CHAPTER: I

INTRODUCTION
Before 1990’s the main area of investment were bank deposits, gold, property and such other
forms of tangible assets but for the past few years we had been witnessing a lot of investment
opportunities coming up in the form of primary and secondary market since the globalization
which had its inception during 90’s foreign capital flowing to India .new multinational
entered the market and a lot of investment opportunities were opened to the people who kept
their saving in bank and other kind of fixed assets .

The topic analysis of risk and return in the banking, pharmaceutical, IT, oil & gas and
automobile had been selected because a lot of investors are making investment in the shares
of different companies. The investors have to be aware of the risk involved in making the
investment .so the investors have to calculate the variance and the beta value to know the
present condition of the Company to know whether there is any risk in investing in the
particular company and does the company offer good returns.
The companies which I have been selected for research having different growth strategies and
difference in revenue, profitability and market capitalization.

Overall, banking in India is considered as fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. Even in terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets-as compared
to other banks in comparable economies in its region. The Reserve Bank of India is an
autonomous body, with minimal pressure from the government. The Indian pharmaceutical is
one of the fast growing sector not only in India but also the whole world There are 74 U.S.
FDA-approved manufacturing facilities in India, more than in any other country outside the
U.S, and in 2008, almost 25% of all Abbreviated New Drug Applications (ANDA) to the
FDA are expected to be filed by Indian companies. Growths in other fields notwithstanding,
generics are still a large part of the picture. London research company Global Insight
estimates that India’s share of the global generics market will have risen from 4% to 35%
in 2006, over 20,000 registered drug manufacturers in India sold $15 billion worth of
formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of
the bulk drugs were exported, mostly to the United States and Russia. Most of the players in
the market are small-to-medium enterprises; 250 of the largest companies control 70% of the
Indian market. Thanks to the 1970 Patent Act, multinationals represent only 35% of the
market, down from 70% thirty years ago.

Indian oil and gas industry estimated to be a US$ 90 billion industry, the Indian oil and gas
industry is among the largest contributors to the central and state exchequers in India. Its
share approximates US$ 13.58 billion. Most of the country's 19 refineries, barring two, with a
capacity to process 148.97 million tonnes per year and are run by state-run companies.
The Indian software industry has grown from a mere US $ 150 million in 1991-92 to a
staggering US $ 5.7 billion (including over $4 billion worth of software exports) in 1999-
2000. No other Indian industry has performed so well against the global competition. Today,
India exports software and services to nearly 95 countries around the world. The share of
North America (U.S. & Canada) in India’s software exports is about 61 per cent. In 1999-
2000, more than a third of Fortune 500 companies outsourced their software requirements to
India.
The Indian automotive industry has flourished like never before in the recent years.
This extra-ordinary growth that the Indian automotive industry has witnessed is a result of a
two major factors namely, the improvement in the living standards of the middle class, and an
increase in their disposable incomes.
The data collected is mainly secondary in nature and no questionnaire has been
formulated for the research .the data(that is the stock price and S&P CNX Nifty index)has
been collected from various websites and has been analyzed and interpreted in order to find
out the spread of return with the help of standard deviation and beta.

BACKGROUND
A company ,which has a high intrinsic worth ,is not necessarily the best stock to buy .it may
have no growth prospects or it may be overpriced .similarly a company that performs well
during any one year may not be the best to buy .on the contrary ,a company which has been
badly for sometime might have turn the corner and it may be the best to buy ,as its shares
may be under prices and it has good prospects of growth hence an analysis of risk or return
guides an investor in proper profitable investment .