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PRESENTED BY :

RAUSHAN

KR. 4 – MBA – C

1020226 CUIM,

KENGERI

SIP Report on “Risk & Return Analysis of FMCG, Banking &

Pharmaceutical Sector” at IIFL.

Research Methodology

Title of study:- “Risk & Return Analysis of FMCG, Banking & Pharmaceutical sectors.”

Statement of the Problem:- “To find out Risk & Return associated with an Investment by measuring

Beta & Standard deviation & then find out optimum portfolio based on that risk and return.”

Objective of study:-1. To analyze the risk & return of companies

2. To study the volatility of companies in comparison with other players in the market.

3. To analyze the under/overvaluation of stocks to understand future prospect


Data sources:- Data has been selected from various secondary sources like internet,

journals & other publications.

• www.nse-india.com

• www.iifl.com

• www.5paisa.com

• www.livemint.com

• www.bseindia.com ( for stock prices)

For charts & diagrams:-• www.icharts.com

• www.moneycontrol.com

• www.indiabulls.com

• www.leavittbrothers.com


Scope of study:- Scope of the study is limited to preparation of portfolio consisting of

equity and no other instruments like debentures, bonds etc. I have made two portfolios with 29 scripts in all, were initially taken for consideration with the help of tools like Beta(risk), Return in Sharpe Optimization model, RETURN Vs. EPS Model, HH %, LL% & PEG Model which shows which stocks are overvalued and which are undervalued.

Limitation:- Few stocks of only few sectors have been selected. Few data is of last two months only. Risk can't be measured so accurately as market is uncertain &

fluctuating. Mainly based on secondary data. It is limited to NSE & BSE only.

Data analysis & Interpretation

Portfolio – 1 – on the basis of Sharpe optimization model.

calculation of beta, return, Std. Dev., variance, U.sys.risk, Net return, Return to beta ratio.

Then the security has been ranked according to their return to beta with excess being more desirable to be included in portfolio.

Then we determine cut off rate and for that we calculate numerator & denominator


As cut off rate is determined then it is clear as to which all stocks are to be selected & rejected to prepare optimum portfolio.

So for optimum portfolio we determine relative investment & weight of investment.

After the securities have been evaluated the portfolio’s risk & return is being evaluated to see whether the investment decision in the portfolio would be profitable or not.


Portfolio – 2 – on the basis of PEG model. Concept of overvaluation & Undervaluation based on pre-post recession.

Selection by graph analysisHH% / LL% & then we select as max being the better Undervaluation / overvaluation -> PEG Model - > RETURN Vs. EPS Model Determining Return and proportion of Investment

FINDINGS

When I compared the risk of investment in banking sector then I found that banks like Indian bank(1.08), Allahabad bank(1.05),Syndicate bank(1.05) were having lesser risk associated with them than Vijya bank(1.24), Yes bank(1.16) in terms of investment done there.

When it came to return associated with their investment then

again companies like Indian bank, Ashok Leyland & Indian hotels Co. ltd had higher return than Syndicate bank,Yes bank, Century textile & LIC housing finance

When I compared the Companies from FMCG, Pharmaceutical & Banking sector then i found out that firms like Cadila healthcare, Lupin pharmaceutical, Dabur India & Nestle were overvalued in comparison to firms like Colgate Palmolive, Punjab National Bank &Emami were undervalued and hence had more future prospect in terms of ROI.

SUGGESTION

Based on my analysis I would like to suggest that when it comes to Pharmaceutical sector then investment in companies like Lupin pharmaceutical & Cadila healthcare are a good option to go with.

When it comes to investing in banking sector then undoubtedly Punjab National bank are way ahead of other competitor and have fair return which proves a good option.

As we talk of FMCG sector then Colgate Palmolive and Emami forms the better option keeping in mind the future prospect.

So I would also like to suggest to the firm to use these tools like PEG model, Return Vs. EPS model, Sharpe optimization model etc. for better decision making regarding calculation of risk, return, HH%, LL%. etc.

CONCLUSION

This study includes 2 different sets of portfolio where all the portfolios have been prepared on the basis of different parameters with different sets of fundamental and technical tools.

While the first portfolio was prepared statistically by adopting Sharpe optimization model the other portfolio included several technical indicators (like William % R, RSI, Chart analysis, ).

With the help of A Sharpe model a 3 month portfolio is created which includes 3 securities i.e.; Indian Bank, Indian Hotel& Co. ltd., Ashok Leyland.

The second portfolio has been prepared including those stocks which were least affected during recession period while got benefitted post recession period. The selected as the result were:- Colgate Palmolive & Punjab National Bank.

During this project what I realized was the fact that most of the large companies stocks gave lesser return in comparison to most of the small stocks like midcap companies because these small companies are providing reasonable return to their investors.

Thank You

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