Performance Evaluation of IT Stocks In India Using Risk Adjusted Measures

Abstract

The Indian Information Technology (IT) industry is among the most vibrant segments of the capital market, as it draws the attention of the investor, as it has potential of growth and its contribution to the economy. To appreciate the investment appeal of IT stocks, it would be necessary to make analyses of their performance and risks involved. The study uses several risk-adjusted measures of performance to evaluate the performance of a sample of IT firms which are listed in the National Stock Exchange (NSE). The Sharpe Ratio, Treynor Ratio, Jensen Alpha, and Sortino Ratio is applied in the study to assess the effectiveness of every business in generating excess returns relative to the risk-free rate based on total risk, systematic risk, and downside risk. Also, the comparison of the various risk-adjusted measures enables the establishment of the minor disparities between the market-related risk, the general volatility, and the downside risks, which assists in developing a more cautious and comprehensive methodology regarding making investment decisions.