Determinants of Equity Share Prices

DETERMINANTS OF EQUITY SHARE PRICES
A RESEARCH REPORT ON
DETERMINANTS OF EQUITY SHARE PRICES IN
THE INDIAN CORPORATE SECTOR
Dissertation Submitted in partial fulfillment for the award

of
MASTER IN BUSINESS
ADMINISTRATION
For Bangalore University
SUBMITTED BY
BANDI PRASAD SANGAPPA
REG NO: 04XQCM6013
UNDER THE GUIDANCE OF
Dr: T.V. N. RAO

(FINANCE PROFESSOR)
M.P.BIRLA INSTITUTE OF MANAGEMENT

ASSOCIATES WITH BHARATIYA VIDYA BHAVAN
#43.RACE COURSE ROAD,
BANGALORE-560001
2004-2006
M P BIRLA INSTITUTE OF MANAGEMENT -1-

DECLARATION
I hereby declare that this dissertation work entitled

“DETERMINANTS OF EQUITY SHARE PRICES IN INDIAN
CORPORATE SECTOR” is a bonafide study, completed under the
guidance and supervision of Dr. T. V. N. Rao and submitted in partial
fulfillment for the award of MASTERS OF BUSINESS
ADMINISTRATION degree at Bangalore University.
I further declare that this project is the result of my own effort and
that it has not been submitted to any other university/institution for the
award of any degree or diploma or any other similar title of recognition.
BANGALORE BANDI PRASAD SANGAPPA

DATE: Reg No: 04XQCM6013

PRINCIPAL’S CERTIFICATE
I here by certify that this project dissertation report is undertaken

and completed by Mr. Bandi Prasad Sangappa bearing Reg. No.
04XQCM6013 on “DETERMINANTS OF EQUITY SHARE
PRICES IN THE INDIAN CORPORATE SECTOR” under the
guidance of Dr: T. V. N RAO Adjunct Professor, M P Birla Institute
of Management, Bangalore
Place: Bangalore
Date: Dr Nagesh S Malavalli

CERTIFICATE
I here by certify that project work embodied in the dissertation

entitled is the result of an study undertaken and completed by Mr.
Bandi Prasad Sangappa bearing Reg No: 04XQCM6013 on
DETERMINANTS OF EQUITY SHARE PRICES IN THE INDIAN
CORPORATE SECTOR under my guidance and supervision.
Place: Bangalore
DATE: Dr: T. V. N RAO

ACKNOWLEDGEMENT
As students collect accolades in the form of grades for the success in

his/her endeavors and his/her success depends on adequate
preparation and in domination and most important of all the support
received from his/her guide. So the accolades I earn of this project, I
would like to share with all those who have played a notable part in
its making
In these two months I have worked on it, I feel indebted to many and
extend my heartful gratitude and profusely thank those people who not
only gave assistance to me but also participated in the making of this
project.
I sincerely thank to Dr .T.V.N Rao my esteemed project guide for his

valuable advice, assistance and guidance provided.
I also remain grateful to all my friends for their assistance to prepare

this project successfully.
Bandi Prasad

INDEX CONTENT PAGE NO
EXECUTIVE SUMMARY i
CHAPTER 1
INTRODUCTION & THEORETICAL BACKGROUND
1.1 Evolution 01
1.2 Leading cities in Stock Market Operation 02
1.3 Growth of Indian Stock Exchange 03
1.4 Financial Analysis 09
CHAPTER 2
LITERATURE SURVEY & PROBLEM IDENTIFICATION
2.1 LITERATURE SURVEY 14
PAPER 1-Determinants of Stock Price in India 14
PAPER 2-Determinants of Price Earning Ratio 18
PAPER 3-Determinants of Share Price 23
2.2 PROBLEM IDENTIFICATION
CHAPTER 3
RESEARCH METHODOLOGY
3.1 Objectives And Scope Of Study 26
3.2 Sample and Period of Study 26
3.3 Sources Of Data 27
3.4 Period Of Data 27
3.5 Statistical Procedure 28
3.6 Variables Used In Determining The Equity Share Price 28
3.7 Limitations of the study 31
CHAPTER 4
ANALYSIS OF DATA & DESCRIPTIVE OF RESULTS
4.1 Descriptive analysis 32
4.2 Tables 32
CHAPTER 5
5.1 Conclusion 51
CHAPTER 6
BIBILOGRAPHY & ANNEXURES 52

TABLE
NO TABLE NAME PAGE NO
1 Growth pattern of Indian Stock Market 05
2 Corporate Financial Performance 07
3 Sample size 26
4 Aggregate Regression Results year 2000 33
10 Summary of aggregate company result 45
11 Summary of all sector results 49
12 F-Values and Adj R2 50
13 List of the companies under the study 53
DIAGRAMS
1 Financial Performance And Its Components 08
2 Characteristics Relation With Performance 08

EXECUTIVE SUMMARY
This study examines the empirical relationship of explanatory variables namely,

dividend per share, earning per share, price earning ratio, book value per share, size.
Cover return on capital employed and payout ratio on the market price of the shares in the
past-reform era.
Share price is the most important indicator readily available to the investors for
their decision to invest or not in a particular share. Theories suggest that share price
changes are associated with changes in fundamental variables which are relevant for
share valuation like payout ratio, dividend yield, capital structure, earnings, size of the
firm and its growth.
Investigation of share price changes appear to yield evidence that changes in

fundamental variable should jointly bring about changes in share price both in developed
and emerging market. However, the actual fundamental factors found to be relevant may
vary from market to market.
Knowledge of relative influence of fundamental factors on equity share prices is

helpful to corporate, management, government and investors. To the corporate
management an understanding of the valuation mechanism in stock market is essential for
the sound financial management of the company

CHAP TE R I
INTR ODUC TION

EVOLUTION
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure. The
East India Company was the dominant institution in those days and business in its loan
securities used to be transacted towards the close of the eighteenth century.
By 1830, business on corporate stocks and shares in Bank and Cotton presses took place
in Bombay. Though the trading list was broader in 1839, there were only half a dozen
brokers recognized by banks and merchants during 1840 and 1850.
The 1850 witnessed a rapid development of commercial enterprise, brokerage business

attracted many men into the field, and by 1860, the number of brokers increased into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a
disastrous slump began (for example, Bank of Bombay Share, which had touched Rs
2850, could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in
Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively
known as “The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in
the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was
consolidated.
M P BIRLA INSTITUTE OF MANAGEMENT - 10 -

OTHER LEADING CITIES IN STOCK MARKET OPERATIONS
Ahmedabad gained importance next to Bombay with respect to cotton textile industry.
After 1880, many mills originated from Ahmedabad and rapidly forged ahead. As new
mills were floated, the need for a Stock Exchange at Ahmedabad was realised and in
1894, the brokers formed "The Ahmedabad Share and Stock Brokers' Association".
The cotton textile industry was to Bombay and Ahmedabad, the jute industry was to
Calcutta. In addition, tea and coal industries were the other major industrial groups in
Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute
shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal
boom between 1904 and 1908. On June 1908, some leading brokers formed "The
Calcutta Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in
India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel
Company Limited in 1907, an important stage in industrial advancement under Indian
enterprise was reached.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with
100 members. However, when boom faded, the number of members stood reduced from
100 to three, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated.
In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. Lahore Stock Exchange was formed in 1934 and it had a brief
life. It was merged with the Punjab Stock Exchange Limited, which was incorporated in
1936.

INDIAN STOCK EXCHANGES - AN UMBRELLA GROWTH
The Second World War broke out in 1939. It gave a sharp boom that was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base. Because of the restrictive controls on cotton, bullion, seeds and other
commodities, those dealing in them found in the stock market as the only outlet for their
activities. They were anxious to join the trade and numerous others swelled their number.
Many new associations were constituted for the purpose and Stock Exchanges in all parts
of the country were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated. In Delhi, two
stock exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi
Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgamated
into the Delhi Stock Exchange Association Limited.
Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore
Exchange was closed during partition of the country and later migrated to Delhi and
merged with Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in
1957 and recognized in 1963.
Most of the other exchanges languished until 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmedabad, Delhi, Hyderabad and Indore, the well-
established exchanges, were recognized under the Act. Some of the members of the other
Associations were required to be admitted by the recognized stock exchanges on a
concessional basis, but acting on the principle of unitary control, all these pseudo stock
exchanges were refused recognition by the Government of India and they thereupon
ceased to function.

Thus, during early sixties there were eight recognized stock exchanges in India
(mentioned above). The number virtually remained unchanged, for nearly two decades.
During eighties, however, many stock exchanges were established: Cochin Stock
Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982),
and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association
Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange
Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986),
Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association
Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara
Stock Exchange Limited (at Baroda, 1990) and recently established exchanges -
Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock
exchanges in India excluding the Over the Counter Exchange of India Limited (OTCEI)
and the National Stock Exchange of India Limited (NSEIL).
The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital
of listed companies. The remarkable growth after 1985 can be clearly seen from the
Table, and this was due to the favoring government policies towards security market
industry.

Growth Pattern of the Indian Stock Market
TABLE 1
Sl. As on 31stDecember 1946 1961 1971 1975 1980 1985 1991 1995
1 No. of Stock 7 7 8 8 9 14 20 22
Exchanges
2 No. of Listed Cos. 1125 1203 1599 1552 2265 4344 6229 8593
3 No. of Stock Issues of 1506 2111 2838 3230 3697 6174 8967 11784
Listed Cos.
4 Capital of Listed Cos. 270 753 1812 2614 3973 9723 32041 59583
(Cr. Rs.)
5 Market value of 971 1292 2675 3273 6750 25302 110279 478121
Capital of Listed Cos.
(Cr. Rs.)
6 Capital per Listed Cos. 24 63 113 168 175 224 514 693
(4/2) (Lakh Rs.)
7 Market Value of 86 107 167 211 298 582 1770 5564

Capital per Listed Cos
(Lakh Rs.)
(5/2)
8 Appreciated valueof 358 170 148 126 170 260 344 803
Capital per Listed Cos.
(Lak Rs.)
Source: Various issues of the Stock Exchange Official Directory, Vol.2 (9) (iii), Bombay Stock Exchange,
Bombay.

Trading Pattern of the Indian Stock Market
Trading in Indian stock exchanges is limited to listed securities of public limited

companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend paying,
growth-oriented companies with a paid-up capital of at least Rs.50 million and a market
capitalization of at least Rs.100 million and having more than 20,000 shareholders are,
normally, put in the specified group and the balance in non-specified group.
Two types of transactions can be carried out on the Indian stock exchanges: (a) spot
delivery transactions "for delivery and payment within the time or on the date stipulated
when entering into the contract which shall not be more than 14 days following the date
of the contract”: and (b) forward transactions "delivery and payment can be extended by
further period of 14 days each so that the overall period does not exceed 90 days from the
date of the contract". The latter is permitted only in the case of specified shares. The
brokers who carry over the outstanding pay carry over charges which are usually
determined by the rates of interest prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell securities
for his clients on a commission basis and also can act as a trader or dealer as a principal,
buy and sell securities on his own account and risk, in contrast with the practice
prevailing on New York and London Stock Exchanges, where a member can act as a
jobber or a broker only.
The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.

Corporate Financial Performance

TABLE 2
(Growth rates in per cent)
2003-04 2004-05 2004-05 2005-06 2004-05 2005-06
(April- (April-
Q1 Q2 Q3 Q4 Q1 Q2 Q3
December) December)
1 2 3 4 5 6 7 8 9 10 11 12
Sales 15.4 25.2 25.9 15.7 24.8 23.7 24.1 21.0 18.5 16.4 13.2
Expenditure 12.5 24.0 24.9 15.3 23.4 22.4 24.3 19.8 18.0 16.3 12.7
Gross Profit 26.6 38.9 37.8 24.1 36.0 35.8 30.5 35.3 32.0 19.1 21.2
Interest Cost -11.5 -2.0 -2.1 -6.4 -3.2 2.1 -13.0 -5.4 -13.5 -8.0 4.6
Profits After 57.9 53.8 48.0 35.0 51.2 45.3 45.5 51.4 54.2 27.5 27.0
Tax
Memo:
(Amount in Rupees crore)
No. of 2,201 1,273 895 2,010 1,255 1,353 1,464 1,301 2,355 2,361 2,366
Companies
Sales 4,28,072 5,68,476 3,63,140 5,77,271 1,35,156 1,53,040 1,62,193 1,79,632 1,94,608 2,12,693 2,19,098
Expenditure 4,06,838 4,90,204 3,11,105 4,95,121 1,15,656 1,31,227 1,40,574 1,56,647 1,66,972 1,83,717 1,88,934
Gross Profit 48,852 72,406 47,591 77,286 17,234 20,448 20,017 23,736 25,577 27,620 28,135
Interest Cost 14,724 12,528 7,831 12,140 3,597 3,584 3,273 3,177 4,241 4,467 4,555
Profits After 26,281 47,333 31,066 51,364 10,396 13,004 13,196 16,798 16,726 18,169 18,790
Tax
Note: 1.Growth rates are percentage change in the level for the period under
reference over the corresponding period of the previous year.
2. Data are based on the audited / unsuited abridged results of the
non-financial non-Government companies except column (2)
which are based on audited balance- sheets for 2003-04.

DIAGRAM 1
DIAGRAM 2

FINANCIAL ANALYSIS
The most important quality for financial analysis is the passion to go for, go into and go
beyond numbers. Let us begin by unlearning some common misconceptions. Many
people relate financial analysis to number crunching. There are some others who have set
benchmarks for financial ratios and numbers, like a current ratio of 2 or debt to equity
ratio of 1, etc. Many have a tendency to calculate expected share price by multiplying
EPS with a normative P/E. Were financial analysis such simple arithmetic, we would
have given you a spreadsheet with pre-written formulae rather than this verbose piece.
You have some acquired knowledge and techniques and then it is all upto your judgement
and experience. Yes, numbers are important. Financial analysis starts with numbers. But
it does not end there.
About Ratio: A ratio is nothing more than a simple division of two numbers. Often
numbers by themselves do not convey anything until they are related. In financial
analysis, we need qualitative information and try to read between the numbers. We have
to ask all the right questions. Over the years, there are some ratios, which have become
more popular and handy for rule of thumb analysis of financial statements. Our purpose
in this note is not deride them but to advice the reader to use them properly to derive the
correct results.
Key Objectives of a Business
Before you look at different ratios, let us look at a firm's objectives in a capitalist market.
The one and only intention of any firm is to maximize shareholders value, which is
effectively done by getting a bigger bang out of the capital employed. Exceptional cases
like charity, passion, hobbies, etc also try to maximize return on capital employed, but
there the definition of capital is different. For the time being, let us stick to financial
capital.

While businesses claim to have multiple objectives such as market share, brand building
and even social objectives, at the end of the day, what really matters is how much money
one makes. All are strategies to maximize return on capital employed, which is the one
and only long term goal of all management. Obviously one will look at money made in
relation to one's investment. If you use 10 times as much capital and make 5 times more
money, it is of no good. If business A earns Rs10 on Rs 100 investment (10%), it is better
than another business B that earns Rs50 on Rs1000 (5%).
To analyze the performance of any business, the key ratio is therefore Return on Capital
Employed (ROCE). We can further analyze this ratio using models popularly know as
The Du Pont model.
The model starts with analysis of ROCE in its two constituents
 Profit margin on sales

 Sales per unit of capital invested
To give an example, say business A is one in which Rs100 capital invested in a year
generates sales of Rs100 with net profit margin of 10%. Whereas, in business B Rs100
investment generates a turnover of Rs500 but with a net profit margin of only 4%.
As you can see, in business B, net profit margin can be lower but is more than
compensated by the fact that turnover generated per unit of capital invested is
significance higher or capital turnover ratio is higher. Return on capital invested is the
product of sales margin and capital turnover ratio.
The same can be presented in the formula as follows.
(Net profit/ sales) * (sales/ capital employed) = Return on capital employed
The above two are the mother of all ratios. Let us look at their children.

Profit Margin.
We all know that profit is revenue minus cost. Each element of cost can be presented as a
% of revenue and at different levels of costs; we have different versions of profit, i.e.
EBIDTA, EBIT, EBT, etc. EBITDA margin is a good indicator of operational efficiency
of any company.
Even revenue can be broken up for the purpose of analysis, which is of use in a multi
product, multi division entity. Typically, analysts look at the relative share of other
income, because this item is where most Indian companies show extra ordinary profits to
boost their bottom line.
Return Ratios
There are two types of providers of capital, owners and lenders. As returns to lenders are
fixed, we don't have to calculate any return ratio on debt, as the same is predetermined.
From owners' perspective, the key ratio is return on net worth. Net worth represents
owners' funds, paid up capital and retained profits called as reserves. As an owner, you
would also be interested in knowing how much return is being generated by the total
capital employed. Capital employed consists of net worth plus debt, i.e. owned and owed
money. So when we calculate this ratio we have to add back the cost of debt, i.e. adjust
for interest expenses. This ratio is calculated primarily on pre-tax basis and it is
equivalent to EBIT (Earnings before Interest and Tax) divided by total capital employed.
If we want to calculate it on post-tax basis, we will have to add interest adjusted for tax
i.e.
EBT + interest*(1-T)/ capital employed, where T is the tax rate.

Add Back Interest for ROCE
Because, while calculating ROCE, we have to add back interest. This ratio calculates the
returns to all the providers of capital. As mentioned earlier, capital can be debt or equity.
On debt, we pay interest while entire PAT belongs to equity holders. Therefore, when we
calculate return on capital employed, we have to do so before any payment is made to the
providers of capital. So if we do not add back interest we will be taking profits after
making some payment to the provider of capital thereby distorting the real picture.
Per Share Ratios
An equity share is a legal document representing ownership of any entity. Shares of listed
companies trade in stock markets. It therefore makes sense to look at most profitability
indicators on a per share basis. The key ratio is earnings per share which is net profit (if
the company has issued preference capital, then one must remove preference dividend to
reflect what belongs to the common equity holders only) divided by number of
outstanding shares
One variant of this ratio of cash earnings per share, which is cash, profited divided by
number of outstanding shares. Cash profit is equivalent to profit after tax plus
depreciation and other non-cash charges.
In stock market, a fraction of ownership known as shares is traded. Therefore in order to

arrive or get a proper picture of the worth of a share (one unit of the company), we should
look at numbers calculated on a per share basis. Earnings per share are profit after tax
(adjusted for preference dividend if any) divided by number of outstanding shares.
Similarly, you can calculate cash profit per share, sales per share, etc. This will facilitate
valuation and comparison with other companies. The most famous of the valuation ratios
is the Price earnings ratio (P/E ratio), which the current market is priced of the share
divided by the earnings per share. Also see the chapter on investing for a detailed
discussion of the same

Dividend per share
The owner can allow profits to remain within business or can withdraw it for other or his
personal use. When he withdraws, it is analogous to dividend payout. In a company, the
management decides on behalf of the owner, whether or not to retain a part of profits
within the company (that is called retained earnings) and gives back a part of profits to
the owners called dividends.
Dividend per share is the total dividend paid per equity share. In case there was a fresh
issue of equity capital in the year, most companies make pro rata payment, i.e. supposing
in a financial year (April to March) there was an issue of equity shares on October 1. The
new shares, which were issued on Oct 1, will be entitled for only 50% dividend as
compared to other shareholders who were there for the full year.
Trends in Some Key Ratios
By trends we mean progress year after year. So one can look at trends in sales, fixed
assets, working capital and trends in various ratios. Trends in some key performance
ratios such as operating margin, return on net worth also convey meaningful results. For
instance, operating margin that was 8% last year and 9% this year.
Comparison One can make comparisons across years in terms of trends in margins,
growth or comparison across companies within a sector or across a sector, by comparing
large companies in both the sectors and sector aggregates. And firms of the same industry
are compared on various parameters. One can look at aggregate numbers of one industry
and compare them with aggregate numbers of another industry to understand the
differences in performance of various industries. For instance, if you look at the
consumer durable industry which might be generating a return on networth of 8-10%,
whereas software industry may be generating a return on networth of 40-50%. So one can
easily conclude that software industry is doing significancely better than the consumer
durables industry.

CHAP TE R I I
L I TE R AT UR E
S URV EY

PAPER I DETERMINANTS OF STOCK PRICE IN INDIA

An empirical study by M. A. Zahir & Yakesh khanna.
INTRODUCTION
Maximization of shareholder’s wealth, determined by the market price if equity
shares, has been universally accepted as the major financial objectives of the firm.
Obviously, there are number of factors that affect the market price of shares. And in this
case it had attempted to analyse the relationship between share and some of the share
these factor.
OBJECTIVE OF THE STUDY

To know the empirical relationship between equity share price and factors like
book value per share, dividend per share, earning rate, yield and coverage?
They assumed for the purpose of analysis, share price has been assumed to be dependent
variables, while the other five factors listed above have been taken as explanatory or
independent variables. An attempt has also been made to study the interrelationship
among these independent variables, as some of these are expected to influence one
another.
METHODOLOGY
The study is fully based on the secondary source of data. For the purpose of
analysis, the relevant data have been taken from the various issues of the economic times.
The study relates to 101 industrial giant in the private sector. But only 62 company’s
information was fully available. There fore sample size consists of 62 of these private
giant
Data relating to independent/explanatory variables have been collected for the
years 1976-78, market prices (high-low) of equity shares of the sample companies have
been noted for the relevant years and the arithmetic average of the highest prices and
lowest prices calculated for the years 1977-78 and 1978-79.

To explain the share prices in the year ‘n’, the data used to calculate the values of
explanatory variable related to the year proceeding year ’n’. Since the paid up values of
equity shares are differed from one company to another company so it was decided to
convert the values of dividend per share and market price of share to the share to
common base of 100. Thus the paid-up values of shares of each company are taken as Rs
100 and other values were adjusted accordingly. However, wherever the values were
expressed in terms of percentages or ratios such adjustments were not necessary.
1. Statistical tools
The following statistical tools have been used to analyse the data
Coefficient of correlation (r) has been used to study the association between the
market price of shares and independent (explanatory) variables, as also among the
independent variables themselves. The significance of r has been tested directly with the
help of Coefficient of correlation (r).
The regression equation has been estimated along with the standard errors of the
coefficient. The significance of the regression co efficient is tested using t distribution.
The coefficients of multiple determinations (R) indicating the proportion of variation in
the dependent variable explained by the independent variable is also worked out for each
regression relationship. Its significance is tested with the help of f-test.
The sum up, the independent variable chosen for the present study is:
 Market price of equity shares (P): The arithmetic average of the highest and the
lowest share price over the years under study.
 To study their impact on the above dependent variable, they have chosen the
following independent /explanatory variables (with one year lag):
A. Book Value per Share (X1)
B. Dividend per share (X2)
C. Earning Rate (X3)
D. Yield: dividend-Price Ratio (X4)
E. Coverage: Earning –Dividend Ratio (X5)

ANALYSIS
Multiple corrélation coefficients (R)
The values of R, determined by the F-test, are highly significance in the

both years. This means that the selected explanatory variables in combination have got a
very significance relationship with the market price of shares.
PERFORMANCE OF INDEPENDENT VARIABLES:
To access the performance of independent variables, in terms of its impact on

share prices as well as on other variables, they have used (a) coefficient of correlation,
and (b) regression equation.
Coefficient Correlation (r)
The coefficient of correlation for both the series (1976-770 and (1977-78). In the
case of first series it maybe observed, the most significance correlation existed between
the X2 (dividend per share) and the share price. Moreover, the coefficient of the book
values X1 and coverage (X5) were also significance at 1% level. The correlation between
share price and yield(X4), on the other hand, was negative, albeit significance. Almost
the same situation existed during 1977-78, though the coefficient of coverage variables
(X5) was not significance in that year.
Multiple Regression Equation
For regression analysis, they used the linear relationship of the form:
P = a + b1X1 + b2X2 + b3X3 + b4X4 + b5X5
The vales of regression coefficient have been found with the help of t-values both 1% and 5% level.

IMPLICATION AND CONCLUSION
The findings of the study may provides some broad guidelines for share valuation
in India, particularly relating to large industrial organization
 A comparison correlation coefficient and regression coefficient reveals that has
emerged highly significance in all the series. The implication of overwhelming
importance of dividend in comparison to other variable is that with in the frame
work of investment and financing constraints, a firm can enhance the market
value of its equity capital by pursuing a more liberal dividend payment policy
 Another highly significance coefficient in all the series pertains to that of yield
(dividend –price ratio). Its association with market price of share is, however,
negative – that is, higher the share pieces, lower the yield, and vice versa. It also
suggests that decline yield, overt a period of time, with the increase in dividend
because increase in share price relatively larger than the increase in dividend per
share coupled with the other factors.
 The third important variable affecting share price is book value per share. The
coefficient of book value is positive throughout and highly significance in all the
series except one. Higher book value is perhaps perceived by investors to be an
index of sound financial position of a firma and a good risk.
 Dividend coverage comes out with significance correlation coefficient ( r ) in one
series, but depicts very weak, influence on the share prices far as the second series
as well s regression coefficient are concerned
 The influence of earning rate on share price appears to be very weak, though it
has a strong positive influence on the size of dividend per share. The strong
association between earning per share (EPS) and dividend per share (DPS) is
quite obvious.

PAPER II: DETERMINANTS OF PRICE-EARNINGS RATIO.

An empirical study by Nishi Tuli & R. K. Mittal
INTRODUCTION
A systematic analysis of securities for investments is important for making sound
investment decision. It helps investors select those securities that conform to their
expected risk-return requirements. Security analysis plays an important role in efficient
stock market as well as stock markets, which are not claimed to be efficient. Fundamental
analysis is concerned foremost. It has been prime concern of the fundamental analysts to
determine the appropriate capitalization rate or equivalently the appropriate multiplier to
be used in valuing particular securities
In one of the early studies, showed that the impact of projected earnings growth,
expected dividend payout ratio, and variability in rates of earnings growth and concluded
that P/E is an increasing function of earning growth and payout and inversely related to
variations in growth of earnings
P/E ratios of firms are compared using the accelerated depreciation with those
firms using straight-line depreciation. With that they found average P/E ratios were larger
for accelerated depreciation firms and also suggested that the investors are forecasting
only short-lived earnings expectations. They also find that P/E ratio are can vary
positively or negatively with market risk depending upon the market condition there fore
risk also doesn’t supply the explanation for P/E differences across firms. They conclude
that differences in P/E ratios are not because of growth or risk but because of difference
accounting methods
Purpose of the study
The primary purpose of the study is to explain the variability of P/E ratio of Indian
corporate equities in terms of fundamental factors
The factors covered in this study are corporate size, variability in earnings per share,
variability in market price, debt equity ratio, dividend payout ratio etc.

METHODOLOGY
The sample is based on the Indian private corporate sector and was selected on the
basis of availability of data
 A data relating to the market price annual high and low of its shares were not
available for all the years are excluded
 The figures of earning per share were negative in any year. 105 companies are
covered in this study.
The data was collected from the Bombay stock exchange official directory, in the
present study multiple regression technique has been adopted to examine the
determinants of P/E ratio corporate size, variability in earnings per share, variability in
market price, debt equity ratio, dividend payout ratio and growth rate in market price.
Under two different classifications. Under the first classification, the impact of above
explanatory variables on P/E ratios are has been examined by the taking sample as whole.
And at the second stage, the influence above explanatory variables on P/E has been
examined at industry level. This criterion was adopted to examine whether there are
differences in the determinants of P/E ratio in different industries.
The following log linear multiple regression equation is used for the studying the
influence of explanatory variables on P/E ratio.
Log P/E = Log a + b1 Log CS + b2 Log VEPS + b3 Log VMP +
b4 Log DER + b5 Log GMP + E
Where P/E = price earning ratio
CS = corporate size
VEPS = variability in earning per share
VMP = variability in market price
DER = debt equity ratio
DPR = dividend payout ratio
GMP = growth rate in market price
The specification and measurement of those variables is given below:

Price earnings ratio: The measure of this ratio is adopted in the is average of annual
high and low of market prices in the numerator and cross sectional year’s earning per
share in the denominator the reason for using each year average share price has the
advantage of smoothing out short term fluctuation in share prices and consequently in
P/E ratio An incidental advantage of relying year average share price, instead of prices at
a particular point of time, was the economy of cost and efforts. And they preferred to use
cross section year’s earning per share in calculating P/E ratio,
Corporate size: Size is expected to influence P/E ratio positively this variable is
measured in terms of total assets and is the arithmetic mean of the value of total assets for
two years proceeding and including cross section year.
Variability in earnings: It is a measure of risk. Risk is expected to have negative

relationship with the P/E ratio of a share. Variability in earnings per share for five years
for proceeding and including cross section year.
Variability in market price: It was hypothesized that higher variation in the market price
should influence P/E ratio in positive way. This variable was obtained by calculating the
standard deviation of mean of annual high and low of market price of equity shares for
five years proceeding and including cross section year
Debt equity ratio: Debt equity ratio is a measure financial risk. It was expected that the
higher the leverage (debt equity), higher is the risk and lower is the price of equity share
in terms of its earnings.
Dividend payout ratio: It has expected to have positive impact on P/E ratio of a firm.
Dividend payout ratio is calculated as percentage of dividend paid to equity share holders
out of earnings available and is the average of dividend payout ratio of two years
preceding and including cross section years.

Growth rate in market price: Growth variable is expected to have positive influence on
P/E ratio of corporate equities. Growth in market price is calculated from a regression of
logarithms of market price against time. The value of market price is arithmetic mean of
higher and lower of market price of a share. The advantage of using regression to
calculate growth rates is that all the observations in time series are considered, as
opposed to calculating the geometric mean growth rate by considering only beginning
and ending values
REGRESSION RESULTS: TOTAL SAMPLE COMPANIES
Dividend payout ratio and variability in market price are the most important
determinants of P/E ratio as their respective coefficients are positively significance in
each of the years covered. The value of coefficient of variability in earnings per share has
the negative sign in all years but significance in three out of five years.
The corporate size measure has the right sign all through. Although, it is
significance in two out of five years, the general consistency of the signs would suggest
that investor’s value the shares of large companies more than those of smaller ones. The
coefficients associated with growth rate in market price and debt-equity ratio are not
found to be significance while positive direction of growth rate in market price supports
the hypothesis and positive direction of debt-equity ratio is contrary to expectation.
The observed relationship of these variables explained on average 35 percent (R2)

of variability in P/E ratios of company’s equities over a period of 1989-93. The relevance
of (R2) is further supported by F-values being significance at 1 percent level throughout
the study period. All this leads us to conclude that explanatory determinants used in the
study have strong influence on P/E ratio except debt-equity ratio and growth rate in
market price.

Results
The results o parametric ANOVA, it contains mean P/E ratio by ownership

pattern, their corresponding standard deviation, computed F-ratio and critical F-ratio
needed for testing the significance at 5 percent level. /the mean P/E ratio for particular
ownership pattern
Conclusion
The empirical study has attempted to examine the varying importance of different
factors influencing the P/E ratio of equity shares. In the context of Indian stock market, it
appears that variability in market price and dividend payout ratio are the most important
determinants of P/E ratio, followed by variability in earnings per share. The corporate
size, debt-equity ratio and growth rate in market price being insignificance variable find
no evidence to support the theoretical work. Industry class and ownership pattern
classifications do not have significance impact on P/E ratio.

PAPER III DETERMINANTS OF SHARE PRICE: study on modified model

Bipul Malakar & Rajnarayan Gupta
Various types of single equation model have been tried to weed out the
unnecessary explanatory variables to find out the significance one. Variables attempted
differed across studies. The most commonly used variables in the literature are dividend
per share, earning per share, book value per share, company size, yield etc.
The single equation technique suffers from the basic lacuna in treating
explanatory variables as exogenous –completely disregarding the factual world.
Interwoven nature of capital market and the product market is closer to reality. This is in
order to avoid the restrictive presumption a simultaneous equation model was
investigated.
In the attempted mode, the share price equation fitted well, but some of the
relationships of the system required modified including more variables and excluding
some of existing statically insignificance variables is investigated.
Section I: The Modified Simultaneous Equation
The process of explaining share price movement the interconnection between

explanatory variables is ignored. In reality, however the interwoven nature of the capital
market and product market is closer to reality.
Earlier simultaneous equation model of share price determination is given below
Share price equation : Pt = ß10 + ß11 + Dt +u1t
Dividend equation : Dt = ß20 + ß21Et-1 + ß22 It + u2t
Earning per share : Et = ß30 + ß31 St + u3t
Investment equation : It = ß40 + ß41 Ä St-1 + u 4t
Volume of sales equation : St = ß50 + ß51 Pt + u5t

This model was tested with data on eight companies in India for a period of 1968
-1988. Since the model over identified. Two stage least square methods were applied for
estimation purpose. And the empirical findings suggests that the model was a close a
approximation of factual world; explanatory power of each companies was high
SECTION II: Information Sources and Estimation
This model has been tested for 8-cement industry in India. Product homogeneity
is the primary reason for choosing cement industry. Eight dominant companies have been
chosen for the purpose, availability of quantitative information has influence the
selection. The period considered ranges from 1968-1988. Thus the present paper carries
out a time cross study.
Data on share prices and company fundamentals are collected from the Bombay
stock exchanges official directories and data on the prices of cement and interest rates are
taken and compiled from RBI bulletin and report on currency and finance. The purpose
of the study is to explain the long run trend; therefore, only annual data have been
analyses. The best-fitted equation of the model expected, as expected is the equation,
which explains the sales proceed, by product price. (R2) has median as high as 0.81 and F
–vales are significance for all companies
The share price equation has behaved nicely explanatory power of companies (the
value of the (R2) is remarkably high with median 0.60 and F-statistics are significance
except one company.
Pt = ß 10 + ß11 D t + ß12 Dt-1 + u1t
The next important relationship of this model is undoubtedly the dividend
equation.
Dt = ß20 + ß21Et + ß22 Rt + u t2

The empirical results are however, not so assertive for other two relationships of
the model, namely the earning per share equation and the equation for the retained
earnings. It perhaps indicates the complicacy of functional relationship among the
considered variables. Similarly incorporation of the industry specific macro – variables
may be suggested for the better fit of the equation for retained earnings.
The fourth equation of the model has been substantially modified; thus it may not
sound meaningfully to compare the fourth equation of the modified model with that of
the older one. The endogenous variable- investment has been made exogenous in the
modified in the system and retained earning is considered as a dependent variable. The
median value of (R2) for the investment equation of the earlier model was as low as 0.03.
The corresponding figure for the retains earning equation in the modified system stands
at 0.28. Thus, the retained earning equation is better fit to the factual word than
investment-sales relationship formulation.
Thus they reiterate-
That system approach is closer to reality than single equation technique.

Comparison of empirical results of the two versions of the models, the earlier simplified
and the present modified, further supports attempted modification. There is however,
scope-e for further improvement in modeling. The present exercise has considered
linkage between share market and product market. Macro aspects have not been
adequately accommodated in the model formulation. The two markets are again
interwoven in a much more complicated manner than postulated. Thus more refined
structural equation and model formulation are essential.

CHAP TE R I II
RES E ARC H
ME TH ODOL OGY

RESEARCH METHODOLOGY
OBJECTIVES AND SCOPE OF STUDY
 The main objective of the study is to determine the determinants of equity share
prices in Indian corporate sector
 To study the empirical relationship of explanatory variables namely, dividend
per share, earning per share, price earning ratio, book value per share, size.
Cover return on capital employed and payout ratio on the market price of the
shares in the past-reform era.
 To know the relationship between dependent and independent variables of 104
companies over a period of six years spanning from 2000 to 2005
SAMPLE AND PERIOD OF STUDY
The data employed in the study relates to manufacturing companies listed in on

Bombay Stock Exchange. A sample of 104 companies covering the following industries
have been finally selected for the purpose of the study.
TABLE 3
INDUSTRY NO OF COMPANIES
Banking & Financial 30
Hotel & Resorts 30
Petroleum &Lubricant 14
Drugs & pharmaceuticals 30
TOTAL 104

While selecting the sample of the companies from six industries, the following criteria
are adopted:
 The necessary financial data required for calculating the measures of dependent
and independent variable pertaining to all the years 2000-2005 is available.
 The companies did not skip dividend for any two successive years are included in
the sample.
 The companies whose average earning per share of any three successive years is
not zero or negative is also considered.
 Further only those companies whose price data is available are retained in the
sample size.
 The listed shares on Bombay Stock Exchange are considered.
SOURCES OF DATA
The data relating to the companies was taken from the ‘PROWESS’ database of the
Centre for Monitoring Indian Economy (CMIE) and Bombay Stock Exchange Official
Directory. The supplementary sources of data were:
 Financial journals/ dailies like capital market, business India, fortune India, and
others financial news papers like economic times and financial express were also
used
 Data regarding the share prices were taken from the website: www.bseindia.com
 Coefficient of determination for various industries were calculated with the help
of SPSS10 software
PERIOD OF DATA
The study has been conducted for the period of past five years i.e. 2001 to 2005
and the total sample were of sixty companies mainly of manufacturing sectors divided
into six different categories as mentioned above.

STATISTICAL PROCEDURE
To analyze the determinants of equity the following model has been used.
Regression model: “the linear multiple regression” approach has been applied primarily
to minimize the problem of multicollinearity. This technique of multivariate analysis was
selected because it is the most appropriate tool evaluating the individual and combined
effect of set of independent variables on dependent variable. The significance of
coefficient of various explanatory variables was tested at 1% and 5% by computing t-
values. To determine the proportion of explained variation in dependent variables,
coefficient of multiple determinations R2 was worked out. The overall significance of
regression equation was tested with the help of F-values.
VARIABLES USED IN DETERMINIG THE EQUITY SHARE PRICES
For the purpose of empirical analysis, share price has been assumed to be
dependent variable while other factors have been taken as independent variable. To
explain the share prices in the year ‘t’, data used to calculate the values of explanatory
variables relate to the year ‘t’ (t refers to the year, the share price of which is being
explained). This is based on the assumption that the dividend decisions made by a
company in a given year as well as other variables are apt to affect the market price of its
share in the following year when the data is publicly made available.
 Share Price (SP)

The forces of demand and supply in the market mainly determine the market price of the
share it is the balance struck between the buyer and seller.
SP = (PH + PT) / 2 PH is the highest market price

PL is the lowest market price
t is the time period

 Book Value (BV)

It also known as net asset value per share because it measures the amount of
assets, which the corporation has on behalf of each equity share. BV shows the
investment per share made in the business by the shareholder’s .a high book value usually
indicates that the company has a good record of past performance. i.e., high reserves
therefore high market price
Book value per share = equity share capital + shareholders reserves
Total no. of equity shares outstanding.
 Cover (C)
It shows the extent to which the dividend per share is purchased by the earning of
the company. Cover has negative relationship with markets price.
Cover = profit after tax and preference dividend / equity dividend

Or
Cover = earning per share /dividend per share.
 Dividend per share (DPS)

This relates to the amount of dividend declared per share. The net profit after
taxes belong to shareholders but the income that they really receive is the amount of
earnings distributed and paid as cash dividend. The dividend generally influence the
share price in positive direction
Dividend per share = Total amount (dividend) paid to equity shareholder

Number of equity shares outstanding

 Earnings per share (EPS)
The equity shareholders are the sole claimants of the net earnings of the
corporation after making payments of dividend to the preference shareholder. The
significance of this ratio flows from the fact that higher the earnings per share, the more
is the scope for a higher rate of dividend and also of retained earning, to built up the inner
strength of the company, there fore higher EPS would increase the market price and vice
versa.
Earnings per share = net income after interest, income tax and preference dividend
Number of equity shares outstanding.
 Dividend payout ratio (P)
Shows the percentage share of the net profit after taxes and preferences dividend
paid out as dividend to equity shareholders. The below formula predicts relation between
payout ratio and the price earning multiple. Conversely it means that there is an inverse
relation between payout ratio and share price changes.
Dividend payout ratio = Total dividend to equity shareholders *100

Total net profit belonging to equity shareholders
Or
Dividend payout ratio = Dividend per share /Earning per share.

 Price / earning ratio (P/E)

It expresses the relationship between the market price of company share and its
earning per share. It indicates the extent to which the earnings of each share are covered
by its price. The ratio helps an investor to make an approximate calculation of the time
required to recover his investment in a companies share. The price-earning ratio has
positive relationship with market price.
P/E = market price per share / earnings per share.
 Return on capital employed (ROCE)

It indicates the efficiency with which a company utilizes invested in it. This ratio
reveals how well the resources of a firm are being used, higher the ratio better are the
results. The inter-firm comparison of this ratio determines whether the investments are
attractive or not as the investor would like invest only where return is high. It has
generally positive relationship with market price
ROCE = Profit after Tax + Interest *100

Total Capital Employed
LIMITATIONS OF THE STUDY
Some limitations of the stydu are..
 The main draw back of the study is time constraint and availability of the data.
 And only study covers four sectors and rest of them are not taken under it.
 Only hundread and four companies are under the study.

CHAP TE R I V
AN AL Y S I S OF D A TA
& DE SCRIP TION

DATA ANALYSIS AND INTERPRETATION
To determine the equity share prices the explanatory variables namely, dividend
per share, earnings per share, cover, dividend payout ratio, return on capital employed,
price earning ratio, book value and size these variables are treated as independent
variable. And the market price is considered to be dependent variable.
For the determinants of equity share prices the data has been collected for four
different sectors for five years from 2000-2005.
To analyze the determinants of equity the following model has been used.
Regression model:
“The linear multiple regression” approach has been applied primarily to

minimize the problem of multicollinearity. This technique of multivariate analysis was
selected because it is the most appropriate tool evaluating the individual and combined
effect of set of independent variables on dependent variable. The significance of
coefficient of various explanatory variables was tested at 10% and 5% by computing t-
values. To determine the proportion of explained variation in dependent variables,
coefficient of multiple determinations R2 was worked out. The overall significance of
regression equation was tested with the help of F-values

AGGREGATE COMPANIES YEAR WISE REGRESSION RESULTS
YEAR 2000 (TABLE 4)
Model Summary
Adjusted Std. Error of

Model R R Square R Square the Estimate
1 .755a .570 .539 311.939974
2 .753b .567 .541 311.420014
3 .750c .563 .541 311.335837
a. Predictors: (Constant), ROCE, DPR, BV, PE, COVER,
DPS, EPS
b. Predictors: (Constant), ROCE, BV, PE, COVER, DPS,
EPS
c. Predictors: (Constant), BV, PE, COVER, DPS, EPS
ANOVAd
Sum of
Model Squares df Mean Square F Sig.
1 Regression 12398379 7 1771196.937 18.202 .000a
Residual 9341429 96 97306.548
Total 21739807 103
2 Regression 12332512 6 2055418.646 21.194 .000b
Residual 9407295 97 96982.425
Total 21739807 103
3 Regression 12240667 5 2448133.358 25.257 .000c
Residual 9499140 98 96930.003
Total 21739807 103
a. Predictors: (Constant), ROCE, DPR, BV, PE, COVER, DPS, EPS
b. Predictors: (Constant), ROCE, BV, PE, COVER, DPS, EPS
c. Predictors: (Constant), BV, PE, COVER, DPS, EPS
d. Dependent Variable: SP

Coefficientsa
Standardi
zed
Unstandardized Coefficien
Coefficients ts
Model B Std. Error Beta t Sig.
1 (Constant) -195.794 62.488 -3.133 .002
BV .849 .622 .299 1.365 .176
COVER 60.614 13.078 .369 4.635 .000
DPS 72.250 10.977 .981 6.582 .000
EPS -13.795 2.842 -.895 -4.854 .000
DPR -96.103 116.809 -.067 -.823 .413
PE 3.973 .917 .301 4.331 .000
ROCE -1.27E-03 .001 -.061 -.882 .380
2 (Constant) -212.233 59.109 -3.591 .001
BV 1.079 .556 .380 1.942 .055
COVER 61.244 13.033 .373 4.699 .000
DPS 67.954 9.639 .923 7.050 .000
EPS -14.331 2.762 -.930 -5.188 .000
PE 3.798 .891 .288 4.263 .000
ROCE -1.39E-03 .001 -.066 -.973 .333
3 (Constant) -214.328 59.054 -3.629 .000
BV 1.033 .553 .364 1.867 .065
COVER 59.723 12.936 .364 4.617 .000
DPS 68.735 9.603 .933 7.158 .000
EPS -14.273 2.761 -.926 -5.170 .000
PE 3.837 .890 .291 4.313 .000
a. Dependent Variable: SP

YEAR 2001 (TABLE 5)

Model Summary

1 .788a .621 .593 183.749881
2 .788b .621 .597 182.800526
3 .787c .619 .600 182.221002
a. Predictors: (Constant), ROCE, PE, DPS, COVER, DPR,
EPS, BV
b. Predictors: (Constant), ROCE, PE, DPS, COVER, DPR,
EPS
c. Predictors: (Constant), PE, DPS, COVER, DPR, EPS
d
ANOVA
Sum of
1 Regression5302190 7 757455.736 22.434 .000a
Residual 3241346 96 33764.019
Total 8543536 103
2 Regression5302181 6 883696.806 26.445 .000b
Residual 3241355 97 33416.032
Total 8543536 103
3 Regression5289496 51057899.116 31.860 .000c
Residual 3254040 98 33204.494
Total 8543536 103
a. Predictors: (Constant), ROCE, PE, DPS, COVER, DPR, EPS, BV
b. Predictors: (Constant), ROCE, PE, DPS, COVER, DPR, EPS
c. Predictors: (Constant), PE, DPS, COVER, DPR, EPS

a
Coefficients
Standardi
zed
Coefficients ts
1 (Constant) 14.150 34.323 .412 .681
BV -7.91E-03 .476 -.005 -.017 .987
COVER 23.918 6.077 .270 3.936 .000
DPS 63.133 10.021 1.380 6.300 .000
EPS -7.229 1.648 -.939 -4.385 .000
DPR -406.671 128.622 -.254 -3.162 .002
PE 4.690 1.106 .276 4.241 .000
ROCE -6.18E-04 .001 -.039 -.602 .549
2 (Constant) 14.014 33.149 .423 .673
COVER 23.911 6.031 .269 3.964 .000
DPS 63.010 6.703 1.377 9.400 .000
EPS -7.249 1.115 -.941 -6.503 .000
DPR -406.130 123.787 -.254 -3.281 .001
PE 4.692 1.091 .276 4.300 .000
ROCE -6.21E-04 .001 -.039 -.616 .539
3 (Constant) 13.449 33.031 .407 .685
COVER 23.607 5.992 .266 3.940 .000
DPS 63.313 6.664 1.384 9.501 .000
EPS -7.317 1.106 -.950 -6.617 .000
DPR -410.523 123.190 -.256 -3.332 .001
PE 4.676 1.088 .275 4.300 .000

YEAR 2002 (TABLE 6)

Model Summary

1 .765a .586 .555 174.198712
2 .765b .586 .559 173.309480
3 .761c .580 .558 173.636349
4 .759d .575 .558 173.612706
5 .753e .567 .554 174.445099
a. Predictors: (Constant), ROCE, PE, DPS, COVER, DPR,
BV, EPS
b. Predictors: (Constant), PE, DPS, COVER, DPR, BV,
EPS
c. Predictors: (Constant), DPS, COVER, DPR, BV, EPS
d. Predictors: (Constant), DPS, COVER, BV, EPS
e. Predictors: (Constant), DPS, BV, EPS
ANOVAf
Sum of
1 Regression 4032469 7 576066.932 18.984 .000a
Residual 2852448 94 30345.191
Total 6884916 101
2 Regression 4031480 6 671913.298 22.370 .000b
Residual 2853437 95 30036.176
Total 6884916 101
3 Regression 3990557 5 798111.329 26.472 .000c
Residual 2894360 96 30149.582
Total 6884916 101
4 Regression 3961203 4 990300.857 32.855 .000d
Residual 2923713 97 30141.372
Total 6884916 101
5 Regression 3902669 3 1300889.806 42.749 .000e
Residual 2982247 98 30431.093
Total 6884916 101
a. Predictors: (Constant), ROCE, PE, DPS, COVER, DPR, BV, EPS
b. Predictors: (Constant), PE, DPS, COVER, DPR, BV, EPS
c. Predictors: (Constant), DPS, COVER, DPR, BV, EPS
d. Predictors: (Constant), DPS, COVER, BV, EPS
f. Dependent Variable: SP

Coefficients a
Standardi
zed
Coefficients ts
1 (Constant) 50.784 29.471 1.723 .088
BV -1.720 .308 -1.448 -5.578 .000
COVER 6.909 5.594 .095 1.235 .220
DPS 58.817 7.460 1.553 7.885 .000
EPS 2.718 1.814 .405 1.499 .137
DPR -65.604 49.237 -.096 -1.332 .186
PE .835 .718 .084 1.162 .248
ROCE 1.249E-04 .001 .012 .181 .857
2 (Constant) 50.959 29.305 1.739 .085
BV -1.714 .305 -1.443 -5.620 .000
COVER 7.078 5.487 .097 1.290 .200
DPS 58.662 7.373 1.549 7.957 .000
EPS 2.716 1.805 .405 1.505 .136
DPR -65.721 48.982 -.096 -1.342 .183
PE .834 .715 .084 1.167 .246
3 (Constant) 48.187 29.264 1.647 .103
BV -1.751 .304 -1.474 -5.765 .000
COVER 7.829 5.459 .108 1.434 .155
DPS 59.524 7.349 1.572 8.099 .000
EPS 2.781 1.807 .415 1.539 .127
DPR -45.192 45.801 -.066 -.987 .326
4 (Constant) 39.257 27.825 1.411 .161
BV -1.726 .303 -1.453 -5.702 .000
COVER 7.600 5.454 .104 1.394 .167
DPS 58.546 7.281 1.546 8.041 .000
EPS 2.798 1.807 .417 1.549 .125
5 (Constant) 62.899 22.161 2.838 .006
BV -1.751 .304 -1.474 -5.767 .000
DPS 56.096 7.100 1.481 7.901 .000
EPS 3.609 1.719 .538 2.100 .038

YEAR 2003 (TABLE 7)

Model Summary

1 .644a .414 .372 150.7263
2 .644b .414 .378 149.9475
3 .644c .414 .385 149.1879
4 .643d .414 .390 148.4836
5 .643e .413 .396 147.8333
a. Predictors: (Constant), ROCE, DPR, COVER, DPS, PE,
BV, EPS
b. Predictors: (Constant), ROCE, COVER, DPS, PE, BV,
EPS
c. Predictors: (Constant), COVER, DPS, PE, BV, EPS
d. Predictors: (Constant), DPS, PE, BV, EPS
ANOVAf
Sum of
1 Regression 1543937 7 220562.497 9.709 .000a
Residual 2180969 96 22718.424
Total 3724906 103
2 Regression 1543935 6 257322.419 11.445 .000b
Residual 2180972 97 22484.244
Total 3724906 103
3 Regression 1543717 5 308743.440 13.872 .000c
Residual 2181189 98 22257.031
Total 3724906 103
4 Regression 1542215 4 385553.805 17.488 .000d
Residual 2182691 99 22047.384
Total 3724906 103
5 Regression 1539439 3 513146.404 23.480 .000e
Residual 2185467 100 21854.670
Total 3724906 103
a. Predictors: (Constant), ROCE, DPR, COVER, DPS, PE, BV, EPS
b. Predictors: (Constant), ROCE, COVER, DPS, PE, BV, EPS
c. Predictors: (Constant), COVER, DPS, PE, BV, EPS
d. Predictors: (Constant), DPS, PE, BV, EPS
f. Dependent Variable: SP

Coefficients a
Standardi
zed
Coefficients ts
1 (Constant) 25.864 19.793 1.307 .194
BV .683 .278 .955 2.458 .016
COVER -3.73E-06 .000 -.021 -.260 .795
DPS 21.275 4.004 1.048 5.313 .000
EPS -4.415 1.261 -1.459 -3.502 .001
DPR .104 9.101 .001 .011 .991
PE 3.880E-02 .114 .027 .339 .735
ROCE -4.17E-05 .000 -.008 -.098 .922
2 (Constant) 25.863 19.691 1.313 .192
BV .683 .276 .955 2.473 .015
COVER -3.73E-06 .000 -.021 -.262 .794
DPS 21.278 3.974 1.048 5.355 .000
EPS -4.416 1.252 -1.459 -3.527 .001
PE 3.895E-02 .113 .027 .345 .731
ROCE -4.16E-05 .000 -.008 -.098 .922
3 (Constant) 25.530 19.298 1.323 .189
BV .681 .274 .953 2.484 .015
COVER -3.69E-06 .000 -.020 -.260 .796
DPS 21.311 3.939 1.050 5.410 .000
EPS -4.416 1.245 -1.459 -3.546 .001
PE 3.931E-02 .112 .027 .350 .727
4 (Constant) 25.177 19.159 1.314 .192
BV .673 .271 .942 2.482 .015
DPS 21.383 3.911 1.053 5.467 .000
EPS -4.391 1.236 -1.451 -3.553 .001
PE 3.967E-02 .112 .027 .355 .723
5 (Constant) 26.201 18.858 1.389 .168
BV .676 .270 .945 2.503 .014
DPS 21.307 3.888 1.049 5.480 .000
EPS -4.394 1.230 -1.452 -3.572 .001

YEAR 2004 (TABLE 8)
Model Summary

1 .700a .490 .458 248.655287
2 .700b .490 .464 247.415568
a. Predictors: (Constant), ROCE, PE, DPS, COVER, BV,
EPS
b. Predictors: (Constant), ROCE, DPS, COVER, BV, EPS
c
ANOVA
Sum of
1 Regression
5755834 6959305.591 15.515 .000a
Residual5997457 97 61829.452
Total 11753290 103
2 Regression
5754273 1150854.595
5 18.800 .000b
Residual5999017 98 61214.463
Total 11753290 103
a.Predictors: (Constant), ROCE, PE, DPS, COVER, BV, EPS
b.Predictors: (Constant), ROCE, DPS, COVER, BV, EPS
c.Dependent Variable: SP

a
Coefficients
Standardi
zed
Coefficients ts
1 (Constant) -39.835 41.281 -.965 .337
BV 1.114 .447 1.121 2.492 .014
COVER 33.402 10.554 .262 3.165 .002
DPS 44.480 7.062 1.890 6.299 .000
EPS -9.945 1.694 -2.695 -5.870 .000
PE 1.157E-03 .007 .012 .159 .874
ROCE -1.10E-03 .001 -.136 -1.794 .076
2 (Constant) -39.584 41.045 -.964 .337
BV 1.102 .438 1.108 2.516 .014
COVER 33.520 10.476 .263 3.200 .002
DPS 44.203 6.809 1.879 6.492 .000
EPS -9.858 1.595 -2.671 -6.182 .000
ROCE -1.10E-03 .001 -.136 -1.802 .075

YEAR 2005 (TABLE 9)

Model Summary

1 .673a .454 .413 230.806493
2 .672b .452 .418 229.868999
3 .670c .449 .420 229.421399
a. Predictors: (Constant), ROCE, PE, DPS, DPR, COVER,
EPS, BV
b. Predictors: (Constant), PE, DPS, DPR, COVER, EPS,
BV
c. Predictors: (Constant), PE, DPS, COVER, EPS, BV
d
ANOVA
Sum of
1 Regression4199923 7 599989.058 11.263 .000a
Residual 5060806 95 53271.637
Total 9260729 102
2 Regression4188112 6 698018.714 13.210 .000b
Residual 5072617 96 52839.757
Total 9260729 102
3 Regression4155214 5 831042.728 15.789 .000c
Residual 5105515 97 52634.178
Total 9260729 102
a. Predictors: (Constant), ROCE, PE, DPS, DPR, COVER, EPS, BV
b. Predictors: (Constant), PE, DPS, DPR, COVER, EPS, BV
c. Predictors: (Constant), PE, DPS, COVER, EPS, BV

a
Coefficients
Standardi
zed
Coefficients ts
1 (Constant) 63.673 39.965 1.593 .114
BV -.732 .307 -.960 -2.387 .019
COVER 21.988 9.025 .211 2.436 .017
DPS 37.281 6.802 1.866 5.481 .000
EPS -2.099 1.020 -.591 -2.058 .042
DPR 108.712 135.933 .080 .800 .426
PE -1.567 .568 -.223 -2.759 .007
ROCE -2.32E-04 .000 -.037 -.471 .639
2 (Constant) 63.784 39.802 1.603 .112
BV -.750 .303 -.984 -2.474 .015
COVER 21.251 8.853 .204 2.401 .018
DPS 37.598 6.741 1.882 5.577 .000
EPS -2.080 1.015 -.586 -2.050 .043
DPR 106.775 135.319 .078 .789 .432
PE -1.567 .566 -.223 -2.770 .007
3 (Constant) 79.503 34.391 2.312 .023
BV -.845 .277 -1.109 -3.049 .003
COVER 22.642 8.658 .217 2.615 .010
DPS 40.827 5.347 2.044 7.635 .000
EPS -2.188 1.004 -.616 -2.180 .032
PE -1.492 .557 -.212 -2.681 .009

ANLYSIS AND INTERPRETATION OF AGGREGATE

COMPANIES REGRESSION RESULTS
TABLE 10
AGG IND BV COVER DPS EPS DPR PE ROCE Adj R2 F-Value

2000 Y** Y* Y* Y* Y* Y* N 0.539 18.202*
2001 N Y* Y* Y* Y* Y* N 0.593 22.434*
2002 Y* N Y* Y* N N N 0.555 18.984*
2003 Y* N Y* Y* N N N 0.372 9.709*
2004 Y* Y* Y* Y* N N Y** 0.458 15.515*
2005 Y* Y* Y* Y* N Y* N 0.413 11.263*
It is clearly shows from the regression results from various years that in the
aggregate industry earning per Share is the most important determinant of market price
among the different variables. And the coefficient of respective years is positively
significance at 5% level. Dividend per share is also significance in all the years. And their
respective coefficients are positively significance at 5% level
The coefficient of book value per share is positively significance at 55 level in the
year 2003 and 2004.but in the year 2000 it is positive significance at 10% level. And in
case of 2002 and 2005 negatively significance at 5% level, in 2001 it is not significance.
Cover is also found to be positive significance at 5% in all the year except 2002
and 2003.Dividend per ratio is negatively significance at 5% level in the 2001 and not
significance in the rest of the years. Price Earning ratio which is positively significance at
5% level in 2000, 2001 and negative significance in the year 2005. Return on capital
Employed has negative significance in the year 2004 and rests of the year are not
significance.

The coefficient of determination (R2) is increased in the year 2001, 2004

respectively but decreases in 2005 at the level of 5% significance. And the R2 is
explained 41.3% in the 2005 which was lower than compared to 53.9% in 2000 which
has decrease in variation. All these leads that the Earning per Share is the most
determinant of share price followed by the Dividend Per share and cover
The average R2 of all sample companies is 51.7% of significance in the study but
rest of 49% was not significance so study shows that there are some other determinants
which are directly affects on share price our study din’t focused on it. Considering into
the earning per share has negative value in all the year except in 2002 hence the earning
per share also has a negative relation with share price. If there is positive increase in
earning per share there will be higher the market price.
Dividend per share has more significance in its value in all the year which
generally influences the share price in positive direction higher the dividend higher would
be the share price. And rest of the variables dint shows the positive reaction all the years.
SECTOR WISE ANALYSIS
BANKING AND FINANCIAL INSTITUTION
As far as industry/institution wise analysis is concerned, banking and financial

institutions price earning ratio has a positively significance at 5% level in all the year
except for 2005 and even book value per share is positively significance at 5% level
except in 2000.
Where as concerned with the cover and earnings per share, which is not
significance in all the years and cover has negatively significance in the year2002 at 10 %
level. Dividend per share also shown positive significance at 5% in 2000 Dividend per

ratio results in 5% level of significance in 2002 and return on capital employed also in
2000 and 2003.
The coefficient of determination R2 indicates the variable could explain 71.4 in

2005, but it was 91.9 compared with 2000 the computed F-Values found to be
significance at 5% level of significance in all the year in this sector nearly 80% of the
share price determined by the variables enter and in study shows that the in most of the
year dividend payout ratio has negatively significance this may effect on determing the
market share price
Hence the analysis says that the price earning ratio is the most important factor
followed by the book value per share that affects the share prices in banking and financial
institutions.
HOTEL AND RESORTS SERVICE INDUSTRIES
In hotel and service industries, the book value per share found to be positive
significance at 5% level in all the year except in 2000 which was not significance at 5%
as well as 10% level of significance. Cover has positive significance at 5% level in 2000.
And negatively significance at 10% level in 2002.
Dividend per share has positive at 5% level in the year 2000, 2002, and 2003. And
has 10% level of significance in the year2001. Earning per share, dividend per share and
return on capital employed has no significance.
The coefficient of determination R2 was 94% in 2005, which was 58.8% in 2000.
And the F –Value found to be significance at 5%level in all the years. Hence the result
proved excessively high book value often raises the expectations for bonus issue
significance affects the market price of share.

PETROLEUM AND LUBRICANT INDUSTRIES
In petroleum and lubricant industries book value per share is treated as the most
important determinant of share price. It has a positive significance at 5% level of in 2003,
2004 and 2005. Cover has positive significance at 5% and 10% in 2000 and 2001
respectively.
Dividend per share only significance at 5% level in 2002 and 2003.earning price
per ratio has positive significance in 2000 and 2001. And rest of the variables in the study
for the remaining years is not significance
The coefficient of determination R2 varies from 77.3% that of in 2000 to 74.1% in

2005.and F-values to be found positive significance at 5% level in all the respective
years. Hence the book value per share is the main determinant factor, which affects on
market price in petroleum and lubricant industries.
PHARMACEUTICALS AND DRUG INDUSTRIES
In pharmaceutical and drug industries, dividend per share has the most
significance at 5% level in all the year except in 2001.book value per share also has
positive significance in first two years and last year. Price earning ratio also has positive
significance at 5% level in first two years and 2003. Cover, which also has positive
significance at 5% level in first two years and 2004. Rest of the variables is not
significance
The coefficient of determination R2 found in 2000 was 96.7% but it declines to
76.5% in 2005. And F – values to be found positively significance in all the year.

TABLE 11: SUMMARY OF ALL REGRESSION RESULTS
DETERMINANTS OF EQUITY SHARE PRICE IN VARIOUS REGRESSION RESULTS

VARI/YEAR INDUSTRY BV COVER DPS EPS DPR PE ROCE
2000 B & F N N Y* N Y* Y* Y*
H&R N Y* Y* N Y* Y* Y*
P&L Y* Y* N Y* N N N
P&D Y** Y* Y* Y* Y* Y* N
AGGREGATE Y** Y* Y* Y* Y* Y* N
2001 B & F Y* N Y** N N Y* N
H&R Y* N Y** N Y** N N
P&L Y* Y** N Y* N N N
P&D Y* Y* N N Y* Y* Y*
AGGREGATE N Y* Y* Y* Y* Y* N
2002 B & F Y* Y** N N Y* Y* Y*
H&R Y* N Y* N Y** N N
P&L N N Y* N Y* Y* N
P&D N N N Y* N N N
AGGREGATE Y* N Y* Y* N N N
2003 B & F Y* N N N Y* Y* Y*
H&R Y* N Y* N Y* Y* N
P&L Y* N Y* Y* N N N
P&D N N Y* N Y* Y* N
AGGREGATE Y* N Y* Y* N N N
2004 B & F Y* N N N N Y* Y*
H&R Y* N N N N N N
P&L Y* N N N N N N
P&D N Y* Y* N N N N
AGGREGATE Y* Y* Y* Y* N N Y**
2005 B & F Y* N N N N N Y*
H&R Y* N N N N N N
P&L Y* N N N N N N
P&D Y* N Y* N N Y* N
AGGREGATE Y* Y* Y* Y* N Y* N
Y* & Y** INDICATES SIGNIFICANCE AT 5% & 10% LEVEL respectively.
B & F banking and financial: H & R hotel and resorts: P & L petroleum and lubricant: P & D
pharmaceuticals and drug companies.

TABLE 12
F-values and adjusted R2
COEFFICIENT OF DETERMINATION OF VARIOUS INDUSTRY REGRESSION RESULTS
YEAR/INDUSTRY VALUES 2000 2001 2002 2003 2004 2005 AVG

2
Adj R 0.919 0.552 0.582 0.73 0.825 0.714 0.801
BANKING
&FINANCIAL F- value 48.128* 6.108* 6.763* 12.179* 20.494* 10.989* 17.659*
2
Adj R 0.588 781 0.789 0.854 0.819 0.903 0.946
HOTELS &
RESORTS F- value 6.92* 15.755* 16.488* 25.307* 19.75* 39.426* 73.647*
2
Adj R 0.773 0.64 0.853 0.826 0.768 0.741 0.56
PETRLOLEUM
&LUBRICANTS F- value 7.321* 4.296* 10.944* 9.806* 7.133* 6.312* 3.366*
2
Adj R 0.967 0.95 0.601 0.761 0.846 0.765 0.775
PHARMACEUTICALS F- value 120.9* 79.499* 7.229* 14.183* 27.5* 14.451* 17.835*

2
Adj R 0.539 0.593 0.555 0.372 0.458 0.413 0.517
AGGREGATE
INDUSTRY F- value 18.202* 22.434* 18.984* 9.709* 15.515* 11.263* 16.78*
Y* INDICATES AT 5% LEVEL

CHAP TE R V
SUM MARY
& CO NCLUSION

CONCLUSION
The present study attempts to examine the empirical relationship of explanatory

variables namely, dividend per share, earning per share ,price earning ratio, book value
per share, cover, return on capital employed and payout ratio on market price of shares in
the post reform era of liberalization. The relationship between independent variables and
dependent variable of 104 companies is studied over six years ranging from 2000-2005.
The result revealed that book value per share are important determinants of share
price as they are an index of sound financial position of the companies.but practically if
we looked that book value to market price is not important or highly significance in
determination of market price.
The result revealed Dividend per share is important determinant of share price,
which shows that the companies should adopt a liberal dividend policy to activate the
primary as well secondary market. A high dividend rate may also help in increasing the
market price and result in high capital appreciation to the shareholders as depicted by
payout ratio but practically growing companies and companies which have high potential
future growth rate they may not give high dividend and they reserved for future
expansion.
Our statistical study reveal that Price earning ratio not highly affected to market
price but practically since earning per share highly affecting in determination of market
price. Since earning per share and market price are essential variables while calculating
the price earning ratio so the price earning ratio is highly significance in determination of
market price.
Our statistical study reveal that ROCE is not significanclly affecting the
determination of share prices. But investors who are looking for long term investment
ROCE is the cut off rate. It means that they are looking minimum appreciation of market
price.

CHAP TE R V I
BIBIL OGR E A PHY
&ANN EX U R ES

BIBILOGRAPHY
JOURNLAS:
 Downs T W. (1991) “An alternative approach to fundamental analysis: The asset
side of the equation”, journal of portfolio management, vol 17, No. 2, pp 6-17.
 Dutta S K, (2004), “The share Price and its Valuation”, The Management
Accountant, vol. 39, No. 4, pp 274-282.
 Malkar B and Gupta R (2002),” Determinants of Share Price-A system approach:
The modified Model”, finance India, vol. 16, No. 4, pp 1409-1418.
 Tuli Nishi and Mittal R K ,(2001),”Determinants of price Earning Ratio”, finance
India, val.15, No. 4, pp. 1235-1250.
 Zahir M A and Khanna, Y, (1982),” Determinants of stock prices in India”, The
Chartered Accountant, vol. 30, No. 8, pp. 521-523.
SOFTWARE USED:
Prowess software
Capitaline
SPSS 10
WEBSITES:
www.nseindia.com
www.google.com
www.yahoo.com/finance
www.equitymaster.com

ANNEXURES
LIST OF COMPANIES UNDER THE STUDY
BANKING AND FINANCIAL DRUGS AND PHARMACEUTICALS
Bank Of Baroda Aarti Drugs Ltd.
Bank Of India Alembic Ltd.
Bank Of Madura Ltd. [Merged] Arvind Remedies Ltd.
Bank Of Punjab Ltd. [Merged] Aurobindo Pharma Ltd.
Bank Of Rajasthan Ltd. Aventis Pharma Ltd.
Centurion Bank Of Punjab Ltd. Burroughs Wellcome (India) Ltd. [Merged]
City Union Bank Ltd. Cipla Ltd.
Corporation Bank D I L Ltd.
Dena Bank Dr. Reddy'S Laboratories Ltd.
Dhanalakshmi Bank Ltd. Glaxosmithkline Pharmaceuticals Ltd.
Federal Bank Ltd. Glenmark Pharmaceuticals Ltd.
Global Trust Bank Ltd. [Merged] J B Chemicals & Pharmaceuticals Ltd.
H D F C Bank Ltd. Jagsonpal Pharmaceuticals Ltd.
I C I C I Bank Ltd. Merck Ltd.
I D B I Bank Ltd. [Merged] Morepen Laboratories Ltd.
I N G Vysya Bank Ltd. Nicholas Piramal India Ltd.
Indusind Bank Ltd. Novartis India Ltd.
Industrial Development Bank Of Orchid Chemicals & Pharmaceuticals Ltd.
India Ltd.
Jammu & Kashmir Bank Ltd. Panacea Biotec Ltd.
Kotak Mahindra Bank Ltd. Pfizer Ltd.
Nedungadi Bank Ltd. [Merged] Pharmacia Healthcare Ltd. [Merged]
Oriental Bank Of Commerce Ranbaxy Laboratories Ltd.
South Indian Bank Ltd. Shasun Chemicals & Drugs Ltd.
State Bank Of Bikaner & Jaipur Sun Pharmaceutical Inds. Ltd.
State Bank Of India Syncom Formulations (India) Ltd.
State Bank Of Mysore Torrent Pharmaceuticals Ltd.
State Bank Of Travancore Unichem Laboratories Ltd.
Syndicate Bank Wockhardt Ltd.
U T I Bank Ltd. Wyeth Ltd.
United Western Bank Ltd. Zandu Pharmaceutical Works Ltd.

HOTEL AND RESORTS PETROLEUM AND LUBRICANTS
Advani Hotels & Resorts (India) Bharat Petroleum Corpn. Ltd.

Ltd.
Asian Hotels Ltd. Bongaigaon Refinery & Petrochemicals Ltd.
Benares Hotels Ltd. Castrol India Ltd.
Blue Coast Hotels & Resorts Ltd. Chennai Petroleum Corpn. Ltd.
Cindrella Hotels Ltd. Crazy Infotech Ltd.
E I H Associated Hotels Ltd. Goa Carbon Ltd.
E I H Ltd. Hindustan Petroleum Corpn. Ltd.
Fomento Resorts & Hotels Ltd. Indian Oil Corpn. Ltd.
G L Hotels Ltd. Kochi Refineries Ltd.
Gujarat Hotels Ltd. Mangalore Refinery & Petrochemicals Ltd.
H S India Ltd. Panama Petrochem Ltd.
Hotel Leelaventure Ltd. Rain Calcining Ltd.
I T C Hotels Ltd. [Merged] Reliance Industries Ltd.
Indian Hotels Co. Ltd. Savita Chemicals Ltd.
Indian Resort Hotels Ltd.
Jaypee Hotels Ltd.

Jindal Hotels Ltd.
Kamat Hotels (India) Ltd.

Khyati Multimedia Entertainment
Ltd.
Mac Charles (India) Ltd.
Oriental Hotels Ltd.
Ras Resorts & Apart Hotels Ltd.
Royale Manor Hotels & Inds. Ltd.
Savera Hotels Ltd.
Sayaji Hotels Ltd.
Sinclairs Hotels Ltd.
Sterling Holiday Resorts (India)
Ltd.
U G Hotels & Resorts Ltd.
Velan Hotels Ltd.
Viceroy Hotels Ltd.

Determinants of Equity Share Prices

Cargado por

Información del documento

Descripción original:

Derechos de autor

Formatos disponibles

Compartir este documento

Compartir o incrustar documentos

Opciones para compartir

¿Le pareció útil este documento?

¿Este contenido es inapropiado?

Copyright:

Formatos disponibles

Determinants of Equity Share Prices

Cargado por

Copyright:

Formatos disponibles

DETERMINANTS OF EQUITY SHARE PRICES

Dissertation Submitted in partial fulfillment for the award

UNDER THE GUIDANCE OF

Dr: T.V. N. RAO

M.P.BIRLA INSTITUTE OF MANAGEMENT

M P BIRLA INSTITUTE OF MANAGEMENT -1-

I hereby declare that this dissertation work entitled

BANGALORE BANDI PRASAD SANGAPPA

M P BIRLA INSTITUTE OF MANAGEMENT -2-

I here by certify that this project dissertation report is undertaken

M P BIRLA INSTITUTE OF MANAGEMENT -3-

I here by certify that project work embodied in the dissertation

M P BIRLA INSTITUTE OF MANAGEMENT -4-

As students collect accolades in the form of grades for the success in

I sincerely thank to Dr .T.V.N Rao my esteemed project guide for his

I also remain grateful to all my friends for their assistance to prepare

M P BIRLA INSTITUTE OF MANAGEMENT -5-

INDEX CONTENT PAGE NO

3.7 Limitations of the study 31

M P BIRLA INSTITUTE OF MANAGEMENT -6-

M P BIRLA INSTITUTE OF MANAGEMENT -7-

This study examines the empirical relationship of explanatory variables namely,

Investigation of share price changes appear to yield evidence that changes in

Knowledge of relative influence of fundamental factors on equity share prices is

M P BIRLA INSTITUTE OF MANAGEMENT -8-

M P BIRLA INSTITUTE OF MANAGEMENT -9-

The 1850 witnessed a rapid development of commercial enterprise, brokerage business

M P BIRLA INSTITUTE OF MANAGEMENT - 10 -

OTHER LEADING CITIES IN STOCK MARKET OPERATIONS

M P BIRLA INSTITUTE OF MANAGEMENT - 11 -

INDIAN STOCK EXCHANGES - AN UMBRELLA GROWTH

M P BIRLA INSTITUTE OF MANAGEMENT - 12 -

M P BIRLA INSTITUTE OF MANAGEMENT - 13 -

Growth Pattern of the Indian Stock Market

7 Market Value of 86 107 167 211 298 582 1770 5564

M P BIRLA INSTITUTE OF MANAGEMENT - 14 -

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges is limited to listed securities of public limited

M P BIRLA INSTITUTE OF MANAGEMENT - 15 -

Corporate Financial Performance

2003-04 2004-05 2004-05 2005-06 2004-05 2005-06

(Amount in Rupees crore)

M P BIRLA INSTITUTE OF MANAGEMENT - 16 -

M P BIRLA INSTITUTE OF MANAGEMENT - 17 -

Key Objectives of a Business

M P BIRLA INSTITUTE OF MANAGEMENT - 18 -

The model starts with analysis of ROCE in its two constituents

 Profit margin on sales

The same can be presented in the formula as follows.

(Net profit/ sales) * (sales/ capital employed) = Return on capital employed

M P BIRLA INSTITUTE OF MANAGEMENT - 19 -

EBT + interest*(1-T)/ capital employed, where T is the tax rate.

M P BIRLA INSTITUTE OF MANAGEMENT - 20 -

Add Back Interest for ROCE

Per Share Ratios

In stock market, a fraction of ownership known as shares is traded. Therefore in order to

M P BIRLA INSTITUTE OF MANAGEMENT - 21 -

Dividend per share

Trends in Some Key Ratios

M P BIRLA INSTITUTE OF MANAGEMENT - 22 -

M P BIRLA INSTITUTE OF MANAGEMENT - 23 -

PAPER I DETERMINANTS OF STOCK PRICE IN INDIA

OBJECTIVE OF THE STUDY