Risk-Return Analysis on NIFTY50 Stocks Assignment

Assignment Task

1. Select Any 10 stocks (each from Different Industry) from NSE “NIFTY50” List (As given in Annexure 1).
2. Download their prices (NSE DATA only) from 1^st January, 2022 to 31^st December, 2022. Save each company data in a separate Excel Worksheet and Label each sheet as [”Sr.No.” “Company Name”]. For example, if you select Reliance Industries Ltd. as the first stock, the sheet will be named as “1 RIL”. Thus, there will be 10 work sheets with company data. Also download NIFTY50 data for the corresponding period and put it in sheet labelled as “11 NIFTY50”.
3. From the price data sheets downloaded above, use only the adjusted closing price of the day. Perform data normalization (edit data for price changes due to issue of bonus share and/or share split besides taking care of missing dates).

Show in a single EXCEL worksheet “12 Master Data”: all the Dates (1^st Column), 10 selected Stocks prices (Column 2 to 11) and NIFTY50 Values (Column 12).

4. Now, do the following computations – Label it as “13 RRB COMP” Sheet: 

• Risk-Return: Calculate for each one of the 10 individual stock and the NIFTY50 (These computations can be performed in the individual stock or NIFTY50 excel sheets): Expected Return (using log normal returns) and Risk (Look up your book / material / web for how to calculate them).
• Compile all the 11 risks and returns (stocks and NIFTY50) data in a single table [TABLE 1] in “13 RRB COMP” Sheet. Interpret the results in your own words.
• Beta Computation: Calculate Beta of each of the individual 10 stocks w.r.t. the Market Index (NIFTY50) [The Beta of the reference market index is always taken as 1]. Tabulate the 10 Betas and sort them in decreasing order [TABLE 2]. Divide the list in two parts with first 5 as “High Betas” [TABLE 3] and next 5 as “Low Betas” [TABLE 4] and Comment on your results. All the 4 tables are put in “13 RRB COMP”

5. Beta Low & High Portfolio Analysis:

• Beta-H Sheet and Beta-L Sheet: Next, Form two portfolios based on 5 high and 5 low beta stocks. Call them “Portfolio Beta-H” and “Portfolio Beta-L”. Adopt equal weightage (1/5) for computing the portfolio Risk and Return for “Portfolio Beta-H” and “Portfolio Beta-L” [Use Separate EXCEL Sheets for each Portfolio computation as “14 Port.B.H” and “15 Port.B.L”]. Compare the risk and return profiles of these two portfolios and state your interpretation.

• Superior-P Sheet: Finally, answer, which of the two portfolios was found to be superior and Why? Use Sharpe Ratio and Rf = 7% for your answer. Show your Answer and working in Excel Sheet – “16 Superior-P”!

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