Market and Sector wise Analysis Along with NIFTY Trends

Factors Influencing Investors’ Decision

Taking decision of investment is complex, many factors need to be analysed. Decision making is driven by three factors- Personal, Technical and Behavioural (Jagongo and Mutswenje, 2014, Chandra, 2008). Personal factors include age, income, education etc. Each investor differs from other so it is not appropriate to make an investment on other investment decision (Chandra, 2008). In short, one investment decision may not be fruitful for the other based on personal factors. Behavioural factor includes greed, emotion, fear, ambition and many more. Behavioural factor influences the price of the asset which can move the price in any direction (Jagongo and Mutswenje, 2014). In a case of some rumour or other factor, investor sentiment can drive the price of the asset, such changes can be temporary or last longer depending on the factors such as market situation, the extent at which the rumour comes true and many more. Technical factor includes the analysis of market which is subdivided into technical analysis and fundamental analysis. Both are used together in order to make an investment where technical analysis provides information about when to buy whereas later inform about what to buy.

The appetite of risk is among one of the factors that influence the investor decision. On the risk appetite, investors are classified as- Risk tolerant investor and risk averse investors (www.investopedia.com, 2009). Risk-tolerant investors have a large appetite of risk as compared to risk averse. The main objective of risk tolerant is to earn more profit and of averse is capital prevention.

Apart from these, there are other factors which affect the investor decision are (www.economicshelp.com, 2009)

  • Economic Growth- It is one of the most important parameters for the investor for taking a decision on investment. Higher the growth more the profitability of the firm, more the dividend so higher the share price.
  • Interest rate- Lower the interest rate lesser the saving and more the investment. It also boost economic growth and makes a firm more profitable.
  • Market Stability- Investor does not appreciate volatility in the market they need more convenient when the market is stable without any large fluctuation.
  • Risks- It is subdivided into two categories, Systematic risk or market risk and Unsystematic risk or specific risk.
  • Availability of choices- Investors have a choice to invest in the different market if investors feel that one market is overvalued then they can invest in another market.

 

The factors discussed above effect the investor decision in a broad way. The growth of any sector or company depends upon the growth of an economy, if an economy is growing sector and organisation will also grow simultaneously. Growing economy will lead to extra disposable income with the people. Accordingly, their expenses increases and growth of sector and organisation happens.

Interest rates play a vital role while taking a decision regarding investment, if the interest rate is high investor will put their saving with banks and earn interest with no risk involved. But, when the interest rate is low the interest earned from the investor will be low and hence they will opt for the different option with higher return and will look for the investment in stock market. Apart from this, the firm will get a loan at a lower rate, can help them to expand and can have higher growth.

Market stability is one of the major concerns for the investors. More stable the market, more comfortable is the investor. Any correction due to volatility in the stock market can erode the capital of the investor and investor can make heavy loss. So, for safe and sound investment, market need to be stable. As one knows that with every investment there is always involvement of risk, the risk may be a market risk which happens due to volatility in the market, market risk can be minimised with the diversification of stock. The other type of risk is a specific risk which is always with the stock and cannot be minimised and every investor has to carry with investment. If one knows that there are different choices of investments available with the investors, one can put money in bank fixed deposit, one can go for bonds and debenture, for short period one can go for money market, investors have the option to invest in commodity market as well as in the equity market depending upon the risk appetite and expected return for investor.

Objective

  • To measure the effect of change in sector performance by change in CNX NIFTY
  • To compare the risk of a different sector with respect to the market.
  • To compare the return received from market, different sector and Bank Fixed Deposits
  • To compare which sector is more profitable with respect to CNX NIFTY.

Methods

Sample: Research has been conducted with secondary data so no sample is taken

Data collection method: Data are collected from the internet and different research work

Data source and its credibility: Historical data were collected from NSE website which is maintained by National Stock Exchange. Apart from this, data were also collected from journals and magazine which support the research.

Data analysis method: Data were collected for CNX NIFTY and other sectors and percentage change was measured, then volatility, advance-decline of nifty, return between the year 2010-15 was calculated which was again compared with bank fixed deposit. Yearly return of each sector has been calculated.


Results

Beta- A measure of Volatility

SECTOR BETA
CNX IT 0.64
CNX Pharma 0.48
CNX FMCG 0.18
CNX Auto 0.93
CNX Bank 1.32
CNX Energy 0.96

Table1.0 Beta value of sector
Fig 1.0 Representation of beta value of different sector

Beta is the measure of the volatility of securities with respect to the movement of the market. The beta value of 1 represents that the securities are moving along with market whereas greater than 1 denotes securities as more volatile and less than 1 represent less volatile. From Table 1.0 we can say that the Pharmaceuticals sector is most volatile. In other words, one can say that 1% movement in a market led to a movement of 1.32% in Bank sector. CNX Bank is followed by CNX Auto, CNX Pharmaceutical, CNX FMCG then CNX IT. CNX Energy has approximately zero beta value that mean any movement in a market has no effect in the Energy sector. One can say that the CNX FMCG have less effect on the volatility of market whereas CNX Bank has more effect on the volatility of the market.

ADVANCE- DECLINE of Sectors In comparison with CNX Nifty

CNX Advance Decline
CNX NIFTY 651 591
CNX IT 647 595
CNX PHARMA 675 567
CNX FMCG 686 556
CNX AUTO 675 567
CNX BANK 647 595
CNX ENERGY 621 621

Table.2.0 Advance decline table

 

Fig. 2.0 Advance decline Chart

The advance decline shows that how the market and sectors have performed over the five years, the number of time market as well as sector went through correction and even perform better than the previous day. Advance means that the Market, as well as the sector, had performed better than the previous day. The decline means that market performed poorly than the previous day. In other words, there is the correction in the market. Advance decline chart helps investor to understand which sector had outperformed the market and which sector have underperformed the market. One can see that CNX Pharma, CNX FMCG, CNX AUTO have outperformed the market as the number of the time these sector advance is more than that of the market, whereas CNX IT, CNX BANK, CNX ENERGY had underperformed with respect to market as they had gone for correction more number of time than a market.

 

Percentage Return from NIFTY, Different sector and Bank Fixed Deposit

 

PERCENTAGE  RETURN
CNX NIFTY 50%
CNX IT 75%
CNX PHARMA 112%
CNX FMCG 75%
CNX AUTO 99%
CNX BANK 87%
CNX ENERGY 0%
BANK FD 50%

Table 3.0 Percentage return from market, sectors, and Bank F.D over 5 year

 

 

Fig 3.0 Percentage return from market, sectors, and Bank F.D over 5 year

 

Comparison between the return from Night, Different Sectors and bank fixed deposit is done over the last 5 years. This will be helpful for the investor to compare where to invest money. One can observe that the Pharma sector has given the maximum return over the period. Return from Pharma sector over the last five-year had been 112% followed by Auto Sector (99%), then Bank (87%), return from FMCG and IT have been 75% over the period, Index and bank fixed deposit has the same return (50%). There had been no return from the Energy sector over five years of time. So, one can say that over the period Pharma sector had performed well and any investor should opt to invest on his choice by going through the return. Pharma sector had performed better over another sector, Nifty and return from a fixed deposit.

Yearly return from Nifty and different Sectors

YEAR 2010-11 2011-12 2012-13 2013-14 2014-15
CNX NIFTY 7.53% -5.02% 9.96% 27.28% 9.72%
CNX IT 10.04% -2.51% 9.96% 42.16% 12.15%
CNX PHARMA 12.55% 7.53% 27.39% 24.80% 36.45%
CNX FMCG 17.57% 20.08% 24.90% 2.48% 12.15%
CNX AUTO 7.53% 10.04% 14.94% 42.16% 21.87%
CNX BANK 20.08% -2.51% 12.45% 32.24% 19.44%
CNX ENERGY -10.04% -10.04% 7.47% 24.80% -9.72%

Table 4.0 yearly return from Nifty and different Sectors

 

Fig 4.0 Line diagram of yearly return from Nifty and different Sectors

Yearly return gives the idea of how the different sectors had performed over the years, one can see that there is increase in return of pharma sectors and FMCG in 2014-15 where all other sector return have reduced. Return the on Pharma sector have been relatively consistent apart from the hic-up of year 2011-12. FMCG sector had predominantly performed well over the year except in 2013-14 and started to show growth. Other sectors apart from pharmaceutical and IT return had reduced between years 2014-15. Most inconsistent sector over the period had been the Energy sector. The return from energy sector had predominantly on negative side apart from 2012 to 2014. Energy sector has been making loses in most of the time and the return is not significant to invest in it. Energy sector has performed poorly in comparison to Nifty which is benchmark of all sectors.

Conclusion

History has shown that the Stock market has given better return over the other form of return, but the lack of knowledge about the stock market is inhibiting people to invest in stock market. There is a dilemma among the investors with regard to what to invest and when to invest. The investor is required to take good decision on investing in order to reduce risk and maximise return. This paper will help investor to find the performance of different sector and return comparison over the sectors. Investor can find themselves in better position on where to put their money for better and safe return. Investor can also compare the return from fixed deposit with the return from the different sector. This paper can help investor to be more informed and take right decision of investment in order to channelize their saving and earn more. Different parameter such as volatile sector, Advance-Decline ratio discussed here gives a broad idea to an investor to judge which sector over performed against Nifty on daily growth. Return chart makes the investor to know the return from different sector with respect to bank fixed deposit and make them to take informed decision on the investment in the stock market. However, predictive models on this can help investors to take better-informed decisions.

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