CIA 1(B)

SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

ASSET RISK AND RETURNS

by

MRIGANK MAULI
2128265

Under the Guidance of

PROF. NISHA SHANKAR

SCHOOL OF BUSINESS AND MANAGEMENT

CHRIST (DEEMED TO BE UNIVERSITY), BANGALORE
 INTRODUCTION

HDFC BANK LTD. (BSE – HDFCBANK)

HDFC Bank Limited is an Indian banking and financial services corporation with its
headquarters in Mumbai. As of April 2021, it is India's largest private sector bank by assets
and the world's tenth largest bank by market capitalization. It has a market capitalization of
$122.50 billion, making it the third largest firm on the Indian stock exchanges. With
approximately 120,000 people, it is India's tenth largest employer. It is listed in Bombay
Stock Exchange Ltd. (BSE), National Stock Exchange of India Ltd. (NSE), New York Stock
Exchange (NYSE).

GOLDMAN SACHS (NYSE – GS)

The Goldman Sachs Group, Inc. is a New York-based American global investment bank and
financial services firm. Investment banking (advisory for mergers and acquisitions and
restructuring), securities underwriting, asset management and investment management, and
prime brokerage are all services offered by Goldman Sachs. It trades credit products,
mortgage-backed securities, insurance-linked securities, securities, currencies, commodities,
equities, equity derivatives, structured products, options, and futures contracts as a market
maker and broker. It is a major player in the Treasury security market in the United States. Its
services include clearing and custodian banking. Goldman Sachs Personal Financial
Management provides wealth management services. It manages hedge funds, private equity
funds, credit and real estate funds, and private equity funds. It creates sophisticated, one-of-a-
kind financial products. It also owns Goldman Sachs Bank USA, a financial institution.

GOLD
Gold is the most popular precious metal for investment out of all the precious metals. Gold is
commonly purchased by investors as a means of risk diversification, particularly through the
use of futures contracts and derivatives. The gold market, like other markets, is vulnerable to
speculation and volatility. Gold has shown to be the most effective safe haven in a lot of
countries when compared to other precious metals used for investment.
DOW JONES INDUSTRIAL AVERAGE (DJIA)
The Dow Jones Industrial Average (DJIA) is a price-weighted stock market index comprised
of 30 well-known companies listed on US stock exchanges. Despite the fact that the DJIA is
one of the oldest and most widely watched equity indexes, many professionals believe it is an
inadequate representation of the total US stock market when compared to larger market
indices like the S&P 500 or Russell 2000 Index. The DJIA is a price-weighted index that
contains only 30 significant businesses, as opposed to later stock indices that include market
capitalization.

BSE SENSEX
The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or
simply SENSEX) is a market-weighted free-float stock market index comprised of 30 well-
established and financially solid companies listed on the Bombay Stock Exchange. The 30
component businesses, which include some of the largest and most actively traded stocks on
the stock exchange, are representative of the Indian economy's diverse industrial sectors. The
S&P BSE SENSEX, which has been published since January 1, 1986, is considered the pulse
of India's local stock markets. The SENSEX was given a base value of 100 on April 1, 1979,
and a base year of 1978–79. The BSE debuted DOLLEX-30, a dollar-linked equivalent of the
SENSEX, on July 25, 2001.

INDIA GOVERNMENT BOND

A government bond, sometimes known as a sovereign bond, is a debt obligation issued by the
government of a country to fund government spending. It usually entails a promise to pay
periodic interest, known as coupon payments, as well as a promise to refund the face value on
the maturity date. Bonds issued by the government can be denominated in either a foreign
currency or the government's own currency. Countries with less stable economies are more
likely to issue bonds in the currency of a more stable one. When governments with less stable
economies issue bonds, it's possible that they won't be able to pay the interest and will
default.
Panel C – COMPARISON TABLE

PERIOD COMPARISON COMMENTS

/COMPANY BETWEEN

Period 1 HDFC Bank Ltd. Share price of both HDFC Bank and Goldman Sachs increased by just
Vs Goldman Sachs double and mean which denotes return is also almost same for both the
companies. The overall mean return of HDFC bank (0.00684554) is
slightly better than Goldman Sachs (0.0061198).

The Standard Deviation (SD) indicates as a measure of risk. Goldman

Sachs (0.030) showed a higher risk as compared to HDFC bank (0.023)

Coefficient of Variance (CV) helps in understanding risk with respect to

return. The CV of HDFC bank is lesser than Goldman Sachs. Lower CV
means better risk/reward ratio.

In conclusion, The HDFC Bank provided better results than Goldman

Sachs during January 2012 to December 2016.

Period 1 HDFC Bank Ltd. Sensex showed more than 11,000 points during this period which is 71%
Vs Sensex increase in its value also HDFC Bank showed a prominent growth in its
share price.

Mean return of Sensex is 0.0033 and HDFC Bank is 0.0068 which means
HDFC Bank performed better than the market performed in that period.

HDFC Bank showed a higher SD than Sensex. So here we can say than
higher the risk, higher the profit.

In conclusion, HDFC Bank showed better performance than the market

during the period 2012-2016.

Period 1 Goldman Sachs Vs From 2012 to 2016, the value of Goldman Sachs increased by 63
Dow Jones percent. DJIA gained 7,541.41 points during the same period, it was a 62
Industrial Average percent increase, which was less than GS. GS delivered a mean return of
 (DJIA) 0.0061 while DJIA delivered a mean return of 0.0034.

The SD of GS is 0.006 whereas DJIA's was 0.013.

In conclusion, Goldman Sachs showed better performance than the

market during the period 2012-2016.

Period 1 Sensex vs Govt. The mean on a 10-year government bond was 7.994%, which is higher
Bond than the Sensex's 0.333% return.
The 10-year government bond standard deviation was 0.602, while the
Sensex's was 0.017. The Government bond showed a higher risk level.
In conclusion we can say that an investor who choose higher risk will get
higher returns.

Period 1 Sensex vs Gold Golds mean delivered a negative number as price fell by 21 % whereas
Sensex showed a positive return.
Gold showed a standard deviation of 0.01731, while the Sensex had a
standard deviation of 0.01767. Therefore, risk level of both Sensex and
Gold are same.
In conclusion we can say that investors would have got better returns if
they would have invested in Sensex as compared to gold with the same
level of risk.

Period 1 Govt Bond vs Gold Gold's mean returns was in negative but in that same period govt bonds
gave a return of 7.99.
Government bonds have a higher risk SD - 0.603 than gold SD - 0.017.

In conclusion we can say that government bonds are better options to

invest as compared to gold because bonds delivered a positive yield.

Period 2 HDFC Bank Ltd.  From Jan 2017 to Dec 2021 there was a slight increase in the share price
Vs Goldman Sachs of HDFC banks (1205 to 1479) whereas GS price also increased (242.7
to 382.5).

The overall mean return of Goldman Sachs (0.00216) is slightly better

than HDFC Bank (0.00099).

SD of Goldman Sachs (0.03) is less than HDFC bank (0.04), which

 means investing HDFC Bank delivers higher risk.

In conclusion, The Goldman Sachs provided better results than HDFC

Bank with less risk during January 2017 to December 2021.

Period 2 HDFC Bank Ltd.  In the second period Sensex increased 31,452 points which aggregated
Vs Sensex to 118% increase but HDFC Bank only showed increase by 22% which
means HDFC Bank underperformed as compared to the market.

HDFC Bank delivered mean return of 0.0009 whereas Sensex delivered

mean return of 0.0044 which means HDFC Bank is not able to deliver
returns as compared to Sensex.

HDFC Banks (0.04) risk degree is also higher than Sensex (0.02).

In conclusion we can say that HDFC Bank underperformed in the second

period whereas in the first period HDFC Bank did better than market.

Period 2 Goldman Sachs Vs  During second period DJIA increased by 83% whereas Goldman Sachs
Dow Jones share price only increased by 57% which means GS underperformed as
Industrial compared to DJIA index.

GS delivered a mean return of 0.0021 while DJIA delivered a mean

return of 0.0038. DJIA index gave a slightly better return than Goldman
Sachs.

SD of Goldman Sachs (0.0384) is also higher than DJIA index (0.0209)

which means Goldman Sachs delivers more risk than DJIA index.

In conclusion we can say that Goldman Sachs underperformed in the

second period as compared to DJIA index.

Period 2 Sensex vs Govt. Sensex 5 years holding period yield is 1.180 whereas government bonds
Bond HPY is in negative which is -0.0044.

SD of Govt. Bond is 0.653 which us more than the SD of Sensex, which

is 0.024, which means investing in government bonds has higher risk.
 In conclusion we can say that Sensex is a better investment as compared
to government bonds.

Period 2 Sensex vs Gold The price of gold surged by 48 percent during this time span, but the
Sensex increased by 118 percent, yielding higher gains. The Sensex had
a return of 0.00442, while gold had a return of 0.00271.

The standard deviation for gold was 0.016, which was lower than the
Sensex's 0.024, which means Sensex delivers more risk.

In conclusion we can say that Sensex is a better investment as compared

to gold.

Period 2 Govt Bond vs Gold The SD of gold (0.0157) was lower than that of a 10-year government
bond (0.6554), which means investing in government is riskier than gold.

Golds 5-year HPY is 1.3759 whereas bonds HPY is in negative which is

-0.004.

In conclusion we can say that Gold is a better investment as compared to

Govt. Bonds.

HDFC Bank Period 1 Vs Period  Mean of HDFC Bank in Period 1 is 0.0006 whereas in period 2 mean is
2 0.0009 which means HDFC Bank gave better return in the second
period.

SD of HDFC Bank is higher in the period 2 as compared to period 1

which is (0.02 to 0.04) which means in period 2 HDFC Bank delivers
higher risk compared to period 1.

In conclusion we can say that HDFC Bank is a better investment in

period 2 as compared to period 1.

Goldman Period 1 Vs Period Mean of Goldman Sachs in Period 1 is 0.00061 whereas in period 2
Sachs 2 mean is 0.0021 which means Goldman Sachs gave better return in the
second period.

SD of Goldman Sachs is slightly higher in the period 2 as compared to

period 1 which is (0.030 to 0.038) which means in period 2 Goldman
 Sachs delivers higher risk compared to period 1.

In conclusion we can say that Goldman Sachs is a better investment in

period 2 as compared to period 1.

Sensex Period 1 Vs Period  It has been very evident that BSE over the period of last decade have
2 shown exponential growth in terms of cap and investment making it the
one of the world’s most famous and iconic exchange. Over the last
decade it has grown roughly 43000 points.

The average of Mean in the 1st Period i.e., 0.003 and 0.004 was mean for
the 2nd Period. There was an uncertain rise in the SD by 0.007 due to
knowledge and curiosity of Demat account holder as the number of users
increased severely in Period 2 as compared to what it was in Period 1.

Govt. Bond Period 1 Vs Period As government bonds are considered to be the safest instrument, at the
2 same time Period 1 was slightly better than Period 2. From an average of
7.994 in the Period 1, there was slight decline in period 2. The same was
with the SD which methodically changed from 0.603 to 0.655 not giving
optimal results.

Gold Period 1 Vs Period Being considered as the safest option to invest after Government bond,
2 Gold has kept up its reputation even after being volatile as due to
availability of it in other markets as well. Mean returns in negative i.e.,
being -0.004 in the 1st Period, Gold made quite a recovery in the 2 nd
Period by going up by 0.003. However, the risk that was attached with
Gold did not alter substantially as the SD only increased by 0.01. Hence,
Gold gave good returns in the second half.

Dow Jones Period 1 Vs Period DJIA had identical performance as Sensex as mean returns which were
Industrial 2 in 1st Period being 0.003 to 0.004 in the 2 nd Half. Hence it was an all in
Average all increase in all the areas be at SD, CV.
(DJIA)