A Comparison of Risk and Return Between BSE Sensex and Bank Fixed Deposits
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Case Details:
Case Code : FINC059
Case Length : 17 Pages
Period : 1994-2008
Pub. Date : 2009
Teaching Note :Not Available
Organization : Bombay Stock Exchange
Industry : Financial Services
Countries : India
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Returns from Stock Markets
Let us have a look at the returns generated by the Indian stock market (BSE) over the last fifteen years between March 31, 1992 and March 31, 2007. The Sensex increased from 4285 points on March 31, 1992 to 13072.10 points as on March 31, 2007 (Refer Exhibit II for the BSE Sensex Chart).
The compounded annual growth rate (CAGR) recorded by the BSE Sensex during this period is 7.72 percent (Refer Table I for the annual return and standard deviation recorded by BSE Sensex between March 1992 and March 2007)...
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Returns from Fixed Deposits
Let us now examine the returns from bank fixed deposits during the period between the financial years 1991-92 and 2006-07 (Refer Table IV). The reason for taking interest rates on fixed deposits for different maturities is that it is widely believed among the general public that fixed deposits with banks are safe investments. The RBI, the banking industry regulator and watchdog of India's monetary policy, fixes the bank rate on which depends the lending and deposit rates of various commercial banks...
Exhibits
Exhibit I: Average Annual WPI Inflation (1992-2008)
Exhibit II: Movement of BSE Sensex (March 1992 - March 2007)
Exhibit III: Return and Standard Deviation of BSE Sensex (1997-2007)
Exhibit IV: Return and Standard Deviation of BSE Sensex (1999-2007)
Exhibit V: Return and Standard Deviation of BSE Sensex (2002-07)
Exhibit VI: Return and Standard Deviation of BSE Sensex (April 2004 - March
2007)
Exhibit VII: Return and Standard Deviation of BSE Sensex (April 2005 - March
2007)
Exhibit VIII: Return and Standard Deviation of BSE Sensex (April 2006 - March
2007)
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