cmm project 3 final

8/3/2019 CMM Project 3 Final

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Symbiosis Centre for Management andHuman Resource Development (SCMHRD)

A constituent of Symbiosis International UniversityAccredited by NAAC with A Grade

Ex-MBA 2010-2013 Batch II

Semester -3

Subject : Capital and Money Markets

CMM Assignment-3: Choose 12 stocks which are not in financial

sector.Calculate cost of carry for first 9 months on monthly basis. Explain

methodology and interpretation of cost of carry.

UNDER THE GUIDANCE OF

Prof. G.Bhaskar

Submitted By

Mithileshkumar Singh

Roll No-2010G20

Capital and Money Markets Ex-MBA 2010-13

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Executive Summary

Following twelve non financial sector companies are considered for the assignment.

1. Asian Paints Ltd

2. Bharat Heavy Electricals Limited

3. CIPLA Limited

4. DABUR India Limited

5. Mahindra & Mahindra Limited

6. Maruti Suzuki India Limited

7. MRF Limited

8. Siemens India

9. Tata Chemicals

10. Tata Motors

11. Tata Global Beverages Limited

12. Voltas Limited

Methodology : Close prices (Spot Price ) and Settle prices (Future Price ) were collected from

the nseindia website for above twelve companies. Close prices and settle prices data were

collected monthly wise (Average taken for one month ) for the 9 months. (January 2011 to

September 2011 ).Expiry period of 90 days were selected.Difference between future price and

spot price will result into cost of carry.

Cost of Carry : Costs incurred as a result of an investment position. These costs can includefinancial costs, such as the interest costs on bonds, interest expenses on margin accounts and

interest on loans used to purchase a security, and economic costs, such as the opportunity costs

associated with taking the initial position.

Cost to carry may not be an extremely high financial cost if it is effectively managed. For

example, the longer a position is made on margin, the more interest payments will need to be


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made on the account.When making an informed investment decision consideration must be given

to all of the potential costs associated with taking that position.

Cost of Carry = r + s

Where, r = Interest Rate

S = Storage Cost

Relation between future price and spot price are explained by the following equation .

P ( future ) = P (Spot ) ( 1 + r + s )

Where , P (future ) = Future Price

P ( Spot ) = Spot Price

Standardization is highly essential in the future market.In general, the future price is greater than the

spot price.In Special cases,when the cost of carry is negative,the future price may be lower than the

spot prices.

Among all these 12 companies, the cost of carry is high for the MRF limited.


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Company -1 : Asian Paints Ltd.

MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry

Cost of Carry = Future

Price - Close Price

(Rs.)

Jan-11 2703.24 2762.61 March 31,2011 59.37

Feb-11 2504.68 2552.67 April 28,2011 47.99

Mar-11

2525.89 2575.8 May 26,2011 49.91Apr-11

2602.56 2652.16 June 30,2011 49.6

May-112844.13 2893.68 July 28,2011 49.55

Jun-113082.28 3140.31 August 25,2011 58.03

Jul-113163.91 3225.39 September 29,2011 61.48

Aug-113183.65 3235.09 October 25,2011 51.44

Sep-113144.58 3200.83 November 24,2011 56.25

Herethe future price is greater than the spot price.Cost of carry is moderare for Asian Paints.Asian paints is

successfully able to maintain the cost of carry.

Capital and Money Markets Ex-MBA 2010-13 4


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Company -2 : Bharat Heavy Electricals Limited

MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 2237.84 2277.17 March 31,2011 39.33

Feb-11 2094.29 2126.96 April 28,2011 32.67

Mar-11 2017.33 2050.63 May 26,2011 33.3

Apr-11 2135.51 2172.05 June 30,2011 36.54

May-11 2006.76 2037.87 July 28,2011 31.11

Jun-11 1941.12 1974.92 August 25,2011 33.8

Jul-11 1947.81 1958.64 September 29,2011 10.83

Aug-11 1756.97 1776.97 October 25,2011 20

Sep-11 1683.77 1696.05 November 24,2011 12.28

From July-2011 onwards,company is able to lower the cost of carry.

Company -3 : CIPLA Limited



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Month Close Prices Future Prices Expiry


Price - Close Price

Jan-11 351.245 358.78 March 31,2011 7.535

Feb-11 311.43 316.78 April 28,2011 5.35

Mar-11 303.57 309.37 May 26,2011 5.8

Apr-11 318.56 324.43 June 30,2011 5.87

May-11 310.75 315.35 July 28,2011 4.6

Jun-11 329.12 335.3 August 25,2011 6.18

Jul-11 321.54 327.56 September 29,2011 6.02

Aug-11 292.64 297.9 October 25,2011 5.26

Sep-11 283.57 288.37 November 24,2011 4.8

Cost of carry for CIPLA Limited is significantly low. Cost of carry is more for the month of January-2011

Company -4 : DABUR India Limited



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MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 99.57 101.45 March 31,2011 1.88

Feb-11 94.94 96.68 April 28,2011 1.74

Mar-11 97.34 99.29 May 26,2011 1.95

Apr-11 101.03 102.88 June 30,2011 1.85

May-11 103.97 105.65 July 28,2011 1.68

Jun-11 114.34 116.51 August 25,2011 2.17

Jul-11 111.39 113.5 September 29,2011 2.11

Aug-11 105.09 106.89 October 25,2011 1.8

Sep-11 105.64 107.24 November 24,2011 1.6

Cost of carry is very low for Dabur India.Company is successfully able to lower the cost of carry by

lowering the interest rate and storage cost.

Company -5 : Mahindra & Mahindra Limited



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Cost of carry is high for the month of January-2011 and has lowered significantly in the month of

May-2011

Company -6 : Maruti Suzuki India Limited


MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 750.825 766.14 March 31,2011 15.315

Feb-11 656.64 667.22 April 28,2011 10.58

Mar-11 665.54 678.4 May 26,2011 12.86

Apr-11 741.04 754.33 June 30,2011 13.29

May-11 691.33 699.93 July 28,2011 8.6

Jun-11 665.76 673.17 August 25,2011 7.41

Jul-11 715.85 727.59 September 29,2011 11.74

Aug-11 711.28 721.6 October 25,2011 10.32

Sep-11 791.5 804.3 November 24,2011 12.8


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MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 1314.69 1334.2 March 31,2011 19.51

Feb-11 1199.38 1210.01 April 28,2011 10.63

Mar-11 1228.93 1243.07 May 26,2011 14.14

Apr-11 1285.48 1302.27 June 30,2011 16.79

May-11 1229.99 1233.22 July 28,2011 3.23

Jun-11 1191.44 1185.66 August 25,2011 -5.78

Jul-11 1171.93 1171.68 September 29,2011 -0.25

Aug-11 1183.16 1186.62 October 25,2011 3.46

Sep-11 1100.79 1110.87 November 24,2011 10.08

Negative cost of carry is observed in the month of June and July.Here the future prices are lower than the

spot prices.

Company -7: MRF Limited



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MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 6713.81 6871.97 March 31,2011 158.16

Feb-11 5884.5 5997.32 April 28,2011 112.82

Mar-11 6335.13 6459.94 May 26,2011 124.81

Apr-11 6801.14 6930.39 June 30,2011 129.25

May-11 6899.85 7030.45 July 28,2011 130.6

Jun-11 6722.05 6847.81 August 25,2011 125.76

Jul-11 7364.01 7506.49 September 29,2011 142.48

Aug-11 6846.68 6974.39 October 25,2011 127.71

Sep-11 6911.82 7035.55 November 24,2011 123.73

Cost of carry is very high here.Company need to devised the strategy to lower the interest rate and storage

cost.

Company -8: Siemens India



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MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 768.9 785.69 March 31,2011 16.79

Feb-11 844.81 852.34 April 28,2011 7.53

Mar-11 866.6 820.01 May 26,2011 -46.59

Apr-11 865.01 877.36 June 30,2011 12.35

May-11 860.02 875.91 July 28,2011 15.89

Jun-11 875.63 892.11 August 25,2011 16.48

Jul-11 913.04 930.73 September 29,2011 17.69

Aug-11 881 896.74 October 25,2011 15.74

Sep-11 858.08 873.43 November 24,2011 15.35

Cost of carry is moderate here.Negative cost of carry is observed in the month of March as future price is

lower than the spot price.

Company -9: Tata Chemicals



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Cost of carry is significantly low for Tata Chemicals.


MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 377.68 386.15 March 31,2011 8.47

Feb-11 326.18 332.17 April 28,2011 5.99

Mar-11 327.12 333.6 May 26,2011 6.48

Apr-11 366.69 373.68 June 30,2011 6.99

May-11 364.89 370.2 July 28,2011 5.31

Jun-11 368.9 375.81 August 25,2011 6.91

Jul-11 376.97 384.11 September 29,2011 7.14

Aug-11 349.81 356.23 October 25,2011 6.42

Sep-11 329.14 335.04 November 24,2011 5.9


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Company -10: Tata Motors

MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 1205.67 1216.96 March 31,2011 11.29

Feb-11 1144.9 1146.85 April 28,2011 1.95

Mar-11 1168.78 1162.1 May 26,2011 -6.68

Apr-11 1247.15 1247.51 June 30,2011 0.36

May-11 1160.91 1159.07 July 28,2011 -1.84

Jun-11 995.16 981.73 August 25,2011 -13.43

Jul-11 1008.06 1016.85 September 29,2011 8.79

Aug-11 802.88 809.18 October 25,2011 6.3

Sep-11 321.3 331.25 November 24,2011 9.95

Cost of carry is moderate except for the months- March,May and June.For these three months, the cost of carry

is negative as future prices are lower than the spot prices.



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Company -11: Tata Global Beverages Limited

MonthClose Prices

(Rs.)

Future Prices

(Rs.)Expiry


Price - Close Price

(Rs.)

Jan-11 105.93 108.2 March 31,2011 2.27

Feb-11 93.85 95.34 April 28,2011 1.49

Mar-11 96.53 98.47 May 26,2011 1.94

Apr-11 103.21 105.2 June 30,2011 1.99

May-11 95.19 97.03 July 28,2011 1.84

Jun-11 94.73 96.15 August 25,2011 1.42

Jul-11 102.98 104.52 September 29,2011 1.54

Aug-11 98.56 100.51 October 25,2011 1.95

Sep-11 90.49 92.1 November 24,2011 1.61

Cost of carry is significantly low here.



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Company -12: Voltas Limited

Month Close Prices Future Prices ExpiryCost of Carry = Future

Price - Close Price

Jan-11 211.03 215.54 March 31,2011 4.51

Feb-11 171.63 174.94 April 28,2011 3.31

Mar-11 162.1 165.22 May 26,2011 3.12

Apr-11 176.01 179.26 June 30,2011 3.25

May-11 164.8 167.87 July 28,2011 3.07

Jun-11 162.31 165.32 August 25,2011 3.01

Jul-11 155.24 158.15 September 29,2011 2.91

Aug-11 125.47 127.78 October 25,2011 2.31

Sep-11 119.6 121.71 November 24,2011 2.11

Cost of carry is significantly low for the Voltas Limited.The future prices are higher than the spot prices

from January-2011 to September-2011



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.

Bibliography

http://www.bseindia.com/

http://www.investopedia.com

Prof. G Bhaskars class notes

Annual Reports of Company

http://www.bseindia.com/http://www.investopedia.com/http://www.bseindia.com/http://www.investopedia.com/


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