Stability of Sector wise Beta: Case Study of India

Abstract

Risk measurement and analysis has been a critical issue for any investment decision because risk can be transferred but cannot be eliminated from the system. The nature and degree of risk varies from industry to industry. The risk can be categorized into two parts ; unique risk and market risk. Beta is used by all categories of investors for measurement of market risk of individual companies, portfolios and sectors. The objective of this paper is to analyze the changing risk profile and stability of beta for different sectors of the Indian economy over last one decade. The period covered for this study is 2003-2012. The sector wise indices from Bombay Stock Exchange of India are used for the purpose of analysis. The sectors which have been considered for the study are auto (BSEAUTO), banking (BSEBANK), capital goods (BSECG), consumer durables (BSECD), FMCG(BSEFMCG), healthcare (BSEHC), Information Technology (BSEIT), metal (BSEMET), oil and gas (BSEOIL), power (BSEPOWER) and reality sector(BSEREAL).The beta and R square values clearly indicate that or selected sectors show that FMCG, healthcare and IT are the most defensive sectors whereas reality, metal and IT are the most volatile sectors.