Analysing stock return value to measure the impact of announcement dates
For investors seeking to make informed investment decisions, a crucial understanding of the concept of stock return value is imperative. Returns serve as guiding beacons for investment strategies, furnishing insights into the profitability and risk associated with diverse assets. Defined as the profit or loss realized from an investment over a specific timeframe, returns are typically expressed as a percentage of the initial investment. The calculation of stock return value equips investors with anticipatory insights into the gains derived from their investments.
Many studies have focussed on assessing individual stock return values, but there is a noticeable gap in the literature concerning comprehensive analyses across different sectors and markets and recognizing that sector-specific information contributes to a comprehension of growth prospects for investors. Consequently, this study transcends a mere examination of overall market returns and individual stock return computations. Instead, it delves into the intricacies of return calculations for stocks within different sectors.
This study aims to investigate the procedural aspects of computing returns for sector-specific stocks and the broader market. By doing so, it seeks to assess the impact of announcements on returns within these sectors, providing a holistic perspective on investment dynamics beyond a singular focus on overall market or isolated stock returns.
Evaluating investment performance through stock return value
The calculation of returns is a fundamental tool for evaluating the performance and profitability of investments. This crucial metric gives investors the insights needed to make informed decisions and monitor financial growth over time.
Comparing individual stock return value with overall market returns provides a valuable gauge to assess the relative success of investments within broader market trends. If an investment surpasses the market return, it suggests above-average performance. Conversely, underperforming the market may signal the necessity for portfolio adjustments. This comparative analysis of stock return value serves as a compass, guiding investors to optimize financial strategies in alignment with prevailing market conditions.
Notably, researchers such as Packard (2023) and Merkoulova & Veld (2022) emphasize the significance of return calculation in making investment decisions. Understanding the formula for return calculation is integral to unravelling the complexities of investment performance.
Return = Closing price-Opening price
Methodology to analyse stock return values
To achieve the research objectives, data collection involved gathering opening and closing prices of various companies, along with index prices of S&P BSE Sensex. The focus was on the energy and pharma sectors. Two distinct periods were selected for analysis – daily price data for FY 2017-18 and quarterly data based on announcement dates for FY 2018-23. For the latter, stock prices were aligned with the announcement dates of companies, coinciding with the release of quarterly results.
All data were meticulously compiled using Microsoft Excel. Subsequently, analysis was conducted utilizing STATA software. Employing the return calculation formula, both stock return and market return values were computed for the specified time periods, facilitating an evaluation of stock performance. Following return computation, the analysis proceeded with trend analysis to further understand the dynamics of the data.
Trend analysis was employed not only for stock return computation but also to identify historical patterns, predict future returns and market behaviour, and assist in making informed investment decisions.
Analysing the Energy Sector
The energy sector encompasses industries involved in the production, distribution, and utilization of various forms of energy, including fossil fuels, renewables, and electricity. Below is the comparison of trend analysis for the period 1st April 2017 to 31st March 2018 and 1st April 2018 to 31st March 2023.
Torrent power: In 17-18, daily data showed higher returns (>20) in the third and fourth quarters, with lower returns in the first and second quarters. For FY 18-23 (around announcement dates), returns ranged from -20 to 20. Notably, in FY 21-22, returns exceeded 20, but in FY 22-23, they dropped to -60. 
Thermax: In 17-18, daily data showed low returns (<50) except in the fourth quarter (more than 50). For FY 18-23 (around announcement dates), returns ranged from -100 to 100. Remarkably, in FY 21-22, returns were over 200, but in 22-23, they were less than -200. 
Tata Power: In 17-18, daily data exhibited price fluctuations with high returns (>4) in the first and third quarters, while returns for the second and fourth quarters were lower but still more than 2. For FY 18-23 (around announcement dates), returns varied from -10 to 10. Notably, in FY 21-22, returns were more than 10. 
Reliance Power: In 17-18, daily data showed low returns (close to 100) in all quarters except the third (1). For FY 18-23 (around announcement dates), returns ranged from -1.5 to 1, with FY 20-21 showing returns between -0.5 and +0.5. 
Reliance Infra: In 17-18, daily data revealed price fluctuations with higher returns, close to 40 in the third quarter, while returns for the first and second quarters were lower at 20. For FY 18-23 (around announcement dates), returns varied from -2 to 4. Notably, in FY 19-20 and 21-22, the return exceeded 4. 
Rattan Power: In 17-18, daily data exhibited price fluctuations with higher returns (>1) in the first, third, and fourth quarters, while the second quarter return was low but still close to 0.5. For FY 18-23 (around announcement dates), returns varied from -2 to 4. Notably, in FY 19-20 and 21-22, the return exceeded 4. 
Promax Power: For FY 18-23, returns varied from -1 to 0. However, in FY 23, the return was low, at -2. 
Power Grid: In 17-18, daily data revealed price fluctuations with higher returns, close to 10 in the second quarter, while the third quarter return was beyond -10. For FY 18-23, returns varied from -10 to 5. Notably, in FY 21-22, the return exceeded 10 and was close to -15. 
Kirloskar Ind: In 17-18, daily data showed higher returns (>200) in Q1 and Q2, with Q3 and Q4 returns still above 100. For FY 2018-23, returns ranged from -100 to 100, but in 22-23, returns approached 200. 
KEC International: In 17-18, daily data revealed price fluctuations with lower returns (-20 to 20) in the first two quarters, while the third and fourth quarters had returns exceeding 20. For FY 18-23 (around announcement dates), returns varied from -20 to 20. However, in FY 21-23, returns exceeded 20. 
JSW Energy: In 17-18, daily data showed higher returns (>4) in the second quarter, while Q1 and Q3 were similar. Notably, returns were close to -6 in Q2 and Q4. For FY 18-23 (around announcement dates), returns varied from -10 to 10. However, in FY 21-23, returns exceeded 10 and approached 20. 
Jai Prakash Power: In 17-18, daily data showed high returns (>10) in Q2 and Q3, with a return close to -1 in Q2. Q1 and Q4 had lower but still more than 5 returns. For FY 18-23, returns ranged from -4 to 2, with FY 18-19 having returns over 4. In FY 22-23, returns started near -6 before reaching close to 4. 
Indian Energy Exchange: In 17-18, daily data exhibited price fluctuations with higher returns (>100) in the third quarter, and a lower but still close to 50 return in the fourth quarter. For FY 18-23, returns varied from -20 to 40. However, in FY 21-22, the return was close to -80. 
GVK Power: In 17-18, daily data revealed price fluctuations with higher returns (>1) in all quarters except the first. However, in the fourth quarter, the return was less than -2. For FY 18-23, returns varied between -2 to 4, with FY 18-19 experiencing returns below -6. 
Gujarat IND Power: In 17-18, daily data exhibited price fluctuations with higher returns (>5) in the first and second quarters, dropping below -10 in the third, and a lower but still close to 5 return in the fourth quarter. For FY 18-23 (around announcement dates), returns varied from -6 to 4. However, in the 20-21 FY, returns exceeded 4. 
BHEL: In 17-18, daily data showed high returns (>5) in Q1, Q3, and Q4, with returns near -5 to 5 in Q2. For FY 18-23 (around announcement dates), returns ranged from -8 to 4. Notably, in FY 22-23, returns exceeded 4, indicating stock improvement post-COVID-19 recovery. 
Adani Transmission: In 17-18, daily data showed Q3 with high returns near 20, while Q1 and Q4 ranged between -10 and 10. For FY 18-23, around the announcement date, returns varied from -100 to 100. Remarkably, in FY 22-23, returns exceeded 100. 
Adani Power: In 17-18, daily data indicated price fluctuations with higher returns, exceeding 2 in all quarters, but notably close to -8 in the first quarter. For 2018-23, returns varied between -10 to 10. In FY 2022-23, initial returns were less than -20, later surging to more than 20. 
Adani Green Energy: In FY 18-23, initial returns around announcement dates varied from 0 to 50. Remarkably, FY 2021-22 witnessed returns surpassing 100, followed by a significant drop to nearly -150. 
NHPC: In 17-18, daily data reveals price fluctuations, yielding a higher return (around 2) in Q1, followed by lower but consistent returns around 1 for the subsequent quarters. In FY 2018-23, data around the announcement date shows initial returns fluctuating between -0.5 to 0.5, with FY 2022-23 exhibiting returns closer to 1. 
SE Power: In 17-18, daily data exhibited price fluctuations with higher returns near 2 in the first two quarters and lower returns in the subsequent quarters. For FY 2018-23, around announcement dates, initial returns varied between -0.5 to +0.5. Notably, in FY 2021-22, returns surpassed 10, indicating improved stock positions amid post-COVID-19 economic recovery. 
NTPC: In 17-18, daily data shows fluctuations with moderate returns, exceeding 5 in Q2 and Q4, and close to 5 in Q1 and Q3. For FY 2018-23, around announcement dates, initial returns fluctuate between -0.5 to 0.5. Notably, FY 2020-21 records returns surpassing 5.
Analysing the Pharma Sector
The pharmaceutical sector encompasses industries engaged in the research, development, manufacturing, distribution, and utilization of pharmaceutical products and healthcare solutions. This includes the creation of drugs, vaccines, and medical treatments aimed at addressing and improving human health. Comparative trend analysis for the periods 1st April 2017 to 31st March 2018 and 1st April 2018 to 31st March 2023 below, provides insights into the sector’s evolution and performance.
Windlas Biotech: For FY 18-23, returns based on announcement dates vary from -10 to 10. However, from April 22 to October 22, the return goes beyond -10. 
Unichem Labs: In 17-18, Q3 had high returns (>20), while Q1, Q2, and Q4 were low. For FY 18-23, stock return values around announcement dates ranged from -20 to +20, except in FY 20-21 when returns exceeded 40 and dropped below -20. 
Suven Life SC: During the 17-18 period, daily data displayed price fluctuations with higher returns, exceeding 20 in the third and fourth quarters, while returns for the first and second quarters were low but still close to 10. For FY 18-23, data around announcement dates showed returns varying from -10 to 20. Notably, in FY 19-20, the return was more than 20 and went beyond -10. 
Sanofi India: In 17-18, daily data showed fluctuations with high returns (>200) in Q1 and Q3, while Q2 and Q4 had low returns, dropping beyond -800 in Q4. For FY 18-23, data around announcement dates had constant, very low returns (0). However, in FY 21-22, returns were less than -6000. 
Pfizer: For FY 18-23, data around announcement dates shows returns varying from -200 to 200. However, in FY 20-22, returns are close to 400, while simultaneously being low, going beyond -200 in FY 20-21. 
Medicamen: In 17-18, daily data displayed price fluctuations with higher returns, exceeding 50 in the second and fourth quarters, while returns for the first and third quarters were low but still close to 50. For FY 18-23 (around announcement dates), returns varied from -100 to 100. However, in FY 20-21, returns were very low, going beyond -300. 
Mankind Pharma: For GY 18-23, the return is constant and varies from >–20 to >40. 
Mangalam Drugs: In 17-18, Q2 had high returns (>20%), while Q1, Q3, and Q4 were >10%. FY 18-23 saw returns from -40% to +20%, with FY 18-19 having >20% returns and FY 22-23 going below -40%. 
Lupin: In 17-18, daily data revealed price fluctuations with lower returns, beyond -150 in the third quarter, while returns for the first, second, and fourth quarters were normal, exceeding 0. For FY 18-23 (around announcement dates), returns varied from -50 to 50. Notably, in FY 21-22, the return was less than -50, and in FY 22-23, it exceeded 50. 
Lincoln Pharma: In 17-18, daily data showed fluctuations with higher returns (>20) in Q2, while returns were low but over 10 in Q1, Q3, and Q4. For FY 18-23 (around announcement dates), returns ranged from -40 to 20. In FY 18-19, returns exceeded 20, but in FY 22-23, they were very low, going beyond -40. 
Laurus Labs: In 17-18, daily data displayed price fluctuations with higher returns, exceeding 20 in all quarters. For FY 18-23 (around announcement dates), stock return values varied from -50 to 50. Notably, in FY 20-21, the return exceeded 100, and in FY 22-23, it was more than 50. 
Kopran: In 17-18, daily data indicated price fluctuations with higher returns, more than 10 in the first quarter, while returns for the second and third quarters were low. For FY 18-23 (around announcement dates), returns varied from -10 to 10. Notably, in FY 22-23, the return exceeded 10. 
Kilitch Drugs: In 17-18, daily data indicated price fluctuations with higher returns, close to 20 in the fourth quarter, while returns for the first, second, and third quarters were low. For FY 18-23 (around announcement dates), returns were very low, at 0. However, in FY 22-23, the return exceeded 1500. 
Jubliant Pharma: In 17-18, daily data indicated price fluctuations with higher returns, more than 200 in the fourth quarter, while returns for the first, second, and third quarters were low. For FY 18-23 (around announcement dates), returns varied from -50 to 50. Notably, in FY 21-22, the return approached 100. 
Jagsonpal Pharma: In 17-18, daily data revealed price fluctuations with higher returns, more than 5 in the third quarter, while returns for the first, second, and fourth quarters were low but still more than 0. For FY 18-23 (around announcement dates), returns varied from -10 to 10. Notably, in FY 22-23, the return approached 20. 
Ipca Labs: In 17-18, daily data showed higher returns (>50) in the second quarter, while returns were similar and low in the other quarters, with Q4 close to 50. For FY 18-23 (around announcement dates), returns ranged from -100 to 100. Notably, in FY 20-21, returns exceeded 100 and also went beyond -100. 
GlaxoSmithKline: For FY 18-23, data around announcement dates indicates a constant return, i.e., 0. However, in FY 19-20, the return is extremely low, beyond -10,000. 
Gland Pharma: For FY 18-23, data around announcement dates shows returns varying from -200 to 200. However, in FY21, the return exceeded 200. 
Dr Reddys: In 17-18, daily data revealed price fluctuations with higher returns, exceeding 100 in all quarters. However, in the fourth quarter, the return trended downwards, close to -200. For FY 18-23 (around announcement dates), returns varied from -200 to 200. Notably, in FY 22-23, the return exceeded 200. 
Biofil Chemicals: In 17-18, daily data displayed price fluctuations with a higher return, more than 2 in the first quarter, while for the rest of the quarters, the return was low but still close to 2. For FY 18-23 (around announcement dates), returns varied from -10 to 10. Notably, in FY 20-21, the return exceeded 10. 
Biocon: In 17-18, daily data showed higher returns (>50) in the first quarter, while returns were lower in the other quarters. For FY 18-23 (around announcement dates), returns ranged from -40 to 20. However, in FY 19-20, returns dropped below -40. 
Bajaj Healthcare: In 17-18, daily data revealed price fluctuations with higher returns, 20 in the second, third, and fourth quarters, while the first quarter’s return was low but still close to 10. For FY 18-23 (around announcement dates), returns varied from -50 to 50. Notably, in FY 22-23, the return exceeded 50. 
AstraZeneca: In 17-18, daily data displayed price fluctuations with higher returns (>50) in Q2 and Q4, while Q1 and Q3 returns were low but close to 50. For FY 18-23 (around announcement dates), returns varied from -200 to 200. Notably, in FY 20-21, the return exceeded 200 and went beyond -200. In FY 22-23, the return was more than 200. 
Amrutanjan Health: In 17-18, daily data displayed price fluctuations with higher returns, close to 60 in the first and third quarters, while returns for the second and fourth quarters were low. For FY 18-23 (around announcement dates), returns varied from -40 to 40. However, in FY 21-22, the return exceeded 40, and it went beyond -60. 
Abbott India: In 17-18, daily data indicated price fluctuations with higher returns, more than 400 in the third quarter, while returns for the first and second quarters were low, and for the fourth quarter, it was more than 200. For FY 18-23 (around announcement dates), returns varied from -500 to 1000. Notably, in FY 20-21 and FY 22-23, returns exceeded 1000. 
Zim Labs: For FY 18-23, data around announcement dates shows returns varying from -20 to 20. However, returns become extremely negative in FY 18-19 and FY 22-23, approaching -40. 
Wockhardt: In 17-18, daily data displayed price fluctuations with higher returns, close to 100 in the third quarter, while returns for the first, second, and fourth quarters were low. For FY 18-23 (around announcement dates), returns varied from -50 to 50. In FY 20-21, the return exceeded 50, and in FY 21-22, it was very low, going beyond -100. 
Themis Medicare: In 17-18, daily data showed higher returns (>50) in Q2 and Q4, with lower returns in Q1 and Q3. For FY 18-23 (around announcement dates), returns ranged from -50 to 50. From 21-23, returns increased, approaching 100, but in FY 22-23, they went beyond -100. 
Syngene: In 17-18, daily data indicated price fluctuations with higher returns, more than 40 in the first quarter, while the second and fourth quarters were lower but still more than 20. For FY 18-23 (around announcement dates), returns varied from -20 to 20. However, in FY 22-23, the return approached 40. 
Solara Active: For FY 18-23, data around announcement dates reveals returns varying from -100 to 100. However, in FY 20-21, returns exceed 100 and go beyond -100 in FY 21-22. 
Shilpa Medicare: In 17-18, daily data indicated price fluctuations with higher returns, exceeding 20 in all quarters. Notably, in the second quarter, returns were low, at -60. For FY 18-23 (around announcement dates), returns varied from -50 to 50. 
Sequent SC: In 17-18, daily data displayed price fluctuations with higher returns, more than 5 in the second and fourth quarters, while returns for the first and third quarters were low, more than 0. For FY 18-23 (around announcement dates), returns varied from -10 to 10. Notably, in FY 21-22, returns exceeded 20 and went beyond -10. 
Nectar Lifesciences: In 17-18, daily data displayed price fluctuations with higher returns, more than 4 in the first and third quarters, while returns for the second and fourth quarters were low but still close to 2. For FY 18-23 (around announcement dates), returns varied from -2 to 2. Additionally, in FY 21-22, returns surpassed 2. 
Natco Pharm: In 17-18, daily data revealed price fluctuations with higher returns, exceeding 50 in the first quarter, while returns for the second quarter were low, beyond -100. For FY 18-23 (around announcement dates), returns varied from -50 to 50. Additionally, in FY 20-21, returns surpassed 50. 
Indoco Remedies: In 17-18, daily data displayed price fluctuations with higher returns, exceeding 30 in the third quarter, while returns for the first, second, and fourth quarters were low but still close to 20. For FY 18-23 (around announcement dates), returns varied from -50 to 50. Additionally, in FY 21-22, returns surpassed 50. 
Ind-Swift Labs: In 17-18, daily data indicated price fluctuations with higher returns, close to 10 in the third quarter, while returns for the first, second, and fourth quarters were low but still close to 1. For FY 18-23 (around announcement dates), returns varied from -5 to 5. Notably, in FY 21-22, returns were low, beyond -5, and in FY 22-23, the return was close to 10. 
Hikal: In 17-18, daily data showed fluctuations with higher returns (close to 15) in Q3 and Q4, and lower but still at 10 in Q1, Q2, and Q4. For FY 18-23 (around announcement dates), returns ranged from -20 to 20. However, in FY 21-22, the return exceeded 60. 
Ami Organics: For FY 18-23, returns were consistently low, close to -200. However, over time, returns became impressive, exceeding 50 in FY 22-23. 
Alpha Labs: In 17-18, daily data showed lower but positive returns in all quarters, with the fourth quarter close to -5. For FY 18-23 (around announcement dates), returns ranged from -5 to 5. However, in FY 22-23, returns went as low as -10 and exceeded 5. 
Aarti drugs: In 17-18, daily data indicated price fluctuations with higher returns, reaching 50 in the third quarter, while returns for the first, second, and fourth quarters varied from -50 to 50. For FY 18-23 (around announcement dates), returns ranged from -50 to 50. Notably, in FY 20-21, the return exceeded 100. 
Orchid Pharma: In 17-18, daily data revealed price fluctuations with higher returns, more than 4 in the first quarter, while returns for the rest of the quarters were low but still above 2. For FY 18-23 (around announcement dates), the return was very low, at 0. However, in FY 21-22, the return was close to 20, and in FY 22-23, it exceeded 20. 
NGL Chem Fine: In 17-18, daily data revealed price fluctuations with higher returns, more than 40 in the second and third quarters, while returns for the first and fourth quarters were low but still more than 20. For FY 18-23 (around announcement dates), returns varied from -100 to 100. Notably, in FY 21-22, the return went beyond -300, and in FY 22-23, it exceeded 100. 
Morepen labs: In 17-18, daily data indicated price fluctuations with higher returns, more than 4 in the third and fourth quarters, while returns for the first and second quarters were low but still above 2 in the second quarter. For FY 18-23 (around announcement dates), the return was very low, at 0. However, in FY 22-23, the return surged to more than 6000. 
IOL Chemicals: In 17-18, daily data had higher returns (close to 10) in Q2 and Q3, with lower but still at 5 returns in Q1 and Q4. For FY 18-23 (around announcement dates), returns ranged from -20 to 20. In FY 20-21, returns were close to 40 and at -40. 
Gufic Biosciences: In 17-18, daily data exhibited price fluctuations with higher returns, close to 15 in the second and third quarters, while returns for the first and fourth quarters were low but still more than 5. For FY 18-23 (around announcement dates), returns varied from -10 to 10. In FY 21-22, returns were close to 10, but in FY 22-23, they were very low, going beyond -30.
Influence of announcement dates on stock return value
This article provided an overview of each company’s performance, emphasizing the need for a detailed examination of stock return values to understand the impact of announcements. The significance of announcement dates in providing transparency and timely information to shareholders, investors, and the public is highlighted. These structured dates play a crucial role in releasing financial results and operational updates, allowing stakeholders to assess a company’s performance and make informed investment decisions.
In 2020, the energy sector experienced a decline due to COVID-19, but recovery efforts played a pivotal role in improving its position. Similarly, the pharmaceutical industry faced challenges, yet resilient companies like Biocon Ltd and Dr Reddy’s Laboratories Ltd. demonstrated higher returns post-pandemic. Notable players in the energy sector, such as the Adani Group and Tata Power, also showcased strong performance in the aftermath of the pandemic, reflecting their effective recovery efforts. This comprehensive overview underscores the importance of ongoing analysis and the impact of external factors on company trajectories.
References
- Fernando, J., Mansa, J., & Kvilhaung, S. (2023). Return on Investment ( ROI ): How to Calculate It and What It Means. Investopedia. https://www.investopedia.com/terms/r/returnoninvestment.asp
- Merkoulova, Y., & Veld, C. (2022). Why do individuals not participate in the stock market ? International Review of Financial Analysis, 83(October), 1–6.
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