Relationship Between Nature of Industry and Market Sensitivity

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Corporate Finance Project

on

“Relationship between Nature of Industry and Market Sensitivity”

Submitted by: Group – 1, Section – A

• Akshay Dewan                29NMP07
• Ankur Maheshwari                29NMP11
• Chandan Kumar                29NMP22
• Harshwardhan Padole                29NMP48
• Kanika Dua                        29NMP36
• Mohnish Manchanda                29NMP45
• Monu Kumar Sangwan        29NMP44

Contents

Introduction        3

Stock Data        3

Relationship of Sectors with Systematic Risk of Market (NIFTY)        4

Relationship of Sectors with Currency Exchange Rates (INR-$ Rate)        5

IT Services Sector        5

Energy Sector        6

FMCG Sector        7

Relationship of Sectors with Inflation in Indian Economy        8

IT Services Sector        8

Energy Sector        9

FMCG Sector        10

Relationship of Sectors with Exports        11

IT Services Sector        11

Energy Sector        12

FMCG Sector        13

Conclusion        14

Introduction

The project analyses the relationship between nature of industry and market sensitivity. Here, we analyze three sectors i.e.

• IT Services sector
• Energy Sector
• FMCG Sector

Companies that are studied under each sector are:

Sensitivity 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 Economy
• Exports in Indian Economy

Stock Data

Stock 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-1

Also 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.