International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056 Volume: 05 Issue: 05 | May-2018 www.irjet.net p-ISSN: 2395-0072 © 2018, IRJET | Impact Factor value: 6.171 | ISO 9001:2008 Certified Journal | Page 1577 BSE Index Ranking and Performance Evaluation Using MCDM Techniques Rupal Jaiswal 1 , Dr. Neelam Sahu 2 1,2 Dr C. V. Raman University, Bilaspur, India. ---------------------------------------------------------------------***--------------------------------------------------------------------- Abstract - It is very difficult to select best index with multiple equally important criterion. Multi Criteria Decision Making (MCDM) is the best method used for ranking alternatives for decision making and performance evaluation with conflicting criterion. Indices have different criterion like P/E ratio, P/B ratio, Dividend etc.. In this research we use two popular MCDM techniques AHP and TOPSIS for index ranking. The performance evaluation is also done using both methods. Six indices namely BSE SENSEX, BSE BENKEX, BSE GREENEX, BSE CARBONEX, BSE AUTO and BSE 100 from Bombay Stock Exchange (BSE) of year 2016-17 are used in experimental work to find best index. Applying AHP and TOPSIS method BSE SENSEX identifies as the top ranked index. Key Words: Multi criteria decision making (MCDM), Analytical Hierarchy Process (AHP), Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method, Bombay Stock Exchange (BSE), Index Ranking. 1. INTRODUCTION High return of investment is based on selection of best indices from the financial market. Selection of best indices for the investment is the challenging task for the fund manager as well as investors. The main challenge is to manage all criterion which is conflicting in nature. Multi Criteria Decision Making (MCDM) techniques are ranking based methods used to calculate the performance of indices. The ranks of indices help the investor to make decisions for investment. A portfolio is basically a collection of stocks held by an institution or individual which may be more reliable than individual stock. On the other hand portfolio selection is a process of choosing which assets and in what proportion will be best with respect to the investor’s preferences for achieving an expected return with minimum risk . Investment in the portfolio may be less risky with less gain as compare to individual stock, but taking the decision to choose best portfolio by the decision makers either as investor or financial manager is a tedious and risky job. Due to complex market competitions under the extremely competitive business environment, financial institutions try their best to make an ultimate policy for portfolio selection to optimize the investor returns. Risk was quantified such that investors could analyze risk return choices. Moreover, quantification of risk, enabled investors to measure risk reduction generated by diversification of investment. So it is essential to diversify the investment to create an efficient portfolio. A framework for mean-variance portfolio optimization is proposed by Markowitz in 1952[1] , the researchers are always investigating to enhance the framework by applying sophisticated quantitative or qualitative techniques. Portfolio selection problem may be considered as multi criteria decision making problem, where the portfolio may consists conflicting nature of criteria. Analytical Hierarchy Process (AHP), Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method, Simple Additive Weighting(SAW) etc. are some very popular methods for selection process. So many domains are there like engineering, science etc. where AHP is very useful MCDM method used by the researchers. Fuzzy AHP and TOPSIS method are used by author [2][3][4] for the ranking of teacher’s performance in different educational fields. Another author [6] has used multi-criteria decision approach for choosing optimal blanching-freezing system. AHP and TOSIS method are also used to evaluate the performance of healthcare industry [6][7]. 2. PRAPOSED WORKFLOW The proposed workflow of this research is presented in fig1. Fig -1: Workflow 2.1 Index Data In this research five popular indices of BSE ( Bombay Stock Exchange), downloaded from www.bseindia.com. BSE SENSEX, BSE BENKEX, BSE GREENEX, BSE CARBONEX, BSE AUTO and BSE 100 are index with six criterion High (C1), Low (C2), Close (C3), P/E ratio (C4), P/B ratio (C5) and Dividend (C6) used for the experimental work. 2.2 Ranking Methods AHP and TOPSIS are the most popular MCDM techniques. These methods are widely used for the ranking alternatives having conflicting criterion. Method description is as follows: BSE Index Normalized Index Data TOPSIS AHP Cooperative Result