Indian Journal of Economics and Development

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Clustering Mid-Cap Stocks in Indian Market using Multi-Variate Data Analysis Technique


Affiliations
1 Hazrat Khajar Bashir Unani Ayurvedic Medical College & Hospital Foundation, Jamalpur, Bangladesh
2 Institute of Business Management, National Council of Education Bengal, Kolkata, West Bengal, India
 

Objectives: This study attempts to identify homogeneous clusters of constituent companies of the CNX NIFTY Mid Cap 50 Index in the Indian markets based on valuation ratios.

Methods: Nine selected valuation ratios of the fifty constituent companies of the CNX NIFTY Mid Cap 50 Index have been considered for the three consecutive years from 2015-16 to 2017-18. The values were standardized to facilitate cluster analysis. Hierarchical and K-Means cluster analysis have been done to identify the clusters of homogeneous stocks in terms of valuation ratios.

Findings: It has been observed that the stocks in all the three years under study, showed two clusters. Mostly there were clear groupings of stocks into the two clusters. A few occasional events have been observed where companies from one sector have been distributed in both the clusters. On an overall basis, considering all the three years under study, Banking, Chemicals, Power & Iron & Steel Industries have been found to have homogeneous valuation ratios. On the other hand, Automobiles, Information Technology, Industrial Gas & Fuels, Healthcare, Agriculture Construction Materials constitute the other cluster. The findings of the study leads to the conclusion that valuation ratios can be used as categorizing factors in clustering of companies across sectors in the mid cap segment of the Indian market.

Applications: Investors in equity shares may use the information about cluster membership based on valuation ratios in deciding the constitution of their portfolios.


Keywords

Cluster Analysis, Midcap Stocks, CNX NIFTY Midcap 50 Index, Valuation Ratio.
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  • Clustering Mid-Cap Stocks in Indian Market using Multi-Variate Data Analysis Technique

Abstract Views: 268  |  PDF Views: 149

Authors

Shuvashish Roy
Hazrat Khajar Bashir Unani Ayurvedic Medical College & Hospital Foundation, Jamalpur, Bangladesh
Rajib Bhattacharya
Institute of Business Management, National Council of Education Bengal, Kolkata, West Bengal, India

Abstract


Objectives: This study attempts to identify homogeneous clusters of constituent companies of the CNX NIFTY Mid Cap 50 Index in the Indian markets based on valuation ratios.

Methods: Nine selected valuation ratios of the fifty constituent companies of the CNX NIFTY Mid Cap 50 Index have been considered for the three consecutive years from 2015-16 to 2017-18. The values were standardized to facilitate cluster analysis. Hierarchical and K-Means cluster analysis have been done to identify the clusters of homogeneous stocks in terms of valuation ratios.

Findings: It has been observed that the stocks in all the three years under study, showed two clusters. Mostly there were clear groupings of stocks into the two clusters. A few occasional events have been observed where companies from one sector have been distributed in both the clusters. On an overall basis, considering all the three years under study, Banking, Chemicals, Power & Iron & Steel Industries have been found to have homogeneous valuation ratios. On the other hand, Automobiles, Information Technology, Industrial Gas & Fuels, Healthcare, Agriculture Construction Materials constitute the other cluster. The findings of the study leads to the conclusion that valuation ratios can be used as categorizing factors in clustering of companies across sectors in the mid cap segment of the Indian market.

Applications: Investors in equity shares may use the information about cluster membership based on valuation ratios in deciding the constitution of their portfolios.


Keywords


Cluster Analysis, Midcap Stocks, CNX NIFTY Midcap 50 Index, Valuation Ratio.

References