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7/30/2019 23-Project Portfolio Management Dimpal Kumari
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WEST BENGAL UNIVERSITY OF TECHNOLOGY
SUMMER PROJECT REPORT
PORTFOLIO MANAGEMENT
FOR
SAHARA INDIA PARIWAR
By:
DIMPAL KUMARI
WBUT Registration No.: 101360710027 of 2010-2012
WBUT Roll No.-13600910023
ARMY INSTITUTE OF MANAGEMENT
KOLKATA
http://www.google.co.in/imgres?q=aimk&um=1&hl=en&tbm=isch&tbnid=d46d7YCep2XMmM:&imgrefurl=http://en.wikipedia.org/wiki/File:AIMK_Logo.jpg&docid=pYNAGLLxUPQGnM&w=300&h=300&ei=GugyTv6GEsryrQeC2c3LCw&zoom=0&iact=hc&vpx=470&vpy=114&dur=127&hovh=116&hovw=116&tx=69&ty=68&page=1&tbnh=105&tbnw=105&start=0&ndsp=20&ved=1t:429,r:2,s:0&biw=1140&bih=498http://www.google.co.in/imgres?q=aimk&um=1&hl=en&tbm=isch&tbnid=d46d7YCep2XMmM:&imgrefurl=http://en.wikipedia.org/wiki/File:AIMK_Logo.jpg&docid=pYNAGLLxUPQGnM&w=300&h=300&ei=GugyTv6GEsryrQeC2c3LCw&zoom=0&iact=hc&vpx=470&vpy=114&dur=127&hovh=116&hovw=116&tx=69&ty=68&page=1&tbnh=105&tbnw=105&start=0&ndsp=20&ved=1t:429,r:2,s:0&biw=1140&bih=4987/30/2019 23-Project Portfolio Management Dimpal Kumari
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TABLE OF CONTENTS
Sr.No. Contents PageNo.1. Acknowledgement 3
2. Executive Summary 4
3. Company Profile 5-8
4. Objectives 9
5. Methodology 10
6. Data Collection 11
7. Data Analysis 12-71
8. Conclusion 72-73
9. Limitations 74
10. Recommendations 75
11. Bibliography 76
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ACKNOWLEDGEMENT
IN EVERY STEP OF ACHIEVING ANYTHING CONCRETE,
THERE IS A NEED OF GUIDANCE, INSPIRATION AND HELP.
I consider it as a privilege to join the worlds largest family SAHARA INDIA
PARIWAR which provided me an opportunity to work as a summer trainee in their
most reputed organization.
I also express my deep sense of gratitude to CA. Santosh Kumar Mishra, CA. Charu
Agarwal for their admirable and valuable guidance, encouragement, and constructive
suggestions during the course of this project. I would also like to thank all the member
workers of SAHARA INDIA PARIWAR, who have lend their immense support and
helped during the course of my training.
And lastly I consider it as an opportunity to thank the clients of CMSD department,
who unknowingly helped me in acquiring knowledge regarding the project.
Yours Sincerely
DIMPAL KUMARI
ARMY INSTITUTE OF MANAGEMENT
KOLKATA
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EXECUTIVE SUMMARY
Portfolio Management is all about strengths, weaknesses, opportunities and
threats in the choice of debt vs. equity, domestic vs. international, growth vs.
safety and many other tradeoffs encountered in the attempt to maximize return
at a given level of risk.
The main objective of this project is to find out the combination of assets into
efficiently diversified portfolios to estimate both the expected risks and returns
for the investment portfolios. By combining the investments having dissimilar
price movements, portfolios risk could be reduced and expected rate of return
could be improved.
This project can contribute in assisting investors to get an insight into the exact
difference between different portfolio designs and plan their investments
accordingly.
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COMPANY PROFILE
I NTRODUCTION OF SAHARA PARIWAR:
Sahara India Pariwar is an Indian multi-business conglomerate with
diversified business interests that include F inance, Insurance, Mutual Fund,
Healthcare, I nf rastructure & Housing, Media & Enter tainment, Consumer
Products, Real Estate, Tour ism & Hospital i ty and Services & Tr ading.It owns
the New IPL team Sahara Pane Warriors and also sponsors the Indian Cricket
and Hockey teams.
Under the flagship real estate project Sahara City Homes chain of townships is
proposed to be across 217 cities in India. Recently Sahara has launched its
Sahara Grace brand of residential complex at Kochi. After Sahara Grace at
Gurgaon and Lucknow the Kochi project is the third under this brand which is
positioned to provide a product mix of apartments and penthouses to its
residents. Other ventures of Sahara real estate business are Sahara States
Lucknow, Gorakhpur, Hyderabad and Bhopal, Brand malls Sahara Ganj,
Lucknow and Sahara Mall, Gurgaon.
http://en.wikipedia.org/wiki/File:Saharindialogo.PNG7/30/2019 23-Project Portfolio Management Dimpal Kumari
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Sahara India Pariwar
Type Private
Industry Conglomerate
Founded Gorakhpur,India(1978)
Founder(s) Subrata Roy
Headquarters Lucknow,India
Key people Subrata Roy(Chairman)
Products
Finance
Real Estate
Media&Entertainment
Tourism&Hospitality
Services&Trading
Website sahara. in
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Conglomerate_%28company%29http://en.wikipedia.org/wiki/Conglomerate_%28company%29http://en.wikipedia.org/wiki/Gorakhpurhttp://en.wikipedia.org/wiki/Gorakhpurhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Entrepreneurhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Real_Estatehttp://en.wikipedia.org/wiki/Real_Estatehttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Websitehttp://www.sahara.in/http://www.sahara.in/http://en.wikipedia.org/wiki/File:Saharindialogo.PNGhttp://www.sahara.in/http://en.wikipedia.org/wiki/Websitehttp://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Real_Estatehttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Entrepreneurhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Gorakhpurhttp://en.wikipedia.org/wiki/Conglomerate_%28company%29http://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Types_of_business_entity7/30/2019 23-Project Portfolio Management Dimpal Kumari
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SAHARA INDIA FINANCIAL CORPORATION LIMITED
Sahara India Financial Corporation Limited, (SIFCL) is the flagship company of
Sahara India Group. Sahara India Financial Corporation Limited is the largest
deposit mobilization company in the private sector with the highest yearly
deposit level in India. It is the first Residuary Non-Banking Company (RNBC)
to be granted a certification of registration by the Reserve Bank of India.
CAPITAL MARKET SERVICE DIVISION (CMSD)
CMSD is a division of Sahara India Financial Corporation Limited established
with an objective to provide various fee based services to the investors in the
capital market .This division operates through a cluster of service centers and
collection centers. It deals in depository services with
National Securities Depository Ltd.
Central Depository Services
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Initial Product Offering by Capital Market Service Division
SAHARA INCOME FUND
Depositing your money in a savings account bank or fixed deposit will only
provide you safety, but the opportunity for your money to appreciate is limited.
Sahara Income Fund provides safety, highest credit quality, plus an opportunity
to earn steady and regular income.
SAHARA LIQUID FUND
Sahara Liquid Fund is a good parking place for your idle funds. It provides an
opportunity to generate returns on your idle funds with minimal risk and high
liquidity.
SAHARA GILT FUND
When you invest in Gilt Fund, your investment carries no Credit risk. You can
enjoy steady returns at a relatively low risk over a medium to long-term horizon.
SAHARA GROWTH FUND
Make your Investments grow with the benefit of Equities.
SAHARA TAX GAIN FUND
Sahara Tax Gain Fund is an Equity Linked Saving Scheme (ELSS) that not only
helps you save tax under section 88 of the Income Tax Act, 1961 but also has the
potential of long-term growth through investments in equities.
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OBJECTIVE OF THE STUDY
To provide basic idea of different stock market investment instruments to
investor.
To provide knowledge to investor about various type of risk associated with
various investment instruments.
To provide investor knowledge about P\E, P\BV and Beta that would help
them in selection of script and creation of portfolio.
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METHODOLOGY OF THE PROJECT
Research methodology is a very organized and systematic way through which a
particular case or problem can be solved efficiently.
It is a step-by-step logical process, which involves:
Defining a problem
Laying the objectives of the research
Sources of data
Methods of data collection
Data analysis & processing
Conclusions & Recommendations
Research inculcates scientific and inductive thinking and it promotes the
development of logical habits of thinking and organization.
Research problem:
To identify the Stock Market Investment Avenue and methods to help investor
in selection of script to create portfolio.
Research design:Research design is exploratory as the basic objective is to identify the stocks
and methods to create and protect portfolio.
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DATA COLLECTION
Primary data: - Primary data are collected by my regular tracking of the stock
price of various scripts selected.
Secondary data: - Secondary data are collected from various journals, websites
and financial news paper.
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ANALYSIS OF INVESTMENT
WHAT IS INVESTMENT?
Investment is the activity, which is made with the objective of earning some sort
of positive returns in the future. It is the commitment of the funds to earn future
returns and it involves sacrificing the present investment for the future return.
Every person makes the investment so that the funds he has, increases as
keeping cash with himself is not going to help as it will not generate any returns
and also with the passage of time, the time value of the money will come down.
As the inflation will rise, the purchasing power of the money will come down
and this will result that the investor who does not invest will become poorer as
he will not have any funds whose value has been increased. Thus every person
whether he is a businessman or a common man will make the investment with
the objective of getting future returns.
TYPES OF INVESTMENT
There are basically three types of investments from which the investors can
choose. The three kinds of investment have their own risk and return profile and
investor will decide to invest taking into account his own risk appetite. The
main types of investments are: -
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Economic investments:-
These investments refer to the net addition to the capital stock of the society.
The capital stock of the society refers to the investments made in plant,
building, land and machinery which are used for the further production of the
goods. These types of investments are very important for the development and
for the overall growth of the economy.
Financial Investments:-
This type of investment refers to the investments made in the marketable
securities which are of tradable nature. It includes the shares, debentures, bonds
and units of the mutual funds and any other securities which are covered under
the ambit of the Securities Contract Regulations Act definition of the word
security. The investments made in the capital market instruments are of vital
importance for the country economic growth as the stock market index is called
as the barometer of the economy.
General Investments:-
These investments refer to the investments made by the common investor in his
own small assets like the television, car, house, motor cycle. These types of
investments are termed as the household investments. Such types of investment
are important for the domestic economy of the country. When the demand in the
domestic economy boost the overall productions and the manufacturing in theindustrial sectors also goes up and this causes rise in the employment activity
and thus boost up the GDP growth rate of the country.
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CHARACTERISICS OF INVESTMENT
Certain features characterize all investments. The following are the main
characteristics feature if investments: -
1. Return: -
All investments are characterized by the expectation of a return. In fact,
investments are made with the primary objective of deriving a return. The return
may be received in the form of yield plus capital appreciation. The difference
between the sale price & the purchase price is capital appreciation. The dividend
or interest received from the investment is the yield. Different types of
investments promise different rates of return. The return from an investment
depends upon the nature of investment, the maturity period & a host of other
factors.
2. Risk: -
Risk is inherent in any investment. The risk may relate to loss of capital, delay
in repayment of capital, nonpayment of interest, or variability of returns. While
some investments like government securities & bank deposits are almost risk
less, others are more risky. The risk of an investment depends on the following
factors.
1. The longer the maturity period, the longer is the risk.2. The lower the credit worthiness of the borrower, the higher is the risk.
The risk varies with the nature of investment. Investments in ownership
securities like equity share carry higher risk compared to investments in debt
instrument like debentures & bonds.
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3. Safety: -
The safety of an investment implies the certainty of return of capital without
loss of money or time. Safety is another features which an investors desire for
his investments. Every investor expects to get back his capital on maturity
without loss & without delay.
4. Liquidity: -
An investment, which is easily saleable, or marketable without loss of money &
without loss of time is said to possess liquidity. Some investments like company
deposits, bank deposits, P.O. deposits, NSC, NSS etc. are not marketable. Some
investment instrument like preference shares & debentures are marketable, but
there are no buyers in many cases & hence their liquidity is negligible. Equity
shares of companies listed on stock exchanges are easily marketable through the
stock exchanges. An investor generally prefers liquidity for his investment,
safety of his funds, a good return with minimum risk or minimization of risk &maximization of return.
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IMPORTANCE
In the current situation, investment becomes necessary for everyone & it is
important & useful in the following ways:
1. Retirement planning: -
Investment decision has become significant as people retire between the ages of
55 & 60. Also, the trend shows longer life expectancy. The earning from
employment should, therefore, be calculated in such a manner that a portion
should be put away as a savings. Savings by themselves do not increase wealth;
these must be invested in such a way that the principal & income will be
adequate for a greater number of retirement years. Increase in working
population, proper planning for life span & longevity has ensured the need for
balanced investments.
2. Increasing rates of taxation: -
Taxation is one of the crucial factors in any country, which introduce an
element of compulsion, in a persons saving. In the form investments, there are
various forms of saving outlets in our country, which help in bringing down the
tax level by offering deductions in personal income.
For examples: -
Unit linked insurance plan
Life insurance
Post office cumulative deposit schemes etc.
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3. Rate of interest: -
It is also an important aspect for sound investment plan. It varies between
investment & another. This may vary between risky & safe investment, they
may also differ due different benefits schemes offered by the investments.
These aspects must be considered before actually investing. The investor has to
include in his portfolio several kinds of investments stability of interest is as
important as receiving high rate of interest.
4. Inflation: -
Since the last decade, now a days inflation becomes a continuous problem. In
these years of rising prices, several problems are associated coupled with a
falling standard of living. Before funds are invested, erosion of the resource will
have to be carefully considered in order to make the right choice of investments.
The investor will try & search outlets, which gives him a high rate of return in
form of interest to cover any decrease due to inflation. He will also have to
judge whether the interest or return will be continuous or there is a likelihood ofirregularity. Coupled with high rate of interest, he will have to find an outlet,
which will ensure safety of principal. Beside high rate of interest & safety of
principal an investor also has to always bear in mind the taxation angle, the
interest earned through investment should not unduly increase his taxation
burden otherwise; the benefit derived from interest will be compensated by an
increase in taxation.
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5. Income: -
For increase in employment opportunities in India, investment decisions have
assumed importance. After independence with the stage of development in the
country a number of organization & services came into being.
For example: -
The Indian administrative services
Banking recruitment services,
Expansion in private corporate sector,
Public sector enterprises,
Establishing of financial institutions, tourism, hotels, and education.
6. Investment channels: -
The growth & development of country leading to greater economic activity has
led to the introduction of a vast array of investment outlays. Apart from putting
aside saving in savings banks where interest is low, investor has the choice of a
variety of instruments. The question to reason out is which is the most suitable
channel? Which media will give a balanced growth & stability of return? The
investor in his choice of investment will give a balanced growth & stability of
return? The investor in his choice of investment will have try & achieve a
proper mix between high rates of return to reap the benefits of both.
For example: -
Fixed deposits in corporate sector
Unit trust schemes.
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EQUITY SHARES
Types of Equity Instruments:
Ordinary Shares
Ordinary shareholders are the owners of a company, and each share entitles the
holder to ownership privileges such as dividends declared by the company and
voting rights at meetings. Losses as well as profits are shared by the equity
shareholders. Without any guaranteed income or security, equity shares are a
risk investment, bringing with them the potential for capital appreciation in
return for the additional risk that the investor undertakes in comparison to debt
instruments with guaranteed income.
Preference Shares
Unlike equity shares, preference shares entitle the holder to dividends at fixed
rates subject to availability of profits after tax. If preference shares are
cumulative, unpaid dividends for years of inadequate profits are paid in
subsequent years. Preference shares do not entitle the holder to ownership
privileges such as voting rights at meetings.
Equity Warrants
These are long term rights that offer holders the right to purchase equity sharesin a company at a fixed price (usually higher than the current market price)
within a specified period. Warrants are in the nature of options on stocks.
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CLASSIFICATION IN TERMS OF MARKET CAPITALIZATION
Market capitalization is equivalent to the current value of a company i.e.
current market price per share times the number of outstanding shares. There are
Large Capitalization companies, Mid-Cap companies and Small-Cap
companies. Different schemes of a fund may define their fund objective as a
preference for Large or Mid or Small-Cap companies' shares. Large Cap
shares are more liquid and hence easily tradable. Mid or Small Cap shares may
be thought of as having greater growth potential. The stock markets generally
have different indices available to track these different classes of shares.
CLASSIFICATION IN TERMS OF ANTICIPATED EARNINGS
In terms of the anticipated earnings of the companies, shares are generally
classified on the basis of their market price in relation to one of the following
measures:
1. Price/Earnings Ratio is the price of a share divided by the earnings per
share, and indicates what the investors are willing to pay for the company's
earning potential. Young and/or fast growing companies usually have high P/E
ratios. Established companies in mature industries may have lower P/E ratios.
The P/E analysis is sometimes supplemented with ratios such as Market Price toBook Value and Market Price to Cash Flow per share.
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2. Dividend Yield for a stock is the ratio of dividend paid per share to current
market price. Low P/E stocks usually have high dividend yields. What matters
to fund managers is the potential dividend yields based on earnings prospects.
Based on companies' anticipated earnings and in the light of the investment
management experiences the world over, stocks are classified in the following
groups:
a) Cyclical Stocks are shares of companies whose earnings are correlated with
the state of the economy. Their earnings (and therefore, their share prices) tend
to go up during upward economic cycles and vice versa. Cement or Aluminium
producers fall into this category. These companies may command relatively
lower P/E ratios and have higher dividend payouts.
b) Growth Stocks are shares of companies whose earnings are expected to
increase at rates that exceed normal market levels. They tend to reinvest
earnings and usually have high P/E ratios and low dividend yields. Software orinformation technology company shares are an example of this type.
c) Value Stocks are shares of companies in mature industries and are expected
to yield low growth in earning. Fund managers try to identify such currently
under-valued stocks that in their opinion can yield superior returns later. A
cement company with a lot of real estate and a company with good brand namesare examples of potential value shares.
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FIXED INCOME INSTRUMENTS
Many instruments give regular income. Debt instruments may be secured by the
assets of the borrowers as generally in case of Corporate Debentures, or be
unsecured as is the case with Indian Financial Institution Bonds.
A debt security is issued by a borrower and is often known by the issuer
category, thus giving us Government Securities and Corporate Securities or FI
bonds. Debt instruments are also distinguished by their maturity profile. Thus,
instruments issued with short-term maturities, typically under one year, are
classified as Money Market Securities. Instruments carrying longer than one-
year maturities are generally called Debt Securities.
Most debt securities are interest-bearing. However, there are securities that are
discounted securities or zero-coupon bonds that do not pay regular interest at
intervals but are bought at a discount to their face value. A large part of the
interest-bearing securities are generally Fixed Income-paying, while there are
also securities that pay interest on a Floating Rate basis.
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A REVIEW OF THE INDIAN DEBT MARKET
The Wholesale Debt Market segment deals in fixed income securities and is fast
gaining ground in an environment that has largely focused on equities.
The Wholesale Debt Market (WDM) segment of the Exchange commenced
operations on June 30, 1994. This provided the first formal screen-based trading
facility for the debt market in the country.
This segment provides trading facilities for a variety of debt instruments
including Government Securities, Treasury Bills and Bonds issued by Public
Sector Undertakings/ Corporate/ Banks like Floating Rate Bonds, Zero Coupon
Bonds, Commercial Papers, Certificate of Deposits, Corporate Debentures,
State Government loans, SLR and Non-SLR Bonds issued by Financial
Institutions, Units of Mutual Funds and Securitized debt by banks, financial
institutions, corporate bodies, trusts and others.
Large investors and a high average trade value characterize this segment. Till
recently, the market was purely an informal market with most of the trades
directly negotiated and struck between various participants. The commencement
of this segment by NSE has brought about transparency and efficiency to the
debt market, along with effective monitoring and surveillance to the market.
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INSTRUMENTS IN THE INDIAN DEBT MARKET
CERTIFICATE OF DEPOSIT
Certificates of Deposit (CD) are issued by scheduled commercial banks
excluding regional rural banks. These are unsecured negotiable promissory
notes. Bank CDs have a maturity period of 91 days to one year, while those
issued by FIs have maturities between one and three years.
COMMERCIAL PAPER
Commercial paper (CP) is a short term, unsecured instrument issued by
corporate bodies (public & private) to meet short-term working capital
requirements. Maturity varies between 3 months and 1 year. This instrument
can be issued to individuals, banks, companies and other corporate bodies
registered or incorporated in India. CPs can be issued to NRIs on non-
repatriable and non transferable basis.
CORPORATE DEBENTURES
The debentures are usually issued by manufacturing companies with physical
assets, as secured instruments, in the form of certificates They are assigned a
credit rating by rating agencies. Trading in debentures is generally based on the
current yield and market values are based on yield-to-maturity. All publiclyissued debentures are listed on exchanges.
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FLOATING RATE BONDS (FRB)
These are short to medium term interest bearing instruments issued by financial
intermediaries and corporate. The typical maturity of these bonds is 3 to 5 years.
FRBs issued by financial institutions are generally unsecured while those from
private corporate are secured.
GOVERNMENT SECURITIES
These are medium to long term interest-bearing obligations issued through the
RBI by the Government of India and state governments. The RBI decides the
cut-off coupon on the basis of bids received during auctions. There are issues
where the rate is pre-specified and the investor only bids for the quantity. In
most cases the coupon is paid semi-annually with bullet redemption features.
TREASURY BILLS
T-bills are short-term obligations issued through the RBI by the Government of
India at a discount. The RBI issues T-bills for different tenures: now 91 -daysand 364-days. These treasury bills are issued through an auction procedure. The
yield is determined on the basis of bids tendered and accepted.
BANK/FI BONDS
Most of the institutional bonds are in the form of promissory notes transferable
by endorsement and delivery. These are negotiable certificates, issued by theFinancial Institutions or by commercial banks. These instruments have been
issued both as regular income bonds and as discounted long-term instruments
(deep discount bonds).
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PUBLIC SECTOR UNDERTAKINGS (PSU) BONDS
PSU Bonds are medium and long term obligations issued by public sector
companies in which the government share holding is generally greater than 51%.
Some PSU bonds carry tax exemptions. The minimum maturity is 5 years for
taxable bonds and 7 years for tax-free bonds. PSU bonds are generally not
guaranteed by the government and are in the form of promissory notes transferable
by endorsement and delivery. PSU bonds in electronic form (demat) are eligible
for repo transactions.
MUTUAL FUND SCHEMES
An investor can participant in various schemes floated by mutual fund instead
of buying equity shares. In mutual funds invest in equity shares & fixed income
securities. There are three broad types of mutual fund schemes.
Growth schemes
Income schemes
Balanced schemes
DEPOSITS
It is just like fixed income securities earn a fixed return. However, unlike fixed
income securities, deposits are negotiable or transferable. The important types
of deposits in India are:
Bank deposits
Company deposits
Postal deposits.
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TAX-SHELTERED SAVING SCHEMES
It provides benefits to those who participate in them. The most important tax
sheltered saving schemes in India is:
Employee provident fund scheme
Public provident fund schemes
National saving certificate
LIFE INSURANCE
In a broad sense, life insurance may be viewed as an investment. Insurance
premiums represent the sacrifice & the assured sum the benefit. In India, the
important types of insurance policies are:
Endowment assurance policy
Money back policy
Whole life policy
Premium back term assurance policy
REAL ESTATE
For the bulk of the investors the most important asset in their portfolio is a
residential house. In addition to a residential house, the more affluent investors
are likely to be interested in the following types of real estate:
Agricultural land
Semi-urban land.
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PRECIOUS OBJECTS
It is highly valuable in monetary terms but generally they are small in size. The
important precious objects are:
Gold & silver
Precious stones
FINANCIAL DERIVATIVES
A financial derivative is an instrument whose value is derived from the value of
underlying asset. It may be viewed as a side bet on the asset. The most import
financial derivatives from the point of view of investors are:
Options
Futures
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RISKRETURN OF VARIOUS INVESTMENT AVENUES
Every investment is characterized by return & risk. Investors intuitively
understand the concept of risk. A person making an investment expects to get
some return from the investment in the future. But, as future is uncertain, so is
the future expected return. It is this uncertainty associated with the returns from
an investment that introduces risk into an investment. Risk arises where there is
a possibility of variation between expectation and realization with regard to an
investment.
Meaning of Risk
Risk & uncertainty are an integrate part of an investment decision. Technically
risk can be defined as situation where the possible consequences of thedecision that is to be taken are known. Uncertainty is generally defined to
apply to situations where the probabilities cannot be estimated. However, risk &
uncertainty are used interchangeably.
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TYPES OF RISKS
1. Systematic risk: -
Systematic risk is non diversifiable & is associated with the securities market as
well as the economic, sociological, political, & legal considerations of prices of
all securities in the economy. The affect of these factors is to put pressure on all
securities in such a way that the prices of all stocks will more in the same
direction.
Example: -
During a boom period prices of all securities will rise & indicate that the
economy is moving towards prosperity. Market risk, interest rate risk &
purchasing power risk are grouped under systematic risk.
RISKS
SYSTAMATIC UNSYSTAMATIC
*Market Risk * Business Risk
* I nterest Rate Risk * F inancial Risk
* Purchasing power Risk
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1. SYSTEMATIC RISK
(A) Market risk
Market risk is referred to as stock variability due to changes in investors
attitudes & expectations. The investor reaction towards tangible and intangible
events is the chief cause affecting market risk.
(B) Interest rate risk
There are four types of movements in prices of stocks in the markets. These
may be termed as (1) long term, (2) cyclical (bull and bear markets), (3)
intermediate or within the cycle, and (4) short term. The prices of all securities
rise or fall depending on the change in interest rates. The longer the maturity
period of a security the higher the yield on an investment & lower the
fluctuations in prices.
(C) Purchasing Power risk
Purchasing power risk is also known as inflation risk. This risk arises out of
change in the prices of goods & services and technically it covers both inflation
and deflation periods. During the last two decades it has been seen that
inflationary pressures have been continuously affecting the Indian economy.
Therefore, in India purchasing power risk is associated with inflation and rising
prices in the economy.
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2. UNSYSTEMATIC RISK
The importance of unsystematic risk arises due to factors like labour strike,
consumer preferences and management policies. These uncertainties directly
affect the financing and operating environment of the firm.
(A) Business risk
Every corporate organization has its own objectives and goals and aims at a
particular gross profit & operating income & also accepts to provide a certain
level of dividend income to its shareholders. It also hopes to plough back some
profits. Once it identifies its operating level of earnings, the degree of variation
from this operating level would measure business risk.
Example: - If operating income is expected to be 15% in a year, business risk
will be low if the operating income varies between 14% and 16%. If the
operating income were as low as 10% or as high as 18% it would be said that
the business risk is high.
(B) Financial Risk: -
Financial risk in a company is associated with the method through which it
plans its financial structure. If the capital structure of a company tends to make
earning unstable, the company may fail financially. How a company raises
funds to finance its needs and growth will have an impact on its future earnings
and consequently on the stability of earnings.
Debt financing provides a low cost source of funds to a company, at the same
time providing financial leverage for the common stock holders. As long as the
earnings ofthe company are higher than the cost of borrowed funds, the earning
per share of common stock is increased. Unfortunately, a large amount of debt
financing also increases the variability of the returns of the common stock
holder & thus increases their risk. The variance in returns is the financial risk.
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RISK RETURN OF VARIOUS INVESTMENT ALTERNATIVES
Management
Decision
Required
Investment
Market
Risk
Business
Risk
Interest
Risk
Purchasing
Power
Risk
H Growth stock H H L L
HSpeculative
common stockH H L L
M Blue chips M M L L
MConvertible
preferred stockM M L L
LConvertible
debenturesM M L L
L Corporate bonds L L H H
L Government bonds L L H H
L Short-term bonds L L L H
LMoney market
fundsL L L H
O Life insurance L L L H
O Commercial banks L L L H
O Unit trusts L L L M-H
O Saving a/c L L L H
O Cash L L L H
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PORTFOLIO
Meaning of portfolio:
A combination of securities with different risk & return characteristics will
constitute the portfolio of the investor. Thus, a portfolio is the combination of
various assets and/or instruments of investments. The combination may have
different features of risk & return, separate from those of the components. The
portfolio is also built up out of the wealth or income of the investor over a
period of time, with a view to suit his risk and return preference to that of the
portfolio that he holds. The portfolio analysis of the risk and return
characteristics of individual securities in the portfolio and changes that may take
place in combination with other securities due to interaction among themselves
and impact of each one of them on others.
An investor considering investments in securities is faced with the problem ofchoosing from among a large number of securities. His choice depends upon the
risk and return characteristics of individual securities. He would attempt to
choose the most desirable securities and like to allocate is funds over this group
of securities. Again he is faced with the problem of deciding which securities to
hold and how much to invest in each. The investor faces an infinite number of
possible portfolios or groups of securities. The risk and return characteristics of
portfolio differ from those of individual securities combining to form a
portfolio. The investor tries to choose the optimal portfolio taking in to
consideration the risk return characteristics of all possible portfolios.
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As the economy and the financial environment keep changing the risk return
characteristics of individual securities as well as portfolios also change. This
calls for periodical review and revision of investment portfolios of investors. An
investor invests his funds in a portfolio expecting to get a good return consistent
with the risk that he has to bear. The return realized from the portfolio has to be
measured and the performance of the portfolio has to be evaluated.
It is evident that rational investment activity involves creation of an investment
portfolio. Portfolio management comprises all the processes involved in the
creation and maintenance of an investment portfolio. It deals specifically with
the security analysis, portfolio analysis, portfolio selection, portfolio revision
and portfolio evaluation. Portfolio management makes use of analytical
techniques of analysis and conceptual theories regarding rational allocation of
funds. Portfolio management is a complex process which tries to make
investment activity more rewarding and less risky.
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PORTFOLIO DESIGN
Before designing a portfolio one will have to know the intention of the investor
or the returns that the investor is expecting from his investment. This will helpin adjusting the amount of risk. This becomes an important point from the point
of view of the portfolio designer because if the investor will be ready to take
more risk at the same time he will also get more returns.
From the above discussion we can conclude that the investors can be of the
following three types:
1. Investors willing to take minimum risk and at the same time are also
expecting minimum returns.
2. Investors willing to take moderate risk and at the same time are also
expecting moderate returns.
3. Investors willing to take maximum risk and at the same time are also
expecting maximum returns.
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TYPES OF PORTFOLIO
In portfolio Design, we are considering only two types of portfolio. They are as
follow:
1. Random Portfolio
2. Sector Portfolio
1. RANDOM PORTFOLIO
Random portfolio consists of the scripts that are randomly selected by the
investor by its own knowledge and preference of the stocks. Here no analysis is
done of the script, they are selected on the tips and buts received by the
investors from the external sources.
Features of random portfolio
There is no method used for selection of the script in the portfolio.
Selection is based on the individual criteria for the scripts.
The investment is made for higher return in short term.
Generally in India most of the portfolio is selected according to this
random method as no investor himself in that much analysis of the script.
Advantages of random portfolio
Easier to keep a track on the market as not much time wasted in the
analysis.
This portfolio seems to have perform better in short term as script are
generally which are performing better at that time.
Tips are available everywhere for the investor to pouch.
It is the experience of the individual that can fetch him good return.
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Disadvantages of random portfolio
There is every chance that you may select a script that has a very bad
background in the market.
Not every time the tips pay off for you. You need to have strong reason to
select that script.
Such portfolios are not able to sustain when there is a crisis in the market.
There is a very high risk and return involve in such portfolio.
2. SECTOR SPECIFIC PORTFOLIO
Sector specific portfolio includes securities of those companies which are in the
same business. Sector portfolios are very useful when there is a particular sector
which is doing very good and has a bright future a head. Sector portfolio has the
securities of those companies that engage in same kind of business.
Features of sector portfolio
Script form the same group of companies that are in to the similar type of
business.
Maximum exposure to the industry/sector. So any news or event has the
direct effect on the portfolio.
Risk regarding the portfolio increases as it is expose to sector specific ups
and downs.
Useful investment tools for speculator and short-sellers.
It is better suited for the sectors which have been providing good revenue
in the near past.
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Advantages of sector portfolio
It is better suited to investors who are willing to take risk.
It provides better short term return than other portfolios.
It is easy to keep a watch on one sector rather than many. You can have a
good command over the things happening.
Limited exposure to other sectors keeps the portfolio safe from the
performance of other sectors in the economy.
Disadvantages of sector portfolio
It is a highly risky portfolio as risk associated with the sector directly
affects the performance of the portfolio.
These types of portfolios are not suited for long-term investor as risk
taken for the return can be too high.
There is always the possibly many scripts in the sector may not be giving
that much good attractive return as others. They may eat the profits from
other script.
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RANDOM PORTFOLIO
Random portfolio consists of the scripts that are randomly selected by the
investor by its own knowledge and preference of the stocks. Here there is no
analysis is done of the script, they are selected on the tips and buts received by
the investors from the external sources.
We are considering BETA factor to design ourRandom Portfolio.
Beta Factor Beta indicates the proportion of the yield of a portfolio to the
yield of the entire market (as indicated by some index). If there is an increase in
the yield of the market, the yield of the individual portfolio may also go up. If
the index goes up by 1.5% and the yield of your portfolio goes up by 0.9%, the
beta is 0.9/1.5 i.e. 0.6. in other words, beta indicates that for every 1 % increase
in the market yield, the yield of the portfolio goes up by 0.6%. High beta shares
do move higher than the market when the market rises and the yield of the funddeclines more than the yield of the market when the market falls. In the Indian
context a beta of 1.2% is considered very bullish.
You can be indifferent to market swings if you know your stocks well. Or you
can put your portfolio into neutral or bias for the upside if you're bullish or a
little for the downside if you're bearish. One way to do that is to have a mix of
stocks that have certain betas in your portfolio. When investors are bullish on
the market, they like to have high beta stocks in their portfolios because if
they're right, then their stocks go up faster than the market in general, and their
performance is better than the market. If investors are bearish on the market,
then they use the low beta or negative beta stocks because their portfolios will
go down less than the market and their performance will be better than the
general market.
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And if they want to be neutral, they can then make sure that they have stocks
with a beta of 1 or develop a portfolio that has stocks with betas greater than 1
and less than 1 so that they have the whole portfolio with an average beta of 1.
A beta for a stock is derived from historical data. This means it has no
predictive value for the future, but it does show that if the stock continues to
have the same price patterns relative to the market in general as it has in the
past, you've got a way of knowing how your portfolio will perform in relation to
the market. And with a portfolio with an average beta of 1, you can create your
own index fund since you'll move more or less in tandem with the market.
IINNTTEERRPPRREETTAATTIIOONN OOFF BBEETTAA
WWhheennBB == 11 mmeeaannss tthhaatt tthhee ssccrriipptt hhaass ssaammee vvoollaattiilliittyy aass ccoommppaarreedd ttoo mmaarrkkeett aanndd
ssuuiittaabbllee ffoorrmmooddeerraattee iinnvveessttoorrss..
WWhheenn BB>>11 mmeeaannss tthhaatt ssccrriipptt iiss mmoorree vvoollaattiillee aass ccoommppaarreedd ttoo mmaarrkkeett aanndd
ssuuiittaabbllee ffoorraaggggrreessssiivvee iinnvveessttoorrss..
WWhheenn BB
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SO BASED ON THIS BETA NOW WE WILL PREPARE THREE
PORTFOLIOS TO MATCH THE RISK TAKING CAPACITY OF AN
INVESTOR.
AGGRESSIVE MODERATE DEFENSIVE
PORTFOLIO
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DEFENSIVE PORTFOLIO
SR. NO. SCRIPTS BETA PRICE
ON 13-
06-2011
PORTFOLIO Wi
1 INFOSYS 0.84 2950.00 120,171.67 12.02
2 ITC 0.74 203.10 105,865.52 10.59
3 BHEL 0.81 2050.50 115,879.83 11.59
4 NTPC 0.72 187.00 103,004.29 10.30
5 TATA
POWER
0.55 1231.00 78,683.83 7.87
6 BAJAJ
AUTO
0.70 1334.90 100,143.06 10.01
7 CIPLA 0.66 327.55 94,420.60 9.44
8 HERO
HONDA
MOTORS
0.57 1715.00 81,545 8.15
9 WIPRO 0.83 408.00 118,741.06 11.87
10 HINDUSTAN
UNILEVER
0.57 308.40 81,545.06 8.15
6.99 10,00,000 100
Total Portfolio Beta = Wi * BETA
=10.09+7.83+9.38+7.41+4.32
7.01+6.23+4.65+9.85+4.65
=71.44~71
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RETURN ON INDIVIDUAL SCRIPTS
SR NO. SCRIPT BETA 13-06-11 13-07-11 RETURN
IN %
1 INFOSYS 0.84 2950.00 2786.00 -5.56
2 ITC 0.74 201.10 203.05 0.96
3 BHEL 0.81 2040.50 1947.10 -4.58
4 NTPC 0.72 187.00 188.75 0.93
5 TATA
POWER
CORP LTD.
0.55 1231.00 1283.00 4.22
6 BAJAJ
AUTO LTD.
0.70 1334.90 1445.95 8.31
7 CIPLA 0.66 327.55 322.70 -1.48
8 HERO
HONDA
MOTORS
0.57 1715.00 1876.10 9.39
9 WIPRO 0.83 408.00 412.75 1.16
10 HINDUSTAN
UNILEVER
0.57 308.40 331.20 7.39
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RETURN IN DEFENSIVE PORTFOLIO
TOTAL PORTFOLIO INVESTMENT = 10, 00,000
VALUE OF PORTFOLIO AS ON 13-07-2011 = 10, 15,290.99
TOTAL RETURN ON PORTFOLIO
= 10,15,290.99 - 1000000
= 15,290.99
TOTAL RETURN IN % TERM = 1.53 %
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MODERATE PORTFOLIO
SR NO. SCRIPT BETA PRICE ON
13-06-11
PORTFOLIO Wi
1 JINDAL
STEEL &
POWER LTD
0.95 629.00 103,711.79 10.37
2 RELIANCE
INDUSTRIES
0.92 873.95 100,436.68 10.04
3 TCS 0.95 1189.20 103,711.79 10.37
4 MARUTI
SUZUKI
0.86 1150.00 93,886.46 9.39
5 BHARTI
AIRTEL
0.99 375.25 108,078.60 10.81
6 PNB 0.87 1100.00 94,978.16 9.50
7 SIEMENS
LTD.
0.98 862.50 106,986.90 10.70
8 TATA TELE.
LTD.
0.90 219.05 98,253.27 9.82
9 AMBUJA
CEMENT
0.87 135.30 94,978.16 9.50
10 ONGC 0.87 266.00 94,978.16 9.50
9.16 10,00,000 100
Total Portfolio Beta =Wi * BETA
= 9.85+9.24+9.85+8.08+10.70
8.26+10.49+8.84+8.27+8.27
=91.85~92
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RETURN ON INDIVIDUAL SCRIPTS
SR NO. SCRIPT BETA 13-06-11 13-07-11 RETURN
IN %
1 JINDAL
STEEL
POWER
LTD.
0.95 625.10 640.05 2.39
2 RELIANCE
INDUSTRIES
0.92 922.60 868.00 -5.91
3 TCS 0.95 1189.20 1157.50 -2.66
4 MARUTI
SUZUKI
0.86 1150.00 1165.90 1.38
5 BHARTI
AIRTEL
0.99 372.25 396.70 6.57
6 PNB 0.87 1079.00 1142.00 7.01
7 SIEMENS
LTD.
0.98 862.50 923.00 -6.60
8 TATA
COMM.
LTD.
0.90 214.00 205.09 -4.16
9 AMBUJA
CEMENT
0.87 133.20 126.00 -5.40
10 ONGC 0.87 265.00 288.50 8.87
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RETURN IN MODERATE PORTFOLIO
TOTAL PORTFOLIO INVESTMENT = 10, 00,000
VALUE OF PORTFOLIO AS ON 13-07-2011 = 10, 14,435.47
TOTAL RETURN ON PORTFOLIO
= 10, 14,435.47 10,00,000
= 14,435.47
TOTAL RETURN IN % TERM = 1.44%
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AGGRESSIVE PORTFOLIO
SR NO. SCRIPT BETA PRICE
ON
13-06-11
PORTFOLIO Wi
1 ICICI BANK
LTD
1.41 1030.20 116,721.85 11.67
2 L & T 1.13 1689.90 93,543.05 9.35
3 HDFC
BANK
1.04 2353.15 86,092.71 8.61
4 TATA
STEEL
1.13 568.00 93,543.05 9.35
5 TATA
MOTORS
1.28 991.95 105,960.26 10.60
6 HCL TECH.
LTD.
1.09 501.00 90,231.78 9.02
7 IDEA
CELLULAR
LTD.
1.15 71.80 95,198.67 9.52
8 DLF LTD. 1.43 230.60 118,377.48 11.84
9 M & M 1.17 663.40 96,854.30 9.69
10 SBI 1.25 2238.95 103,476.82 10.35
12.08 10,00,000 100
Total Portfolio Beta = Wi * BETA
=16.45+10.57+8.95+10.56+13.56+16.93
11.33+12.20+9.8
= 121.27 ~ 121
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RETURN ON INDIVIDUAL SCRIPTS
SR NO. SCRIPT BETA 13-06-11 13-07-11 RETURN
IN %
1 ICICI
BANK LTD
1.41 1030.20 1055.10 2.42
2 L & T 1.13 1689.90 1793.00 6.10
3 HDFC
BANK
1.04 2353.15 2505.00 6.45
4 TATA
STEEL
1.13 568.00 575.55 1.32
5 TATA
MOTORS
1.28 991.95 1038.00 4.64
6 HCL TECH.
LTD.
1.09 501.00 494.15 -1.37
7 IDEA
CELLULAR
LTD.
1.15 71.80 80.90 12.60
8 DLF LTD. 1.43 230.60 225.55 -2.19
9 M & M 1.17 663.40 713.65 7.57
10 SBI 1.25 2238.95 2433.00 8.66
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RETURN IN AGGRESSIVE PORTFOLIO
TOTAL PORTFOLIO INVESTMENT = 10, 00,000
VALUE OF PORTFOLIO AS ON 13-07-2011 = 10, 44,694.45
TOTAL RETURN ON PORTFOLIO
= 10,44,694.45 - 1000000
= 44,694.45
TOTAL RETURN IN % TERM =4.47 %
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INTERPRETATION OF RANDOM PORTFOLIO
he theoretical way we have seen that the Beta shows the movement or
change in the price of script vis--vis index. And a Beta >1 is more risky and
hence should give more return as compared to the script having Beta < 1. As the
person is taking more risk then he should get more return. But in our case we
have seen that Defensive portfolio has given more return as compared to
Moderate Portfolio.
subject to market
risk and anyone having long-term investment horizon should only enter into
equity market. This analysis that has been carried out was only for a period of
a month, so there are chances that in the long run Moderate portfolio would
outperform the Defensive portfolio.
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SECTOR PORTFOLIO
Sector specific portfolio includes securities of those companies that engage in
same kind of business. Sector portfolios are very useful when there is a
particular sector which is doing very good and has a bright future ahead.
We are considering IT Sector as ourSector Portfolio
INDUSTRY ANALYSIS
The Indian IT sector is growing rapidly and it has already made its presence felt
in all parts of the world. IT has a major role in strengthening the economic and
technical foundations of India. Indian professionals are setting up examples of
their proficiency in IT, in India as well as abroad.
The sector can be classified into 4 broad categories - IT Services, Engineering
Services, ITES-BPO Services, and E- Business.
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MARKET SHARE OF DIFFERENT IT COMPANIES
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COMPANY ANALYSIS
TCS Tata Consultancy Services
TCS was founded in 1968 and is one among the top 10 IT Companies India and
it has the highest staff strength of 111,000 employees. It first started as the Tata
Computer Center and acquired its present form after realizing the huge potential
of the IT services.
Company at glance
Industry: Software
52 Week High: 1247.00
52 Week Low: 763.00
Volume: 76,503
Face Value: 1.00
P/E Ratio: 29.79
EPS: 38.68
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One Month chart
The below given chart shows the performance of the script in the BSE for the
last month. It shows the volatility of the stock for the month of JUNE-JULY.
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FINANCIAL PERFORMANCE
For the
year
Mar07 Mar08 Mar09 Mar10 Mar11
Operating
Income
43.95 51.35 61.52 34.06 44.82
Net Profit 3757.29 4508.76 4696.21 5618.51 7569.99
Net Worth 8058.99 11004.81 13446.25 15116.62 19579.49
No. of
shares (in
lakhs)
9786.10 9786.10 9786.10 19572.21 19572.21
Adjusted
EPS(Rs)
37.10 43.64 56.01 28.97 38.56
Book
Value per
share(Rs)
82.35 111.43 136.38 76.72 99.53
Dividend
per
share(Rs)
11.50 14.00 14.00 20.00 14.00
Net Profit
Margin
(%)
25.00 24.11 20.74 24.13 25.44
Current
Ratio
1.93 1.98 1.83 1.49 2.41
Lt Debt
Equity
- 0.01 0.01 0.01 0.01
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WIPRO
It was a hydrogenated cooking fat company basically and now has IT, BPO and
R&D services which has its centers in about 50 countries. Started by Premji
Wipro not only ranks prominently among the top 10 IT companies India, but is
also ranked highly among the top 10 global outsourcing providers.
Company at glance
Industry: Information Technology
52 Week High: 499.90
52 Week Low: 384.00
Volume: 31,887
Face Value: 2.00
P/E Ratio: 20.93EPS: 19.73
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One Month chart
The below given chart shows the performance of the script in the BSE for last
month. It shows the volatility of the stock for the Month of JUNE-JULY.
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FINANCIAL PERFORMANCE
FOR THE
YEAR
MAR07 MAR08 MAR09 MAR10 MAR11
Operating
Income
22.31 25.42 32.48 37.47 23.47
Net Profit 93.79 119.69 146.81 156.12 107.16
Net Worth 9,320.40 11,610.70 12,515.00 17,692.20 21,320.90
No. of
shares (in
lakhs)
14590.00 14615.00 14649.81 14682.11 24544.09
Adjusted
EPS (Rs.)
19.48 20.96 26.77 30.36 17.98
Book
Value Per
Share
(Rs.)
63.86 79.05 85.42 120.49 86.86
Dividend
Per Share
(Rs.)
6 6 4 6 4
Net Profit
Margin
(%)
20.34 17.19 13.53 20.97 17.96
Current
Ratio
1.68 2.54 1.10 1.33 1.45
Long
Term Debt
Equity
0.03 0.33 0.01 0.01 _
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INFOSYS
Infosys Technologies Ltd. started in the year 1981 and has today become a
global brand. In addition to being ranked among the top 10 IT Companies in
India, Infosys was also named by Forbes magazine as one among the Global
High Performers.
Company at glance
Industry: Information Technology
52 Week High: 5493.95
52 Week Low: 2660.55
Volume: 93,640
Face Value: 5.00
P/E Ratio: 23.98
EPS: 116.09
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One Month chart
The below given chart shows the performance of the script in the BSE for last
month. It shows the volatility of the stock for the month of JUNE-JULY.
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FINANCIAL PERFORMANCE
For the year 07-MAR 08-MAR 09-MAR 10-MAR 11-MAROperating
income
73.98 86.87 120.59 128.30 146.56
Net profit 230.20 273.57 353.75 368.40 442.13
Net worth 11,162 13,490 17,809 22,036 24,501
No. of
shares(in
lakhs)
5712.10 5719.96 5728.30 5738.25 5741.52
Adjusted
EPS(Rs.)
65.42 78.06 108.08 99.46 111.54
Book value
per
share(Rs.)
195.41 235.84 310.89 384.02 426.73
Dividend
per
share(Rs.)
11.50 33.25 23.50 25.00 60.00
Net profit
margin (%)
28.05 27.37 27.52 26.36 24.31
Current
ratio
4.96 3.30 4.71 4.28 5.11
Lt debt
equity
- - - - -
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RATIO ANALYSIS
PER SHARE RATIO
Reported Cash EPS Ratio
TCS WIPRO INFOSYS
Mar-07 41.90 21.95 74.44
Mar-08 50.76 24.08 87.69
Mar-09 52.18 23.94 113.70
Mar-10 31.02 37.31 115.19
Mar-11 41.37 20.18 125.11
Total 217.23 127.46 516.15
Average 43.45 25.50 103.23
Operating Profit per Share
TCS WIPRO INFOSYS
Mar-07 43.95 22.31 73.98
Mar-08 51.35 25.42 86.78
Mar-09 61.52 32.48 120.59
Mar-10 34.06 37.47 128.30
Mar-11 44.82 23.47 146.56
Total 235.70 141.15 556.21
Average 47.14 28.23 111.24
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Book Value per Share
TCS WIPRO INFOSYS
Mar-07 82.35 63.86 195.41
Mar-08 111.43 79.05 235.84
Mar-09 136.38 85.42 310.89
Mar-10 76.72 120.49 384.02
Mar-11 99.53 86.86 426.73
506.41 435.68 1552.89
Average 101.28 87.14 310.58
Net Operating Income per Share
TCS WIPRO INFOSYS
Mar-07 93.79 152.67 230.20
Mar-08 119.69 189.39 273.57
Mar-09 146.81 228.92 353.75
Mar-10 156.12 117.74 368.40
Mar-11 107.16 149.58 442.13
838.30 623.57 1668.05
Average 167.66 124.71 333.61
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Free Reserve per Share
TCS WIPRO INFOSYS
Mar-07 80.25 - 190.30
Mar-08 110.22 - 230.74
Mar-09 134.37 81.06 305.80
Mar-10 75.24 116.54 378.08
Mar-11 97.95 84.28 420.79
498.03 469.80 1525.71
Average 99.61 93.96 305.14
PER SHARE RATIO
0
50
100
150
200
250
300
350
TCS WIPRO INFOSYS
REPORTED CASH EPS RATIO
OPERATING PROFIT PER SHARE
BOOK VALUE PER SHARE
NET OPERATING INCOME PER
SHARE
FREE RESERVE PER SHARE
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PROFITABILITY RATIO
Operating Margin in %
TCS WIPRO INFOSYS
Mar-07 28.79 23.78 32.13
Mar-08 27.11 21,24 31.72
Mar-09 26.87 22.12 34.09
Mar-10 28.93 24.00 34.82
Mar-11 29.96 21.90 33.14
141.66 113.04 165.90
Average 28.33 22.61 33.18
Gross Profit Margin in %
TCS WIPRO INFOSYS
Mar-07 29.17 21.15 28.57
Mar-08 24.64 18.63 28.23
Mar-09 25.01 19.64 30.66
Mar-10 26.89 21.47 31.00
Mar-11 28.12 19.62 30.23
133.83 100.51 148.69
Average 26.77 20.10 28.74
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Net Profit Margin in%
TCS WIPRO INFOSYS
Mar-07 25.00 20.34 28.05
Mar-08 24.11 17.19 27.37
Mar-09 20.74 13.53 27.52
Mar-10 24.13 20.97 26.36
Mar-11 25.44 17.96 24.31
119.42 89.99 133.61
Average 23.88 18.00 26.72
Return on long term fund in %
TCS WIPRO INFOSYS
Mar-07 50.12 33.31 36.64
Mar-08 42.96 23.32 37.77
Mar-09 43.27 37.17 39.80
Mar-10 42.46 30.12 33.69
Mar-11 44.28 27.20 35.84
223.19 151.12 183.74
Average 44.64 30.22 36.75
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PROFITABILITY RATIO
0
5
10
15
20
25
30
35
40
45
TCS WIPRO INFOSYS
OPERATING MARGIN IN %
GROSS PROFIR MARGIN IN %
NET PROFIT MARGIN IN %
RETURN ON LONG TERM FUND IN %
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PORTFOLIO IN IT SECTOR
Average return Portfolio Wi
TCS 583.06 251,024.66 25.10
WIPRO 450.47 193,940.72 19.39
INFOSYS 1289.19 555,034.61 55.50
2322.72 10,000,00 100
PRICE ON PARTICULAR DATE
Company 13-06-11 13-07-11 RETURN IN
%
TCS 1189.20 1157.50 -2.67
WIPRO 408.00 412.75 1.16
INFOSYS 2848.50 2786.00 -2.20
TOTAL PORTFOLIO = 10, 00,000
TOTAL RETURN ON INVESTMENT
=Total return - Total Investment
=983336.59 1000000
= -16663.41
TOTAL RETURN ON INVESTMENT = - 1.67%
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INTERPRETATION OF SECTOR PORTFOLIO
that sector specific portfolio has perform negatively during theperiod of the report. That is due to the fact that there is a systematic risk involve
with the portfolio as lack of diversification. If we look at the performance of the
Sensex during this period then we will find that Sensex has perform better than
the sector portfolio. It is mainly due to diversification of risk as Sensex has the
30 scripts from different sectors, so any ups and downs in a sectors
performance will not affect the overall Sensex, that badly in the case of sector
portfolio.
plotted graph that all the three scripts in the sector portfolio
are following a same kind of trend in the given one month of the study. It is due
to the fact that they all belong to the same sector and they all face same
systematic risk as others in the sector. So the performance of the scripts rightly
indicates the need of diversification to remove the systematic risk from the
portfolio. As its gets highly risky investment such portfolio are rarely used by
investors in the general scenario.
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FINDING OF THE REPORT
Findings of the report gives the fruit of the all the analysis done on the research
of measuring and comparing performance of the portfolio with the market
portfolio.
RANDOM PORTFOLIO
After understanding the various concepts about what are the investments
option and what are the risks associated with the various investment avenues. It
is advisable to use the direct equity investment only if the investors have
adequate knowledge about selection of stocks.
The task does not end with the selection of script but they are also required to
pay close attention to the various happening in the economy that have direct or
indirect effect on stock market as the price of the script is affected
by two factors, one is company specific news and the other is economy specific
news. So any investor investing in the equity directly has to keep the close track
of the economy as well as the company in which they invest.
analytical capabilities
then one should avoid going for direct equity investment as the chances of loss
increases. And the other very important aspect is the regular monitoring of the
portfolio and reviewing is also an important aspect that one needs to pay close
attention to.
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SECTOR PORTFOLIO
study as there is
systemic risk as very high in the sector portfolio because of non diversification.
This portfolio has given -1.67% returns on the one month performance so it is
advisable for the investor not to go for such a high risky investment options.
All the individual scripts and the portfolio showing very steady chart, there is
very little movement in the performance chart.
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LIMITATIONS OF THE PROJECT
The time duration given to complete the report was not sufficient.
The report is basically made in the horizon of one months and the situation of
market is very dynamic so the conclusion or the return might not reflect the true
picture.
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RECOMMENDATIONS
From the above given findings and the conclusions of the study done by me,
here are the list of recommendations that comes out of the study.
portfolio is
highly risky option for investment. Here in the study it is providing negative
return. That shows that investors who want to have safe return must think twice
before selecting sector portfolio for a long term investment.
and volatility,
but for a long term prospect it becomes hard to fetch good return out of it as it is
hard to take use of high volatility.
maintain the higher
return and to make use of high volatility.
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BIBLIOGRAPHY
Books & Newspapers
1. Security analysis and Portfolio Management
-Prasanna Chandra
2. Economic Times
Web Bibliography
1. www.sahara.in
2. www.google.com
3. www.valueresearchonline.com
4. www.bizfinance.about.com
5. www.moneycontrol.com
6. www.stocks.about.com