Risk Return Analysis

KEYWORDS: Risk & Return, Investment, National Stock Exchange (NSE), Bombay Stock Exchange (BSE), Shares.

Objectives of Study

The core objective of this study is to analyze the risk return of 10 Information Technology sector companies listed on BSE. The following specific objective has been followed.

• To evaluate the risk and return of selected information technology companies.
• To measure the financial performance of the selected stock for the study.
• To offer meaningful suggestion to the investors based on the findings of the study.
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Secondary data

Secondary data was collected from published sources various website, journals, magazines, books, previous research data.

Sampling Design

For sampling design the following thing should be considered:

• S. No Name of the Company
• HCL Technologies Ltd
• Tata Consultancy Services Ltd
• Wipro Ltd
• Infosys Ltd
• NIIT Technologies Ltd
• ORACLE Financial Services Software Ltd
• Mindtree Ltd
• Persistent Systems Ltd
• KPIT Technologies Limited
• 10 Tech Mahindra Ltd.

Sampling Tool Used

• Standard Deviation
• Beta
• Sharpe

The above table no 1 depicts the performance of HCL technologies ltd through returns, Average Risk, Beta and Sharpe Measure during the study period from 2013-14 to 2017-18.

Return

It can be seen that HCL technologies ltd performed better in the year 2013(72.69%) 2016(8.731%) and 2017(27.351%). By further analyzing the stock outperformed the average returns by providing better returns. The stock performed very badly in the year 2014 & 2015 with a negative return of -23.03% & -12.79 %.

Risk (Beta)

The Beta value is varying between -0.22 to 0.57 and on an average it is hovering around 0.148 it represents that in all the years the stock is less volatile and thus less risky.

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The stock has least beta value in the year 2014-15. Standard deviation for the stock lies between 3.76 (2016-17) to 17.04(2014-15).

Sharpe Measure

Sharpe measure is one of the most common tools of evaluating the portfolio returns. It is the ratio of the fund portfolio’s average excess return divided by the standard deviation of returns. Positive value shows better performance. Negative Sharpe measure shows their bad performance. The stock performed better positive values all the years except 2014-15, 2015-16 & 2016-17. It is concluded that the stock performed better in all the years during the study period except 2014-15, 2015-16 & 2016-17. It is more volatile also in the same year.

The above depicts the performance of KPIT technologies ltd through returns, Average Risk, Beta and Sharpe Measure during the study period from 2013-14 to 2017-18

Return

It can be seen that KPIT technologies ltd performed better in the year 2013(55.34), 2015 (51.03) and 2017 (78.06). By further analyzing the stock outperformed the average returns by providing better returns. The stock performed very badly in the year 2014-15 with a negative return of -31.65 % followed by 2016-17 with negative return of -14.19%.

Risk (Beta)

The Beta value is varying between -0.69 to 1.05 and on an average IT is hovering around 0.278 It represents that in all the years the stock is less volatile and thus less risky except 2014-15 & 2016-2017. The stock beta value is more than 1 in the year 2015-16, It indicates that the stock is said to be riskier in comparison to market i.e., which indicates that the stock had more volatile than market. The stock has least beta value in the year 2013-14. Standard deviation for the stock lies between 7.59 (2013-14) to 15.80 (2014-15).

Sharpe Measure

Sharpe measure is one of the most common tools of evaluating the portfolio returns. It is the ratio of the fund portfolio’s average excess return divided by the standard deviation of returns. Positive value shows better performance. Negative Sharpe measure shows their bad performance. The stock performed better positive values all the years except 2014-15 and 2016-17.

It is concluded that the stock performed better in all the years during the study period except 2014-15 and 2016-17. I

Findings

HCL technologies ltd performed better in the year2013(72.69%) 2016(8.731%) and 2017(27.351%). The stock performed very badly in the year 2014 & 2015 with a negative return of -23.03% & -12.79 %. The Beta value is varying between -0.22 to 0.57 and on an average it is hovering around 0.148 it represents that in all the years the stock is less volatile and thus less risky. Standard deviation for the stock lies between 3.76 (2016-17) to 17.04(2014-15). It is concluded that the stock performed better in all the years during the study period except 2014-15, 2015-16 & 2016-17. It is more volatile also in the same year.

Tata Consultancy Services ltd performed better in the year 2013-14(46.44), 2014-15(6.099), 2015-16 (3.85) and 2017-18(25.32). The stock performed very badly in the year 2016-17 with a negative return of -3.07 %. The Beta value is varying between -0.46 to 0.96 and on an average Information Technology is hovering around 0.132 it represents that in all the years the stock is less volatile and thus less risky. Standard deviation for the stock lies between 4.86 (2016-17) to 9.23 (2017-18). It is concluded that the stock performed better in all the years during the study period except 2015-16 and 2016-17. It is more volatile also in the same year.

Suggestions

From the above analysis It is concluded that the all companies except three companies named HCL Technologies Ltd, Tata Consultancy Services, Infosys, Tech Mahindra, Oracle Ltd has out performance than the other selected INFORMATION TECHNOLOGY companies in this study. KPIT technologies Ltd, Persistent Systems Ltd, Mind tree Ltd, NIIT Pvt Ltd , Wipro technologies Ltd , has more volatility than market volatility because Information Technology’s beta value is more than 1. So the investor has to take care these analyses to invest your surplus money in these securities.

Conclusion

To sum up the risk return analysis of Information technology companies, all the companies except the NIIT technologies ltd, MINDTREE ltd, KPIT technologies ltd companies its performance is out performance. So the investors have to consider its risk and return behavior while investing in stocks.