Authors

1. Mr. Gaurav Malpani
2. Dr. Punam Mishra

Affiliation

• Assistant Professor FMS-IRM Jaipur
• Assistant Professor FMS-IRM Jaipur

Abstract

The capital market in India has witnessed spectacular growth during the nineties. The trend was overwhelming euphoric in consequence with the process of reforms and the gradual shift towards economic liberalization replacing controls by the free market forces. Buoyed by the bull phase and an unrelenting appreciation in stock prices in 2004-05, the Initial Public Offering (IPO) market was quite active in 2005-06. The bullishness in the secondary market always spill over to the primary market. Before the Sen sex came tumbling down from its 12,671 peak in May 2006, the sentiments of the courses got carried over into the IPO market and many companies tapped the capital market to ride the upbeat sentiments by pricing their shares aggressively. This list includes some high profile companies such as Jet Airways, Shopper Stop, Suzlon Energy and Reliance Petroleum; it also featured stock market debuts by some unconventional companies in the new business such as multiplexes, aviation and broadcasting hitherto unpresented on the stock market.
Investment in securities market requires the study of relationship between the revenue and risk. This paper is an attempt to understand the empirical validity of the Standard CAPM model in India, and to ascertain relationship between return securities/portfolios and book to market equity ratio. The study is based on BSE Sensex companies that were part of the index from base year (1978-79) to 30th June, 2005. Market model is being used to calculate beta and alpha of the sample companies. This model is used by Black, Jensen and Scholes (1972) and other researchers. The paper is organized in four parts. Part 1 is the introduction; Part 2 presents objectives, hypothesis, data and methodology; Part 3 analyses the results; and Part 4 presents the summary and conclusions.

Keywords

Capital market, Standard CAPM model

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