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Investment Analysis

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INVESTMENT ANALYSIS

Table of Contents 1.0. Introduction: 3 3.0. Advantages of frequency distribution: 3 4.0. Analysis of returns of Reliance industries limited 4 3.1 Analysis of return of ONGC: 5 3.2 Analysis of return of Bharti Airtel: 6 4. Measurement of central tendency: 6 4.1 Mode: 7 4.2 Median: 7 4.3 Mean 7 5. Conclusion: 8 REFERENCES 10

1.0. Introduction: Generally shares are issued in the primary market and new issued shares are traded in the secondary market. BSE and NSE are two renowned stock exchanges which plays an important role in Indian stock market. Most of the big companies in India are listed in these stock exchanges. The companies are enlisted with these stock exchanges as per rules and regulation specified by particular stock exchanges (Greer and Kolbe, 2008). In Indian context the company distributes the shares in lieu of capital with the help of these stock exchanges. It is an essential pillar of private sector companies. Mallin and Ow–Yong (2009) commented that capital formation is the main function of stock exchanges. Beside the main function stock exchanges in India do lots of work. It provides a place where all the securities are traded. Security market provides a linkage between saving sector and corporate sector.
Stock market generally provides the all the information about price and trading of the securities altogether. The author selects three big companies i.e. Reliance industries ltd, ONGC, Bharti Airtel Ltd, to compare as required in the assignment. In this report the author collects financial and statistical data of these companies and analyse them to make reasonable comments on the above companies (CACEIS, 2010).
2.0. Calculations of returns of stocks: Calculation of daily and monthly return of different companies shows in the Excel Sheet 1,2 3,4,5 and 6 [Available from: http://in.finance.yahoo.com/, 6 August 2012]. 3.0. Advantages of frequency distribution: Selection of proper methodology is the preliminary factor of any kind of experiment. Data should be summarise in such a way that every material information highlights. Anderson et al. (2011) demonstrated that statistical data is generally use to answering the question like highest or lowest, range etc. statistic helps us to generate all the revenant data in a single table which is more time saving and easy to understand. Analysis can be done in different way like financial analysis, statistical analysis, and technical analysis. To interpret about index and stock statistical analysis tends to be the best practised method as the analysis of index and stock needs a lot of result which may not be possible through financial or technical analysis (Balasubramanian and Satwalekar, 2010).
The above analysis on index and stock is done by using frequency distribution method. Advantages of using frequency distribution method are given below.
This method describes information in such a manner which is easy to understand.
Frequency distribution method can summarise a large amount of data in useful and simple format (Singh, 2012).
This distribution method considers the entire useful variable.
Frequency distribution analysis interprets any data in graphical form.
Most commonly used method for analysing data and giving graphical deception is frequency distribution method. It is very useful method for comparing purpose also.
4.0. Analysis of returns of Reliance industries limited: Reliance is ranked first as per NSE stock exchange amongst the selected companies. The attached Excel Sheet no 3 provides a clear view about return they made during 2011-2012. The analysis shows that in first four months the performance of reliance is not satisfactory, as its return level decreasing month by month. For the next two months the rate of return of reliance is just improved as it shows the positive figure in the annexure Excel Sheet no 4. Again in the months of November and December the rate of return shows a decreasing trend which is not predictable. For the remaining months it shows an increasing trend in the return but as reliance industry is one of main organisation which makes big impact on the Indian economy, the return is not satisfactory [Available from: http://economictimes.indiatimes.com/topic/BSE, 8 August 2012].

3.1 Analysis of return of ONGC: ONGC is the most recognised organisation in NSE, following Reliance Industries Limited. The author graphically depicted the figure of return of ONGC for measuring their performance. In the first four month the performance of ONGC is not satisfactory as it shows a negative rate of return. For the next two months the return is positive but the figure is too low to attract the investor to invest in their company. In the month of November and December again the return falls to negative line which absolutely not expected from ongc. The reaming months show positive returns but as reliance the return of once is also not satisfactory to the investors [See Excel Sheet No. 2 &5] [Available from: http://www.nse-india.com/, 7 August 2012].

3.2 Analysis of return of Bharti Airtel: Third organisation which Author chooses to compare is Bharti Airtel. This organisation out of three shows a positive return in first few months. But in the months of august and September the return tends to fall for Bharti Airtel. They are continuously goes through negative return in other months except October. There may be some unavoidable reasons for fall of returns [See Excel Sheet No. 1 &6].
The author makes a comparative discussion after analysing the individual three organisations. Compare of these three organisations is difficult as they are not in same line of business. For that reason the Author makes comparative discussions on their return. There must be some huge problem in first few months as the all three organisations rate of return decreases. Performance of Bharti Airtel seems very bad as its rate of return falls in back to back months (Barry and Starks, 2008). The comparative analysis between reliance and ONGC, performance of ONGC seems good according to rate of return. But Rate of return is not only criteria to compare performance of business. Risk is also a major factor. So before choosing an organisation between these three the author should makes an analysis on risk also.

4. Measurement of central tendency: Author analyse three big companies in different way together with their statistical views. For analysis purpose author use frequency distribution method as well as measurement of central tendency.
Measurement of central tendency works with single number for constitution of some typical performance. It constructed with three content mean, median and mode.
Description and justification of these contents are given below
4.1 Mode: Mode is the figure which occurs most frequently in the table.
Advantages of mode: it is easy to calculate and understand.
Mode can be used in nominal data.
Disadvantages of mode: It describes mostly frequent number which may mislead the viewer.
There may be more than one mode which is very confusing.
Mode is very sensitive in analysing the grouped data (Keasey, 2007).
4.2 Median: when data’s are interpreted in size order then the middle value takes as mean. But there is some problem when the number is even then the computation of median is made through by averaging two middle numbers.
Advantages of median:
It distorts the effects of extremely high and low value.
Median is useful to interpret ordinal and ratio data.
Disadvantage of median:
It does not take the in account the whole numbers of the table.
It avoids mathematical rules.
4.3 Mean: mean is the average value.
Advantage of mean:
Mean is only thing under measurement of central tendency which takes into account all the given figures.
Application of means comes in different times in statistical analysis (Mard, 2002).
Mean cannot be used in ordinal data.
After taking into consideration the return factor the author provides a brief discussion on measurement of central tendency. To elucidated authors view he makes a graphical presentation on measurement of central tendency under which all the contents of central tendency described in tabular form.
Mean shows average value. If analysis is done through on average rate of return basis then performance of ONGC is best amongst three companies [Available from: http://in.finance.yahoo.com/, 6 August 2012].
Individual investors always prefer average rate of return for taking investment decisions.
Other content in central tendency is median, is the middle most value. Median does not help us for comparing return or in the risk analysis but as per requirement of that assignment median value is computed. Another major factor on which investment decision depends is risk [Available from: http://www.nseindia.com/products/content/equities/slbs/risk_management.ht, 9 August 2012].
Risk is the difference between actual and expected outcome. Before taking any investment decision one should measure risk of that business. Risk is measured through standard deviation or as per variance analysis. Here Author makes risk analysis through standard deviation. As per above analysis ongc seems to be risky between three organisation as its standard deviation is 2.592 [See Excel Sheet No.7] (Geltner, 2007).
Standard deviation of Bharti Airtel is 0.6466 which is lowest amongst them. Risky organisation means its return is fluctuating more. Now it is depends upon investors. Risk lover investor always prefer for risky investment where risk avoiders invest there where risk is less [See Excel Sheet No.7].
5. Conclusion: In India BSE and NSE are the two main stock exchanges under which all the developed corporate sector resides. The author makes an analysis of three big companies under NSE. All the technical and statistical analysis put to get a good overview of these three companies. Return analysis and risk analysis are two main parts to asses a company’s performance. Here the author makes an analysis of return of three companies under appropriate methods and gives his recommendation. Also the assignment provides graphical data to interpreted companies performance which gives clear scenery of companies operations during few months. Index value shows the trend of price. The assignment also gives a clear view about index value with the help of that a price fluctuation of the above three companies possible. for investment decision return is main criteria but not the only criteria risk also associate and closely related with investment decision. so before taking any decision we must consider the risk factor. There are two types of risk in investment decision strategy system, systematic and non systematic risk.
Non systematic risk is not related with market but systematic risk is so much related with market condition. Assignment also gives a brief description about the systematic risk of the companies the investor should consider this all types of systematic risk. Information can be described in many types, but for disclosure purpose it is very essential to select the appropriate method. Here the author use appropriate method to describe all related information about companies and with graphical deception which gives a perfect view for compare purpose also.
The assignment highlights all the information about two broad stock exchanges, some meaning full definition to understand the structure and function of stock exchanges and meanwhile it gives a brief view of three big companies which makes a great impact on Indian economy.

REFERENCES:
Anderson, D. R., Sweeney, D. J. and Williams, T. A. (2011) Essentials of Statistics for Business and Economics, 4th ed. Mason: South-Western Cengage Learning
Balasubramanian, N. and Satwalekar, D. M. (2010) “Corporate Governance, An Emerging Scenario”, The National Stock Exchange of India Limited.
Barry, C. B., and Starks, L. (2008), Investment management and risk sharing with multiple managers, Journal of Finance 39, 477–491
BSE: Latest News & Videos, Photos about BSE | The Economic Times, Available from: http://economictimes.indiatimes.com/topic/BSE [Accessed 8 August 2012]
CACEIS. (2010) “Securities Lending & Repo markets: A Practical Guide.” Caisse d’Épargne Investment Services. http://www.caceis.com/fileadmin/pdf/reference_papers_en/securities_lending.pdf
Finance News | Personal Finance | Market Investing - Yahoo! India, Available from: http://in.finance.yahoo.com/ [Accessed 6 August 2012]
Geltner, D. (2007) Commercial real estate analysis and investments, 4th ed. Harlow: Financial Times Prentice Hall.
Greer, G, and Kolbe, P. (2008) Investment analysis for real estate decisions, 4th ed. Chicago: Real Estate Education.
Keasey K., (2007) “Regulation of the Alternative Investment Market (AIM) - A Tale of Potential Woe”, Journal of Financial Regulation and Compliance, 15
Mallin C. and Ow–Yong K. (2009) “Corporate Governance in Alternative Investment Market Companies: Determinants of Corporate Governance Disclosure”, Third Singapore International Conference on Finance.
National Stock Exchange, “Risk Management of Securities Lending and Borrowing Scheme.” Available from: http://www.nseindia.com/products/content/equities/slbs/risk_management.htm [Accessed 9 August 2012]
NSE - National Stock Exchange of India Ltd. Available from: http://www.nse-india.com/ [Accessed 7 August 2012]
Singh, T. (2012) An Analysis of Exchange Platform for Small and Medium Enterprises in India, NSE WORKING PAPER, WP/5/2012
Suvanam, G. K. and Jalan, M. (2012) Developing the Securities Lending and Borrowing Market in India, NSE WORKING PAPER, W P/7/2012…...

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