0701095 Study of Portfolio Management by Baban

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ACKNOWLEDGEMENT

Talent and capabilities are of course necessary but opportunities and good guidance

are two very important things without which no person can climb those infant ladders

towards progress

It is great pleasure for me to acknowledge the kind of help and guidance received to

me during my project work. I was fortunate enough to get support from a large number of

people to whom I shall always remain grateful.

I would like to express my sincere gratitude to Mr. Sandeep Kakade for giving me

this opportunity to undergo this lucrative project with Globe Capital Marked Ltd. and also

for their great guidance and advice on this project, without which I will not be able to

complete this project.

I am very thankful to my mentor Prof. Mr. Mahesh Halale for him inspiration and

for initiating diligent efforts and expert guidance in course of my study and completion of

the project and I am very thankful to my project guide for giving me timely and concrete

guidance for making this project successful.

I would like to thankful to staff members of Globe Capital Marked Ltd. For

helped me during the project report and providing me more and more valuable information

for my project report.

I would thank to God for their blessing and my Parents also for their valuable

suggestion and support in my project report.

I would also like to thank our friends and those who have helped us during this

project directly or indirectly.

Baban R. Mahanur

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TABLE OF CONTENTS

Chapter.

No

PARTICULARS Page. No

1. EXECUTIVE SUMMARY 4

2. COMPANY PROFILE 6

3. OBJECTIVE OF PROJECT 9

4. RESEARCH METHODOLOGY 10

5. THEORETICAL BACKGROUND 11

6. DATA ANALYSIS & INTERPRETATION 45

7. FINDINGS 87

8. CONCLUSIONS 88

9. LIMITATIONS 89

10. BIBLIOGRAPHY 90

11. ANNEXURE 91

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Chapter 1

EXECUTIVE SUMMARY

The Project on Portfolio Management was carried out for Globe Capital Market Ltd.

.Overview

In Today’s Competitive world, where banks and financial institutions provide

number of services which provides a customer with a wide spectrum of investment

opportunities. They in order to retain their customers provide them special services besides

traditional services.

The invention of new technology and services by banks and financial institutions

has given the consumers a wide range of investment avenues to invest in. One of the

special services brought out by banks and financial institutions is PORTFOLIO

MANAGEMENT SERVICES (PMS) which aims at providing an investor to invest a

combination of securities all together which enables him to earn maximum returns at

minimum level of risk & without any confusion.

I am inclined to this topic, as it has given me actual knowledge of this service along

with its working and how the portfolio manager manages the portfolio.

Moreover, it has guided me to understand this so called complex world of

investment and also increase my knowledge to such extent. I hope it will prove beneficial

to me in developing my further career.

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Research Objective

The main objective of this project is to review the real meaning of Portfolio

Management, its objectives, role, framework, responsibilities of portfolio manger

and the study of various other issues related to it.

Basically to understand the concept of portfolio management.

Scope Of Project

The scope of the study is confined to Globe capital Market Ltd. only.

It is depended on the information collected from various sources like Annual

Reports, Magazines, etc.

Primary & Secondary sources are used for the data collection.

Findings and Analysis

The collection of information is based on the secondary probe.

The information has been collected through various books, various journals,

magazines, articles, books, published documents have also been considered in the

project work.

An attempt has been made to simplify the process of the PORTFOLIO

MANAGEMENT by using the fundamental analysis.

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Chapter 2

COMPANY PROFILE

Objective

“To be a good financial service provider by arranging the financial services under one roof

at affordable price through cost effective delivery systems and achieve organic growth in

business by adding new lines of business”

Sole Proprietor: Mr Sandeep Kakade

Manager: Samrat Lad

Sandeep kakade & Associates started in the year 2005 when acquired franchisee of Angel

Broking Ltd. Earlier Mr Sandeep Kakade had started an investment consultancy in 1992.

Areas of Business

It is a sole proprietorship firm. It provides services in stock market (NSE,

BSE, NSEFO, Commodity & Academy of Share market). It also deals in Insurance

products. And now concentrates more on UNIT LINKED PLANS.

The Complete Investment Destination:

It provides comprehensive range of investment services. That’s advantage of

having all the services investor need under one roof.

Equity & Derivatives:

You can look for an easy and convenient way to invest in equity and take positions

in the futures and options market using their research and tools. To start trading in Equity,

all you need to do is open an online trading account. You can call them and they will have

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their representative meet you. You can get help opening the account and get guidance on

how to trade in Equity.

Commodity

You can enter the whole new world of commodity futures. Investors looking for a

fast-paced dynamic market with excellent liquidity can now trade in Commodity Futures

Market. The Commodity Exchange is a Public Market forum and anyone can play in these

vital Commodity Markets. Globe Capital Market Ltd. can certainly be your point of entry

to the Commodity Markets. It is a registered trading-cum-clearing member of NCDEX and

MCX.

Internet Trading:

Making the right trade at the right time! E-Broking service, which brings you

experience of online buying and selling of shares with just a click.

A detail resource like live quotes, charts, research and advice helps you take proper

decisions. Their robust risk management system and 128 bit encryption gives you a

complete security about money, shares, and transaction documents.

IPO

It offers bidding for all booked bills IPOs being floated through NSE network.

It also offers services to customer such as advises on the minimum lot to applied in case of

refer and details and data to be furnished into IPO form. It enables the investors to

subscribe qualitative IPOs.

Mutual Fund

Transact in a wide range of Mutual Funds. Mutual Funds are an attractive means of

saving taxes and diversifying your investment portfolio. So if you are looking to invest in

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mutual funds, Globe Capital Market Ltd. offers you a host of mutual fund choices under

one roof backed by in-depth information and research to help you invest smartly.

Cash Market Services:

Globe Capital Market Ltd. offer cash market trading services for the clients. It

provides perfect Intraday Calls and Investment Research reports.

Stock broking:

It offers complete range of pre-trade and post-trade services on the BSE and the

NSE. Whether an investor come into its conveniently environment, or issue instruction

over the phone, its highly trained team and sophisticated equipment ensure smooth

transactions and prompt services.

Trading Terminals:

It offers its sub-broker and approved/authorized user fully equipped trading

terminals, at the location of investors choice. It is fully functional terminal, with a variety

of helpful features like market watch, order entry, order confirmation, charts, and trading

calls, all available in resizable windows. And it can be operated through the keyboard

using F1 for buy, F2 for sell.

Other Investment Products:

To help investor balance their portfolio, it offers a completer range of other

investment products, like Life Insurance, SIP in mutual funds etc.

Commodity Exchange:

It provides trading facility on MCX & NCDEX, a commodity exchange and has

providing services in the field of commodity trades to its clients. It deals in gold silver, and

all other commodities.

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Chapter 3

OBJECTIVE OF PROJECT

Primarily understand the basic concept of Stock Market

To understand concept of Portfolio Management.

To understand the functions and responsibilities of Portfolio Management.

To understand the concept of company analysis.

1. Fundamental Analysis

2. Technical Analysis

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Chapter 4

RESEARCH METHODLOGY

Research methodology is a very organized and systematic medium through which a

particular case or problem solved.

It is analytical, descriptive and quantitative research where the comparison between the

different stocks is made on the basis of risk, volatility and return.

Research design –descriptive

Data sources- primary data and secondary data

Research approach – face to face interview, observation, individual depth

interview

Research instrument –questionnaire.

Data Collection:

Primary Data:

1) Use of a Questionnaire for carrying out a survey

2) Presentation given by the Advisors

3) Data explaining the working of the Portfolio Management

Secondary Data:

1) Books

2) Magazines

4) Internet

5) Booklet

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This project is about studying the portfolio management which is on the boom. The

introductory part containts the meaning of portfolio management, its evolution. The

project contains various graphs, tables and further explanations.

Chapter 5

THEORETICAL BACKGROUND

Stock Market

Understanding the stock market starts with a basic understanding stocks. A stock

represents partial ownership of a company – the smallest share possible. Company's issues

stocks to raise capital and investors who buy stock are actually buying a portion of the

company.

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STOCK MARKET

PRIMARY MARKET SECONDARY MARKET

EQUITY MARKET

OR

CASH MARKET

DERIVATIVE

MARKET

FUTURE OPTION

CALL PUT



Where the buying and selling of stocks take place is known as STOCK MARKET.

Stock trading is done on stock market like the NSE (National Stock Exchange) or BSE

(Bombay Stock Exchange) This means that only companies listed on a public exchange

have shares that can be bought and sold on the open market. Of course, you could also buy

partial ownership in a smaller company that is not listed on a stock market but that is a very

different type of investment than buying stocks. Because stocks must be bought and sold

on a stock market, an individual investor needs a broker to make transactions for him.

Brokers take orders to buy or sell a certain stock. The order may include instructions to

trade at a certain price or simply what the market will bear. Once the broker receives the

order he attempts to execute it by finding a buyer or seller as the case may be. The buyer or

seller is also represented by a broker and each broker receives a commission on the sale.

Primary Securities Market

Most companies are usually stared privately by their promoter(s). However, the

promoter’s capital and the borrowings from the banks and the financial institutions may not

be sufficient for setting up or running the business over a long term. So companies invite

the public to contribute toward the equity and issue shares to individual investors. The way

to invite share capital from the public is through a ‘Public Issue’ simply stated, a public

issue is an offer to the public to subscribe to the share capital of a company. Once this is

done the company allots shares to the applicants as per the prescribe rules and regulation

laid down by SEBI.

Secondary Securities Market

Secondary market refers to a market where securities are traded after being initially

offered to the public in the primary market and/or listed on the Stock Exchange. Majority

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of the trading is done in the secondary market Secondary market comprises of equity

markets and the debt markets.

In the primary market, securities are offered to public for subscription for the

purpose of raising capital or fund. Secondary market is an equity trading venue in which

already existing/pre-issued securities are traded among investors. Secondary market could

be either auction or dealer market. While stock exchange is the part of an auction market,

Over-the-Counter (OTC) is a part of the dealer market.

Equity Market / Cash Market;

Capital Market is generally understood as the market for long term fund .However,

sometimes used in a very broad sense to include also the market for short term funds.

Capital market means the market for all the financial instruments, short term and long term,

as also commercial, industrial and govt paper.

Derivative Market

The term derivative indicates that it has no independent value, i.e its value is

entirely derived from the value of the underlying assets. The underlying asset can be

securities, commodities, bullion, currency, live stock or anything else. In other words ,

derivative means a forward, future, option or any other hybrid contract of pre determined

fixed duration, linked for the purpose of contract fulfilment to the value of a specified real

or financial asset or to an index of securities

Future

Future contract means a legally binding agreement to buy or sell the underlying

security on future date. Future contract are the organized/standardized contracts in terms of

quantity, quality (incase of commodities), delivery time and place for settlement on any

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date in future, the contract expires on a pre-specified date which is called the expiry date of

the contract. On expiry, future can be settled by delivery of the underlying asset or cash.

Options

An option on the other hand is the privilege sold by one party to another that offers

the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-

upon price during a certain period of time or on a specific date.

Call Option

A call option gives the holder (buyer/one who is long call), the right to buy

specified quantity of the underlying assets at the strike price on or before an expiration date.

The seller of the call option (one who is short call) however, has the obligation to sell the

underlying assets if the buyer of the call option decides to exercise his option to buy.

Put Option

A Put option gives the holder (buyer/one who is long put), the right to sell

specified quantity of the underlying assets at the strike price on or before an expiry date. The

seller of the put option (one who is short put) however, has the obligation to buy the

underlying assets at the strike price if the buyer of the put option decides to exercise his

option to sell.

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INTRODUCTION OF PORTFOLIO MANAGEMENT

“Portfolio” means the total holdings of securities belonging to any person.

Portfolio management is the management various financial assets which comprise

the portfolio. In a narrow spectrum, the term portfolio management can be applied to only

shares and debentures whereas the management of the total financial assets can be

attributed to the investment management.

Portfolio management is a decision - support system that is designed with a view to

meet the multi-aced needs of investors.

As per definition of SEBI Portfolio means “a collection of securities owned by an

investor”. It represents the total holdings of securities belonging to any person". It

comprises of different types of assets and securities. Portfolio management refers to the

management or administration of a portfolio of securities to protect and enhance the value

of the underlying investment. It is the management of various securities (shares, bonds etc)

and other assets (e.g. real estate), to meet specified investment goals for the benefit of the

investors. It helps to reduce risk without sacrificing returns. It involves a proper investment

decision with regards to what to buy and sell. It involves proper money management. It is

also known as Investment Management .Portfolio Management, called, as Portfolio

Management Services are the advisory services provided by corporate financial

intermediaries. It enables investors to promote and protect their investments that help them

to generate higher returns. It devotes sufficient time in reshuffling the investments on hand

in line with the changing dynamics.

It provides the skill and expertise to steer through these complexes, volatile and dynamic

times. It is a choice of selecting and revising spectrum of securities to it with the

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characteristics of an investor. It prevents holding of stocks of depreciating-value. It acts as

a financial intermediary and is subject to regulatory control of SEBI.

ROLE OF PORTFOLIO MANAGEMENT

In the beginning of the nineties India embarked on a programme of economic

liberalization and globalization. This reform process has made the Indian capital markets

active. The Indian stock markets are steadily moving towards capital efficiency, with rapid

computerization, increasing market transparency, better infrastructure, better customer

service, closer integration and higher volumes. Large institutional investors with their

diversified portfolios dominate the markets. A large number of mutual funds have been set

up in the country since 1987. With this development, investment securities have gained

considerable momentum. Along with the spread of securities investment among ordinary

investors, the acceptance of quantitative techniques by the investment community changed

the investment scenario in India. Professional portfolio management, backed by competent

research, began to be practiced by mutual funds, investment consultants and big brokers.

The Securities and Exchange Board of India, the stock market regulatory body in India, is

supervising the whole process with a view to making portfolio management a responsible

professional service to be rendered by experts in the field. With the advent of computers

the whole process of portfolio management has become quite easy. The computer can

absorb large volumes of data, perform the computations accurately and quickly give out

the results in a desired form. The trend towards liberalization and globalization of the

economy has promoted free flow capital across international borders. Portfolios now

include not only domestic securities but also foreign securities. Diversification has become

international.

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Another significant development in the field of portfolio management is the

introduction of derivatives securities such as options and futures. The trading in derivative

securities, their valuation, etc. has broadened the scope of portfolio management. Portfolio

management is a dynamic concept, having systematic approach that helps it to achieve

efficiency in investment.

Portfolio Management Role;

Origination

Above figure itself indicate the role of portfolio management. Portfolio management plays

very important role in respect of issuer and investor means companies and investors. After

research portfolio manager decide which security or which other product is good or

investible, accordingly he prepare strategies to invest. On the basis of the strategies he

structures a portfolio. According to research portfolio manager decide weightage for the

selected companies and distribute the share to that particular portfolio. It also involves

market clearing process i.e. taking delivery of share and making payment for those shares.

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Strategy

EquityEquity DerivativesDerivatives Other productsOther products

Portfolio Management ProcessPortfolio Management Process

DistributionDistribution

ProcessProcess

INVESTORINVESTORISSUERISSUERResearchResearch

ProcessProcess

Market Clearing ProcessMarket Clearing Process

Structuring ProcessStructuring Process



SCOPE OF PORTFOLIO MANAGEMENT

Portfolio management is a continuous process. It is a dynamic activity. The following are

the basic operations of a portfolio management:

Monitoring the performance of portfolio by incorporating the latest market

conditions.

Identification of the investor’s objective, constraints and preferences.

Making an evaluation of portfolio income (comparison with targets and

achievements).

Making revision in the portfolio.

Implementation of strategies in tune with the investment objective.

ELEMENTS OF PORTFOLIO MANAGEMENT

Portfolio management is an on-going process involving the following basic tasks:

Identification of the investor’s objectives, constraints and preferences, which will

help formulate the investment policy.

Strategies are to be developed and implemented in tune with the investment policy

formulated. This will help the selection of asset classes and securities in each class

depending upon their risk-return attributes.

Review and monitoring of the performance of the portfolio by continuous overview

of the market conditions, companies performance and investor’s circumstances.

Finally, the evaluation of the portfolio for the results to compare with the targets

and needed adjustments have to be made in the portfolio to the emerging conditions

and to make up for any shortfalls in achievement vis-à-vis targets.

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The collection of data on the investor’s preferences, objectives, etc., is the foundation of

portfolio management. This gives an idea of channels of investment in terms of asset

classes to be selected and securities to be chosen based upon the liquidity requirements,

time horizon, taxes, asset preferences of investors, etc. these are the building blocks for

the construction of a portfolio. According to these objectives and constraints, the

investment policy can be formulated. The policy will lay down the weights to be given to

different asset classes of investment such as equity share, preference shares, debentures,

company deposits, etc., and the proportion of funds to be invested in each class and

selection of assets and securities in each class are made on this basis. The next stage is to

formulate the investment strategy for a time horizon for income and capital appreciation

and for a level of risk tolerance. The investment strategies developed by the portfolio

managers have to be correlated with their expectation of the capital market and the

individual sectors of industry. Then a particular combination of assets is chosen on the

basis of investment strategy and manager’s expectations of the market.

OBJECTIVE OF THE PORTFOLIO MANAGEMENT

The objective of portfolio management is to maximize the return and minimize the risk.

These objectives are categorized into:

1. Basic Objectives.

2.Subsidiary Objectives

Basic Objectives

The basic objectives of a portfolio management are further divided into two kinds viz., (a)

maximize yield (b) minimize risk. The aim of the portfolio management is to enhance the

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return for the level of risk to the portfolio owner. A desired return for a given risk level is

being started. The level of risk of a portfolio depends upon many factors. The investor, who

invests the savings in the financial asset, requires a regular return and capital appreciation.

Subsidiary Objectives

The subsidiary objectives of a portfolio management are expecting a reasonable income,

appreciation of capital at the time of disposal, safety of the investment and liquidity etc.

The objective of investor is to get a reasonable return on his investment without any risk.

Any investor desires regularity of income at a consistent rate. However, it may not always

be possible to get such income. Every investor has to dispose his holding after a stipulated

period of time for a capital appreciation. Capital appreciation of a financial asset is highly

influenced by a strong brand image, market leadership, guaranteed sales, financial strength,

and large pool of reverses, retained earnings and accumulated profits of the company. The

idea of growth stocks is the right issue in the right industry, bought at the right time. A

portfolio management desires the safety of the investment. The portfolio objective is to

take the precautionary measures about the safety of the principal even by diversification

process. The safety of the investment calls for careful review of economic and industry

trends. Liquidity of the investment is most important, which may not be neglected by any

investor/portfolio manager. An investment is to be liquid, it must have “termination and

marketable” facility at any time.

TYPES OF PORTFOLIO MANAGEMENT

1. The discretionary Portfolio Management

2. The non-discretionary Portfolio Management

The discretionary Portfolio Management

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In this type, the client parts with his money in favour of the manager, who is return,

handles all the paper work, makes all the decisions and give a good return on the

investment and charge fees. In the discretionary portfolio management to maximise the

yield, almost all portfolio managers park the funds in the money market securities such as

overnight market, 182 days treasury bills and 90 days commercial bills. Normally, the

return on each investment varies from 14 to 18 per cent, depending on the call money rates

prevailing at the time of investment

The non-discretionary Portfolio Management

The manager function as a counsellor, but the investor is free to accept or reject the

manager’s advice. The paper work is also undertaken by the manager for services charge

the manager concentrates on stock market – instrument with a portfolio tailor made to the

risk taking ability of the investor.

Approaches of Portfolio Management

Traditional Approach

Philosophy of holding assets till maturity (or default)

Relationships have been perceived by the extent of paper / risk that is held

by banks

Performance metrics have been driven by revenues & net income versus

economic capital and ROE

Emphasis on primary distribution with no markets / products for secondary

sales.

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BuyBuy HoldHold



Modern Approach

Originate to distribute

Portfolio Management acts as buyer, seller and manager of risk

Support OR profit center?

– Support in a cross sell environment

– ‘Hold’ to be at least SVA neutral

Fundamental shift in viewing exposures from ‘Approved commitments’ to

‘Economic capital usage’

What is Hedging?

A hedge is an investment that is taken out specifically to reduce or cancel out the

risk in another investment. Hedging is a strategy designed to minimize exposure to an

unwanted business risk, particularly in inflationary economies, while still allowing the

business to profit from an investment activity. Typically, a hedger might invest in a

security that he believes is under-priced relative to its "fair value".

PORTFOLIO MANAGER

• Portfolio Manager is a professional who manages the portfolio of an investor with

the objective of profitability, growth and risk minimization.

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BuyBuy Sell, HedgeSell, Hedge

http://en.wikipedia.org/wiki/Risk

http://en.wikipedia.org/wiki/Business_strategy

http://en.wikipedia.org/wiki/Inflation

http://en.wikipedia.org/wiki/Security_(finance)

http://en.wikipedia.org/wiki/Risk

http://en.wikipedia.org/wiki/Business_strategy

http://en.wikipedia.org/wiki/Inflation

http://en.wikipedia.org/wiki/Security_(finance)



• According to SEBI, Any person who pursuant to a contract or arrangement with a

client, advises or directs or undertakes on behalf of the client the management or

administration of a portfolio of securities or the funds of the client, as the case may

be is a portfolio manager.

• He is expected to manage the investor’s assets prudently and choose particular

investment avenues appropriate for particular times aiming at maximization of

profit. He tracks and monitors all your investments, cash flow and assets, through

live price updates.

• The manager has to balance the parameters which defines a good investment i.e.

security, liquidity and return. The goal is to obtain the highest return for the client

of the managed portfolio.

• There are two types of portfolio manager known as Discretionary Portfolio

Manager and Non Discretionary Portfolio Manager. Discretionary portfolio

manager is the one who individually and independently manages the funds of each

client in accordance with the needs of the client and non-discretionary portfolio

manager is the one who manages the funds in accordance with the directions of the

client.

GENERAL RESPONSIBILITIES OF A PORTFOLIO MANAGER

Following are some of the responsibilities of a Portfolio Manager:

•

The portfolio manager shall act in a fiduciary capacity with regard to the client's

funds.

• The portfolio manager shall transact the securities within the limitations placed by

the client.

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• The portfolio manager shall not derive any direct or indirect benefit out of the

client's funds or securities.

• The portfolio manager shall not borrow funds or securities on behalf of the client.

• The portfolio manager shall ensure proper and timely handling of complaints from

his clients and take appropriate action immediately

• The portfolio manager shall not lend securities held on behalf of clients to a third

person except as provided under these regulations.

CODE OF CONDUCT OF A PORTFOLIO MANAGER

Every portfolio manager in India as per the regulation 13 of SEBI shall follow the

following Code of Conduct:

• A portfolio manager shall maintain a high standard of integrity fairness.

• The client’s funds should be deployed as soon as he receives.

• A portfolio manager shall render all times high standards and unbiased service.

• A portfolio manager shall not make any statement that is likely to be harmful to the

integration of other portfolio manager.

• A portfolio manager shall not make any exaggerated statement.

• A portfolio manager shall not disclose to any client or press any confidential

information about his client, which has come to his knowledge.

• A portfolio manager shall always provide true and adequate information.

• A portfolio manager should render the best pose advice to the client.

SEBI’S GUIDLINE TO PORTFOLIO MANAGEMENT

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SEBI has issued detailed guidelines for portfolio management services. The guidelines

have been made to protect the interest of investors. The salient features of these guidelines

are:

• The nature of portfolio management service shall be investment consultant.

• The portfolio manager shall not guarantee any return to his client.

• Client’s funds will be kept in a separate bank account.

• The portfolio manager shall act as trustee of client’s funds.

• The portfolio manager can invest in money or capital market.

• Purchase and sale of securities will be at a prevailing market price.

POWER OF SEBI

The Securities and Exchange Board of India has the following powers to control and

manage the portfolio managers:

• The portfolio manager shall submit to SEBI such reports, returns and documents as

may be prescribed.

• SEBI may investigate the affairs of a portfolio manager such as inspection of books

of accounts, records, etc.,

• SEBI has full authority in the event of violation of any provision to suspend or

cancel the license.

• No exemptions will be given under any circumstances to portfolio manager.

TYPES OF RISK IN PORTFOLIO MANGEMENT

Each and every investor has to face risk while investing. What is Risk? Risk is the

uncertainty of income/capital appreciation or loss of both. Risk is classified into:

25



Systematic risk or Market related risk and Unsystematic risk or Company related

risk.

Systematic risk

Systematic risk refers to that portion of variation in return caused by factors that

affect the price of all securities. It cannot be avoided. It relates to economic trends with

effect to the whole market. This is further divided into the following:

Market risk: A variation in price sparked off due to real, social political and economical

events is referred as market risk.

Interest rate risk: Uncertainties of future market values and the size of future incomes,

caused by fluctuations in the general level of interest is referred to as interest rate risk. Here

price of securities tend to move inversely with the change in rate of interest. Inflation risk :

Uncertainties in purchasing power is said to be inflation risk.

Unsystematic risk

Unsystematic risk refers to that portion of risk that is caused due to factors related to a firm

or industry. This is further divided into:

Business risk: Business risk arises due to changes in operating conditions caused by

conditions that thrust upon the firm which are beyond its control such as business cycles,

government controls, etc.

Internal risk: Internal risk is associated with the efficiency with which a firm conducts its

operations within the broader environment imposed upon it.

Financial risk : Financial risk is associated with the capital structure of a firm. A firm with

no debt financing has no financial risk. The extends depends upon the leverage of the firms

capital structure.

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PORTFOLIO MANAGEMENT FRAMWORK

Portfolio Management Process

1. SPECIFICATION OF INVESTMENT OBJECTIVES AND CONSTRAINTS

The first step in the portfolio management process is to specify the investment

policy that consists of investment objectives, constraints and preferences of

investor. The investment policy can be explained as follows:

OBJECTIVES

Return requirements: Return is the primary motive that drives investment. It is the

reward for undertaking the investment. The commonly stated investment goals are income,

growth and stability. Since income and growth represent two ways through which income

is generated and stability implies containment or elimination of risk. But investment

objectives may be more clearly expressed in terms of returns and risk. However, return and

risk go hand in hand. An investor would primarily be interested in a higher return (in the

form of income or capital appreciation) and lower level of risk. So he has to bear higher

level of risk in order to earn high return. How much risk he would be willing to bear to earn

a high return depends on his risk disposition. The investment objective should state the

investor the preference of return in relation to risk.

Specification of investment objectives can be done in following two ways:

• Maximize the expected rate of return, subject to the risk exposure being held within

a certain limit (the risk tolerance level).

• Minimize the risk exposure, with out sacrificing a certain expected rate of return

(the target rate of return).

27



An investor should start by defining how much risk he can bear or how much he can afford

to lose, rather than specifying how much money he wants to make. The risk he wants to

bear depends on two factors:

A. Financial situation

B. Temperament

To assess financial situation one must take into consideration: position of the

wealth, major expenses, earning capacity, etc and a careful and realistic appraisal of the

assets, expenses and earnings forms a base to define the risk tolerance

After appraisal of the financial situation assess the temperamental tolerance of risk.

Risk tolerance level is set either by one’s financial situation or financial temperament

which ever is lower, so it is necessary to understand financial temperament objectively.

One must realize that risk tolerance cannot be defined too rigorously or precisely. For

practical purposes it is enough to define it as low, medium or high. This will serve as a

valuable guide in taking an investment decision. It will provide a useful perspective and

will prevent from being a victim of the waves and manias that tend to sweep the market

from time to time.

Risk tolerance: Risk refers to the possibility that the actual outcome of an investment will

differ from its expected outcome. More specifically, most of the investors are concerned

about the actual outcome being less than the expected outcome. The wider the range of

possible outcomes, the greater is the risk. It all depends on the investor, how much risk he

is able to bear. If he is willing to bear high risk, he is expected to get high return and if he is

willing to bear low risk, he will get low return.

28



CONSTRAINTS AND PREFERENCES

Liquidity: Liquidity refers to the speed with which an asset can be sold, without suffering

any loss to its actual market price. For example, money market instruments are the most

liquid assets, whereas antiques are among the least liquid.

Investment horizon: the investment horizon is the time when the investment or part of it is

planned to liquidate to meet a specific need. For example, the investment horizon for ten

years to fund the child’s college education. The investment horizon has an important

bearing on the choice of assets.

Taxes: The post – tax return from an investment matters a lot. Tax considerations therefore

have an important bearing on investment decisions. So, it is very important to review the

tax shelters available and to incorporate the same in the investment decisions.

2. SELECTION OF ASSET MIX

Based on the objectives and constraints, selection of assets is done. Selection of assets

refers to the amount of portfolio to be invested in each of the following asset categories:

• Cash: The first major economic asset that an individual plan to invest in is his or

her own house. Their savings are likely to be in the form of bank deposits and

money market mutual fund schemes. Referred to broadly as ‘cash’, these

instruments have appeal, as they are safe and liquid.

• Bonds: Bonds or debentures represent long-term debt instruments. They are

generally of private sector companies, public sector bonds, gilt-edged securities,

RBI saving bonds, national saving certificates, Kisan Vikas Patras, bank deposits,

public provident fund, post office savings, etc.

• Real estate: The most important asset for individual investors is generally a

residential house. In addition to this, the more affluent investors are likely to be

29



interested in other types of real estate, like commercial property, agricultural land,

semi-urban land, etc.

• Precious objects and others: Precious objects are items that are generally small in

size but highly valuable in monetary terms. It includes gold and silver, precious

stones, art objects, etc. Other assets includes like that of financial derivatives,

insurance, etc.

The fallacy of Time Diversification: The notion or the idea of time diversification is

fallacious. Even though the uncertainty about the average rate of return diminishes over a

longer period, it also compounds over a longer time period. Unfortunately, the latter effect

dominates. Hence the total return becomes more uncertain as the investment horizon

lengthens.

3. FORMULATION OF PORTFOLIO STRATEGY

After selection of asset mix, formulation of appropriate portfolio strategy is required. There

are two types of portfolio strategies, Active Portfolio Strategy and Passive Portfolio

Strategy.

• ACTIVE PORTFOLIO STRATEGY

Most investment professionals follow an active portfolio strategy and aggressive investors

who strive to earn superior returns after adjustment for risk. The four principal vectors of

an active strategy are:

1. Market Timing

2. Sector Rotation

3. Security Selection

4. Use of a specialized concept

30



Market timing: This involves departing from the normal (or strategic or long run) asset

mix to reflect one’s assessment of the prospects of various assets in the near future.

Suppose an investor’s investible resources for financial assets are 100 and his normal (or

strategic) stock-bond mix is 50:50. In short and intermediate run however he may be

inclined to deviate from long-term asset mix. If he expects stocks to out perform bonds, on

a risk-adjusted basis, in the near future, he may perhaps step up the stock component of his

portfolio to say 60 to 70 percent. Such an action, of course, would raise the beta of his

portfolio. On the other hand, if he expects the bonds to outperform stocks, on a risk-

adjusted basis, in the near future, he may set up the bond component of his portfolio to 60

to 70 percent. This will naturally lower the beta of his portfolio. Market timing is based on

an explicit or implicit forecast of general market movements. The advocates of market

timing employ a variety of tools like business cycle analysis, advance-decline analysis,

moving average analysis, and econometric models. The forecast of the general market

movement derived with the help of one or more of these tools are tempered by the

subjective judgment of the investor. Often, of course, the investor may go largely by his

market sense.

Sector Rotation: The concept of sector rotation can be applied to stocks as well as bonds.

It is however, used more commonly with respect to stock component of portfolio where it

essentially involves shifting the weightings for various industrial sectors based on their

assessed outlook. For example if it is assumed that cement and pharmaceutical sectors

would do well compared to other sectors in the forthcoming period, one may overweight

these sectors, relative to their position in market portfolio. With respect to bonds, sector

rotation implies a shift in the composition of the bond portfolio in terms of quality, coupon

rate, term to maturity and so on. For example, if there is a rise in the interest rates, there

31



may be shift in long term bonds to medium term or even short-term bonds. But we should

remember that a long-term bond is more sensitive to interest rate variation compared to a

short-term bond.

Security Selection: Security selection involves a search for under priced securities. If an

investor resort to active stock selection, he may employ fundamental and or technical

analysis to identify stocks that seems to promise superior returns and overweight the stock

component of his portfolio on them. Likewise, stocks that are perceived to be unattractive

will be under weighted relative to their position in the market portfolio. As far as bonds are

concerned, security selection calls for choosing bonds that offer the highest yield to

maturity at a given level of risk.

Use of a specialized Investment Concept:: A fourth possible approach to achieve superior

returns is to employ a specialized concept or philosophy, particularly with respect to

investment in stocks. As Charles D. Ellis words says, a possible way to enhance returns “is

to develop a profound and valid insight into the forces that drive a particular group of

companies or industries and systematically exploit that investment insight or concept.”

Some of the concepts of investment practitioners are as follows:

Growth stocks

Value stocks

Asset-rich stocks

Technology stocks

Cyclical stocks

32



PASSIVE PORTFOLIO STRATEGY:

The passive strategy rests on the tenet that the capital market is fairly efficient with respect

to the available information. The passive strategy is implemented according to the

following two guidelines

• Create a well-diversified portfolio at a predetermined level of risk.

• Hold the portfolio relatively unchanged over time, unless it becomes inadequately

diversified or inconsistent with the investor’s risk-return preferences

4. SELECTION OF STOCKS

Three board approaches are employed for the selection of equity shares:

• Technical analysis

• Fundamental analysis

• Random selection

Technical analysis looks at price behaviour and volume data to determine whether the

share will move up or down or remain trend less.

Fundamental analysis focuses on fundamental factors like the earnings level, growth

prospects, and risk exposure to establish the intrinsic value of a share. The recommendation

to buy, hold, or sell is based on a comparison of the intrinsic value and the prevailing

market price.

Random selection approach is based on the premise that the market is efficient and

securities are properly priced.

33



Models of Portfolio

To make the asset allocation process easier for clients, many investment companies create a

series of model portfolios, each comprising different proportions of asset classes. These

portfolios of different proportions satisfy a particular level of investor risk tolerance. In

general, these model portfolios range from conservative to very aggressive:

1. Conservative Portfolio

2. Moderately Conservative portfolio

3. Aggressive Portfolio

4. Moderately Aggressive Portfolio

5. Very Aggressive Portfolio

• Conservative Model

Conservative model portfolios generally allocate a large percent of the total portfolio to

lower-risk securities such as fixed-income and money market securities.

5% to 15% cash & equivqlent

15% to 20% Equities

70% to 75% fixed income

securities

Our main goal with a conservative portfolio is to protect the principal value of our

portfolio. As such, these models are often referred to as "capital preservation portfolios".

34



Even if you are very conservative and prefer to avoid the stock market entirely, some

exposure can help offset inflation. You could invest the equity portion in high-quality blue

chip companies, or an index fund, since the goal is not to beat the market

• Moderately Conservative portfolio

A moderately conservative portfolio is ideal for those who wish to preserve a large portion

of the portfolio’s total value, but is willing to take on a higher amount of risk to get some

inflation protection.

5% to 10% Cash & Equivalent

35% to 40% Equity

55% to 60% Fixed Income

Securities

A common strategy within this risk level is called "current income". With this strategy, you

chose securities that pay a high level of dividends or coupon payments.

35



• Aggressive Portfolio

Aggressive portfolios mainly consist of equities, so these portfolios' value tends to fluctuate

widely. If you have an aggressive portfolio, your main goal is to obtain long-term growth

of capital. As such the strategy of an aggressive portfolio is often called a "capital growth"

strategy.

5% to 10% Cash &

Equivalent

20% to 25% Fixed Income

Securities

65% to 70% Equities

To provide some diversification, investors with aggressive portfolios usually add some

fixed-income securities.

• Moderately Aggressive Portfolio

Moderately aggressive model portfolios are often referred to as "Balanced Portfolios" since

the asset composition is divided almost equally between fixed income securities and

equities in order to provide a balance of growth and income.

5% to 10% Cash & Equivalent

35% to 40% Fixed Incom e

55% to 60% Equity

36



Since these moderately aggressive portfolios have a higher level of risk than those

conservative portfolios mentioned above, select this strategy only if you have a longer time

horizon (generally more than five years), and have a medium level of risk tolerance.

• Very Aggressive Portfolio

Very aggressive portfolios consist almost entirely of equities. As such, with a very

aggressive portfolio, your main goal is aggressive capital growth over a long time horizon.

10% Fixed Income

10% Cash & Equivalent

80% to 90% Equity

Since these portfolios carry a considerable amount of risk, the value of the portfolio will

vary widely in the short term.

37



Phases of Portfolio Management

Security Analysis

Portfolio Analysis

Portfolio Selection

Portfolio Revision

Portfolio Evaluation

• Security Analysis

Professional investor will make more money & less loss than, who let their heart rule.

Their head eliminate all emotions for decision making. Be ruthless & calculating, you are

out to make money. Decision should be based on actual movement of share price measured

both in money & percentage term & nothing else. Greed must be avoided patience may be

a virtue, but impatience can frequently be profitable.

In Security Analysis anticipated growth, calculations are based on considered

FACTS & not on HOPE. Equity analysis is basically a combination of two independent

analyses, namely Fundamental analysis & Technical analysis. The subject of Security

analysis, i.e. the attempt to determine future share price movement & its reliability by

references to historical data is a vast one, covering many aspect from the calculating

various FINANCIAL RATIOS, plotting of CHARTS to extremely sophisticated

indicators.

A general investor can apply the principles by using the simplest of tools: pocket

calculator, pencil, ruler, chart paper & your cautious mind, watchful attention. It should be

38



pointed out that, this equity analysis does not discuss how to buy & sell shares, but does

discuss a method which enables the investor to arrive at buying & selling decision.

Fundamental Analysis

The financial analysts always need yardsticks to evaluate the efficiency & performances of

any business unit at the time of investment. Fundamental analysis is useful in long term

investment decision. In Fundamental analysis company goodwill, its performances,

liquidity, leverage, turnover, profitability & financial health was checked & analysis with

the help of ratio analysis for the purpose of long term successful investment. It is important

criteria for selecting the company to invest. It also provides the base for decision-making in

investment. The one of the most frequently used yardstick to check & analyze profitability

& financial health is Ratio Analysis. For that matter a verity of ratios was consider. This

Fundamental analysis is helpful to general investor in many ways. It provides important &

vital information regarding the financial position of the company.

Ratio analysis involves the use of various methods for calculating & interpreting financial

ratios to assess the performances & status of the business unit. It is the tool of financial

analysis, which not only studies but also reflecting the numerical & quantitative

relationship between the important financial variables.

Fundamental analysis facilitates comparison between two companies. It reflects the

financial efficiency & financial position of a company. Fundamental analysis is fruitful in

preparing plans for the future. However, fundamental Analysis should not be considering

as the ultimate objective test but it may be carried further based on the outcome &

revelations about the cause of variations. Fundamental Analysis is helpful in forecasting

likely position of company in near future.

39



Fundamental analysis is a very powerful analytical tool useful for measuring performance

of an organization. The ratio analysis concentrates on the inter-relationship among the

figures appearing in the financial and accounting statements. The ratio analysis helps the

investor to analyze the past performance of the firm and to make further future projection

regarding financial position. Ratio analysis allows interested parties like shareholders,

investors, creditors and government to make an evaluation of financial aspect of a firm s

performance.

Fundamental analysis i.e. Ratio analysis is process of comparison of one figure against

another, which makes a ratio, and appraisal of the ratios to make proper analysis about the

strength and weakness of the firms operation. Fundamental analysis is extremely helpful in

providing valuable insight into a company s financial picture. Ratios provide an easy way

to compare present performance of businesses. Ratios depicts the areas in which a

particular business competitively advantaged or disadvantaged through comparing ratios to

those of other businesses of the same size within the same industry.

Technical Analysis

Technical analysis refers to the study of market generated data like prices & volume to

determine the future direction of prices movements. Technical analysis mainly seeks to

predict the short term price travels. It is important criteria for selecting the company to

invest. It also provides the base for decision-making in investment. The one of the most

frequently used yardstick to check & analyze underlying price progress. For that matter a

verity of tools was consider. This Technical analysis is helpful to general investor in many

ways. It provides important & vital information regarding the current price position of the

company. Technical analysis involves the use of various methods for charting, calculating

& interpreting graph & chart to assess the performances & status of the price. It is the tool

40



of financial analysis, which not only studies but also reflecting the numerical & graphical

relationship between the important financial factors.

The focus of technical analysis is mainly on the internal market data, i.e. prices & volume

data. It appeals mainly to short term traders. It is the oldest approach to equity investment

dating back to the late 19th century.

Basic premises of technical analysis:

1. Market prices are determined by the interaction of supply & demand forces.

2. Supply & demand are influenced by variety of supply & demand affiliated

factors both rational & irrational.

3. These include fundamental factors as well as psychological factors.

4. Barring minor deviations stock prices tend to move in fairly persistent trends.

5. Shifts in demand & supply bring about change in trends.

6. This shift s can be detected with the help of charts of manual & computerized action,

because of the persistence of trends & patterns analysis of past market data can be used to

predict future prices behaviours.

Drawbacks / limitations of technical analysis:

1 Technical analysis does not able to explain the rezones behind the employment or

selection of specific tool of Technical analysis.

2 The technical analysis failed to signal an uptrend or downtrend in time.

3 The technical analysis must be a self defeating proposition. As more & more people use,

employ it the value of such analysis trends to reduce.

Assumptions for Security Analysis

1. Works only in normal share-market conditions with great reliability, it also works

in abnormal share-market conditions, but with low reliability.

41



2. Equity analysis is purely based on the INVESTMENT PHILOSOPHY, so the

investment object has vital importance associated to return along with risk.

3. Cash management gets the magnitude role, because the scenario of equity analysis

is revolving around the term money

4. Portfolio management, risk management was up to the investor s knowledge.

5. Capital market trend is always a friend, whether it is short run or long run.

6. You are buying stock & not companies, so don t be curious or panic to do Post-

mortem of company’s performances.

7. History repeats: investors & speculators react the same way to the same types of

events homogeneously

• Portfolio Analysis

A portfolio is a group of securities held together as investment. It is an attempt to spread

the risk allover. The return & risk of each portfolio has to be calculated mathematically and

expressed quantitatively. Portfolio analysis phase of portfolio management consists of

identifying the range of possible portfolios that can be constituted from a given set of

securities and calculating their risk for further analysis.

• Portfolio Selection

The goal of portfolio construction is to generate a portfolio that provides the highest returns

at a given level of risk. Harry Markowitzh portfolio theory provides both the conceptual

framework and the analytical tools for determining the optimal portfolio in a disciplined

and objective way.

• Portfolio Revision

In the entire process of portfolio management, portfolio revision is as important stage as

portfolio selection. Portfolio revision involves changing the existing mix of securities. This

42



may be effected either by changing the securities currently included in the portfolio or by

altering the proportion of funds invested in the securities. New securities may be added to

the portfolio or some existing securities may be removed from the portfolio. Thus it leads

to purchase and sale of securities. The objective of portfolio revision is similar to the

objective of selection i.e. maximizing the return for a given level of risk or minimizing the

risk for a given level of return.

The need for portfolio revision has aroused due to changes in the financial markets since

creation of portfolio. It has aroused because of many factors like availability of additional

funds for investment, change in the risk attitude, change investment goals, the need to

liquidate a part of the portfolio to provide funds for some alternative uses. The portfolio

needs to be revised to accommodate the changes in the investor’s position .

Portfolio Revision basically involves two stages;

Portfolio Rebalancing: Portfolio Rebalancing involves reviewing and revising the

portfolio composition (i.e. the stock- bond mix). There are three basic policies with respect

to portfolio rebalancing: buy and hold policy, constant mix policy, and the portfolio

insurance policy. Under a buy and hold policy, the initial portfolio is left undisturbed. It is

essentially a ‘buy and hold’ policy. Irrespective of what happens to the relative values, no

rebalancing is done. For example, if the initial portfolio has a stock-bond mix of 50:50 and

after six months it happens to be say 70:50 because the stock component has appreciated

and the bond component has stagnated, than in such cases no changes are made. The

constant mix policy calls for maintaining the proportions of stocks and bonds in line with

their target value. For example, if the desired mix of stocks and bonds is say 50:50, the

constant mix calls for rebalancing the portfolio when relative value of its components

change, so that the target proportions are maintained.

43



The portfolio insurance policy calls for increasing the exposure to stocks when the

portfolio appreciates in value and decreasing the exposure to stocks when the portfolio

depreciates in value. The basic idea is to ensure that the portfolio value does not fall below

a floor level.

Portfolio Upgrading: While portfolio rebalancing involves shifting from stocks to bonds

or vice versa, portfolio-upgrading calls for re-assessing the risk return characteristics of

various securities (stocks as well as bonds), selling over-priced securities, and buying

under-priced securities. It may also entail other changes the investor may consider

necessary to enhance the performance of the portfolio.

• Portfolio Evaluation

Portfolio evaluation is the last step in the process of portfolio management. It is the process

that is concerned with assessing the performance of the portfolio over a selected period of

time in terms of return and risk. Through portfolio evaluation the investor tries to find out

how well the portfolio has performed. The portfolio of securities held by an investor is the

result of his investment decisions. Portfolio evaluation is really a study of the impact of

such decisions. This involves quantitative measurement of actual return realized and the

risk born by the portfolio over the period of investment. It provides a mechanism for

identifying the weakness in the investment process and for improving these deficient areas.

The evaluation provides the necessary feedback for designing a better portfolio next time

44



Chapter 6

DATA ANALYSIS & INTERPRETATION

Data analysis involve financial analysis, financial analysis could be processed in many

different ways, depending on what we want to achieve. Financial analysis can be used as

just a monitoring tool in the selection of stocks in the secondary market. Or it can be used

as a forecasting tool for future financial conditions and results. It may be used for

evaluation and diagnosis of managerial, operating or other problem areas. Furthermore,

financial analysis is a great and accurate base to rely which reduces the guessing and

uncertainty that presents in all decision making situations. Financial analysis does not

lesson the need for judgment but rather establishes a sound and systematic basis for its

rational application.

This is the first stage of the PORTFOLIO MANAGEMENT PROCESS. On the

basis of fundamental analysis select the company to invest in, and accordingly he decide

the weightage of that company in the portfolio. After having selected some good

performing companies and adds those companies in the portfolio. Since the share market is

volatile he makes changes in the portfolio or formulates strategies to earn more return. And

compare the portfolio’s returns with the market returns i.e. with NSE or BSE.

Following analysis shows that what portfolio manager has to do while managing

portfolio. Analysis also indicates how portfolio manager manage the portfolio.

45



Fundamental Analysis of Companies

HDFC BANK LTD

Company history;

HDFC Bank, a private sector bank was incorporated in the year of 1994 by Housing

Development Finance Corporation Limited (HDFC), India's premier housing finance

company. HDFC was amongst the first to receive an 'in principle' approval from the

Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank commenced

its operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's

liberalisation. HDFC Bank deals with three key business segments -Wholesale Banking

Services, Retail Banking Services, and Treasury. In credit card industry alone, HDFC

grown more than 10 times within the 3 years from 2005 to 2007. The bank has over 10

million customers and 1605 ATMS. The Reserve Bank of India has allowed HDFC Bank

to start a non banking finance company. The NBFC, to be set up by HDFC Bank as a

wholly owned subsidiary and will undertake retail operations such as auto, personal loans

etc. On June 2nd of 2007 HDFC Bank has opened 19 branches in a day in Delhi and the

National Capital Region (NCR), outdoing its own record of 14 branches in a day 2005. As

part and apart from the regular banking activity. The number of branches accounted 684 in

316 towns and cities as of 2007 and the bank want to survive as ' a World Class Indian

Bank ', benchmarking against international standards and best practices in terms of product

offering, technology, service levels, risk management.

46



Company Background;

Incorporation year 1994

Registered office HDFC Bank House Senapati Bapat Marg

Lower parel, Mumbai

Chairman Jagdish Capoor

Managing director Aditya Puri

Company Secretary Sanjay Dongre

Auditor Haribhakti & Co

Face Value 10.00

Market Lot 1

Registrar Datamatics Financial Services

PlotNo-A-16-17 Part B,Cross Lane MIDC,

Marol Andheri (East), Mumbai- 400 093

Market Capital 52,928.04 cr

47



Key Financials

Net Profit;

YEAR 2008 2007 2006 2005 2004

Rs in crore 1590.18 1141.45 870.78 665.56 509.50

0

200400

600

800

1000

1200

1400

1600

2004 2005 2006 2007 2008

Net profit

Current Ratio;

YEAR 2008 2007 2006 2005

PERCENTAGE 10.43 6.75 6.46 7.78

0

2

4

6

8

10

12

2005 2006 2007 2008

Current Ratio

Debt-Equity Ratio;

YEAR 2008 2007 2006 2005

48

Rs

Year

Rs

Year



Equity % 34.72 33.92 34.21 35.13

Debt % 65.28 66.08 65.79 64.87

0

20

40

60

80

100

2005 2006 2007 2008

Debt

Equity

Earning Per Share;

YEAR 2008 2007 2006 2005 2004

Rs 43.42 34.55 27.04 20.84 17.44

0

10

20

30

40

50

2004 2005 2006 2007 2008

EPS

Dividend History;

YEAR 2008 2007 2006 2005 2004

Rs in crore 301.27 223.57 172.23 140.07 100.05

49

Years

Rs

Rs

Year



0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008

Dividend

Interpretation;

According to data available, HDFC’s volume growth was nearly in line with expectations.

Though, we were expecting EBITDA margins to expand. Since 2004 company has made good

profit and its increasing year on year. Bank’s credibility is not in under utilization Management of

bank is utilizing its credibility proper result in management is well qualified. Company has been

maintaining enough liquidity to meet the current expenses; on the basis of earlier data we can

expect it can maintain the proper ratio. If you look at the Net Profit, EPS, Dividend History,

company has been doing well. In further year we can expect rise in net profit resulting in rise in

dividend and share price. We expect that performance is going to be good in future for long term

investment company is good.

TATA MOTORS LTD

Company History;

Tata Sons purchased the Tatanagar shops from the Government of India on 1st June 1945

for Rs. 25.39 lakhs with the aim of immediately manufacturing steam locomotive boilers.

50

Rs

Year



Later it planned to manufacture complete locomotives and other engineering products. Tata

Motors Ltd was incorporated in the year of 1945. In world charisma the Tata Motors Ltd

(Formerly known as Tata Engineering and Locomotive Company Ltd) is the fifth-largest

manufacturer of medium and heavy commercial vehicle and the second largest medium and

heavy bus manufacturer. The company producing light, medium and heavy commercial

vehicles and also manufacturing passenger cars, utility vehicles, excavators and machine

tools in manufacturing units located at Jamshedpur, Pune, Lucknow and Pant Nagar in

Uttarakhand. 1946 Tata Engineering was undertaken manufacture of 5000 'KC' broad

gauge open wagons for the Indian Railway. The Managing Agency Tata Sons was

transferred to Tata Industries on 1st July 1946. In the year 1948 the company made

collaboration with Marshal Sons (UK) and introduced Steam Road Roller and in 1950

Collaboration signed with M/s Krauss-Maffei, West Germany for manufacture of steam

locomotives. Collaboration with M/s Daimler-Benz AG, West Germany was made in the

year 1954 for the manufacture of medium commercial vehicles at Jamshedpur. In 1966 the

company acquired Investa Machine Tool for setting up of Machine Tools Division at Pune

and in the next year it was executed, vehicle manufacture facilities steadily built up at

Pune. As on 1977 the first commercial vehicle was successfully produced at Pune. In 1985

First hydraulic excavator produced under Hitachi collaboration. The First Light

Commercial Vehicle - TATA 407 was produced by complete indigenous design with

minimal import content in the year 1986 followed by next year Second model of

completely indigenously designed LCV-TATA 608 produced and LPT 2416 a multi-axled

vehicle introduced. In 1989 Third model of LCV - Tatamobile 206 produced Collaboration

with M/s Kloth-Senking Metalligessari, Gmbh, West Germany, for know-how of

manufacturing aluminum castings. Collaboration with Hitachi, Japan the First EX model

51



hydraulic excavator produced in the year 1990. As on December 2007 Tata launched seven

medium and heavy trucks in Pune, the company plans to launch 30 new models in the

commercial vehicle segment. Joint venture between Fiat Group Automobiles SpA and Tata

Motors, has rolled out plans for expanding production capacity and backward integration in

Pune with an additional investment of Rs 2,341 crore comes under memorandum of

understanding in March 2008 and also Tata Motors has entered into a definitive agreement

with the Ford Motor Company for the purchase of Jaguar Land Rover, comprising brands,

plants and intellectual property rights. As on April 2008, the first test a small car namely

'Nanos' roll out from Uttarakhand plant. The trail production of Nano will start in June-July

from Singur, West Bengal after the equipment test and commercial production of the same

will start around October. Tata Motors is working on technology that will allow its diesel

generators to also use natural gas and in process of entering into a technology tie-up with

the New Energy & Industrial Technology Development Organisation (NEDO), a Japanese

Govt agency. To convert its generator to ' Dual-Fuel System'. The company concentrate on

various initiatives which focused on cost reduction, right sizing the organisation, volume /

market share gains, product quality and the launch of new products have enabled the

company a turnaround one in the globe.

Company Background;

Incorporation Year 1945

Registered Office Bombay House, 24 Homi Mody Street,

Mumbai,

Chairman Ratan N Tata

52



Managing Director Ravi Kant

Company Secretary H K Sethna

Auditors Deloitte Haskins & Sells

Face Value 10.00

Market Lot 1

Registrar TSR Darashaw Ltd

6-10 Haji Moosa, Patrawala Ind.Estate DrEMoses

Rd Mahalaxm Mumbai- 400 011


Key Financial

Net Profit;

YEAR 2008 2007 2006 2005 2004

Rs in crore 2028.92 1913.46 1528.88 1236.95 810.34

53



0

500

1000

1500

2000

2500

2004 2005 2006 2007 2008

Net Profit

Current Ratio;

YEAR 2008 2007 2006 2005

PERCENTAGE 0.86 1.07 1.08 0.87

0

0.2

0.4

0.6

0.8

1

1.2

2005 2006 2007 2008

Current Ratio

Debt-Equity Ratio;

YEAR 2008 2007 2006 2005

Equity % 30 34 34 51

Debt % 70 56 56 49

54

Rs

Year

Rs

Year



0

20

40

60

80

100

2005 2006 2007 2008

Debt

Equity

Earning Per Share;

YEAR 2008 2007 2006 2005 2004

Rs 50.52 47.10 37.59 32.44 21.93

0

10

20

30

40

50

60

2004 2005 2006 2007 2008

EPS

Dividend History;

YEAR 2008 2007 2006 2005 2004

Rs in crore 578.43 578.14 497.94 453.73 282.11

55

Year

Rs

Year

Rs



0

100

200

300

400

500

600

2004 2005 2006 2007 2008

Dividend History

Interpretation;

On the basis of available financial data company’s past has been very good. Since last five

to six year company has been making good profit.As per data we can expect that company

will earn good EBITDA in next year. As far as debt-equity ratio concern company is

utilizing its credibility for expanding business, it also expanding year on year, we can see

that in form of net profit. Fundamentally company has been remaining so strong. Company

has enough liquidity to meet its current expenses. If you look at the four to five years

dividend and EPS history company has been giving good return and its increasing year on

year, on the basis of that record we can expect good return in future. On the basis of data

we are expecting 15% to 20% rise in net profit.

TATA STEEL LTD

Company History

Tata Steel is the world's 6th largest steel company. It is a Asia's 1st and as well as India's

largest integrated steel company in private sector with operations in 24 countries and

commercial presence in over 50 countries. The company's history is a century old, the

56

Year

Rs



origins and ascent of Tata Steel, which has culminated into the century long history of an

industrial empire, emerge from the illustrious efforts of India's original iron man and the

remarkable people who thereafter, have kept the fire burning. Tata Steel was founded by

Jamsetji Nusserwanji Tata in the year 1907 as Tata Iron and Steel Company (TISCO) and

later its renamed to Tata Steel Limited. It is an ISO-14001 and also SA 8000 certified

company. Tata Steel is a global player with a balanced presence in developed European and

fast growing Asian markets and with a strong position in the construction, automotive and

packaging markets. Tata Steel's first ingot of steel was rolled out in February 1912 and the

Greater Extension Scheme was launched in 1916 to raise capacity to 4, 50,000 tonnes for

diversify production. The period of one year between 1942 and 1943, was characterized by

the efforts of the Steel Company to produce a wide variety of special steels required for

defence purposes including armoured cars called 'Tatanagars. Tata Steel's took step

towards nation building was in 1943 with the construction of Howrah Bridge. The Two

Million Expansion plan was undertaken between the years of 1953-54. The Ferro

Manganese Plant commenced production at Joda in April 1967

It was ranked the 'World's Best Steel Maker', for the third time by World Steel

Dynamics in its annual listing in February, 2006. Tata Steel has been conferred the Prime

Minister of India's Trophy for the Best Integrated Steel Plant five times. On 2nd April '07,

Tata Steel acquired Corus Europe's second largest steel producer for consideration of US$

12 Billion, which made Tata Steel the sixth largest steel producer globally and the second-

most geographically diversified steel producer in the world. It also entered into an

agreement to acquire controlling equity stake in two rolling mills located in Haiphorg,

Vietnam. The fourth retail outlet, 'steel junction', at Behala was opened on February 2008

by the company. The company plans to expand its of Jamshedpur plant's crude steel

57



making capacity from 5 million tonnes to 6.8 million tonnes with cost of Rs.4550 crores

and also the company plans to set up a 6 million tonne integrated steel project at

Kalinganagar in the state of Orissa under two phases of 3 million each.

Company Background


Registered Office Bombay House, 24 Homi Mody Street,

Fort Mumbai,

Chairman Ratan N Tata

58



Managing Director B Muthuraman

Company Secretary J C Bham

Auditors Deloitte Haskins & Sells

Face Value 10.00

Market Lot 1

Registrar TSR Darashaw Ltd

6-10 Haji Moosa, Patrawala Ind.Estate DrEMoses

Rd Mahalaxm Mumbai- 400 011


Key Financials;

Net Profit

YEAR 2008 2007 2006 2005 2004

Rs in crore 4687.03 4222.15 3506.38 3474.16 1746.22

59



0

1000

2000

3000

4000

5000

2004 2005 2006 2007 2008

et Profit

Current Ratio

YEAR 2008 2007 2006 2005

PERCENTAGE 2.86 1.26 0.71 0.65

0

0.5

1

1.5

2

2.5

3

2005 2006 2007 2008

Current Ratio

Debt-Equity Ratio

YEAR 2008 2007 2006 2005

Equity % 33 49 69 47

Debt % 67 51 31 53

60

Year

Rs in

crore



0

20

40

60

80

100

2005 2006 2007 2008

Debt

Equity

Earning per share

YEAR 2008 2007 2006 2005 2004

Rs 61.06 69.95 61.51 60.91 46.02

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007 2008

EPS

Dividend History

YEAR 2008 2007 2006 2005 2004

Rs in crore 1168.93 943.91 719.51 719.51 368.98

61

%

Year



0

200

400

600

800

1000

1200

2004 2005 2006 2007 2008

Dividend History

Interpretation

As far as TATA STEEL concern. This company has been very good performer since

inception. If you look at the financial situation of the company it has also been very strong.

On the basis of four to five year financial details company has been performing very well.

As per the data available Company is making good profit since 2004. Company has enough

liquidity to meet its liability. Company is using its credibility properly. Company’s profit is

also increasing year on year. If you look at the dividend and EPS history company has been

giving good returns. On the basis of available data we can expect that company will earn

good profit in future. On the basis of performance we can expect that 15 to 20% rise in net

profit in the next year. Since the company is financially strong we can invest into the

company for long term.

RELIANCE INDUSTRIES LTD

Company History

In the year 1966 the RIL was founded by Shri Dhirubhai H.Ambani, it was started as a

small textile manufacturer unit. In May 8th, 1973 RIL was incorporated and conformed

62

Rs in

crore

Year



their name as RIL in the year 1985. Over the years, the company has transformed their

business from manufacturing of textiles products into a petrochemical major. RIL is the

largest private-sector enterprise in India in terms of revenues, profits, net worth, assets and

market capitalization. It's operations capture value addition at every stage, from the

production of crude oil and gas to polyester, polymer and chemical products, and finally to

the production of textiles. The company operates mainly in India but has business activities

and customers in more than 100 countries around the world. It has production facilities at

three major locations in India and a further four locations in Europe. It also has exploration

and production interests in India, Yemen and Oman. The company has set up a texturising /

twisting facilities in 1979, RIL has also set up plants for Polyester Staple Fiber (PSF) in

1986 and for Linear Alkyl Benzene (LAB) & Purified Terephthalic Acid (PTA) in 1988.

RIL has setup a petrochemical facility to produce HDPE and PVC at Hazira, Gujarat in

technical collaboration with DuPont and BF Goodich respectively. The Hazira

petrochemical plant was commissioned in 1991-92. In the year 1995-96, the company

entered the telecom industry through a joint venture with NYNEX, USA and promoted

Reliance Telecom Private Limited in India. Reliance became the first corporate in Asia to

issue bonds in the U.S at the year of 1996-97. The company commissioned an 80,000 tonne

bottle grade PET chip plant at Hazira manufacturing complex. During the year 2002-03

company has also amalgamated Indian Petrochemicals Corporations Limited (IPCL),

which leads to compete from a stronger base in the global market. Reliance discovered

natural gas in the very first exploration well it drilled in the deep-water exploration block

KG-D6 in the Krishna-Godavari basin off Andhra Pradesh. In 2004-05, RIL acquired the

polyester major, Trevira GmbH, headquartered in Frankfurt, Germany which has the

capacity of 130,000 tonnes per annum of polyester staple fibers, polyester filament yarns

63



and polyester chips. As of 2007 across the globe, RIL is largest producer of polyester fiber

and yarn, 4th largest producer of Paraxylene (PX) and Purified Terephthalic Acid (PTA),

6th largest producer of Mono Ethylene Glycol (MEG) and 7th largest producer of

Polypropylene (PP). Gujarat State Petronet Ltd (GSPL) and Reliance Industries Ltd (RIL)

have signed a gas transportation agreement to transport 11 million standard cubic meters

per day (MSCMD) of natural gas from Bhadbhut in Bharuch to RIL's refinery and

petrochemical complex in Jamnagar. The company has signed a letter of intent with NOVA

Chemicals on May 2008, to form 51:49 a joint venture in the area of building and

construction. This proposed new joint venture between RIL and NOVA Chemicals would

be a technological partnership for deploying green building and construction technologies

to design, engineer, fabricate and build a range of high-efficiency structures for the Indian

sub-continent. Reliance Industries Ltd plans to investment Rs 17,000 crore in oil and gas

exploration over the next few years; The Company has already invested Rs 9,000 crore in

exploration so far. RIL is also considering surrendering seven exploration blocks awarded

to it by the Government.

Company Background


Registered Office 3rd Floor Maker Chambers IV, 222

Nariman Point Mumbai-400021

64



Chairman Mukesh D Ambani

Managing Director Mukesh D Ambani

Company Secretary Vinod M Ambani

Auditor Chaturvedi & shah/Rajendra & Co Face

Value 10.00

Market Lot 1

Registrar Karvy Computershare Pvt Ltd

Karvy House 46,Road No 4 Street, No1,

Banjara Hills, Hyderabad - 500034

Market Capital 2, 97,669.85 cr

Key Financial

Net profit

Year 2008 2007 2006 2005 2004

Rs in crore 19458.29 11943.40 9069.34 7571.68 5160.14

65



0

5000

10000

15000

20000

25000

2004 2005 2006 2007 2008

Net Profit

Current Ratio

Year 2008 2007 2006 2005

Percentage 0.96 0.90 1.03 1.10

0

0.2

0.4

0.6

0.8

1

1.2

2005 2006 2007 2008

Current ratio

Debt-Equity Ratio

Year 2008 2007 2006 2005

Equity % 54 53 51 43Debt % 46 47 49 57

66

Rs incrore

Year

%

Year



0

20

40

60

80

100

2004 2005 2006 2007

Debt

Equity

Earning Per Share

Year 2008 2007 2006 2005 2004

Rs 131.97 84.28 63.70 53.30 36.31

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008

EPS

Dividend History

Year 2008 2007 2006 2005 2004

Rs in crore 1631.24 1440.44 1393.51 1045.13 733.10

67

%

Year

Year

Rs



0

50

100

150

200

250

2004 2005 2006 2007 2008

Dividend History

Interpretation

Reliance Industry Ltd has been very good performer in respect of sales and other

investment. As far as financial data concern Company’s financial background has been

very strong. Company has been giving good return as per expectation. Company is

utilizing its credibility properly and expanding its business. If you look at the available

financial details of the company has been making good profit since 2004.In next year

company can earn 25 to 30% profit. Company’s dividend & EPS history have been good.

Company can give good return in future.

RELIANCE INFRASTRUCTURE LIMITED

Company History

Reliance Energy Limited (REL), with its corporate lineage going back to 1929. At the time

of incorporation REL was called as Bombay Suburban Electric Supply Limited (BSES).

68

Rs in

crore

Year



The company has been in the field of power distribution for nearly eight decades and with

its emphasis on continuous improvements. REL is a fully integrated utility engaged in the

generation, transmission and distribution of electricity. It ranks among India's top listed

private companies on all major financial parameters, including assets, sales, profits and

market capitalization. A key constituent of the Reliance - Anil Dhirubhai Ambani Group,

India's third largest business house. Reliance Energy has emerged as one of the leading

players in India in the Engineering, Procurement and Construction (EPC) segment of the

power sector. Reliance Energy company currently pursue several gas, coal, wind and

hydro-based power generation projects in Maharashtra, Uttar Pradesh, Arunachal Pradesh

and Uttaranchal with aggregate capacity of over 13,510 MW. Reliance Energy is also

active in the trading and transmission of power sector and has forayed as an equity investor

in to the infrastructure business, including in the prestigious Mumbai metro rail project and

various road projects of the National Highways Authority of India. REL has also entered

into the Internet service provider business in a big way by the name of powersurfer.net.

REL (BSES) has several group companies - ST-BSES Coal Washery (Joint Venture),

BSES Infrastructure Finance, Utility Powertech (Joint Venture), Ticapco, BSES Telecom,

BSES Kerala Power, BSES Andhra Power and three new companies of Orissa. The

company has a strategy of adding value by strategic alliances within the group

During the year 2002-2003, the company has successfully commissioned 210 MW Gas

Based Combined Cycle power plants for BSES Andhra Power and 24 MW Bagasse fired

Power Plant for Godavari Sugar Mills Ltd and 20 MW for Suryachakra Power Corporation

Ltd. In April 2003 Andhra Power Ltd and Reliance Salgocar Power Company Ltd were

amalgamated with the company. During the year 2003-2004, the Company was renamed to

Reliance Energy Ltd from its old name BSES. The company has targeted to complete all

69



activities under the six sigma project, ISO 27001 and OHSAS certifications during 2007-

08, which will make Reliance Energy the first utility in the country to achieve these

certifications. These initiatives are aimed to cater the market and at further promoting

business excellence in all functional areas of the company. In 2008 company engaged in

several mega projects under implementation and under consideration in different functional

areas, in that the notable two big projects are engineering, procurement and construction

(EPC) contract from Damodar Valley Corporation (DVC) to set up the 2 x 600 MW coal

based power station at Raghunathpur in West Bengal worth of Rs 3,725 crore and Airport

Metro Express Line, Delhi project on BOOT basis for a concession period of 30 years

worth of Rs 2,500 crore.

Company Background


Registered Office Reliance Energy Centre, Santa Cruz (East)

Mumbai, Maharashtra - 400055

Chairman Anil Ambani

Managing Director Anil Ambani

70





0

200

400

600

800

1000

1200

2004 2005 2006 2007 2008

Net pr ofit

Current Ratio

Year 2008 2007 2006 2005

Percentage 2.57 2.99 2.64 2.23

0

10

20

30

40

2005 2006 2007 2008

Current ratio

Debt Equity Ratio

Year 2008 2007 2006 2005

Equity % 42 35 33 38

Debt % 58 65 67 62

72

Rs in

crore

Year

%

Year



0%

20%

40%

60%

80%

100%

2005 2006 2007 2008

Debt

Equity

Earning Per Share

Year 2008 2007 2006 2005 2004

Rs 44.97 34.16 29.92 27.40 20.43

0

10

20

30

40

50

2004 2005 2006 2007 2008

EPS

Dividend History

Year 2008 2007 2006 2005 2004

Rs In Crore 147.73 81.72 105.98 87.36 70.49

73

%

Year

Rs

Year



0

20

4060

80

100

120

140

160

2004 2005 2006 2007 2008

Dividend history

Interpretation

Reliance Infrastructure Ltd net profit growth has been nearly in line with expectations. Though,

we were expecting EBITDA margins to expand, we were surprised by the extent of it. We are

revising our FY08E and FY09E forecast upwards to account for the better pricing scenario. We

are also building a case for slight margin expansion in FY08E over FY09E since we see a couple

of levers for REL. If you look at the dividend & EPS history company is giving good return.

Since the company is fundamentally strong it ca give good return in future.

Comparison of NIFTY’S return with above companies return

Nifty’s Chart

74

Rs in

crore

Year



Period Index Figure Return %

Jan 05 To July 05 2000 To 2250 12.50%

July 05 To Jan 06 2250 To 2750 22.22%

Jan 06 To July 06 2750 To 3300 20%

July 06 To Jan 07 3000 To 3900 30%

Jan 07 To July 07 3900 To 4400 12.82%

July 07 To Jan 08 4400 To 6000 36.36%

Jan 08 To July 08 6000 To 4000 -33.33%

Yearly Return Given By Nifty

Jan 05 to Jan 06 = 12.50% + 22.22% = 34.72%

Jan 06 to Jan 07 = 20% + 30% = 50 %

75



Jan 07 to Jan 08 = 12.82% + 36.36% = 49.18%

3 years average return of Nifty is 44.63%

Tata Motors Ltd

Period Share Prices (in Rs) Return %Jan 05 To July 05 500 to 410 -18%

July 05 To Jan 06 410 to 630 34.92%

Jan 06 To July 06 630 to 755 19.84%

July 06 To Jan 07 755 to 930 23.17%

Jan 07 To July 07 930 to 690 -25.80%

July 07 To Jan 08 690 to 770 11.60%

Jan 08 To July 08 770 to 380 -50.64%

Yearly Return of Tata Motors Ltd.

Jan 05 to Jan 06 = -18% + 34.92% = 16.92%

Jan 06 to Jan 07 = 19.84% + 23.17% = 43.01%

Jan 07 to Jan 08 = -25.80% + 11.60% = -14.20%

3 years average return is 45.73%

Tata Steel Ltd

76



Period Share Prices (in Rs) Return %Jan 05 To July 05 350 to 320 -8.50%

July 05 To Jan 06 320 to 340 6.25%

Jan 06 To July 06 340 to 490 44.11%

July 06 To Jan 07 490 to 420 -14.28%

Jan 07 To July 07 420 to 550 30.95%

July 07 To Jan 08 550 to 950 72.72%

Jan 08 To July 08 950 to 750 -21.05%

Yearly Return of Tata Steel Ltd.

Jan 05 to Jan 06 = -8.50% + 6.25% = -2.25%

Jan 06 to Jan 07 = 44.11% + -14.28% =29.83%

Jan 07 to Jan 08 = 30.95% + 72.72% =103.67%


HDFC Bank Ltd

77



Period Shares Prices (in Rs) Return %Jan 05 To July 05 550 to 700 27.27%

July 05 To Jan 06 700 to 750 7.14%

Jan 06 To July 06 750 to 850 13.33%

July 06 To Jan 07 850 to 1050 23.50%

Jan 07 To July 07 1050 to 1150 9.52%

July 07 To Jan 08 1150 to 1700 52.17%

Jan 08 To July 08 1700 to 1050 -38.23%

Yearly Returns of HDFC Bank Ltd

Jan 05 to Jan 06 = 27.27% + 7.14% = 34.41%

Jan 06 to Jan 07 = 13.33% + 23.50% = 36.83%

Jan 07 to Jan 08 = 9.52% + 52.17% = 61.69%


Reliance Industry Ltd

78



Period Share Prices (in Rs) Return %

Jan 05 To July 05 450 to 550 22.22%July 05 To Jan 06 550 to 750 36.36%

Jan 06 To July 06 750 to 1100 46.66%

July 06 To Jan 07 1100 to 1250 13.36%

Jan 07 To July 07 1250 to 1750 40%

July 07 To Jan 08 1750 to 3000 71.42%

Jan 08 To July 08 3000 to 2250 -25%

Yearly Returns of Reliance Industry Ltd.

Jan 05 to Jan 06 = 22.22% + 36.36% = 58.58%

Jan 06 to Jan 07 = 46.66% + 13.36% = 60.02%

Jan 07 to Jan 08 = 40% + 71.42% = 111.42%


Reliance Infrastructure Ltd

79



Period Share Prices (in Rs) Return %

Jan 05 To July 05 550 to 600 10%July 05 To Jan 06 600 to 570 -3.33%

Jan 06 To July 06 570 to 470 -17.54%

July 06 To Jan 07 470 to 550 17.02%

Jan 07 To July 07 550 to 580 5.54%

July 07 To Jan 08 580 to 2550 339.65%

Jan 08 To July 08 2550 to 1000 -60.78%

Yearly returns of Reliance Infrastructure Ltd.

Jan 05 to Jan 06 = 10% -3.33% = 6.67%

Jan 06 to Jan 07 = -17.54% + 17.02% = 34.56%

Jan 07 to Jan 08 = 5.54% + 339.65% = 345.19%


As far as market return concern NIFTY has given average 44.63% return yearly

since 2005. If you look at the above all companies return, every company has given at least

44% return yearly for long- term investment, it is nearby the NIFTY’s return. There were

80



so many up and downs in the share prices of the above companies over 3 years, still the

companies have given good return

On the basis of above fundamental analysis and market return analysis I have

prepared an investment portfolio. And accordingly weightage have been given to each

company.

MODEL OF PORTFOLIO

Company Weightage Sector

HDFC BANK LTD 15% Banking

TATA MOTORS LTD 15% Automobile

81



TATA STEEL LTD 10% Steel

RELIANCE INDUSTRY LTD 20% Diversified

RELIANCE INFRASTRUCTURE

LTD

30% Infrastructure

CASH 10%

Portfolio’s Pie Chart

82



15%

15%

10%

20%

30%

10%HDFC Bank Ltd

Tata Motors Ltd

Tata Steel Ltd

Reliance Ind

Reliance Infra

Cash

Weighted average return of the PORTFOLIO Year 2005-06

Company Portfolio Share %

(A)

Returns of

2005-06

(B)

Weighted Avg

returns

(A*B)HDFC BANK LTD 0.15 34.41% 5.16

TATA MOTORS LTD 0.15 16.92% 2.54

83



TATA STEEL LTD 0.10 -2.25% -0.225RELIANCE

INDUSTRY LTD

0.20 58.58% 11.72

RELIANCE

INFRASTRUCTURE

LTD

0.30 6.67% 2.001

TOTAL 21.20%

NIFTY’S return in 2005-06 is 34.72%

Portfolio’s weighted average return in 2005-06 is 21.20%

In 2005-06 decision went wrong; portfolio could not beat the NIFTY. Tata steel ltd

performed negatively and reliance infrastructure could also not perform as per expectation

that’s why portfolio could not beat the NIFTY.



(A)

Returns of

2006-07

(B)

Weighted Avg

returns

(A*B)HDFC BANK LTD 0.15 36.83% 5,52

TATA MOTORS LTD 0.15 43.01% 6.45TATA STEEL LTD 0.10 29.83% 2.98

RELIANCE

INDUSTRY LTD

0.20 60.02% 12

RELIANCE

INFRASTRUCTURE

0.30 34.56% 10.36

84



LTD

TOTAL 37.31

NIFTY’S return in 2006-07 is 50%


In this year also portfolio could not beat the NIFTY, but if you compare the portfolio’s

return of 2006-07 with 2005-06, in 2006-07 portfolio has performed well than 2005-06

returns without changing any weightage.



(A)

Returns of

2007-08

(B)

Weighted Avg

returns

(A*B)HDFC BANK LTD 0.15 61.69% 9.25

TATA MOTORS LTD 0.15 14.20% 2.13TATA STEEL LTD 0.10 103.67% 10.36

RELIANCE

INDUSTRY LTD

0.20 111.42% 22.28

RELIANCE

INFRASTRUCTURE

LTD

0.30 345.19% 103.55

TOTAL 147.57

NIFTY’S return in 2007-08 is 49.18%

85




In 2007-08 portfolio performed exceptionally well compare to above two years. It could

beat NIFTY too in 2007-08.Without changing any weightage portfolio performed well.

Chapter 7

FINDINGS

In entire Study of Project following things have been observed,

While doing project I observed that for systematic and diversified investment

portfolio management services is required.

Portfolio manager must have and various types of skills like marketing skill,

analytical skill, etc.

Portfolio manager has to perform various functions like

Financial analysis of securities,

Selection of securities,

Revision of portfolio, etc.

Portfolio manager has to keep himself very update about the market conditions.

Making a fundamental analysis of a company is difficult task. Analyst has to

consider various aspects of company while making fundamental analysis.

Technical analysis mainly seeks to predict the short term price travels.

86





Chapter 9

LIMITATIONS

Project could not cover all the aspect of the Portfolio Management.

It is difficult to carry out the whole process of fundamental analysis within two

months because of the vastness.

Project could cover Portfolio Management of equities only.

Inadequacy of data.

Fundamental analysis may offer excellent insights, but it can be extraordinarily time-

consuming.

88



Chapter 1 0

BIBLIOGRAPHY

Books

Khan & Jain ( Financial Management)

TATA McGraw Hill, page no- 3.5, 6.1 to 6.25.

Dr. M A Kohok ( Advance Financial Management)

Everest Publishing House, page no- 257 to 291.

Security Analysis and Portfolio Management – Prasanna Chandra

Magazines

Dalal Street.

Website

Investsmartindia.com

Bygreekshares.com

Wikipedia

89



Chapter-11

ANNEXURE

QUESTIONNAIRE

(1). NAME:

________________________________________________________________

(2). ADDRESS: _____________________________________________________________

_____________________________________________________________________

__

(3). CONTACT NO.

_________________________________________________________

(4). PROFESSION:

_________________________________________________________

(5). SEX: _______________ (6). AGE: ______

(7). EDUCATION: _____________________________

(8). Where do you invest your saving?

Bank Mutual Fund Post Office

90



Insurance Real Assets Govt. Bonds

IPO Gold/Silver Stock Market

If Others, Please specify.____________________________________

(9). If you invest in stock market, where do you invest your savings?

Equity Derivatives Commodity

(9). How you reach at investment decision?

Self analysis Tips from Experts Tips from friends/relatives

Business channels Newspapers Other (Specify) _________

(10). Which factor plays a crucial role when you make a decision to invest in Stock

Market?

Risk Reduction Speculative Motive Leverage Benefit

Investment Arbitrage Benefit

(11). Duration of attachment with Stock Market?

Less than 1 year 1 to 5 year 5 to 10 year

More than 10 year

(12). Which type of companies you would like to invest?Large cap Mid cap Small cap

(13). Which type of trading you prefer to deal with?

Square up mode Arbitrage Intraday

Hedging Delivery based

(14). Which exchange you prefer to deal with?

NSE BSE

(15). How do you view yourself?

Trader Speculator

Short-term investor Long-term investor

91



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0701095 Study of Portfolio Management by Baban