A project on Tata motors

PRESENTED BY:
AKSHAY KUMAR
MUKESH KUMAR
AUTOMOBILE INDUSTRY
The automotive industry designs, develops, manufactures, markets & sells
motor vehicles & is one of the Earths most important economic sectors by revenue
.
Indias automobile exports have grown consistently & reached $4.5 billion
in 2009, with United Kingdom being Indias largest export market followed by Italy
, Germany, Netherlands & South Africa.
According to New York Times, Indias strong engineering base & expertise i
n the manufacturing of low-cost fuel efficient cars has resulted in the expansio
n of manufacturing facilities of several automobile companies like Hyundai Motor
s, Nissan, Toyota, Suzuki.
INTRODUCTION ABOUT THE TATA MOTORS:
The company has the registered office in Mumbai and the activities of the compan
y are making commercial vehicles, automotive parts etc. The company is listed in
NSE and BSE both. The company has gone for the public issue in 1945 with a face
value of Rs 2. Presently the stock is trading at a price of Rs 212.80
Tata Motors Limited formerly TELCO is an Indian multinational Automotive
Corporation.
Tata Motors was ranked # 35 globally in Fortune Global 500 list in 2011.
Tata Motors is South Asias largest Automobile Company.
It is the leader in commercial vehicles & among the top three in passeng
er vehicles.
Type:
Traded as:
Industry:
Founded:
Founder:
Headquarter:
Products:

Public
NSE: TATA MOTORS
BSE: 500570
NYSE: TTM
Automobile
1945
Jamshedji Tata
Mumbai
Automobiles, commercial vehicles, Automotiv

e parts

Stock prices of
MONTH OPENING
JULY (2011)
AUGUST 190.80
SEPTEMBER
OCTOBER 154.30
NOVEMBER
DECEMBER
JAN (2012)
FEBRUARY
MARCH 269.75
APRIL 280.00
MAY
312.95
JUNE
235.00

Tata Motors (last 12 months):

STOCK CLOSING STOCK % MONTHLY RETURNS
201.20 189.48 -5.825
148.34 -22.254
150.20 156.10 3.928
198.45 28.613
195.30 172.45 -11.670
181.00 178.40 -1.436
182.00 243.60 33.846
244.80 270.80 10.621
275.70 2.206
316.75 13.125
233.20 -25.483
242.05 3.000

% monthly returns=

(((closing stockopening stock))/opening stock) x100

Total Monthly returns of Tata Motors

Average monthly return= (28.671)/12
Calculation of historical variance &
Y
Y bar (Y-Ybar)
(Y-Y
-5.825 2.389 -8.214 67.470
-22.254 2.389 -24.643 607.277
3.928 2.389 1.539 2.368
28.613 2.389 26.224 687.698
-11.670 2.389 -14.059 197.655
-1.436 2.389 -3.825 14.631
33.846 2.389 31.457 989.543
10.621 2.389 8.232 67.766
2.206 2.389 -0.183 0.034
13.125 2.389 10.736 115.262
-25.483 2.389 -27.872 776.848
3.000 2.389 0.611 0.373

=28.671%
= 2.389%
S.D:
bar)2

=
3526.925
Historical variance=

((y-y bar)^2)/(n-1) =

Standard Deviation= (320.630) =

(3526.925)/11= 320.630

17.906

Since Tata Motors is a part of Sensex, Sensex is the market.

STOCK OF SENSEX (MARKET) FOR LAST 12 MONTHS
MONTH OPENING STOCK CLOSING STOCK %MONTHLY RETURNS
JULY
18974.96
18197.20
-4.099
AUGUST 18352.23
16676.75
-9.129
SEPTEMBER
16963.67
16453.76
-3.006
OCTOBER 16255.97
17705.01
8.914
NOVEMBER
17540.55
16123.46
-8.079
DECEMBER
16555.93
15454.92
-6.650
JANUARY 15534.67
17193.55
10.679
FEBRUARY
17179.64
17752.68
3.336
MARCH 17714.62
17404.20
-1.752
APRIL 17429.96
17318.81
-0.638
MAY
17370.93
16218.53
-6.634
JUNE
16217.48
17429.98
7.477
=
-9.557
Average monthly Market returns= (-9.557)/12= -0.796%
Calculation of
X
X bar
-4.099 -0.796
-9.129 -0.796
-3.006 -0.796
8.914 -0.796
-8.079 -0.796
-6.650 -0.796
10.679 -0.796
3.336 -0.796
-1.752 -0.796
-0.638 -0.796
-6.634 -0.796
7.477 -0.796

historical variance & S.D for Sensex:

(X-Xbar)
(X-Xbar)^2
-3.303 10.910
-8.333 69.439
-2.210 4.884
9.710 94.284
-7.283 53.042
-5.854 34.269
11.475 131.676
4.132 17.073
-0.956 0.914
0.158 0.025
-5.838 34.082
8.273 68.443
=

519.041

Historical variance of Sensex= (519.041)/11 =47.186

Standard Deviation of Sensex =
6.869
Calculation for
(X-X bar)
-3.303 -8.214
-8.333 -24.643
-2.210 1.539
9.710 26.224
-7.283 -14.059
-5.854 -3.825
11.475 31.457
4.132 8.232
-0.956 -0.183
0.158 10.736
-5.838 -27.872
8.273 0.611

beta:
(Y-Y bar)
27.131
205.350
-3.401
254.635
102.392
22.392
360.969
34.015
0.175
1.696
162.717
5.055

(X-X bar)*(Y-Y bar)

=1173.126
= (Cov(stock,market))/(Market(variance))
Cov (stock, market)=((X-X bar)(Y-Y bar))/(n-1)=(1173.126)/11
=106.648
Market (variance)=47.186
Therefore =(106.648)/(47.186)= 2.26
Total Variance of the Stock=320.630
Systematic variance of the stock
= 2 *Market (variance)
=2.26x2.26x47.186
=241.007
Systematic risk of stock= 15.524
Unsystematic risk of stock= (17.906-15.524)
=2.382
Sharpes single index model:
X
Y
XY
X^2
-4.099 -5.825 23.877 16.802
-9.129 -22.254 203.157 83.339
-3.006 3.928 -11.808 9.036
8.914 28.613 255.056 79.459
-8.079 -11.670 94.282 65.270
-6.650 -1.436 9.549 44.223
10.679 33.846 361.441 114.041
3.336 10.621 35.432 11.129
-1.752 2.206 -3.865 3.070
-0.638 13.125 -8.374 0.407
-6.634 -25.483 169.054 44.010
7.477 3.000 22.431 55.906
X=-9.581
Y=28.671
XY=1150.232
X2=486.699
PART 2:
Portfolio returns=0.6x0.7%+0.4x2.389%
=0.42+0.9556
=1.3756%
TO FIND CORELATION COEFFICIENT:
X

xy

X^2

Y^2

0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
x=8.4

-5.825 -4.0775 0.49

33.93063
-22.254 -15.5778
0.49
495.2405
3.928 2.7496 0.49
15.42918
28.613 20.0291 0.49
818.7038
-11.670 -8.169 0.49
136.1889
-1.436 -1.0052 0.49
2.062096
33.846 23.6922 0.49
1145.552
10.621 7.4347 0.49
112.8056
2.206 1.5442 0.49
4.866436
13.125 9.1875 0.49
172.2656
-25.483 -17.8381
0.49
649.3833
3.000 2.1
0.49
9
y=28.671
xy=20.0697
x2=5.88

y2=3595.428

r= (nxy-xy)/(nx^2-(x)^2 )*1/(ny^2-(y)^2 )
=(12*20.0697-8.4*28.671)/(12*5.88-70.56)*1/(12*3595.428-822.026)
=(240.8364-240.8364)/(12*5.88-70.56)*1/(12*3595.428-822.026)
= 0
Covariance is given by:
Cov (x,y)= r* x* y
=0*0*17.906
=0
Now the Portfolio risk is given by
Prisk =(w1^2*1^2+ w2^2*2^2+2w1w2*cov(1,2))
=((0.6)^2*0+(0.4)^2*(17.906)^2+2*0.6*0.4*0)
=(0.16+320.62)
=(320.78)
= 17.91047
PART-3:
Let us take another company INDIAN OIL CORPORATION LIMITED
Stock prices of IOCL (last 12 months):
MONTH OPENING STOCK CLOSING STOCK % MONTHLY RETURNS
JULY
400
382.75 -4.3125
AUGUST 386
373.15 -3.3290155
SEPTEMBER
375
365.4 -2.56
OCTOBER 368.6 333.3 -9.576777
NOVEMBER
340
277
-18.529412
DECEMBER
282
251.7 -10.744681
JANUARY 255.5 294.65 15.322896
FEBRUARY
295.1 312.65 5.9471366
MARCH 313.7 303.2 -3.347147
APRIL 300
300.9 0.3
MAY
301
290.55 -3.4717608
JUNE
289
335.05 15.934256
Total Monthly returns of IOCL =-18.367%
Average monthly return= (-18.367)/12 = -1.53058%
Calculation of historical variance & S.D
Z
Z bar (Z-Zbar)
(Z-Zbar)^2
-4.3125 -1.53058
-2.78192
7.739058
-3.3290155
-1.53058
-1.79843
3.234357
-2.56 -1.53058
-1.02942
1.059698
-9.576777
-1.53058
-8.04619
64.74123
-18.529412
-1.53058
-16.9988
288.9602
-10.744681
-1.53058
-9.2141 84.89959
15.322896
-1.53058
16.85348
284.0398
5.9471366
-1.53058
7.47772 55.9163
-3.347147
-1.53058
-1.81656
3.299902
0.3
-1.53058
1.830584
3.351037

-3.4717608
15.934256

-1.53058
-1.53058

-1.94118
17.46484

3.768169
305.0206

Historical variance of IOCL= (1106.03)/11 =100.5482

Standard Deviation of IOCL =(100.5482) 10.027
Portfolio returns=0.7x2.389%+0.3x-1.53%
=1.6723-0.459
=1.2133%
TO FIND CORELATION COEFFICIENT:
Y
Z
YZ
X^2
Y^2
-5.825 -4.3125 -4.0775 0.49
33.93063
-22.254 -3.3290155
25.12031
33.93063
18.59766
3.928 -2.56 74.08391
495.2405
11.08234
28.613 -9.576777
-10.0557
15.42918
6.5536
-11.670 -18.529412
-274.02 818.7038
91.71466
-1.436 -10.744681
216.2382
136.1889
343.3391
33.846 15.322896
15.42936
2.062096
115.4482
10.621 5.9471366
518.6187
1145.552
234.7911
2.206 -3.347147
63.16454
112.8056
35.36843
13.125 0.3
-7.38381
4.866436
11.20339
-25.483 -3.4717608
3.9375 172.2656
0.09
3.000 15.934256
88.47088
649.3833
12.05312
Y=28.671
Z=-18.367
yZ=761.4064
Y2=3595.428
Z2=1134.142
r= (nxy-xy)/(nx^2-(x)^2 )*1/(ny^2-(y)^2 )
=(12*761.4064-28.671*(-18.367))/(12*3595.428-822.026)*1/(12*1134.142-337.3467)
=(9136.8768+526.6)/(43145.136-822.026)*1/(13609.704-337.3467)
=(9663.4768)/(205.73*115.057)
=(9663.4768)/(23670.6766)
=0.408
Covariance is given by:
Cov (x,y)= r* y* z
=0.408*17.906*10.027
=73.25
Now the Portfolio risk is given by
Prisk =(w1^2*1^2+ w2^2*2^2+2w1w2*cov(1,2))
=((0.7)^2*(17.906)^2+(0.3)^2*(10.027)^2+2*0.7*0.3*73.25)
=(0.49*320.62+0.09*100.54+30.765)
=(157.1+9.0486+30.765)
=(196.9136)
= 14.03