NIIT University

MBA Finance and Banking 2014-2016

COMPARATIVE STUDY OF RETURNS OF STOCK WITH SECTORAL INDEX,

MARKET INDEX and RISK FREE BOND
(Financial Instruments Project)

Submitted by
Name
Apoorva Sharma
Anoop Sharma
Adarsh Chhajed
Rushikesh
Chinderkar
Arpit Somani

Roll No
P301414CMG4
22
P301414CMG4
20
P301414CMG4
11
P301414CMG4
58
P301414CMG4
23

Contents
IT Industry overview................................................................................................... 3
Methodology............................................................................................................ 3
Market Representation............................................................................................ 3
NIFTY IT Performances............................................................................................. 4
Choice of Stocks...................................................................................................... 4
Descriptive Analysis................................................................................................... 5
Returns on all stocks and indices............................................................................6
Tata Consultancy Services....................................................................................... 7
Tech Mahindra....................................................................................................... 10
Wipro..................................................................................................................... 13
Infosys................................................................................................................... 16
HCL........................................................................................................................ 19
References................................................................................................................ 22

IT Industry overview
Information Technology (IT) industry has played a major role in the Indian economy
during the last few years. A number of large, profitable Indian companies today
belong to the IT sector and a great deal of investment interest is now focused on
the IT sector. In order to have a good benchmark of the Indian IT sector, IISL has
developed the Nifty IT sector index. Nifty IT provides investors and market
intermediaries with an appropriate benchmark that captures the performance of the
IT segment of the market.
Companies in this index are those that have more than 50% of their turnover from
IT related activities like IT Infrastructure, IT Education and Software Training,
Telecommunication Services and Networking Infrastructure, Software Development,
Hardware Manufacturers, Vending, Support and Maintenance.

Methodology

The Nifty IT index is computed using free float market capitalization method with a
base date of Jan 1, 1996 indexed to a base value of 1000 wherein the level of the
index reflects total free float market value of all the stocks in the index relative to a
particular base market capitalization value. The base value of the index was revised
from 1000 to 100 with effect from May 28, 2004. The method also takes into
account constituent changes in the index and importantly corporate actions such as
stock splits, rights, new issue of shares etc. without affecting the index value.

Effective May 29, 2015, the index is computed with 10 companies and weights of
each company in the index are capped at 25%. At the time of rebalancing of shares/
change in index constituents/ change in investable weight factors (IWFs), the
weightage of the index constituent (where applicable) is capped at 25%. Weightage
of such stock may increase beyond 25% between the rebalancing periods.

Market Representation
The Nifty IT Index represents about 11.96% of the free float market capitalization of
the stocks listed on NSE and 96.66% of the free float market capitalization of the
stocks forming part of the IT sector as on March 31, 2015.

The total traded value for the last six months ending March 2015 of all index
constituents is approximately 9.48% of the traded value of all stocks on the NSE and
90.10% of the traded value of the stocks forming part of the IT sector.

NIFTY IT Performances

Choice of Stocks
The constituents (stocks) have been chosen based on the weightage:
Company Name
Infosys Ltd.
Tata Consultancy Services Ltd.
HCL Technologies Ltd.
Wipro Ltd.
Tech Mahindra Ltd.

Weight (%)
24.77
24.2
16.81
12.83
11.37

Descriptive Analysis

Average Nifty IT
Average Nifty 50
Average G sec
Average TCS
Average Tech
Mahindra
Average Wipro
Average Infy
Average HCL

Daily
Annual
5 Years
-0.07%
-16.62%
-68.51%
-0.04%
-10.02%
-41.29%
0.01%
1.78%
7.34%
-0.08%
-20.08%
-82.77%
0.02%
-0.04%
0.08%
-0.07%

5.20%
-11.10%
19.70%
-18.01%

21.44%
-45.78%
81.23%
-74.27%

Returns on all stocks and indices

Tata Consultancy Services

t-Test: Paired Two Sample for Means

Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
Df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

Return TCS
0.0007966
4
0.0002496
13
1037
0.7362206
56

Return Nifty IT
-0.000659424
0.000175418
1037

0
1036
0.4086386
9
0.3414446
43
1.6463257
71
0.6828892
85
1.9622564
54

Null Hypothesis: the mean of returns of NIFTY IT and TCS are equal
We notice that the two sample mean values (volatility) are -0.00079664
(0.000249613) and -0.000659424 (0.000175418). The two tailed calculated tstatistic is -0.4086 and the highlighted p-value for this test is p= 0.6829. Since the
p-value is greater than 0.05, this provides evidence to accept the null hypothesis of
equal means. Thus the daily returns of both NIFTY IT and TCS are equal which
means whether we invest in NIFTY IT or TCS for a day the returns are same or
similar.

t-Test: Paired Two Sample for Means

Mean

Return TCS
0.0007966
4

Return Nifty
50
0.000397436
7

Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
Df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.0002496
13
1037
0.3605999
83

0.000109466
1037

0
1036
0.8300352
5
0.2033550
38
1.6463257
71
0.4067100
75
1.9622564
54

Null Hypothesis: the mean of returns of NIFTY 50 and TCS are equal
We notice that the two sample mean values (variance) are -0.00079664(0.0002496)
and -0.000397436 (0.000109466). The two tailed calculated t-statistic is -0.8300
and the highlighted p-value for this test is p= 0.4067. Since the p-value is greater
than 0.05, this provides evidence to accept the null hypothesis of equal means.
Thus the daily returns of both NIFTY 50 and TCS are equal which means whether we
invest in NIFTY 50 or TCS for a day the returns are same or similar.

Return TCS- Nifty 50

15.0000%
10.0000%
5.0000%

-5.0000%

f(x) = 0.55x
0.0000%
R = 0.13
0.0000%

5.0000%

10.0000%

-5.0000%
-10.0000%
-15.0000%

1. Slope which is also beta is +.5466 that shows that returns TCS is minutely
correlated to Nifty 50 returns.
2. Both are positively correlated that shows returns move in same direction.
t-Test: Paired Two Sample for Means

Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
Df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

Return TCS
0.0007966
4
0.0002496
13
1037
0.0349403
1

Return G sec
0.000071
0.000046
1037

0
1036
1.6053080
1
0.0543653
98
1.6463257
71
0.1087307
95
1.9622564
54

Null Hypothesis: the mean of returns of Return G Sec and TCS are equal
We Notice that the two sample mean values (variance) are -0.00079664(0.0002496)
and 0.000071 (0.000046). The two tailed calculated t-statistic is -1.6053 and
the highlighted p-value for this test is p= 0.1087. Since the p-value is greater than
0.05, this provides evidence to accept the null hypothesis of equal means. Thus the
daily returns of both G Sec and TCS are equal which means whether we invest in G
Sec or TCS for a day the returns are same or similar.

Return TCS- G sec

15.0000%
10.0000%
5.0000%
- 0.08x
-10.0000% f(x) =
-5.0000%
R = 0

0.0000%
0.0000%

5.0000%

10.0000%

-5.0000%

-10.0000%
-15.0000%

1. Slope which is also beta is -0.083 that shows that returns TCS is minutely
related to Nifty 50 returns.
2. Both are negatively correlated, for a portfolio if correlation is negatives
between the two choices its good and effective diversification.

10

Tech Mahindra
t-Test: Paired Two Sample for Means
Return Tech
Mahindra
Mean

0.000206351

Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
Df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.002255191
1037
0.017628697

Return G
sec
7.06471E05
4.56109E05
1037

0
1036
0.091329478
0.463624226
1.646325771
0.927248451
1.962256454

Null Hypothesis: the mean of returns of Return G Sec and Tech Mahindra are equal
We Notice that the two sample mean values (variance) are 0.0002065 (0.002255)
and 0.000071 (0.000046). The two tailed calculated t-statistic is 0.09134 and
the highlighted p-value for this test is p= 0.9272. Since the p-value is greater than
0.05, this provides evidence to accept the null hypothesis of equal means. Thus the
daily returns of both G Sec and Tech Mahindra are equal which means whether we
invest in G Sec or TCS for a day the returns are same or similar.

11

Return tech mahindra- G sec

160.0000%
140.0000%
120.0000%
100.0000%
80.0000%
60.0000%
40.0000%
20.0000%
0.0000%
0.12x
-10.0000% f(x) =
-5.0000%
0.0000%
-20.0000%
R = 0

5.0000%

10.0000%

1. Slope which is also beta is +.1243 that shows that returns Tech Mahindra is
minutely related to G sec returns.
2. Both are positively correlated that shows returns move in same direction.
t-Test: Paired Two Sample for Means
Return Tech
Mahindra
Mean

0.000206351

Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
Df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.002255191
1037
0.128829025

Return
Nifty 50
0.0003974
36
0.0001094
66
1037

0
1036
0.411126399
0.34053244
1.646325771
0.681064881
1.962256454

Null Hypothesis: the mean of returns of Return Nifty 50 and Tech Mahindra are equal
We Notice that the two sample mean values (variance) are 0.0002065 (0.002255)
and - 0.0003975 (0.0001095). The two tailed calculated t-statistic is 0.4111264 and
12

the highlighted p-value for this test is p= 0.681064. Since the p-value is greater
than 0.05, this provides evidence to accept the null hypothesis of equal means.
Thus the daily returns of both Nifty 50 and Tech Mahindra are equal which means
whether we invest in Nifty 50 or Tech Mahindra for a day the returns are same or
similar.

Return tech mahindra- Nifty 50

200.0000%
150.0000%
100.0000%
50.0000%
0.0000%
-5.0000% f(x) = 0.58x
0.0000%
R
=
0.02
-50.0000%

5.0000%

10.0000%

1. Slope which is also beta is +.5466 that shows that returns Tech Mahindra is
highly correlated to Nifty 50 returns.
2. Both are positively correlated that shows returns move in same direction.

t-Test: Paired Two Sample for Means

Return Tech
Mahindra
Mean

0.000206351

Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
Df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.002255191
1037
0.175575067

Return
Nifty IT
0.0006594
24
0.0001754
18
1037

0
1036
0.593093049
0.276624164
1.646325771
0.553248328
1.962256454
13

Null Hypothesis: the mean of returns of Return G Sec and Tech Mahindra are equal
We Notice that the two sample mean values (variance) are 0.000206351 (0.002255)
and -0.000659424 (0.000175418). The two tailed calculated t-statistic is
0.593093049 and the highlighted p-value for this test is p= 0.553248328. Since the
p-value is greater than 0.05, this provides evidence to accept the null hypothesis of
equal means. Thus the daily returns of both Nifty IT and Tech Mahindra are equal
which means whether we invest in Nifty IT or Tech Mahindra for a day the returns
are same or similar.

14

Wipro
t-Test: Paired Two Sample for Means
Return
Wipro
Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.0004405
8
0.0002787
32
1037
0.5978521
18

Return
Nifty IT
0.0006594
24
0.0001754
18
1037

0
1036
0.5115954
72
0.3045215
89
1.6463257
71
0.6090431
77
1.9622564
54

We Notice that the two sample mean values (variance) are -0.00044058
(0.000278732) and -0.000659424 (0.000175418). The two tailed calculated tstatistic is 0.511595472 and the highlighted p-value for this test is p= 0.609043177.
Since the p-value is greater than 0.05, this provides evidence to accept the null
hypothesis of equal means. Thus the daily returns of both Nifty IT and Wipro are
equal which means whether we invest in Nifty IT or Wipro for a day the returns are
same or similar.

t-Test: Paired Two Sample for Means

Return
Wipro
Mean
Variance

0.00044058
0.00027873

Return
Nifty 50
0.0003974
36
0.0001094
15

Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

2
1037
0.31588518
2

66
1037

0
1036
0.08335074
2
0.46679437
8
1.64632577
1
0.93358875
6
1.96225645
4

We Notice that the two sample mean values (variance) are -0.00044058
(0.000278732) and -0.000397436 (0.000109466). The two tailed calculated tstatistic is -0.083350742 and the highlighted p-value for this test is p=
0.933588756. Since the p-value is greater than 0.05, this provides evidence to
accept the null hypothesis of equal means. Thus the daily returns of both Nifty 50
and Wipro are equal which means whether we invest in Nifty 50 or Wipro for a day
the returns are same or similar.

Return Wipro- Nifty 50

15.0000%
10.0000%
5.0000%

-5.0000%

f(x) = 0.5x
0.0000%
R = 0.1
0.0000%

5.0000%

10.0000%

-5.0000%
-10.0000%

1. Slope which is also beta is 0.5049 that shows that returns Wipro is highly
correlated to Nifty 50 returns.
16

t-Test: Paired Two Sample for Means

Return
Wipro
Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.00044058
0.00027873
2
1037
0.00884919
8

Return G
sec
7.06471E05
4.56109E05
1037

0
1036
0.91694077
7
0.17969353
7
1.64632577
1
0.35938707
3
1.96225645
4

We Notice that the two sample mean values (variance) are -0.00044058
(0.000278732) and -7.06471E-05 (4.56109E-05). The two tailed calculated t-statistic
is -0.916940777 and the highlighted p-value for this test is p= 0.359387073. Since
the p-value is greater than 0.05, this provides evidence to accept the null
hypothesis of equal means. Thus the daily returns of both G-Sec and Wipro are
equal which means whether we invest in G-Sec or Wipro for a day the returns are
same or similar.

17

Return Wipro- G Sec

15.0000%
10.0000%
5.0000%

-10.0000% f(x) =
-5.0000%
0.02x
R = 0

0.0000%
0.0000%

5.0000%

10.0000%

-5.0000%
-10.0000%

1. Slope which is also beta is +.0212 that shows that returns TCS is minutely
correlated to G sec returns.
2. Both are positively correlated that shows returns move in same direction.

18

Infosys
t-Test: Paired Two Sample for
Means

Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

Return
Infy
0.0007817
84
0.0013056
46
1037
0.0276558
75

Return G
sec
7.06471E
-05
4.56109E
-05
1037

0
1036
0.6261141
16
0.2656890
06
1.6463257
71
0.5313780
12
1.9622564
54

We Notice that the two sample mean values (variance) are 0.000781784
(0.001305646) and 7.06471E-05 (4.56109E-05). The two tailed calculated t-statistic
is 0.626114116 and the highlighted p-value for this test is p= 0.531378012. Since
the p-value is greater than 0.05, this provides evidence to accept the null
hypothesis of equal means. Thus the daily returns of both G-Sec and Infosys are
equal which means whether we invest in G-Sec or Infosys for a day the returns are
same or similar.

19

Return Infy- G sec

80.0000%
70.0000%
60.0000%
50.0000%
40.0000%
30.0000%
20.0000%
10.0000%
0.0000%
0.15x
-10.0000% f(x) =
-5.0000%
0.0000%
-10.0000%
R = 0
-20.0000%

5.0000%

10.0000%

1. Slope which is also beta is +.1492 that shows that returns Infy is minutely
correlated to G sec returns.
2. Both are positively correlated that shows returns move in same direction.

t-Test: Paired Two Sample for

Means
Return
Infy
Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.000781
784
0.001305
646
1037
0.183918
934

Return
Nifty 50
0.000397
436
0.000109
466
1037

0
1036
1.063042
159
0.144005
278
1.646325
771
0.288010
555
1.962256
454
20

We Notice that the two sample mean values (variance) are 0.000781784
(0.001305646) and 0.000397436 (0.000109466). The two tailed calculated tstatistic is 1.063042159 and the highlighted p-value for this test is p= 0.288010555.
Since the p-value is greater than 0.05, this provides evidence to accept the null
hypothesis of equal means. Thus the daily returns of both Nifty 50 and Infosys are
equal which means whether we invest in Nifty 50 or Infosys for a day the returns are
same or similar.

Return Infy- Nifty 50

80.0000%
70.0000%
60.0000%
50.0000%
40.0000%
30.0000%
20.0000%
10.0000%
-5.0000%

f(x) =0.0000%
0.63x
0.0000%
R =
0.03
-10.0000%

5.0000%

10.0000%

-20.0000%

1. Slope which is also beta is 0.6314 that shows that returns Infy is highly
correlated to Nifty 50 returns.

t-Test: Paired Two Sample for

Means
Return
Infy
Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat

0.0007817
84
0.0013056
46
1037
0.4761838
97

Return
Nifty IT
0.0006594
24
0.0001754
18
1037

0
1036
1.4494179
21

P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

13
0.0737617
69
1.6463257
71
0.1475235
38
1.9622564
54

We Notice that the two sample mean values (variance) are 0.000781784
(0.001305646) and 0.000659424 (0.000175418). The two tailed calculated tstatistic is 1.449417913 and the highlighted p-value for this test is p= 0.147523538.
Since the p-value is greater than 0.05, this provides evidence to accept the null
hypothesis of equal means. Thus the daily returns of both Nifty IT and Infosys are
equal which means whether we invest in Nifty IT or Infosys for a day the returns are
same or similar.

22

HCL
t-Test: Paired Two Sample for Means

Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

Return
HCL

Return
Nifty IT

0.0007148
16
0.0008487
65
1037
0.3834589
74

0.000659
42
0.000175
42
1037

0
1036
0.0660988
23
0.4736559
51
1.6463257
71
0.9473119
01
1.9622564
54

We Notice that the two sample mean values (variance) are 0.000714816
(0.000848765) and 0.00065942(0.00017542). The two tailed calculated t-statistic is
0.066098823 and the highlighted p-value for this test is p= 0.947311901. Since the
p-value is greater than 0.05, this provides evidence to accept the null hypothesis of
equal means. Thus the daily returns of both HCL and Nifty IT are equal which means
whether we invest in HCL or Nifty IT for a day the returns are same or similar.
t-Test: Paired Two Sample for
Means

Mean
Variance

Return
HCL

Return
Nifty 50

0.0007148
16
0.0008487
65

0.000397
44
0.000109
47
23

Observations

1037
0.2286749
48

Pearson Correlation
Hypothesized Mean
Difference
df

1037

0
1036
0.3571680
09
0.3605193
87
1.6463257
71
0.7210387
74
1.9622564
54

t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

We Notice that the two sample mean values (variance) are 0.000714816
(0.000848765) and -0.00039744 (0.00010947). The two tailed calculated t-statistic
is 0.357168009 and the highlighted p-value for this test is p= 0.721038774. Since
the p-value is greater than 0.05, this provides evidence to accept the null
hypothesis of equal means. Thus the daily returns of both HCL and Nifty 50 are
equal which means whether we invest in HCL or Nifty 50 for a day the returns are
same or similar.

Return HCL Nifty 50

80.0000%
70.0000%
60.0000%
50.0000%
40.0000%
30.0000%
20.0000%
10.0000%
-5.0000%

f(x) =0.0000%
0.64x
0.0000%
R =
0.05
-10.0000%

5.0000%

10.0000%

-20.0000%

1. Slope which is also beta is +.6384 that shows that returns HCL is minutely
correlated to Nifty 50 returns.
2. Both are positively correlated that shows returns move in same direction.

24

t-Test: Paired Two Sample for Means

Return
HCL
Mean
Variance
Observations
Pearson Correlation
Hypothesized Mean
Difference
df
t Stat
P(T<=t) one-tail
t Critical one-tail
P(T<=t) two-tail
t Critical two-tail

0.0007148
16
0.0008487
65
1037
0.0263278
91

Return
G sec
7.0647E
-05
4.5611E
-05
1037

0
1036
0.8507169
77
0.1975615
82
1.6463257
71
0.3951231
64
1.9622564
54

We Notice that the two sample mean values (variance) are 0.000714816
(0.000848765) and -7.0647E-05 (4.5611E-05). The two tailed calculated t-statistic is
0.850716977 and the highlighted p-value for this test is p= 0.395123164. Since the
p-value is greater than 0.05, this provides evidence to accept the null hypothesis of
equal means. Thus the daily returns of both HCL and G-Sec are equal which means
whether we invest in HCL or G-Sec for a day the returns are same or similar.

25

Return HCL G sec

80.0000%
70.0000%
60.0000%
50.0000%
40.0000%
30.0000%
20.0000%
10.0000%
0.0000%
0.11x
-10.0000% f(x) =
-5.0000%
0.0000%
-10.0000%
R = 0
-20.0000%

5.0000%

10.0000%

1. Slope which is also beta is +.1125 that shows that returns HCL is minutely
correlated to G sec returns.
2. Both are positively correlated that shows returns move in same direction.

References
1.
2.
3.
4.

http://www.nseindia.com/
http://in.investing.com/rates-bonds/india-10-year-bond-yield-historical-data
http://www.bloomberg.com/quote/GIND10YR:IND
https://www.statisticssolutions.com/manova-analysis-paired-sample-t-test/

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