A Case Study on Port Folio Management

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PROJECT REPORT ON A CASE STUDY ON PORT FOLIO MANAGEMENT

CERTIFICATE

This is to certify that the project work entitled A Case Study on Portfolio

Management with reference to Inter-Connected Stock E c!ange of India "imited#ISE$; Hyderabad has been carried out by %%%%% under y !uidance in partialfulfill ent of the Re"uire ents for the award of #

MASTER &F '(SI)ESS A*MI)ISTRATI&)

$%aculty # %inance& $Course Co'ordinator& $(irector&


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C&)TE)TS

)* CO+P,N- PRO%./E

0* .NTRO(1CT.ON

2* PORT%O/.O ,N,/-3.3

4* ,N,/-3.3 5 .NTERPRET.ON

6* C,/C1/,T.ON O% ,7ER,8E RET1RN O% CO+P,N.E3

9* C,/C1/,T.ON O% PORT%O/.O R.3:

* C,/C1/,T.ON O% PORT%O/.O * ?.?./O8R,PH-

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CO+P,N- PRO%./E

.nter'connected stock e@chan!e of .ndia li ited A.3EB has been pro oted by )4

Re!ional stock e@chan!es to pro ide cost'effecti e tradin! linka!eDconnecti ity

to all the e bers of the participatin! E@chan!es with the objecti e of widenin!

the arket for the securities listed on these E@chan!es* .3E ai s to address the

needs of s all co panies and retail in estors with the !uidin! principle of

opti iFin! the e@istin! infrastructure and harnessin! the potential of re!ional

arkets so as to transfor these into a li"uid and ibrant arket throu!h the use

of state'of'the'art technolo!y and networkin!*

The participatin! E@chan!es of .3E in all about 46GG stock brokers out

of which ore than 0GG ha e been currently re!istered as traders on .3E* .n order

to le era!e its infrastructure and to e@pand its nationwide reach .3E has also

appointed around 46G (ealers across G cities other than the participatin!

E@chan!e centers* These dealers are ad inistrati ely supported throu!h the

re!ional offices of .3E at (elhi AnorthB kolkata AeastB Coi batore Hyderabad

AsouthB and Na!pur AcentralB besides +u bai*

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.3E has also floated a wholly'owned subsidiary .3E securities and

ser ices li ited A.33B which has taken up corporate e bership of the National

3tock E@chan!e of .ndia /td* AN3EB in both the Capital +arket and %utures and

Options se! ents and The 3tock E@chan!e +u bai .n the E"uities se! ent sothat the traders and dealers of .3E can access other arkets in addition to the .3E

arkets and their local arket* .3E thus pro ides the in estors in s aller cities a

one'stop solution for cost'effecti e and efficient tradin! and settle ent in

securities*


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SAILENT FEATURES

)et0ork of intermediaries/

,s at the be!innin! of the financial year 0GG2'G4 64= inter ediaries

$0G Traders and 24) (ealers& are re!istered on .3E* , broad of e bers for s

the bedrock for any E@chan!e and in this respect .3E has a lar!e pool of

re!istered inter ediaries who can be tapped for any new line of business *

Ro1ust &2erational Systems

The tradin! settle ent and funds transfer operations of .3E and .33 are

co pletely auto ated and state'of'the'art syste s ha e been deployed* The

co unication network of .3E which has connecti ity with o er 4GG tradin!

e bers and is spread across49 cities is also used for supportin! the operations of

.33* The tradin! software and settle ent software as well as the electronic funds

transfer arran!e ent established with H(%C ?ank and .C.C. ?ank !i es .3E and

.33 the re"uired operational efficiency and fle@ibility to not only handle the

secondary arket functions effecti ely but also by le era!in! the for new

entures*

Skilled and e 2erienced man2o0er

.3E and .33 ha e e@perienced and professional staff who ha e wide

e@perience in 3tock E@chan!esD capital arket institutions with in so e cases the

e@perience !oin! up to nearly twenty years in this industry* The staff has the skill'

set re"uired to perfor a wide ran!e of functions dependin! upon the

re"uire ents fro ti e to ti e*

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Aggressi3e 2ricing 2olicy/

The philosophy of .3E is to ha e an a!!ressi e pricin! policy for the

arious products and ser ices offered by it* The ai is to penetrate the retail

arket and stren!then the position so that a wide ariety of products and ser ices

ha in! appeal for the retail arket can be offered usin! a co on distribution

channel* The a!!ressi e pricin! policy also ensures that the inter ediaries ha e

sufficient financial incenti es for offerin! these products and ser ices to the end'

clients*

Trading4 Risk Management and Settlement Soft0are Systems

The OR?.T $Online Re!ional ?ourses .nter'connected Tradin!& and

,I.3 $,uto ated E@chan!e .nte!rated 3ettle ent& software de eloped on the

+icrosoft NT platfor with consultancy assistance fro +icrosoft are the ost

conte porary of the tradin! and settle ent software introduced in the country* The

applications ha e been built on a technolo!y platfor which offers low cost ofownership facilitates si ple aintenance and supports easy up !radation and

enhance ent* The soft wares are so desi!ned that the transaction processin!

capacity depends on the hardware used; capacity can be added by just addin!

ine@pensi e hardware without any additional software work*

,i1rant Su1sidiary &2erations

.33 the wholly owned subsidiary of .3E is one of the bi!!est E@chan!e

subsidiaries in the country* On any !i en day ore than 06G re!istered

inter ediaries of .33 traded fro 49 cities across the len!th and breadth of the

country*

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)ame of t!e 'oard of directors

)* Prof* P* 7* Narasi ha Public .nterest (irector 0* 3hri 7* 3hankar +ana!in! (irector 2* (r* 3* (* .srani Public .nterest (irector 4* (r* +* -* :han Public .nterest (irector 6* +r* P* J* +athew 3hareholder (irector 9* +* C* Rodri!ues 3hareholder (irector * +r* +* :* ,nanda :u ar 3hareholder (irector =* +r* T*N*T Nayar 3hareholder (irector >* +r* :* (* 8upta 3hareholder (irector )G* +r* 7* R* ?haskar Reddy 3hareholder (irector ))* +r* Ja bu :u ar Jain Tradin! +e ber (irector

I)TR&*(CTI&)

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.n est ent ay be defined as an acti ity that co its funds in any financial

for in the present with an e@pectation of recei in! additional return in the future*

The e@pectations brin! with it a probability that the "uantu of return ay ary

fro a ini u to a a@i u * This possibility of ariation in the actual return isknown as in est ent risk* Thus e ery in est ent in ol es a return and risk*

.n est ent is an acti ity that is undertaken by those who ha e sa in!s*

3a in!s can be defined as the e@cess of inco e o er e@penditure* ,n in estor

earnsDe@pects to earn additional onetary alue fro the ode of in est ent that

could be in the for of financial assets*

The three i portant characteristics of any financial asset are

Return'the potential return possible fro an asset*

Risk'the ariability in returns of the asset for the chances of its alue

!oin! downDup*

/i"uidity'the ease with which an asset can be con erted into cash*

.n estors tend to look at these three characteristics while decidin! on their

indi idual preference pattern of in est ents* Each financial asset will ha e a

certain le el of each of these characteristics*

In3estment a3enues))


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There are a lar!e nu ber of in est ent a enues for sa ers in .ndia* 3o e of

the are arketable and li"uid while others are non' arketable* 3o e of the

are hi!hly risky while so e others are al ost risk less*

.n est ent a enues can be broadly cate!oriFed under the followin! head*

)* Corporate securities

0* E"uity shares*

2* Preference shares*

4* (ebenturesD?onds*

6* (eri ati es*

9* Others*

Cor2orate Securities

Joint stock co panies in the pri ate sector issue corporate securities* These

include e"uity shares preference shares and debentures* E"uity shares ha e

ariable di idend and hence belon! to the hi!h risk'hi!h return cate!ory;

preference shares and debentures ha e fi@ed returns with lower risk*The

classification of corporate securities that can be chosen as in est ent a enues can

be depicted as shown below

MET &*&"&5. &F T E ST(*.

)0

E"uity 3hares

Preferenceshares

?onds


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&'+ECTI,ES &F T E ST(*./

The objecti es of the study are as follows

To study the in est ent pattern and its related risks 5 returns*

To find out opti al portfolio which !a e opti al return at a ini iFe risk

to the in estor*

To see whether the portfolio risk is less than indi idual risk on whose basis

the portfolios are constituted*To see whether the selected portfolios is yieldin! a satisfactory and constant

return to the in estor*

To understand analyFe and select the best portfolio*

SC&PE &F ST(*./

This study co ers the +arkowitF odel* The study co ers the calculation of

correlations between the different securities in order to find out at what percenta!e

funds should be in ested a on! the co panies in the portfolio* ,lso the study

includes the calculation of indi idual 3tandard (e iation of securities and ends at

the calculation of wei!hts of indi idual securities in ol ed in the portfolio* These

percenta!es help in allocatin! the funds a ailable for in est ent based on risky

portfolios*

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(ata collection was strictly confined to secondary source* No pri ary data is

associated with the project*

(etailed study of the topic was not possible due to li ited siFe of the

project*

There was a constraint with re!ard to ti e allocation for the research studyi*e* for a period of two onths*

P&RT F&"I& MA)A5EME)T

MEA)I)5/

, portfolio is a collection of assets* The assets ay be physical or financial

like 3hares ?onds (ebentures Preference 3hares etc* The indi idual in estor or

a fund ana!er would not like to put all his oney in the sares of one co pany

that would a ount to !reat risk* He would therefore follow the a!e old a@i

that one should not put all the e!!es into one basket* ?y doin! so he can achie e

objecti e to a@i iFe portfolio return and at the sa e ti e ini iFin! the

portfolio risk by di ersification*

Portfolio ana!e ent is the ana!e ent of arious financial assets which

co prise the portfolio*

Portfolio ana!e ent is a decision # support syste that is desi!ned with a

iew to eet the ulti'faced needs of in estors*

,ccordin! to 3ecurities and E@chan!e ?oard of .ndia Portfolio +ana!er is

defined as portfolio eans the total holdin!s of securities belon!in! to any

personK*

PORTFOLIO MANAGER eans any person who pursuant to a contract or

arran!e ent with a client ad ises or directs or undertakes on behalf of the

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client $whether as a discretionary portfolio ana!er or otherwise& the

ana!e ent or ad inistration of a portfolio of securities or the funds of the

client*

DISCRETIONARY PORTFOLIO MANAGER eans a portfolio ana!erwho e@ercises or ay under a contract relatin! to portfolio ana!e ent

e@ercises any de!ree of discretion as to the in est ents or ana!e ent of

the portfolio of securities or the funds of the client*

F()CTI&)S &F P&RTF&"I& MA)A5EME)T/

To fra e the in est ent strate!y and select an in est ent i@ to achie e

the desired in est ent objecti es

To pro ide a balanced portfolio which not only can hed!e a!ainst the

inflation but can also opti iFe returns with the associated de!ree of risk

To ake ti ely buyin! and sellin! of securities

To a@i iFe the after'ta@ return by in estin! in arious ta@ sa in!

in est ent instru ents*

STR(CT(RE 6 PR&CESS &F T.PICA" P&RTF&"I& MA)A5EME)T

.n the s all fir the portfolio ana!er perfor s the job of security analyst*

.n the case of ediu and lar!e siFed or!aniFations job function of portfolio

ana!er and security analyst are separate*

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RESEARC$e*!* 3ecurity,nalysis&

P&RTF&"I&MA)A5ERS

&PERATI&)S$e*!* buyin! andsellin! of 3ecurities&

C"IE)TS

C ARACTERISTICS &F P&RTF&"I& MA)A5EME)T/

.ndi iduals will benefit i ensely by takin! portfolio ana!e ent ser ices

for the followin! reasons


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ajor e@chan!es of .ndia look after his deli eries and pay ents* This is

further co plicated by the olatile nature of our arkets which de ands

constant reshuffin! of portfolios*

T.PES &F P&RTF&"I& MA)A5EME)T/

78 *ISCRETI&)AR. P&RTF&"I& MA)A5EME)T SER,ICE 9*PMS:/

.n this type of ser ice the client parts with his oney in fa our of the

ana!er who in return handles all the paper work akes all the decisions and!i es a !ood return on the in est ent and char!es fees* .n the (iscretionary

Portfolio +ana!e ent 3er ice to a@i ise the yield al ost all portfolio

ana!ers park the funds in the oney arket securities such as o erni!ht arket

)= days treasury bills and >G days co ercial bills* Nor ally the return of such

in est ent aries fro )4 to )= percent dependin! on the call oney rates

pre ailin! at the ti e of in est ent*

2. )&)-*ISCRETI&)AR. P&RTF&"I& MA)A5EME)T SER,ICE

9)*PMS:/

The ana!er functions as a counsellor but the in estor is free to accept or

reject the ana!erLs ad ice; the paper work is also undertaken by ana!er for a

ser ice char!e* The ana!er concentrates on stock arket instru ents with a

portfolio tailor' ade to the risk takin! ability of the in estor*

IMPORTANCE OF PORTFOLIO MANAGEMENT :

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E er!ence of institutional in estin! on behalf of indi iduals* , nu ber of

financial institutions utual funds and other a!encies are undertakin! the

task of in estin! oney of s all in estors on their behalf*

8rowth in the nu ber and siFe of in esti!able funds # a lar!e part of

household sa in!s is bein! directed towards financial assets*

.ncreased arket olatility # risk and return para eters of financial assets

are continuously chan!in! because of fre"uent chan!es in !o ern entLsindustrial and fiscal policies econo ic uncertainty and instability*

8reater use of co puters for processin! ass of data*

ProfessionaliFation of the field and increasin! use of analytical ethods $e*!*

"uantitati e techni"ues& in the in est ent decision # akin!

/ar!er direct and indirect costs of errors or shortfalls in eetin! portfolio

objecti es # increased co petition and !reater scrutiny by in estors*

STEPS IN PORTFOLIO MANAGEMENT:

3pecification and "ualification of in estor objecti es constraints and

preferences in the for of an in est ent policy state ent*

(eter ination and "ualification of capital arket e@pectations for the

econo y arket sectors industries and indi idual securities*

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,llocation of assets and deter ination of appropriate portfolio strate!ies for

each asset class and selection of indi idual securities*

Perfor ance easure ent and e aluation to ensure attain ent of in estor

objecti es*

+onitorin! portfolio factors and respondin! to chan!es in in estor

objecti es constrains and D or capital arket e@pectations*

Rebalancin! the portfolio when necessary by repeatin! the asset allocation

portfolio strate!y and security selection*

CRITERIA F&R P&RTF&"I& *ECISI&)S/

.n portfolio ana!e ent e phasis is put on identifyin! the collecti ei portance of all in estors holdin!s* The e phasis shifts fro indi idual

assets selection to a ore balanced e phasis on di ersification and risk'

return interrelationships of indi idual assets within the portfolio* .ndi idual

securities are i portant only to the e@tent they affect the a!!re!ate portfolio*

.n short all decisions should focus on the i pact which the decision will

ha e on the a!!re!ate portfolio of all the assets held*

Portfolio strate!y should be oulded to the uni"ue needs and characteristics

of the portfolioLs owner*

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(i ersification across securities will reduce a portfolioLs risk* .f the risk and

return are lower than the desired le el le era!es $borrowin!& can be used to

achie e the desired le el*

/ar!er portfolio returns co e only with lar!er portfolio risk* The ost

i portant decision to ake is the a ount of risk which is acceptable*

The risk associated with a security type depends on when the in est ent

will be li"uidated* Risk is reduced by selectin! securities with a payoff close

to when the portfolio is to be li"uidated*

Co petition for abnor al returns is e@tensi e so one has to be careful in

e aluatin! the risk and return fro securities* . balances do not last lon! and one

has to act fast to profit fro e@ceptional opportunities*

;(A"ITIES &F P&RTF&"I& MA)A5ER/

)* S&()* 5E)ERA"


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is s continuous job of the portfolio ana!er* , !ood analyst akes a !ood

financial consultant* The analyst can know the stren!ths weaknesses

opportunities of the econo y industry and the co pany*

2* MAR


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responsibilities business or professional situation and ta@ status all of which

affect the in estorLs willin!ness to assu e risk*

Stage in t!e "ife Cycle/

One of the ost i portant factors affectin! the indi idualLs in est ent

objecti e is his sta!e in the life cycle* , youn! person ay put !reater e phasis

on !rowth and lesser e phasis on li"uidity* He can afford to wait for realiFation of

capital !ains as his ti e horiFon is lar!e*

Family res2onsi1ilities

The in estorLs arital status and his responsibilities towards other e bers of the

fa ily can ha e a lar!e i pact on his in est ent needs and !oals*

In3estor>s e 2erience/

The success of portfolio depends upon the in estorLs knowled!e and

e@perience in financial atters* .f an in estor has an aptitude for financial affairshe ay wish to be ore a!!ressi e in his in est ents*

Attitude to0ards Risk/

, personLs psycholo!ical ake'up and financial position dictate his ability to

assu e the risk* (ifferent kinds of securities ha e diffferent kinds of risks* The

hi!her the risk the !reater the opportunity for hi!her !ain or loss*

"i?uidity )eeds/

/i"uidity needs ary considerably a on! indi idual in estors* .n estors

with re!ular inco e fro other sources ay not worry uch about instantaneous

li"uidity but indi iduals who depend hea ily upon in est ent for eetin! their

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The protection of the rupee alue of the in est ent is of pri e i portance to

ost in estors* The ori!inal in est ent can be reco ered only if the security can

be readily sold in the arket without uch loss of alue*

Assurance of Income/

M(ifferent in estors ha e different current inco e needs* .f an indi idual is

dependent of its in est ent inco e for current consu ption then inco e recei ed

now in the for of di idend and interest pay ents beco e pri ary objecti e*

In3estment Risk/

,ll in est ent decisions re ol e around the trade'off between risk and

return* ,ll rational in estors want a substantial return fro their in est ent* ,n

ability to understand easure and properly ana!e in est ent risk is funda ental

to any intelli!ent in estor or a speculator* %re"uently the risk associated with

security in est ent is i!nored and only the rewards are e phasiFed* ,n in estor

who does not fully appreciate the risks in security in est ents will find it difficult

to obtain continuin! positi e results*

RIS< A)* E%PECTE* RET(R)/

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There is a positi e relationship between the a ount of risk and the a ount of

e@pected return i*e* the !reater the risk the lar!er the e@pected return and lar!er

the chances of substantial loss* One of the ost difficult proble s for an in estor is

to esti ate the hi!hest le el of risk he is able to assu e*

Risk is easured alon! the horiFontal a@is and increases fro the left to

ri!ht*

E@pected rate of return is easured on the ertical a@is and rises fro

botto to top*

The line fro G to R $f& is called the rate of return or risk less in est ents

co only associated with the yield on !o ern ent securities*

The dia!onal line for R $f& to E$r& illustrates the concept of e@pected rate

of return increasin! as le el of risk increases*

T.PES &F RIS


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)* 3yste atic Risk

0* 1n'syste atic Risk

78 Systematic Risk/

3yste atic risk is caused by factors e@ternal to the particular co pany and

uncontrollable by the co pany* The syste atic risk affects the arket as a whole*

%actors affect the syste atic risk are

econo ic conditions political conditions

sociolo!ical chan!es

The syste atic risk is una oidable* 3yste atic risk is further sub'di ided into three

types* They are

a& +arket Risk b& .nterest Rate Risk

c& Purchasin! Power Risk

a:8 Market Risk/

One would notice that when the stock arket sur!es up ost stocks post hi!her

price* On the other hand when the arket falls sharply ost co on stocks will

drop* .t is not unco on to find stock prices fallin! fro ti e to ti e while a

co panyLs earnin!s are risin! and ice' ersa* The price of stock ay fluctuate

widely within a short ti e e en thou!h earnin!s re ain unchan!ed or relati ely

stable*

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b). Interest Rate Risk/

.nterest rate risk is the risk of loss of principal brou!ht about the chan!es in the

interest rate paid on new securities currently bein! issued*

c)8 Purc!asing Po0er Risk/

The typical in estor seeks an in est ent which will !i e hi current inco e and Dor capital appreciation in addition to his ori!inal in est ent*

B8 (n-systematic Risk/

1n'syste atic risk is uni"ue and peculiar to a fir or an industry* The nature and

ode of raisin! finance and payin! back the loans in ol e the risk ele ent*

%inancial le era!e of the co panies that is debt'e"uity portion of the co panies

differs fro each other* ,ll these factors %actors affect the un'syste atic risk and

contribute a portion in the total ariability of the return*

+ana!erial inefficientlyTechnolo!ical chan!e in the production process

, ailability of raw aterials

Chan!es in the consu er preference

/abour proble s

The nature and a!nitude of the abo e entioned factors differ fro industry toindustry and co pany to co pany* They ha e to be analyFed separately for each

industry and fir * 1n'syste atic risk can be broadly classified into

a& ?usiness Risk

b& %inancial Risk

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a8 'usiness Risk/

?usiness risk is that portion of the unsyste atic risk caused by the operatin!en iron ent of the business* ?usiness risk arises fro the inability of a fir toaintain its co petiti e ed!e and !rowth or stability of the earnin!s* Theolatibility in stock prices due to factors intrinsic to the co pany itself is known as?usiness risk* ?usiness risk is concerned with the difference between re enue andearnin!s before interest and ta@* ?usiness risk can be di ided into*

i:8 Internal 'usiness Risk

.nternal business risk is associated with the operational efficiency of the

fir * The operational efficiency differs fro co pany to co pany* The efficiency

of operation is reflected on the co panyLs achie e ent of its pre'set !oals and the

fulfill ent of the pro ises to its in estors*

ii:8 E ternal 'usiness Risk

E@ternal business risk is the result of operatin! conditions i posed on the

fir by circu stances beyond its control* The e@ternal en iron ents in which it

operates e@ert so e pressure on the fir * The e@ternal factors are social and

re!ulatory factors onetary and fiscal policies of the !o ern ent business cycle

and the !eneral econo ic en iron ent within which a fir or an industry operates*

18 Financial Risk/

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.t refers to the ariability of the inco e to the e"uity capital due to the debt capital*

%inancial risk in a co pany is associated with the capital structure of the co pany*

Capital structure of the co pany consists of e"uity funds and borrowed funds*

P&RTF&"I& A)A".SIS/

7arious !roups of securities when held to!ether beha e in a different

anner and !i e interest pay ents and di idends also which are different to the

analysis of indi idual securities* , co bination of securities held to!ether will

!i e a beneficial result if they are !rouped in a anner to secure hi!her return after

takin! into consideration the risk ele ent*

There are two approaches in construction of the portfolio of securities* They

are

Traditional approach

+odern approach

TRA*ITI&)A" APPR&AC /

Traditional approach was based on the fact that risk could be easured on

each indi idual security throu!h the process of findin! out the standard de iation

and that security should be chosen where the de iation was the lowest* Traditional

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3tandard de iation

Co'efficient of correlation

+arkowitF odel is also called as an %ull Co ariance +odel * Throu!h this

odel the in estor can find out the efficient set of portfolio by findin! out the trade

off between risk and return between the li its of Fero and infinity* ,ccordin! to

this theory the effects of one security purchase o er the effects of the other

security purchase are taken into consideration and then the results are e aluated*

+ost people a!ree that holdin! two stocks is less risky than holdin! one stock* %or

e@a ple holdin! stocks fro te@tile bankin! and electronic co panies is betterthan in estin! all the oney on the te@tile co panyLs stock*

+arkowitF had !i en up the sin!le stock portfolio and introduced di ersification*

The sin!le stock portfolio would be preferable if the in estor is perfectly certain

that his e@pectation of hi!hest return would turn out to be real* .n the world of

uncertainity ost of the risk ad erse in estors would like to join +arkowitF rather

than keepin! a sin!le stock because di ersification reduces the risk*

ASS(MPTI&)S/

,ll in estors would like to earn the a@i u rate of return that they can

achie e fro their in est ents*

,ll in estors ha e the sa e e@pected sin!le period in est ent horiFon*

,ll in estors before akin! any in est ents ha e a co on !oal* This is

the a oidance of risk because .n estors are risk'a erse*

.n estors base their in est ent decisions on the e@pected return and

standard de iation of returns fro a possible in est ent*

Perfect arkets are assu ed $e*!* no ta@es and no transation costs&

20


30/69

The in estor assu es that !reater or lar!er the return that he achie es on his

in est ents the hi!her the risk factor surrounds hi * On the contrary when

risks are low the rerturn can also be e@pected to be low*

The in estor can reduce his risk if he adds in est ents to his portfolio*

,n in estor should be able to !et hi!her return for each le el of risk by

deter inin! the efficient set of securities *

,n indi idual seller or buyer cannot affect the price of a stock* This

assu ption is the basic assu ption of the perfectly co petiti e arket*

.n estors ake their decisions only on the basis of the e@pected returnsstandard de iation and co ariances of all pairs of securities*

.n estors are assu ed to ha e ho o!enous e@pectations durin! the

decision' akin! period

The in estor can lend or borrow any a ount of funds at the riskless rate of

interest* The riskless rate of interest is the rate of interest offered for the

treasury bills or 8o ern ent securities*.n estors are risk'a erse so when !i en a choice between two otherwise

identical portfolios they will choose the one with the lower standard

de iation*

.ndi idual assets are infinitely di isible eanin! that an in estor can buy a

fraction of a share if he or she so desires*

There is a risk free rate at which an in estor ay either lend $i*e* in est&

oney or borrow oney*

There is no transaction cost i*e* no cost in ol ed in buyin! and sellin! of

stocks*

22


31/69

There is no personal inco e ta@* Hence the in estor is indifferent to the for of

return either capital !ain or di idend*

T E EFFECT &F C&M'I)I)5 T=& SEC(RITIES/

.t is belie ed that holdin! two securities is less risky than by ha in! only one

in est ent in a personLs portfolio*


32/69

relationship with assetLs beta alue i*e* undi ersifiable or syste atic risk $i*e*

arket related risk& because non arket risk can be eli inated by di ersification

and syste atci risk easured by beta* Therefore the relationship between an assets

return and its syste atic risk can be e@pressd by the C,P+ which is also calledthe 3ecurity +arket /ine*

R 2D R f %f R m97- %f :

R 2 Portfolio return

%f The proportion of funds in ested in risk free assets

7- % f The proportion of funds in ested in risky assets

R f Risk free rate of return

R m Return on risky assets

%or ula can be used to calculate the e@pected returns for different situtions like

i@in! riskless assets with risky assets in estin! only in the risky asset and

i@in! the borrowin! with risky assets*

T E C&)CEPT/

,ccordin! to C,P+ all in estors hold only the arket portfolio and risk

less securities* The arket portfolio is a portfolio co prised of all stocks in the

arket* Each asset is held in proportion to its arket alue to the total alue of all

risky assets*

26


33/69

%or e@a ple if 3atya .ndustry share represents )6 of all risky assets then the

arket portfolio of the indi idual in estor contains )6 of 3atya .ndustry

shares* ,t this sta!e the in estor has the ability to borrow or lend any a ount of

oney at the risk less rate of interest*E!* assu e that borrowin! and lendin! rate to be )0*6 and the return fro

the risky assets to be 0G * There is a trade off between the e@pected return and

risk* .f an in estor in ests in risk free assets and risky assets his risk ay be less

than what he in ests in the risky asset alone* ?ut if he borrows to in est in risky

assets his risk would increase ore than he in ests his own oney in the risky

assets*


34/69

E,A"(ATI&) &F P&RTF&"I&/

Portfolio ana!er e aluates his portfolio perfor ance and identifies the

sources of stren!ths and weakness* The e aluation of the portfolio pro ides a feed

back about the perfor ance to e ol e better ana!e ent strate!y* E en thou!h

e aluation of portfolio perfor ance is considered to be the last sta!e of in est ent

process it is a continuous process* There are nu ber of situations in which an

e aluation beco es necessary and i portant*

i8 Self Valuatio ! ,n indi idual ay want to e aluate how well he has done*

This is a part of the process of refinin! his skills and i pro in! his

perfor ance o er a period of ti e*

ii8 E"aluatio of Ma a#e$%! , utual fund or si ilar or!aniFation i!ht want

to e aluate its ana!ers* , utual fund ay ha e se eral ana!ers each

runnin! a separate fund or sub'fund* .t is often necessary to co pare the

perfor ance of these ana!ers*

iii8 E"aluatio of Mutual Fu &%! ,n in estor ay want to e aluate the arious

utual funds operatin! in the country to decide which if any of these

should be chosen for in est ent* , si ilar need arises in the case of

indi iduals or or!anisations who en!a!e e@ternal a!encies for portfolio

ad isory ser ices*

2


35/69


36/69


37/69

own cycle of fluctuations* These price fluctuations ay be related to econo ic

acti ity in a country or due to other chan!ed circu stances in the arket*

.f an in estor is able to forecast these chan!es by de elopin! a fra ework for thefuture throu!h careful analysis of the beha ior and o e ent of stock prices is in

a position to ake hi!her profit than if he was to si ply buy securities and hold

the throu!h the process of di ersification* +echanical ethods are adopted to

earn better profit throu!h proper ti in!* The in estor uses for ula plans to help

hi in akin! decisions for the future by e@ploitin! the fluctuations in prices*

F&RM("A P"A)S/

The for ula plans pro ide the basic rules and re!ulations for the purchase

and sale of securities* The a ount to be spent on the different types of securities is

fi@ed* The a ount ay be fi@ed either in constant or ariable ratio* This depends

on the in estorLs attitude towards risk and return* The co only used for ula

plans are

i* , era!e Rupee Plan

ii* Constant Rupee Plan

iii* Constant Ratio Plan

i * 7ariable Ratio Plan

A*,A)TA5ES/

?asic rules and re!ulations for the purchase and sale of securities are

pro ided*

4G


38/69

The rules and re!ulations are ri!id and help to o erco e hu an e otion*

The in estor can earn hi!her profits by adoptin! the plans*

, course of action is for ulated accordin! to the in estorLs objecti es*

.t controls the buyin! and sellin! of securities by the in estor*

.t is useful for takin! decisions on the ti in! of in est ents*

*ISA*,A)TA5ES/

The for ula plan does not help the selection of the security* The selection of

the security has to be done either on the basis of the funda ental or

technical analysis*

.t is strict and not fle@ible with the inherent proble of adjust ent*

The for ula plans should be applied for lon! periods otherwise the

transaction cost ay be hi!h*

E en if the in estor adopts the for ula plan he needs forecastin!* +arket

forecastin! helps hi to identify the best stocks*

A)A".SIS I)TERPRETI&)

CALC(LATION OF AVERAGE RET(RN OF COMPANIES!

4)


39/69


40/69

, era!e Return 9G*>9D6 )0*)>

ACC!

.ear

&2enings!are 2rice

9PG:

Closings!are 2rice

9P7: 9P7-PG:9P7-PG:6PGH7GG

0GG0'0GG2 )62*4G )2=*6G ')4*)> '>*0GG2'0GG4 )2=*6G 064*96 ))9*)6 =2*=90GG4'0GG6 064*96 29G*66 )G6*> 4)*6=

0GG6'0GG9 29G*66 =0*0G 40)*9) ))9*>60GG9'0GG =0*0G 26*06 '49*>6 '9*GG

T&TA" RET(R) BBL8

, era!e Return 009*=D6 46*29

*ARAT *EAVY ELECTRICALS LTD!

.ear

&2enings!are 2rice

9PG:

Closings!are 2rice


0GG0'0GG2 )9>*GG 002*)6 64*)6 20*G40GG2'0GG4 002*)6 9G4*26 2=*)0 ) G*=20GG4'0GG6 9G4*26 99*4G )90*G6 09*=)0GG6'0GG9 99*4G 004)*>6 )4 6*66 )>0*620GG9'0GG 004)*>6 009)*26 )>*4 G*=

T&TA" RET(R) BN8G

, era!e Return 402*G=D6 =4*90

42


41/69

*ERO*ONDA A(TOMO ILES LIMITED!

.ear

&2enings!are 2rice

9PG:

Closings!are 2rice


0GG0'0GG2 22=*66 )==*0G ')6G*26 '44*4G0GG2'0GG4 )==*0G 4>G*9G 2G0*4G )9G*9=0GG4'0GG6 4>G*9G 64=*GG 6 *4G ))* G0GG6'0GG9 64=*GG =>G*46 240*46 90*6G0GG9'0GG =>G*46 9==* 6 '0G*) '00*96

T&TA" RET(R) 7LJ8 B

, era!e Return )9 *=0D6 22*69

+IPRO!

.ear

&2enings!are 2rice

9PG:

Closings!are 2rice


0GG0'0GG2 ) GG*9G )022*46 '49 *)6 '0 *40GG2'0GG4 ) 022*46 )29)*0G )0 * 6 )G*290GG4'0GG6 ) 29)*0G 0 G)0 96G*= 4 *=0GG6'0GG9 9 G*>6 66>* ')))*06 ')9*6=0GG9'0GG 66>* G 66>*4G 'G*2 'G*G6

T&TA" RET(R) 7 87N

, era!e Return )4*)2D6 0*=2

44


42/69


43/69

ACC!

.ear Return9R: A3g8Return 9R: 9R-R: 9R-R: B

0GG0'0GG2 '>* 46*29 '66*G9 2G200GG2'0GG4 =2*=9 46*29 2=*6 )4=00GG4'0GG6 4)*6= 46*29 '2* = )2*9>0GG6'0GG9 ))9*>6 46*29 )*6> 6)060GG9'0GG '9*GG 46*29 '6)*29 092=

T&TA" 7B4BK7

7ariance )Dn') $R'R& 0 )D6 $)0 0>)& 046=

3tandard (e iation 7ariance 046= 4>*6=

+IPRO!

.earReturn

9R:A3g8

Return 9R: 9R-R: 9R-R: B

0GG0'0GG2 '0 *4 0*=2 '2G*0> >)0GG2'0GG4 )G*29 0*=2 *62 60GG4'0GG6 4 *= 0*=2 46*G4 0G0>0GG6'0GG9 ')9*6= 0*=2 ')>*4) 20GG9'0GG 'G*G6 0*=2 '0*== =

T&TA" NN

7ariance )Dn') $R'R& 0 )D6 $22==& =4

3tandard (e iation 7ariance =4

22*G>49


44/69

*EL!

.ear

Return

9R:

A3g8

Return 9R: 9R-R: 9R-R:B

0GG0'0GG2 20*G4 =4*90 '60*6= 0 960GG2'0GG4 ) G*=2 =4*90 =9*0) 4200GG4'0GG6 09*=) =4*90 '6 *=) 22400GG6'0GG9 )>0*62 =4*90 )G *>) ))9460GG9'0GG G*= =4*90 '=2* 6 G)4

T&TA" NB47K

7ariance )Dn') $R'R& 0 )D6 $20)>=& 944G

3tandard (e iation 7ariance 944G =G*06

*ERO *ONDA!

.ear Return9R: A3g8Return 9R: 9R-R: 9R-R: B

0GG0'0GG2 '44*4G 22*69 ' *> 9G >0GG0'0GG2 )9G*9= 22*69 )0 *)0 )9)9G0GG4'0GG6 ))* G 22*69 '0)*=9 4 =0GG6'0GG9 90*6G 22*69 0=*>4 =2=0GG9'0GG '00*96 22*96 '69*0) 2)9G

T&TA" BL4J7O

7ariance )Dn') $R'R& 0 )D6 $09 )6& 6242

3tandard (e iation 7ariance 6242 2*G>

CA"C("ATI&) &F C&RRE"ATI&) /

4


45/69

Co ariance $CO7 ab& )Dn $R,'R,&$R?'R?&Correlation Coefficient CO7 abD aQ b

i. ACC ,RA) - ITC ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '66*G9 '46*>= 06200GG2'0GG4 2=*6 0>*= ))4>*>>0GG4'0GG6 '2* = ' *6 0=*260GG6'0GG9 )*6> =0*2) 6=>0*60GG9'0GG '6)*29 '6=* ) 2G)6

T&TA" 7BL7J8K

Co ariance $CO7 ab& )D6 $)09) *>& 0602*6=

Correlation Coefficient CO7 abD aQ b a 4>*6 ; b 6)*64 0602*6=D$4>*6 &$6)*64& G*>=

ii& ACC (RA) & WIPRO (RB)

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '60*6= ' *> 4G>>*990GG2'0GG4 =9*0) )0 *)0 )G>6>*G)0GG4'0GG6 '6 *=) '0)*=9 )092* 00GG6'0GG9 )G *>) 0=*>4 2)00*>)0GG9'0GG '=2* 6 '69*0) 4 G *6=

T&TA" B 7OB8

Co ariance $CO7 ab& )D6 $04)60*==& 4=2G*6

Correlation Coefficient CO7 abD aQ b a 09 ; b 4)*90 4=2G*6 D$=G*06&$ 2*G>& G*=0

4=


46/69

iii. +IPRO ,RA) - DR REDDY ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':

0GG0'0GG2 '2G*0> '0=*)> =62*=0GG2'0GG4 *62 '6*=9 '44*)00GG4'0GG6 44*>= '29*22 ')924*)00GG6'0GG9 ')>*4) =G*)) ')664*>20GG9'0GG '0*== '>* 0 0 *>>

T&TA" -BNO78N7

Co ariance $CO7 ab& )D6 $'026)*2)& 4 G*09

Correlation Coefficient CO7 abD aQ b a 09*GG ; b 4)*90 '4 G*09D$09*GG&$4)*90& 'G*42

". ITC ,RA) - *EL ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '46*>= '60*6= 04) *920GG2'0GG4 '0>*= =9*0) '06 6*G>0GG4'0GG6 ' 6 '6 *=) '422*6=

0GG6'0GG9 =0*2) )G *>) ===0*G0GG9'0GG '6=* ) '=2* 6 4>)9*>9

T&TA" 7 GJO87O

Co ariance $CO7 ab& )D6 $)4G 6*)6& 0=)6*G2

Correlation Coefficient CO7 abD aQ b

4>


47/69

a 6)*64 ; b =G*06 0=)6*G2D$6)*64&$=G*06& G*9=

". ACC ,RA) - *EL ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '66*G9 '60*6= 0=>6*G60GG2'0GG4 2=*6 =9*0) 22)>*G=0GG4'0GG6 '2* '6 *=) 0)2*=>0GG6'0GG9 )*6> )G *>) 06*00GG9'0GG '6)*2 '=2* 6 40>9*2

T&TA" 7 K8LL

Co ariance $CO7 ab& )D6 $)=44>*99& 29=>*>2

Correlation Coefficient CO7 abD aQ b a 4>*6 ; b =G*06

)=44>*99D$4>*6 &$=G*06& G*>0

2. Co$$elatio bet ee ACC - ot/e$ Co0'a ie%!

i. ACC ,RA) - *ERO*ONDA ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '66*G9 ' *> 40>2*G0

0GG2'0GG4 2=*6 )0 *)0 4=>4*)00GG4'0GG6 '2* = '0)*=9 =0*920GG6'0GG9 )*6> 0=*>4 0G )*=)0GG9'0GG '6)*29 '69*0) 0==9*>6

T&TA" 7 BB 8ON

Co ariance $CO7 ab& )D6 $)400=*62& 0=46* G

6G


48/69

Correlation Coefficient CO7 abD aQ b a 4>*6= ; b 2*G4 0=46* GD$4>*6 &$09*GG& G* =

ii. ACC ,RA) - +IPRO ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '66*G9 '2G*0> )99 *0GG2'0GG4 2=*6 *62 0=>*>G0GG4'0GG6 '2* = 44*>= ') G*G0

0GG6'0GG9 )*6> ')>*4) ')2=>*690GG9'0GG '6)*29 '0*== )4 *>)

T&TA" O L

Co ariance $CO7 ab& )D6 $649& )G>*0

Correlation Coefficient CO7 abD aQ b a 4>*6 ; b 09*GG )G>*0D$4>*6 &$09*GG& G*G=

iii. ACC ,RA) - DR REDDY ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '66*G9 '0=*)> 660*)40GG2'0GG4 2=*6 '6*=9 '006*9)0GG4'0GG6 '2* = '29*22 )2 *220GG6'0GG9 )*6> =G*)) 6 26*G

0GG9'0GG '6)*29 '>* 0 4>>*0)

T&TA" JLK 87

Co ariance $CO7 ab& )D6 $ 9>=*)4& )62>*92

Correlation Coefficient CO7 abD aQ b a 4>*6 ; b 4)*90

6)


49/69

)62>*92D$4>*6 &$4)*90& G* 4

i". ITC ,RA) - *ERO *ONDA ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '46*>= ' *> 26=6*G90GG2'0GG4 0>*= )0 *)0 2 > *G0GG4'0GG6 ' *6 '0)*=9 )92*>60GG6'0GG9 =0*2) 0=*>4 02=0*G60GG9'0GG '6=* ) '69*0) 22GG*G=

T&TA" 7NBB 8B7

Co ariance $CO7 ab& )D6 $)200=*0)& 0946*94

Correlation Coefficient CO7 abD aQ b a 6)*64 ; b 2*G>

0946*94D$6)*64&$ 2*G>& G* G

1. Co$$elatio et ee DR REDDY - Ot/e$ Co0'a ie%

i. ITC,RA) - +IPRO!

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 ')9*G04 ')G*=> ) 4*6G0GG0'0GG2 '09*6 4 '49*>4 ) 04 *2=0GG2'0GG4 '2*9=4 '=* 20*G60GG4'0GG6 '24* 04 '09*>= >29*=60GG6'0GG9 =)*GG9 >2*62 6 9*4>

T&TA" K4KLJ8B

Co ariance $CO7 ab& )D6') $>>9 *0=& 04>)*=0

Correlation Coefficient CO7 abD aQ b60


50/69

a 49* 6 ; b 64*4= 04>)*=0D$49* 6&$64*4=& G*> =

ii. DR. REDDY ,RA) - -ITC ,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '0=*)> '46*>= )0>9*)0GG2'0GG4 '6*=9 0>*= ') 6*G20GG4'0GG6 '29*22 ' *6 0 0*40GG6'0GG9 =G*)) =0*2) 96>2*=6

0GG9'0GG '>* 0 '6=* ) 6 G*99

T&TA" OO 87B

Co ariance $CO7 ab& )D6 $=66=*)0& ) ))*90

Correlation Coefficient CO7 abD aQ b a 4)*90 ; b 6)*64 ) ))*90D$4)*90&$6)*64& G* >

i38 DR REDDY ,RA) -*ERO*ONDA,R )

Co ariance $CO7 ab& )D6 $99G)*=& )20G*29

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '0=*)> ' *> 0)> *>

0GG2'0GG4 '6*=9 )0 *)0 44*>00GG4'0GG6 '29*22 '0)*=9 >4*)0GG6'0GG9 =G*)) 0=*>4 02)=*2=0GG9'0GG '>* 0 '69*0) 649*29

T&TA" LLG78

62


51/69

Correlation Coefficient CO7 abD aQ b a 4)*90 ; b 2*G>

)20G*29D$4)*90&$ 2*G>&

G*42

. Co$$elatio et ee *LL - Ot/e$ Co0'a ie%

i. *ERO*ONDA ,RA) - +IPRO,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 ' *> '2G*0> 029)* )0GG2'0GG4 )0 *)0 *62 >6 *0)0GG4'0GG6 '0)*=9 46*G4 '>=4*60GG6'0GG9 0=*>4 ')>*4) '69)* 00GG9'0GG '69*0) '0*== )9)*==

T&TA" 7KN 8O7

64


52/69

Co ariance $CO7 ab& )D6 $)>24*6)& 2=9*>GCorrelation Coefficient CO7 abD aQ b a 2*G>; b 09*GG

2=9*>GD$ 2*G>&$09*GG& G*0Gii. DR REDDY ,RA) - *EL,R )

Co ariance $CO7 ab& )D6 $)0629& 2=9*>G

Correlation Coefficient CO7 abD aQ b a 4)*90; b =G*06 06G *0D$4)*90&$=G*06& G*>2

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '0=*)> '60*6= )4=0*020GG2'0GG4 '6*=9 =9*0) '6G6*)>0GG4'0GG6 '29*22 '6 *=) 0)GG*040GG6'0GG9 =G*)) )G *>) =944*90GG9'0GG '>* 0 '=2* 6 =)4*G6

T&TA" 7BONL

66


53/69

3. CORRELATION ET+EEN *EL,RA) - +IPRO,R )

.EAR 9RA-RA: 9R'-R': 9RA-RA: 9R'-R':0GG0'0GG2 '60*6= '2G*0> )6>0*960GG2'0GG4 =9*0) *62 94>*)90GG4'0GG6 '6 *=) 46*G4 '09G2* 90GG6'0GG9 )G *>) ')>*4) '0G>4*620GG9'0GG '=2* 6 '0*== 04)*0

T&TA" -BB7O8B

Co ariance $CO7 ab& )D6 $'00)6*0=& '442*G6

Correlation Coefficient CO7 abD aQ b a =G*06; b 09*GG '442*G6D$=G*06&$09*GG& 'G*0)

CA"C("ATI&) &F P&RTF&"I& =EI5 TS/

%OR+1/,


54/69

b 09*GGnab 'G*G0

6

CA"C("ATI&) &F =EI5 TS &F ' E" =IPR&/

a =G*06 b 09*GGnab 'G*0)

6


55/69

*6 b 6)*64nab G*>=


56/69

A 2*G>'$G*=0Q80.25 &B (80.25) 0 (73.09) 0 # 0$G*=0&Q(80.25) Q(73.09)

'G*4>

i * .TC $a& 5 ?HE/ $b&

a 6)*64 b =G*06nab G*9=


57/69

(51.54) 0 (80.25) 0 # 0$G*9=&Q(51.54) Q(80.25)

0Q49.57 &B (49.57) 0 (80.25) 0 # 0$G*>0&Q(49.57) Q(80.25)


58/69

G*=)

* ,CC $a& 5 (R RE((- $b&

a 4>*6 b 4)*90

nab G* 4


59/69


60/69

9


61/69

CA"C("ATI&) &F P&RTF&"I& RIS


62/69

iii* *6 b =G*06 0D2 )D2nab G*>0

R P $0D2&0$4>*6 &0 $)D2 )0$=G*06&0 0$4>*6 &(80.25) Q(0.92) Q$0D2&Q$)D2&

96


63/69

= 4 =9 9>*)=

.* C,/C1/,T.ON O% PORT%O/.O R.3: O% ,CC 5 OTHERCO+P,N.E3

i* ,CC$a& 5 HEROHON(,$b&

a 4>*6 b 2*G>

0D2 )D2nab G* =

R P $0D2&0$4>*6 &0 $)D2 )0$ 2*G>&0 0$4>*6 &(73.09) Q(0.78) Q$0D2&Q$)D2&

= 0>44 64*06

ii* ,CC $a& 5 *6 b 09*GG

0D2 )D2nab G*G=

R P $0D2&0

$4>*6 &0

$)D2 )0

$09*GG&0

0$4>*6 &(26.00) Q(0.08) Q$0D2&Q$)D2&

= )009 26*G)

iii* ,CC $a& 5 (R RE((- $b&

a 4>*6

99


64/69

b 4)*90 0D2 )D2nab G* 4

R P $0D2&0$4>*6 &0 $)D2 )0$4)*90&0 0$4>*6 &(41.62) Q(0.74) Q$0D2&Q$)D2&

= )> 0 44*4G

i@* .TC $a& 5 HEROHON(, $b&

a 6)*64 b 2*G> 0D2

)D2nab G* G

R P $0D2&0$6)*64&0 $)D2 )0$ 2*G>&0 0$6)*64&(73.09) Q(0.70) Q$0D2&Q$)D2&

= 0>4> 64*2G

..* C,/C1/,T.ON O% PORT%O/.O R.3: O% (R RE((- 5OTHER CO+P,N.E3

@* (RRE((- $a& 5 .TC $b&

a 4)*90 b 6)*64

)D2 0D2nab G* >

9


65/69

R P $)D2&0$4)*90&0 $0D2)0$6)*64&0 0$4)*90&(51.54) Q(0.79) Q$0D2&Q$)D2&

= 0)26 49*0

@i* (RRE((- $a& 5 HEROHON(, $b&

a 4)*90 b 2*G> )D2 0D2nab G*42

R P $)D2&0$4)*90&0 $0D2)0$ 2*G>&0 0$4)*90&(73.09) Q(0.43) Q$0D2&Q$)D2&

= 2) 0 69*20

@ii* (RRE((- $a& 5 ?HE/ $b&

a 4)*90 b =G*06

)D2 0D2nab G*= =

R P $)D2&0$4)*90&0 $0D2)0$=G*06&0 0$4)*90&(80.25) Q(0.75) Q$0D2&Q$)D2&

= 4)> 94* =

III8 CA"C("ATI&) &F P&RTF&"I& RIS< &F ITC &T ERC&MPA)IES

@iii* .TC $a& 5


66/69

b 09*GG 0D2 )D2nab 'G*G0

R P $0D2&0$6)*64&0 $)D2 )0$09*GG&0 0$6)*64&(26.00) Q(26.00) Q$0D2&Q$)D2&

= )0=) 26* >

@i * HEROHON(, $a& 5 b 09*GG 0D2 )D2nab G*0G

R P $0D2&0$ 2*G>&0 $)D2 )0$09*GG&0 0$ 2*G>&(26.00) Q(0.20) Q$G*9 &Q$G*22&

= 0949 6)*44

.7* C,/C1/,T.ON O% PORT%O/.O R.3: O% ?HE/ $a& 5


67/69

)D2nab 'G*0)

R P $0D2&0$=G*06&0 $)D2 )0$09*GG&0 0$=G*06&(26.00) Q(0.21) Q$0D2&Q$)D2&

= 0 = 60

CONCL(SION

%or any in est ent the factors to be considered are the returnon the in est ent and the risk associated with that in est ent*

(i ersification in the in est ent into different assets canreduce the risk* There fore by followin! odern portfolio theorerisk can be reduced for a re"uired return

G


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*

I ILOGRAP*Y

4.SEC(RITY ANALYSIS AND PORTFOLIO MANAGEMENT

5(onald*E*%isher Ronald*J*Jordan

2.INVESTMENTS'


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+E REFERENCES

http;DDwww*nseindia*co

http;DDwww*bseindia*cohttp;DDwww*econo icti es*cohttp;DDwww*answers*co

Documents

A Case Study on Port Folio Management