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International Journal of Management (IJM)
Volume 9, Issue 2, March–April 2018, pp. 43–55, Article ID: IJM_09_02_005
Available online at
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ISSN Print: 0976-6502 and ISSN Online: 0976-6510
© IAEME Publication
PERFORMANCE OF SELECTED STOCKS IN
OLD GENERATION PRIVATE SECTOR BANKS
IN INDIA
Dr. Nalla Bala Kalyan
Assistant Professor, Department of Management Studies
Sri Venkateswara College of Engineering, Tirupati, India
Dr. S. Gautami
Associate Professor, Department of Management Studies,
Sri Venkateswara College of Engineering, Tirupati, India
ABSTRACT
A stock market or equity market is a public entity for the trading of company stock
(shares) and derivatives at an agreed price; these are securities listed on a stock
exchange as well as those only traded privately. The present study is deliberate to
examine the recital selected Stocks in Old Generation Private Sector Banks in India.
The banking sector plays a magnificent role in an economy for the smooth as well as
efficient functioning of the different activities of the society. The role of banks in
promoting the economic and social welfare for the betterment and advancement of the
life of the community is well recognized while the Indian economy is yet to strengthen
the Indian banking system continuously to deal with improvement in asset quality,
execution of sensible risk management practices and capital adequacy.
Key words: India, Old Generation, Performance, Private Sector Banks, Stocks.
Cite this Article: Dr. Nalla Bala Kalyan and Dr. S. Gautami, Performance of Selected
Stocks in Old Generation Private Sector Banks in India. International Journal of
Management, 9 (2), 2018, pp. 43–55.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=9&IType=2
1. INTRODUCTION
The Indian banking industry is one of the oldest trading industries that have been around even
before the establishment of BSE in 1875. BSE is the oldest stock market in India. The history
of India stock trading starts with 318 persons taking membership in Native share and Stock
Brokers Association which we know by the name Bombay Stock Exchange or BSE in short.
In 1965, BSE got permanent recognition from the Government of India. BSE and NSE
represent themselves as synonyms of India stock market. The history of India stock market is
almost the same as the history of BSE. A stock exchange provides services for stock brokers
and traders to trade stocks, bonds and other securities. Stock exchanges also provide facilities
Dr. Nalla Bala Kalyan and Dr. S. Gautami
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for issue and redemption of securities and other financial instruments and capital events
including the payment of income and dividends. Securities traded on stock exchange include
shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.
The old private sector banks were those banks which were working in the private sector
before the great depression. The old private sector banks have been operating for a long time
and may be referred to those banks, which are in operation from before 1991. These banks are
more than 50 years old. The banks, which were not nationalized at the time of bank
nationalization that took place during 1969 and 1980, are known to be the old private sector
banks.
2. NEED FOR THE STUDY
In the investment market, it is necessary to find out every aspect of the business due to
competitions, particularly, in evaluating and determination of investment decisions. The
investment decisions play a crucial part for an investor, the selection (or) choosing the best
alternative of investment decisions depends on the performance of the company itself and in
the market place.
3. SCOPE OF THE STUDY
The present study and analysis evaluates the financial performance of selected equity stocks
in old generation private sector banks for the period of past 5 years (2012-2017) and five
banks only. From which the investors can come to know whether to invest or not to invest in
old generation private sector banks Equities.
4. OBJECTIVES OF THE STUDY
To evaluate risk and return of selected stocks of old generation private sector banks.
To examine return selected stock through sharpe and Treynor ratios.
To compare performance of selected stocks with bench mark.
5. LIMITATIONS OF THE STUDY
Only past performance of the companies is analyzed and it is not the perfect measure to expect
the future performances.
The study is limited to five selected old generation private sector banks equities only.
The study is conducted in limited time period only and in-depth and broad study is not
possible for given period of time.
6. DATA ANALYSIS & INTERPRETATION
Table 1 Selected Banks for Performance Evaluation
SL.NO
BANK NAME
1
Karnataka Bank
2
Karur Vysya Bank
3
Dhanlaxmi Bank
4
City Union Bank
5
Lakshmi Vilas Bank
Performance of Selected Stocks in Old Generation Private Sector Banks in India
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7.1. Calculation of Returns of Karnataka Bank
Table 2
Year
Opening price(Rs)
Closing price (Rs)
2012-13
96
130.75
2013-14
134
117.25
2014-15
116.30
124.65
2015-16
127.95
102.65
2016-17
104.65
140.70
Return= (Closing price- Beginning Price)*100
Beginning Price
Return (2012-2013) = (130.75-96)*100 = 36.19%
96
Return (2013-2014) = (117.25-134)*100 = -12.5%
134
Return (2014-2015) = (124.65-116.30)*100 = 7.17%
116.30
Return (2015-2016) = (102.65-127.95)*100 = -19.77%
127.95
Return (2016-2017) = (140.70-104.65)*100 = 34.44%
104.65
Calculation of Average Rate of Return
=
=
= 9.10
Calculation of Standard Deviation:
Standard deviation = √
=√ =23.15
Interpretation: The above calculation shows that 5 years Average Return of Karnataka Bank
Equity is 9.016 and standard Deviation is 23.15.
Table 3 Calculation of Beta
Year
Market Returns x
Returns y
x2
2012-13
6.86
36.19
47.06
2013-14
17.53
-12.5
307.30
2014-15
26.33
7.17
693.27
2015-16
-9.87
-19.77
97.42
2016-17
18.94
34.44
358.72
∑x=59.79
∑y=45.53
∑x2=1503.77
Beta (β) =
Dr. Nalla Bala Kalyan and Dr. S. Gautami
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=
=
= 0.66
Calculation of Risk Adjustment Return
Risk adjusted return =
=
=
= 1.96
Interpretation: The above calculation shows that the beta of Karnataka Bank is less than the
Bench Mark i.e., 0.66<1. The returns are greater than the Bench Mark for Five Years. The risk
adjusted return of SBI equity is 1.96.
Calculation of Sharpe Ratio
Sharpe ratio =
=
= 0.13
Calculation of Treynor‟s Ratio: Treynor ratio =
=
= 4.53%
Interpretation: The above calculation shows that Sharpe and treynor ratio of Karnataka Bank
Equity is 0.13 and 4.53.
7.2. Calculation of Returns of Karur vysya bank
Table 4
Year
Opening Price(Rs)
Closing Price(Rs)
2012-13
376.10
450.40
2013-14
454.20
375.30
2014-15
367.95
543.90
2015-16
545
436.80
2016-17
442.50
112
Return= (Ending price- Beginning Price)*100
Beginning Price
Return (2012-2013) = (450.40-376.10)*100 =19.75%
376.10
Return (2013-2014) = (375.30-454.20)*100 = -17.37%
454.20
Return (2014-2015) = (543.90-367.95)*100 = 47.81%
367.95
Return (2015-2016) = (436.80-545)*100 = -19.85%
545
Return (2016-2017) = (112-442.50)*100 = -74.68%
Performance of Selected Stocks in Old Generation Private Sector Banks in India
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442.50
Calculation of Average Rate of Return: =
=
= (-8.87)
Calculation of Standard Deviation: Standard deviation = √
= √ = 41.28
Interpretation: The above calculation shows that 5 years Average Return of Karur Vysya
Bank Equity is -8.87 and Standard Deviation is 41.28.
Table 5 Calculation of Beta
Year
Market Returns x
Return Y
X2
XY
2012-13
6.86
19.75
47.06
135.48
2013-14
17.53
-17.37
307.30
-304.49
2014-15
26.33
47.81
693.27
1258.83
2015-16
-9.87
-19.85
97.42
195.91
2016-17
18.94
-74.68
358.72
-1414.43
∑x=59.79
∑y=-44.34
∑x2=1503.77
∑xy=-128.7
Beta (β) =
=
=
β = 0.50
Calculation of Risk Adjustment Return
Risk adjustment return=
=
=
= -1.07
Interpretation: The above calculation shows that the Beta of Karur Vysya Bank is less
than the Bench Mark i.e., 0.50>1 the returns are less than the Bench Mark for Five Years. The
risk adjusted return is -1.70
Calculation of Sharpe‟s Ratio: Sharpe ratio =
=
= -0.36
Calculation of Treynor‟s Ratio: Treynor ratio=
=
= -29.96
Interpretation: The above calculation shows that Sharpe and treynor ratio of Karur Vysya
Bank Equity is -0.36 and -29.96.
7.3. Calculation of Returns of Dhanalaxmi Bank
Table 6
Year
Opining
Price(Rs)
Closing
Price(Rs)
2012-13
70.30
45.75
2013-14
48.55
36.05
2014-15
35.55
30.90
2015-16
31.75
19.60
2016-17
20.05
29.75
Return= (Ending price- Beginning Price)*100
Beginning Price
Return (2012-2013) = (45.75-70.30)*100 = -34.92%