Review of Professional Management- A Journal of New Delhi Institute of Management

Satyam Khatri ¹, Shubhra Johri ²

Affiliations
1 MBA Department, G.L. Bajaj, Greater Noida, IN
2 MBA Department, ABES Engineering College, Ghaziabad, IN

Abstract

A Common Observation regarding stock price behavior pre and post inclusion and exclusion of a company into indices is that share prices tend to increase prior to inclusion and decrease prior to exclusion. Although Eligibility criteria for inclusion and exclusion include Impact Cost (Liquidity), Market Capitalization, Domicile, Eligible types of Securities and Free Float but still if we can devise models that predict inclusion or exclusion using certain key performance indicator that are widely available, then, the stock market can surely provide a lot of scope for making money for the equity investors. This research work aims at developing two such models. Model-1 predicts with extreme accuracy whether or not any company from the existing 50 companies in Nifty Index will be excluded in the near future and Model-2 predicts if a company will be included as Nifty constituent using discriminant analysis. The KPIs used for the purpose of study include Rate of growth of Profit after tax (ROG-PAT), Rate of growth of Net Sales (ROG-SALES), Rate of growth of Market Capitalization (ROG-MCAP) and Interest Coverage Ratio (ICR). The model proposes a range of outcome values which can be used to predict inclusion or exclusion from NIFTY. A long (buy) position if taken in the securities that are predicted by the model to be included in the index, will help in generating higher returns as its financial performance will improve before the inclusion leading to higher stock price. Alternately, a short (sell) position taken in the securities that are predicted by the model to be excluded from the index, will also be a good bet as its financial performance will degrade before the exclusion, leading to lower stock price.

Keywords

Inclusion, Exclusion Nifty, KPIs, Long-Term, Short-Term.

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Satyam Khatri ¹, Nisha Verma ¹, Ankita Indu ¹

Affiliations
1 G L Bajaj Institute of Management & Research, Greater Noida, UP, IN

Abstract

This research is aimed to investigate on the level of awareness about financial/investment products among the working professional in Delhi/NCR. Financial/Investment assets such as mutual funds, fixed deposits, Public Provident Funds (PPF), Insurance, Equity (shares), Recurring deposits (RD), Provident Funds (PF), Post office schemes and Commodity Derivatives are selected for studying level of awareness among sample respondents. Research also analyzed insights about retirement planning, factors influencing decision making for investment, Income range for first time investors and percentage of total income invested in financial products. Cluster analysis technique has been used to divide the entire population into two unique clusters; constituent elements of a cluster have similar characteristics in terms of awareness about the financial/investment products. Upon analyzing data, it is clear that awareness about range of Financial/investment products is very less among working professionals. People hesitate investing in complex financial products such as equities and derivatives due to their risky nature and are quite less aware about the risk management strategies. This research is useful for various investment companies and for people who are looking forward towards making an investment.

Keywords

Cluster Analysis, Mutual Funds, Financial Assets, Awareness, Working Professionals.

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