Security Analysis of Fmcg Sector

Topics: Stock market, Stock, Investment Pages: 6 (1833 words) Published: August 17, 2010

In this era of high volatility in markets, investors look at several parameters before investing in stocks for example EPS, earning growth rate, debt/equity , p/e ratios. These parameters will no doubt help us to select the best companies but beta is one such parameter which can tell us about the returns with the volatility of a particular stock with respect to market. The concept of beta is actually very simple - it's a measure of individual stock risk relative to the overall stock market risk. Beta analysis can provide great insights into the movements of a particular stock relative to market movements Before investing in a company's stock, the beta analysis allows an investor to understand if the price of that security has been more or less volatile than the market itself. In our assignment we have worked on five companies ITC, Dabur,HUL, Nestle, and Britannia and calculated Rate of Return(%), Standard Deviation and Beta value. Result of calculation is below:- PERIOD RATE OF RETURN(%) HUL ITC DABUR BRITANNIA NESTLE NSE(STOCK) Boom period

Recovery(may 2009 onwards)*
Expected rate of return(%) 0.007 2.148 2.34 0.176 0.072 0.624
0.002 0.033 1.15 0.013 0 1.340

0.004 4.211 4.27 0.003 -0.127 1.82

0.013 6.392 7.76 0.0192 -0.055 3.784

Boom period


0.087 8.38 11.32 0.070 0.450 7.34
0.084 7.69 11.63 0.122 0 15.73

0.767 11.77 7.55 0.097 3.01 5.92

Boom period


0.628 0.596 0.55 0.459 -0.011

0.343 0.173 0.53 0.532 0

-0.103 0.607 0.017 0.154 -.02246

STOCK ANALYSIS IN BOOMING PERIOD(2002/2003-2008):- As India is a developing economy the country have seen a huge growth in economy during this period.Undoubtedly the FMCG sector also show growth due to global boom.The NSE stock also show the return of 0.624% with the risk factor of 7.34%. As we analyse that the during this six years of booming phase Dabur & ITC shows the highest rate of return i.e. 2.34 & 2.14 respectively with the risk factor of 11.32 & 8.38 respectively.If we analyse the data we can found that the expected rate of return for Dabur is 7.76%,which is maximum as comparison to all other securities present in the above portfolio. Dabur indicating though the risk is involved but with assured rates of returns though low justified by low beta value stating less volatility with the market that is expected returns does not vary much with change in risk factor this is evident by the fact that during this period Dabur announced issue of 1:1 Bonus share to the shareholders of the company, i.e. one share for every one share held. The Board also proposed an increase in the authorized share capital of the company from existing Rs50 crore to Rs 125 crore. Further Dabur rose up to $200 million from the international market through Bonds, FCCBs, GDR, ADR, QIPs or any other securities providing investors with more reliable ground to invest. ITC Ltd in 2003 divested...
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