Investing in Stock Unit 1 PDF

# Basics of Investing ## Chapter Contents: * Concept of Investment * Investment Process * Types of Investing * Concept of Risk and Return * Types of Risk * Instruments of Investment * Summary * Self Assessment ## Learning Objectives After reading the chapter, students should be able to understan...

# Basics of Investing ## Chapter Contents: * Concept of Investment * Investment Process * Types of Investing * Concept of Risk and Return * Types of Risk * Instruments of Investment * Summary * Self Assessment ## Learning Objectives After reading the chapter, students should be able to understand * Concept of Investment * Different types of Risk and the risk-return tradeoff * Steps involved in Investing * Various instruments of Investment * Difference between Investment, Speculation, and Gambling ## 1.1 Introduction Income earned by an individual is rarely spent in full as people are not only interested in the present consumption but also in saving for future contingencies. This gives rise to an interesting activity that is called 'Investment'. People from all walks of life irrespective of their background, education, occupation are interested in decoding the different avenues available for investment. In simple terms, investment can be defined as a sacrifice of current money or other resources for future benefits. A simple equation can be used to define the word Investment: ``` Consumption + Savings = Income ``` Steps taken to make the savings increase over time is known as investment. ## 1.2 Investment - Meaning The word Investment has been defined in several ways as it is a term that can be used in different contexts. A few of them are provided here: * “The outlay of money usually for income or profit.” - Merriam-Webster * “An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in value at some point in the future.” - Investopedia * “Investment is the production of goods that will be used to produce other goods.” - Hassett (1980) The word 'Investment' holds different meanings in different principles and subjects. The meanings are though almost similar wherein it refers to the commitment of the financial resources with the sole objective of having gains in the future. In Economics, Investment refers to any physical/tangible asset like machinery or a house. Economic investment hence means the net additions to the capital stock of the society which consists of goods and services that are used in the production of other goods and services. In Finance, Investment refers to the commitment of funds in a financial product with the anticipation of earning positive returns in the future. On the whole, investment can be thus defined as the technique of accumulating wealth by putting aside some money out of the total income to obtain profit over a period of time. The income that an individual earns is generally divided between immediate consumption and savings. Saving and investing are thus often used interchangeably, but there is a difference between the two which can be highlighted as: * **Saving:** It refers to money that is set aside out of the disposable income of an individual for any future contingency or purchase. Savings generally provide a lower return with little or no risk. * **Investment:** It refers to spending money on the purchase of assets like shares, bonds, mutual funds, or real estate with the objective of long-term growth. ## 1.3 Types of Investment Investment has been categorized into different types based on the assets that are acquired in the process, the liquidity that it offers, and the level of transferability that it possesses. Few such classifications of investments are provided here. 1. **Real and Financial Investment:** Real investment refers to the purchase of tangible assets like land, plant and machinery, precious metal ornaments etc. They can be used for further production like in the case of land, plant and machinery while in the case of gold or silver ornaments they are not used for further production. Financial Investment on the other hand refers to the acquisition of financial assets like shares, bonds, mutual funds etc. They are acquired to generate positive returns in the future and are non-tangible in nature wherein future benefits come in the form of a claim to future cash flows. 2. **Marketable and Non Marketable Investment:** Investment can be also classified based on the liquidity that they possess and hence can be defined as either the marketable or Non Marketable investment wherein the former ones are those that can be easily converted into cash in a short period without much loss in value like shares, mutual funds are some financial assets that can be easily traded on the stock exchange while the latter is generally not listed on the stock exchange and hence cannot be bought or sold in the open market like the insurance schemes, bank deposits are few examples of non-marketable financial assets apart from land, building and other real assets. Non-marketable investments being low on the liquidity front can lead to a loss in value as it is difficult to convert them into cash instantly. 3. **Transferable and Non-transferable Investment:** Investments that can be transferred to other names by virtue of sale or exchange are called transferable like shares, debentures, etc while the investments that lack this feature and cannot be sold to someone else are non-transferable investments like insurance policies, bank deposits, etc. The above list is however not exhaustive and there can be various other classifications of investments but it lays down the background for an understanding of the various aspects of investment that are important for an investor to understand before we proceed towards the understanding of the nature of the investment. ## 1.4 Nature of Investment All Investments whether it be Real or Financial are categorised by four features that are risk, return, safety and liquidity. It explains the basic nature of investment that is further explained below: 1. **Risk:** Investment is carried out with the main objective of earning a return that compensates the investor for the level of risk assumed. Hence, risk is an important feature of any investment. Risk can be defined as the probability of earning a return that is different than what was expected. It refers to the future uncertainty about deviation from an expected outcome. There can be different sources of risk and hence its understanding is very crucial for making a well-informed investment decision. 2. **Return:** All investments are done with the sole objective of earning a return. Return can be either in the form of capital appreciation or a stream of income like interest or dividend. The expectation of the return is dependent on various factors the foremost being the risk that the investment faces along with the duration for which the investment is undertaken apart from other factors. 3. **Safety:** Investments are done to earn a rate of return that compensates the investor for the postponement of the consumption. However, investors cannot do so at the cost of the safety of the amount being invested. So, safety is another essential feature of every investment. 4. **Liquidity:** Investors prefer their investments to provide an adequate rate of return along with providing safety and liquidity where the latter refers to the ease with which an investment can be converted to cash without much loss in value. There is generally a trade-off between liquidity and return wherein the investments with greater liquidity are expected to generate lower returns and vice versa. ## 1.5 Objective of Investment There are various investment alternatives where in the savings of an investor can be put. Savings in themselves do not provide any return until and unless they are put to some productive use via the investment process. The savings are hence invested in assets depending on their risk and return characteristics. Objectives of investment can be divided into primary and secondary aspects: | Primary Objective | Secondary Objective | | ------------------- | ---------------------- | | Maximisation of Return | Hedge against Inflation | | Minimisation of Risk | Tax Benefits | | | Liquidity and Safety | 1. **Maximisation of Return:** Every investor tries to maximise the return on his investment by choosing an optimum combination of risk and return based on his individual preference and risk appetite. Different financial assets have a different expected return and associated risk like the government securities are considered to be risk-free and hence generate a return that is not that high while shares possess not only high risk but also the probability to generate higher returns. An investor thus has to identify the asset that matches the return that he wants over a period of time, this being the prime objective of any investment. 2. **Minimisation of Risk:** High return generation is not possible without taking a risk as there is found to be a trade-off between risk and return wherein higher return commands undertaking a higher risk and vice versa. A risk-averse investor hence would like to minimise the risk by doing a detailed analysis of the various investment alternatives available to him. Minimisation of risk is thus an important objective of investment. 3. **Hedge against Inflation:** The two primary objectives of investment specify how risk-return analysis is at the core of any investment decision-making. An investor undertakes investment by the postponement of the consumption expenditure wherein he expects to generate a return that not only compensates for the postponement of the consumption but also provides a hedge against inflation. It is necessary as rising inflation leads to a reduction in purchasing power. The rate of return thus should be higher than the rate of inflation to ensure that the investor is not facing a loss in real terms. 4. **Tax Benefits:** Apart from earning a good return on investment, investors also have other incentives to consider certain investments and that is the tax benefits provided under Income Tax Act 1961. Investment in certain financial assets like Fixed deposits (FDs), Public Provident Fund (PPF), and Equity Linked Savings Schemes (ELSS) provide tax benefits and helps in reducing tax liability that can be considered as an important objective of investment. 5. **Liquidity and Safety:** Investors while investing not only want to earn a good return but also want to ensure that their capital is liquid and safe which is an important criterion in determining investment. ## 1.6 Investment, Speculation and Gambling Investment, speculation and gambling are the words that are used interchangeably in the financial market especially the first two. Investors however need to be aware of the difference between the three terms. | Basis of Difference | Investment | Speculation | | ------------------- | ----------- | ------------ | | Duration | Long period | Short period | | Risk | Moderate | High | | Return | Moderate | High | | Criteria for Decision making | Fundamental | Technical | | Funds availability | Own funds | Borrowed funds | | Stability of Income | More stable | Uncertain | | Type of Investors | Conservative | Aggressive | Example: An investor who invests in a company after an in-depth analysis of the company's valuation and future prospects is doing an 'Investment'. He is not concerned about the day-to-day fluctuations in the prices and is more interested in the dividends, interest, etc. On the other hand, an investor who is concerned about the day-to-day fluctuations in the price of a financial asset and is not worried about the company's long term growth is basically a speculator whose decision making is generally based on technical analysis wherein he decides the right time and price to enter and exit the market. ## Investment Vs Gambling Gambling is considered to be an act that has a very high element of risk as against investment where the risk is undertaken after a thorough analysis of the pros and cons. Gambling can be both legal as well as illegal and is generally undertaken to provide a thrill and excitement to the investor. | Basis of Difference | Investment | Gambling | | :------------------- | :--------------- | :------------- | | Duration | Long period | Short period | | Risk | Moderate | Very High | | Return | Expected returns | Expected returns | | Criteria for Decision Making | Fundamental analysis | Random, thrill and fun | | Stability of Income | More stable | Unstable | | Type of Investors | Conservative | Aggressive | | Example | shares, mutual funds, gold, and other assets | horse races, lotteries, casinos | ## 1.7 Investment Process Investment refers to the purchase of an asset with the sole objective of generating a positive return. The process of investment thus involves a careful and detailed analysis of different assets and their associated risk and return profile. The main steps that an investor needs to undertake for investing are given below: | Step | Description | | :------------------------------------ | :--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Assessment of investment prerequisites | The first step in the investment process is to have an evaluation of the existing financial situation of the investor that is the assets, liabilities, income, and expenditures that one has along with assessing the risk appetite of the investor. The investor also needs to identify the contingencies that may arise over the years and have to make sure that the buffer is created against those emergencies before going ahead with the investment. | | Setting of different investment objectives | After analysis of the financial situation of the investor the next step is to set the investment objective clearly. Investor here needs to remember that the higher returns are commensurate with higher risk and hence the investment objective and the risk-return profile should also match the risk appetite of the investor. In this step, the investment objective should be provided whether it is for retirement, to provide an extra source of income, to fund some extra expenditure, or for tax saving. | | Assessment of different assets and allocating funds to them | The third step in the investment process after assessment of the investment prerequisites and setting its objectives is to determine the asset class wherein the investor needs to allocate his savings. In this step, the investor needs to be careful about analysing different investment opportunities available to him, understand the risk-return profile of each asset, and to ensure that there is an efficient diversification to reduce the risk while attaining the objectives laid down in step 2. | | Establishing Investment process strategy | Most of the task of the allocation of the funds has been done till step 3 of the investment process but an important step that determines how the investment grows is to decide the strategy that the investor would be following for managing the investments. There are two of them - Active and Passive. | | Evaluation, appraisal and updation of the Investment Process | Now the last step in the investment process is to ensure that there is a timely evaluation and appraisal of the portfolio. Irrespective of the strategy that has been adopted in the previous step it is necessary to ensure that the investor evaluates and update the portfolio whether quarterly or annually to make sure that his objectives would be met as and when required. Based on the changes in the economy and other aspects it is necessary to ensure that the strategies too are updated on a timely basis. If the investment process is not found to be in line with the objectives, the investor should try to re-balance it by selling off the investments that are not on the track and acquiring the assets that can help him earn the desired return. | ## 1.8 Risk and Return The main objective of investing can be described as the maximisation of return that is commensurate to a particular level of risk. There exist a trade-off between the risk and the return such that higher risk is expected to generate a higher return. **Risk** In a layman's term risk can be defined as the likelihood to get outcomes that one may not like. For instance, overspeeding may lead one to the risk of getting a 'challan' or the worse he may get into an accident. So, this is the risk of driving too fast. Risk is thus generally considered to have a negative connotation but it is not the same in the financial dictionary. In finance, risk refers to the potential of having a return different than what was expected. It includes both the upside variability as well as downside variability, both of which are included in the definition of risk. This variation in returns can arise because of various factors which are known as the ‘Elements of Risk'. They can be broadly divided into two categories * Systematic Risk and * Unsystematic Risk. Total Risk = Systematic Risk + Unsystematic Risk ## 1.9 Systematic Risk Systematic Risk also known as the non-diversifiable risk refers to that part of the total variation in return that has an impact on all the market segments. **Example:** The reason that all the sectors were impacted because of the Covid pandemic (irrespective of the impact whether it was positive or negative) was that it was the systematic risk that had an impact on all the segments. Systematic Risk can be further divided to include the following three types of risk: 1. **Market Risk:** Market risk refers to the price volatility that arises due to unanticipated fluctuations in factors that affect the entire financial market. Market risk is the major component of systematic risk and hence sometimes market and systematic risk are used synonymously. The reason for the occurrence of the market risk can be real/tangible that includes economic, political, sociological factors or intangible like market psychology. **Example:** When the pandemic hit the Indian economy and the lockdown was initiated, there was a heavy fall in the Indian stock market on 23rd March 2020. The reason was not only the expectation of a weak economic condition because of lockdown but also because of fear amongst the investors. It had an impact on all the major market segments. 2. **Interest Rate Risk:** The risk that leads to a change in the asset's value as a result of the interest rate volatility is known as the interest rate risk. It generally affects fixed-income securities directly as their valuation is closely linked to the interest rates and hence it is one of the major risks that all fixed-income security holders face. But its impact is also there on other investments because of the interlinkages between the different market segments and instruments. There is an inverse relationship between the interest rate changes and the price of a fixed-income investment. As the interest rate rises the price of such an asset falls as bearing a fixed interest rate it becomes less lucrative and hence its demand and price falls and vice versa. It includes the following two types of risk: * **Price Risk:** Price risk refers to the uncertainty associated with potential changes in the price of an asset caused by changes in interest rate levels in the economy. Price risk is directly and positively related to interest rates as shown below: **Example:** Mr. X has invested ₹1000 on the bond with the face value of ₹10 each carrying interest rate of 5% per annum. After a year the value of the invested amount would be: ``` Amount = ₹1000 + ₹1000 (5%) = ₹1050 ``` However, if the interest rate increased to 10% on the new bonds then an investor investing in the new bonds would have the value of ``` Amount = ₹1000 + ₹1000 (10%) = ₹1100 ``` So when the interest rate increased, more people would be interested to adjust the investment pattern in the expectation of earning a higher return, and hence the price of the bond offering a lower interest rate would fall. * **Reinvestment Risk:** Reinvestment risk is the risk that future cash flows (interest or maturity amount) would be reinvested at an interest rate lower than the current rate. It is inversely related to the interest rate changes as if interest rates in the market increase then the reinvestment opportunities would be sufficient and viable thereby reducing the reinvestment risk and vice versa. **Example:** Mr. X has invested ₹1000 on a bond with the face value of ₹10 each having an interest rate of 5% wherein he expects that he would re-invest ₹50 (interest payment) further at the prevailing interest rate of 5%. However, if the interest rate reduces then his expected reinvestment return of the interest payment would be less than what he had presumed. This is the reinvestment risk. Interest rate risk is also visible in other types of investments other than the fixed interest-bearing ones and a few such impacts can be understood from the examples below: * There is an indirect impact on the stock market as an increase in the interest rate makes fixed income securities more appealing and hence may reduce the demand of the shares and may lead to their sell-off leading to a fall in the stock market. * Another aspect might be that corporations not only use owned funds but also make use of the borrowed funds. So, if there is an increase in the interest rate the fixed financial cost of the firms might increase making them less profitable thereby leading to a reduction in the 'Earning Per Share' and hence a fall in the share prices. 3. **Purchasing Power Risk:** An investor postpones his consumption and makes an investment with the objective to have a return that compensates him for the risk being taken as well as for the postponement of the consumption. In the process, he also expects to earn a positive ‘Real rate of return' that makes sure that his purchasing power does not go down because of the increase in inflation. The high rate of inflation leads to erosion in the purchasing power of money that leads to a decrease in returns. The risk that arises because of the increase in inflation that leads to a reduction in purchasing power is known as the purchasing power risk. Systematic Risk can be thus summarised as: * It is 'Uncontrollable' in nature * It has a 'Broad' impact * Their trigger/cause is ‘External' The above three risks that are the market risk, interest rate risk, and purchasing power risk are the main sources of systematic risk but this is not the total risk as there is another part of the total risk that is the unsystematic risk which also needs to be taken into consideration. ## 1.10 Unsystematic Risk Unsystematic risk refers to that portion of the total risk that is peculiar to a particular business, market segment, industry, or sector. It includes factors like government regulations that impact a particular industry, labor strikes, capability of the manager, demand of the consumer, entry of a new competitor in the market etc. These factors have an impact only on a small segment and hence it needs to be examined separately for each one of them. These risk factors are avoidable and can be reduced and even eliminated by taking appropriate steps. It can be thus defined as the risk that specifically affects a single asset or a small group of assets and hence is also known as 'Specific Risk'. **Example:** In the year 2011, Automobile giant Maruti Suzuki India Limited suffered one of its major setbacks wherein it had lost crores of rupees because of the worker's strike. It not only impacted its manufacturing process but also had an impact on its share prices. This is an example of the unsystematic risk as it had an impact only on a particular company. Unsystematic risk can be further divided into two parts: 1. **Business Risk:** Business Risk refers to that type of unsystematic risk that determines how durable is the competitive advantage of a particular firm, that is, whether the firm would be able to generate a considerable amount of profits or not. It is dependent upon the operating conditions of the firm and how its variation is going to have an impact on the future income stream of the company. The risk being dependent upon the operating conditions of a firm is also known as the 'liquidity or 'operating risk'. Business risk can be further classified into- Internal business risk and External business risk. Internal business risk can arise because of factors that are internal to the firm like labor strike, death of a key employee while external business risk arises because of factors like the entry of a new competitor or stoppage in the supply of raw material. **Example:** Suppose there are two firms ABC Ltd. and XYZ Ltd. whose expected return profile and variation is provided below: * ABC Ltd. – The expected increase in the operating income was 20% while the actual increase in the income has been in the range of 12-25 percent. * XYZ Ltd. – The expected increase in the operating income was 20% while the actual increase in the income has been in the range of 18-21 percent. Here as the degree of variation is much higher in the case of ABC Ltd. hence it is considered to possess a higher business risk over the other firm. 2. **Financial Risk:** Apart from the operating risk the other major risk that a particular firm faces is how its finances are met. A firm can mainly finance its activities using 'Owned funds' or the 'Borrowed funds' wherein the latter have a fixed financial obligation that results in the financial risk. Financial risk is also known as the 'Credit Risk' and is mainly attributable to the capital structure of the company. There is a direct relationship between the leverage (use of debt in the capital structure of the company) and the financial risk as the higher the amount of leverage a company has, the higher is the financial risk. It is specific to a particular firm as the level of debt can be controlled to a certain extent. A higher debt in the capital structure puts a fixed burden on the company such that when the company goes into a bad time there is a ripple effect not only because of the reduced profits but also because of the presence of the fixed financial cost. Unsystematic Risk, on the whole,can be thus categorised as: * It is 'Controllable' in nature * It has a 'Specific/Narrow' impact limited to a particular sector or asset class and is therefore also known as 'Unique Risk' * Their trigger/cause is 'Internal' ## 1.11 Difference between Systematic and Unsystematic Risk | Risk Type | Description | | :--------------- | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | Systematic Risk | A risk that affects a large number of assets, each to a greater or lesser degree. It can not be eliminated even by having efficient diversification. It is also known as ‘Non-diversifiable' risk and is Macro in nature. It can be divided broadly into – Market risk, interest rate risk, purchasing power risk. | | Unsystematic Risk | A risk that specifically affects a single asset or a small group of assets. It can be reduced and even eliminated by having a well-diversified portfolio, the components of which are not highly correlated. It is also known as 'Diversifiable Risk' and is Micro in nature. It can be divided broadly into – Business risk and Financial risk. | **Example of Recession, Inflation, War, Pandemic, etc.** **Example: Change in Management, Labour strike, etc.** ## 1.12 Calculation of Risk Just an understanding of the concept of risk is not enough as the investor also needs to quantify the risk to analyse the risk-return profile of different investment options. The two most commonly used tools to calculate the risk of a particular investment are standard deviation (variance) and beta. ## 1.13 Standard Deviation as a Measure of Risk Mostly all investments have a risk element as they might not perform as expected and there might be a deviation in the actual returns and the expected returns. This difference measures the volatility of the returns and highlights the risk element in an investment. It is measured using the tool named standard deviation. Investments that show greater volatility in their returns are considered risky as against the securities that have less volatility. ## 1.14 Coefficient of Variation as a Measure of Risk Variance and standard deviation are absolute measure of risk, another measure that is also used commonly by the investors is to find out the risk per unit of return that is measured using 'Coefficient of Variation'. It is a relative measure of risk and is calculated using the formula below: ``` COV = Standard Deviation of Return / Expected Return * 100 ``` **Example** A investor has invested in 2 stocks namely X and Y whose expected returns depend on the three states of the economy viz. Recession, normal, good having equal probabilities. The expected returns are given below: | State of the Economy | Return on Stock X | Return on Stock Y | | :-------------------- | :----------------- | :----------------- | | Recession | 5% | -5% | | Normal | 10% | 5% | | Good | 20% | 25% | Find out which stock is riskier and comment why? **Solution:** The first step to calculate standard deviation is to find out the expected returns | State of the Economy | Probability | Return on stock X | Return on stock Y | Expected Return on stock X | Expected Return on stock Y | | :-------------------- | :---------- | :----------------- | :----------------- | :-------------------------- | :-------------------------- | | Recession | 0.33 | 5% | -5% | 0.0165 | -0.0165 | | Normal | 0.33 | 10% | 5% | 0.033 | 0.0165 | | Good | 0.33 | 20% | 25% | 0.066 | 0.0825 | | | | | | 0.1155 or 11.55% | 0.0825 or 8.25% | The second step to calculate standard deviation is to find out the deviations from the expected/average returns and calculate its square and multiply it by the probability of the respective situation after which the variance is calculated using the following formula: * (σ²) = ∑P[R, – E(R)]² And standard deviation is the square root of the variance which is calculated as: * Standard Deviation = √∑P [R - E(R)]² | State of the Economy | Probability | Dx = Rx - E(Rx) | Dy = Ry - E(Ry) | (Dx)² | (Dy)² | P(Dx)² | P(Dy)² | | :-------------------- | :---------- | :-------------- | :-------------- | :---- | :---- | :------ | :------ | | Recession | 0.33 | -6.55 | -13.25 | 42.9025 | 175.5625 | 14.15783 | 57.93563 | | Normal | 0.33 | -1.55 | -3.25 | 2.4025 | 10.5625 | 0.792825 | 3.485625 | | Good | 0.33 | 8.45 | 16.75 | 71.4025 | 280.5625 | 23.56283 | 92.58563 | | | | | | | | 38.51348 | 154.0069 | Standard Deviation = √38.51 = 6.21 Standard Deviation = √154 = 12.41 Risk, as measured by Standard Deviation, is higher in the case of Stock Y depicting greater volatility in returns and hence greater risk. ## 1.15 Coefficient of Variation as a Measure of Risk Variance and standard deviation are absolute measure of risk, another measure that is also used commonly by the investors is to find out the risk per unit of return that is measured using 'Coefficient of Variation'. It is a relative measure of risk and is calculated using the formula below: ``` COV = Standard Deviation of Return / Expected Return * 100 ``` ## 1.16 Beta as a Measure of Risk Variance and standard deviation measure the total risk of a particular investment that includes both the systematic as well as the unsystematic risk. Another measure that is commonly used to assess the risk of a particular investment (specifically of equity) is the 'Beta' which is a measure of the systematic risk. Beta of a particular stock measures its volatility of returns as against the entire market. | Value of Beta | Interpretation | | :------------ | :------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | B<0 | An investment with a negative beta shows that it has an inverse relation with the market. A negative beta investment is not common though. | | B = 0 | An investment with a beta of zero shows that it has no relationship with the market. | | 0<B<1 | An investment with a beta lying in the range of zero to one shows that it is less volatile than the market. Such a stock can be also called 'Defensive stock’ | | B = 1 | An investment with a unitary beta shows that it has a direct and positive relationship with the market such that the direction and the quantum of the market and the investment are the same. | | B>1 | An investment with a beta greater than one shows that it has a direct relationship with the market and the instrument is in fact highly volatile as the movement in it is greater than the market itself. Such stocks, in general, are called 'Aggressive stocks'. | Beta being a measure of risk shows the volatility vis a vis the market and hence greater beta signifies greater risk. A glimpse of the beta of the thirty companies listed on the BSE Sensex for the period 2015 to 2021 are given below: | Company Name | Beta as on 31st May 2015 | Beta as on 31st May 2016 | Beta as on 31st May 2017 | Beta as on 31st May 2018 | Beta as on 31st May 2019 | Beta as on 31st May 2020 | Beta as on 31st May 2021 | | :----------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Asian Paints Ltd. | 0.56 | 0.57 | 0.73 | 0.75 | 0.74 | 0.7 | 0.67 | | Axis Bank Ltd. | 1.55 | 1.44 | 1.36 | 1.34 | 1.17 | 1.29 | 1.6 | | Bajaj Auto Ltd. | 0.81 | 0.82 | 0.83 | 0.84 | 0.82 | 0.84 | 0.88 | | Bajaj Finance Ltd. | 1.09 | 1.06 | 1.14 | 1.22 | 1.1 | 1.3 | 1.56 | | Bajaj Finserv Ltd. | 0.88 | 0.82 | 0.95 | 0.95 | 1 | 1.24 | 1.41 | | Bharti Airtel Ltd. | 0.73 | 0.72 | 0.75 | 0.78 | 0.77 | 0.8 | 0.8 | | Dr. Reddy'S Laboratories Ltd. | 0.37 | 0.53 | 0.52 | 0.57 | 0.64 | 0.7 | 0.59 | | HCL Technologies Ltd. | 0.51 | 0.54 | 0.31 | 0.27 | 0.36 | 0.64 | 0.75 | | HDFC Bank Ltd. | 0.96 | 0.87 | 0.82 | 0.74 | 0.59 | 0.73 | 0.9 | | Hindustan Unilever Ltd. | 0.41 | 0.42 | 0.51 | 0.6 | 0.56 | 0.6 | 0.52 | | Housing Development Finance Corpn. Ltd.| 1 | 0.98 | 0.97 | 0.93 | 0.87 | 0.91 | 1.12 | | ICICI Bank Ltd. | 1.49 | 1.49 | 1.5 | 1.48 | 1.34 | 1.41 | 1.56 | | ITC Ltd. | 0.49 | 0.55 | 0.6 | 0.65 | 0.6 | 0.63 | 0.6 | | Indusind Bank Ltd. | 1.31 | 1.31 | 1.28 | 1.14 | 0.99 | 1.68 | 2.04 | | Infosys Ltd. | 0.52 | 0.5 | 0.39 | 0.33 | 0.34 | 0.5 | 0.55 | | Kotak Mahindra Bank Ltd. | 1.05 | 1.03 | 0.97 | 0.9 | 0.8 |