Out of various investment alternatives, equity shares are one of the most popular as well as fascinating alternative. Although they carry high risk, they have a potential to generate higher returns in comparison to most of the other investment alternatives. Therefore, equity shares are not only preferred by individual investors but also by institutional investors. While selecting stocks for investment, rational investors take their decisions on the basis of large number of factors but two of them are most important i.e. Risk and Return. Modern portfolio theory also emphasises on using these two parameters while analysing and selecting stocks for the purpose of investment.
This study is an attempt to analyse and compare ten prominent stocks each from two important sectors of Indian economy i.e. Automobile and Pharmaceuticals on the basis of their risk and return. Researchers have not only analysed these stocks using their total risk but have also used their beta factors, systematic risk as well as unsystematic risk for a rather comprehensive analysis. Sharpe’s ration has also been used to analyse these stocks in terms of the risk-adjusted returns generated by them. The study reveals that among the stocks of two chosen sectors, stocks of pharmaceutical sector generated higher return and that too at relatively lower risk. Stock of the pharmaceutical company Abbott India Ltd has the highest value of Sharpe’s ratio during the study period.