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2
, then students t statistic is defined as:
=x/n
S
2=1/ (n-1) (X-
)
2
Variance
The variance is a somewhat abstract measure of the variability in a set of data. Unlike the
variability the standard deviation can be easily conceptualized by plotting it along with the
individual points in the set. It is easy to visualize the standard deviation in this way along with
the data set
Variance () = Pi (R-E(R))
OR () = N (y) - (y)
N
Coefficient of Correlation:
Coefficient of Correlation is a statistical technique, which measures the degree or extent to which
two or more variables fluctuate with reference to one another. Correlation analysis helps in
determining the degree of relationship between two variables but correlation does not always
imply cause and effect relationship.
The Coefficient of Correlation is essentially the covariance taken not as an absolute value but
relative to the standard deviations of the individual securities. It indicates, in effect, how much x
and y vary together as a proportion of their combined individual variations, measured by SD of x
multiplied by SD of Y
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 48
Correlation Co-efficient
Correlation(r) = [NXY-(X) (Y)] [NX
2
- (X
2
)] [NY
2
(Y)
2
]
Techniques used for data analysis:
Basically whole data analysis has been performed using spreadsheet in Excel by using different
statistical functions inbuilt in Excel. The following statistical functions have been employed
during the data analysis.
Risk:
Risk is the uncertainty of the income and capital appreciation or loss of both. It is inherent in any
investment. This risk may relate to loss or delay in repayment of the principal capital or loss on
non-payment of the interest or variability of returns. While some securities are almost risk less
like Government securities others are more risky.
The degree of the risk however varies on the basis of the features of the assets, investment
instruments, the mode of the investment, the issuer of security, etc. The uncertainty associated
with the returns from an investment introduces risk into an investment. The possibility of the
variation of the actual return from the expected return in termed as risk. An investment whose
returns are fairly stable is considered as low-risk investment, whereas an investment whose
returns fluctuate significantly is considered to be a high-risk instrument.
Risk depends on the following factors:
Wrong decision of what to invest in.
Wrong timings of investments.
Nature of the investments invested in.
Creditworthiness of the issuer.
Maturity period or length of the investment.
Amount of the investments.
Risks can be classified as Systematic risks and Unsystematic risks.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 49
Unsystematic Risks:
The Risk of price change due to the unique circumstance of a specific security, as opposed to the
overall market. This risk can be virtually eliminated from a portfolio through diversification.
These are risks that are unique to a firm or industry. Factors such as management capability,
consumer preferences, labor, etc. contribute to unsystematic risks. Unsystematic risks are
controllable by nature and can be considerably reduced by sufficiently diversifying one's
portfolio.
Systematic Risks:
Risk, which is common to an entire class of assets or liabilities. The value of investments may
decline over a given time period simply because of economic changes or other events that impact
large portions of the market. Asset allocation and diversification can protect against systematic
risk because different portions of the market tend to underperformed at different times, also
called Market Risk.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 50
CHAPTER- 4
ANALYSIS AND INTERPRETAION
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 51
FMCG & Consumer Durables:
The budget was largely positive for the FMCG & Consumer durable sector. While cigarettes will
become expensive for consumers, the rate hike was lesser than expectations Further, hike in
excise duty on beedi and other tobacco products is positive for cigarette manufacturers and could
lead to consumers shifting to cigarettes. Excise duty on cigarettes increased by 10%, Ad valorem
duty to be imposed on some cigarettes cigarettes will become expensive. Hike in excise duty
on beedi and other tobacco products
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 52
Indian Tobacco Company:
Table NO 4.1 Showing of Indian Tobacco Company Ltd stock prices and returns of pre
and post budget session for year 2012-2013:
Date Close prices Days Return
2-Mar-12 205.25
-10
-0.77
3-Mar-12 205
-9
-0.12
5-Mar-12 207
-8
0.97
6-Mar-12 210.4
-7
1.64
7-Mar-12 209.95
-6
-0.21
9-Mar-12 208.25
-5
-0.80
12-Mar-12 206.8
-4
-0.69
13-Mar-12 209.05
-3
1.08
14-Mar-12 212.5
-2
1.65
15-Mar-12 208.9
-1
-1.69
16-Mar-12 216.15
0
3.47
19-Mar-12 220.5
1
2.01
20-Mar-12 223.6
2
1.40
21-Mar-12 223.85
3
0.11
22-Mar-12 219.7
4
-1.85
23-Mar-12 222.45
5
1.25
26-Mar-12 222.7
6
0.11
27-Mar-12 226.05
7
1.50
28-Mar-12 226.8
8
0.33
29-Mar-12 224.55
9
-0.99
30-Mar-12 226.9
10
1.04
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 53
Analysis:
The above table shows the share prices of Indian Tobacco Company For the period of 21
days prior pre-budget along with high return 1.65% & post budget highest is 2.01%. The
standard deviation denotes 2.35 during the pre budget and 2.47during post budget session. The
percentage change between the standard deviation stood to 4.86%. The variance is 5.53 and 6.10
during pre and post budget session respectively.
Graph NO 4.1 Trend Movement of Indian Tobacco Company Ltd returns pre and post
budget session for year 2012-13:
Interpretation:
The market is more volatile in the pre budget session but not much positively volatile in the post
budget session.
-3
-2
-1
0
1
2
3
4
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 54
Banking sector:
Rs. 15,888 Cr. For recapitalization of Public sector banks, RRB and NABARD
o Fresh infusion of equity for banks to meet Basel-iii norms and to fund future
growth
Target for agricultural credit to Rs.5075 lakh Cr.
o More loans have to be disbursed to framing sector
Interest income up to Rs.10,000 from saving bank accounts to be exempted for those
having an income up to Rs.5 lakhs
Table NO 4.2. Showing of State Bank of India company stock prices and returns of pre and post
budget session for year 2012-13:
Date Close prices Days Return
2-Mar-12 2246.7 -10 1.25
3-Mar-12 2250.85 -9 0.18
5-Mar-12 2176.05 -8 -3.32
6-Mar-12 2147.85 -7 -1.29
7-Mar-12 2141.55 -6 -0.29
9-Mar-12 2226.4 -5 3.96
12-Mar-12 2310.8 -4 3.79
13-Mar-12 2327.5 -3 0.72
14-Mar-12 2354.8 -2 1.17
15-Mar-12 2299.3 -1 -2.35
16-Mar-12 2227.9 0 -3.10
19-Mar-12 2157.55 1 -3.15
20-Mar-12 2187.35 2 1.38
21-Mar-12 2232.85 3 2.08
22-Mar-12 2160.6 4 -3.23
23-Mar-12 2166.75 5 0.28
26-Mar-12 2117.45 6 -2.27
27-Mar-12 2129.15 7 0.55
28-Mar-12 2079.25 8 -2.34
29-Mar-12 2061.35 9 -0.86
30-Mar-12 2096.35 10 1.69
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 55
Analysis:
The above table shows the share prices of State Bank of India for the period of 21 days
prior pre-budget along with high return 3.79% & post budget highest is 2.08%. The standard
deviation denotes 75.51 during the pre budget and 52.39during post budget session. The
percentage change between the standard deviation stood to (-30.61%). The variance is 5701.83
and 2745.12 during pre and post budget session respectively.
Graph NO.4.2 Trend Movement of State Bank of India Company returns pre and post
budget session for year 2012-13:
Interpretation: The banking sector bellwether stock indicates that the pre budget returns are
highly volatile with positive but in post budget session returns are volatile with positive and
negative also.
-4
-3
-2
-1
0
1
2
3
4
5
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 56
Information Technology:
Introduction of Advance Priding Agreement (APA) in the finance bill of 2012
Central plan outlay by the department of Information Technology (IT) increased by
86.7% to Rs. 53.6 billion.
A national information utility (NIU) for the computerization of public distribution system
is being created.
It is expected to become operational by December 2012.
Table NO.4.3 Showing of TATA Consultancy Services company stock prices and returns of
pre and post budget session for year 2012-13:
Date Close prices Days Return
2-Mar-12 1,217.25
-10
-0.19
3-Mar-12 1,218.40
-9
0.09
5-Mar-12 1,207.30
-8
-0.91
6-Mar-12 1,202.00
-7
-0.43
7-Mar-12 1,192.85
-6
-0.76
9-Mar-12 1,208.55
-5
1.31
12-Mar-12 1,189.05
-4
-1.61
13-Mar-12 1,197.00
-3
0.66
14-Mar-12 1,154.55
-2
-3.54
15-Mar-12 1,163.70
-1
0.79
16-Mar-12 1,169.55
0
0.50
19-Mar-12 1,122.00
1
-4.06
20-Mar-12 1,134.85
2
1.14
21-Mar-12 1,175.75
3
3.60
22-Mar-12 1,167.75
4
-0.68
23-Mar-12 1,184.65
5
1.44
26-Mar-12 1,161.60
6
-1.94
27-Mar-12 1,174.75
7
1.13
28-Mar-12 1,165.10
8
-0.82
29-Mar-12 1,141.20
9
-2.05
30-Mar-12 1,168.80
10
2.41
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 57
Analysis:
The above table shows the share prices of TATA Consultancy Services for the period of 21 days
prior pre-budget along with high return 1.31% & post budget highest is 3.60%. The standard
deviation denotes 20.19 during the pre budget and 19.41 post budget sessions. The percentage
change between the standard deviation stood to (-3.86%). The variance is 407.56 and 376.90
during pre and post budget session respectively.
Graph NO.4.3 Trend Movement of TATA Consultancy Services company returns pre and
post budget session for year 2012-13:
Interpretation:
The Information Technology sector stocks showing that there is a quite volatility in stock in pre
budget session with expectations. On budget day the returns TATA consultancy Services is
4.24%. And in the post budget session also the returns are positive.
-5
-4
-3
-2
-1
0
1
2
3
4
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 58
2013-14
Power Sector:
The power sector faces challenges on multitude front with 1) DISCOM restructuring
facing a roadblock due to inability of states to support the restructuring exercise 2)
continuing high AT&C losses making DISCOM threatening viability and 3) slower coal
production growth (4-5% CAGR) vis-a-vis 8-9% CAGR over the 12th Plan.
NTPC Limited Company NTPC imports ~10% i.e. 16MT of 160MT coal requirement
and has pass-through PPAs. Consequently, the increase in steam coal prices would not
affect the company. On the other hand, as 80IA extension is positive as it plans to
commission 2.4GW in FY14.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 59
Table NO 4.4 Showing of NTPC Limited company stock pre and post budget session for
year 2013-14
Date Close prices Days Return
15-Feb-13 149.95
-10
0.43
18-Feb-13 151.1
-9
0.76
19-Feb-13 153.5
-8
1.58
20-Feb-13 152.4
-7
-0.71
21-Feb-13 152
-6
-0.26
22-Feb-13 151.55
-5
-0.29
25-Feb-13 149.85
-4
-1.12
26-Feb-13 151
-3
0.76
27-Feb-13 153.85
-2
1.88
28-Feb-13 150.9
-1
-1.91
1-Mar-13 150.05
0
-0.56
4-Mar-13 149.35
1
-0.46
5-Mar-13 149.55
2
0.13
6-Mar-13 148.45
3
-0.73
7-Mar-13 148.15
4
-0.20
8-Mar-13 149.05
5
0.60
11-Mar-13 149.6
6
0.36
12-Mar-13 147.8
7
-1.20
13-Mar-13 146.8
8
-0.67
14-Mar-13 146.85
9
0.03
15-Mar-13 145.95
10
-0.61
Analysis:
The above table shows the share prices of NTPC limited for the period of 21 days prior pre-
budget along with high return 1.88% & post budget highest is 0.60%. The standard deviation
denotes 1.35 during the pre budget and 1.29 post budget sessions. The percentage change
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 60
between the standard deviation stood to (-4.44%). The variance is 1.82 and 1.65 during pre and
post budget session respectively.
Graph NO.4.4Trend Movement of NTPC Limited Company returns pre and post budget
session for year 2013-14:
Interpretation: The above graph is showing that the returns of the company are positive in pre
budget session. But in post budget session the returns are much negatively volatile.
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 61
Steel sector:
While the demand outlook continues to remain highly uncertain, the domestic steel
industry is witnessing a continuous rise in crude steel capacity. CARE Research expects
domestic steel capacity to increase at a CAGR of about 7.3 percent during the period
FY12 to FY17, marginally at a faster pace than the increase in domestic steel demand.
Going forward favorable economic policy, prudent regulatory process, broad anti-
dumping measures and increased investment in research and development are needed to
provide impetus to the industry as a whole and fade away the short-term concerns.
Increase in customs duty and CVD on steam coal is likely to result in increase in cost of
production.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 62
Table NO 4.5. Showing of Steel Authority Of India Ltd company stock pre and post budget
session for year 2013-14:
Date Close prices Days Return
15-Feb-13 77.85
-10
0.32
18-Feb-13 78
-9
0.19
19-Feb-13 78.5
-8
0.64
20-Feb-13 78.85
-7
0.445
21-Feb-13 75.95
-6
-3.67
22-Feb-13 76.5
-5
0.72
25-Feb-13 74.95
-4
-2.02
26-Feb-13 72.75
-3
-2.93
27-Feb-13 74.35
-2
2.19
28-Feb-13 70.9
-1
-4.64
1-Mar-13 71.6
0
0.98
4-Mar-13 68.2
1
-4.74
5-Mar-13 69.5
2
1.90
6-Mar-13 70.45
3
1.36
7-Mar-13 69.1
4
-1.91
8-Mar-13 70.35
5
1.80
11-Mar-13 70.45
6
0.14
12-Mar-13 70.9
7
0.63
13-Mar-13 70.9
8
0
14-Mar-13 70.55
9
-0.49
15-Mar-13 68.75
10
-2.55
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 63
Analysis:
The above table shows the share prices of Steel Authority Of India Ltd company limited for
the period of 21 days prior pre-budget along with high return 2.19% & post budget highest is
1.90%. The standard deviation denotes 2.63 during the pre budget and 0.96 post budget sessions.
The percentage change between the standard deviation stood to (- 63.49%). The variance is 6.92
and 0.92 during pre and post budget session respectively.
Graph NO.4.5.Trend Movement of Steel Authority Of India Ltd company Company
returns pre and post budget session for year 2013-14:
Interpretation:
The graph showing that Steel Authority of India Limited (SAIL) returns are not much volatile in
pre budget session. In post budget session returns are highly volatile with the positive news from
the budget to steel sector, And also continuous increase in steel demand.
-6
-5
-4
-3
-2
-1
0
1
2
3
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 64
Textile Sector:
The Zero excise duty route, as existed prior to Budget FY12, is being re-established
with respect to branded readymade garments and made-ups. Going by this, in the case of
cotton, there will be zero duty at the fiber stage also and in the case of spun yarn, there
will be a duty of 12% at the fiber stage. The zero excise duty route will be in addition to
the CENVAT route now available.
Allocation of ` 0.5 billion to the Ministry of Textiles for establishing apparel parks within
the Scheme for Integrated Textile Parks (SITP).
Allocation of ` 0.96 billion to the Ministry of Textiles to provide working capital and
term loans at a concessional interest rate of 6%.
The existing Technology Up gradation Fund Scheme (TUFS) for the textiles sector to
continue. Allocation of ` 24 billion for modernization of the power loom sector.
The Integrated Processing Development Scheme with plan disbursement of ` 5 billion
would be implemented in the 12th Five Year Plan for addressing environmental issues
faced by the textiles industry. It is proposed to provide ` 0.5 billion in FY14 for the
scheme.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 65
Table NO. 4.6. Showing of Raymond Limited company stock pre and post budget session
for year 2013-14:
Date Close prices Days Return
15-Feb-13 341.5
-10
-0.04
18-Feb-13 349.6
-9
2.37
19-Feb-13 356.4
-8
1.94
20-Feb-13 358.6
-7
0.61
21-Feb-13 343.65
-6
-4.16
22-Feb-13 337.75
-5
-1.71
25-Feb-13 338.3
-4
0.16
26-Feb-13 333.15
-3
-1.52
27-Feb-13 329.15
-2
-1.20
28-Feb-13 311.15
-1
-5.46
1-Mar-13 317.05
0
1.89
4-Mar-13 310.85
1
-1.95
95-Mar-13 321.2
2
3.32
6-Mar-13 325.55
3
1.35
7-Mar-13 321.1
4
-1.36
8-Mar-13 321.1
5
0
11-Mar-13 321.2
6
0.03
12-Mar-13 320.4
7
-0.24
13-Mar-13 313.05
8
-2.29
14-Mar-13 309.3
9
-1.19
15-Mar-13 299.3
10
-3.23
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 66
Analysis:
The above table shows the share prices of Raymond Limited for the period of 21 days prior pre-
budget along with high return 2.37% & post budget highest is 3.32%. The standard deviation
denotes 13.83 during the pre budget and 7.99 post budget sessions. The percentage change
between the standard deviation stood to (-42.23%). The variance is 191.95 and 63.86 during pre
and post budget session respectively.
Graph NO.4.6.Trend Movement of Raymond Limited Company returns pre and post
budget session for year 2013-14:
Interpretation:
The above graph showing that pre budget returns are quite volatile. Post budget returns are more
positively volatile.
-6
-5
-4
-3
-2
-1
0
1
2
3
4
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 67
2014-15
Auto mobile sector:
The auto sector has slowed down significantly in the last few quarters. Car sales continue
to remain subdued. At such a time, the government has announced a reduction in excise
duty the tax on goods produced within the country across different segments. Excise
duty on small cars, two-wheelers and commercial vehicles has been cut to 8% from 12%,
while that on Sports Utility Vehicles (SUVs) has been reduced to 24% from 30% earlier.
Large and mid-segment cars will attract an excise duty of 20%. This is expected to make
cars cheaper.
Excise duty on SUVs reduced to 24%,on large cars to 20%
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 68
Table NO. 4.7 Showing of TATA MOTORS company stock pre and post budget session for
year 2014-15:
Date Close prices Days Returns (%)
5-Feb-14 355.1
-10
2.67
6-Feb-14 357.65
-9
0.71
7-Feb-14 360.2
-8
0.71
10-Feb-14 364.05
-7
1.06
11-Feb-14 374.5
-6
2.87
12-Feb-14 376.65
-5
0.57
13-Feb-14 375.95
-4
-0.18
14-Feb-14 388.8
-3
3.41
17-Feb-14 386.6
-2
-0.56
18-Feb-14 391.4
-1
1.24
19-Feb-14 391.5
0
0.02
20-Feb-14 391.85
1
0.08
21-Feb-14 396.2
2
1.11
24-Feb-14 396.55
3
0.08
25-Feb-14 398.5
4
0.49
26-Feb-14 401.2
5
0.67
28-Feb-14 416.95
6
3.92
3-Mar-14 410.7
7
-1.49
4-Mar-14 412.9
8
0.53
5-Mar-14 409.6
9
-0.79
6-Mar-14 408.45
10
-0.28
Analysis: The above table shows the share prices of TATA Motors for the period of 21days prior
pre-budget along with high return 3.41% & post budget highest is 3.92%. And the standard
deviation denotes 13.32 during the pre budget and 9.20 during post budget session. The
percentage change between the standard deviation stood to (-30.93%). The variance is 191.95
and 63.86 during pre and post budget session respectively.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 69
Graph NO.4.7 Trend Movement of TATA MOTORS pre and post budget session for year
2014-15:
Interpretation:
The above graph indicates that the returns of the company are volatile in pre budget session
but not volatile in post budget session effected quite negatively.
Manufacturing Sector:
The sluggish import is a matter of concern for manufacturing and domestic trade sector.
8 National Investment and Manufacturing Zones (NIMZ) along Delhi Mumbai Industrial
Corridor (DMIC) have been announced. 9 Projects had been approved by the DMIC trust.
3 more Industrial Corridors connecting Chennai and Bangalore, and Mumbai & Amritsar
and Kolkata are under different stages of preparatory works.
Additional capacities are being installed in major manufacturing industries
The huge focus on building up manufacturing sector.
National manufacturing policy is set to revive manufacturing in 2014
-2
-1
0
1
2
3
4
5
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 70
Table NO. 4.8. Showing of Ashok Leyland limited company stock pre and post budget
session for year 2014-15:
Date Close prices Days Returns
(%)
5-Feb-14 16
-10
-2.73
6-Feb-14 15.95
-9
-0.31
7-Feb-14 16.1
-8
0.94
10-Feb-14 15.65
-7
-2.79
11-Feb-14 15.7
-6
0.31
12-Feb-14 15.6
-5
-0.63
13-Feb-14 15.5
-4
-0.64
14-Feb-14 15.6
-3
0.64
17-Feb-14 15.35
-2
-1.60
18-Feb-14 15.35
-1
0
19-Feb-14 15.65
0
1.95
20-Feb-14 15.65
1
0
21-Feb-14 15.7
2
0.31
24-Feb-14 15.5
3
-1.27
25-Feb-14 15.5
4
0
26-Feb-14 15.7
5
1.29
28-Feb-14 15.65
6
-0.31
3-Mar-14 15.55
7
-0.6
4-Mar-14 15.6
8
0.32
5-Mar-14 16.15
9
3.52
6-Mar-14 16
10
-0.92
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 71
Analysis:
The above table shows the share prices of Ashok Leyland limited for the period of 21days prior
pre-budget along with high return 1.51% & post budget highest is 6.32%. And the standard
deviation denotes 0.26 during the pre budget and 0.21 during post budget session. The
percentage change between the standard deviation stood to (-19.23%). The variance is 0.07 and
0.05 during pre and post budget session respectively.
Graph NO.4.8 Trend Movement of Ashok Leyland limited company returns pre and post
budget session for year 2014-15:
Interpretation:
The pre budget session returns are more negatively volatile. As the budget is positive news also
the market returns are not much volatile in post budget session. Market is not responding in both
session of budget.
Infrastructure Sector:
In 2012-13 and in nine months of the current financial year, 29, 350 MW of power
capacity, 3, 928 kilometers of National Highways, 39, 144 kilometers of Rural Roads,
3,343 kilometers of New Railway track and 217.5 million tones of capacity per annum in
our ports have been created to give a big boost to infrastructure industries.
-4
-3
-2
-1
0
1
2
3
4
-
1
0
-
9
-
8
-
7
-
6
-
5
-
4
-
3
-
2
-
1
0
1
2
3
4
5
6
7
8
9
1
0
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 72
19 Oil and Gas blocks were given out for exploration and 7 new Air ports are under
construction.
296 projects worth Rs 660000 crrore cleared by cabinet committee on investment by end
January 2014.
Table NO. 4.9. Showing of Larsen & Toubro Limited company stock pre and post budget session
for year 2014-15:
Date Close prices Days Returns (%)
5-Feb-14 985.4
-10
0.24
6-Feb-14 975.25
-9
-1.03
7-Feb-14 984.15
-8
0.91
10-Feb-14 995.9
-7
1.19
11-Feb-14 993.65
-6
-0.22
12-Feb-14 1,010.50
-5
1.69
13-Feb-14 986.95
-4
-2.33
14-Feb-14 992.75
-3
0.58
17-Feb-14 998.3
-2
0.55
18-Feb-14 1,017.40
-1
1.91
19-Feb-14 1,031.30
0
1.36
20-Feb-14 1,034.65
1
0.32
21-Feb-14 1,055.15
2
1.98
24-Feb-14 1,084.65
3
2.79
25-Feb-14 1,087.90
4
0.29
26-Feb-14 1,096.65
5
0.80
28-Feb-14 1,109.65
6
1.18
3-Mar-14 1,097.55
7
-1.09
4-Mar-14 1,116.70
8
1.74
5-Mar-14 1,123.35
9
0.59
6-Mar-14 1,142.50
10
1.70
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 73
Analysis:
The above table shows the share prices of Larsen & Turbo Limited for the period of 21days prior
pre-budget along with high return 1.91% & post budget highest is 2.79%. And the standard
deviation denotes 12.54 during the pre budget and 31.87 during post budget session. The
percentage change between the standard deviation stood to 60.65%.The variance is 157.32 and
1015.80 during pre and post budget session respectively.
Graph NO.4.9.Trend Movement of Larsen & Turbo Limited Company returns pre and
post budget session for year 2014-15:
Interpretation: the above graph showing that there is negative returns before the budget period.
In the post budget session negative but not much as in pre budget session.
-3
-2
-1
0
1
2
3
4
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
RETURN
RETURN
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 74
Chapter-5
SUMMARY OF FINDINGS, CONCLUSION
AND
SUGGESTIONS
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 75
2012:
Sectors Effect Correlation t value P
value(two
tailed)
Results
FMCG & consumer
durables(ITC Ltd)
positive Negatively
correlated (-0.77)
-0.55 0.594 H
0
is
Accepted
Banking Sector(State
Bank of India)
positive Negatively
correlated(-0.41)
0.83 0.430 H
0
is
Accepted
Information
Technology(TATA
consultancy services)
Positive Positively
correlated(0.04)
-0.56 0.586 H
0
is
Accepted
We can infer the findings from the study that ITC Ltd was quite volatile during the budget period
with the pre budget standard deviation of 2.35 and post budget with 2.47, so we can find that
there was a 5.10% change in the standard deviation it means the risk is increased in the post
budget session for the investors.
We can infer the findings from the study State Bank of India was positive volatile during the
budget period with the pre budget standard deviation of 75.51 and post budget with 52.39, so we
can find that there was a -30.61% change in the standard deviation it means the risk in the State
Bank of India stocks is decreased.
We can infer the findings from the study TATA consultancy Services was negative volatile
during the budget period with the pre budget standard deviation of 21.31 and post budget with
20.19, so we can find that there was a -5.25% change in the standard deviation it means the risk
in the TATA consultancy services stocks is decreased.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 76
2013
Sectors Effect Correlation T value p value(Two
tailed
Results
Power
sector(NTPC
Limited)
Negative Positively
correlated(0.1629)
0.99 0.347 H
0
is
Accepted
Steel Sector
(SAIL)
Negative Negatively
correlated(-0.04)
-0.49 0.635 H
0
is
Accepted
Textile Sector
(Raymond
Limited)
Positive Positively
correlated(0.64)
-0.56 0.588 H
0
is
Accepted
We can infer the findings from the study that National Thermal Power corporation Limited was
positive volatile during the budget period with the pre budget standard deviation of 1.35 and
post budget with 1.29, so we can find that there was a -4.44% change in the standard deviation it
means the risk is decreased in the post budget session for the investors.
We can infer the findings from the study that STEEL AUTHORITY OF INDIA LIMITED
(STEEL AUTHORITY OF INDIA LIMITED (SAIL) was quite volatile during the budget period
with the pre budget standard deviation of 2.63 and post budget with 0.96, so we can find that
there was a -63.49% change in the standard deviation it means the risk is decreased in the post
budget session for the investors.
We can infer the findings from the study that Raymond Limited was quite volatile during the
budget period with the pre budget standard deviation of 13.85 and post budget with 7.99, so we
can find that there was a -42.31% change in the standard deviation it means the risk is decreased
in the post budget session for the investors.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 77
2014
Sectors Effect Correlation T value P value(Two
tailed)
Results
Automobile
sector(TATA
motors)
positive Positively
correlated(0.15)
1.43 0.18 H
0
is
Accepted
Manufacturing
sector(Ashok
Leyland Ltd)
Negative Negatively
correlated(-0.26)
-1.35 0.20 H
0
is
Accepted
Infrastructure
Sector(L&T
Limited)
negative Positively
correlated(0.50)
-1.79 0.10 H
0
is
Accepted
We can infer the findings from the study that TATA motors was positive volatile during the
budget period with the pre budget standard deviation of 13.32 and post budget with 9.20, so we
can find that there was a -30.93% change in the standard deviation it means the risk is decreased
in the post budget session for the investors.
We can infer the findings from the study that Ashok Leyland Limited was marginally negative
volatile during the budget period with the pre budget standard deviation of 0.26and post budget
with 0.21, so we can find that there was a -19.23% change in the standard deviation it means the
risk is decreased in the post budget session for the investors.
We can infer the findings from the study that Larsen and Turbo Limited was negative volatile
during the budget period with the pre budget standard deviation of 12.54 and post budget with
31.87, so we can find that there was a 154% change in the standard deviation it means the risk is
increased in the post budget session for the investors.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 78
SUGGESTION AND RECOMMENDATION:
1. The union budget affects the stock market, so close examination should be made during
the budget session.
2. For an investor who is willing to take high risk an ideal portfolio would be consists of
state bank of India, Steel Authority Of India Limited (Steel Authority Of India Limited
(SAIL) & TATA Motors.
3. Hence an ideal risk free portfolio would be ITC Ltd, TCS & National Thermal Power
Corporation Limited during the budget.
4. Stock of L&T Ltd is highly risky during the budget and hence careful work should be
done before investing.
5. If budget contains any proposal regarding corporate tax i.e. if percentage of corporate tax
is reduced then the share prices increases and if percentage is increased hence the share
prices will decrease.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 79
CONCLUSION
The Government Budget announcement is one of the important factors as it is related to the
financial or economic health of country involving all the industries. The study reveals that in
India, the budget mainly affects the stock market in short term.
It is true that share market is the most sensitive parameter of the economy. It responds negligible
changes even immediately. It is obvious that the budget, economic policy-making decision shall
have significant impact on the sensitive parameter, stock market.
The study examines the casual relationship between the share prices of the selected Bellwether
Stocks of effected sectors and budget.
1. There are certain recommendations made in budget that affects the share prices of all the
industries. And there is a certain recommendation that affects only Bellwether Stocks.
2. The stock market will also affect depending on the financial decisions taken up by the
finance minister during the budget session.
3. Share prices fluctuate mainly due to
Company news
Country news (Budget).
4. Exemptions on duties of certain raw material used in different industries will affect on the
finished good to be produced.
5. More the favorable factors than the unfavorable in union budget will increases in the
share prices, if unfavorable factors is more than favorable in union budget then will
decreases.
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 80
BIBLIOGRAPHY
Books:
1. S.C.Gupta, Fundamentals of statistics, Himalaya Publishing House, Seventh
revised and Enlarged Edition: 2012
Articles:
1. Gupta Arindam and Kundu Debashis (2006), A Study of the Impact of Union
Budget on Stock Prices in India, The ICFAI Journal of Applied Finance,
Vol.12, No.12, pp65-76.
2. Rao S.V.D Nageswara (1997), Impact of Macroeconomic Events on Stock
Price Behaviour, Management and Accounting Research, Vol 1, No.1, pp.
46-67.
3. Mohanty Munmum (2004), Stock Market Reaction to Announcement of
Policy Changes In The ICFAI Journal of Applied Finance, Dec 2004
Websites
1. Www. Fortune.co.in
2. www.nseindia.com
3. www.investopedia.com
4. www.myiris.com
5. www.moneycontrol.com
6. www.yahoofinance.com
7. http://financialdictionary.
8. http://finmin.nic.in/
9. www.euroojournals.com/finance.htm
10. http:/indiabudget.nic.in
A STUDY ON VOLATILITY OF BELLWETHER STOCKS WITH RESPECT TO PRE AND POST BUDGET SESSION
ACHARYA INSTITUTE OF TECHNOLOGY, BANGALORE Page 81