Relationship Between Nature of Industry and Market Sensitivity
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[pic 1]Corporate Finance Projecton“Relationship between Nature of Industry and Market Sensitivity”Submitted by: Group – 1, Section – A Akshay Dewan 29NMP07Ankur Maheshwari 29NMP11Chandan Kumar 29NMP22Harshwardhan Padole 29NMP48Kanika Dua 29NMP36Mohnish Manchanda 29NMP45Monu Kumar Sangwan 29NMP44ContentsIntroduction 3Stock Data 3Relationship of Sectors with Systematic Risk of Market (NIFTY) 4Relationship of Sectors with Currency Exchange Rates (INR-$ Rate) 5IT Services Sector 5Energy Sector 6FMCG Sector 7Relationship of Sectors with Inflation in Indian Economy 8IT Services Sector 8Energy Sector 9FMCG Sector 10Relationship of Sectors with Exports 11IT Services Sector 11Energy Sector 12FMCG Sector 13Conclusion 14IntroductionThe project analyses the relationship between nature of industry and market sensitivity. Here, we analyze three sectors i.e.IT Services sectorEnergy SectorFMCG SectorCompanies that are studied under each sector are:AInformation Technology1TCS2Wipro3Polaris ConsultBEnergy/ Power1ONGC2Reliance Infra3Tata PowerCFMCG1P&G2HUL3DaburSensitivity variables for which the relationship is being determined for these stocks and sectors are:
Systematic Risk of Market (NIFTY)Currency Exchange Rate (INR-$ Rate)Inflation in Indian EconomyExports in Indian EconomyStock DataStock Price data has been obtained for all the nine (9) stocks from NSE website. Stock prices have been collected for the period starting from 1st April 2014 till 31st March 2016 on daily basis. Average returns have been calculated for each stock using symmetric returns method. Average Return = PT – PT-1[pic 2]PT-1Also data for NIFTY i.e. the market variable has also been collected from NSE Website. Total 491 observations for stock prices of each company were used for various calculations during the course of this project.Relationship of Sectors with Systematic Risk of Market (NIFTY)Average daily returns for all the stocks were calculated from the stock price data following the symmetric returns methods. Same was done for Nifty price data. Daily Standard deviation was calculated for Nifty and corresponding covariance were calculated for all the stocks in relation to nifty. This was then used to calculate the beta (β) values for all the stocks in different sectors.StockβRevenue(Bn $)WeightIndustry Beta (β)IT Services SectorTCS0.3316.540.790.39Wipro0.554.030.19Polaris Consult0.980.400.02FMCG SectorP&G0.3730.810.840.32HUL0.074.530.12Dabur0.041.270.03Energy SectorONGC1.2420.950.731.30Reliance Infra1.792.690.09Tata Power1.264.970.17