Project On Capm

SHIVAJI UNIVERSITY, KOLHAPUR
1.1 INTRODUCTION
In order to show whether the assets are correctly priced, a model must be
developed. The capital asset pricing model (CAPM) relates the risk-return trade-off of
individual assets to market returns. The basic form of the CAPM is a linear relationship
between returns on the individual shares and the stock market returns over time.
The CAPM is used a measure of systematic risk that can be compared with other
assets in the market. Using this measure of risk can theoretically allow investors to
improve their portfolios and managers to find their required rate of return.
We would not expect any model to be exactly replicated in practice but if we are
to try and use a model to make forecasts about the future we need to have some idea of its
relevance and robustness to the real world.
1.2 OBJECTIVES OF STUDY

1. To ascertain the relationship between valuation of securities and returns.
2. To test validity of CAPM in the Indian market with HDFC Bank Ltd., ICICI Bank Ltd.,
Axis Bank, Yes Bank .
3. To estimate the value of securities with the help of P/E ratio and CAPM model.
4. To provide suggestions if any to the investor.
1.3 IMPORTANCE OF STUDY
AGIMS, SANGLI
Page 1
All economic models, of which the CAPM is but one, are simplifications of real
world. We would not expect any model to be exactly replicated in practice but if we are to
try and use a model to make forecasts about the future we need to have some ideas of its
relevance to the real world. Casual observation seems supportive of model; historically;
investors require higher returns for investing in company equities than in relatively risk
free government securities. The investors are also concerned with non diversifiable risk.
Managers often use the corporate cost of capital as the required rate of return for
new corporate capital investments.
To develop this overall cost of capital the managers must have an estimate of the
cost of equity capital. To calculate the cost of equity, some mangers estimate the firms
beta and use CAPM to determine the firms required return on equity.
Using the CAPM to estimate the cost of equity for the firm is relatively common
as other equity cost methods require the use of market determined equity price and
estimate of future growth rates and dividends for the firms, CAPM is of special interest to
managers whose firms are closely held, pay no dividends or have uncertain future rates of
growth.
Some managers are not satisfied with a single corporate hurdle rate as required
rate of return. For firms that have diverse business with different risks, a single rate is
believed inadequate to represent a fair return for each business segment. As a result, some
managers have developed multiple hurdle rates-one for each business unit or line of
business. The CAPM has been adopted to determine directly these multiple rate.
1.4 SCOPE OF STUDY

The scope of study was limited to the HDFC Bank, ICICI Bank, AXIS Bank and
YES Bank at Samrudhi Investment,Sangli only .
1.5 RESEARCH METHODOLOGY
AGIMS, SANGLI
Page 2
It includes the procedure & the material used for doing the study & getting the results. It
shows the sources from where the information has been collected to complete the study.
The methodology used for collection of the data is divided into two types:Primary Data
The primary data are those data which are collected first time and
fresh. The data is collected through discussion, interview, schedule and observations in
the company with concerned department heads, finance manager and other related
officers.
Secondary Data
The secondary data are those data which are published in books,
journals, newspapers, etc. this data is collected from published reports, official records,
books and paper of the company.
This study is mainly based on the secondary data. The data has been collected from the
following sources:
Financial statements of the Company
Annual Reports of the Company
Company Website
Reference Books
AGIMS, SANGLI
Page 3
1.6 LIMITATIONS OF STUDY

1. Data is related for only four securities.
2. The whole data is secondary data related to last five financial year ended with
31/03/2014.
3. Since Beta values for last five years were not available, Beta value of last year has been
considered for the calculation.
4. There is inadequacy of information regarding the value obtained is high or Low for a
specified date.
AGIMS, SANGLI
Page 4
2.1 INTRODUCTION OF CAPM

Capital market has become an integral part of economies of most of the countries. The
way securities are priced in capital market has attracted the attention of researchers for
long investment in securities market requires the study of the relationship between risks
and returns. Researchers in securities market have attempted to understand the
relationship between risk and returns and the way securities are priced in the market.
These researchers have assumed rational investors and constructed the general
equilibrium models of security prices and returns. Sharpe (1964), Lintner (1965) and
Mossin(1968) have independently developed the standard form of general equilibrium
model for asset returns in securities market. This model has come to be known as SharpeLintner-Mossin form of Capital Asset Pricing Model (CAPM). This model is based on
many assumptions about capital market. However, it has served to understand the
complex relationship between securities returns and risks. The studies conducted by
Brennan(1971), Black(1972), Fama and Macbeth(1973), Fama(1976), Elton and Gruber
(1978,1996),
Pettit
and
Stanley(1979),
Mayers(1972),
Brito(1977,1978),
Lintner(1969,1971), Sharpe(1970), Gonedes(1976), Black, Jensen and Scholes(1972),

Blume and Frank(1973), Blume and Irwin(1973), Litzenberger and Ramaswamy(1979),
Gibbons and Wayne(1985), Shankan(1985a, 1985b, 1987), Fama and French (1992,
1996) have focused on some of the issues related to CAPM. Research finding of these
studies have been debated again and again. The empirical avidence against the CAPM by
Eama and French (1992, 1996) has generated a lot of debate in the west and has called for
major reexamination of the CAPM model. While many studies have been conducted on
CAPM in the capital markets of the western countries, there are a few studies in the
Indian context studies byVarma(1988), YaIwar(1988), Srinivasan(1988) have generally
supported the CAPM theory. Studies by Basu(1977), Gupta and Sehgal(1993),
Madhusudhan(1997), Sehgal(1997), Ansari (2000) have questioned the validity of CAPM
in Indian markets are scanty and no robust conclusions exist on this model.
The riskiness or volatility of share prices, as measured by the standard deviation of
returns, is a crucial variable in financial decision making. According to Markowitz (1952,
1959) diversification by investors into a portfolio of assets hedges fluctuations in returns
AGIMS, SANGLI
Page 5
and hence reduces volatility. Thus, there exists a close relationship between the mean and
variance of returns in a portfolio of financial assets. The choice of an optimal portfolio in
the mean variance(M-V) approach aims at maximizing returns for an overall risk level or
vice-versa. But in a dynamic environment characterized by shifting risk profiles, M-V
approach loses much of its significance (Fama 1965b). As an extension/ modification of
the M-V approach, the capital assets pricing model(CAPM) was proposed by Sharpe
(1964). The capital Asset Pricing Model is based on the two parameter portfolio analysis
model
The assumptions underlying this model are
Summarized as under:.
Investors make investment decisions based on expected return and the variances of
security returns.
There exists a risk less asset and investors can lend or invest at the risk less rate and also
borrow at this rate.
All investments are perfectly divisible.
All investors have homogenous expectations with regard to investment horizons and
holding periods.
There are no imperfections in the capital market to impede investor buying and selling.
All security prices fully reflect all changes in future inflation expectations.
Capital markets are in equilibrium.
In recent times,CAPM has been applied extensively to explain the behavior of stock
markets and other financial assets markets. In Sharpes model, for every security active in
the market, there can be associated a beta value. A beta value of one indicates
movement of the gives stock identical with the market and a value less than one shows
under performance of the stock while a value greater than one implies over volatility of
the stock return compared to the market. In terms of share prices it indicates elasticity of
stock price with respect to the share market price. Riskiness or volatility of returns of a
stock in the market can be decomposed into two components. One part is due to the
market as a whole and this cannot be diversified away. This is called systematic risk.
AGIMS, SANGLI
Page 6
For instance, if the market is an efficient and good one; it will show variation in return
due to changes in the real world market. Investors holding diversified portfolios are
exposed only to systematic risk and they are rewarded in terms of higher expected
returns. Systematic risk is the relevant financial variable for investment considerations.
The other component is stock specific and can be reduced through diversification into
other stocks. This is known as unsystematic risk. This is measured by the residual
standard deviation. There is no reward associated with it.
2.2 LIMITATIONS OF CAPM MODEL
One of the important outcomes of the CAPM
assumptions is that all investors hold a portfolio which is a combination of risk less
portfolio and market portfolio. This implies that all investors hold the same combination
of market portfolio which contains all risky assets. However, in practice it is impossible
to construct a market proxy which contains all assets. Again, the total risk of a portfolio
can be decomposed as the sum of systematic plus unsystematic risk. If CAPM holds then
the investors should hold diversified portfolios and the systematic risk or nondiversifiable risk will be the only risk which will be of importance to the investors. The
other part of risk, known as unsystematic risk can be reduced to nil by holding a
diversified portfolio. Thus, beta is only important from the investors point of view based
on their utility function and this decision is independent of other important decisions like
financing decision, market conditions, etc. Also, the assumption that the capital market is
fully efficient is not realistic.
The practical problems with the use of CAPM in investment appraisal are follows:
1. It is hard to estimate the risk free rate of return on projects under different economic
environment.
2. The CAPM is really just a single period model. It is not possible to use the CAPM for
projects which last for more than one year.
3. It may be hard to estimate the risk-free rate of return.
4. Complications in decision-making cannot be modeled easily.
2.3 RISK MEASUREMENT USING-(CAPM)
AGIMS, SANGLI
Page 7
The risk and return model that has been in use the longest and is still the standard is the
capital asset pricing model. The model makes two assumptions which it takes into
consideration while calculating the hurdle rate. While diversification reduces the
exposure of investors to firm specific risk, most investors limit their diversification to
holding only a few assets. There are two reasons why investors stop diversifying. In order
for an investor to diversify he has to purchase additional stocks in his portfolio, this
purchase of additional security leads to transaction costs. Another reason for limiting
diversification is that many investors believe that they can find undervalued assets and
therefore would hold only those assets and stop buying once they believe they have
acquired all undervalued stocks in their portfolio. The capital asset pricing model
assumes that there are no transaction costs and that all assets are traded. It also assumes
that everyone has access to the same information and that investors cannot find under or
overvalued assets in the market. By making these assumptions it allows investors to
diversify without additional casts. Therefore, each investor will include each and every
traded asset in his portfolio. The fact that this diversified portfolio includes all traded
securities in the market is the reason it is called the market portfolio.
But now the question that arises is that if every investor in the market holds the identical
market portfolio, how do investors reflect their risk aversion in their investment? In the
model investors adjust their risk preferences in their allocation decision, where they
decide how much to invest in the risk less asset (typically Government bonds) and the
allocation toward the market portfolio. Investors who are risk averse might choose to
allocate a higher proportion of their wealth in the risk less asset as against the market
portfolio and vice versa. The risk of any asset to an investor is the risk added by the asset
to the investors overall portfolio, the risk to an investor of an individual asset will be the
risk that this asset adds on to that portfolio. Statistically this added risk is measured by
the covariance of the asset with the market portfolio. However, the covariance is a
percentage value and it becomes difficult to make any judgment of an investment by
looking at this value.
AGIMS, SANGLI
Page 8
Therefore, the risk measure is standardized by dividing the covariance of each asset with
the market portfolio. This yields a risk measure called the beta of the asset:
Beta of an asset=
Covariance of asset with market portfolio

---------------------------------------------------------Variance of the market portfolio
Assets which are riskier than average will have betas that are greater than1. The risk less
asset will have a beta of 0. Once we accept the assumptions that lead to all investors
holding the market portfolio and measure the risk of an asset with the beta, the return one
can expect to make from an investment would be
Expected return on investment= Risk free rate + Beta (Market return-Risk free rate)
Risk free rate: the risk free rate becomes the base from which expected returns are tried to
be projected. Essentially, if an investor can make 8% by investing in a risk less security
like a Government bond, then the investor will not settle for less than this as an excepted
return for investing in a riskier asset. We usually use the interest rate on Government
securities to estimate the risk free rate, assuming that such securities have no default risk.
Beta of the investment: The beta is the only component in this model which varies from
investment to investment. Investments which add more risk to the market portfolio will
have higher betas. Risk premium: It is the premium that an investor would demand for
investing in equities as an asset class as opposed to the risk free investment. Bringing this
entire together, one can use the CAPM to estimate the expected return on stocks for the
future. Assuming a bond rate of 8%, the beta of 1.39 for Pantaloon and a risk premium of
4% we can find out the expected return for Pantaloons stock. Expected return= 8%
+1.39(4) =13.56%
For Pantaloon to be a good investment, the investor would have to expect it to make more
than 13.56% as an annual rate in the future. In this model all the market risk is captured
in the beta, measured relative to a market portfolio.
AGIMS, SANGLI
Page 9
2.4 RISK AND RETURNS

Return: Return is the income that we are expecting to get from investment we have
made. Return in Investment Management is divided as:
A: Cash receipts: Shares- Dividend, Deb, NSC, - Interest
B: Price Change: Difference between sale price and purchase price of a security.
Total Return= cash receipts = or Price change.
Risk:
In investment management, risk means the possibility of the expected return not
materializing.
Risk to investor is that: he may not get the return he has expected.
2.5 TYPES OF INVESTMENT RISK
Systematic Risk: Certain factors affect the performance of whole system/economy. The
effect of risk associated is called the systematic risk. This is classified into three:
1: Market Risk: Even if companies are performing well but the prices of securities start
falling unexpectedly. Many events such as Loksabha elections, Change in political party,
unexpected war between nations etc. MP of shares affects.
2: Interest rate risk: If risk free interest rate changes, the prices of securities may
change. If interest rate on Govt. securities increases, the other securities with more risk
become unattractive. On the other hand if Gov tint rate decreases securities with high risk
may become attractive.
The Co which lend money (Banks & FIs)
Increases, lenders get more income more profit-better performance. Borrowers pay more
interest lesser profit- bad performance.
AGIMS, SANGLI
Page 10
3: Purchasing Power Risk:

Inflation: General prices of commodities and services rise. Consumers will be able to
purchase fewer quanta with the same amount of money. PP goes down. They may
postpone invt in securities because major portion of income is used for regular needs.
Securities having fixed income ie bonds pref. shares are more hit by PP risk.
Deflation: The prices of commodities and services fall Purchasing power of consumers
increase.
These economic conditions have impact on purchasing power of consumer.
Unsystematic Risk: The factors which affects the performance of an industry or a
company alone. They do not affect system as a whole economy.
1: Business Risk: factors affecting the earnings and dividend of company are business
risk. If the fixed cost is more in the cost structure there is more operating leverage and
more risk.
Internal Business Risk: controllable Eg. Labour relations, cost structures, production
efficiency.
External Business Risk: uncontrollable by the company. Eg: Government policies,
customers preferences, death of efficient Manager.
2: Financial risk: Financial Capital structure of Co. Financial LeverageMore debt
more financial risk, where as No Debt no financial risk.
2.6 STANDARD DEVIATION
Investors and analysts should be at least somewhat familiar with the study of probability
distributions. Since the return an investor will earn from investing is not knows, it must
be estimated. An investor may expect the total return on a particular security to be 10
percent for the coming year, but in truth this is only a point estimate.
AGIMS, SANGLI
Page 11
2.7 BETA
Beta is a measure of stocks volatility in relation to the market. By definition, the market
has a beta of 1.0, and individual stocks are ranked according to how much they deviate
from the market. A Stock that swing more than the market over time has a beta above 1.0.
If a stock moves less than the market, the stocks beta is less than 1.0. High-beta stocks
are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose
less risk but also lower returns.
2.8 PRICE EARNINGS RATIO (P/E RATIO)
The P/E Ratio is the most common earnings valuations model. The P/E ratio is the ratio
between the price of a share and its EPS.
For example, if a share whose EPS is Rs. 10 is having a market price of Rs. 250, then its
P/E ratio is 250/10=25. It means that the market price of the share is 25 times that of the
EPS. As per P/E ratio approach the value of the share is expected as
Value= EPS*P/E ratio.
AGIMS, SANGLI
Page 12
3.1Name of the Company

Samrudhi Investment
3.2Address of the company:106, C-Wing, Chaphalkar complex,Maruti Road,Sangli-416416
3.3 About Samrudhi Investment

Firm is a sub-broker under Intime Equity Limited, Mumbai.
Firm Name
M/S Samrudhi Investment
Established
21 august 2011
Accounts
53
Intraday
9 to 12 and other investors
Services available
BSE, NSE-F&O
3.4 About Intime Equities Ltd

Trade Name
: INTIME EQUITIES LIMITED
OLD NAME 1 OF MEMBER
FORTUNE
LIMITED
AGIMS, SANGLI
Page 13
EQUITY
BROKERS
(INDIA)
OLD NAME 2 OF MEMBER
: FORTUNE FINANCIAL SERVICES (INDIA)
LTD
:K.K.CHAMBERS, 2NDFLOOR, SIR
REGISTERED OFFICE
PURUSHOTTAMDAS THAKURDAS MARG

OFF D.N.ROAD, FORT MUMBAI-400001.
Corporate Email
: admin@ffsil.com
Intime Equity Limited Company is a company incorporated under the provisions of the
Companies Act, 1956. The Company Has spread its business all over India.
With major thrust on Retail Broking, , the company has strong IPO and Mutual Funds
division for the benefit of the clients. Research brings latest reports giving specific
developments in the stock market. Being client-focused the company offers internet
trading platform. Portfolio Management services offers best schemes based on clients
need of wealth creation.
Intime Equity Limited is member of National Stock Exchange of India Ltd.,Bombay
Stock Exchange Ltd. and many regional exchanges in India.
Fortune Financial Services (India) Limited was incorporated in the year 1991 by Mr. J. T.
Poonja, Chairman and Mr.Nimish C Shah, Vice Chairman and Managing Director.
Fortune Group which comprises the holding company Fortune Financial Services (India)
Limited and its wholly-owned subsidiaries, is engaged in providing a range of Financial
Services right from Equities and Derivatives trading, Equity Research, Commodities
Trading, Portfolio Management Services, Distribution of Mutual Funds, IPO & Insurance
products and also Investment banking services.
CALCULATION OF RETURN ON SENSEX

First market returns are calculated by taking high & low values of Sensex from April
2009 to March 2014. Market returns are calculated for each month and their average is
taken. Values of high, low and return are given below
Months
2009/10
High
AGIMS, SANGLI
Low
Return
(%)
Months
2010/11
Page 14
High
Low
Return
(%)
April
May
June
July
August
September
October
November
December
January
February
March
11492.1
14930.54
15600.3
15732.81
16002.46
17142.52
17493.17
17290.48
17530.94
17790.33
16669.25
17793.01
Months
2011/12
April
May
June
July
August
September
October
November
December
January
February
March
High
19811.14
19253.87
18873.39
19131.7
18440.07
17211.8
17908.13
17702.26
17003.71
17258.97
18523.78
18040.69
9246.29
11621.3
14016.95
13219.99
14684.45
15356.72
15993.83
15330.56
16577.78
16182.14
15651.99
16438.45
Average
Low
19015.05
17786.13
17314.38
18131.86
15765.53
15801.01
15745.43
15645.78
15190.74
15358.02
17061.55
16920.61
Average
20.38
28.48
11.30
19.01
8.98
11.63
9.37
12.78
5.75
9.94
6.50
8.24
12.70
Return
(%)
4.19
8.25
9.00
5.51
16.96
8.93
13.74
13.14
11.93
12.38
8.57
6.62
9.94
April
May
June
July
August
September
October
November
December
January
February
March
17995.25
17536.86
17919.62
18237.56
18475.27
20267.98
20854.55
21108.64
20552.03
20664.8
18690.97
19575.16
Months
2012/13
April
May
June
July
August
September
October
November
December
January
February
March
High
17664.1
17432.33
17448.48
17631.19
17972.54
18869.94
19137.29
19372.7
19612.18
20203.66
19966.69
19754.66
17276.8
15960.15
16318.39
17395.58
17819.99
18027.12
19822.66
19167.19
20412.76
18038.48
17295.62
17792.17
Average
Low
17010.16
15809.71
15748.98
16598.48
17026.97
17250.8
18393.42
18255.69
19149.03
19508.93
19237.98
18568.43
Average
Continued
Months
2013/14
April
May
June
July
August
AGIMS, SANGLI
High
Low
19622.68
20443.62
19860.19
20351.06
19569.2
18144.22
19451.26
18467.16
19126.82
17448.71
Page 15
Return
(%)
8.15
5.10
7.54
6.40
12.15
4.16
9.88
9.81
4.84
3.68
12.43
5.21
10.13
0.68
14.56
8.07
10.02
7.79
Return
(%)
3.84
10.26
10.79
6.22
5.55
9.39
4.04
6.12
2.42
3.56
3.79
6.39
6.03
Septembe
r
October
November
December
January
February
March
20739.69
18166.17
14.17
21205.44
21321.53
21483.74
21409.66
21140.51
22467.21
19264.72
20137.67
20568.7
20613.62
19963.12
20920.98
Average
10.07
5.88
4.45
3.86
5.90
7.39
7.59
Return on Index
= High-Low/Low*100
Average Market Return
= Total of return on Index/ number of years
Average Market Return
12.70+7.79+9.94+6.03+7.59
5
= 8.81 %
The average market return for the financial 2009/10 found out to be 12.70% that of
2010/11 was 7.79%; similarly for the three consecutive years market return were i.e. For
2011/12, 2012/13 & 2013/14 were 9.94%, 6.03% & 7.59% respectively.
The average market return of the total five years i.e. from April 2009 to March 2013
found out to be 8.81%.
Months
2009/10
April
May
June
July
August
September
High
Low
227.6
299.6
316.00
309.76
305.0
330.6
19034
222.02
270.56
266.6
270.66
284.00
AGIMS, SANGLI
Return
(%)
19.54
34.94
16.79
16.19
12.69
16.41
Months
2010/11
April
May
June
July
August
September
Page 16
High
Low
401.98
399.00
401.8
426.8
448.1
500.78
378.66
357.00
366.14
379.4
409.8
424.4
Return
(%)
6.16
11.76
9.74
12.49
9.35
17.99
October
November
December
January
February
March
347.46
361.56
367.2
358.94
346.6
397.2
Months
2011/12
April
May
June
July
August
September
October
November
December
January
February
March
High
488.00
480.00
503.00
519.5
495.65
497.4
496.9
492.4
470.05
501.05
540.00
533.00
321.00
316.4
328.42
310.45
310.00
341.3
Average
Low
455.00
442.00
454.00
481.75
435.5
438.8
437.00
411.25
400.45
419.35
481.8
493.2
Average
8.24
14.27
11.81
15.62
11.81
16.38
16.22
Return
(%)
7.25
8.60
10.79
7.84
13.81
13.35
13.71
19.73
17.38
19.48
12.08
8.07
12.67
October
November
December
January
February
March
503.6
483.59
484.2
479.77
449.00
478.00
Months
2012/13
April
May
June
July
August
September
October
November
December
January
February
March
High
557.7
556.95
565.00
593.55
609.7
639.25
644.9
705.00
700.00
690.00
680.75
659.5
447.62
451.62
429.74
399.4
396.00
412.00
Average
Low
515.7
486.00
485.1
560.25
577.3
583.55
604.5
628.00
670.00
641.3
618.00
602.00
Average
12.51
7.08
12.67
20.12
13.38
16.02
12.44
Return
(%)
8.14
14.60
16.47
5.94
5.61
9.55
6.68
12.26
4.48
7.59
10.15
9.55
9.25
3.3HDFC BANK
Monthly high, Low & return of the stock HDFC BANK; are given below
Continued
Months
2013/14
April
May
June
July
August
Septembe
AGIMS, SANGLI
High
Low
704.00
727.00
701.00
696.9
637.8
689.9
612.45
668.35
620.00
605.1
528.00
558.4
Page 17
Return
(%)
14.95
8.78
13.06
15.17
20.80
23.55
r
October
November
December
January
February
March
688.00
688.00
714.8
685.00
682.15
760.5
610.00
629.05
650.00
625.2
618.00
661.15
Average
12.79
9.37
9.97
9.56
10.38
15.03
13.65
CALCULATIONS OF HDFC BANK

Return
on
security
Average
return
on
Average /Number of years
Year
2009/10
2010/11
2011/12
2012/13
2013/14
Total
Average
16.22
12.44
12.67
9.25
13.65
64.23
= 64.23/5
=12.84%
AGIMS, SANGLI
Page 18
=High-Low/Low*100
security
Total
of
Year
Dividend(Rs.)
2009/10
2010/11
2011/12
2012/13
2013/14
Total
10
12
16.5
4.3
5.5
48.3
Dividend
Decrease
(%)
20
37.5
-73.93
27.90
11.47
Increase/
CALCULATION OF DIVIDEND
Average Dividend (Rs)
= Total of dividend/5
=48.3/5
= 9.66
Expected Dividend (%)
= 20+37.5-73.93+27.90 /4
= 11.47/4
=2.87% i.e.2.87
Average growth in Dividend (Rs.)
Risk Free Return
= 8%
Beta
= 0.83
Market return
= 5.66 (5.5+0.16)
= 8.81%
CALCULATION OF BETA OF SECURITY:Year
Return
AGIMS, SANGLI
Average
Deviation
Return
Page 19
Average
Deviation
D1*D2
2009/10
2010/11
2011/12
2012/13
2013/14
on
security
16.22
12.44
12.67
9.25
13.65
on
security
12.84
12.84
12.84
12.84
12.84
(D1)
on
Index
12.70
7.79
9.94
6.03
7.59
3.38
-0.4
-0.17
-3.59
0.81
on Index
(D2)
8.81
8.81
8.81
8.81
8.81
3.89
-1.02
1.13
-2.78
-1.22
Total
13.15
0.40
-0.19
9.98
-0.99
22.14
Covariance = Total of D1*D2 / 5

=4.43
STANDARD DEVIATION OF SECURITY (S.D.):Year
2009/10
2010/11
2011/12
2012/13
2013/14
Deviation
(D1)
3.38
-0.4
-0.17
-3.59
0.81
Total
Variance on security
D1 square
11.42
0.16
0.03
12.89
0.66
25.16
= Total of D1 square / 5
= 25.16 /5
= 5.03
S.D
= 2.24
Variance on Index
= Total of D2 square /5
= 26.67 /5
=5.33
Beta = Covariance of Security / Variance of Index

=4.44 /5.33
AGIMS, SANGLI
Page 20
Deviation
(D2)
3.89
-1.02
1.13
-2.78
-1.22
Total
D2 square
15.13
1.04
1.28
7.73
1.49
26.67
=0.83
According to CAPM,
Return(R) = Risk Free Return + Beta (Market return-Risk Free Return)
=8 + 0.83 (8.81-8)
=8 + 0.83 (0.81)
= 8 + 0.67
Return(R) = 8.67%
VALUATION OF SECURITY
Calculation for the Average Value of Security
Average Value of security= High value for the 52week + Low value for the52 week
2
Average Value of Security
Year
High
Low
2009/10
2010/11
2011/12
2012/13
2013/14
330.63
454.72
501.41
633.53
697.92
285.98
404.32
445.84
580.98
615.48
High value +
Low value/2
330.63+285.98/2
454.72+404.32/2
501.41+445.84/2
633.53+580.98/2
697.92+615.48/2
CALCULATION OF CAPITAL APPRECIATION
AGIMS, SANGLI
Page 21
Average value
of security
308.31
429.52
473.63
607.26
656.7
Capital Appreciation (CA) =
Closing value -Opening Value

-----------------------------------------------
*100
Opening Value
Year
2009/10
2010/11
2011/12
2012/13
2013/14
Average
value
security
308.31
429.52
473.63
607.26
656.7
Opening
of Value
Closing
Value
308.31
429.52
473.63
607.26
656.7
308.31
429.52
473.63
607.26
CA= CV -OV
-----------*100
OV
121.21/308.31*100
44.11/429.52*100
133.63/473.63*100
49.44/607.26*100
Total
Average Capital Appreciation = 39 + 10 + 28 + 8 /4

= 21 %
Expected value 2014/15 = 656.7 + 656.7*21%
= 656.7 + 137.81
= 794.61
Expected Market Price of security on 2014/15(Rs.)
=CA +Expected dividend/CAPM return *100/1
= 137.81+5.66/8.67*100/1
= 143.47/8.67*100/1
= 1654
CALCULATION OF P/E RATIO
AGIMS, SANGLI
Page 22
CA
(%)
39
10
28
8
85
P/E Ratio = M.P/EPS

Year
2009/10
2010/11
2011/12
2012/13
2013/14
EPS
Average
Value
52.77
64.42
84.40
22.02
28.27
Security( M.P)
308.31
429.52
473.63
607.26
656.7
of P/E Ratio
Average P/E Ratio = 5.84 + 6.67 + 5.61 + 27.58 + 23.23

5
= 13.79
CALCULATION OF EPS Year
2009/10
2010/11
2011/12
2012/13
2013/14
EPS
52.77
64.42
84.40
22.02
28.27
EPS Raised (%)

22
31
-73.91
28.38
Expected Future EPS

= 22 + 31 73.91 + 28.38 /4
= 1.87 % i.e. 0.52
Expected future EPS = 28.27 + 0.52 = 28.79
Expected Market Price of security
= P/E Ratio * EPS
= 13.79*28.79
= 397.01
DATA INTERPRETATION OF HDFC BANK
AGIMS, SANGLI
Page 23
5.84
6.67
5.61
27.58
23.23
The average market return for the financial year 2009/10 found out to be 16.22% that of
2010/11 was 12.44%; similarly for the three consecutive years market return were i.e. for
2011/12, 2012/13 and 2013/14 were 12.67%, 9.25% and 13.62% respectively.
The average return for the five year comes to 12.84%.
The Dividend given by the company during the financial year 2009/10 was 10; for
2010/11 dividends gives by the company was 12. The next year i.e. in 2011/12 dividend
given by the company was 16.5. For the year 2012/13 the dividend given by the company
was 4.3. And in 2013/14 the dividend declared by the company was 5.5.
The average dividend for the five 3.5 the expected future dividend is 9.5.
The Beta for the security is 0.83; risk free rate assumed 8%; market return calculated the
figure is 8.81%. According to CAPM the expected return (R) comes Rs.8.67.
Capital appreciation for the year 2010/11 was 39 that to in the year 2011/12 was 10, for
2012/13 and 2013/14 was 28 & 8% respectively. The expected trade of Rs. 794.61.and
the expected future return is 1654.
The average value of security for the five financial years are calculated by taking average
of 52week high and low and taking EPS value for same financial year.
The P/E ratios are calculated by dividing average market price by EPS. The P/E ratio for
2009/10 was 5.84 that to for the year 2010/11 were 6.67 and for the year 2011/12 P/E
ratio was 5.61, 2012/13 was 27.58 & 2013/14 was 23.23.
The average P/E ratio was 13.79 which are used for valuation of security for 2014/15 i.e.
397.01.
The market price of the share in July 14 is Rs.839.65.
Months
2009/10
High
AGIMS, SANGLI
Low
Return
(%)
Months
2010/11
Page 24
High
Low
Return
(%)
April
May
June
July
August
Septembe
r
October
November
December
January
February
March
96.5
159.4
155.9
161.4
160.76
181.68
64.8
97.42
130.25
121.34
138.12
144.8
48.92
63.62
19.69
33.01
16.39
25.47
April
May
June
July
August
September
201.9
191.48
181.76
187.34
204.6
227.00
180.78
160.66
161.00
165.96
181.89
192.47
11.68
19.18
12.89
12.88
12.49
17.94
196.74
187.8
183.3
181.46
177.3
193.98
234.73
255.4
239.92
231.6
214.4
225.2
High
High
214.64
200.45
200.8
200.8
165.00
166.62
Months
2012/13
April
May
June
July
August
September
215.00
218.68
208.24
198.7
188.03
196.00
Average
Low
227.58
223.74
219.78
222.2
211.8
186.00
30.08
21.46
14.49
26.75
12.64
9.58
26.84
Return
(%)
6.03
11.62
9.45
10.66
28.36
11.63
October
November
December
January
February
March
Months
2011/12
April
May
June
July
August
Septembe
r
October
November
December
January
February
March
151.25
154.62
160.1
154.6
157.4
177.02
Average
Low
183.5
179.00
180.94
194.64
197.71
217.35
165.57
153.4
153.59
177.00
179.53
175.3
9.18
16.79
15.21
16.56
14.02
14.90
14.48
Return
(%)
10.83
16.69
17.81
9.97
10.13
23.99
190.65
184.78
158.2
181.28
199.7
191.52
152.41
141.21
128.2
137.03
175.69
168.7
Average
25.09
30.85
23.40
32.30
13.67
13.53
18.05
October
November
December
January
February
March
220.48
219.9
231.8
246.2
240.63
230.17
206.49
203.04
218.63
228.61
205.22
199.4
Average
6.78
8.30
6.02
7.69
17.25
15.43
12.57
3.4ICICI BANK
Monthly high, Low & return of the stock ICICI BANK; are given below
Continued
AGIMS, SANGLI
Page 25
Months
2013/14
April
May
June
July
August
September
October
November
December
January
February
March
High
Low
237.6
247.38
233.29
215.36
185.15
213.8
225.97
227.97
241.24
223.6
209.98
Year
254.58
2009/10
2010/11
2011/12
2012/13
2013/14
Total
196.72
221.93
204.1
178.4
158.00
155.51
176.81
180.33
200.00
193.00
188.85
Average
204.45
26.84
Average
14.48
18.05
12.57
21.66
93.6
Return
(%)
20.78
11.47
14.30
20.72
17.18
49.06
27.80
26.42
20.62
15.85
11.19
24.52
21.66
Calculations of ICICI BANK

Return on security
=High-Low/Low*100
Average return on security = Total of Average /Number of years
= 93.6/5
=18.72%
AGIMS, SANGLI
Page 26
Year
Dividend(Rs.)
2009/10
11
2010/11
12
2011/12
14
2012/13
16.5
2013/14
20
Total
73.5
Dividend
Decrease
(%)
9
16
17
21
63
Increase/
Average Dividend (Rs) = Total of dividend/Number of years

=73.5/5
= 14.7
Expected Dividend (%) = 9+16+17+21 /4
= 63/4
=15.75% i.e. 3.15
Risk Free Return

Beta
= 23.15
= 8%
= 0.85
Market return
= 8.81%
Return
AGIMS, SANGLI
Average
Deviation
Return
Page 27
Average
Deviation
D1*D2
2009/10
2010/11
2011/12
2012/13
2013/14
Covariance
on
security
24.84
14.48
18.05
12.57
21.66
on
security
18.72
18.72
18.72
18.72
18.72
(D1)
on
Index
12.70
7.79
9.94
6.03
7.59
6.12
-4.24
-0.67
-6.15
2.94
on Index
(D2)
8.81
8.81
8.81
8.81
8.81
3.89
-1.02
1.13
-2.78
-1.22
Total
23.81
4.32
-0.76
17.09
-3.59
40.87
= Total of D1*D2 / 5
=8.17
Standard Deviation OF SECURITY (S.D.):Year

2009/10
2010/11
2011/12
2012/13
2013/14
Deviation
(D1)
6.12
-4.24
-0.67
-6.15
2.94
Total
D1 square
37.45
17.98
0.45
37.82
8.64
102.34
= 102.34 /5
= 20.46
S.D
= 4.52
Variance on Index
= 26.67 /5
=5.33

=4.52 /5.33
AGIMS, SANGLI
Page 28
Deviation
(D2)
3.89
-1.02
1.13
-2.78
-1.22
Total
D2 square
15.13
1.04
1.28
7.73
1.49
26.67
=0.85
According to CAPM,
=8 + 0.85 (8.81-8)
=8 + 0.85 (0.81)
= 8 + 0.69
Return(R) = 8.69%

2

Year
High
Low
2009/10
2010/11
2011/12
2012/13
2013/14
169.69
216.28
199.77
211.86
226.33
137.64
188.95
170.96
188.82
188.18
High value +
Low value/2
169.69+137.64/2
216.28+188.95/2
199.77+170.96/2
211.86+188.82/2
226.33+188.18/2
AGIMS, SANGLI
Page 29
Average value
of security
153.67
202.62
185.37
200.34
207.26

-----------------------------------------------
*100
Opening Value
Year
2009/10
2010/11
2011/12
2012/13
2013/14
Average
value
security
153.67
202.62
185.37
200.34
207.26
Opening
of Value
Closing
Value
153.67
202.62
185.37
200.34
207.26
153.67
202.62
185.37
200.34
CA= CV -OV
-----------*100
OV
48.95/153.67*100
-17.25/202.62*100
14.97/185.37*100
6.92/200.34*100
Total
Average Capital Appreciation = 31 8.51 + 8.08 + 3.45 /4

= 34.02 %
Expected value 2014/15 = 207.26 + 207.26*8.51%
= 207.26 + 17.64
= 224.9
= 17.64+23.15/8.69*100/1
= 40.79/8.69*100/1
= 469.39

P/E Ratio = M.P/EPS
AGIMS, SANGLI
Page 30
CA
(%)
31
-8.51
8.08
3.45
34.02
Year
2009/10
2010/11
2011/12
2012/13
2013/14
EPS
Average
Value
33.76
36.10
44.73
56.09
72.17
Security( M.P)
153.67
202.62
185.37
200.34
207.26
of P/E Ratio
4.55
5.61
4.14
3.57
2.87
Average P/E Ratio = 4.55 + 5.61 + 4.14 + 3.57 + 2.87

5
= 4.15
2009/10
2010/11
2011/12
2012/13
2013/14
Expected Future EPS
EPS
33.76
36.10
44.73
56.09
72.17
EPS Raised (%)

2.34
8.63
11.36
16.08
= 2.34+8.63 + 11.36 + 16.08 /4

= 21.23 % i.e. 15.32
= P/E Ratio * EPS
= 87.49*4.15
= 363
DATA INTERPRETATION OF ICICI BANK

AGIMS, SANGLI
Page 31
given by the company was 14. For the year 2012/13 the dividend given by the company
was 16.5. And in 2013/14 the dividend declared by the company was 20.
The average dividend for the five 14.7 the expected future dividend is 20.63.
Capital appreciation for the year 2010/11 was 31% that to in the year 2011/12 was 8.51%,
for 2012/13 and 2013/14 was 8.08%& 3.45% respectively. The expected trade of Rs.
224.9.and the expected future return is 469.39.
ratio was 4.14, 2012/13 was 3.57 & 2013/14 was 2.87.
363.
The market price of the share in July 14 is Rs.301.
3.5AXIS BANK
Monthly high, Low & return of the stock AXIS BANK; are given below
Months
2009/10
April
May
June
High
Low
113.98
169.8
180.2
80.1
113.8
135.46
AGIMS, SANGLI
Return
(%)
42.30
49.21
33.03
Months
2010/11
April
May
June
Page 32
High
Low
257.4
263.6
253.6
225.8
229.32
234.64
Return
(%)
13.99
14.95
8.08
July
August
September
October
November
December
January
February
March
193.8
187.6
197.96
209.6
207.7
212.58
223.6
227.4
243.08
Months
2011/12
April
May
June
July
August
September
October
November
December
January
February
March
High
292.11
259.95
263.2
268.4
273.42
231.98
238.8
231.18
210.4
218.00
261.8
256.8
141.03
159.42
175.8
180.00
177.85
183.84
193.43
199.1
219.64
Average
Low
254.00
235.12
240.22
204.68
198.42
203.02
189.27
184.22
160.6
156.9
210.6
219.02
Average
37.42
17.68
12.61
16.44
16.78
15.63
15.60
14.21
10.67
23.47
Return
(%)
15.00
10.56
9.57
31.13
37.80
14.26
26.17
25.49
31.00
38.94
24.31
17.25
23.46
July
August
September
October
November
December
January
February
March
279.74
277.00
316.00
321.6
316.98
292.00
275.4
268.2
288.74
Months
2012/13
April
May
June
July
August
September
October
November
December
January
February
March
High
245.2
225.4
214.4
216.36
224.38
235.00
249.28
264.8
275.4
303.00
303.8
285.33
243.21
255.65
266.4
286.5
259.3
246.27
239.2
229.8
246.6
Average
Low
215.18
184.4
188.86
198.62
198.00
185.38
216.00
235.39
260.64
268.8
266.8
255.2
Average
15.02
8.35
18.62
12.25
22.24
18.57
15.13
16.71
17.09
15.08
Return
(%)
13.95
22.23
13.52
8.93
13.32
26.77
15.41
12.49
5.66
12.72
13.87
11.81
14.22
Continued
Months
2013/14
April
May
June
July
August
Septembe
AGIMS, SANGLI
High
Low
303.72
309.8
288.89
271.66
232.6
234.74
239.00
282.36
241.88
203.46
157.12
152.8
Page 33
Return
(%)
27.08
9.72
19.44
33.52
46.04
53.63
Year
2009/10
2010/11
2011/12
2012/13
2013/14
Total
Dividend(Rs.)
r
October
November
10
December
January
12
February
14
March
16
18
70
Dividend Increase/
252.00 Decrease
202.54
(%)
251.4
202.33
-268.1
232.1
254.00
221.8
20
253.8
216.68
16.66
294.96
249.46
14.28
Average
12.5
63.44
37.27
24.25
15.51
14.52
17.13
18.24
26.36
CALCULATIONS OF AXIS BANK

Return on security
Year
2009/10
2010/11
2011/12
2012/13
2013/14
Total
Average
23.47
15.08
23.46
14.22
26.36
102.59
Average return on security = Total of Average /

Number of years
= 102.59/5
=20.52%
AGIMS, SANGLI
=High-Low/Low*100
Page 34
= Total of dividend/Number of years

=70/5
= 14
Average growth in Dividend (%)
= 20+16.66+14.28+12.5/4
= 63.44/4
=15.86% i.e.2.85
Expected Dividend (Rs.)
Risk Free Return
= 20.85 (18+2.85)
= 8%
Beta
= 1.15
Market return
= 8.81%
2009/10
2010/11
2011/12
Return
on
security
23.47
15.08
23.46
AGIMS, SANGLI
Average
on
security
20.52
20.52
20.52
Deviation
(D1)
Return
Average
on Index on Index
Deviation
(D2)
D1*D2
2.95
-5.44
2.94
12.70
7.79
9.94
3.89
-1.02
1.13
11.48
5.55
3.32
Page 35
8.81
8.81
8.81
2012/13
2013/14
14.22
26.36
20.52
20.52
-6.3
5.84
6.03
7.59
8.81
8.81
-2.78
-1.22
Total
17.51
-7.12
30.74
Covariance = Total of D1*D2 / 5

=6.15
Deviation
(D1)
2.95
-5.44
2.94
-6.3
5.84
Total
2009/10
2010/11
2011/12
2012/13
2013/14
D1 square
8.70
29.59
8.64
39.69
34.11
120.73
Deviation
(D2)
3.89
-1.02
1.13
-2.78
-1.22
Total
D2 square
15.13
1.04
1.28
7.73
1.49
26.67
= 120.73 /5
= 24.15
S.D
= 4.91
Variance on Index
= 26.67 /5
=5.33

=6.15/5.33
=1.15
According to CAPM,
AGIMS, SANGLI
Page 36
=8 + 1.15 (8.81-8)
=8 + 1.15 (0.81)
= 8 + 0.93
Return(R) = 8.93%

2
Year
High
Low
2009/10
2010/11
2011/12
2012/13
2013/14
197.28
284.19
250.50
253.53
267.97
163.29
246.89
204.67
222.77
216.79
High value +
Low value/2
197.28+163.29/2
284.19+246.89/2
250.50+204.67/2
253.53+222.77/2
267.97+216.79/2
Average value of
security
180.29
265.54
227.59
238.15
242.38


-----------------------------------------------
*100
Opening Value
AGIMS, SANGLI
Page 37
Year
2009/10
2010/11
2011/12
2012/13
2013/14
Average
value
security
180.29
265.54
227.59
238.15
242.38
Opening
of Value
180.29
265.54
227.59
238.15
242.38
Closing
Value
180.29
265.54
227.59
238.15
CA= CV -OV
-----------*100
OV
85.25/180.29*100
-37.95/265.54*100
10.56/227.59*100
4.23/238.15*100
Total
Average Capital Appreciation = 47.28 -14.29+ 4.64 + 1.78 /4

= 9.85 %
Expected value 2014/15
= 242.38 + 242.38*9.85%
= 242.38+ 23.87
= 266.25
= 23.87+20.85/8.93*100/1
= 44.72/8.93*100/1
= 500.78

P/E Ratio = M.P/EPS
Year
EPS
2009/10
2010/11
2011/12
2012/13
2013/14
50.57
62.06
82.54
102.67
110.68
AGIMS, SANGLI
Average Value
Security( M.P)
180.29
265.54
227.59
238.15
242.38
Page 38
of P/E Ratio
3.57
4.28
2.75
2.32
2.19
CA
47.28
-14.29
4.64
1.78
39.41
Average P/E Ratio = 3.57 + 4.28+ 2.75 + 2.32 + 2.19

5
= 3.02
2009/10
2010/11
2011/12
2012/13
2013/14
EPS
50.57
62.06
82.54
102.67
110.68
Total
EPS Raised (%)

22
33
24
7
86
Expected Future EPS

= 22 + 33 +24 + 7 /4
= 21.5 % i.e. 23.80
Expected Market Price of security= P/E Ratio * EPS
= 134.48*3.02
= 418.20
DATA INTERPRETATION OF AXISBANK

given by the company was 14. For the year 2012/13 the dividend given by the company
was 16. And in 2013/14 the dividend declared by the company was 18.
AGIMS, SANGLI
Page 39
The average dividend for the five 14 the expected future dividend is 20.85.
Capital appreciation for the year 2010/11 was 47.28 that to in the year 2011/12 was14.29, for 2012/13 and 2013/14 was 4.64 & 1.78% respectively. The expected trade of
Rs. 266.25.and the expected future return is 500.78.
ratio was 82.54, 2012/13 was 102.67 & 2013/14 was 110.68.
418.20.
The market price of the share in July 14 is Rs.403.
3.6YES BANK
Monthly high, Low & return of the stock YES BANK; are given below
Months
2009/10
April
May
June
July
August
September
October
High
Low
87.55
144.2
155.4
165.8
175.9
206.5
261.7
49.7
73.8
115.00
124.15
145.00
163.4
184.00
AGIMS, SANGLI
Return
(%)
76.16
95.39
35.13
33.55
21.31
26.38
42.23
Months
2010/11
April
May
June
July
August
September
October
Page 40
High
Low
297.4
290.4
299.5
304.7
344.4
358.7
380.00
244.00
253.3
263.00
265.1
296.5
312.55
341.05
Return
(%)
25.89
14.64
13.88
14.94
16.16
14.77
11.42
November
December
January
February
March
274.9
278.35
287.9
257.4
260.3
Months
2011/12
April
May
June
July
August
September
October
November
December
January
February
March
High
341.3
308.4
316.95
340.00
319.8
300.4
324.00
318.5
299.00
332.5
374.00
389.4
214.2
243.00
232.1
223.00
236.5
Average
Low
302.5
272.5
274.00
306.8
252.55
256.00
240.5
260.2
237.00
230.55
318.00
331.00
Average
28.34
14.55
24.04
15.43
10.06
35.21
Return
(%)
38.8
13.17
16.68
10.82
26.63
17.34
34.72
22.41
26.16
44.22
17.61
17.64
23.6
November
December
January
February
March
388.00
341.8
317.7
288.45
326.00
Months
2012/13
April
May
June
July
August
September
October
November
December
January
February
March
High
380.5
352.95
353.00
365.95
373.9
388.45
421.00
448.00
475.00
535.00
539.00
500.75
290.00
277.2
246.95
233.55
254.00
Average
Low
345.55
294.25
310.7
337.85
326.35
322.3
378.00
411.1
440.05
466.00
467.00
417.1
Average
33.80
23.30
28.65
23.51
28.35
20.78
Return
(%)
10.11
19.95
13.61
8.32
14.57
20.52
11.38
8.98
7.94
14.81
15.42
20.06
13.81
Continued
AGIMS, SANGLI
Months
2013/14
April
May
June
July
August
September
October
November
December
January
February
March
High
509.00
547.15
514.7
502.00
339.05
394.7
382.2
386.35
415.00
381.75
302.00
407.8
Low
417.15
486.00
438.55
288.55
216.1
224.00
280.4
323.25
358.15
304.00
292.1
301.7
Page
41
Average
Return
(%)
22.02
12.58
17.36
73.97
56.89
76.21
36.31
19.52
15.87
25.58
3.39
35.17
32.91
Year
Dividend(Rs.)
2009/10
2010/11
2011/12
2012/13
2013/14
Total
1.5
2.5
4
6
14
Dividend
Decrease
(%)
66
60
50
176
Increase/
CALCULATIONS OF YES BANK

Return on security
=High-Low/Low*100
Average return on security = Total of Average / Number of years

Year
Average
2009/10
35.21
2010/11
20.78
2011/12
23.6
2012/13
13.81
2013/14
32.91
Total
126.31
= 126.31/5
=26.26%
AGIMS, SANGLI
Page 42
= Total of dividend/ Number of years

=14/5
= 3.5
Expected Dividend (%) = 66+60+50 /3

= 176/3
=58.66 % i.e. 3.5
= 9.5 (6+3.5)
Risk Free Return
= 8%
Beta
= 2.40
Market return
= 8.81%
2009/10
2010/11
2011/12
2012/13
2013/14
Return
on
security
35.21
20.78
23.6
13.81
32.91
AGIMS, SANGLI
Average
on
security
25.26
25.26
25.26
25.26
25.26
Deviation
(D1)
9.95
-4.48
-1.66
-11.45
7.65
Return
on
Index
12.70
7.79
9.94
6.03
7.59
Page 43
Average
on Index
Deviation
(D2)
D1*D2
8.81
8.81
8.81
8.81
8.81
3.89
-1.02
1.13
-2.78
-1.22
38.71
4.57
-1.88
31.83
-9.33
Total
Covariance
63.9
= Total of D1*D2 / Number of years

=12.78
Deviation
(D1)
9.95
-4.48
-1.66
-11.45
7.65
Total
2009/10
2010/11
2011/12
2012/13
2013/14
D1 square
99.00
20.07
2.76
131.10
58.52
311.45
Deviation
(D2)
3.89
-1.02
1.13
-2.78
-1.22
Total
D2 square
15.13
1.04
1.28
7.73
1.49
26.67
= 311.45 /5
= 62.29
S.D
= 7.89
Variance on Index
= 26.67 /5
=5.33
Beta
= Covariance of Security / Variance of Index

=12.78 /5.33
=2.40
According to CAPM,
AGIMS, SANGLI
Page 44
=8 + 2.40 (8.81-8)
=8 + 2.40 (0.81)
= 8 + 1.94
Return(R)
= 9.94%

2

Year
High
Low
2009/10
2010/11
2011/12
2012/13
2013/14
212.99
328.00
330.35
427.79
423.48
166.99
273.1
273.47
376.35
327.50
High value +
Low value/2
212.99+166.99/2
328.09+273.1/2
330.35+273.47/2
427.79+376.35/2
423.48+327.50/2
Average value
of security
189.99
300.60
301.91
402.07
375.49

-----------------------------------------------
*100
Opening Value
Year
AGIMS, SANGLI
Average
value
security
Opening
of Value
Closing
Value
Page 45
CA= CV -OV
-----------*100
OV
CA
(%)
2009/10
2010/11
2011/12
2012/13
2013/14
189.99
300.60
301.91
402.07
375.49
189.99
300.60
301.91
402.07
375.49
Average Capital Appreciation
189.99
300.60
301.91
402.07
110.61/189.99*100
1.31/300.60*100
100.16/301.91*100
-26.58/402.07*100
Total
= 58 + 0.43 + 33 - 7/4
= 21.11%
Expected value 2014/15
= 375.49 + 375.49*21.11%
= 375.49 + 79.27
= 454.76

= 79.27+9.5/9.94*100/1
= 88.77/9.94*100/1
= 893

P/E Ratio = M.P/EPS
Year
EPS
2009/10
2010/11
2011/12
10.23
14.06
20.95
AGIMS, SANGLI
Average Value
Security( M.P)
189.99
300.60
301.91
Page 46
of P/E Ratio
18.57
21.38
14.41
58
0.43
33
-7
84.43
2012/13
2013/14
Average P/E Ratio
27.68
36.27
402.07
372.49
14.53
10.35
= 18.57 + 21.38 + 14.41+ 14.53 + 10.35 /5

= 79.24/5
= 15.84

2009/10
2010/11
2011/12
2012/13
2013/14
EPS
10.23
14.06
20.95
27.68
36.27
Total
EPS Raised (%)

37
49
32
31
149
Expected Future EPS

= 37 + 49 +32 + 31 /4
= 37 % i.e. 13.41
= P/E Ratio * EPS
= 49.68*15.84
= 786.93
DATA INTERPRETATION OF YES BANK

AGIMS, SANGLI
Page 47
The Dividend given by the company during the financial year 2009/10 was not declared;
for 2010/11 dividends gives by the company was 1.5. The next year i.e. in 2011/12
dividend given by the company was 2.5. For the year 2012/13 the dividend given by the
company was 4. And in 2013/14 the dividend declared by the company was 6.
The average dividend for the five 9.66% the expected future dividend is 3.5.
Capital appreciation for the year 2010/11 was 58 that to in the year 2011/12 was 0.43, for
2012/13 and 2013/14 was 33 & 7% respectively. The expected trade of Rs.454.76 .and
the expected future return is 893.
ratio was 14.41, 2012/13 was 14.53 & 2013/14 was 10.35.
786.93.
The market price of the share in July 14 is Rs.547.8.
5.1 FINDINGS
A. The average market return for the study period (April- march 2014) was 8.81%.
B. According to CAPM, the expected return for the stock of HDFC Bank was 8.67%.
C. ICICI bank expected return was 8.69%.
AGIMS, SANGLI
Page 48
D. The expected return for AXIS Bank was 8.83%.

E. The expected return for YES Bank was 9.94%.
F. The valuations of stocks are done with the help of P/E ratio (Price earning) formula as
well as CAPM Value.
1. The HDFC BANK Expected value as per P/E ratio will 397.01 and CAPM value will be
1654.
2. The ICICI BANK Expected value as per P/E ratio will 363 and CAPM value will be
469.39.
3. The AXIS BANK Expected value as per P/E ratio will 418.20 and CAPM value will be
500.78.
4. The YES BANK Expected value as per P/E ratio will 786.93 and CAPM value will be
893.
5.2 SUGGESTIONS
An Investor can make the decision regarding the Buy or Sell of the Security depending
upon the information given below:1. The HDFC BANK minimum estimated price of security is 397.01 so decision is buying
security and the maximum estimated price of security is 1654 so decision is sell the
security
2. The ICICI BANK minimum estimated price of security is 363 so decision is buying the
security and the maximum estimated price of security is 469.39 so decision is sell the
security.
AGIMS, SANGLI
Page 49
3. The AXIS BANK minimum estimated price of security is 418.20 so decision is buying
security and the maximum estimated price of security is 500.78 so decision is sell the
security
4. The YES BANK minimum estimated price of security is 786.93 so decision is buying
security and the maximum estimated price of security is 893 so decision is sell the
security.
5. If the values of securities lie below the minimum estimated price then the investor should
definitely buy the security and if value of security crosses the maximum estimated price
then investor should sell the security to book the profit.
6. Above suggestions are for the year2014/15. Investor can make use of these calculations
for the next year.
5.3 CONCLUSION:
After completing study in HDFC BANK ,ICICI BANK , AXIS BANK &
YES BANK on topic Application of CAPM , the researcher came to know that,
CAPM value is the better than the P/E ratio Value for Investing in shares, so the
Investor can invest with the help of CAPM value.
AGIMS, SANGLI
Page 50

Project On Capm

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Project On Capm

Enviado por

Direitos autorais:

Formatos disponíveis

SHIVAJI UNIVERSITY, KOLHAPUR

1.2 OBJECTIVES OF STUDY

1.3 IMPORTANCE OF STUDY

SHIVAJI UNIVERSITY, KOLHAPUR

1.4 SCOPE OF STUDY

1.5 RESEARCH METHODOLOGY

SHIVAJI UNIVERSITY, KOLHAPUR

Financial statements of the Company

Annual Reports of the Company

SHIVAJI UNIVERSITY, KOLHAPUR

1.6 LIMITATIONS OF STUDY

SHIVAJI UNIVERSITY, KOLHAPUR

2.1 INTRODUCTION OF CAPM

Lintner(1969,1971), Sharpe(1970), Gonedes(1976), Black, Jensen and Scholes(1972),

SHIVAJI UNIVERSITY, KOLHAPUR

SHIVAJI UNIVERSITY, KOLHAPUR

SHIVAJI UNIVERSITY, KOLHAPUR

SHIVAJI UNIVERSITY, KOLHAPUR

Covariance of asset with market portfolio

SHIVAJI UNIVERSITY, KOLHAPUR

2.4 RISK AND RETURNS

SHIVAJI UNIVERSITY, KOLHAPUR

3: Purchasing Power Risk:

SHIVAJI UNIVERSITY, KOLHAPUR

SHIVAJI UNIVERSITY, KOLHAPUR

3.1Name of the Company

3.2Address of the company:106, C-Wing, Chaphalkar complex,Maruti Road,Sangli-416416

3.3 About Samrudhi Investment

3.4 About Intime Equities Ltd

: INTIME EQUITIES LIMITED

OLD NAME 1 OF MEMBER

SHIVAJI UNIVERSITY, KOLHAPUR

OLD NAME 2 OF MEMBER

: FORTUNE FINANCIAL SERVICES (INDIA)

PURUSHOTTAMDAS THAKURDAS MARG

CALCULATION OF RETURN ON SENSEX

SHIVAJI UNIVERSITY, KOLHAPUR

SHIVAJI UNIVERSITY, KOLHAPUR

Average Market Return

= Total of return on Index/ number of years

Average Market Return

SHIVAJI UNIVERSITY, KOLHAPUR

SHIVAJI UNIVERSITY, KOLHAPUR

CALCULATIONS OF HDFC BANK

SHIVAJI UNIVERSITY, KOLHAPUR

Expected Dividend (%)

Average growth in Dividend (Rs.)

Risk Free Return

CALCULATION OF BETA OF SECURITY:Year

SHIVAJI UNIVERSITY, KOLHAPUR

Covariance = Total of D1*D2 / 5

Beta = Covariance of Security / Variance of Index

SHIVAJI UNIVERSITY, KOLHAPUR

CALCULATION OF CAPITAL APPRECIATION

SHIVAJI UNIVERSITY, KOLHAPUR

Capital Appreciation (CA) =

Closing value -Opening Value

Average Capital Appreciation = 39 + 10 + 28 + 8 /4

CALCULATION OF P/E RATIO

SHIVAJI UNIVERSITY, KOLHAPUR

P/E Ratio = M.P/EPS

Average P/E Ratio = 5.84 + 6.67 + 5.61 + 27.58 + 23.23

EPS Raised (%)