Program & Batch: Term: Course Name: Name of the faculty: Topic/ Title : Original or Revised Write-up: INDIVIDUAL

Contact No. and email: Name and Roll No. of the Student

PGDM 2013-2015, Section D 3 CF Dr. A K Chauhan Risk and Beta calculation of Indian Oil Corporation Ltd. Original

Individual Assignment/ Section D +91-7840084200, ft13vipulkumarsingh1@imt.ac.in Sl. Roll No. Name 1 1301-442 Vipul Kumar Singh

Company Indian Oil Corporation Ltd.

Beta Calculation -: Calculating Return- Return is calculated by taking log of ratio of todays adjusted closing and previous adjusted closing. Return for company, Rc = log (todays adjusted closing/ previous adjusted closing) Return for market, Rm = log (todays adjusted closing/ previous adjusted closing) For calculating beta the regression has been done between past 1 year return of company stock and CNX Nifty stock. The regression equation is Rc = + * Rm The result of regression is as follows. SUMMARY OUTPUT Regression Statistics Multiple R 0.432691004 R Square 0.187221505 Adjusted R Square 0.183970391 Standard Error 0.019630655 Observations 252 ANOVA df Regression Residual Total 1 250 251 SS MS F 0.02219183 0.02219183 57.58687811 0.096340652 0.000385363 0.118532482 Standard Error Significance F 6.39289E-13

Intercept X Variable 1

Coefficients 0.001232994 0.839674908

P-value Lower 95% 0.001236921 0.996824545 0.319813524 0.003669108 0.110649488 7.588601855 6.39289E-13 0.621750926

t Stat

From Regression we get following results-: = 0.00123 = 0.83967 Thus Beta value for Indian Oil Corporation Ltd. Is 0.83967

Risk Calculation-: Standard Deviation of Rc, c = 0.021731 Standard Deviation of Rm, m = 0.011198 Variance of Rc, c2|Daily = 0.000472 Variance of Rc, m2|Daily = 0.000125 This variance is calculated on daily basis, while calculating the Total Risk we need to multiply by 252 to get the total risk for the year. Total Risk of company, c2 = 252* c2|Daily = 252*0.000472 = 0.1190 2 Total Risk of market, m = 252* m2|Daily = 252*0.000125 = 0.0316 Systematic Risk for company = 2 * m2 (Total Risk of market) = 0.839672 * 0.0316 = 0.0223 Unsystematic Risk for company = Total Risk Systematic Risk = 0.1190 - 0.0223 = 0.0967 Total Risk of company = 11.90% Systematic Risk for company = 2.23% Unsystematic Risk for company = 9.67%

Conclusion-: Indian Oil Corporation Beta is coming to be less than 1 thus the investment in its stock is less risky because if market goes down by 10% then company stock will go down by 8%. However the returns will also be less, when market goes up by 10% then company stock will go up by 8%. Moreover being a PSU total risk of the company is also less i.e. 11.90% and out of which the market risk is only 2.23% and internal risk is high i.e. 9.67%.