Volume 7 •
Number 5 • May 2013 |
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Size and Returns : A Study of the Indian Stock Market |
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Abstract:Indian Journal of Finance, Volume 7,
Number 5, pp. 5 – 13 |
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The Size effect is one of the prominent
anomalies which have been observed in the
stock markets around the world. The present
study attempts to find out if the portfolio of
small stocks yields higher returns vis-a-vis
the portfolio of large stocks and whether the
size effect is present in the Indian stock
market or not. The sample consists of the
monthly returns of the stocks included in the
S&P CNX 500 index from April 1, 2001 to March
31, 2010. Equal weighted portfolios of thirty
smallest and largest stocks were constructed
for each year for the entire period of the
study based on the criteria of total assets
and market capitalization. Using correlation
analysis, CNX Nifty Junior was finalized as
the market proxy, and the market model was
applied by using the variables of excess
returns on the portfolio of the stocks and the
returns on the market proxy. The results
indicate that the returns on the portfolio of
small stocks are not significantly different
from the returns on the portfolio of large
stocks. Therefore, based on the results, the
study concludes that the size effect is not
present in the Indian stock market. |
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Keywords: size effect, market
anomalies, small firm effect, market proxy,
capital asset pricing model
JEL Classification: G02, G14 |
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References |
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Holle, F. V., Annaert, J., Crombez, J., &
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Effects: Now You See It, Now You Don't.”
Retrieved from SSRN, http://papers.ssrn.com/sol3/papers.cfm?abstract_id
=302653 |
| 14 |
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“Bad News Travels Slowly: Size, Analysts,
and the Profitability of Momentum
Strategies.” Journal of Finance, 55 (1),
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Stock Returns: Evidence from India.”
Indian Journal of Finance, 5 (5), pp.
43-48. |
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Effect?” Indian Journal of Finance, 6 (3),
pp. pp.43-53. |
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L. (2012). “A Search for Rational Sources
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Sehgal S., & Muneesh, K. (2002). “The
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Finance, 8 (2), pp. 41-50. |
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Su, R., Dutta, A., Xu, M., & Ma, J.
(2011). “Financial Anomalies: Evidence
from Chinese A-Shares Markets.”
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Finance, 3 (2), pp. 76-88. |
| 34 |
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"Firm Size and Cyclical Variations in
Stock Returns." The Journal of Finance, 55
(3), pp.1229-1262. |
| 35 |
Xu, J. (2002). "The Size Effect of the
Stock Returns in the Chinese Market."
Working Paper, Peking University, China,
pp.1-16. |
| 36 |
Zadeh, A.A. (2010). “The Return of the
Size Anomaly: Evidence from the German
Stock Market.” European Financial
Management Journal, 17 (1), pp. 145-182. |
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Saroj S. Prasad
Assistant Professor
Prestige Institute of Management & Research
Indore, Madhya Pradesh.
chetnasinha.prasad@gmail.com |
Ashutosh Verma
Associate Professor
Indian Institute of Forest Management (IIFM)
Bhopal - 462003, Madhya Pradesh.
ashutoshverma512@gmail.com |
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The Global Financial Crisis and Performance of the Indian Corporate Sector: A Firm Level Analysis |
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Abstract: Indian Journal of Finance, Volume 7,
Number 5, pp. 14 - 23 |
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The U.S. financial crisis has made its upshots on
both developed and developing economies of the
world. However, India did not face a full - blown
recession, but only experienced an economic
deceleration, which is normally considered as a
temporary phenomenon. Analysis of the financial
parameters of corporate India revealed
intersectoral as well as intrasectoral differences
among them in respect of their financial
fundamentals during the period of crisis, which
could be attributed to many factors. The Banking
sector found an opportunity for growth during the
period of crisis, the credit of which goes to wise
and judicious policies of the central bank of the
country. The Automobile and construction sector
were hit most adversely by the crisis due to their
high capital intensive nature and stringent
measures taken by the lending institutions by
cutting back of credit to individuals for adding
luxuries to their personal lives. Our IT industry
is more exposed to the U.S. and European markets;
hence, the financial crisis in these advanced
economies affected the export earnings of this
sector. However, sharp depreciation of the Rupee
helped them to compensate in aggregate what they
lost due to the crisis in the global market.
Domestic market orientation and not being very
capital-intensive are among the factors that
insulated the FMCG sector from the downturn. The
degree of shock exerted by the global financial
turmoil on the performance of the Indian corporate
sector was also not the same. While some companies
under a particular sector were severely hit by the
crisis, fundamentally strong companies could
unshackle themselves from it. |
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Keywords: global financial crisis, economic
growth, financial performance, t test
JEL Classification: G01, E4, G3 |
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References |
| 1 |
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(2002). “Statistics for Business and
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pp. 200-220. |
| 2 |
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Kane, A., Marcus, A.J., & Mohanty, P. (2006).
“Investments.” Tata McGraw Hill Publishing Co.
Ltd., New Delhi, p. 230. |
| 3 |
Chakrabarti, R.
(2001). “FII Flows to India: Nature and
Causes.” Money and Finance, 2 (7), Retrieved
from
http://ssrn.com/abstract=649852 |
| 4 |
Fridson, M.S.,
& Alvarez, F. (2002). “Financial Statement
Analysis: A Practitioner's Guide.” John Wiley
and Sons Inc., Canada, pp. 125-140. |
| 5 |
Harikumar,S.,
Saji, T.G., & Kasim, C. M. (2010a). “Financial
Market Investments during the Period of Global
Recession.” In: Arunachalam, P. (Ed). “Impact
of Global Financial Crisis on Indian Economy.”
1st Edn. Global Research Publications, New
Delhi, pp. 588-592. |
| 6 |
Harikumar, S.,
Saji T.G., & Kasim C.M. (2010b). “Foreign
Institutional Investments and Stock Price
Behaviour in Emerging Markets: Evidence from
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New Delhi, pp.107-116. |
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Jain, P.K. (2008). “Basic Financial
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| 14 |
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Yadav, A.P. (2010). “Global Financial Crisis
and India's Economic Growth: A Deep Insight.”
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Subbarao, D.
(2009). “Impact of the Global Financial Crisis
on India: Collateral Damage and Response.”
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by the Institute for International Monetary
Affairs, Tokyo on February 18, 2009. |
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Taylor, J.B.
(2009). “The Financial Crisis and the Policy
Responses: An Empirical Analysis of What Went
Wrong.” NBER Working Paper, January, pp.1-19. |
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T. G. Saji
Assistant Professor
Post Graduate Department of Commerce and
Management Studies
Sri C. Acutha Menon Government College, Thrissur
Kerala - 680014.
sajthazhungal@gmail.com
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S.
Harikumar
Professor, Department of Applied Economics
Cochin University of Science and Technology,
Kerala.
shari@cusat.ac.in
Mohammed Kasim C.
Research Scholar
Department of Applied Economics, Cochin University
of Science and Technology
Kerala.
turn2kas@gmail.com |
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Higher Grades, Better Performance: Debunking Myths Associated with IPOs |
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Abstract : Indian Journal of Finance, Volume 7,
Number 5, pp. 24 - 31. |
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May 1, 2007 marked the day when a distinctive
mandatory system prevalent nowhere in the world
was introduced by India's market regulator SEBI -
mandatory initial public offering (IPO) grading.
It was for the first time in the history of
securities market regulator that a company
planning to get listed needed to get a grading of
its issue. The rationale behind the mandatory
grading was that the retail investors who are
usually at a disadvantage of having inadequate
information about the issue would get an
indication about the fundamentals of the company.
The belief that "Higher Grades lead to better IPO
performance both in the pre and post listing
period" has been proved to be a myth over and over
again. Lately, there has been a debate over the
significance and relevance of IPO Grading. Out of
the total 56 public issues that were launched and
listed on the NSE during the one year period from
January - December 2010, 42 issues traded at a
loss after one year of listing as compared to
their issue price. This paper analyses the myths
surrounding the IPO Grades and their performance. |
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Keywords: CRA ,IPO, IPO grades, retail
investors, high grades, low grades
JEL Classification: G12, G24, G32 |
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References |
| 1 |
Ahmad, A., & Rana, U.S. (2012). “Forecasting
Performance of Various Volatility Models on
Intra-Day Equity Price in the Indian Stock
Market.” Indian Journal of Finance, 6 (6), pp.
21- 29. |
| 2 |
Deb, S. S., &
Marisetty, V. B. (2008). 'Information Content
of IPO Grading.' Retrieved from http://ssrn.com/abstract=1276243,
DOI :
http://dx.doi.org/10.2139/ssrn.1276243 |
| 3 |
Duraipandian,
R., & Suresh, A.S. (2012). “IPOs Performance
and its Relationship with QIB Subscriptions
and Grade.” International Journal of Research
in Commerce & Management, 3 (3), pp. 35 - 38. |
| 4 |
Gupta L. C.
(2007, June 14). 'How IPO Grading Can Help.'
The Business Line, Retrieved from
http://www.thehindubusinessline.com/ |
| 5 |
Haldea, P.
(2007, April 14). 'My grade to IPO Grading:
0.' published in Article 58, Indian
Express-Express Money, Retrieved from
http://expressindia.indianexpress.com/ |
| 6 |
Hoque, A., &
Krishnamurti, C. (2012). “Modeling Moneyness
Volatility in Measuring Exchange Rate
Volatility.” International Journal of
Managerial Finance, 8 (4), pp. 365-380. DOI :
10.1108/17439131211261279 |
| 7 |
Krishnamurti,
C. ,Thong, T. Y., & Vishwanath, S. R. (2009).
“Does certification work in emerging markets?
Evidence from the Indian IPO Market.” JCF
Conference on Emerging Market Corporate
Finance, August 24-25 2009, Beijing, China. |
| 8 |
Krishnamurti,
C., & Hoque, A. (2011). “Efficiency of
European Emissions Markets: Lessons and
Implications.” Energy Policy, 39 (10), pp.
6575-6582. |
| 9 |
National Stock
Exchange of India (NSE) (2012). Historical
Index Data, Retrieved from
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| 10 |
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Exchange of India (NSE) (2012). Past Issue
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| 11 |
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Exchange of India (NSE) (2012). Security wise
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| 12 |
Poon, W. P.H.,
& Chan, K. C. (2008). 'The Effects of Credit
Ratings on Stock Returns in China.' Chinese
Economy, 41 (2), pp. 34 - 55. |
| 13 |
Poudyal, S.
(2008). 'Grading Initial Public Offerings (IPOs)
in India's Capital Markets - A Globally Unique
Concept.' IIMA Research and Publications, W.P.
No.2008-12-08. |
| 14 |
SEBI (2011). “
Frequently Asked Questions on IPO Grading.”
Retrieved from http://www.sebi.gov.in/faq/ipograding.html |
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Shalini Trivedi
Assistant Professor (Grade III) and Area
Chairperson
Department of Economics, Amity Business School,
Amity University
Sector 125, Gautam Buddha Nagar, Noida, Uttar
Pradesh.
drshalinidixit@gmail.com |
Bhavarth Sheth
Relationship Manager
Emerging Corporate Group, IndusInd Bank Ltd.,
Surat - 395001, Gujarat.
bhavarth.sheth@gmail.com |
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Exploring Overreaction Hypothesis for Large Cap Stocks in the Indian Stock Market: An Empirical Evidence of Superior Returns in Nifty 50 |
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Abstract:Indian Journal of Finance, Volume 7,
Number 5, pp. 32 - 40 |
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The stock market usually overreacts to various
global, economic, industry or company-specific
news. This overreaction leads to the generation of
excess returns through momentum for a short
period, and contrarian for a longer period. In
this regard, most of the previous studies focused
on creation of excess returns through momentum and
contrarian strategies. The present study aims to
explore the overreaction hypothesis with a special
focus on large-cap stocks of Nifty 50 stocks from
the Indian equity market. The present study also
tries to confirm whether the behavioral
justification of overreaction occurs due to the
traders' activity in the short run, and in the
long run, whether the reversal of momentum (De
Bondt & Thaler, 1985,1987; Jagadeesh & Titman,
1993,2001) is true or not for the large cap
stocks. At the same time, it tries to identify if
such profits were created, then was it only
signaling any evidence of presence of risk-return
trade off, or was it a real case of superior
returns? The study tries to find out the reversal
point as results of Nifty 50 stock returns were
showing momentum followed by contrarian. For this
purpose, monthly return data of Nifty 50 stocks
for the period from January 2004 to December 2010
had been collected. Analysis was done with the
help of ANOVA and inferences were drawn. |
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Keywords: overreaction hypothesis, reversal
point, contrarian strategy, momentum strategy,
Nifty50
JEL Classification: G14 |
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“Short-term Abnormal Returns of the Contrarian
Strategy in the Japanese Stock Market.”
Journal of Business Finance and Accounting, 22
(7), pp. 1035-1048. |
| 3 |
Chen, A.
(2000). “Momentum Does Not Matter
Consistently: The Evidence from Taiwan Stock
Returns.” National Sun Yat-sen University, pp.
1-20. |
| 4 |
Chen, Y.,
Fortnow, L., Nikolova, E., & Pennock, D.
(2007). “Betting on Permutations.” Proceedings
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Commerce, 8(1), pp. 326 - 335, ISBN
978-1-59593-653-0. |
| 5 |
Chui, A.C.W.,
Titman, S., & Wei, K.C. J. (2000). “Momentum,
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Paper, Hong Kong University of Science and
Technology, pp. 1-17. |
| 6 |
Conard, J., &
Kaul, G. (1998). “An Anatomy of Trading
Strategies.” Review of Financial Studies, 11
(3), pp. 489-519. |
| 7 |
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Kaul, G. (1993). “The Returns to Long
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www.nseindia.com |
| 8 |
De Bondt, W., & Thaler, R. (1985). “Does the
Stock Market Overact?” Journal of Finance, 40
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| 9 |
De Bondt, W., &
Thaler, R. (1987). “Further Evidence on
Investor Overreaction and Stock Market
Seasonality.” Journal of Finance, 42 (3), pp.
557-581. |
| 10 |
Griffin, J., Ji,
X., & Martin, S. (2005). “Global Momentum
Strategies: A Portfolio Perspective.” Journal
of Portfolio Management, 31 (2), pp. 23-39. |
| 11 |
Hameed, A., &
Kusnadi, Y. (2002). “Momentum Strategies:
Evidence from Pacific Basin Stock Markets.”
Journal of Financial Research, 45 (3), pp.
383-398. |
| 12 |
Hameed, A., &
Ting, S. (2000). “Trading Volume and
Short-Horizon Contrarian Profits: Evidence
from Malaysian Stock Market.” Pacific-Basin
Finance Journal, 8 (1), pp. 67-84. |
| 13 |
Hong, H., &
Stein, J.C. (1999). “A Unified Theory of
Underreaction, Momentum Trading, and
Overreaction in Asset Markets.” Journal of
Finance, 54 (6), pp. 2143-2184. |
| 14 |
Jegadeesh, N.,
& Titman, S. (1993). “Return to Buy Winners
and Selling Losers: Implications for Stock
Market Efficiency.” Journal of Finance, 48
(1), pp. 65-91. |
| 15 |
Jegadeesh, N.,
& Titman, S. (2001). “Profitability of
Momentum Strategies: An Evaluation of
Alternative Explanations.” Journal of Finance,
56 (2), pp. 699-720. |
| 16 |
Joshipura, M.
(2009). “Does the Stock Market Overreact?
Empirical Evidence of Contrarian Returns from
Indian Markets.” Published at ISM national
stock exchange, pp. 217-244. |
| 17 |
Kang, J., Liu,
M. H., & Ni, S. X. (2002). “Contrarian and
Momentum Strategies in the China Stock Market:
1993-2000.” Pacific-Basin Finance Journal, 10
(3), pp. 243-265. |
| 18 |
Kumar, U.
(2012). “Is There any Diwali Effect?” Indian
Journal of Finance, 6 (3), pp. 43-53.
Liu, W., Strong, N., & Xu, X. (1999). “The
Profitability of Momentum Investing.” Journal
of Business, Finance, and Accounting, 26 (10),
pp. 1043-1089. |
| 19 |
Rouwenhorst,
K.G. (1998). “International Momentum
Strategies.” Journal of Finance, 53 (1), pp.
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| 20 |
Simai, P.
(2009). “Evaluating Momentum and Contrarian
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Finance, 3 (1), pp. 3-8. |
| 21 |
Thaler, R. H.
(1999). “The End of Behavioral Finance.”
Financial Analysts Journal, 55 (6), pp. 12-17. |
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Abhishek Parikh
Assistant Professor, V. M. Patel Institute of
Management
Ganpat Vidyanagar, Kherva
Mehsana - 382711, Gujarat.
abhishek.parikh@ganpatuniversity.ac.in |
Mitali Baruah
Assistant Professor
V. M. Patel Institute of Management
Ganpat Vidyanagar, Kherva
Mehsana - 382711, Gujarat.
mitali.baruah@ganpatuniversity.ac.in
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Analysis of the Financial Performance of Indian Commercial Banks: A Comparative Study
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Abstract:Indian Journal of Finance, Volume 7,
Number 5, pp. 41 - 49 |
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Financial
performance of a bank indicates the strength and
weakness of that particular bank by properly
establishing the association between the items of
the balance sheet and profit & loss account. The
present study is a comparative analysis of the
financial performance of Indian commercial banks.
The study considered a sample of 37 banks (22
public sector banks and 15 private sector banks)
for the period from 2006-07 to 2010-11. CAMELS
rating methodology was used in the study to
measure the performance of the considered banks.
The study found that the IDBI Bank was the best
performing bank followed by Kotak Mahindra Bank
and ICICI Bank. Dhanalaxmi Bank had the worst
performance followed by J & K Bank and Karnataka
Bank Ltd. The results of the 't' - test disclosed
that there is a significant difference in the
Capital Adequacy, Asset Quality and Earning
Capacity of public and private sector banks in
India, while there is no significant difference in
the Management, Liquidity Position and Sensitivity
to market risk of the two different banks groups.
The study concluded that on an average, there is
no statistically significant difference in the
financial performance of the public and private
sector banks in India, but still, there is a need
for overall improvement in the public sector banks
to make their position strong in the competitive
market. |
|
Keywords: financial performance, Indian
commercial banks, capital adequacy, asset quality,
liquidity, CAMELS methodology
JEL Classification: G21,P17 |
|
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Anita
Makkar
Junior Research Fellow (UGC), Haryana School of
Business
Guru Jambheshwar University of Science
&Technology, Hisar, Haryana.
anita29561@gmail.com |
Shveta Singh
Assistant Professor, Haryana School of Business,
Guru Jambheshwar University of Science
&Technology, Hisar, Haryana.
shvetachahal@gmail.com |
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