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Submitted by: Ayan Ghosh Ayush Agrawal Chetan Sabadra (10FN-031) (10FN-032) (10FN-034)
(10FN-036) (10FN-038)
Highlights........................................................................................................................................3 Market Representation.................................................................................................................3 Paindex Companies-....................................................................................................................4 Eligibility Criteria............................................................................................................................3 Liquidity......................................................................................................................................4 Market Capitalization..................................................................................................................4 Shares Outstanding......................................................................................................................4 Domicile......................................................................................................................................4 Eligible Securities........................................................................................................................4 Other Variables............................................................................................................................4 Methodology....................................................................................................................................5 Formula to Calculate Paindex......................................................................................................5 Adjustments.................................................................................................................................5 Performance of Paindex v/s Sensex.................................................................................................5 Conclusion.......................................................................................................................................6 Conclusion
Introduction
A wide range of paint companies are available in India. While some are foreign manufacturers, there are several ones which are truly Indian in content and style.
The Paindex is the index based on the Bombay Stock Exchange of India Ltd for the stocks of the companies from Paint Industry which are listed. The Paindex tracks the behaviour of a portfolio of Paints Industries largest and most liquid Indian securities. It includes 4 of the 6 companies listed on the BSE and is a true reflection of the Indian stock market.
Highlights
The Paindex is a 4 stock, market-capitalization-weighted index for Paint Industry in India. It can be used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. The Paindex is based on solid economic research and is created for those interested in investing and trading in equities related to Paints Industry
Market RepresentationThe Paindex stocks represent about 90% of the total Paint market capitalization of the Bombay Stock Exchange (BSE). Following are the companies listed on BSE: AKZO NOBEL (I) ASAHI SONGWON COLORS ASIAN PAINTS BERGER PAINT JENSON & NICHOLSON KANSAI NEROLAC
Eligibility Criteria
The table below gives us a snap-shot the financial strength and the market capitalization of the paint companies listed in the bourses:
Name of the Company FreeMarket Free-float Float Cap Factor Cap 3165 0.4 1266 31-122010 3837 30-092010 3652 30-062010 4394 31-122009 3027 30-092009 4184
Akzo Nobel Asahi Songwon Colors Asian Paints Berger Paints Jenson and Nicholson
48 15258 861 12
Kansai Nerolac
4851
0.35
1697
5886
4159
5361
5192
3392
The constituents and the criteria for the selection judge the effectiveness of the index. Selection of the index set is based on following four criterias:
Financial Results: For inclusion in the index, the scrip company should have positive net
worth for at least last 5 quarters. Jenson and Nicolson failed to clear this criterion.
Trading Interest: For inclusion in the index, the companies must have a minimum listing
record of 6 months on the Exchange. In addition these companies must have demonstrated high turnover and trading frequency. All the companies passed this criterion.
Market Capitalization - Companies eligible for inclusion in the Paindex must have a sixmonth average market capitalization of Rs 5 billion or more, during the latest six months. Two companies, namely, Asahi Songwon Colors and Jenson and Nicolson failed to clear this criterion.
Shares Outstanding - Companies eligible for inclusion in the Paindex should have at least
12% of its stock available to investors (float). For this purpose, float shall mean stocks which are not held by the promoters and associated entities (where identifiable) of such companies. All the companies passed this filter.
Domicile - The Company must be domiciled in India and trade on the BSE. All the companies
passed this filter.
Eligible Securities - All common shares listed on the BSE (which are of equity and not of a
fixed income nature) are eligible. Convertible stock, bonds, warrants, rights, and preferred stock that provide a guaranteed fixed return are not eligible. All the companies passed this filter.
Other Variables
A company which comes out with an IPO will be eligible for inclusion in the index, if it fulfils the normal eligibility criteria for the index -- impact cost, market capitalization and floating stock -- for a 3-month period instead of a 6-month period. None of the companies were listed in the last 6 months, so we did not make any adjustment for this criterion.
Paindex CompaniesFollowing are the four companies which represents Paindex based on below mentioned eligibity Criteria AKZO NOBEL (I) ASIAN PAINTS BERGER PAINT KANSAI NEROLAC
Methodology
Paindex is being calculated on a free-float market capitalization methodology on daily basis for last 5 years. Base date for Paindex is 3rd July 2006, and the base value considered is Rs 100. While calculating Paindex following factors were considered Price of the stock Number of Shares Free Float Factor
Based on above values Weighted Market cap for each company was calculated and aggregated to form Paindex
Adjustments
When the bonus shares were issued by the company, adjustments were made in the in the calculations. The ratio in which bonus shares were issued by the company, accordingly the price of the share and the numbers of shares of that particular company were adjusted. For Example: On 12th October 2006, Berger Paints issued bonus shares in the ratio of 3:5. Hence its price was adjusted from Rs 86.35 to Rs. 56.35 and the numbers of shares were increased from
199295290 to 318872464.
Conclusion
We have successfully created Paindex which represents the Paints Industry in India. The Paindex have been calculated based on the shares of companies which comes under Paints
Industry listed in Bombay Stock Exchange. Paindex was calculated on the free float market capitalization methodology. The comparison of Paindex v/s Sensex shows that Paints Industry has performed better than the ideal portfolio made by largest 30 companies by market capitalization from different sectors.