STUDY REPORT ON

“COMPARATIVE ANALYSIS OF RISK AND RETURN WITH

REFERENCE TO SELECTED STOCKS OF NIFTY IT”

By
CHAITRA R
1DA17MBA09

Under The Guidance Of

Dr. S Baskaran
Associate Professor and HOD, Dept. Of MBA, Dr. AIT, Bangalore
Dr. AMBEDKAR INSTITUTE OF TECHNOLOGY

Dr. Ambedkar Institute Of Technology

Near JnanaBarathi Campus, Bangalore – 560056
 ABSTRACT
This report is on comparative analysis of risk and returns with reference to selected
stock of NIFTY IT. This study speaks about the interconnection between the risk and
return factors of IT sector taking Nifty IT index.

The study compares the performance of top 8 listed companies involved in IT sector
index in NSE. These 8 companies are analyzed and compared by using three years data
based on the beta value. IT sector which is considered as one of the major sectors
which play a major role in contributing to the Indian GDP. The market value of IT
sector is uneven which depends on the performance of the company's politics economic
tax and market condition. The eight companies chosen for the study hour are Infosys
Ltd, Tata Consultancy Services Ltd, HCL Technologies Ltd, Tech Mahindra Ltd, Wipro
Ltd, Mind Tree Ltd, Oracle Financial Services Software Ltd and KPIT Technologies
Ltd. The selected companies are most popular and highly performing companies.

The outcome of this research work would help the existing and potential investors to
take investment decisions with reference to those IT sector companies which have
stability index stock price so as to make a good return and help the investors to
diversify their portfolio to earn high rate of return with minimal risk.
 INTRODUCTION
• Risk refers to the chance or probability of not delivering the
actual or expected returns from a certain investment.
• Return refers to the actual amount earned from an investment
by investors during certain period.
• The Risk and Return trade off says that the prospective Return
rises with an increase in Risk.
• The study analyses the monthly returns of the IT sector indices
which is taken from the National Stock Exchange (NSE) in the
Indian market.
• IT sector is considered as one of the major sector which
contributes 79% of the industries total revenue and is playing
major role in contribution to Indian GDP.
 NEED FOR THE STUDY

This study is conducted to analyze the stock movement

of IT sector which is observed and taken from NSE
Nifty. It also analyses the performance of IT sector
shares to know the rate of return and also the risk
associated to a particular company’s stock. The risk and
return of IT company stock is calculated using different
risk elements succeeding in the market and also in other
factors of economy. This study is designed to analyze
the selected IT sectors share’s performance and also the
risk and return for a particular period of time.
 OBJECTIVES OF THE STUDY

• To study the share price variations of

selected IT companies.
• To examine the risk and return of top 8
companies which are listed in Nifty IT
• To assess and compare risk and return of
selected nifty IT
 REVIEW OF LITERATURE
 Dr. Prema Chandra (2016) - The study was conducted to know the Volatility and
Returns of stocks of Banking Sector in India with referral to NSE Nifty.
 Shaini Naveen & T. Mallikarjunappa (2016) – The study was conducted to know
the risk and return analysis with reference to stocks of CNX bank nifty.
 Dr. Prema Chandran (2016) – The topic for the study was on analyzing the
sectoral predictability of risk and return in India.
 Dr. S. Krishnaprabha & Mr.M.Vijayakumar (2015) – The topic for the study
was on Risk and Return Analysis of Selected Stocks in India.
 Bora and Adhikary (2015) – topic is to “Study on the risk-return relationship
using BSE Sensex companies”.

Research gap:
 From the literature review the study relevant to risk and return analysis on IT
sectorial indices at macro level could be retrieved. The studies at macro level on IT
sectoral indices was not found in any of the above literature therefore the study
found the gap and conducted the research on selected 8 companies performance
from IT sectorial from Nifty.
 NATIONAL STOCK EXCHANGE
• The national stock exchange is one of the leading stock exchanges
of India which was published in 1992. It was set up to bring
transparency in the market. It was set up by leading financial
institution of India. The objectives of NSE are to provide a fair,
transparent and efficient security market to investors using
electronic trading system.
• NIFTY IT Index: it is an indication or reflection of performance
and behaviour of all IT activities such as IT software development,
hardware development, maintenance, software training education,
networking etc.
• Maximal stocks constituted: 10 companies
• Base date: 1, January 1996
• Base Value: 100 (w.e.f, 28, may 2004)
• Weightage of each company in this index is limited to 25%
(up to 29, march 2019)
 FORMULAS
𝑻𝒐𝒅𝒂𝒚’𝒔 𝒄𝒍𝒐𝒔𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆 – 𝒚𝒆𝒔𝒕𝒆𝒓𝒅𝒂𝒚’𝒔 𝒄𝒍𝒐𝒔𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆
ROI = × 𝟏𝟎𝟎
𝒚𝒆𝒔𝒕𝒆𝒓𝒅𝒂𝒚 𝒄𝒍𝒐𝒔𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆

∑𝑹𝑶𝑰
Return = 𝑵

D = (ROI - X)

√∑𝑑2
Risk = 𝑁
ഥ)𝟐
√∑(𝒙 − 𝒙
𝝈=
𝒏−𝟏

𝒏∑𝑿𝒀 − ∑𝑿 (∑𝒀)
ß=
𝒏∑𝑿𝟐 − (∑𝑿)𝟐

Standard Deviation (SD) – it is a tool which is uses by analyst to know or to predict

the performance of a particular investment’s riskiness.

Beta- It is used to measure risk which basically indicates the level of volatility or
systematic risk, which will help the investors to make a decision whether to go for the
riskier stock or not.
 ANALYSIS
2016-17
1.5
1.19558
1.10747

1
0.77169

0.5
0.27621 0.23569

-0.0464
0

-0.4572 Beta
-0.5

-0.89696

-1

-1.5
HCL INFOSYS KPIT MindTress OFSS TCS TECHM WIPRO
Beta -0.89696 1.10747 1.19558 0.27621 0.23569 -0.0464 -0.4572 0.77169
BETA VAUES
 2017-18
1

0.8 0.72736

0.6

0.4
0.24576

0.2
-0.022
0 -0.1198
-0.2154 -0.236 Beta
-0.2

-0.4 -0.5298

-0.6

-0.8464
-0.8

-1
HCL INFOSYS KPIT MindTress OFSS TCS TECHM WIPRO
Beta 0.72736 -0.2154 -0.8464 -0.022 0.24576 -0.1198 -0.5298 -0.236
Beta value
 2018-19
0

-0.363
-0.4835
-0.5
-0.7202
-0.8386 -0.8253

-1

-1.5

Beta
-2.0725
-2
-2.2828

-2.5
-2.7468

-3
HCL INFOSYS KPIT MindTress OFSS TCS TECHM WIPRO
Beta -0.8386 -0.8253 -2.7468 -2.0725 -0.4835 -0.7202 -2.2828 -0.363
Beta value
 SUGGESTIONS
After comparing and analyzing the stock of IT sectors. It is suggested that:
• The study found that the stocks of IT sectors swings too much. That is the
volatility of IT sector stocks keeps on fluctuating. Hence the investors must
be very care full in selecting the stocks.
• Since the beta value of shares is highly fluctuating, it will be suitable for
those investors who take high risk for better returns.
• It is suggested to investors to always invest in better diversified portfolio,
than investing in stock of a particular company.
• In the year 2018-19 the IT companies have negative beta value. Hence it is
suggested to investors that the investors must go for diversifying their
portfolios, than investing in particular IT sectors.
• The remaining Shares which show negative beta value does not mean it
fetch less return, the investors need to analyse each stock to know why beta
is negative and then need to decide if it is good for investing.
THANK YOU