Title: Analysis of risk and returns: a study of Indian industrial sectors

Authors: Sangeeta D. Misra, Dheeraj Misra

Addresses: Indian Institute of Management, Prabandh Nagar, Off Sitapur Road, Lucknow 226 013, India. ' Jaipuria Institute of Management, Vineet Khand, Gomti Nagar, Lucknow 226 010, India

Abstract: This study aims at analysing risk and returns of different sectors of the Indian economy using both the market and accounting based information. The results based on market information show that Fast Moving Consumer Goods (FMCG), healthcare and oil and gas sectors are the most defensive sectors of the Indian economy whereas metal and Information Technology (IT) sectors are the most aggressive sectors of the Indian economy. They further show that macroeconomic factors explain the highest percentage of total absolute risk of metal, auto and capital goods sectors whereas sector specific factors explain the highest percentage of total risk of the FMCG sector. Moreover, the results indicate that market risk for different sectors of the Indian economy has not been stable over time. The results based on accounting information suggest that FMCG, metal and IT sectors are having the highest business risk whereas sectors like technology, auto and public sector units are having the least business risk. The results based on accounting information further prove that consumer durables and metal sectors are having the highest financial risk whereas FMCG, healthcare, IT and oil and gas sectors are having the least financial risk. Regarding the association of market and accounting based measures of risk, the results demonstrate that the entire risk computed on the basis of accounting information is not significantly captured by the market. It is only the financial risk which is significantly captured by the market.

Keywords: business risk; financial risk; market risk; returns; sector-specific risk; India; Indian economy; business management; fast moving consumer goods; healthcare; oil and gas; metal industries; information technology.

DOI: 10.1504/IJICBM.2007.014469

International Journal of Indian Culture and Business Management, 2007 Vol.1 No.1/2, pp.28 - 47

Published online: 10 Jul 2007 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article