BUSINESS RESEARCH DESIGN AND CONTROL

MINIPROJECT

SUBMITTED TO:
Prof. KISHORE.G
SUBMITTED BY:
KARTHIK.MG
Keyword: STOCK MARKET

AREA: RETURNS IN THE STOCK MARKET.

LITRATURE REVIEW:

As stock markets are always a mysterious in nature, I intend to check few facts about the
investment in the stock markets and the return on investments. 2009 turned out to be a year when
stock market minnows beat the big fish of Dalal Street, as mid-cap and small-cap shares
outperformed blue chips, setting the momentum for 2010. Although the stock market saw a
recovery across the board in the year, the stocks of companies with medium and small market
capitalizations shot up more significantly than the scrip’s with larger valuations. Analysts said
the smaller capitalization stocks do not need huge amounts of investments to rally and thus
managed to outperform their peers in the benchmark index Sensex in the year.
According to an analysis of the performance of mid-cap and small cap indices on the Bombay
Stock Exchange, the small-cap index has given a return of as much as 115 per cent, while the
mid-cap index has gained nearly 100 per cent so far in 2009. In comparison to the performance
of its smaller peers, the 30-share bellwether index, Sensex, gave a return of 75.3 per cent to
investors. The mid-cap and small cap indices track the performance of companies with market
capitalizations that are a fifth or tenth of that of blue chip firms. "The rally in the mid-cap and
small-cap has been stronger than that of the large cap index of Sensex. Mid-cap and small-cap
indices comprise stocks require relatively smaller investment as they are available at cheap rates
in the market.”

In terms of investor wealth, mid-cap index companies saw their combined valuations surging by
about Rs 4,64,034 Crore, while the gains of small-cap firms have been at about Rs 1,71,223
Crore for 2009.

While, Sensex companies have gained about Rs 1,101,535 Crore due to the surge in the overall
market. The total market capitalisation of the Sensex stands at nearly Rs 25,37,601 Crore till
December 18, 2009. Looking at the next year, analysts felt that same trend to continue on the
back of robust growth performance of the corporate sector and huge FIIs buying in the domestic
markets.

The valuation gap between the mid-cap, small-cap companies and large-cap was significant. The
improvement in the economic conditions and hence corporate performance, made the small and
mid-cap asset class an attractive bet, thus aiding them to outperform the large caps.

Moreover, the mid-cap and small-cap stocks also became sweet investments spots for the
Foreign Institutional Investors (FIIs), which returned back to Indian markets this year.
FIIs have made a net investment of about USD 16.8 billion (nearly Rs 80,637 Crore) during the
year till date in the Indian stock markets. Over a long period of time the mid-cap and small-cap
indices outperform the large caps. Thus, the mid-cap and small-cap stocks would continue to be
on the radar of the FII investors.

Mid-cap funds are funds which invest in small- or medium-sized companies. Constant research is
undertaken to find and evaluate such potential companies. Hence, these schemes present
investment opportunities in mid-cap companies which are yet to be identified by the markets. In
the long run, such companies offer higher growth potential and therefore an opportunity to
benefit from higher-than-average returns.

Large numbers of investors prefer investing in mid-cap funds as they have greater potential to
generate higher returns albeit at higher risks. The recent scenario suggests that mid-cap stocks
tend to drive the markets. During the last 20 months the BSE Mid-cap and CNX Mid-cap have
done significantly well by delivering 175% and 173% absolute returns, respectively. Both these
indices have outpaced Sensex and Nifty by considerable margins.

FACTS:

1. Thousands of million rupees of volumes are traded daily in the stock markets.
2. The risk and return on investment are high in the derivatives.
3. Among the equities and derivatives what is the most affecting factor for the increased
volatility in the markets?
4. The credit rating agencies rated scrip attracts huge FII inflows.
5. The large cap companies are stable and generate stable returns.
6. The mid cap companies gives higher returns than large cap companies.
7. Is the belief true that the mid cap companies doesn’t state the cash inflows and
outflows properly?
8. Are the mid cap companies are more volatile than large cap companies?
9. What is the performance of midcap companies compared to nifty index?
10. Investor’s perception towards mid cap sector companies.
11. Even the sector wise, are the midcap companies outperforming the large cap
companies.
12. Are the medium capitals companies are growing in the faster pace than large caps?
13. Is the excess returns earned by midcap than large caps is the symptom of markets
inefficiency?
14. Midcap companies attract both institutional and individual investors as they are
valued low.
15. Is high movement in midcap stocks is because of insider trading?
HYPOTHESIS:

There is a significant level of outperformance of midcap stocks over large cap stocks.

OBJECTIVES:

1. To do an in depth analysis of midcap stocks and large cap stocks.

2. To study the financial performance of the companies over a period of time.
3. To examine whether the stocks are undervalued or fairly valued.
4. To measure and compare the percentage returns generated by midcap over large cap.
5. To know the risk involved with midcap stocks (volatility).

TYPE OF RESEARCH:

This is purely a quantitative research method, as the topic I have taken is to describe the
phenomenon of the midcap stocks, I would prefer to go with descriptive approach as the type
of research. So that, I will have the feasibility to do my research on the out-performance of
midcap stocks.

RESEARCH DESIGN:

The research design for this research is comparative research design, where my job is to
compare the return on investments on the stocks invested in large cap and midcap stocks.

SAMPLING:

There are two methods of sampling – Probability and Non-probability method of sampling.
Probability sampling is one where the elements of the population have an equal chance of being
picked up to be included in the sample, whereas non-probability sampling is one where the
elements in the population have an unequal chance to be included in the sample.

Probability sampling is the type of sampling best suits for this research and under this I’m
taking simple systematic random sampling as the sampling technique.

The universal sample is the whole 7700 BSE listed stocks, and the sample would be random
selection of 50 large caps and 50 midcap stocks among all the listed stocks.

SECONDARY DATA:

Company Name,
1. Ackruti City Ltd.,
2. Adani Power Ltd.,
3. Aditya Birla Nuvo Ltd.,
4. Allahabad Bank,
5. Amtek Auto Ltd.,
6. Anant Raj Industries Ltd.,
7. Andhra Bank,BANKS,
8. Apollo Hospitals Enterprises Ltd.,
9. Areva T&D India Ltd.,ELECTRICAL EQUIPMENT,
10. Ashok Leyland Ltd.,
11. Asian Paints Ltd.,
12. Aurobindo Pharma Ltd.,
13. Aventis Pharma Ltd.,
14. BEML Ltd.,
15. Bajaj Hindusthan Ltd.,
16. Balrampur Chini Mills Ltd.,
17. Bank of Maharashtra.,
18. Bharat Forge Ltd.,
19. Biocon Ltd.,
20. Britannia Industries Ltd.,
21. CESC Ltd.,
22. Cadila Healthcare Ltd.,
23. Century Textile & Industries Ltd.,
24. Chennai Petroleum Corporation Ltd.,
25. Colgate Palmolive (India) Ltd.,
26. Corporation Bank,
27. Crompton Greaves Ltd.,
28. Cummins India Ltd.,
29. Deccan Chronicle Holdings Ltd.,
30. Divi's Laboratories Ltd.,
31. EIH Ltd.,
32. Educomp Solutions Ltd.,
33. Engineers India Ltd.,
34. Exide Industries Ltd.,
35. GVK Power & Infrastructures Ltd.,
36. Gillette India Ltd.,
37. GlaxoSmithkline Consumer Healthcare Ltd.,
38. Glenmark Pharmaceuticals Ltd.,
39. Godrej Consumer Products Ltd.,
40. Godrej Industries Ltd.,
41. Great Eastern Shipping Co. Ltd.,
42. HCL Infosystems Ltd.,
43. HMT Ltd.,
44. HT Media Ltd.,
45. Hindustan Petroleum Corporation Ltd.,
46. Housing Development and Infrastructure Ltd.,
47. IDBI Bank Ltd.,
48. IFCI Ltd.,
49. ING Vysya Bank Ltd.,
50. IRB Infrastructure Developers Ltd.,
51. IVRCL Infrastructures & Projects Ltd.,
52. India Cements Ltd.,
53. Indiabulls Real Estate Ltd.,
54. Indian Bank,
55. Indian Hotels Co. Ltd.,
56. Indian Overseas Bank ,
57. Indraprastha Gas Ltd.,
58. Jammu & Kashmir Bank Ltd.,
59. Jet Airways (India) Ltd.,
60. Jindal Saw Ltd.,
61. KSK Energy Ventures Ltd,
62. Kansai Nerolac Paints Ltd.,
63. LIC Housing Finance Ltd.,
64. Lanco Infratech Ltd.,
65. Lupin Ltd.,
66. Madras Cements Ltd.,
67. Mahanagar Telephone Nigam Ltd.,
68. Marico Ltd.,
69. Max India Ltd.,
70. Motherson Sumi Systems Ltd.,
71. MphasiS Ltd.,
72. Nirma Ltd.,
73. oriental Bank of Commerce,
74. Patni Computer Systems Ltd.
75. Petronet LNG Ltd.,
76. Pfizer Ltd.,
77. Piramal Healthcare Ltd.,
78. Procter & Gamble Hygiene & Health Care Ltd.,
79. Punj Lloyd Ltd.,
80. rashtriya Chemicals & Fertilizers Ltd.,
81. Shipping Corporation of India Ltd.,
82. Shree Cement Ltd.,
83. Shriram Transport Finance Co. Ltd.,
84. Sterling Biotech Ltd,
85. Sun TV Network Ltd.,
86. Syndicate Bank,
87. Tata Chemicals Ltd.,
88. Tata Global Beverages Ltd.,
89. Tech Mahindra Ltd.,
90. Thermax Ltd.,
91. titan Industries Ltd.,
92. Torrent Power Ltd.,
93. UCO Bank,BANKS,
94. UltraTech Cement Ltd.,
95. Union Bank of India,
96. United Phosphorus Ltd.,
97. Vijaya Bank,BANKS,
98. welspun Corp Ltd.,
99. Yes Bank Ltd.,