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Risk-Return Volatility Analysis of the Nifty 50 Financial Geared Stocks

Rohit Sood (Mittal School of Business, Lovely Professional University, Punjab, India)
Ajay Sidana (Amity School of International Business, Amity University, Noida, India)
Neeru Sidana (Amity School of Economics, Amity University, Noida, India)

VUCA and Other Analytics in Business Resilience, Part A

ISBN: 978-1-83753-903-1, eISBN: 978-1-83753-902-4

Publication date: 13 May 2024

Abstract

Introduction: The government has taken many initiatives for the overall growth of India after liberalisation and remarkably performed to make India an emerging economy. Due to changes in macroeconomic conditions, investment in companys’ shares includes the possibility of bearing high risk, which cannot be eliminated but, to some extent, minimised. The persistence of risks motivates investors to invest in different available options of investment. Gearing measures, a company’s financial leverage, represent the risk afforded within the company’s capital structure.

Purpose: The research aims to identify the risk-return analysis of financial geared stocks of Nifty 50 companies in India, which have debt equity ratios of more than 1.

Methodology: Convenience and cluster sampling techniques were used to identify companies with debt equity ratios of more than 1. The considered time period is 2010–2019.

Findings: This research found capital structure ratios, debt equity ratio, and total debt ratio. The total equity ratio does not have any visible effect on any of the dependent variables, i.e., Return on equity (ROE), Return on Assets (ROA), Earnings per share (EPS), Return on capital employed (ROCE). It explains the impact of high-levered firms’ performance on profitability and functioning. The study highlights that highly geared companies do not significantly impact the ROA, proving Modigliani and Miller’s (1958) irrelevant theory.

Keywords

Citation

Sood, R., Sidana, A. and Sidana, N. (2024), "Risk-Return Volatility Analysis of the Nifty 50 Financial Geared Stocks", Singh, D., Sood, K., Kautish, S. and Grima, S. (Ed.) VUCA and Other Analytics in Business Resilience, Part A (Emerald Studies in Finance, Insurance, and Risk Management), Emerald Publishing Limited, Leeds, pp. 209-227. https://doi.org/10.1108/978-1-83753-902-420241011

Publisher

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Emerald Publishing Limited

Copyright © 2024 Rohit Sood, Ajay Sidana and Neeru Sidana