INVESTMENT GROUP 3 :-
SAUMIL JANI (171150)
BANKING KRITI RATHI (171223)
PRASOON MISHRA (171234)
RAMAN KUMAR (171237)
“Index funds are passively managed funds that allow investors to participate
WHAT ARE INDEX FUNDS?
• Index funds are passively managed funds that allow
investors to participate intelligently in the stock market.
• The index is a theoretical construct: “This means you can’t
buy shares directly in an index, but you can buy shares of
the companies, which are included in the index.”
10 NSE INDICES
• NIFTY 50 - The NIFTY 50 index is National Stock Exchange of
India’s benchmark stock market index for Indian equity market.
Nifty is owned and managed by India Index services & products
ltd. (IISL).
• NIFTY ALPHA 50 - NIFTY Alpha 50 Index aims to measure the
performance of securities listed on NSE with high alphas. It is a
well-diversified 50 stock index.
• NIFTY BANK - Nifty Bank Index is an index comprised of the most
liquid and large capitalized Indian Banking stocks. It provides
investors and market intermediaries with a benchmark that
captures the capital market performance of Indian Banks.
• NIFTY ENERGY - The NIFTY Energy Index is intended to mirror the conduct and
execution of a differentiated arrangement of organizations speaking to the
products fragment which incorporates parts, for example, Petroleum, Gas
and Power and so on.
• NIFTY FMCG - FMCGs (Fast Moving Consumer Goods) are those goods and
products, which are non-durable, mass consumption products and available
off the shelf. The Nifty FMCG Index comprises of maximum of 15 companies
who manufacture such products, which are listed on the National Stock
Exchange (NSE).
• NIFTY IT - Nifty IT furnishes financial specialists and market mediators with a
fitting benchmark that catches the execution of the IT portion of the market.
• NIFTY MIDCAP 100 - The NIFTY Midcap 100 Index speaks to about 11% of the
free buoy advertise capitalization of the stocks recorded on NSE as on
March 31, 2018.
• NIFTY MNC - The NIFTY MNC Index involves organizations in which the remote
shareholding is over half and/or the administration control is vested in the
outside organization.
• NIFTY NEXT 50 - The NIFTY Next 50 Index represents about 12% of the free float
market capitalization of the stocks listed on NSE as on March 31, 2016. NIFTY
Next 50 was introduced on January 1, 1997, with base date and base value
being November 03, 1996 and 1000 respectively and a base capital of `0.43
trillion.
• NIFTY SERVICES SECTOR - The NIFTY Services Sector Index incorporates
organizations that speaks to parts, for example, Computers – Software, IT
Education and Training, Banks, Telecommunication – administrations,
Financial Institutions, Power, Media, Courier, Shipping and so forth.
LITERATURE REVIEW
ANJU BALA (JULY 2013)
• Today long-term investors are interested to invest in the Stock market rather than
invest anywhere. The Bombay Stock Exchange (BSE), the National Stock Exchange
(NSE) and the Calcutta Stock Exchange (CSE) are the three large stock exchanges
of Indian Stock Market.
• It has also been suggested that liquid markets improve the allocation of resources
and enhance prospects of long term economic growth.
• Stock Market is the mitigation of risk through the spreading of investment across
multiple entities, which is achieved by the group of a number of small investments
into a large bucket.
• Stock Market is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost.
LETTAU AND LUDVIGSON (2001)
• This Paper show that a conditional (consumption) CAPM that uses the
consumption-wealth ratio as the scaling variable explains these cross-section
returns very well.
• They explain that small-size or low book-to-market ratio stocks have higher
(consumption) betas in bad times or when the consumption-wealth ratio is
high than they have in good times or when the consumption-wealth ratio is
low.
MUNYA CHAWANA
(December2001)
• The risk return trade-off for investing in the stocks is the possibility of a return
greater than that of a risk-free asset versus the increase risk off holding stocks
over a risk-free asset.
• In this paper it shows, a trade-off between conditional variance and
conditional mean of the stock market return.
• In support we find a positive and significant relation between risk and return.
• This relation is robust in subsamples, does not change when the conditional
variance is allowed to react asymmetrically to positive and negative returns.
RAGHAVAN. R. S (2000)
• The Paper commented on the risk perceptions and the risk measure
parameters.
• He opined that risk measures are related to the return measurements. While
risks can only be contained and cannot be eliminated altogether, there is no
doubt that some risks have to be taken to get adequate returns.
• Returns can be increased or made quicker by taking more financial and
operating risks.
• He concluded that the process of retaining the levels of risks within the
desirable levels must be practiced in the daily operations.
SHRIKUMAR HD (MAR 2015)
• Stock with more systematic risk is not favorable for investment because it has
highest market risk. Thus, to construct an efficient portfolio it is better to avoid
such stocks.
• More specifically, most investors are concerned about the actual outcome
being less than the expected outcome as the wider the range at possible
outcome the greater the risk in fact valuation and on understanding of the
trade of between risk & return from the foundation for maximizing
shareholders wealth.
• The study is undertaken with the main objective of determining the risk return
profile of 30 listed stock of NSE. Only top 30 companies share listed on NSE
are considered.
VIJAY SOODD (2000)
• It is revealed the risks faced by banks and financial institutions and the
degree of risk faced by them.
• According to him, risk management is gathering momentum at a time when
there is increasing pressure on banks and financial institutions to better
manage their assets and improve their balance sheet.
• He opined that the greater the volatility of expected returns, the higher is
the risk. The essence of risk management is to reduce the volatility.
ANALYSIS OF RISK
AND RETURNS
• No. of indices taken – 10.
• Criteria of Selection – Max. Market Capitalization in each category.
• Data period – daily index value from 20/11/2012 to 26/11/2018.
• Formula for daily return – ln(Current day Return/Previous day Return)*100.
• Formula for Risk – Standard Deviation of Average daily return.
• Criteria of distribution – Dividing complete range between maximum and
minimum into 3 regions.
AVERAGE RISK & RETURN OF 10 INDICES
PORTFOLIO RETURN RISK
NIFTY 50 0.0435% 0.8981%
NIFTY ALPHA 50 0.0684% 1.3245%
NIFTY BANK 0.0560% 1.3168%
NIFTY ENERGY 0.0419% 1.2193%
NIFTY FMCG 0.0482% 1.0765%
NIFTY IT 0.0564% 1.1768%
NIFTY MIDCAP 100 0.0546% 1.0874%
NIFTY MNC 0.0587% 0.9454%
NIFTY NEXT 50 0.0605% 1.0687%
NIFTY SERVICES SECTOR 0.0510% 0.9623%
RANGE DETERMINATION
VARIABLES RETURN(%) RISK(%)
AVERAGE 0.05392 1.10758
MAXIMUM 0.0684 1.3245
MINIMUM 0.0419 0.8981
MAXIMUM-AVERAGE 0.01448 0.21692
AVERAGE-MINIMUM 0.01202 0.20948
HIGH RANGE 0.0684 to 0.0587 1.3245 to 1.2522
MEDIUM RANGE 0.0587 to 0.0499 1.2522 to 1.0377
LOW RANGE 0.0499 to 0.0419 1.0377 to 0.8981
INDICES CLASSIFICATION
PORTFOLIO RETURN HIGH MEDIUM LOW PORTFOLIO RISK HIGH MEDIUM LOW
NIFTY 50 0.0435% yes NIFTY 50 0.8981% yes
NIFTY ALPHA 50 0.0684% yes NIFTY ALPHA 50 1.3245% yes
NIFTY BANK 0.0560% yes NIFTY BANK 1.3168% yes
NIFTY ENERGY 0.0419% yes NIFTY ENERGY 1.2193% yes
NIFTY FMCG 0.0482% yes NIFTY FMCG 1.0765% yes
NIFTY IT 0.0564% yes NIFTY IT 1.1768% yes
NIFTY MIDCAP 100 0.0546% yes NIFTY MIDCAP 100 1.0874% yes
NIFTY MNC 0.0587% yes NIFTY MNC 0.9454% yes
NIFTY NEXT 50 0.0605% yes NIFTY NEXT 50 1.0687% yes
NIFTY SERVICES SECTOR 0.0510% yes NIFTY SERVICES SECTOR 0.9623% yes
INDICES CLASSIFICATION
ANALYSIS
Portfolio Selection
• Different indices offer different levels of risk and return to investors. However,
these investment options are not favored by all investors.
• An index that provides high returns may or may not be suitable for the
investor.
• Consider the risk profile of its investors and try to match its portfolio to
financial instruments with a similar risk and return profile
ANALYSIS
PORTFOLIOS CREATED
Low Risk- Medium Return
• NIFTY •NIFTY IT
Medium Risk – Medium Return
High Risk- High Return
Medium Risk – High Return
NEXT 50 •NIFTY
MIDCAP 100
•NIFTY ALPHA •NIFTY MNC
50 •NIFTY MNC
NIFTY
NIFTY NEXT 50 SERVICES •NIFTY NEXT
SECTOR 50
• NIFTY
SERVICES
SECTOR
WEIGHTAGES FOR MEDIUM RISK
MEDIUM RETURN
NIFTY NIFTY
PORTFOLI MIDCAP NIFTY NIFTY SERVICES TOTAL TOTAL
O NIFTY IT 100 MNC NEXT 50 SECTOR RETURN RISK
1 0.2 0.2 0.2 0.2 0.2 0.05624 1.04812
2 0.3 0.3 0.2 0.2 0 0.05714 1.08208
3 0.1 0.1 0.3 0.3 0.2 0.05706 1.02311
4 0 0.2 0.2 0.4 0.2 0.05706 1.0265
5 0.05 0.05 0.3 0.3 0.3 0.05661 1.00613
MANAGERIAL IMPLICATIONS
• Risk and return analysis of stocks helps the speculator to get the securities
dependent on their choice.
• The wider the range, the more prominent the risk in valuation.
• Returns can be increased or made quicker by taking more financial and
operating risks.
• Since the index is a good reflector of the market, for all purposes, the return
of the market is measured by the return of the index.
CONCLUSION
• The share trading market is sometimes highly volatile.
• It is seen that high risk may yield high rewards, but it is not necessary.
• The external factors play a vital role in the index performance.
• Consistent analysis helps select the companies or on an umbrella scale ,
indices to invest in.
THANK YOU !
