculty

member of M.P.B.I.M. Bangalore.

.

Place: Bangalore (Dr. N. S. Malavalli)

Date: Principal, MPBIM


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ACKNOWLEDGEMENTS

I am happy to express my gratitude to Dr. N. S. Malavalli, (Principal, M. P. Birla

Institute of Management), for his encouragement, guidance and many valuable ideas

imparted to me for my project.

I extend my sincere thanks to Prof. SanthanamMPBIM, Bangalore for providing me

all the information required and the guidance throughout the project without which

this project would not have been possible.

I would also like to sincerely thank all my lecturers and my friends for their help in

completing my project successfully.


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MARKET INDEXES

Introduction:

People from different walk of life use and are affected by

market indexes. Investors, both individual and institutional, used

the market index as a bench mark against which, they evaluate the

performance of their own or institutional portfolio.

The technicians or the chartists often base their decisions to

buy and sell on the patterns emerging out of the time series data of

market indexes. Even the economists and statisticians use stock

market indexes to study the trend of growth patterns in the

economy, to analyze as well as forecasts business cycles and to

correlate stock indexes to economic activity. The most important

index in financial market is the stock index, which uses a set of

stocks that are representative of the whole market, or a specified

sector, to measure the change in overall behavior of the markets, or

sector over a period of time. The final use of the market index is in

portfolio analysis. In discussions of the market model and

systematic it will be evident that the relevant risk of a security is

determined by the relationship between that securities return and

the return on the market.


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An index is a number used to represent the changes in a set

of values between a base time period and another time period. A

stock index is a number that helps measure the levels of the

market. Stock index is a derivative asset because it derives its

existence and value from independent stocks issued by

corporations. It is the simplest derivative because it is structured as

merely same average of specified underlying stocks without any

complicated payoff.

Most stock indices attempt to be proxies for the market they

exist in. Returns on the index thus are supposed to represent

returns on the market that is the returns that an investor can get if

he has the portfolio representing the entire market.


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Major stock indexes in India:

. BSE-SENSEX,

first compiled in 1986 is a "MarketCapitalization-Weighted" index of 30 component stocks

representing a sample of large, well established and financially

sounds companies. The base year of BSE-SENSEX is 1978-79.

The index is widely reported in both domestic and international

markets through print as well as electronic media.BSE-SENSEX is

not only scientifically designed but also based on globally accepted

construction and review methodology. The "Market Capitalization-

Weighted" methodology is a widely followed index construction

methodology on which majority of global equity benchmarks are

based.

Since then, the stock market in the country has passed

through both good and bad periods. The journey in the 20th

century has not been an easy one. Till the decade of eighties, there

was no measure or scale that could precisely measure the various

ups and downs in the Indian stock market. The Stock Exchange,

Mumbai (BSE) in 1986 came out with a Stock Index that

subsequently became the barometer of the Indian Stock Market.

The growth of equity markets in India has been phenomenal

in the decade gone by. Right from early nineties the stock market

witnessed heightened activity in terms of various bull and bear

runs. More recently, the bourses in India witnessed a similar frenzy

in the 'TMT' sectors. The BSE-SENSEX captured all these


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happenings in the most judicial manner. One can identify the

booms and bust of the Indian equity market through BSE-

SENSEX.

The Index Committee of the Exchange reviews all BSE-

Indices periodically. The committee frames the broad policy

guidelines for the development and maintenance of all BSE

indices. The Index Cell of the Exchange carries out the day to day

maintenance of all indices and conducts research on development

of new indices

The Index was initially calculated based on the "Full Market

Capitalization" methodology but was shifted to the free-float

methodology with effect from September 1, 2003. The "Free-float

Market Capitalization" methodology of index construction is

regarded as an industry best practice globally. All major indexproviders like MSCI, FTSE, STOXX, S&P and Dow Jones use the

Free-float methodology.

Sensex Calculation Methodology

Sensex is calculated using the "Free-float MarketCapitalization" methodology. As per this methodology, the level of

index at any point of time reflects the Free-float market value of 30

component stocks relative to a base period. The market

capitalization of a company is determined by multiplying the price


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of its stock by the number of shares issued by the company. This

market capitalization is further multiplied by the free-float factor to

determine the free-float market capitalization

Understanding Free-float Methodology

Concept:

Free-float Methodology refers to an index construction

methodology that takes into consideration only the free-float

market capitalization of a company for the purpose of index

calculation and assigning weight to stocks in Index. Free-float

market capitalization is defined as that proportion of total shares

issued by the company that are readily available for trading in the

market.

National stock exchange indices:

With commencement of derivatives trading in India, foreign

bourses have evinced interest to introduce trading in derivatives

based on Indian indices. Under an agreement, Singapore exchange

derivatives trading Ltd., (SGX-DT) was granted a license to trade

futures and options contracts based on S&P CNX Nifty index.

SGX-DT launched the SGX S&P CNX Nifty index futures

contract on sep 25, 2000. the contract is based on the S&P CNX

Nifty index, which is owned by IISL, a subsidiary of NSE. The


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SGX S&P CNX Nifty index futures is traded in US $, with a

contract size equivalent to US $ 20 multiplied by the S&P CNX

future index. The trading of nifty future SGX was introduced for

enabling international market participants gain exposure to the

Indian stock market in a highly cost effective manner. With the

growing no of global investors getting exposure to the Indian

market place, especially in stocks related to technology, internet

and pharmaceuticals, the contracts will help participants to

effectively trade as well as hedge their portfolio.

S&P CNX Nifty, which comprises of 50 largest and most

liquid stocks, was introduced in April 1996. It has a historical time

series dating back to January 1990. It accounted for 51.2% of total

market capitalization of CM segment of NSE as at end June 2001.

CNX Nifty junior introduced in December 1996 is built out of the

next 50 large and liquid stocks. S&P CNX Nifty was introduced bythe NSE keeping in mind that it would be used for modern

applications such as index funds and index derivatives besides

reflecting the stock market accurately. It has become the most

popular and widely used indicator of the stock market in the

country.

These indices are monitored and updated dynamically and

are reviewed regularly. These are maintained professionally to

ensure that if continues to be a consistent benchmark of the equity

market. This involves inclusion and exclusion of stocks in the


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index and the day today tracking and giving effect to corporate

actions on individual stocks. The composition of Nifty is reviewed

every quarter. This helps in maintaining liquidity of the index

while preventing too many changes making the index unsuitable.

The index is calculated afresh every time a trade takes place in an

index stocks. It is calculated unlike online and disseminated over

trading terminals across the country.

Correlation analysis:

Correlation analysis measures the relationship between two

items, for example, a securitys price and an indicator. The

resulting value (called the correlation coefficient) shows if

changes in one item (e.g., an indicator) will result in changes in the

other item (e.g., the securities prices). When comparing the

correlation between two items, one item is called thedependent

item and the other the independent item. The goal is to see if a

change in the independent item (which is usually an indicator) will

result in a change in the dependent item (usually a securities price).

This information helps to understand an indicators predictive

ability.

The correlation coefficient can range between + or

1.0(plus or minus one). A coefficient of + 1.0, a perfect positive

correlation, means that changes in the independent item will result

in an identical change in the dependent item (e.g., a change in the


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indicator will result in an identical change in the securities price).

A coefficient of -1.0, a perfect negative correlation, means that

changes in the independent item will results in an identical changes

in the dependent item, but the change will be in the opposite

direction. A coefficient of zero means, there is no relationship

between the two items and that a change in the independent item

will have no effect in the dependent item.

A low correlation coefficient (e.g., less than+-0.10)

suggests that the relationship between two items is weak or non-

existent. A high correlation coefficient (i.e., closer to plus or minus

one) indicates that the dependent variable (e.g., the securitys

price) will usually change when the independent variable (e.g., an

indicator) changes.

The direction of the depended variables changes dependson the sign of the coefficient. If the coefficient is a positive

number, than the dependent variable will move in the same

direction as the independent variable, if the coefficient is negative

than the dependent variable will move in the opposite direction of

the independent variable.

Correlation analysis can be used in two basic ways, to

determine the predictive ability of an indicator and to determine

the correlation two securities. When comparing the correlation

between an indicator and a securities price, a high positive


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coefficient (e.g., more than + 0.70) tells that a change in the

indicator will usually predict a change in securities price. A high

negative correlation (e.g. less than 0.70) tells that when the

indicator changes, the securities price will usually move in the

opposite direction. A low coefficient (e.g., close to zero) indicates

that the relationship between the securities price and the indicator

is not significant.

Correlation analysis is also valuable in gauging the

relationship between two securities. Often, one securities price

leads or predict the price of another security. For example the

correlation coefficient of gold verses the dollar shows a strong

negative relationship. This means that an increase in the dollar

usually predicts a decrease in the price of the gold.

Relative Strength, comparativeOverview

Comparative Relative Strength compares two securities to

show how the securities are performing relative to each other. Be

careful not to confuse Comparative Relative Strength with the

Relative Strength Index.

Interpretation

Comparative Relative Strength compares a security's price

change with that of a "base" security. When the Comparative


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Relative Strength indicator is moving up, it shows that the security

is performing better than the base security. When the indicator is

moving sideways, it shows that both securities are performing the

same (i.e., rising and falling by the same percentages). When the

indicator is moving down, it shows that the security is performing

worse than the base security (i.e., not rising as fast or falling

faster).

Comparative Relative Strength is often used to compare a

security's performance with a market index. It is also useful in

developing spreads (i.e., buy the best performer and short the

weaker issue).

Calculation

The Comparative Relative Strength indicator is calculated

by dividing one security's price by a second security's price (the

"base" security). The result of this division is the ratio, or

relationship, between the two securities.


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RESEARCH METHODOLOGY

Research design simply means a search for facts answer to

questions and solutions to problems. A research design is a

purposeful scheme of action proposed to be covered out in a

sequence during the process of research focusing on the problem to

be tackled. It is a guideline for the researcher to enable him to keep

track of his actions and to know whether he was moving in the

right direction in order to achieve his goal. The design has a

specific presentation of the various steps in the process of the

research.

For the purpose of this study, the following methodology

was adopted:

Identification of the study period.

Identification of certain industries that are considered to be

leading indicators of stock market and identifying onecompany each from these industries.

Collection of monthly closing price of equity stocks of

companies in the above industries.


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Conducting serial correlation tests on the stock prices for

twelve months and thus co-efficient of correlation is found

out.

Collection of BSE indices closing values for the same period

on a monthly basis and comparing individual stocks with

their respective indices.

STATEMENT OF PROBLEM

Several investors have gained as well as lost in the stock

market. One way to determine the stock price is fundamental

analysis, which in turn is composed of economy, industry and

company. The other way is technical analysis, which says that the

past trends will repeat in the future.

The question that arises here is that whether security moves

with the market index, so that losses and gains can be estimated

with the movement of the market index. The relationship between

the security and market index is done by correlation, relative

strength index and moving average method.

Therefore in this study the researcher has tried to find out;

The study period

The economic indicator of the stock market

Conduct a serial correlation analysis to determine whether

the relationship exist or not


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Whether ordinary investor has out performed or over

performed with scrips is checked with moving average

To determine the indicator that is a combination of security

and market index, this is done by drawing the RSI curve.

OBJECTIVES OF THE STUDY

The main objective of the study is to test The performance

of selected securities in comparison with market index. The

research means that security prices are the reflection of market

index. With this, the research work deals with the following

objectives:

Understanding the performance of selected securities in

comparison with market index.

Provide guidance for the investors in determining what types

of analysis is useful.

To study the literature behind market index.

To carry out correlation analysis.

To find out regression equation.


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To determine whether speculator in India can invest in

security by tracing market indices.

SCOPE OF THE STUDY

One of the most important functions of the market index is

to show, in which direction the set of scrips are heading towards.

The market index as a bench mark against which, the investor

evaluate the performance of their own or institutional portfolio.

Market indices are one of the economic indicators, if the index is

heading upwards, it shows that economy is on boom, investors

purchasing power is high, and market is bullish. If index is headingdownwards, it signifies slack period in the economy, in this period

investor is bearish. If the historical data is projected it shows future

trends, by the help of this, investor can forecast and take decisions

accordingly to buy or to sell or to hold the securities. This research

seeks to investigate and constructively contribute to help:

The investors in understanding the performance of selected

securities in comparison with market index.


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It also helps the investor to understand the working of

market index and other related concepts.

It serves as a reference for further research.

REVIEW OF LITERATURE

One of the dominant themes in the academic literature since

the 1960s has been the concept of a capital market. As it is a well-

researched area abundant literature is available for it. For the

purpose of this study, the following books were referred:

Security analysis and portfolio management, fifth edition,

Balla.

Investments, sixth edition, Jack Clark Francis.

Investment analysis and portfolio management, ninth

edition, Prasanna Chandra. Tata McGraw-Hill publishing Co

Ltd., New Delhi.

Financial management, seventh edition, R K Sharma and

Shashi K Gupta, Kalayani Publishers.

Journals


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Capital Market,

Emerging trends in financial markets,

Outlook- money

Dailies

Business Line

Economic Times

Financial Express

Business Standard

DEFINITION OF CONCEPTS

Stock market: The financial market for small, medium and

long term securities.

Market index: A stock index is a number that helps

measure the levels of the market. Stock index is a derivative

asset because it derives its existence and value from

independent stocks issued by corporations

Equity: The net worth of a firm consisting of paid up equity

capital plus, reserves and surplus.

Portfolio: A combination of assets


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Correlation Analysis: It is the statistical tool used to

describe the degree to which one variable is linearly related

to another.

SAMPLING METHOD

A sample is a small representation of lot of population

selected at random. The random of drawing a sample from largepopulation is called as sampling. The sampling method adopted in

this study is judgment sampling. Sampling data in this study

comprised of five stocks listed on the Bombay Stock Exchange for

the period from December 2004 to May 2006. Each series consists

of 18-montly observation made at each month end closing price for

each stock dominated in Indian rupees. The sample stocks were

selected from the specified group of Bombay Stock Exchange. The

selection of the stocks was also based on the fact that the data set

continuously available through the period considered that is from


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December 2004 to May 2006. For the purpose of this study, the

share price series are adjusted for rights and bonds.

DATA COLLECTION TOOL

This study is by and large a desk job work. Both primary

and secondary data are collected for the study purpose. Conducting

interviews with stockbrokers collects the primary data. Secondary

data is collected from different sources, which are as follows:

Textbooks and journals- as stated under review of literature.

Websites- equitymaster.com, capitalmarket.com,

bseindia.com, indiainfoline.com


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News papers Economic Times, Business Line, Financial

Express.

Stock Exchange BSE, BgSE. and NSE.

LIMITATIONS OF THE STUDY

Though sincere attempts have been made during the

research work, certain limitations cannot be avoided, they are:

Difference in definitions.

The research work does not considered other type of

securities such as Debentures, short term and long term

loans etc.


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Accuracy of testing the performance of selected securities in

comparison with market index depends on the experience of

the researcher. Here the researcher lacks it.

LAYOUT OF THE CHAPTERS

Chapter 1: Introduction

This chapter includes the general introduction to market

index and leading stock index in India. The chapter gives an over

all idea about market indices.

Chapter 2: Design of the study

This chapter deals with the various aspects of research

methodology, viz., statement of the problem, scope and objectives

of the study, review of literature, definition of concepts, sampling


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methods, tools for collection of data and analysis, limitation of the

study.

Chapter 3: study of industrial sectors to which selected

securities belong

This chapter contains historical background and trends of

the industries under study.

Chapter 4: Analysis

This chapter contains an analysis of the data with reference

to the objectives. The entire data is summarized into tables and

charts.

Chapter 5: summary of the study

This chapter contains the executive summary of the

dissertation, valid findings of the study

INDUSTRIAL BACKGROUND OF THE STUDY

ALUMINIUM

The most commercially mined aluminum ore is bauxite, as it

has the highest content of the base metal. The primary aluminum

production process consists of three stages. First is mining of

bauxite, followed by refining of bauxite to alumina and finally

smelting of alumina to aluminum. India has the fifth largest


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bauxite reserves with deposits of about 3 bn tones or 5% of world

deposits. India's share in world aluminum capacity rests at about

3%. Production of 1 tone of aluminum requires 2 tones of alumina

while production of 1 tone of alumni

The aluminum production process can be categorized into

upstream and downstream activities. The upstream process

involves mining and refining while the downstream process

involves smelting and casting & fabricating. Downstream-

fabricated products consist of rods, sheets, extrusions and foils.

Power is amongst the largest cost component in

manufacturing of the non-ferrous metal, as the production process -

- smelting -- involves electrolysis. Consequently, manufacturers

are located near cheap and abundant sources of electricity such as

hydroelectric power plants. Alternatively, they could set up captive

power plants, which is the pattern in India. Indian manufacturers

are the lowest cost producers of the base metal due to access to

captive power, cheap labour and proximity to abundant supply of

raw material bauxite

The Indian aluminum sector is characterized by large

integrated players like Hindalco and National Aluminum Company

(Nalco). The other producers of primary aluminum include Indian

Aluminum (Indal), now acquired by Hindalco. Bharat Aluminum

(Balco) and Madras Aluminum (Malco), the erstwhile PSUs, have

been acquired by Sterlite Industries. Consequently, there are only

three main primary metal producers in the sector.


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The per capita consumption of aluminum in India continues

to remain abysmally low at under 1 kg as against nearly 20 kgs in

the US and Europe, 15 kgs in Japan, 10 kgs in Taiwan and 4 kgs in

China. The key consumer industries in India are electricals

(power), transportation, consumer durables, packaging and

construction. Of this, power is the biggest consumer (over 1/3rd of

total) followed by transportation (about 18% of total). However,

internationally, the pattern of consumption is in favour of

transportation, primarily due to large-scale aluminum consumption

by the aviation industry.

The metal has a long working life due to its propensity for

recycling. Recycled metal requires significantly less amounts of

energy for manufacturing of primary aluminum. Just to put things

in perspective, the recycling of aluminum scrap requires 5% of the

energy required for primary smelting, which is astoundingly lower,

considering that power is such a high cost component

Key points:

Supply: Supply of aluminum is in excess and any deficit can be

imported at low rates of duty. Currently, domestic production

comfortably meets domestic requirements.

Demand: Demand for aluminum is estimated to grow at 6%-8%

per annum in view of the low per capita consumption in India.

Also, demand for the metal is expected to pick up as the scenario

improves for user industries, like power and transportation, which

closely track economic growth.


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Barriers to entry: Large economies of scale. Consequently, high

capital costs.

Bargaining power of suppliers: Being a commodity, customersenjoy relatively high bargaining power, as prices are determined on

demand and supply.

Bargaining power of customers: Being a commodity, customers

enjoy relatively high bargaining power, as prices are determined on

demand and supply.

Competition: Competition is primarily on quality and price, as

being a commodity, differentiation is difficult. However, the recent

spate of consolidation has reduced the competitive pressure in the

industry

Prospects:

Globally, newer packaging applications and increased usage

in automobiles is expected to keep the international demand

growth for aluminum between 3% - 4% in the long-term. Asia will

continue to be the high consumption growth area led by China,

which has been and is expected to continue to register double-digit

growth rates in aluminum consumption in 2005.


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With key consuming industries forming part of the domestic

core sector, the aluminum industry is sensitive to fluctuations in

performance of the economy. Electricals and transportation

account for more than 50% of domestic aluminum consumption.

With the Government focusing towards attaining GDP growth

rates above 8%, the key consuming industries are likely to lead the

way, which could positively impact aluminum consumption.

Domestic demand growth is estimated to average in the region ofabout 6% - 8% over the longer-term, though FY05 would be

another year of above average growth.

Being a commodity, international prices on the London

Metal Exchange (LME) are closely linked to the demand-supply

position and consequently global inventory levels. Volatility in

domestic prices is lower compared to international prices, as Indianmanufacturers adjust prices only when a clear trend is visible on

the LME. However, with reduction in import duties in Interim

Budget '05, the buffer on international prices will reduce leading to


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stronger linkage with international markets. Consequently,

volatility in domestic markets could increase.

The improvement in the economy in FY05 had its positiveimpact on the aluminum industry, which can be gauged from the

fact that production and consumption increased by nearly 20% last

fiscal. During FY05, the Index of Industrial Production (IIP) grew

by 6.8%, which was an improvement over FY03's 5.8% growth.

We reckon domestic demand in the current fiscal to remain firm.

Over the past few years, mergers & acquisitions (M&A)have led to three main groups in the domestic aluminum industry

A.V. Birla, Sterlite and the Government run Nalco. Further

consolidation in the domestic market is likely to augur well for the

industry. With lesser competition, companies could assert greater

control over pricing. In this context, the approach adopted by the

incumbent government towards privatization, which has put on the

back burner the divestment of state-owned Nalco, has provided a

sort of a setback to the consolidation in the sector. Consolidation in

any industry not only helps it to compete better but also improve

overall efficiencies.

While there was no specific announcement made in Interim

Budget 2005 pertaining to the aluminum industry, reduction in

peak customs duty from 25% to 20% is a cause for concern.

Lowering of duties reduces the net tariff protection for domestic

aluminum producers. With reduction in import duties, domestic

realization of aluminum majors, namely Hindalco, Nalco and


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Indal, is likely to be under pressure, as the buffer on international

prices is reduced. Moreover, with greater linkage to international

prices, volatility in financials could increase. However, producers

are moving downstream to negate the higher volatility.

Further, though the interim budget did not announce any

specific measures for the aluminum sector, the increased thrust on

infrastructure spending will benefit the industry in the long run.

Spending on infrastructure sectors and the announcement that

mega power status would now be given to all power projects is a

positive for the aluminum industry. It must be noted that the power

sector accounts for over 1/3rd of the domestic aluminum

consumption. Power, transportation and construction, which are

the key aluminum-consuming industries, are likely to reap the

benefits of government spending.

CONSUMER PRODUCTS

The consumer product sector mainly consists of personal

care, cosmetics and home products segments. The sector can be

further sub-divided into dental care products, soaps, detergents,

surface cleaning products, skin care, and hair care products.

The sector is divided into two distinct segments - the

premium segment catering mostly to urban higher/upper middle

class and the popular segment with prices as low as 25%-30% of


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the premium segment, catering to mass segments in urban and

rural markets. The premium segment is less price sensitive and

more brand conscious.

India's rural markets have seen a lot of activity in the last

few years. Since penetration levels are pretty high in most

categories, future growth can come only from deeper rural

penetration. FMCG majors are aggressively looking at rural India

since it accounts for 70% of the total Indian households.

The industry is volume driven and is characterized by lowmargins. The products are branded and backed by marketing,

heavy advertising, slick packaging and strong distribution

networks. Also, raw material prices play an important role in

determining the pricing of the final product.

Despite the strong presence of MNC players, the

unorganized sector has a significant presence in this industry. In

most categories, unorganized sector is almost as big as the

organized sector, if not bigger.

Brand building and extensive distribution network is a key

factor. A successful brand is a precious asset, which could fetch a

price many times the cost of assets required to make the product. A

study conducted by A&M-ORG-MARG reflects that the share of

branded goods is high for a number of daily used products, and the

share of unbranded products is shrinking, albeit slowly.


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The industry is very clearly sold on Dr. C. K. Prahlad's

concept of 'value at the bottom of the pyramid'. They recognize

that India is a value led market. There are numerous examples of

buoyant growth if the price proposition is right (telecom, home

loans, consumer durables). Therefore, the focus was on improving

efficiencies, reducing costs, improving supply chain efficiencies to

look at giving value to consumers, in a bid to bring about internal

factors led growth.

Key points:

Supply: Abundant supply in metros. Distribution networks are

Beefed up to penetrate the rural areas.

Demand: At an average GDP growth of 5.5% until FY2009, the

present consumer demand is set to boom by almost 60% over this

period.

Barriers to entry: Huge investments in promoting brands, setting

up distribution networks and intense competition.

Bargaining power of suppliers: Many established players have a

slight edge in bargaining power given the competition among

suppliers. Also, some of the companies have backward integrated,which reduces the supplier's clout.

Bargaining power of customers: In case of branded products,

there is little that the consumer can influence, but intense


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competition within the FMCG companies results in value for

money deals for consumers (e.g. buy one, get one free concept).

Competition: Competition is based mainly on product attributes.However, in a bid to increase penetration in the nascent market,

companies often compete on pricing by offering discounts and

freebies. Foreign products are becoming increasingly visible in

urban domestic markets.

Prospects:

As per NCAER estimates, the ratio of the consuming class

to total households will touch 46% by FY07 (17.4% in FY95).

With per capita consumption low in most categories and

expectations of the consuming class growing in significant

numbers (as per NCAER estimates), the FMCG sector in India has

immense growth potential in the long term.

While the homegrown companies are looking to expand

beyond the Indian shores, the MNC subsidiaries are likely to look

for greater leverage of the parent strengths. Since India is a big

potential market, none of the big MNC's can afford to ignore the

region for long. The decade ahead is likely to see more MNC's

looking to enter India, as organized

Category Market Size Major players Growing


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hub of agri-processing. The e-choupal (ITC) and Shakti (HLL)

initiatives by corporate is likely to shape the dynamics of what

farmers produce going forward, with improved efficiency. The

interest of Group's like Bharti and Reliance in investing in this

sector points to the potential.

Companies are increasingly using information technology

for supply chain management. This is likely to result in a reduction

in inventory levels and an improvement in the working capital

cycle. The aim is to evolve just in time delivery systems. This will

benefit companies by controlling costs and improving margins.

Some MNCs have set up 100% subsidiaries (for example

Procter & Gamble), which is a cause for concern for the listed

subsidiaries, as new product launches are largely set to take place

through these subsidiaries.

The rising penetration of satellite and cable networks will

also fuel demand for a wide variety of consumer products. E-

commerce will bring in procurement efficiencies and will reduce

overheads finally allowing the companies to reduce their prices.

With new brands being launched rapidly and competition

becoming very aggressive, only those companies, who can spend

on research and development to innovate and develop new

products and processes, will gain in the long term.


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value chain and export formulations and generic products. The

total exports from the country were more than at Rs 225 bn in the

year 2005. The country also offers excellent exports opportunities

for clinical trials, R&D, custom synthesis, technical services like

Bioinformatics.

The fortunes of Indian pharma industry are significantly

influenced by regulations. Indian companies capitalized on the

absence of product patents in the country and mastered the art of

making generics version of the patented drugs at very low cost.

However, by virtue of India being a member of the World Trade

Organization (WTO) and a signatory to the General Agreement on

Tariffs and Trade (GATT) it is bound recognize product patents,

latest by 2005.

The drug price control order (DPCO) continues to be amenace for the industry. The pricing authority arbitrarily sets

prices of drugs that fall within its ambit without giving due

consideration even to the costs of production. There are three tiers

of regulations -on bulk drugs, on formulations and on overall

profitability. This has made the profitability of the sector

susceptible to the whims and fancies of the pricing authority.

Consequently, MNCs show reluctance in launching patented drugs

from their parent's product portfolio, thereby, affecting their

market share. However, off late, some MNCs have started making

aggressive product launches. Although government has brought


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down the DPCO cover from 74 to 25 drugs in the new DPCO, the

same has not been brought into effect due to impending litigation.

However, once implemented, this could increase profitability of

companies having relatively older portfolios particularly MNCs.

While the average R&D spending in India for the industry

has been around Rs 6.6 bn, as a whole which is a meager 2% of

sales, the spend of the top five companies is about 6%. Despite

growing at a CAGR of 35% over last five years, the ratio is still

way below the global average of 15-20% of sales. However,

despite the low R&D spending as comparison to global

benchmarks, Indian companies are stepping up their research

activities to make themselves more self sufficient in terms of

product development ahead of the year 2005 deadline. Companies

like Dr. Reddy's and Ranbaxy have already achieved reasonable

measure of success in their R&D efforts.

Another peculiar feature of the domestic R&D initiative is a

lack of facilities and resources to develop a molecule, conduct

trials and then launch the product. On an average it costs roughly

US$ 350 m to US$ 500 m for a New Chemical Entity (NCE) to

pass through the various stages of clinical trials. Although Indian

companies with their expertise in chemistry are able to synthesize

molecules, the huge costs involved in conducting clinical trials and

launching the drug has prompted them to depend on international

peers to undertake the more expensive clinical trials and product


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launches in return for upfront and milestone payments (ex

Ranbaxy out-licensed one of its urology molecules to Schwarz

Pharma and Dr Reddy's out licensed a molecule to Novo Nordisk).

Indian companies are thus able to mitigate the risk involved in new

drug discovery. However, off-late, Indian companies like Dr.

Reddy's have indicated plans of conducting clinical trials on their

own.

Key points:

Supply: Higher for traditional a therapeutic segment, which is

typical of a developing market. However, relatively lower for

lifestyle segment.

Demand: Very high for certain diseases, will change as life

expectancy, literacy increases.

Barriers to entry: Licensing, distribution network, patents, plant

approval by regulatory authority.

Bargaining power of suppliers: Distributors are increasingly

pushing generic products in a bid to earn higher margins.

Bargaining power of customers: High, a fragmented industry has

ensured that there is widespread competition in almost all product

segments.


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Competition: High. Very fragmented industry with the top 300 (of

10,000 manufacturing units) players accounting for 85% of sales

value. Consolidation in the industry is likely to intensify.

Prospects:

While FY05 recorded a good growth and the markets grew

by about 8% mainly driven by high growth in lifestyle segment

such as CVS (17%), CNS (9%), anti-diabetic (12%) and

respiratory (9%) therapeutic segments. However, intense

competition ensured that the values of the products to decline. In

fact the growth in volume terms was about 2% more than growth

in value terms. In the year while Indian companies performed very

well both in exports as well as the domestic markets, performance

of the MNC's was not very impressive. However, in the longer run,

Indian companies would face fresh competition from MNCs, asthey would make aggressive new launches once product patents

are recognized post 2005.

The life style segments such as cardiovascular, anti-diabetes,

anti-ulcer and anti-depressants will continue to be lucrative and

fast growing. Growth in domestic sales in the future will depend on

the ability of companies to launch/shift products in relatively fast-

growing therapeutic segments. These are likely to be the key

earnings drivers. Here again, in view of the competition from


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MNCs post 2005 and rise in the number of new entrants, the

current margins may not be sustainable in the long run.

The DPCO is likely to be significantly diluted soon though

there is litigation pending over it in supreme court. In case the new

order is passed the pressure on pricing of MNC pharma products is

likely to go away. Companies with high DPCO coverage currently

and strong brands in place are expected to benefit.

A new concept that is gaining momentum in the pharma

industry is contract research and contract manufacturing. Given the

low cost, high quality advantage, Indian companies are poised to

benefit from contract research business on behalf of multinationals.

As for contract manufacturing, large global pharmaceutical

companies are finding it profitable to outsource production. To

cash in on these opportunities much large production houses in the

country are becoming US FDA compliant.

The penetration of health insurance is abysmally low in the

country. The entry of private players would not only bring in

quantum leap in the health insurance business but also increase

capital inflows into this sector. With drug prices expected to

increase post 2005, health insurance could provide a cushion

against it and thus maintain the demand for drugs.

On the exports front, the global generics market is growing

at the rate of 10% to 12% and drugs having estimated sales of over


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US$ 55 bn expected to go off patent in the next few years. This

coupled with the fact that the US government is facilitating a

speedy introduction of generic drugs into the market, increasing

the number of generics drugs in its Mediclaim policy, bodes well

for generic exporters. However the opportunity here may not be as

big as stated above, because the prices fall drastically once the

drug goes off patent.

BANKING

With the economic growth picking up pace and the

investment cycle on the way to recovery, the banking sector has

witnessed a transformation in its vital role of intermediating

between the demand and supply of funds. The revived credit off

take (both from the food and non food segments) and structuralreforms has paved the way for a change in the dynamics of the

sector itself. Besides gearing up for the compliance with Basel

accord, the sector is also looking forward to consolidation and

investments on the FDI front.


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Public sector banks have been very proactive in their

restructuring initiatives be it in technology implementation or

pruning their loss assets. Windfall treasury gains made in the

falling interest rate regime were used for writing off the doubtful

and loss assets. Incremental provisioning made for asset slippages

have safeguarded the banks from witnessing a sudden impact on

their bottom lines.

Retail lending (especially mortgage financing) formed a

significant portion of the portfolio for most banks and the entities

customized their products to cater to the diverse demands. With

better penetration in the semi urban and rural areas the banks

garnered a higher proportion of low cost deposits thereby

economizing on the cost of funds.


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Apart from streamlining their processes through technology

initiatives such as ATMs, telephone banking, online banking and

web based products, banks also resorted to cross selling of

financial products such as credit cards, and mutual funds and

insurance policies to augment their fee based income.

Key points

Supply: The Reserve Bank of India (RBI) controls liquidity.

Demand: India is a growing economy and demand for credit is

high though it could be cyclical.

Barriers to entry: Licensing requirement, investment in

technology and branch network.


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Bargaining power of suppliers: High during periods of tight

liquidity. Trade unions in public sector banks can be anti reforms.

Depositors may invest elsewhere if interest rates fall.

Bargaining power of customers: For good creditworthy

borrowers bargaining power is high due to the availability of large

number of banks

Competition: High- There is public sector banks, private sector

and foreign banks along with non-banking finance companies

competing in similar business lines.

Prospects:

RBI's soft interest rate policy has helped increase the

liquidity in the market, however credit off take has not exactly

been robust. Going forward, the scenario is set to change in favour

of higher credit off take due to expected improvement in

agricultural output on the back of good monsoons as well as

revival in the Indian industry. However the same cannot be said for

the interest rate regime. Higher inflation and the prospect of the US

raising interest rates may necessitate a hike in interest rates in thedomestic markets also. This may in turn curb the growth of the

credit in the economy. Hence while the growth in credit may still

be robust, a higher interest rate scenario may however limit the

potential.


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While the new law regarding securitization and foreclosure

of assets may take a while to bear any large benefits, currently the

benefits of increased power in the hands of the lender are making

the borrowers to come to the negotiating table. FY04 saw a

scenario where the borrowers were forced to negotiate with the

lenders, which consequently led to the borrowers returning some of

the dues to the lenders. Going forward the new law will bring

about greater accountability within the system and ensure that

borrowers do not take undue advantage of the system. Already an

asset reconstruction company has been set up by SBI in partnership

with other institutions like ICICI Bank and IDBI. If properly

implemented, this new law may lead to significant benefits for the

banking sector as a whole.

Currently the banking sector in the country is strongly

fragmented and hence with further policy changes taking place in

the sector, consolidation is likely to take place at a faster rate.

However this is subject to the removal of the ceiling on voting

rights will ensure that private sector and foreign banks will be in a

much better position to carry out acquisitions in the banking sector.

A hike in FDI capital limits in the sector would further go a long

way in the process of consolidation.

In terms of credit growth, going forward India's core sector

is witnessing a revival of sorts. The manufacturing sector

especially led by steel and cement industries has shown significant

improvement in FY05. We expect the trend to continue. Hence as


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corporate growth picks up lending too is likely to see an up tick.

Retail credit off-take is expected to remain strong going forward

with the housing finance industry, the main contributor to credit

off-take from this segment, expected to grow between 20%-25% in

the next 3-4 years.

TELECOM

Although India's teledensity has improved from 3.64% in

March 2001 to over 7.5% in March 2004, we are way behind other

developing nations and also the Asian economies. The total annual

telecom revenue is estimated to be around Rs 435 bn and the sector

can broadly be divided into three segments, basic telephony,

cellular telephony and the Internet.

The cellular telephony segment has emerged as the fastest

growing segment in the Indian telecom industry. In fact, the

segment achieved a landmark in FY03 when for the first time;

more cellular subscribers were added than fixed line subscribers. A


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slew of tariff reduction in the past 18 months has helped the

segment to gain in popularity. The cellular segment is playing an

important role in the industry by making itself available in the rural

and semi urban areas where teledensities are the lowest and where

the fixed line services will take some time to come because of high

capital investments required building a network.

As far as the internet services are concerned, currently there

are about 130 ISPs (internet service providers) who cater to an

estimated 9.8 m users through 1.7 m connections. Currently, two

firms, Videsh Sanchar Nigam Ltd (VSNL) and Satyam Infoway

Ltd (Sify) dominate the internet services landscape by accounting

for nearly 66% of the market.

On the international basic telephony front, the end of

VSNL's monopoly in 2002 brought two private players in the

international basic telephony business and the immediate effect

was the fall in tariffs. In the first six months only, the tariffs fell by

50% and the trend is likely to continue. With the most favored

customer status given to VSNL by fixed line majors like BSNL

and MTNL going away in FY04, the segment witnessed fierce

competition

In order to ensure fair competition and protection of

consumer interests, Telecom Regulatory Authority of India (TRAI)

was established in 1997 for providing a policy framework and

guiding the companies in the right direction. Although, TRAI has

had few successes to its credit, there are a couple of issues like the


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current WLL row and the controversy regarding the move toward

an unification licensing regime (under this, one player can provide

all the services viz. Basic, cellular, International Long Distance,

National Long Distance in one circle or nationally) which need to

be resolved quickly so that it benefits both the companies and the

consumers.

Key points

Supply: Intense competition has resulted in prompt service to the

subscribers. However, smaller towns and villages continue to have

waiting periods on account of non-availability of adequate

infrastructure.

Demand: Given the low penetration levels in the country and

continuously falling tariffs, demand will continue to remain higher

in the foreseeable future across all the segments.

Barriers to entry: High capital investments, older and well-

established players who have a nation wide network, license fee,

continuously evolving technology and falling tariffs.

Bargaining power of suppliers: The suppliers to fixed line

providers have low bargaining power on account of monopoly ofBSNL and MTNL. In the cellular services, CDMA suppliers have

significant bargaining power, as it is a proprietary technology.


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Bargaining power of customers: A wide variety of choices

available to customers both in fixed as well as mobile telephony

have resulted in increased bargaining power for the customers.

Competition: The entry of fourth cellular player and

commencement of WLL services has resulted in intense

competition in the bigger cities. Reducing tariffs will hurt the new

entrants, as they will be unable to recover their high capital

investments.

Prospects:

As far as the fixed line business goes, the low penetration

levels in the country and the increasing demand for data based

services such as the internet will act as major catalysts in the

growth of this segment, which is expected to touch 66 m

subscribers by 2005. The huge market share of public sector

behemoths, MTNL and BSNL (together they account for 97% of

the total fixed line connections) is unlikely to dwindle significantly

in the near term. This is on account of high capital investments

required in setting up a nation wide network. As a result, the

private sector players will have to rely on key business centers and

pockets of high urbanization for their growth.

Increasing choice and one of the lowest tariffs in the world

have made the cellular services an attractive proposition for the

average consumer. The segment has grown at over 160% in FY03


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and almost 65% of the incremental subscribers in the telecom

sector were mobile phone users as compared to fixed line users. It

is being estimated that during the tenth five-year plan, around 31.6

m subscribers would jump onto the cellular bandwagon all over

India and this would entail an investment to the tune of Rs 252.4

bn. However, if the industry has to achieve the growth target and

attract the necessary investments, further policy measures like hike

in FDI limits may have to be implemented.

The International Long Distance (ILD) telephony business is

expected to witness increased competition with the entry of private

players. Already, private players like Bharti and Data Access have

started providing ILD services and this has pulled the tariffs down

by 50%. A couple of other players have also acquired the license

and are most likely to roll out their services in the near future.

Although this would result in depressed revenues in the near term,

low tariffs would ultimately result in increased volumes and higher

usage. Therefore we feel that instead of a single player calling the

shots, there will be enough room for every ILD service provider to

grow.

The segment of International Long Distance was witness to

another action recently, when Reliance Infocom acquired FLAG,

an international provider of wholesale telecom network transport

and communications. Thus VSNL, which was the sole provider of

international bandwidth till a year back, will face increased

competition as a result of the FLAG deal.


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The Internet services market is not growing as fast as was

expected. The high growth in the region of 50% seems to be a

thing of the past as the number of subscribers is growing by less

than 10% on a quarter-to-quarter basis. High charges seem to be

the major impediment for growth. A majority of the access charge

goes toward paying for the local telephone charge and these

telephone companies refuse to share the revenues or reduce the

charges. However with the entry of private players into the

business of fixed telephony, the charges are expected to come

down. The government's decision to allow voice-based services on

Internet is also likely to boost the prospects of the ISP industry.

AUTOMOBILES

The Indian automotive industry consists of five segments:

commercial vehicles; multi-utility vehicles & passenger cars; two-

wheelers; three-wheelers; and tractors. With 5,822,963 units sold

in the domestic market and 453,591 units exported during the first

nine months of FY2005 (9MFY2005), the industry (excluding

tractors) marked a growth of 17% over the corresponding previous.

The two-wheeler sales have witnessed a spectacular growth trend

since the mid nineties.

Two-wheelers: Market Size & Growth

In terms of volume, 4,613,436 units of two-wheelers were sold in

the country in 9MFY2005 with 256,765 units exported. The total


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two-wheeler sales of the Indian industry accounted for around

77.5% of the total vehicles sold in the period mentioned.

Demand Drivers

The demand for two-wheelers has been influenced by a number of

factors over the past five years. The key demand drivers for the

growth of the two-wheeler industry are as follows:

Inadequate public transportation system, especially in the semi-

urban and rural areas;

Increased availability of cheap consumer financing in the past 3-

4 years;

Increasing availability of fuel-efficient and low-maintenance

models;

Increasing urbanisation, which creates a need for personaltransportation;

Changes in the demographic profile;

Difference between two-wheeler and passenger car prices, which

makes two-wheelers the entrylevel vehicle;

Steady increase in per capita income over the past five years; and

Increasing number of models with different features to satisfy

diverse consumer needs.


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INFRASTRUCTURE

According to the India infrastructure Report (IIR),

currently 5.5 percent of the GDP is invested in the infrastructuresector. This needs to be increased to 7 percent within the next three

years and 8 per cent by 2005-06, by which time the annual level of

investment in infrastructural facilities is projected to treble or rise

even more, from the current level of Rs. 6000 billion (US$52

billion) by 2005-2006.

The total infrastructure investment requirements for the

next five years again have been estimated in the report at about Rs.

4000-4500.

The task of finding such large amounts and thereafter deploying

them productively calls for a close partnership between the public

and private sectors, with a vital role reserved for foreign capital.

To finance this large short fall, the domestic saving rate needs to

be increased by a minimum of 26.7%. besides this has to be

supplemented at the margin by FDI. However, this "margin is

indeed very important since the role of foreign investment has to

be read not only as a gap filler between saving and investment but

also as a means for bringing better technology and management.

MEDIA

The Indian entertainment and media (E&M) industry is poised to

grow at 19 per cent compound annual growth rate (CAGR) to

reach Rs 837.4 billion by 2010 from Rs. 353 billion (Rs 35,300


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crore).

The television segment is slated to grow from its present size of Rs

148 billion to Rs 427 billion by 2010, according to a Federation of

Indian Chambers of Commerce and Industry ( FICCI) and

PricewaterhouseCoopers (PwC) report.

Economic growth, rising income levels, consumerism, coupled

with technological advancements and policy initiatives taken by

the Indian government, which are encouraging the inflow of

investment, will prove to be the key drivers for the entertainment

and media industry.

The industry has been forecast to outperform the economic growth

in each year till 2010.

Today media penetration is poor in lower socio-economic classes,

but efforts to increase it even slightly are likely to deliver much

higher results, simply due to the absolute numbers being large, he

added.

Strong economic growth, rising consumer spending and regulatory

corrections are drawing foreign investments in most segments of

the E&M industry, especially the print media.


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ANALYSIS

This chapter concentrates on testing the performance of

selected securities with market index. This is done by employing

statistical or technical tools viz., correlation analysis, relative

strength index and moving average. In this study, an attempt is

made to test the responsiveness of the selected security to the

market index (BSE sensex). For this proposes of testing five major


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scrips were considered from five different industries (aluminum

consumer goods, pharmaceutical, banking, and telecom).

In the below given tables and graphs, correlation co-efficient

was calculated by taking price movements and index movements,

strength of security were studied by drawing relative strength

index and return on security is compared with market return by

moving average.

Correlation co-efficient = (covariance of market and stock) / (SD

Of stock * SD of market)

Relative strength index = (security price / market indicator)

Monthly moving average= (opening price / base price) * 100

Table showing price movement and RSI for HINDALCO

Month Hindalco Sensex RSI

Dec-04 134.21 6602.69 0.020327Jan-05 122.33 6555.94 0.018659

Feb-05 131.18 6713.86 0.019539

Mar-05 121.69 6492.82 0.018742

Apr-05 111.6 6154.44 0.018133

May-05 106.33 6715.11 0.015834

Jun-05 112.95 7193.85 0.015701

Jul-05 119.5 7635.42 0.015651

Aug-05 134.94 7805.43 0.017288


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0

50

100

150

200

250

Dec- Jan

-Fe

b-M a

r- A pr-

M ay- Jun

-Jul

-Au

g-Se

p- Oct-

Nov-

Dec- Jan

-Fe

b-M a

r- Apr-

May-

0

2000

4000

6000

8000

10000

12000

14000

Hindalco

Sensex

Graph showing RSI for HINDALCO


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0

0.005

0.01

0.015

0.02

0.025

Dec-0

4

Jan-05

Feb-05

Mar-

05

Apr-0

5

May-0

5

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar-

06

Apr-0

6

May-0

6

Table & graph showing monthly moving for HINDALCO

Month Hindalco Sensex

Dec-04 100 100

Jan-05 91.1482 99.29196

Feb-05 97.74234 101.6837

Mar-05 90.67134 98.33598

Apr-05 83.15327 93.2111

May-05 79.22659 101.7026

Jun-05 84.15915 108.9533Jul-05 89.03956 115.641

Aug-05 100.5439 118.2159

Sep-05 103.0624 130.7722

Oct-05 79.97169 119.5319

Nov-05 93.77096 133.1095

Dec-05 106.8475 142.3349

Jan-06 122.7926 150.2401

Feb-06 114.224 157.0608

Mar-06 135.9437 170.8389

Apr-06 167.2007 182.3887

May-06 171.1869 187.1919


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0

20

40

60

80

100

120

140

160

180

200

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

Hindalco

Sensex

Monthly moving average shows that if an investor has invested Rs

100, in both the index and in security. At the end of the period, the

security fetches Rs 71 where as market average return is Rs 87.


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Table showing price movement and RSI for HLL

Month HLL Sensex RSI

Dec-04 143.5 6602.69 0.021734Jan-05 159.85 6555.94 0.024382

Feb-05 144 6713.86 0.021448

Mar-05 131.75 6492.82 0.020292

Apr-05 137.7 6154.44 0.022374

May-05 143.15 6715.11 0.021318

Jun-05 163.6 7193.85 0.022742

Jul-05 166.95 7635.42 0.021865

Aug-05 165.65 7805.43 0.021222

Sep-05 181.15 8634.48 0.02098

Oct-05 161.4 7892.32 0.02045

Nov-05 181.95 8788.81 0.020702

Dec-05 197.25 9397.93 0.020989

Jan-06 194.8 9919.89 0.019637

Feb-06 241.95 10370.24 0.023331

Mar-06 272.3 11279.96 0.02414

Apr-06 287.95 12042.56 0.023911

May-06 284.85 12359.7 0.023047

The resulting correlation from the above data is +0.972 thismeans there is appositive correlation but not the perfect one.


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Graph showing price movements for HLL

0

50

100

150

200

250

Dec-0

4

Jan-05

Feb-

05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-0

5

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-

06

Mar

-06

Apr-0

6

May

-06

HLL

Sensex

Graph showing RSI for HLL

0

0.005

0.01

0.015

0.02

0.025

0.03

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

RSI


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Table & graph showing monthly moving for HLL

HLL Sensex

Dec-04 100 100

Jan-05 111.3937 99.29196

Feb-05 100.3484 101.6837

Mar-05 91.81185 98.33598

Apr-05 95.95819 93.2111

May-05 99.7561 101.7026

Jun-05 114.007 108.9533

Jul-05 116.3415 115.641

Aug-05 115.4355 118.2159

Sep-05 126.2369 130.7722

Oct-05 112.4739 119.5319Nov-05 126.7944 133.1095

Dec-05 137.4564 142.3349

Jan-06 135.7491 150.2401

Feb-06 168.6063 157.0608

Mar-06 189.7561 170.8389

Apr-06 200.662 182.3887

May-06 198.5017 187.1919

0

0.005

0.01

0.015

0.02

0.025

0.03

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

RSI

The graph shows that, if Rs 100 is invested in December

2004 in HLL is now 98 where as the bench mark BSE Sensex


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recorded a rise of 87. There fore the over all market has been

bullish, HLL has under performed.

Table showing price movement and RSI for RANBAXY

Month Ranbaxy Sensex RSI

Dec-04 625.7 6602.69 0.094764

Jan-05 542.48 6555.94 0.082746

Feb-05 509.9 6713.86 0.075947

Mar-05 501.93 6492.82 0.077305

Apr-05 456.43 6154.44 0.074163

May-05 550.5 6715.11 0.081979Jun-05 528.83 7193.85 0.073511

Jul-05 470.6 7635.42 0.061634

Aug-05 525.3 7805.43 0.067299

Sep-05 491.25 8634.48 0.056894

Oct-05 350.85 7892.32 0.044455

Nov-05 385.15 8788.81 0.043823

Dec-05 362.35 9397.93 0.038556

Jan-06 399.1 9919.89 0.040232

Feb-06 429.4 10370.24 0.041407

Mar-06 431.6 11279.96 0.038263

Apr-06 472.55 12042.56 0.03924

May-06 506.55 12359.7 0.040984

The resulting co-efficient of correlation from the above data

is -0.398.

By seeing the RSI in the above table we can say the securityperformed well in starting of the period but gradually it is loosing

its ground.


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Graph showing price movements for RANBAXY

0

100

200

300

400

500

600

700

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

0

2000

4000

6000

8000

10000

12000

14000

Ranbaxy

Sensex

Graph showing RSI for RANBAXY

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06


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Table & graph showing monthly moving for RANBAXY

Monthly Ranbaxy Sensex

Dec-04 100 100

Jan-05 86.6997 99.29196

Feb-05 81.49273 101.6837

Mar-05 80.21895 98.33598

Apr-05 72.9471 93.2111

May-05 87.98146 101.7026

Jun-05 84.51814 108.9533

Jul-05 75.21176 115.641

Aug-05 83.95397 118.2159

Sep-05 78.51207 130.7722

Oct-05 56.0732 119.5319Nov-05 61.55506 133.1095

Dec-05 57.91114 142.3349

Jan-06 63.78456 150.2401

Feb-06 68.62714 157.0608

Mar-06 68.97874 170.8389

Apr-06 75.52341 182.3887

May-06 80.95733 187.1919

0

20

40

60

80

100

120

140

160

180

200

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-05

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

Ranbaxy

Sensex

Rs 100 invested in this scrip in December 2004 is now worth

Rs 80 the bench mark BSE Sensex recorded a rise of 87%.


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Table showing price movement and RSI for ICICI

Month ICICI Bank Sensex RSI

Dec-04 370.75 6602.69 0.056151

Jan-05 360.6 6555.94 0.055004

Feb-05 380.75 6713.86 0.056711

Mar-05 393 6492.82 0.060528

Apr-05 360.2 6154.44 0.058527

May-05 392.05 6715.11 0.058383

Jun-05 421.55 7193.85 0.058599

Jul-05 536 7635.42 0.070199Aug-05 481.7 7805.43 0.061713

Sep-05 600.35 8634.48 0.069529

Oct-05 497.7 7892.32 0.063061

Nov-05 537.15 8788.81 0.061117

Dec-05 584.7 9397.93 0.062216

Jan-06 609.15 9919.89 0.061407

Feb-06 615.1 10370.24 0.059314

Mar-06 589.25 11279.96 0.052239

Apr-06 590.25 12042.56 0.049014

May-06 638.6 12359.7 0.051668

The resulting correlation from above data is +0.891 this

means the security is having a perfect positive correlation with

market index.


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72

Graph showing price movements for ICICI

0

100

200

300

400

500

600

700

Dec-04

Jan-05

Feb-05

Mar-05 Ap

r-05May

-05Jun-05 Ju

l-05Au

g-05Se

p-05Oc

t-05No

v-05De

c-05Jan-06

Feb-06

Mar-06 Ap

r-06May

-06

0

2000

4000

6000

8000

10000

12000

14000

ICICI Bank

Sensex

Graph showing RSI for ICICI

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06


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Table & graph showing monthly moving for ICICI

Month ICICI Bank Sensex

Dec-04 100 100

Jan-05 97.26230614 99.29196

Feb-05 102.6972353 101.6837

Mar-05 106.0013486 98.33598

Apr-05 97.15441672 93.2111

May-05 105.7451113 101.7026

Jun-05 113.7019555 108.9533

Jul-05 144.5718139 115.641

Aug-05 129.925826 118.2159

Sep-05 161.9285233 130.7722

Oct-05 134.2414026 119.5319Nov-05 144.881996 133.1095

Dec-05 157.70735 142.3349

Jan-06 164.3020904 150.2401

Feb-06 165.9069454 157.0608

Mar-06 158.934592 170.8389

Apr-06 159.2043156 182.3887

May-06 172.2454484 187.1919

0

20

40

60

80

100

120

140

160

180

200

Dec-0

4

Jan

-05

Feb

-05

Mar-0

5

Apr-0

5

May

-05

Jun

-05

Jul-05

Aug

-05

Sep

-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan

-06

Feb

-06

Mar-0

6

Apr-0

6

May

-06

ICICI Bank

Sensex


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75

Graph showing price movements for BHARTI TELE

0

50

100

150

200

250

300

350

400

450

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

0

2000

4000

6000

8000

10000

12000

14000

BharthiSensex

Graph showing RSI for BHARTI TELE

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

0.045

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06


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Table & graph showing monthly moving for BHARTI TELE

Month Bharthi Sensex

Dec-04 100 100

Jan-05 106.8414 99.29196

Feb-05 104.4063 101.6837

Mar-05 95.94156 98.33598

Apr-05 96.08071 93.2111

May-05 103.9193 101.7026

Jun-05 112.6391 108.9533

Jul-05 131.308 115.641Aug-05 146.3126 118.2159

Sep-05 161.6419 130.7722

Oct-05 149.6521 119.5319

Nov-05 165.8395 133.1095

Dec-05 160.3432 142.3349

Jan-06 164.9351 150.2401

Feb-06 167.5788 157.0608

Mar-06 191.4889 170.8389

Apr-06 189.2161 182.3887

May-06 195.6633 187.1919

0

50

100

150

200

250

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

Bharthi

Sensex


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From the above Graph and Table the investor who invested

Rs.100.00 in this security in December-2004 is now worth for

Rs.195. Where BSE sensex is raised by Rs 87.

Table showing price movement and RSI for Bajaj Auto

Month Bajaj Sensex RSI

Dec-04 1131.2 6602.69 0.171324

Jan-05 1039.2 6555.94 0.158513

Feb-05 1033.4 6713.86 0.15392

Mar-05 1082.1 6492.82 0.166661

Apr-05 1082.7 6154.44 0.175922

May-05 1230.55 6715.11 0.183251

Jun-05 1383.6 7193.85 0.192331Jul-05 1449.1 7635.42 0.189787

Aug-05 1412.4 7805.43 0.180951

Sep-05 1694.3 8634.48 0.196225

Oct-05 1707.2 7892.32 0.216312

Nov-05 2009.95 8788.81 0.228694

Dec-05 2001.1 9397.93 0.21293

Jan-06 2154.65 9919.89 0.217205

Feb-06 2601.25 10370.24 0.250838

Mar-06 2746.25 11279.96 0.243463

Apr-06 3011.1 12042.56 0.250038

May-06 3130.35 12359.7 0.253271

The resulting co-efficient of correlation from the above data is

+0.99 this means the scrip has the perfect positive correlation and

the security is closely related to the market index.

Graph showing price movements for BAJAJ AUTO


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0

500

1000

1500

2000

2500

3000

3500

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

0

2000

4000

6000

8000

10000

12000

14000

Bajaj

Sensex

Graph showing RSI for BAJAJ AUTO

0

0.05

0.1

0.15

0.2

0.25

0.3

Dec-0

4

Jan-05

Feb-05

Mar

-05

Apr-0

5

May

-05

Jun-05

Jul-05

Aug-05

Sep-05

Oct-0

5

Nov-0

5

Dec-0

5

Jan-06

Feb-06

Mar

-06

Apr-0

6

May

-06

Table & graph showing monthly moving for BAJAJ AUTO

Month Bajaj Sensex

Dec-04 100 100

Jan-05 91.86704 99.29196

Feb-05 91.35431 101.6837

Mar-05 95.65948 98.33598

Apr-05 95.71252 93.2111

May-05 108.7827 101.7026

8/7/2019 Performance of Selected Securities in Comparison With Market Index-Vishwas HK

Performance of Selected Securities in Comparison With Market Index-Vishwas HK-04120

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Transcript of Performance of Selected Securities in Comparison With Market Index-Vishwas HK-04120