RESEARCH REPORT

“STABILITY OF BETA OVER MARKET PHASES:

AN EMPIRICAL STUDY ON INDIAN STOCK MARKET”

Project Guide:
Prof.,miss Sana moid

Submitted By:
RAVI SRIVASTAVA
Roll No: - 0928170042
MBA IV Semester
2009-2011
In Partial Fulfillment of the Requirement for Masters of Business
Administration (M.B.A.)
Degree Programme
of Gautam Buddh Technical University Lucknow

1
PREFACE

2
 PREFACE

The main motive behind carrying out this project is to study about the stability of
Beta over Market Phases.
The significant role played by beta in diverse aspects of financial decision making has
forced people from small investors to investment bankers to rethink on beta in the era of
globalization. In the present changing market condition, it is imperative to understand the
stability of beta which augments an efficient investment decisions with additional
information on beta. This study examined the stability of beta for India market for a four
year period from Feb, 2007 to Feb, 2011. The monthly return data of 15 selected stocks
are considered for examining the stability of beta in different market phases. This
stability of beta is tested using the Ordinary Least Square (OLS) technique. The results
obtained from this, that there are most of the stocks signal of beta instability over the
market phases.
I have tried to touch all the important points relevant to the project. I hope the
report will be appreciated by those who will go through it.

3
ACKNOWLEDGEMENT

4
 ACKNOWLEDGEMENT

Any project is a collaborative effort. Many people helped me along the way to the
completion of this project. Of course there is not enough space to thank everyone who
contributed to this project. But certain people stand out as having made a difference and I
wish to thank the many individuals who made this project possible. First of all I would
like to express my sincere gratitude to Prof.,miss Sana moid my project guide for
putting me into a challenging project and I would like to thank him for his/her keen
interest, cogent observation and thought a minded comment that helps me to complete my
project. I especially want to thank my college faculty for giving his valuable guidance
and cooperation, which helped me a lot in the completion of my project.

I would like to present a deep bow of gratitude to my family and friends who have been
of great help directly and indirectly.
Thanks to you all.
(Ravi srivastava)

5
 STUDENT
DECLARATION

6
 DECLARATION

I, Ravi srivastava Student of Master of Business

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

Date : (Ravi srivastava)

LIST OF CONTENTS

7
  College Certificate 2

 Preface 3
 Acknowledgement 5
 Student Declaration 7
 Executive Summary 11

1. CHAPTER-I 14
 Introduction 15

 Capital Market 16
 Significance, Role or Functions of Capital Market 17
 Structure of Indian Capital Market with Diagram 19
 Types of Securities Markets 21
 Stock Exchange 24
 Characteristics of the Stock Market

24

 Functions of the Stock Exchange Market

26
 Kinds of Speculators 29

 Concept of Risk and Return 31

 Types Of Risk  31
 Systematic Risk 31

 Unsystematic Risk 32

 Stock Beta and Volatility 33

8
  Beta Values 33
 Interpretation of Beta Value 35
 CAPM Theory and Beta 37
 Advantages and Disadvantages of Beta 38
 Beta Calculations 39
 Alpha Values 40

2. CHAPTER –II 41
 Literature Review 42

3. CHAPTER – III 46
 Research Methodology 47

 Research Objective 48
 Research Design 49
 Data collection 49
 Sample Design 50
 Research Instrument/ Method 50
 Analytical Tools 51

4. CHAPTER – IV 52
 Data Analysis & Findings
53
 Identification of Market Phase 54
 Beta Value of Individual Securities 57
 Findings 59

5. CHAPTER – V 60
 Recommendation & Suggestion 61

9
5. CHAPTER – VI 62
 Conclusions 63

 Limitation of Research 64
 Bibliography 65
 Annexure 66-88

EXECUTIVE SUMMARY

10
 EXECUTIVE SUMMARY

Beta is the systematic relationship between the return on the portfolio and the
return on the market (Rosenberg and Marathe, 1979). It refers to the slope in a linear
relationship fitted to data on the rate of return on an investment and the rate of return of
the market (or market index). Beta is a technique of telling how volatile a stock is
compared with the rest of the market. When the return on the portfolio is more than the
return on the market, beta is greater than one and those portfolios are referred to as
aggressive portfolios. That means, in a booming market condition, aggressive portfolio
will achieve much better than the market performance. While in a bearish market
environment the fall of aggressive portfolios will also be much prominent. On the other
hand, when the return on portfolio is less than the market return, beta measure is less than
one and those portfolios are treated as defensive. In case of defensive portfolios, when the
market is rising, the performances associated with it will be less than the market
portfolio. However, when the market moves down, the fall in the defensive portfolios
would also be less than the market portfolio. In those situations where, the return of the
portfolio accurately matches the return of the market, beta is equal to one that rarely
happens in real life situations.

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

stock selection, capital budgeting, and performance evaluation. It is significant for both
practitioners and academics. Practitioners use beta in financial decision making to

11
estimate cost of capital. Beta is also a key variable in the academic research; for example
it is used for testing asset pricing models and market efficiency. Given the importance of
this variable a pertinent question for both practitioners and academics is how to obtain an
efficient estimation. This study is aimed at testing the beta stability for India. Further the
stability of beta is of great concern as it is a vital tool for almost all investment decisions
and plays a significant role in the modern portfolio theory.

The estimation of beta for individual securities using a simple market model has
been widely evaluated as well as criticized in the finance literature. One important aspect
of this simple market model is the assumption of symmetry that propounds the estimated
beta is valid for all the market conditions. Many studies questioned this assumption and
examined the relationship between beta and market return in different market conditions,
but the results are mixed and inconclusive. In this Report, an attempt is made to
investigate the stability of beta in the Indian stock market during the last 4 years i.e. from
February 2007 to February, 2009. With this objective, the paper is divided into Six
Chapters. Chapter 1 includes Introduction, Section 2 reviews the existing literature
Section 3 describes the data sources and methodology. Section 4 outlines the results of
tests for investigating the stability of beta and its findings. Section 5 describes the
Recommendation & findings and Section 6 is dedicated to summary, conclusion,
Limitations and scope for further research in the area.

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

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

 Research helped peoples to know about the volatility of the Securities. And helps in
taking the right decisions related to the investment in the right securities.

 A firsthand experience was taken as to how the stock market works and what position
of the various securities in the market.

12
  Learned the different Market Phases i.e. Bullish or Bearish in last 4 years period (Feb,
2007 to Feb, 2011).

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

CHAPTER-I

INTRODUCTION 15

 Capital Market 16
 Significance, Role or Functions of Capital Market 17
 Structure of Indian Capital Market with Diagram 19
 Types of Securities Markets 21

 Stock Exchange 24
 Characteristics of the Stock Market

24

 Functions of the Stock Exchange Market

26
 Kinds of Speculators 29

 Concept of Risk and Return 31

13
  Types Of Risk  31

 Systematic Risk 31
 Unsystematic Risk 32

 Stock Beta and Volatility 33

 Beta Values 33
 Interpretation of Beta Value 35
 CAPM Theory and Beta 37
 Advantages and Disadvantages of Beta 38
 Beta Calculations 39
 Alpha Values 40

INTRODUCTION

14
 CAPITAL MARKET

Sources from which long-term capital is raised

for the setting up the sustained growth of
companies. The stock exchange is a part of the
capital market, not only because it readily
provides money for new or existing ventures,
but also because it helps investors to trade in
their shares and maintains the liquidity of
investments. Investment in further public and rights issues, convertible and non-
convertible debentures, therefore, become an attractive proposition and companies are
able to raise the resource they need. The capital market is distinct from money market –
banks and lending institutions – which provides short – term finance.

Meaning and Concept of Capital Market

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

15
necessary to study its correct meaning. Broadly speaking the capital market is a market
for financial assets which have a long or indefinite maturity. Unlike money market
instruments the capital market intruments become mature for the period above one year.
It is an institutional arrangement to borrow and lend money for a longer period of time. It
consists of financial institutions like IDBI, ICICI, UTI, LIC, etc. These institutions play
the role of lenders in the capital market. Business units and corporate are the borrowers in
the capital market. Capital market involves various instruments which can be used for
financial transactions. Capital market provides long term debt and equity finance for the
government and the corporate sector. Capital market can be classified into primary and
secondary markets. The primary market is a market for new shares, where as in the
secondary market the existing securities are traded. Capital market institutions provide
rupee loans, foreign exchange loans, consultancy services and underwriting.

SIGNIFICANCE, ROLE OR FUNCTIONS OF CAPITAL MARKET

Like the money market capital market is also very important. It plays a significant role in
the national economy. A developed, dynamic and vibrant capital market can immensely
contribute for speedy economic growth and development.
Let us get acquainted with the important functions and role of the capital market.

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

savings from the economy. It mobilizes funds from people for further investments in
the productive channels of an economy. In that sense it activate the ideal monetary
resources and puts them in proper investments.

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

net addition to the existing stock of capital in the economy. Through mobilization of
ideal resources it generates savings; the mobilized savings are made available to
various segments such as agriculture, industry, etc. This helps in increasing capital
formation.

16
3. Provision of Investment Avenue : Capital market raises resources for longer periods
of time. Thus it provides an investment avenue for people who wish to invest
resources for a long period of time. It provides suitable interest rate returns also to
investors. Instruments such as bonds, equities, units of mutual funds, insurance
policies, etc. definitely provides diverse investment avenue for the public.

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

production and productivity in the national economy. As it makes funds available for
long period of time, the financial requirements of business houses are met by the
capital market. It helps in research and development. This helps in, increasing
production and productivity in economy by generation of employment and
development of infrastructure.

5. Proper Regulation of Funds: Capital markets not only helps in fund mobilization,
but it also helps in proper allocation of these resources. It can have regulation over
the resources so that it can direct funds in a qualitative manner.

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

types of services. It includes long term and medium term loans to industry,
underwriting services, consultancy services, export finance, etc. These services help
the manufacturing sector in a large spectrum.

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

avenue is continuously available for long term investment. This is a liquid market as
it makes fund available on continues basis. Both buyers and seller can easily buy and
sell securities as they are continuously available. Basically capital market
transactions are related to the stock exchanges. Thus marketability in the capital
market becomes easy.

17
These are the important functions of the capital market.

Final Glance and Conclusion on Capital Market

The lack of an advanced and vibrant capital market can lead to underutilization of
financial resources. The developed capital market also provides access to the foreign
capital for domestic industry. Thus capital market definitely plays a constructive role in
the over all development of an economy.

STRUCTURE OF INDIAN CAPITAL MARKET WITH DIAGRAM

Broadly speaking the capital market is classified in to two categories. They are the
Primary market (New Issues Market) and the Secondary market (Old (Existing) Issues
Market). This classification is done on the basis of the nature of the instrument brought in
the market. However on the basis of the types of institutions involved in capital market, it
can be classified into various categories such as the Government Securities market or
Gilt-edged market, Industrial Securities market, Development Financial Institutions
(DFIs) and Financial intermediaries. All of these components have specific features to
mention. The structure of the Indian capital market has its distinct features. These
different segments of the capital market help to develop the institution of capital market
in many dimensions. The primary market helps to raise fresh capital in the market. In the
secondary market, the buying and selling (trading) of capital market instruments takes
place. The following chart will help us in understanding the organizational structure of
the Indian Capital market.

18
1. Government Securities Market : This is also known as the Gilt-edged market. This
refers to the market for government and semi-government securities backed by the
Reserve Bank of India (RBI).

2. Industrial Securities Market : This is a market for industrial securities i.e. market
for shares and debentures of the existing and new corporate firms. Buying and
selling of such instruments take place in this market. This market is further classified
into two types such as the New Issues Market (Primary) and the Old (Existing)
Issues Market (secondary). In primary market fresh capital is raised by companies by
issuing new shares, bonds, units of mutual funds and debentures. However in the
secondary market already existing i.e old shares and debentures are traded. This
trading takes place through the registered stock exchanges. In India we have three
prominent stock exchanges. They are the Bombay Stock Exchange (BSE), the
National Stock Exchange (NSE) and Over The Counter Exchange of India (OTCEI).

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

of Indian capital market. This comprises various financial institutions. These can be
special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc. These

19
 financial institutions provide long term finance for those purposes for which they are
set up.

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

market is the financial intermediaries. This comprises various merchant banking
institutions, mutual funds, leasing finance companies, venture capital companies and
other financial institutions.

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

SEBI Regulates Indian Capital Market

For the smooth functioning of the capital market a proper coordination among above
organizations and segments is a prerequisite. In order to regulate, promote and direct the
progress of the Indian Capital Market, the government has set up 'Securities and
Exchange Board of India' (SEBI). SEBI is the supreme authority governing and
regulating the Capital Market of India.

TYPES OF SECURITIES MARKETS

Securities markets are the markets in which securities, or financial assets, are traded.
There are two different types of securities markets. The first type is known as the primary
market: the primary market is used for trading newly issued securities. The second type
of securities market is known as the secondary market: the secondary market is used for
trading securities that have already been issued. Primary markets and secondary markets
are generally used for trading equity securities.

Primary Markets

Primary markets, or primary financial markets, are where new financial assets are issued.
There are two main types of primary-market issues. The first type of issue is known as an

20
initial public offering, or IPO. These issues are the very first shares a company offers to
the public. Investment bankers serve as underwriters for these issues: they facilitate the
process of selling these initial public offerings.

The second type of issue is known as a seasoned new issue. These issues are new shares
that are being issued by a company that already has publicly traded shares on existing
stock exchanges. A seasoned new issue is the way a company sells more shares to the
investing public.

Secondary Markets

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

owned shares of stocks, bonds, and other financial assets). Secondary markets consist of
both organized exchanges, such as the New York Stock Exchange, and over-the-counter
or electronic markets, such as NASDAQ: secondary markets consist of markets in which
existing securities are traded.

Organized stock exchanges: Organized stock exchanges are markets that are used to
facilitate the trading of financial instruments. The main organized stock exchanges are
the New York Stock Exchange and the American Stock Exchange. There are also
regional stock exchanges, such as the Pacific, Chicago, Philadelphia, Cincinnati,
Intermountain, Spokane, and Boston Stock Exchanges, but these stock exchanges are
very small.

The largest stock exchange in the United States is the New York Stock Exchange. This
stock exchange is more than two hundred years old, and it is still limited to 1,366 seats:
the same number of seats it has had since 1953. The New York Stock Exchange includes
over 3,000 listed companies. Generally, 80 percent of the daily trading volume in the
United States is done on the New York Stock Exchange.

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

that allows investors to execute trades without going through specialists or
intermediaries. That is, there is no single physical location (exchange) where stocks are

21
traded, rather these trades are executed through the National Association of Securities
Dealer Automated Quotation System (NASDAQ) which links various dealers and brokers
through a computer or telephone based system. Usually the bigger companies are traded
on an exchange rather than an OTC.  These trades are also executed through the National
Market System, a system under the sponsorship of the National Association of Securities
Dealers (NASD), which trades stocks of specific sizes, profitability, and trading
requirements. NASD also trades “pink sheets,” or lists of small companies not listed on
any exchange; these stocks are traded by brokers through a network of phone and
computer systems and may be significantly more risky.

Secondary bond markets: An organized exchange for individual retail investors to trade
bonds does not exist. This may be because there is little demand for bonds among
individual investors; this may also be because the transaction costs to trade bonds are so
small. Generally, individuals must work with a broker who buys or sells bonds through a
bond dealer.

Government bond trading: Government bond trading is dominated by investment

houses, commercial banks, and the Federal Reserve. Some bonds, such as Series EE and I
Bonds and some Treasury securities, can be purchased directly over the Internet at
www.treasurydirect.gov.

International stock markets: There are domestic stock exchanges in the developed
countries and in many of the emerging or developing countries.] Most nations have
securities exchanges; these markets  trade more than $25 trillion in assets. In the U.S.
stock markets  investors can often trade American Depository Receipts (ADRs), which
are receipts for -shares that are held on deposit by foreign banks and represent ownership
of companies which have their primary listing on exchanges outside the United States.-.
Buying an ADR is very similar to buying the underlying domestic share from their home
market, except you get your dividends in U.S. dollars and your annual report information
in English. Another way to invest in international shares is to invest in mutual funds:
many mutual funds invest internationally.

22
23
 STOCK EXCHANGE

Stock exchange market refers to an organized market where govt. Securities and shares,
bonds and debentures of the benefited trading units are regularly transacted. Its business
is carried on with in a particular building in which a person can easily convert his shares
into cash or new securities. Thus it is a market for the exchange of transfer able securities
by providing a continuous market.

The term stock exchange is referred by some people to stat Market. Therefore some
writer says, "It is a place to get rich quick while others regard as place of gambling.The
securities of public companies can be transacted in the exchange only if they have been
approved by the committee of the stock exchange.

A company desiring its shares to be approved must first satisfy very rigid rules
concerning the prospectus. It must also agree to abide by the regulations of the stock
exchange about any aspects of its conduct.

FEATURES OF STOCK EXCHANGE MARKET

1. Specialized market. Stock exchange is a specialized market for the purchase and sale
of industrial and financial securities.

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

3. Basis of formation. Its activities are controlled by the company ordinance in our
country. It can be formed as company limited by guarantee or company limited by shares

24
CHARACTERISTICS OF THE STOCK MARKET

The stock market in the United States is made up of stock exchanges such as the New
York Stock Exchange (NYSE) and NASDAQ and self-regulating organizations such as
the Pink Sheets, where smaller companies trade over the counter. The NYSE has
acquired the American Stock Exchange, the Pacific Stock Exchange, the Philadelphia
Stock Exchange, and others.

Growth Capital

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

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

Liquidity

The free and transparent trading that takes place in the stock market prices all
stocks according to demand and supply, bid and ask. In this way it provides
liquidity for investors seeking to transact sales of their holdings through this active
pricing mechanism.

Transparency

The public nature of trading maintains transparency in financial transactions.

Efficiency, growth, freedom and variety are all possible because of transparency
that allows all participants to access the bid and ask prices of all securities traded
on the market and because all participants have access to the same information.

Organization

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

the SEC, FINRA and other legal regulatory and self-regulating bodies on state and
professional levels that serve to create an organized and liquid group of stock
exchanges and stock trading platforms.

25
 Economic Indicator

One of the ten components of the Leading Economic Indicators is made up of the
Standard & Poor's 500 Stock Index, one of the major stock market indexes. The
direction of trading activity in the stock market provides an indication of the state
of commerce and overall confidence in the economy

FUNCTIONS OF THE STOCK EXCHANGE MARKET

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

 To promote the savings and for them to be canalized towards of carrying through
investment projects that otherwise wouldn’t   be possible you need that the issuing
institution of the securities to be admitted for quoting. The negotiations will be done on
the primary market.
 To provide liquidity to the investors. The investor can   recuperate the money invested
when needed. For it, he has to go to the stock exchange market to sell the securities
previously acquired. This function of the stock market is done on the secondary market.

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

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

 To provide official information about the quantities that are negotiated and of the quoted
prices.
 To fix the prices of the securities according to the fundamental law of the offer and the
demand.

Specifying a bit more and centering on the two main agents that intervene in the market,
investors and companies, we could do the following classification:

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

26
 It permits him the access to the profitable activities of the big companies.
 It offers liquidity to the security investments, through a place in which to sell or buy
securities.
 It permits for the investor to have a political power in the companies in which he invests
its savings due that the acquisition of ordinary shares gives him the right (among other
things) to vote in the general shareholders meetings of the company in question.
 It offers the possibility of diversifying   your portfolio by enlarging the field of strategy of
investments due to alternative options, as could be the derived market, the money market,
etc.

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

 It supplies them with the obtaining of long-term funds that permits the company to make
profitable activities or to do determine projects that otherwise wouldn’t be possible to
develop for lack of financing. Also, this funding signifies a less cost than if obtained at
other channels.
 The securities quoted at the stock exchange market usually have more fiscal purpose
advantages for the companies.
 It offers to the company’s free publicity, which in other way would suppose considerable
expenses. The institution is objecting of attention of the media (television, radio, etc.) in
case any important change in its owners (the share holders).

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

Therefore we can see how the stock exchange market supposes a great advantage to the
companies, but there are also some inconveniences to have in mind:

 First of all, they need of a series of conditions to be apt to enter to the quotations, not all
the companies that apply can do it.
 The issuing of shares may suppose a loss of power for the founders of the company.
Anyway, this is very relative because it will depend on the grade of atomization on the

27
 participations of the new shareholders and of the percentage of shares that the founders
keep over the total capital of the company.
 If for example a 49% of the share capital is in hands of the founders, these could loose
the control of in case the other 51% would be in hands of one main shareholder.
However, this rarely happens, due that the share capital that usually goes to the stock
market tends to be distributed between a great number of shareholders that acquire
modest participations in respect to that of the capital of the company the founders may
still keep control with share capital is distributed between a great number of participants.
 Now then, the property of these shares implies the possession of certain rights over the
company in which you participate.

These are: political rights, among which appears the possibility of participating in the
general share holders meetings and in the administration of the company by means of the
execution of your rights to vote; and the economic right, which embraces the possibility
of receiving dividends, preferential rights of subscription, the transmission of shares
(selling) and the right to the liquidity value.

This last implies that at the moment in which the company is liquidated, what remains is
proportionally divided between the shareholders.

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

 The shares may pass to be property of unknown people to the founders. At the moment in
which they are object of quotations at the stock exchange market any supplier of capital
may have them. If it’s a company that previously knew all its shareholders, considering
this as an asset of value to the company. The stock market quotation may generate an
important change that will not always be positive.
 The companies that are quoted at the stock market offer a better transparency, in a way
that the general public may have access to any information related to their evolution and
activities.
 This makes them have a greater control and to supervise every movement done.

28
KINDS OF SPECULATORS

“Four kinds of speculators operate in the Indian Stock Exchange. They are known
as bull, bear, stag and lame duck. A Bull also called as Tejiwala is an operator who
is hopeful of price rise in the near future.”

Four kinds of speculators operate in the Indian Stock Exchange. They are known as bull,
bear, stag and lame duck. A Bull also called as Tejiwala is an operator who is hopeful of
price rise in the near future. In anticipation of price rise he makes purchases of shares and
other securities with the intention of selling them at higher prices in future. He being a
speculator has no intention of taking delivery of securities but deals only in difference of
prices. Such as a speculator is called a Bull because of his resemblance of behaviour with
a bull. As a bull is famous for throwing up the opponent in the air, similarly a bull
speculator also takes the price of securities high up in the air. He does this by placing
high-value purchase orders.

A bear or a Mandiwala on the other hand is a speculator who is wary of fall in prices
and hence sells securities so that he may buy them at cheap price in future. A bear does
not have securities at present but sells them at higher prices in anticipation that he will
supply them business purchasing at lower prices in the future. If the prices move down as
per the expectations of the bear he will earn profits out of these transactions. 

Just as a bear presses his victims down to the ground, the bear speculator tends to force
down the prices of different securities. It so happens that when bearish operators are bent
upon selling securities, the prices also automatically come down. It is a usual practice that
a bear is not interested in taking the delivery of securities but he is desirous of getting the
variation in prices, provided the prices come down. In case prices rise then he will have
to pay the difference between the prices at which he purchased the securities and the
prevailing prices on the date of delivery.

Then comes a stag. A stag is that type of speculator who treads his path very carefully.
He applies for shares in new companies and expects to sell them at a premium if he gets

29
an allotment. He selects those companies whose shares are most in demand and are likely
to carry a premium. He sells the shares before being called to pay the allotment money. A
stag does not indulge in purchase and sale of shares in the market like a bull and a bear. A
Lame Duck is nothing but a stressed bear. When a bear finds it difficult to complete his
promise he is labeled as a lame duck.

30
 CONCEPT OF RISK AND RETURN

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

amplified returns is known as investment activity. For any investment the major concern
for investors is always the “return”. But as we know that the return is a function of the
future and the future is always uncertain so one can never be sure about the returns
associated with some investment.

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

returns. Investors try their best to identify the exact risk
associated with some return in order to make a healthy decision
about the investment. Risk can simply be defined as the
uncertainty associated with any expected outcome. In finance,
there are two units of return—one is the “absolute rate of return”
and other one is the “real rate of return”

Absolute and real rate of return 

The absolute rate of return simply reflects the expected and theoretical return associated
with some investment; on the other hand, the real rate of return includes the concept of
time value of money and other risks associated with the investment activity. So, the real
rate of return is an effort to calculate the actual practical returns to be got out of an
investment. Financial management deals with efficient and proper risk assessment for
various theoretical returns.

TYPES OF RISK 
As major classification risks can broadly be classified into two categories—systematic
risk and unsystematic risk.

SYSTEMATIC RISK
Systematic risk is also known as uncontrollable risk, simply because this risk lies beyond
the possibility of regulation. It cannot be avoided due to certain factors. Various types of

31
systematic risks are—market risk, purchasing power risk and bond rate risk.

Market risk: These are the risks associated with the demand and supply conditions. It
can’t be regulated by an individual.

Purchasing power risk: After investment, it may be possible that the inflation rate in
economy increases, and as a result, purchasing power of the investor decreases. The
theoretical return will lose some of its value under such conditions. This risk depends
upon the monetary policy of the government.

Bond rate risk: This risk is associated with the fluctuations of prevailing interest rates in
the economy. It depends upon the fiscal policy of the government. Actually, the return
given by the companies (dividend, interest etc) depends upon their performance and
companies possess huge amount of debt financing (loans). So, if interest rate increases in
the economy, the performance of the companies decreases, and as a result, returns also
decrease.

UNSYSTEMATIC RISK
Unsystematic risk is also known as controllable risk, because it can be avoided by the
proper management and decisions of top level management. Various types of
unsystematic risks are—business risk and financial risk.

Business risk: This risk is associated with the behaviour of the top level management of
the organization. Flexibility of management of the organization is required to be at
optimum level for managing this risk.

Financial risk: This risk is associated with the capital structure of the organization i.e.
managing the proper proportion of debt and equity financing. Higher the debt financing,
higher will be the financial risk.

32
 STOCK BETA AND VOLATILITY

Perhaps the single most important measure of stock risk or volatility is a stock's beta. 
It's one of those at-a-glance measures that can provide serious stock analysts with insights
into the movements of a particular stock relative to market movements.

Beta Values

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

individual stock risk relative to the overall risk of the
stock market.  It's sometimes referred to as financial
elasticity.  The measure is just one of several values that
stock analysts use to get a better feel for a stock's risk
profile.  As we'll see later on in our discussion, the beta
value is calculated using price movements of the stock
we're analyzing.  Those movements are then compared
to the movements of an overall market indicator, such as
a market index, over the same period of time.

The formula for the beta of an asset within a portfolio is

 ,

Where:

ra measures the rate of return of the asset,

rp measures the rate of return of the portfolio

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

The portfolio of interest in the CAPM formulation is the market portfolio that contains all
risky assets, and so the rp terms in the formula are replaced by rm, the rate of return of the
market.

33
Beta is also referred to as financial elasticity or correlated relative volatility, and can be
referred to as a measure of the sensitivity of the asset's returns to market returns, its non-
diversifiable risk, its systematic risk, or market risk. On an individual asset level,
measuring beta can give clues to volatility and liquidity in the marketplace. In fund
management, measuring beta is thought to separate a manager's skill from his or her
willingness to take risk.

The beta coefficient was born out of linear regression analysis. It is linked to a regression
analysis of the returns of a portfolio (such as a stock index) (x-axis) in a specific period
versus the returns of an individual asset (y-axis) in a specific year. The regression line is
then called the Security characteristic Line (SCL).

αa is called the asset's alpha and βa is called the asset's beta coefficient. Both coefficients
have an important role in Modern portfolio theory.

For an example, in a year where the broad market or benchmark index returns 25% above
the risk free rate suppose two managers gain 50% above the risk free rate. Because this
higher return is theoretically possible merely by taking a leveraged position in the broad
market to double the beta so it is exactly 2.0, we would expect a skilled portfolio manager
to have built the outperforming portfolio with a beta somewhat less than 2, such that
the excess return not explained by the beta is positive. If one of the managers' portfolios
has an average beta of 3.0, and the other's has a beta of only 1.5, then the CAPM simply
states that the extra return of the first manager is not sufficient to compensate us for that
manager's risk, whereas the second manager has done more than expected given the risk.
Whether investors can expect the second manager to duplicate that performance in future
periods is of course a different question.

Security market line

The SML graphs the results from the capital asset

pricing model (CAPM) formula. The x-axis
represents the risk (beta), and the y-axis

34
represents the expected return. The market risk premium is determined from the slope of
the SML.

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

line (SML) which shows expected return as a function of β. The intercept is the nominal
risk-free rate available for the market, while the slope is E(Rm)− Rf. The security market
line can be regarded as representing a single-factor model of the asset price, where Beta
is exposure to changes in value of the Market. The equation of the SML is thus:

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

reasonable expected return for risk. Individual securities are plotted on the SML graph. If
the security's risk versus expected return is plotted above the SML, it is undervalued
because the investor can expect a greater return for the inherent risk. A security plotted
below the SML is overvalued because the investor would be accepting a lower return for
the amount of risk assumed.

Beta Rules of Thumb

Beta values are fairly easy to interpret too.  If the stock's price experiences movements
that are greater - more volatile - than the stock market, then the beta value will be greater
than 1.  If a stock's price movements, or swings, are less than those of the market, then
the beta value will be less than 1.

Since increased volatility of stock price means more risk to the investor, we'd also expect
greater returns from stocks with betas over 1.  The reverse is true if a stock's beta is less
than 1.  We'd expect less volatility, lower risk, and therefore lower overall returns.

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

market i.e. the degree to which price fluctuates in relation to the overall market. It can
also be used to compare the different securities. The question is: How to interpret Beta?
When is beta considered low and when is it considered high? Different value of Beta can
be interpreted as follows:

35
β Less than 0 (Negative β): Although variances and standard deviations musty be equal
to or greater than zero, it is possible to have negative β. β value less than zero indicates a
negative (inverse) relationship between stock return and market return. It is possible but
quite unlikely. Negative β means that if market goes up, the prices of that security are
likely to go down.

β value Zero: If β value is zero, it means that there is no systematic risk and the share
prices have no relationship with the market. It is very unlikely.

β value between zero and 1: It shows that the particular stock has less volatility than the
market. In case of rise of fall, share price will show lesser fluctuations than market.

β value 1: It means that volatility in share price and market is equal. Share prices are
expected to move in tandem with the market index.

β value more than 1: It means that the stock has a higher volatility than the market.
Fluctuations in share price will be more than the fluctuations in the market index.

Raking Rm as the Market return and Rs as the Security return, the relationship of these
variables with beta has been shown in figure given below:

36
CAPM Theory and Beta

During our discussions of calculating stock prices, and our follow up discussion of the
capital asset pricing model, or CAPM, we explained how we could calculate the expected
return on an investment by examining risk-free investments, expectations of the stock
market, and stock betas.

For example, by using the following CAPM formula we can calculate the expected rate
of return on an investment as:

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

Where:

 rf = The risk-free interest rate is the interest rate the investor would expect to
receive from a risk-free investment.  Typically, U.S. Treasury Bills are used for
U.S. dollars and German Government bills are used for the Euro.

37
  B = A stock beta is used to mathematically describe the relationship between the
movements of an individual stock versus the market itself.  Investors can use a
stock's beta to measure the risk of a security versus the market.
 rm = The expected market return is the return the investor would expect to
receive from a broad stock market indicator such as the S&P 500.  For example,
over the last 17 years or so, the S&P 500 has yielded investors an average
annual return of around 8.10%.

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

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

plus the risk premium that's associated with the stock market itself, adjusted for the
relative risk of the common stock we've chosen."

Stock beta values are a key element when using the CAPM.  If you'd like to work through
some examples to see how this theory works in practice then try our online CAPM
calculator.

ADVANTAGES AND DISADVANTAGES OF BETA

In the next two sections, we're going to discuss the advantages and disadvantages of beta
values.  The outcome of this discussion should be an overall understanding of how to use
this measure in practice.  For example, you may want to look at a stock's beta before
making a purchase decision.  That's a good step to take as part of your stock research, as
long as you understand what the value is telling you.

Advantages of Beta

The calculation of beta is based on extremely sound finance theory.  The CAPM pricing
theory is about as good as it gets when it comes to pricing stocks, and is far easier to put
into practice when compared to the Arbitrage Pricing Theory, or APT.  If you're thinking
about investing in a company's stock, then the beta allows you to understand if the price

38
of that security has been more or less volatile than the market itself.  That's certainly a
good factor to understand about a stock you're planning to add to your portfolio.

If we understand the theory behind beta, then it's easy to understand how emerging
technology stocks typically have beta values greater than 1, while 100 year-old utility
stocks typically have beta values less than 1.  In fact, in March 2007 Priceline.com had a
beta of 3.4 while Public Service Enterprise Group had a beta of 0.57.  It's nice when
theory seems to work in the real world.

Disadvantages of Beta

We're an advocate of value investing, which includes conducting stock research that
focuses on a company's fundamentals and an understanding of financial
ratios before investing in a stock.  Unfortunately, if you're calculating stock beta values
using price movements over the past three years, then you need to bear in mind that the
"past performance is no guarantee of future returns" rule applies to beta values.

Beta is calculated based on historical price movements, which may have little to do with
how a company's stock is poised to move in the future.  Because the measure relies on
historical prices, it's not even possible to accurately calculate the beta of newly issued
stocks.

Beta also doesn't tell us if the stock's movements were more volatile during bear markets
or bull markets.  It doesn't distinguish between large upswing or downswing movements. 
So while beta can tell us something about the past risk of a security, it tells us very little
about the attractiveness or the value of the investment today or in the future.

BETA CALCULATIONS

You'll find calculated values of beta on all of the major stock reporting websites:  Yahoo
Finance, MSN Money, and Google Finance all report stock beta values.  You can also
calculate beta yourself using a fairly straightforward linear regression technique that's

39
available in a spreadsheet application such as Microsoft's Excel or Open Office
Calculations.

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

 Closing stock prices for the stock you're examining.

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

Most of the time, beta values are calculated using the month-end stock price for the
security you're examining, and the month end closing price of the S&P 500 Index
($INX).

The formula for the beta can be written as:

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

You can see the calculation of beta at work in our Stock Beta Calculation Spreadsheet. 
There you'll not only find a table that you can use to calculate the value of beta yourself,
but also two charts:  one for the market index and a second called the Security
Characteristic Line (SCL), which applies to the stock you're analyzing.

Alpha Values

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

measure of excess returns on an investment, which has been adjusted for risk.  It's
commonly used to assess the performance of a portfolio manager (such as the case with
a mutual fund) as it's an indicator of their ability to provide returns in excess of a
benchmark such as the S&P 500.

For example:

 If alpha < risk-free investment return, then the fund manager has destroyed value;
 If alpha = risk-free investment return, then the fund manager has neither created nor
destroyed value; and

40
If alpha > risk-free investment return, then the fund manager has created value.

41
 CHAPTER-II

 LITERATURE REVIEW 42

42
 LITERATURE REVIEW

Several studies are carried out to study the nature and the behavior of beta. Baesel
(1974) studied the impact of the length of the estimation interval on beta stability. Using
monthly data, betas were estimated using estimation intervals of one year, two years, four
years, six years and nine years. He concluded that the stability of beta increases
significantly as the length of the estimation interval increases. Levy (1971) and Levitz
(1974) have shown that portfolio betas are very stable whereas individual security betas
are highly unstable. Likewise Blume (1971) used monthly prices data and successive
seven-year periods and shown that the portfolio betas are very stable where as individual
security betas are highly unstable in nature. He shows that, the stability of individual beta
increases with increase in the time of estimation period. Similar results were also
obtained by Altman et al (1974). In both the cases, initial and succeeding estimation
periods are of the same length. Allen et al. (1994) have considered the subject of
comparative stability of beta coefficients for individual securities and portfolios. The
usual perception is that the portfolio betas are more stable than those for individual
securities. They argue that if the portfolio betas are more stable than those for individual
securities, the larger confidence can be placed in portfolio beta estimates over longer
periods of time. But, their study concludes that larger confidence in portfolio betas is not
justified.

Alexander and Chervany (1980) show empirically that extreme betas are less
stable compared to interior beta. They proved it by using mean absolute deviation as a
measure of stability. According to them, best estimation interval is generally four to six
years. They also showed that irrespective of the manner portfolios are formed,
magnitudes of inter-temporal changes in beta decreases as the number of securities in the
portfolios rise contradicting the work of Porter and Ezzell (1975). Chawla (2001)
investigated the stability of beta using monthly data on returns for the period April 1996
to March 2000. The stability of beta was tested using two alternative econometric
methods, including time variable in the regression and dummy variables for the slope
coefficient. Both the methods reject the stability of beta in majority of cases.

43
 Many studies focused on the time varying beta using conditional CAPM
(Jagannathan and Wang (1996) Lewellen and Nagel (2003)). These studies concluded
that the fluctuations and events that influence the market might change the leverage of the
firm and the variance of the stock return which ultimately will change the beta. Haddad
(2007) examine the degree of return volatility persistence and time-varying nature of
systematic risk of two Egyptian stock portfolios. He used the Schwert and Sequin (1990)
market model to study the relationship between market capitalization and time varying
beta for a sample of investable Egyptian portfolios during the period January, 2001 to
June, 2004. According to Haddad, the small stocks portfolio exhibits difference in
volatility persistence and time variability. The study also suggests that the volatility
persistence of each portfolio and its systematic risk are significantly positively related.
Because of that, the systematic risks of different portfolios tend to move in a different
direction during the periods of increasing market volatility.

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

conditions. For example, Fabozzi and Francis (1977) in their seminal paper considered
the differential effect of bull and bear market conditions for 700 individual securities
listed in NYSE. Using a Dual Beta Market Model (DBM), they established that estimated
betas of most of the securities are stable in both the market conditions. They experienced
it with three different set of bull and bear market definitions and concluded with the same
results for all these definitions.

Fama and French (1992, 1996), Jegadeesh (1992) and others revealed that betas
are not statistically related to returns. McNulty et al (2002) highlight the problems with
historical beta when computing the cost of capital, and suggest as an alternative- the
forward-looking market derived capital pricing model (MCPM), which uses option data
to evaluate equity risk. In the similar line, French et al. (1983) merge forward-looking
volatility with historical correlation to improve the measurement of betas. Siegel (1995)
notes the improvement of a beta based on forward-looking option data, and proceeds to
propose the creation of a new derivative, called an exchange option, which would allow
for the calculation of what he refers to as “implicit” betas. Unfortunately the exchange

44
options discussed by Siegel (1995) are not yet traded, and therefore his method cannot be
applied in practice to compute forward-looking betas.

A few studies are carried out to explore the reason for instability of beta. For
example, Scott & Brown (1980) show that when returns of the market are subjected to
measurement errors, the concurrent autocorrelated residuals and inter-temporal
correlation between market returns and residual results in biased and unstable estimates
of betas. This is so even when true values of betas are stable over time. They also derived
an expression for the instability in the estimated beta between two periods. Chen (1981)
investigates the connection between variability of beta coefficient and portfolio residual
risk. If beta coefficient changes over time, OLS method is not suitable to estimate
portfolio residual risk. It will lead to inaccurate conclusion that larger portfolio residual
risk is associated with higher variability in beta. A Bayesian approach is proposed to
estimate the time varying beta so as to provide a precise estimate of portfolio residual
risk. Bildersee and Roberts (1981) show that during the periods interest rates fluctuate,
betas would fluctuate systematically. The change would be in tune with their value
relative to the market and the pattern of changes in interest rate.

Few research studies are available in the Indian context to examine the factors
influencing systematic risk. For example, Vipul (1999) examines the effect of company
size, industry group and liquidity of the scrip on beta. He considered equity shares of 114
companies listed at Bombay Stock Exchange from July 1986 to June 1993 for his study.
He found that size of the company affects the value of betas and the beta of medium sized
companies is the lowest which increases with increase or decrease in the size of the
company. The study also concluded that industry group and liquidity of the scrip do not
affect beta. In another study, Gupta & Sehgal (1999) examine the relationship between
systematic risk and accounting variables for the period April 1984 to March 1993. There
is a confirmation of relationship in the expected direction between systematic risk and
variables such as debt equity ratio, current ratio and net sales. The association between
systematic risk and variables like profitability, payout ratio, earning growth and earnings

45
volatility measures is not in accordance with expected sign. The relationship was
investigated using correlation analysis in the study.

46
CHAPTER-III
 Research Methodology 47

 Research Objective 48
 Research Design 49
 Data collection 49
 Sample Design 50
 Research Instrument/ Method 50
 Analytical Tools 51

47
RESEARCH METHODOLOGY

48
 METHODOLOGY

It is a way to systematically solve the search problem i.e. it signifies how the research is
being carried out.
We collected the information from a sample size of 15 different Selected Stocks of Indian
Stock Market.

RESEARCH OBJECTIVES

This Research project work undertaken for the partial fulfillment of the MBA degree
programme fulfils the following objectives:

Primary Objective:

 To Test the Stability of Beta in different market phases.

Secondary Objectives:

 An Empirical Study on India Stock Market

 To determine the Market Phases i.e. Bearish or Bullish.
 To Estimate the beta value for different market phases as well as 4 year periods.
 To find out the volatility of the Securities.

49
 RESEARCH DESIGN

After formulating the research objective, the next step is to select the suitable research
design. It is a conceptual structure within which the research is conducted.
It constitutes of blue prints for collection, measurement & analysis of data. However the
research design has been classified into following categories.
 Research type used Exploratory Research. In this exploratory research we have
used the stratified random sampling.
 Collect Data from company’s last years Annual Reports, websites, booklets,
business magazines etc.
 Analyzing the data using the graphs and tables.

Place of Research: Lucknow

RESEARCH HYPOTHESIS:

Null Hypothesis (H0): The beta is stable over the market phases.
Alternative Hypothesis (H1): Beta values are not stable and vary according to phases in
the market.

DATA COLLECTION

Data are collected from two sources that are primary and secondary sources. As in this
case data collection from primary source is very difficult and almost it is not possible. So
data is collected from Secondary sources that are from company’s last years Annual
Reports, websites, booklets, bushiness magazines and other theoretical and conceptual
books of Stock Market. Different other sources are been used so as to get the theoretical
aspect and to understand the analysis and to give interpretation.

50
 SAMPLE DESIGN

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

because of time & money constrains. In such a case sampling is the only technique.
Sample design includes:
Population: The samples used in the study include Bombay Stock Exchange, BSE-100
Index.
Size of the Sample: The data related to the study is taken for 15 stocks from BSE-100
index.

RESEARCH INSTRUMENTS/ METHODS:

The top 15 stocks are chosen on the basis of their market capitalization in BSE-100
index. These 15 stocks are selected from BSE- 100 stocks in such a way that the
continuous price data is available for the study period. The adjusted closing prices of
these 15 stocks were collected for the last 4 years period i.e. from February 2007 to
February 2011. The stock and market (BSE-100) data has been collected from BSE
website for the above period.

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

methodology. Scrip selection in the index is generally taken into account a balanced
sectoral representation of the listed companies in the universe of Bombay Stock
Exchange (BSE). As per the stock market guideline, the stocks inducted in the index are
on the basis of their final ranking. Where the final rank is arrived at by assigning 75
percent weightage to the rank on the basis of three-month average full market
capitalization and 25 percent weightage to the liquidity rank based on three-month
average daily turnover & three-month average impact cost.

51
The following method has been used to compute the monthly return on each of the stock.
P i,t – P i,t-1
ri,t = ––––––––––
P i, t-1
Where:
P i,t = Average price of stock “i” in the month t
Pi,t-1= Average price of stock “i” in the month t-1
r i,t= Return of ith stock in the month t.
The monthly market return is computed in the following way:
Bt – Bt-1
mt = ––––––––––
B t-1
Where:
Bt = BSE-100 Index at time period t
Bt-1 = BSE-100 Index at time period t-1
mt = Market return at time period t.

ANALYTICAL TOOLS
 Table in Excel sheet
 Percentage
 Graph Chart

52
 CHAPTER-IV

 Data Analysis & Findings

53
 Identification of Market Phase 54
 Beta Value of Individual Securities 57
 Findings 59

53
DATA ANALYSIS
&
FINDINGS

54
 DATA ANALYSIS

The following method has been used to compute the monthly return on each of the stock.
P i,t – P i,t-1
ri,t = ––––––––––
P i, t-1
Where:
P i,t = Average price of stock “i” in the month t
Pi,t-1= Average price of stock “i” in the month t-1
r i,t= Return of ith stock in the month t.
The monthly market return is computed in the following way:
Bt – Bt-1
mt = ––––––––––
B t-1
Where:
Bt = BSE-100 Index at time period t
Bt-1 = BSE-100 Index at time period t-1
mt = Market return at time period t.

IDENTIFICATION OF MARKET PHASE

Cumulative Market
Month Closing Price Return, Rm 1+R Wealth Index Phases
Feb-07 6527.12        
Mar-07 6587.21 0.0092 1.0092 1.0100 1
Apr-07 7032.93 0.0677 1.0677 1.0777 1
May-07 7468.70 0.0620 1.0620 1.1396 1
Jun-07 7605.37 0.0183 1.0183 1.1579 1
Jul-07 8004.05 0.0524 1.0524 1.2103 1
Aug-07 7857.61 -0.0183 0.9817 1.1920 1
Sep-07 8967.41 0.1412 1.1412 1.3333 1
Oct-07 10391.19 0.1588 1.1588 1.4921 1
Nov-07 10384.40 -0.0007 0.9993 1.4914 1
Dec-07 11154.28 0.0741 1.0741 1.5655 1
Jan-08 9440.94 -0.1536 0.8464 1.4119 2
Feb-08 9404.98 -0.0038 0.9962 1.4081 2
Mar-08 8232.82 -0.1246 0.8754 1.2835 2
Apr-08 9199.46 0.1174 1.1174 1.4009 2

55
 May-08 8683.27 -0.0561 0.9439 1.3448 2
Jun-08 7029.74 -0.1904 0.8096 1.1544 2
Jul-08 7488.48 0.0653 1.0653 1.2196 2
Aug-08 7621.40 0.0177 1.0177 1.2374 2
Sep-08 6691.57 -0.1220 0.8780 1.1154 2
Oct-08 4953.98 -0.2597 0.7403 0.8557 2
Nov-08 4600.45 -0.0714 0.9286 0.7843 2
Dec-08 4988.04 0.0843 1.0843 0.8686 2
Jan-09 4790.32 -0.0396 0.9604 0.8290 2
Feb-09 4516.38 -0.0572 0.9428 0.7718 2
Mar-09 4942.51 0.0944 1.0944 0.8661 2
Apr-09 5803.97 0.1743 1.1743 1.0404 3
May-09 7620.13 0.3129 1.3129 1.3533 3
Jun-09 7571.49 -0.0064 0.9936 1.3470 3
Jul-09 8176.54 0.0799 1.0799 1.4269 3
Aug-09 8225.50 0.0060 1.0060 1.4329 3
Sep-09 8930.31 0.0857 1.0857 1.5185 3
Oct-09 8333.18 -0.0669 0.9331 1.4517 3
Nov-09 8914.77 0.0698 1.0698 1.5215 3
Dec-09 9229.71 0.0353 1.0353 1.5568 3
Jan-10 8707.82 -0.0565 0.9435 1.5003 3
Feb-10 8758.51 0.0058 1.0058 1.5061 3
Mar-10 9300.20 0.0618 1.0618 1.5679 3
Apr-10 9379.04 0.0085 1.0085 1.5764 3
May-10 9041.23 -0.0360 0.9640 1.5404 3
Jun-10 9442.58 0.0444 1.0444 1.5848 3
Jul-10 9556.67 0.0121 1.0121 1.5969 3
Aug-10 9627.72 0.0074 1.0074 1.6043 3
Sep-10 10627.35 0.1038 1.1038 1.7081 4
Oct-10 10639.96 0.0012 1.0012 1.7093 4
Nov-10 10280.81 -0.0338 0.9662 1.6755 4
Dec-10 10675.02 0.0383 1.0383 1.7139 4
Jan-11 9569.01 -0.1036 0.8964 1.6103 4
Feb-11 9259.48 -0.0323 0.9677 1.5779 4

After the monthly stock and market returns are calculated as per the above formula, we
identified the different market phases to compute beta separately. The market phases are
identified, by creating a cumulative wealth index from the market returns. The

56
cumulative wealth index data is presented above table. As per the cumulative wealth
index, we identified five different market phases in BSE-100 index. We recognized that
there are two bullish phases (Feb-07 to Dec-07 and Apr-09 to Aug-10 and two bearish
phases (Jan -08 to Mar. - 09, Sep, 10 to Feb, 11). The summary of different market
phases is depicted in Table & figure below.

Table: Different Market Phases

Market Phase Timing

Market Phases Market Type
Start End

Phase I Feb-07 Dec-07 Bullish

Phase II Jan-08 Mar-09 Bearish
Phase III Apr-09 Aug-10 Bullish
Phase IV Sep-10 Feb-11 Bearish

Figure- Different Market Phases

Cum ulative Wealth Index

1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Nov-07

Nov-08

Nov-09

Nov-10
M ay-07

M ay-08

M ay-09

M ay-10
Aug-07

A ug-08

Aug-09

A ug-10
Feb-07

Feb-09
Feb-08

Feb-10

Feb-11

Months

BETA VALUES

57
 Beta Value of Individual Securities Over All 4 Phases
S.
No Overall Phase-I Phase-II Phase-III Phase-IV
. Name of Company β β β β β
1 BHARTI AIRTEL LTD. 0.5755 0.5883 0.6332 0.4533 0.3823

2 HDFC BANK LTD. 0.9497 1.1223 0.9724 0.9069 0.8513

3 HERO HONDA MOTORS LTD. 0.5452 0.4776 0.8059 0.6026 1.3363

4 HUL 0.2386 -0.2239 0.4849 -0.0012 1.0450

5 ICICI BANK LTD. 1.4075 1.3391 1.2373 1.6976 0.9256

6 INFOSYS TECHNOLOGIES Ltd. 0.4650 0.4434 0.4753 0.3178 1.3756

7 ITC LTD. 0.2995 0.3686 0.4214 0.1002 0.4699

8 L&T Ltd. 1.6128 1.7877 1.5548 1.6131 1.3283

9 ONGC Ltd. 0.9680 1.4899 0.8423 0.9806 1.1413

10 SBI 1.1436 0.6357 1.1473 1.3520 0.0428

11 TCS Ltd. 0.6322 0.2049 0.6319 0.7138 0.8799

12 TATA MOTORS LTD 1.3281 0.5324 1.5191 1.4225 1.3067

13 WIPRO LTD 0.7931 0.5816 0.8149 0.5243 1.5608

14 NTPC LTD 0.6240 1.0049 0.5533 0.5268 0.7758

15 BHEL 0.7318 0.6308 0.6668 0.8563 0.7281

On the Basis of Variance of the return of Market Portfolio (Annexure-1) and Covariance
between the return of various security, S, and the return on Market Portfolio, M,
( Annexure-2 to Annexure-16), the calculate value of beta for overall 4 year period and
for the four phases are as follows:

58
 β value of Individual Securities for 4 year period
1.8 0

1.6 0 L&T, 1.61

1.4 0 ICIC I, 1.41 TATA MO TO RS,

1.33
1.2 0
SBI, 1.14
β value

1.0 0
HDFC , 0.95 O NGC, 0.97
0 .8 0 WIPRO , 0.79
BHEL, 0.73
0 .6 0 TC S, 0.63 NTPC, 0.62
BAL, 0.58 HHM , 0.55
INFO SYS., 0.47
0 .4 0
ITC, 0.30
0 .2 0 HUL, 0.24

0 .0 0

β value of Individual Securities for four Phases

2.00

1.50

1.00
β value

0.50

0.00
Phase-I, β Phase-II, β Phase-III,β Phase-IV, β

-0.50
Phases
BAL HDFC HHM HUL
ICICI INFOSYS. ITC L&T
ONGC SBI TCS TATA MOTORS
WIPRO NTPC BHEL

59
FINDINGS

Initially the beta coefficient is calculated using the Ordinary Least Square (OLS)
technique. The estimation was carried out by using monthly return data for the 4 market
phases for each of the 15 stocks. To compare the phase wise beta estimation with the
entire 4 year period, the same estimation also carried out taking the whole 4 years for
each stock separately. Stock wise beta values over 4 market phases and the entire period
is reported in the above table (Beta Value of Individual Securities over All 4 Phases).

From Beta value table, it is revealed that there are 4 stocks beta value is greater
than 1 in phase I. This figure (beta value greater than 1) has reduced to 4, 4 and 7 for
phase-2 to phase-4 respectively. It is also illustrated that, there are 4 stocks whose beta
value is greater than 1 in respect to overall between Feb-07 to Feb-11 and highest being
for L&T of 1.61. The stocks having beta value more than 1 are considered to be volatile
securities. It is noticed that, as we increase the period of estimation to full four years
period, there are less number of stocks proved to be more volatile. Out of the total 15
stocks considered in the study, only one company i.e. L&T has beta more than 1 in all
phases including the overall period. But none of the company’s overall beta value is more
than the phase wise betas. There are four companies (BAL, ITC, TCS and BHEL) whose
beta values are less than 1 all through the phases including overall period. These stocks
are considered to be less volatile than the market. There is only one company (Hindustan
Unilever Ltd.) whose beta value is negative in Phase-I and Phase-III.

It is observed from Beta Value table that there are only one company i.e. HDFC
whose beta values are consistently declining over time and only one company i.e TCS
whose beta values are consistently increasing over time. However there are 3 stocks viz.
BAL, SBI and Tata Motors whose beta values are showing a decreasing trend from phase
II onwards, while ONGC is the only stock whose beta values are showing an increasing
trend during the same period.

60
 CHAPTER-V

 Recommendation & Suggestion 61

61
 RECOMMENDATION & SUGGESTION

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

 Small companies’ shares are relatively limited and were only given to the
financial institutions of the city via ‘placing’. Thus there was limited liquidity in
the market. So in boom companies required to issue more capital to increase
liquidity of the market for shares, making supply more elastic and slowing share
price growth.

 Inflation also causes negative impact on the Beta value. In order to combat
inflation, the Fed usually uses short term interest rates. Since the interest rates are
increased, it becomes more expensive to borrow money. As a result borrowing is
discouraged, which leads to less money in circulation.

 During the periods interest rates fluctuate, betas would fluctuate systematically.
The change would be in tune with their value relative to the market and the
pattern of changes in interest rate.

 Analyses of the stock should consider the fundamental basis, i.e. ratio of market
price to asset value.

62
 CHAPTER-VI
 Conclusions 63

 Limitation of Research 64
 Bibliography 65
 Annexure 66-88

63
 CONCLUSIONS

The objective of the present study is to examine the stability of beta in different Indian
market phases. For the purpose of the study monthly return data of 15 stocks for the
period from Feb., 2007 to Feb., 2011 is considered. Considering the bullish and bearish
condition in the Indian market, we divided the whole 4 years into 4 different market
phases. Initially the beta has been estimated for different market phases and also taking
the whole 4 years period. The results show that the beta values are not showing any
particular pattern but in the overall phase almost all the stocks are statistically significant.

We can thus finally conclude that the results obtained from our study that the beta values
are stable or instable over the market phases. But there are number of stocks which give a
strong indication that their beta values are not stable over the market phases.

The instability of beta has its implications in taking sound corporate financial decisions.
Financial decisions should not be based on the overall beta of the company. Rather, the
company’s periodical beta should be relied upon for taking certain managerial decisions.
Considering the inconclusive results obtained from present study, it is suggested that the
future research on beta in Indian market may be investigated from:-
(a) Industry wise stability of beta in different market phases
(b) Stability of beta from portfolio point of view
(c) Optimal time limit for stability of beta
(d) Forward looking beta and its stability
(e) Impact of market and company specific factors and stability of beta and
(f) Market efficiency study using phase wise beta under the event study methodology.

64
 LIMITATIONS OF RESEARCH

Although all efforts have been taken to make a result of research, accurate but the
research suffers from following limitations.

 Data collection from primary source is very difficult and almost it is not possible,
so the whole data was collected from the secondary sources.
 Beta is used only for short-term uses not for long-term ones, because it is more
likely to predict the price fluctuations over the short-term.
 This Research was not carried out by direct interactions with the companies’
personnel’s.
 I took only 15 companies from only BSE-100 Index.
 Time & Money did not allow me to have a large sample.
 Duration of study was limited.
 This Research on beta in Indian market not investigates Industry wise stability of
beta in different market phases.
 If beta coefficient changes over time, OLS method is not suitable to estimate
portfolio residual risk. It will lead to inaccurate conclusion that larger portfolio
residual risk is associated with higher variability in beta
 Financial decisions of any company not depend only on the beta values.

65
 BIBLIOGRAPHY

Financial Management by R.P. Rustagi

Research Methodology Method & Techniques by C.R. Kothari
www.nseindia.com
en.wikipedia.org
www.eurojournals.com
www.martialcapital.com
www.investopedia.com
www.statistics-help-online.com
www.financescholar.com

66
ANNEXURE

67
Annexure-1

Estimation of Variance of Return of Market Portfolio

Deviation Square of
S.No. Month Index Return, Rm
(Rm-Mean Rm) Deviation
1 Feb-07 6527.12      
2 Mar-07 6587.21 0.0092 -0.0028 0.0000
3 Apr-07 7032.93 0.0677 0.0556 0.0031
4 May-07 7468.70 0.0620 0.0499 0.0025
5 Jun-07 7605.37 0.0183 0.0063 0.0000
6 Jul-07 8004.05 0.0524 0.0404 0.0016
7 Aug-07 7857.61 -0.0183 -0.0303 0.0009
8 Sep-07 8967.41 0.1412 0.1292 0.0167
9 Oct-07 10391.19 0.1588 0.1467 0.0215
10 Nov-07 10384.40 -0.0007 -0.0127 0.0002
11 Dec-07 11154.28 0.0741 0.0621 0.0039
12 Jan-08 9440.94 -0.1536 -0.1656 0.0274
13 Feb-08 9404.98 -0.0038 -0.0158 0.0003
14 Mar-08 8232.82 -0.1246 -0.1367 0.0187
15 Apr-08 9199.46 0.1174 0.1054 0.0111
16 May-08 8683.27 -0.0561 -0.0681 0.0046
17 Jun-08 7029.74 -0.1904 -0.2025 0.0410
18 Jul-08 7488.48 0.0653 0.0532 0.0028
19 Aug-08 7621.40 0.0177 0.0057 0.0000
20 Sep-08 6691.57 -0.1220 -0.1340 0.0180
21 Oct-08 4953.98 -0.2597 -0.2717 0.0738
22 Nov-08 4600.45 -0.0714 -0.0834 0.0070
23 Dec-08 4988.04 0.0843 0.0722 0.0052
24 Jan-09 4790.32 -0.0396 -0.0517 0.0027
25 Feb-09 4516.38 -0.0572 -0.0692 0.0048
26 Mar-09 4942.51 0.0944 0.0823 0.0068
27 Apr-09 5803.97 0.1743 0.1623 0.0263
28 May-09 7620.13 0.3129 0.3009 0.0905
29 Jun-09 7571.49 -0.0064 -0.0184 0.0003
30 Jul-09 8176.54 0.0799 0.0679 0.0046
31 Aug-09 8225.50 0.0060 -0.0060 0.0000
32 Sep-09 8930.31 0.0857 0.0737 0.0054
33 Oct-09 8333.18 -0.0669 -0.0789 0.0062
34 Nov-09 8914.77 0.0698 0.0578 0.0033
35 Dec-09 9229.71 0.0353 0.0233 0.0005
36 Jan-10 8707.82 -0.0565 -0.0686 0.0047
37 Feb-10 8758.51 0.0058 -0.0062 0.0000

68
 38 Mar-10 9300.20 0.0618 0.0498 0.0025
39 Apr-10 9379.04 0.0085 -0.0035 0.0000
40 May-10 9041.23 -0.0360 -0.0480 0.0023
41 Jun-10 9442.58 0.0444 0.0324 0.0010
42 Jul-10 9556.67 0.0121 0.0001 0.0000
43 Aug-10 9627.72 0.0074 -0.0046 0.0000
44 Sep-10 10627.35 0.1038 0.0918 0.0084
45 Oct-10 10639.96 0.0012 -0.0108 0.0001
46 Nov-10 10280.81 -0.0338 -0.0458 0.0021
47 Dec-10 10675.02 0.0383 0.0263 0.0007
48 Jan-11 9569.01 -0.1036 -0.1156 0.0134
49 Feb-11 9259.48 -0.0323 -0.0444 0.0020
      0.5771   0.4493
           
    Mean Rm 0.0120    
           
    Var-M 0.0094    

Annexure-2

69
 Estimation of COV.(S,M) for BHARTI AIRTEL LTD. ( 532454 )
Return,
S.No. Month Price Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 718.75      
2 Mar-07 763.2 0.0618 0.0694 -0.0002
3 Apr-07 812.05 0.0640 0.0716 0.0040
4 May-07 847.8 0.0440 0.0516 0.0026
5 Jun-07 835.95 -0.0140 -0.0064 0.0000
6 Jul-07 903.45 0.0807 0.0883 0.0036
7 Aug-07 879.9 -0.0261 -0.0185 0.0006
8 Sep-07 941.2 0.0697 0.0772 0.0100
9 Oct-07 1006.6 0.0695 0.0770 0.0113
10 Nov-07 939.45 -0.0667 -0.0592 0.0007
11 Dec-07 994.55 0.0587 0.0662 0.0041
12 Jan-08 864.45 -0.1308 -0.1233 0.0204
13 Feb-08 825.6 -0.0449 -0.0374 0.0006
14 Mar-08 826.1 0.0006 0.0082 -0.0011
15 Apr-08 898.8 0.0880 0.0956 0.0101
16 May-08 876.45 -0.0249 -0.0173 0.0012
17 Jun-08 721.65 -0.1766 -0.1691 0.0342
18 Jul-08 799.15 0.1074 0.1149 0.0061
19 Aug-08 837.2 0.0476 0.0552 0.0003
20 Sep-08 785.05 -0.0623 -0.0547 0.0073
21 Oct-08 649 -0.1733 -0.1657 0.0450
22 Nov-08 671.05 0.0340 0.0415 -0.0035
23 Dec-08 715.1 0.0656 0.0732 0.0053
24 Jan-09 633.85 -0.1136 -0.1061 0.0055
25 Feb-09 636.65 0.0044 0.0120 -0.0008
26 Mar-09 625.8 -0.0170 -0.0095 -0.0008
27 Apr-09 749.3 0.1973 0.2049 0.0332
28 May-09 819.65 0.0939 0.1014 0.0305
29 Jun-09 802.1 -0.0214 -0.0139 0.0003
30 Jul-09 410.55 -0.4882 -0.4806 -0.0326
31 Aug-09 424.7 0.0345 0.0420 -0.0003
32 Sep-09 418.55 -0.0145 -0.0069 -0.0005
33 Oct-09 292.15 -0.3020 -0.2944 0.0232
34 Nov-09 299.7 0.0258 0.0334 0.0019
35 Dec-09 328.8 0.0971 0.1046 0.0024
36 Jan-10 306.5 -0.0678 -0.0603 0.0041
37 Feb-10 279.25 -0.0889 -0.0814 0.0005
38 Mar-10 311.9 0.1169 0.1245 0.0062
39 Apr-10 298.4 -0.0433 -0.0357 0.0001
40 May-10 262.3 -0.1210 -0.1134 0.0054
41 Jun-10 263.25 0.0036 0.0112 0.0004
42 Jul-10 306.9 0.1658 0.1734 0.0000
43 Aug-10 327.15 0.0660 0.0735 -0.0003
44 Sep-10 365.9 0.1184 0.1260 0.0116
45 Oct-10 325.7 -0.1099 -0.1023 0.0011
46 Nov-10 360.4 0.1065 0.1141 -0.0052
47 Dec-10 358.4 -0.0055 0.0020 0.0001
48 Jan-11 318.55 -0.1112 -0.1036 0.0120
49 Feb-11 331.1 0.0394 0.0469 -0.0021
      -0.3625   0.2586

70
 Mean Rs -0.0076
   
COV.( S,M) 0.0054
   
Beta 0.5755

Annexure-3

71
 Estimation of COV.(S,M) for HDFC BANK LTD. ( 500180 )
  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 932.6      
2 Mar-07 949.4 0.0180 -0.0040 0.0000
3 Apr-07 1026.15 0.0808 0.0589 0.0033
4 May-07 1139.75 0.1107 0.0887 0.0044
5 Jun-07 1144.1 0.0038 -0.0181 -0.0001
6 Jul-07 1198.65 0.0477 0.0257 0.0010
7 Aug-07 1171.3 -0.0228 -0.0448 0.0014
8 Sep-07 1439.05 0.2286 0.2066 0.0267
9 Oct-07 1653.1 0.1487 0.1268 0.0186
1
0 Nov-07 1719 0.0399 0.0179 -0.0002
1
1 Dec-07 1727.8 0.0051 -0.0168 -0.0010
1
2 Jan-08 1568 -0.0925 -0.1145 0.0190
1
3 Feb-08 1453.45 -0.0731 -0.0950 0.0015
1
4 Mar-08 1319.95 -0.0919 -0.1138 0.0156
1
5 Apr-08 1514.85 0.1477 0.1257 0.0132
1
6 May-08 1357.85 -0.1036 -0.1256 0.0086
1
7 Jun-08 1002.3 -0.2618 -0.2838 0.0575
1
8 Jul-08 1095.25 0.0927 0.0708 0.0038
1
9 Aug-08 1277.25 0.1662 0.1442 0.0008
2
0 Sep-08 1229 -0.0378 -0.0597 0.0080
2
1 Oct-08 1023.65 -0.1671 -0.1891 0.0514
2
2 Nov-08 920.4 -0.1009 -0.1228 0.0102
2
3 Dec-08 997.6 0.0839 0.0619 0.0045
2
4 Jan-09 924.6 -0.0732 -0.0951 0.0049
2
5 Feb-09 884.85 -0.0430 -0.0650 0.0045
2
6 Mar-09 967.85 0.0938 0.0718 0.0059
2
7 Apr-09 1100.7 0.1373 0.1153 0.0187
2
8 May-09 1442.35 0.3104 0.2884 0.0868
2
9 Jun-09 1491.75 0.0342 0.0123 -0.0002
3
0 Jul-09 1499.6 0.0053 -0.0167 -0.0011

72
 3
1 Aug-09 1469.35 -0.0202 -0.0421 0.0003
3
2 Sep-09 1642.25 0.1177 0.0957 0.0070
3
3 Oct-09 1621.3 -0.0128 -0.0347 0.0027
3
4 Nov-09 1772.55 0.0933 0.0713 0.0041
3
5 Dec-09 1700.4 -0.0407 -0.0627 -0.0015
3
6 Jan-10 1630.85 -0.0409 -0.0629 0.0043
3
7 Feb-10 1704.65 0.0453 0.0233 -0.0001
3
8 Mar-10 1932.5 0.1337 0.1117 0.0056
3
9 Apr-10 1991.6 0.0306 0.0086 0.0000
4
0 May-10 1885.4 -0.0533 -0.0753 0.0036
4
1 Jun-10 1914.65 0.0155 -0.0065 -0.0002
4
2 Jul-10 2127.45 0.1111 0.0892 0.0000
4
3 Aug-10 2132.45 0.0024 -0.0196 0.0001
4
4 Sep-10 2480.8 0.1634 0.1414 0.0130
4
5 Oct-10 2278.1 -0.0817 -0.1037 0.0011
4
6 Nov-10 2289.2 0.0049 -0.0171 0.0008
4
7 Dec-10 2346.5 0.0250 0.0031 0.0001
4
8 Jan-11 2042.85 -0.1294 -0.1514 0.0175
4
9 Feb-11 2049.7 0.0034 -0.0186 0.0008
      1.0543   0.4267

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

73
Annexure-4

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

S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 675.6      
2 Mar-07 685.15 0.0141 -0.0062 0.0000
3 Apr-07 683.6 -0.0023 -0.0226 -0.0013
4 May-07 732.35 0.0713 0.0510 0.0025
5 Jun-07 688.9 -0.0593 -0.0796 -0.0005
6 Jul-07 673.65 -0.0221 -0.0424 -0.0017
7 Aug-07 648.6 -0.0372 -0.0575 0.0017
8 Sep-07 744.8 0.1483 0.1280 0.0165
9 Oct-07 726.85 -0.0241 -0.0444 -0.0065
10 Nov-07 722.7 -0.0057 -0.0260 0.0003
11 Dec-07 697.65 -0.0347 -0.0550 -0.0034
12 Jan-08 676.95 -0.0297 -0.0500 0.0083
13 Feb-08 764.45 0.1293 0.1090 -0.0017
14 Mar-08 690.2 -0.0971 -0.1174 0.0160
15 Apr-08 850.7 0.2325 0.2122 0.0224
16 May-08 746.7 -0.1223 -0.1425 0.0097

74
17 Jun-08 682.8 -0.0856 -0.1059 0.0214
18 Jul-08 804.65 0.1785 0.1582 0.0084
19 Aug-08 828.8 0.0300 0.0097 0.0001
20 Sep-08 868.9 0.0484 0.0281 -0.0038
21 Oct-08 748.3 -0.1388 -0.1591 0.0432
22 Nov-08 800.8 0.0702 0.0499 -0.0042
23 Dec-08 805.1 0.0054 -0.0149 -0.0011
24 Jan-09 876.95 0.0892 0.0690 -0.0036
25 Feb-09 926.55 0.0566 0.0363 -0.0025
26 Mar-09 1070.15 0.1550 0.1347 0.0111
27 Apr-09 1184.25 0.1066 0.0863 0.0140
28 May-09 1340.9 0.1323 0.1120 0.0337
29 Jun-09 1397.85 0.0425 0.0222 -0.0004
30 Jul-09 1605.5 0.1485 0.1283 0.0087
31 Aug-09 1511.35 -0.0586 -0.0789 0.0005
32 Sep-09 1669.65 0.1047 0.0844 0.0062
33 Oct-09 1565.8 -0.0622 -0.0825 0.0065
34 Nov-09 1720.9 0.0991 0.0788 0.0045
35 Dec-09 1716.45 -0.0026 -0.0229 -0.0005
36 Jan-10 1558.7 -0.0919 -0.1122 0.0077
37 Feb-10 1772.15 0.1369 0.1166 -0.0007
38 Mar-10 1942.55 0.0962 0.0759 0.0038
39 Apr-10 1904.95 -0.0194 -0.0396 0.0001
40 May-10 1937.8 0.0172 -0.0030 0.0001
41 Jun-10 2046.9 0.0563 0.0360 0.0012
42 Jul-10 1815.4 -0.1131 -0.1334 0.0000
43 Aug-10 1791.8 -0.0130 -0.0333 0.0002
44 Sep-10 1851.9 0.0335 0.0132 0.0012
45 Oct-10 1865.8 0.0075 -0.0128 0.0001
46 Nov-10 1973.4 0.0577 0.0374 -0.0017
47 Dec-10 1986.1 0.0064 -0.0139 -0.0004
48 Jan-11 1630.5 -0.1790 -0.1993 0.0230
49 Feb-11 1464.95 -0.1015 -0.1218 0.0054
      0.9741   0.2449

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

75
Annexure-5
Estimation of COV.(S,M) for HINDUSTAN UNILEVER LTD. ( 500696 )
S.No.  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 176.15      
2 Mar-07 205.25 0.1652 0.1525 -0.0004
3 Apr-07 199.4 -0.0285 -0.0412 -0.0023
4 May-07 203.5 0.0206 0.0079 0.0004
5 Jun-07 188.85 -0.0720 -0.0846 -0.0005
6 Jul-07 206.35 0.0927 0.0800 0.0032
7 Aug-07 208.6 0.0109 -0.0017 0.0001
8 Sep-07 219.35 0.0515 0.0389 0.0050
9 Oct-07 207.6 -0.0536 -0.0662 -0.0097
10 Nov-07 207.15 -0.0022 -0.0148 0.0002
11 Dec-07 213.9 0.0326 0.0199 0.0012
12 Jan-08 206.5 -0.0346 -0.0472 0.0078
13 Feb-08 227.35 0.1010 0.0883 -0.0014
14 Mar-08 228.7 0.0059 -0.0067 0.0009
15 Apr-08 249.5 0.0909 0.0783 0.0083
16 May-08 237.15 -0.0495 -0.0622 0.0042
17 Jun-08 206.1 -0.1309 -0.1436 0.0291
18 Jul-08 239.7 0.1630 0.1504 0.0080

76
19 Aug-08 245.4 0.0238 0.0111 0.0001
20 Sep-08 251.55 0.0251 0.0124 -0.0017
21 Oct-08 221.95 -0.1177 -0.1303 0.0354
22 Nov-08 236.2 0.0642 0.0516 -0.0043
23 Dec-08 250.25 0.0595 0.0468 0.0034
24 Jan-09 261.2 0.0438 0.0311 -0.0016
25 Feb-09 253.8 -0.0283 -0.0410 0.0028
26 Mar-09 238.2 -0.0615 -0.0741 -0.0061
27 Apr-09 234.55 -0.0153 -0.0280 -0.0045
28 May-09 231.1 -0.0147 -0.0274 -0.0082
29 Jun-09 267.1 0.1558 0.1431 -0.0026
30 Jul-09 291.2 0.0902 0.0776 0.0053
31 Aug-09 259.85 -0.1077 -0.1203 0.0007
32 Sep-09 262.85 0.0115 -0.0011 -0.0001
33 Oct-09 282.95 0.0765 0.0638 -0.0050
34 Nov-09 285.25 0.0081 -0.0045 -0.0003
35 Dec-09 264.75 -0.0719 -0.0845 -0.0020
36 Jan-10 244.1 -0.0780 -0.0907 0.0062
37 Feb-10 235.75 -0.0342 -0.0469 0.0003
38 Mar-10 238.7 0.0125 -0.0001 0.0000
39 Apr-10 239 0.0013 -0.0114 0.0000
40 May-10 236.75 -0.0094 -0.0221 0.0011
41 Jun-10 266.9 0.1273 0.1147 0.0037
42 Jul-10 251.1 -0.0592 -0.0719 0.0000
43 Aug-10 264.4 0.0530 0.0403 -0.0002
44 Sep-10 308 0.1649 0.1522 0.0140
45 Oct-10 294.1 -0.0451 -0.0578 0.0006
46 Nov-10 298.9 0.0163 0.0037 -0.0002
47 Dec-10 312.3 0.0448 0.0322 0.0008
48 Jan-11 271.15 -0.1318 -0.1444 0.0167
49 Feb-11 282.1 0.0404 0.0277 -0.0012
      0.6073   0.1072
   
  Mean Rs 0.0127  
       
  COV.( S,M) 0.0022  
       
    Beta 0.2386    

77
Annexure-6

Estimation of COV.(S,M) for ICICI BANK LTD. ( 532174 )

S.No  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 831.9      
2 Mar-07 853.1 0.0255 0.0114 0.0000
3 Apr-07 865.9 0.0150 0.0009 0.0001
4 May-07 918.9 0.0612 0.0471 0.0024
5 Jun-07 955.3 0.0396 0.0255 0.0002
6 Jul-07 927.05 -0.0296 -0.0437 -0.0018
7 Aug-07 884.65 -0.0457 -0.0598 0.0018
8 Sep-07 1063.15 0.2018 0.1877 0.0243
9 Oct-07 1257 0.1823 0.1682 0.0247
10 Nov-07 1184.65 -0.0576 -0.0716 0.0009
11 Dec-07 1232.4 0.0403 0.0262 0.0016
12 Jan-08 1145.65 -0.0704 -0.0845 0.0140
13 Feb-08 1090.95 -0.0477 -0.0618 0.0010
14 Mar-08 770.1 -0.2941 -0.3082 0.0421
15 Apr-08 879.4 0.1419 0.1278 0.0135

78
16 May-08 788.3 -0.1036 -0.1177 0.0080
17 Jun-08 630.2 -0.2006 -0.2146 0.0435
18 Jul-08 634.85 0.0074 -0.0067 -0.0004
19 Aug-08 671.5 0.0577 0.0436 0.0002
20 Sep-08 534.85 -0.2035 -0.2176 0.0292
21 Oct-08 399.35 -0.2533 -0.2674 0.0727
22 Nov-08 351.4 -0.1201 -0.1342 0.0112
23 Dec-08 448.35 0.2759 0.2618 0.0189
24 Jan-09 416.3 -0.0715 -0.0856 0.0044
25 Feb-09 328.1 -0.2119 -0.2260 0.0156
26 Mar-09 332.6 0.0137 -0.0004 0.0000
27 Apr-09 477.75 0.4364 0.4223 0.0685
28 May-09 740.7 0.5504 0.5363 0.1614
29 Jun-09 722 -0.0252 -0.0393 0.0007
30 Jul-09 759.05 0.0513 0.0372 0.0025
31 Aug-09 749.5 -0.0126 -0.0267 0.0002
32 Sep-09 904.8 0.2072 0.1931 0.0142
33 Oct-09 789.6 -0.1273 -0.1414 0.0112
34 Nov-09 864.3 0.0946 0.0805 0.0047
35 Dec-09 875.7 0.0132 -0.0009 0.0000
36 Jan-10 830.4 -0.0517 -0.0658 0.0045
37 Feb-10 871.85 0.0499 0.0358 -0.0002
38 Mar-10 952.7 0.0927 0.0786 0.0039
39 Apr-10 950.5 -0.0023 -0.0164 0.0001
40 May-10 867.05 -0.0878 -0.1019 0.0049
41 Jun-10 862 -0.0058 -0.0199 -0.0006
42 Jul-10 904.45 0.0492 0.0352 0.0000
43 Aug-10 977.3 0.0805 0.0665 -0.0003
44 Sep-10 1110.35 0.1361 0.1220 0.0112
45 Oct-10 1161.65 0.0462 0.0321 -0.0003
46 Nov-10 1143.65 -0.0155 -0.0296 0.0014
47 Dec-10 1144.65 0.0009 -0.0132 -0.0003
48 Jan-11 1020 -0.1089 -0.1230 0.0142
49 Feb-11 971 -0.0480 -0.0621 0.0028
      0.6764   0.6323

Mean Rs 0.0141
   
COV.( S,M) 0.0132
   
Beta 1.4075

79
Annexure-7

Estimation of COV.(S,M) for INFOSYS TECH. LTD. ( 500209 )

S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 2078.35      
2 Mar-07 2012.6 -0.0316 -0.0434 0.0001
3 Apr-07 2049.35 0.0183 0.0065 0.0004
4 May-07 1920.25 -0.0630 -0.0748 -0.0037
5 Jun-07 1929.2 0.0047 -0.0071 0.0000
6 Jul-07 1977.25 0.0249 0.0131 0.0005
7 Aug-07 1855.05 -0.0618 -0.0736 0.0022
8 Sep-07 1896.75 0.0225 0.0107 0.0014
9 Oct-07 1839.1 -0.0304 -0.0422 -0.0062
10 Nov-07 1604.05 -0.1278 -0.1396 0.0018
11 Dec-07 1768.4 0.1025 0.0907 0.0056
12 Jan-08 1503.9 -0.1496 -0.1614 0.0267
13 Feb-08 1546.85 0.0286 0.0168 -0.0003
14 Mar-08 1430.15 -0.0754 -0.0872 0.0119
15 Apr-08 1753.75 0.2263 0.2145 0.0226
16 May-08 1957.55 0.1162 0.1044 -0.0071
17 Jun-08 1734.75 -0.1138 -0.1256 0.0254
18 Jul-08 1583.3 -0.0873 -0.0991 -0.0053

80
19 Aug-08 1748.5 0.1043 0.0925 0.0005
20 Sep-08 1397.55 -0.2007 -0.2125 0.0285
21 Oct-08 1381.65 -0.0114 -0.0232 0.0063
22 Nov-08 1240.6 -0.1021 -0.1139 0.0095
23 Dec-08 1117.85 -0.0989 -0.1107 -0.0080
24 Jan-09 1305.5 0.1679 0.1561 -0.0081
25 Feb-09 1231.3 -0.0568 -0.0686 0.0047
26 Mar-09 1324.1 0.0754 0.0636 0.0052
27 Apr-09 1507.3 0.1384 0.1266 0.0205
28 May-09 1602 0.0628 0.0510 0.0154
29 Jun-09 1776.9 0.1092 0.0974 -0.0018
30 Jul-09 2063.9 0.1615 0.1497 0.0102
31 Aug-09 2132.3 0.0331 0.0213 -0.0001
32 Sep-09 2308.4 0.0826 0.0708 0.0052
33 Oct-09 2205.4 -0.0446 -0.0564 0.0045
34 Nov-09 2383.95 0.0810 0.0692 0.0040
35 Dec-09 2605.25 0.0928 0.0810 0.0019
36 Jan-10 2476.7 -0.0493 -0.0611 0.0042
37 Feb-10 2601.6 0.0504 0.0386 -0.0002
38 Mar-10 2615.1 0.0052 -0.0066 -0.0003
39 Apr-10 2736.15 0.0463 0.0345 -0.0001
40 May-10 2657.65 -0.0287 -0.0405 0.0019
41 Jun-10 2788.55 0.0493 0.0375 0.0012
42 Jul-10 2788.85 0.0001 -0.0117 0.0000
43 Aug-10 2707.1 -0.0293 -0.0411 0.0002
44 Sep-10 3041 0.1233 0.1115 0.0102
45 Oct-10 2969.6 -0.0235 -0.0353 0.0004
46 Nov-10 3049.45 0.0269 0.0151 -0.0007
47 Dec-10 3445 0.1297 0.1179 0.0031
48 Jan-11 3116.3 -0.0954 -0.1072 0.0124
49 Feb-11 3003.05 -0.0363 -0.0481 0.0021
    3054.45 0.5661   0.2089

Mean Rs 0.0118
   
COV.( S,M) 0.0044
   
Beta 0.4650

81
Annexure-8

Estimation of COV.(S,M) for ITC LTD. ( 500875 )

  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 171.85      
2 Mar-07 150.4 -0.1248 -0.1311 0.0004
3 Apr-07 160 0.0638 0.0575 0.0032
May-
4 07 163.6 0.0225 0.0162 0.0008
5 Jun-07 154.7 -0.0544 -0.0607 -0.0004
6 Jul-07 170.7 0.1034 0.0971 0.0039
7 Aug-07 170.55 -0.0009 -0.0072 0.0002
8 Sep-07 189.7 0.1123 0.1060 0.0137
9 Oct-07 179.15 -0.0556 -0.0619 -0.0091
1
0 Nov-07 188.6 0.0527 0.0465 -0.0006
1 Dec-07 210.3 0.1151 0.1088 0.0068

82
1
1
2 Jan-08 195.2 -0.0718 -0.0781 0.0129
1
3 Feb-08 202.15 0.0356 0.0293 -0.0005
1
4 Mar-08 206.35 0.0208 0.0145 -0.0020
1
5 Apr-08 219.8 0.0652 0.0589 0.0062
1 May-
6 08 217.65 -0.0098 -0.0161 0.0011
1
7 Jun-08 187 -0.1408 -0.1471 0.0298
1
8 Jul-08 187.8 0.0043 -0.0020 -0.0001
1
9 Aug-08 188.6 0.0043 -0.0020 0.0000
2
0 Sep-08 188 -0.0032 -0.0095 0.0013
2
1 Oct-08 153.9 -0.1814 -0.1877 0.0510
2
2 Nov-08 173.5 0.1274 0.1211 -0.0101
2
3 Dec-08 171.45 -0.0118 -0.0181 -0.0013
2
4 Jan-09 179.7 0.0481 0.0418 -0.0022
2
5 Feb-09 182.95 0.0181 0.0118 -0.0008
2
6 Mar-09 184.8 0.0101 0.0038 0.0003
2
7 Apr-09 189.1 0.0233 0.0170 0.0028
2 May-
8 09 183.65 -0.0288 -0.0351 -0.0106
2
9 Jun-09 190.45 0.0370 0.0307 -0.0006
3
0 Jul-09 250.05 0.3129 0.3067 0.0208
3
1 Aug-09 231.2 -0.0754 -0.0817 0.0005
3
2 Sep-09 231.9 0.0030 -0.0033 -0.0002
3
3 Oct-09 255.15 0.1003 0.0940 -0.0074
3
4 Nov-09 257.8 0.0104 0.0041 0.0002
3
5 Dec-09 250.85 -0.0270 -0.0332 -0.0008
3
6 Jan-10 250.25 -0.0024 -0.0087 0.0006
3
7 Feb-10 232.05 -0.0727 -0.0790 0.0005
3
8 Mar-10 263.15 0.1340 0.1277 0.0064

83
3
9 Apr-10 265.05 0.0072 0.0009 0.0000
4 May-
0 10 283.15 0.0683 0.0620 -0.0030
4
1 Jun-10 304.75 0.0763 0.0700 0.0023
4
2 Jul-10 308.75 0.0131 0.0068 0.0000
4
3 Aug-10 162.65 -0.4732 -0.4795 0.0022
4
4 Sep-10 178.05 0.0947 0.0884 0.0081
4
5 Oct-10 171.15 -0.0388 -0.0450 0.0005
4
6 Nov-10 171 -0.0009 -0.0072 0.0003
4
7 Dec-10 174.5 0.0205 0.0142 0.0004
4
8 Jan-11 162.95 -0.0662 -0.0725 0.0084
4
9 Feb-11 169 0.0371 0.0308 -0.0014
      0.3020   0.1346

Mean Rs 0.0063
   
COV.( S,M) 0.0028
   
Beta 0.2995

84
Annexure-9

Estimation of COV.(S,M) for L&T Ltd. 500510

Return
S.No. Month Price , Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 1487.5      
2 Mar-07 1619.15 0.0885 0.0688 -0.0002
3 Apr-07 1696.4 0.0477 0.0280 0.0016
4 May-07 1998.65 0.1782 0.1584 0.0079
5 Jun-07 2196.05 0.0988 0.0790 0.0005
6 Jul-07 2606.5 0.1869 0.1672 0.0068
7 Aug-07 2582.75 -0.0091 -0.0289 0.0009
8 Sep-07 2812.6 0.0890 0.0692 0.0089
9 Oct-07 4244.55 0.5091 0.4894 0.0718
10 Nov-07 4129 -0.0272 -0.0470 0.0006
11 Dec-07 4171.85 0.0104 -0.0094 -0.0006
12 Jan-08 3680.35 -0.1178 -0.1376 0.0228
13 Feb-08 3523.05 -0.0427 -0.0625 0.0010
14 Mar-08 3024.8 -0.1414 -0.1612 0.0220
15 Apr-08 3003.35 -0.0071 -0.0268 -0.0028
16 May-08 2981.35 -0.0073 -0.0271 0.0018
17 Jun-08 2183.2 -0.2677 -0.2875 0.0582
18 Jul-08 2602.7 0.1921 0.1724 0.0092
19 Aug-08 2589.85 -0.0049 -0.0247 -0.0001
20 Sep-08 2442.85 -0.0568 -0.0765 0.0103
21 Oct-08 805.45 -0.6703 -0.6900 0.1875
22 Nov-08 726.95 -0.0975 -0.1172 0.0098
23 Dec-08 774.4 0.0653 0.0455 0.0033
24 Jan-09 689.2 -0.1100 -0.1298 0.0067
25 Feb-09 611.45 -0.1128 -0.1326 0.0092
26 Mar-09 672.65 0.1001 0.0803 0.0066
27 Apr-09 879.55 0.3076 0.2878 0.0467
28 May-09 1405.6 0.5981 0.5783 0.1740
29 Jun-09 1568.3 0.1158 0.0960 -0.0018
30 Jul-09 1506.6 -0.0393 -0.0591 -0.0040
31 Aug-09 1567.6 0.0405 0.0207 -0.0001
32 Sep-09 1683.2 0.0737 0.0540 0.0040
33 Oct-09 1567.15 -0.0689 -0.0887 0.0070
34 Nov-09 1614.15 0.0300 0.0102 0.0006
35 Dec-09 1679.4 0.0404 0.0207 0.0005
36 Jan-10 1425.05 -0.1515 -0.1712 0.0117
37 Feb-10 1566.85 0.0995 0.0798 -0.0005

85
38 Mar-10 1626.35 0.0380 0.0182 0.0009
39 Apr-10 1608.35 -0.0111 -0.0308 0.0001
40 May-10 1628.6 0.0126 -0.0072 0.0003
41 Jun-10 1804.55 0.1080 0.0883 0.0029
42 Jul-10 1797.1 -0.0041 -0.0239 0.0000
43 Aug-10 1812.45 0.0085 -0.0112 0.0001
44 Sep-10 2044.7 0.1281 0.1084 0.0100
45 Oct-10 2021.85 -0.0112 -0.0309 0.0003
46 Nov-10 1949.85 -0.0356 -0.0554 0.0025
47 Dec-10 1979.05 0.0150 -0.0048 -0.0001
48 Jan-11 1641.15 -0.1707 -0.1905 0.0220
49 Feb-11 1528.05 -0.0689 -0.0887 0.0039
      0.9478   0.7245

Mean Rs 0.0197
   
COV.( S,M) 0.0151
   
Beta 1.6128

86
Annexure-10

Estimation of COV.(S,M) for ONGC Ltd. 500312

Return,
S.No. Month Price Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 790.6      
2 Mar-07 878.15 0.1107 0.1120 -0.0003
3 Apr-07 911.9 0.0384 0.0396 0.0022
4 May-07 914.6 0.0030 0.0042 0.0002
5 Jun-07 902.15 -0.0136 -0.0124 -0.0001
6 Jul-07 914 0.0131 0.0143 0.0006
7 Aug-07 857.55 -0.0618 -0.0605 0.0018
8 Sep-07 957.9 0.1170 0.1182 0.0153
9 Oct-07 1247.9 0.3027 0.3040 0.0446
10 Nov-07 1170.75 -0.0618 -0.0606 0.0008
11 Dec-07 1236.5 0.0562 0.0574 0.0036
12 Jan-08 988.4 -0.2006 -0.1994 0.0330
13 Feb-08 1012.35 0.0242 0.0254 -0.0004
14 Mar-08 981.35 -0.0306 -0.0294 0.0040
15 Apr-08 1033.4 0.0530 0.0543 0.0057
16 May-08 864.3 -0.1636 -0.1624 0.0111
17 Jun-08 814.7 -0.0574 -0.0562 0.0114
18 Jul-08 996.05 0.2226 0.2238 0.0119
19 Aug-08 1023.3 0.0274 0.0286 0.0002
20 Sep-08 1035.55 0.0120 0.0132 -0.0018
21 Oct-08 669.8 -0.3532 -0.3520 0.0956
22 Nov-08 695.35 0.0381 0.0394 -0.0033
23 Dec-08 667.65 -0.0398 -0.0386 -0.0028
24 Jan-09 658.2 -0.0142 -0.0129 0.0007
25 Feb-09 691.15 0.0501 0.0513 -0.0035
26 Mar-09 779.7 0.1281 0.1293 0.0106
27 Apr-09 865.5 0.1100 0.1113 0.0181
28 May-09 1175.9 0.3586 0.3599 0.1083
29 Jun-09 1067.1 -0.0925 -0.0913 0.0017
30 Jul-09 1164.5 0.0913 0.0925 0.0063
31 Aug-09 1185.2 0.0178 0.0190 -0.0001
32 Sep-09 1171.3 -0.0117 -0.0105 -0.0008
33 Oct-09 1132.7 -0.0330 -0.0317 0.0025
34 Nov-09 1199.05 0.0586 0.0598 0.0035
35 Dec-09 1177.55 -0.0179 -0.0167 -0.0004
36 Jan-10 1099.8 -0.0660 -0.0648 0.0044

87
 37 Feb-10 1117.05 0.0157 0.0169 -0.0001
38 Mar-10 1098.5 -0.0166 -0.0154 -0.0008
39 Apr-10 1055.1 -0.0395 -0.0383 0.0001
40 May-10 1167.2 0.1062 0.1075 -0.0052
41 Jun-10 1320.4 0.1313 0.1325 0.0043
42 Jul-10 1242.55 -0.0590 -0.0577 0.0000
43 Aug-10 1338.75 0.0774 0.0786 -0.0004
44 Sep-10 1401.55 0.0469 0.0481 0.0044
45 Oct-10 1303.25 -0.0701 -0.0689 0.0007
46 Nov-10 1248.2 -0.0422 -0.0410 0.0019
47 Dec-10 1293.4 0.0362 0.0374 0.0010
48 Jan-11 1177.55 -0.0896 -0.0884 0.0102
49 Feb-11 270.65 -0.7702 -0.7689 0.0341
      -0.0583   0.4349

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

88
Annexure-11

Estimation of COV.(S,M) for STATE BANK OF INDIA 500112

  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 1039.15      
2 Mar-07 992.9 -0.0445 -0.0729 0.0002
3 Apr-07 1105.25 0.1132 0.0848 0.0047
4 May-07 1352.4 0.2236 0.1952 0.0097
5 Jun-07 1525.3 0.1278 0.0995 0.0006
6 Jul-07 1624.5 0.0650 0.0367 0.0015
7 Aug-07 1599.5 -0.0154 -0.0438 0.0013
8 Sep-07 1950.7 0.2196 0.1912 0.0247
9 Oct-07 2068.15 0.0602 0.0318 0.0047
1
0 Nov-07 2300.3 0.1123 0.0839 -0.0011
1
1 Dec-07 2371 0.0307 0.0023 0.0001
1
2 Jan-08 2162.25 -0.0880 -0.1164 0.0193
1
3 Feb-08 2109.7 -0.0243 -0.0527 0.0008
1
4 Mar-08 1598.85 -0.2421 -0.2705 0.0370
1
5 Apr-08 1776.35 0.1110 0.0826 0.0087
1
6 May-08 1443.35 -0.1875 -0.2158 0.0147
1
7 Jun-08 1111.45 -0.2300 -0.2583 0.0523
1
8 Jul-08 1414.75 0.2729 0.2445 0.0130
1
9 Aug-08 1403.6 -0.0079 -0.0363 -0.0002
2
0 Sep-08 1465.65 0.0442 0.0158 -0.0021
2
1 Oct-08 1109.5 -0.2430 -0.2714 0.0737
2
2 Nov-08 1086.85 -0.0204 -0.0488 0.0041
2
3 Dec-08 1288.25 0.1853 0.1569 0.0113
2
4 Jan-09 1152.2 -0.1056 -0.1340 0.0069
2
5 Feb-09 1027.1 -0.1086 -0.1370 0.0095
2
6 Mar-09 1066.55 0.0384 0.0100 0.0008
2
7 Apr-09 1277.7 0.1980 0.1696 0.0275

89
2
8 May-09 1869.1 0.4629 0.4345 0.1307
2
9 Jun-09 1742.05 -0.0680 -0.0964 0.0018
3
0 Jul-09 1814 0.0413 0.0129 0.0009
3
1 Aug-09 1743.05 -0.0391 -0.0675 0.0004
3
2 Sep-09 2195.7 0.2597 0.2313 0.0170
3
3 Oct-09 2191 -0.0021 -0.0305 0.0024
3
4 Nov-09 2238.15 0.0215 -0.0069 -0.0004
3
5 Dec-09 2269.45 0.0140 -0.0144 -0.0003
3
6 Jan-10 2058 -0.0932 -0.1216 0.0083
3
7 Feb-10 1975.85 -0.0399 -0.0683 0.0004
3
8 Mar-10 2079 0.0522 0.0238 0.0012
3
9 Apr-10 2297.95 0.1053 0.0769 -0.0003
4
0 May-10 2268.35 -0.0129 -0.0413 0.0020
4
1 Jun-10 2302.1 0.0149 -0.0135 -0.0004
4
2 Jul-10 2503.8 0.0876 0.0592 0.0000
4
3 Aug-10 2764.85 0.1043 0.0759 -0.0003
4
4 Sep-10 3233.2 0.1694 0.1410 0.0129
4
5 Oct-10 3151.2 -0.0254 -0.0537 0.0006
4
6 Nov-10 2994.1 -0.0499 -0.0782 0.0036
4
7 Dec-10 2811.05 -0.0611 -0.0895 -0.0024
4
8 Jan-11 2641.05 -0.0605 -0.0889 0.0103
4
9 Feb-11 2632 -0.0034 -0.0318 0.0014
      1.3625   0.5137

Mean Rs 0.0284
   
COV.( S,M) 0.0107
   
Beta 1.1436

90
Annexure-12

Estimation of COV.(S,M) for TCS Ltd. 532540

  Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 1188.45      
2 Mar-07 1231.2 0.0360 0.0293 -0.0001
3 Apr-07 1265.7 0.0280 0.0213 0.0012
4 May-07 1208.6 -0.0451 -0.0518 -0.0026
5 Jun-07 1149.25 -0.0491 -0.0558 -0.0004
6 Jul-07 1158.45 0.0080 0.0013 0.0001
7 Aug-07 1065 -0.0807 -0.0873 0.0026
8 Sep-07 1056.75 -0.0077 -0.0144 -0.0019
9 Oct-07 1037.9 -0.0178 -0.0245 -0.0036
1
0 Nov-07 1013.95 -0.0231 -0.0298 0.0004

91
1
1 Dec-07 1083.35 0.0684 0.0618 0.0038
1
2 Jan-08 875.25 -0.1921 -0.1988 0.0329
1
3 Feb-08 874.3 -0.0011 -0.0078 0.0001
1
4 Mar-08 810.9 -0.0725 -0.0792 0.0108
1
5 Apr-08 919.55 0.1340 0.1273 0.0134
1
6 May-08 1029.25 0.1193 0.1126 -0.0077
1
7 Jun-08 858.8 -0.1656 -0.1723 0.0349
1
8 Jul-08 832.55 -0.0306 -0.0372 -0.0020
1
9 Aug-08 812.45 -0.0241 -0.0308 -0.0002
2
0 Sep-08 662.75 -0.1843 -0.1909 0.0256
2
1 Oct-08 537.45 -0.1891 -0.1957 0.0532
2
2 Nov-08 558.05 0.0383 0.0317 -0.0026
2
3 Dec-08 478.1 -0.1433 -0.1499 -0.0108
2
4 Jan-09 511.95 0.0708 0.0641 -0.0033
2
5 Feb-09 480.6 -0.0612 -0.0679 0.0047
2
6 Mar-09 540 0.1236 0.1169 0.0096
2
7 Apr-09 623.2 0.1541 0.1474 0.0239
2
8 May-09 699.75 0.1228 0.1162 0.0350
2
9 Jun-09 389.7 -0.4431 -0.4498 0.0083
3
0 Jul-09 526.4 0.3508 0.3441 0.0234
3
1 Aug-09 527 0.0011 -0.0055 0.0000
3
2 Sep-09 619.35 0.1752 0.1686 0.0124
3
3 Oct-09 626.2 0.0111 0.0044 -0.0003
3
4 Nov-09 687.2 0.0974 0.0907 0.0052
3
5 Dec-09 749.75 0.0910 0.0843 0.0020
3
6 Jan-10 735.45 -0.0191 -0.0257 0.0018
3
7 Feb-10 761 0.0347 0.0281 -0.0002
3 Mar-10 780.8 0.0260 0.0193 0.0010

92
8
3
9 Apr-10 766 -0.0190 -0.0256 0.0001
4
0 May-10 742 -0.0313 -0.0380 0.0018
4
1 Jun-10 751.15 0.0123 0.0057 0.0002
4
2 Jul-10 841.1 0.1197 0.1131 0.0000
4
3 Aug-10 843.85 0.0033 -0.0034 0.0000
4
4 Sep-10 922.55 0.0933 0.0866 0.0079
4
5 Oct-10 1051.8 0.1401 0.1334 -0.0014
4
6 Nov-10 1076.7 0.0237 0.0170 -0.0008
4
7 Dec-10 1165.05 0.0821 0.0754 0.0020
4
8 Jan-11 1157.15 -0.0068 -0.0135 0.0016
4
9 Feb-11 1112.95 -0.0382 -0.0449 0.0020
      0.3204   0.2840

Mean Rs 0.0067
   
COV.( S,M) 0.0059
   
Beta 0.6322

93
Annexure-13

Estimation of COV.(S,M) for TATA MOTORS LTD 500570

S.No
. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 783.95      
2 Mar-07 727.75 -0.0717 -0.0928 0.0003
3 Apr-07 750.45 0.0312 0.0100 0.0006
4 May-07 757.5 0.0094 -0.0117 -0.0006
5 Jun-07 669.75 -0.1158 -0.1370 -0.0009
6 Jul-07 699.3 0.0441 0.0230 0.0009
7 Aug-07 701.85 0.0036 -0.0175 0.0005
8 Sep-07 778.15 0.1087 0.0876 0.0113
9 Oct-07 757.7 -0.0263 -0.0474 -0.0070
10 Nov-07 733.35 -0.0321 -0.0533 0.0007
11 Dec-07 742.1 0.0119 -0.0092 -0.0006
12 Jan-08 706.15 -0.0484 -0.0696 0.0115
13 Feb-08 700.25 -0.0084 -0.0295 0.0005
14 Mar-08 623.45 -0.1097 -0.1308 0.0179
15 Apr-08 662.2 0.0622 0.0410 0.0043
16 May-08 576.9 -0.1288 -0.1500 0.0102
17 Jun-08 426.5 -0.2607 -0.2818 0.0571
18 Jul-08 403.25 -0.0545 -0.0757 -0.0040
19 Aug-08 440.35 0.0920 0.0709 0.0004
20 Sep-08 344.2 -0.2183 -0.2395 0.0321
21 Oct-08 171.8 -0.5009 -0.5220 0.1418
22 Nov-08 136.35 -0.2063 -0.2275 0.0190
23 Dec-08 159.05 0.1665 0.1453 0.0105
24 Jan-09 149.65 -0.0591 -0.0802 0.0041
25 Feb-09 149.45 -0.0013 -0.0225 0.0016
26 Mar-09 180.3 0.2064 0.1853 0.0153
27 Apr-09 242.35 0.3441 0.3230 0.0524
28 May-09 336.7 0.3893 0.3682 0.1108

94
29 Jun-09 291.15 -0.1353 -0.1564 0.0029
30 Jul-09 421.55 0.4479 0.4267 0.0290
31 Aug-09 489.35 0.1608 0.1397 -0.0008
32 Sep-09 591.35 0.2084 0.1873 0.0138
33 Oct-09 565 -0.0446 -0.0657 0.0052
34 Nov-09 660.9 0.1697 0.1486 0.0086
35 Dec-09 792.6 0.1993 0.1781 0.0042
36 Jan-10 694.35 -0.1240 -0.1451 0.0099
37 Feb-10 711.05 0.0241 0.0029 0.0000
38 Mar-10 755.7 0.0628 0.0417 0.0021
39 Apr-10 872.85 0.1550 0.1339 -0.0005
40 May-10 754.65 -0.1354 -0.1566 0.0075
41 Jun-10 778.35 0.0314 0.0103 0.0003
42 Jul-10 846.15 0.0871 0.0660 0.0000
43 Aug-10 1007.45 0.1906 0.1695 -0.0008
44 Sep-10 1097.3 0.0892 0.0680 0.0062
45 Oct-10 1159.45 0.0566 0.0355 -0.0004
46 Nov-10 1237.1 0.0670 0.0458 -0.0021
47 Dec-10 1306.3 0.0559 0.0348 0.0009
48 Jan-11 1148.25 -0.1210 -0.1421 0.0164
49 Feb-11 1081.8 -0.0579 -0.0790 0.0035
      1.0149   0.5966
   
  Mean Rs 0.0211  
       
  COV.( S,M) 0.0124  
       
    Beta 1.3281    

95
Annexure-14

Estimation of COV.(S,M) for WIPRO LTD 507685

S.No
. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 560.85      
2 Mar-07 558.35 -0.0045 -0.0082 0.0000
3 Apr-07 571.25 0.0231 0.0194 0.0011
4 May-07 544.55 -0.0467 -0.0505 -0.0025
5 Jun-07 518.5 -0.0478 -0.0516 -0.0003
6 Jul-07 495.65 -0.0441 -0.0478 -0.0019
7 Aug-07 482.25 -0.0270 -0.0308 0.0009
8 Sep-07 459.85 -0.0464 -0.0502 -0.0065
9 Oct-07 504.8 0.0977 0.0940 0.0138
10 Nov-07 460.3 -0.0882 -0.0919 0.0012
11 Dec-07 525.6 0.1419 0.1381 0.0086
12 Jan-08 413.35 -0.2136 -0.2173 0.0360
13 Feb-08 434.65 0.0515 0.0478 -0.0008
14 Mar-08 425.3 -0.0215 -0.0253 0.0035
15 Apr-08 488.6 0.1488 0.1451 0.0153
16 May-08 508 0.0397 0.0360 -0.0024
17 Jun-08 437.95 -0.1379 -0.1416 0.0287
18 Jul-08 416 -0.0501 -0.0539 -0.0029
19 Aug-08 432.3 0.0392 0.0354 0.0002
20 Sep-08 339.65 -0.2143 -0.2181 0.0292
21 Oct-08 272.15 -0.1987 -0.2025 0.0550
22 Nov-08 243.3 -0.1060 -0.1098 0.0092
23 Dec-08 233.55 -0.0401 -0.0438 -0.0032
24 Jan-09 231.1 -0.0105 -0.0142 0.0007
25 Feb-09 207.35 -0.1028 -0.1065 0.0074
26 Mar-09 245.4 0.1835 0.1798 0.0148
27 Apr-09 330.5 0.3468 0.3430 0.0557

96
28 May-09 381.55 0.1545 0.1507 0.0453
29 Jun-09 377.65 -0.0102 -0.0140 0.0003
30 Jul-09 490.65 0.2992 0.2955 0.0201
31 Aug-09 550.75 0.1225 0.1187 -0.0007
32 Sep-09 601.75 0.0926 0.0889 0.0065
33 Oct-09 607.65 0.0098 0.0061 -0.0005
34 Nov-09 628.9 0.0350 0.0312 0.0018
35 Dec-09 679.4 0.0803 0.0766 0.0018
36 Jan-10 647.4 -0.0471 -0.0508 0.0035
37 Feb-10 676.7 0.0453 0.0415 -0.0003
38 Mar-10 706.8 0.0445 0.0407 0.0020
39 Apr-10 673.5 -0.0471 -0.0509 0.0002
40 May-10 668.35 -0.0076 -0.0114 0.0005
41 Jun-10 384.75 -0.4243 -0.4281 -0.0139
42 Jul-10 411.35 0.0691 0.0654 0.0000
43 Aug-10 399.8 -0.0281 -0.0318 0.0001
44 Sep-10 448.35 0.1214 0.1177 0.0108
45 Oct-10 419.6 -0.0641 -0.0679 0.0007
46 Nov-10 420.2 0.0014 -0.0023 0.0001
47 Dec-10 490.25 0.1667 0.1630 0.0043
48 Jan-11 438.45 -0.1057 -0.1094 0.0127
49 Feb-11 438.4 -0.0001 -0.0039 0.0002
      0.1799   0.3563
   
  Mean Rs 0.0037  
       
  COV.( S,M) 0.0074  
       
    Beta 0.7931    

97
Annexure-15
Estimation of COV.(S,M) for NTPC LTD 532555
S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 139.95      
2 Mar-07 149.75 0.0700 0.0621 -0.0002
3 Apr-07 159.2 0.0631 0.0552 0.0031
4 May-07 158.4 -0.0050 -0.0130 -0.0006
5 Jun-07 152.35 -0.0382 -0.0461 -0.0003
6 Jul-07 165.65 0.0873 0.0794 0.0032
7 Aug-07 173.3 0.0462 0.0383 -0.0012
8 Sep-07 193.45 0.1163 0.1083 0.0140
9 Oct-07 239.4 0.2375 0.2296 0.0337
10 Nov-07 236.65 -0.0115 -0.0194 0.0002
11 Dec-07 250.05 0.0566 0.0487 0.0030
12 Jan-08 197.9 -0.2086 -0.2165 0.0359
13 Feb-08 201.75 0.0195 0.0115 -0.0002
14 Mar-08 197 -0.0235 -0.0315 0.0043
15 Apr-08 196.75 -0.0013 -0.0092 -0.0010
16 May-08 172.25 -0.1245 -0.1324 0.0090
17 Jun-08 151.65 -0.1196 -0.1275 0.0258
18 Jul-08 170.45 0.1240 0.1160 0.0062
19 Aug-08 175.2 0.0279 0.0199 0.0001
20 Sep-08 171.75 -0.0197 -0.0276 0.0037
21 Oct-08 140.55 -0.1817 -0.1896 0.0515
22 Nov-08 159.6 0.1355 0.1276 -0.0106
23 Dec-08 181 0.1341 0.1262 0.0091
24 Jan-09 189.5 0.0470 0.0390 -0.0020
25 Feb-09 184.2 -0.0280 -0.0359 0.0025
26 Mar-09 180.2 -0.0217 -0.0296 -0.0024
27 Apr-09 190.15 0.0552 0.0473 0.0077
28 May-09 215.45 0.1331 0.1251 0.0376
29 Jun-09 195.05 -0.0947 -0.1026 0.0019
30 Jul-09 215.6 0.1054 0.0974 0.0066
31 Aug-09 212.65 -0.0137 -0.0216 0.0001

98
32 Sep-09 213.7 0.0049 -0.0030 -0.0002
33 Oct-09 211.4 -0.0108 -0.0187 0.0015
34 Nov-09 209.75 -0.0078 -0.0157 -0.0009
35 Dec-09 235.7 0.1237 0.1158 0.0027
36 Jan-10 214.25 -0.0910 -0.0989 0.0068
37 Feb-10 203 -0.0525 -0.0604 0.0004
38 Mar-10 207 0.0197 0.0118 0.0006
39 Apr-10 206.95 -0.0002 -0.0082 0.0000
40 May-10 202 -0.0239 -0.0318 0.0015
41 Jun-10 199.15 -0.0141 -0.0220 -0.0007
42 Jul-10 198.6 -0.0028 -0.0107 0.0000
43 Aug-10 195.75 -0.0144 -0.0223 0.0001
44 Sep-10 216.9 0.1080 0.1001 0.0092
45 Oct-10 194.95 -0.1012 -0.1091 0.0012
46 Nov-10 184.25 -0.0549 -0.0628 0.0029
47 Dec-10 200.6 0.0887 0.0808 0.0021
48 Jan-11 188.9 -0.0583 -0.0663 0.0077
49 Feb-11 170.05 -0.0998 -0.1077 0.0048
      0.3804   0.2803
   
  Mean Rs 0.0079  
       
  COV.( S,M) 0.0058  
       
    Beta 0.6240    

99
Annexure-16

Estimation of COV.(S,M) for BHEL (500103)

S.No. Month Price Return, Rs Deviation (Rs-Mean Rs) COV.(S,M)
1 Feb-07 2176.8      
2 Mar-07 2260.75 0.0386 0.0324 -0.0001
3 Apr-07 2487.25 0.1002 0.0941 0.0052
4 May-07 1398.9 -0.4376 -0.4437 -0.0222
5 Jun-07 1538.25 0.0996 0.0935 0.0006
6 Jul-07 1731.7 0.1258 0.1196 0.0048
7 Aug-07 1889.15 0.0909 0.0848 -0.0026
8 Sep-07 2032.75 0.0760 0.0699 0.0090
9 Oct-07 2613.35 0.2856 0.2795 0.0410
10 Nov-07 2680.25 0.0256 0.0195 -0.0002
11 Dec-07 2584.25 -0.0358 -0.0419 -0.0026
12 Jan-08 2064.1 -0.2013 -0.2074 0.0344
13 Feb-08 2282 0.1056 0.0994 -0.0016
14 Mar-08 2056.55 -0.0988 -0.1049 0.0143
15 Apr-08 1897 -0.0776 -0.0837 -0.0088
16 May-08 1662.15 -0.1238 -0.1299 0.0089
17 Jun-08 1380.6 -0.1694 -0.1755 0.0355
18 Jul-08 1679.05 0.2162 0.2101 0.0112
19 Aug-08 1706.55 0.0164 0.0103 0.0001
20 Sep-08 1586 -0.0706 -0.0768 0.0103
21 Oct-08 1281.6 -0.1919 -0.1980 0.0538
22 Nov-08 1361.3 0.0622 0.0561 -0.0047
23 Dec-08 1362.4 0.0008 -0.0053 -0.0004
24 Jan-09 1320.45 -0.0308 -0.0369 0.0019
25 Feb-09 1396.3 0.0574 0.0513 -0.0036
26 Mar-09 1504.35 0.0774 0.0713 0.0059
27 Apr-09 1651.75 0.0980 0.0919 0.0149
28 May-09 2174.9 0.3167 0.3106 0.0935
29 Jun-09 2204.35 0.0135 0.0074 -0.0001
30 Jul-09 2228.05 0.0108 0.0046 0.0003
31 Aug-09 2314.7 0.0389 0.0328 -0.0002
32 Sep-09 2325.15 0.0045 -0.0016 -0.0001

100
33 Oct-09 2217.1 -0.0465 -0.0526 0.0041
34 Nov-09 2244.55 0.0124 0.0063 0.0004
35 Dec-09 2406.1 0.0720 0.0659 0.0015
36 Jan-10 2406.45 0.0001 -0.0060 0.0004
37 Feb-10 2352.15 -0.0226 -0.0287 0.0002
38 Mar-10 2385.45 0.0142 0.0080 0.0004
39 Apr-10 2492.1 0.0447 0.0386 -0.0001
40 May-10 2356.65 -0.0544 -0.0605 0.0029
41 Jun-10 2460.7 0.0442 0.0380 0.0012
42 Jul-10 2438.9 -0.0089 -0.0150 0.0000
43 Aug-10 2408.2 -0.0126 -0.0187 0.0001
44 Sep-10 2483.6 0.0313 0.0252 0.0023
45 Oct-10 2445.7 -0.0153 -0.0214 0.0002
46 Nov-10 2205.75 -0.0981 -0.1042 0.0048
47 Dec-10 2324.75 0.0539 0.0478 0.0013
48 Jan-11 2217.5 -0.0461 -0.0523 0.0060
49 Feb-11 2000.65 -0.0978 -0.1039 0.0046
      0.2937   0.3288
   
  Mean Rs 0.0061  
       
  COV.( S,M) 0.0068  
       
    Beta 0.7318    

101
102