Port folio management

Port f o l io Man agem en t

From the rational edge: the first in a new series of articles O n portfolio management, this

introduction expresses IBM’s viewpoint about the foundations and essentials of

portfolio management, and discusses ideas and assets that support and enable effective

portfolio management practices.

A good way to begin understanding what portfolio management i s (and is not) may be to define

the term portfolio. In a business context, we can look to the mutual fund industry to

explain the term's origins. Morgan Stanley's Dictionary of Financial Terms offers the

following explanation

If you own more than one security, you have an investment portfolio. You build the portfolio by

buying additional stocks, bonds, mutual funds, or other investments. Your goal is to increase the

portfolio’s value by selecting investments that you believe will go up in price

According to modern portfolio theory, you can reduce your investment risk by creating a

diversified portfolio that includes enough different types, or classes, of securities so that at least

some of them May produce strong returns in any economic climate.

Executives and managers of organizations both large and small manage portfolios of assets and

activities representing what the business is and what it does. Managed well, these portfolios

directly support the effective and efficient achievement of mission goals. Managed poorly, these

portfolios target achievement of differing and sometimes competing objectives or inappropriately

expend resources on low value activities; ultimately diminishing the organization’s ability to

maximize value creation. thus, the focus of portfolio management is the optimization of resource

deployment across the collection of activities most directly supporting achievement of mission

goals.

Portfolios are the collections of either assets sharing similar characteristics or activities

supporting achievement of common objectives. individual items with the collection may or may

not be interdependent or directly related. these logical groupings, however,

Facilitate measurement, comparison, and prioritization which in-turn provides portfolio

managers with the information necessary to make and implement decisions that maximize value

creation for the resources expended.

Investing in various types of assets is an interesting activity that attracts people from all walks

of life irrespective of their occupation, economic status, education and family background.

When a person has more money then he requires for current consumption, he would be called as

a potential investor. The investor who is having extra cash could invest it in securities or in any

other asset like gold or real estate or could simply deposit it in his bank account. The companies

that have extra income may like to invest their money in the extension of the existing firm or

undertake new venture. All of these activities in a broader sense mean investment.

Need for The Study

Portfolio Management Presents the best investment plans to the individuals as per to the

individuals as per their income, age and ability to undertake risk. Portfolio management

minimizes the risk involved in investing and also increases the chance of making profits.

Portfolio management understands the clients financial need and suggest the best and unique

investment policy for them with risk involved. Portfolio management enables the portfolio

managers to provide customized investment solutions to client as their need and requirements.

Objectives of The Study

• To understand, analyze and select the best portfolio.

• To study the risk and returns of the selected sample companies

• The correlation among the different portfolios.

• To help the investors to choose wisely between alternatives.

• To study the comparison of the equity securities.

Scope of The Study

• Economic liberalization has accelerated the pace of development in the securities market,

which has undergone a sea change during the last 2 decades.

• In India, the role of securities market in mobilizing & channelizing private capital for

the economic development of the country has increased over the years and the securities

market itself has undergone structural transformation with the introduction of

computerized online trading & interconnected market system.

• Investing in securities such as shares, debentures & bonds is profitable well as exciting. It

is indeed rewarding but involves a great deal of risk & need artistic skill. Investing in

financial securities is now considered to be one of the most risky avenues of investment.

• Portfolio Management deals with the analysis of individual securities as well as with the

theory & practice of optimally combining securities into portfolios.

• To study of investment for investor to choose best securities in the market.

Research Methodology

Research design or research methodology is the procedure of collecting, analyzing and

interpreting the data to diagnose the problem and react to the opportunity in such a way

where the costs can be minimized and the desired level of accuracy can be achieved to arrive

at a particular conclusion.

Primary Data:

The primary data are those which are collected a fresh and for the first time and thus

happened to be original in character. Primary data include the information collected from the

officials and existing company through discussions.

Secondary Data:

The secondary data, on the other hand are those which have already been collected by

someone else and which have already been passed though the statically process.

The secondary data include the information from the company annual reports which include

financial statement like balance sheet and income statement and such other information from

text books of financial management, journals and magazine also been collected.

The methodology using for the study for the completion of the project is secondary data

Statistical Tools

• Average returns= R/N

Where: R =returns

N=number of times period

• Standard Deviation= ( variance)

• Variance=1/n-1( d2)

• Covariance(covab)=1/n-1( dx.dy)

• Correlation of coefficient=cov ab/ σa*σb

• Wa = (σb2 )-rab (σa)( σb)

___________________

(σa)2+( σb)2-2rab(σa)( σb)

W = Means Weight of portfolio

• σp= σ2*(Xa)2+σb2*(Xb)2+2rab*σa*σb*Xa*Xb

• Rp=W1R1+W2R2(for two securities)

Limitations of The Study:

The study has certain constraints which has limited to its scope and objectives of the

study.

• From BSE and NSE listing – a very few and randomly selected scripts are analyzed.

• For study purpose 5 Companies will be taken for Calculations.

• Detailed study of the topic was not possible due to limited period of the project

• Study is limited period 5 years.

• The calculations based on secondary data only

Review of Literature

Previous Literature and Theory

There are numerous methods for valuing equity securities; including methods more heavily

employed before the advent of quantitative equity portfolio construction and management.

These theories include the arbitrage pricing theory (apt), capital asset pricing model (capm),

and discounted cash flow (dcf). Although modern portfolio management still employs these

models, they have been replaced with newer, more effective models such as quantitative

equity portfolio management.

According to the quantitative equity portfolio management theory, several factors including

price to earnings, price/earnings before interest, taxes, depreciation, and amortization

(ebitda), and price/cash flow are important in the fundamental factor modeling process.

Price/ebitda is the ratio of the current price to a different iteration of the firm’s earnings. The

price/cash flow ratio measures the security’s price in relation to its generated cash flow,

which is a measure of operating efficiency. The price to earnings ratio, or P/E, is illustrated as

the price of the underlying stock divided by the annual earnings of the target firm. This helps

determine the fair value of the firm. According to qepm, the price of a given security can be

significantly attributed to a combination of these factors. The importance of these factors,

however, may vary for different stocks making it important to determine their influence on an

individual basis. Thus, in order to build a useful model for each stock these factors must be

measured against time in predicting historical returns in order to make the model truly

significant.

A portfolio is a collection of securities since it is really desirable to invest the entire funds

of an individual or an institution or a single security, it is essential that every security be

viewed in a portfolio context. Thus it seems logical that the expected return of the portfolio.

portfolio analysis considers the determine of future risk and return in holding various blends

of individual securities portfolio expected return is a

weighted average of the expected return of the individual securities but portfolio variance, in

short contrast, can be something reduced portfolio risk is because risk depends greatly on the

co-variance among returns of individual securities. Portfolios, which are combination of

securities, may or may not take on the aggregate characteristics of their individual parts.

Since portfolios expected returns a weighted average of the

expected return of itssecurities, the contribution of each security the portfolio’s expected retur

ns depends on itsexpected returns and its proportionate share of the initial portfolio’s market

value. it follows that an investor who simply wants the greatest possible expected return

should hold one security; throne which is considered to have a greatest expected return.

Programmer and projects can be scrutinized and monitored to ensure ongoing alignment with

strategic objectives and business imperatives.

Thee broad allocation of skilled programmer & project resources can be optimized.

Commitments.Program me and project demands on operational business can be managed and

coordinated at a corporate level.

Industry profile

History of Stock Exchanges

In 1860, the exchange flourished with 60 brokers. In fact the 'Share Mania' in India began

when the American Civil War broke and the cotton supply from the US to Europe stopped.

Further the brokers increased to 250.

At the end of the war in 1874, the market found a place in a street (now called Dalal Street).

In 1887, "Native Share and Stock Brokers' Association" was established. In 1895, the

exchange acquired a premise in the street which was inaugurated in 1899.

Introduction

In general, the Financial Market is divided into two, Money Market and Capital Market.

Securities market is an important, organized capital market where transaction of capital is

facilitated by means of direct financing using securities as a commodity. Securities market

can be divided into a primary market and secondary market.

Primary Market

The primary market is an intermittent and discrete market where the initially listed shares are

traded first time, changing hands from the listed company to the investors. It refers to the

process through which the companies, the issuers of stocks, acquire capital by offering their

stocks to investors who supply the capital. In other words primary market is that part of the

capital markets that deals with the issuance of new securities. Companies, Governments or

Public sector institutions can obtain funding through the sale of a new stock or bond issue.

This is typically done through a syndicate of securities dealers. The process of selling new

issues to investors is called Underwriting. In the case of a new stock issue, this sale is called

an Initial Public Offering (IPO). Dealers earn a commission that is built into the price of the

security offering, though it can be found in the prospectus

Secondary Market

The secondary market is an on-going market, which is equipped and organized with a place,

facilities and other resources required for trading securities after their initial offering. It refers

to a specific place where securities transaction among many and unspecified persons is

carried out through intermediation of the securities firms, i.e., a licensed broker, and the

exchanges, a specialized trading organization, in accordance with the rules and regulations

established by the exchanges.

A bit about history of stock exchange, they say it was under a tree that it all started in

1875.Bombay Stock Exchange (BSE) was the major exchange in India till 1994.National

Stock Exchange (NSE) started operations in 1994.

NSE was floated by major banks and financial institutions. It came as a result of Harshad

Mehta’s scam of 1992. Contrary to popular belief the scam was more of a banking scam than

a stock market scam. The old methods of trading in BSE were people assembling on what as

called a ring in the BSE building. They had a unique sign language to communicate apart

from all the shouting. Investors weren't allowed access and the system was opaque and

misused by brokers. The shares were in physical form and prone to duplication and fraud.

NSE was the first to introduce electronic screen based trading. BSE was forced to follow suit.

The present day trading platform is transparent and gives investors prices on a real time basis.

With the introduction of depository and mandatory dematerialization of shares chances of

fraud reduced further. The trading screen gives you top 5 buy and sell quotes on every scrip.

A typical trading day starts at 10 ending at 3.30 Monday to Friday. BSE has 30 stocks which

make up the Sensex .NSE has 50 stocks in its index called Nifty. FII s Banks, financial

institutions, mutual funds are biggest players in the market. Then there are retail investors and

speculators. The last ones are the ones who follow the market morning to evening; Market

can be very addictive like blogging though stakes are higher in the former.

Origin of Indian Stock Market

The origin of the stock market in India goes back to the end of the eighteenth century when

long-term negotiable securities were first issued. However, for all practical purposes, the real

beginning occurred in the middle of the nineteenth century after the enactment of the

Companies Act in 1850, which introduced the features of limited liability and generated

investor interest in corporate securities.

An important early event in the development of the stock market in India was the formation

of the native share and stock brokers 'Association at Bombay in 1875, the precursor of the

present day Bombay Stock Exchange. This was followed by the formation of

associations/exchanges in Ahmadabad (1894), Calcutta (1908), and Madras (1937). In

addition, a large number of ephemeral exchanges emerged mainly in buoyant periods to

recede into oblivion during depression times subsequently.

Entrepreneurs needed money for long term whereas investors demanded liquidity – the

facility to convert their investment into cash at any given time. The answer was a ready

market for investments and this was how the stock exchange came into being.

Stock exchange means anybody of individuals, whether incorporated or not, constituted for

the purpose of regulating or controlling the business of buying, selling or dealing in

securities. These securities include:

• Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a

like nature in or of any Incorporated Company or other Body Corporate;

• Government securities and

• Rights or interest in securities.

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are

the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges.

However, the BSE and NSE have established themselves as the two leading exchanges and

account for about 80 per cent of the equity volume traded in India. The NSE and BSE are

equal in size in terms of daily traded volume. The average daily turnover at the exchanges has

increased from Rs.851 crore in 1997-98 to Rs 1,284 crore in 1998-99 and further to Rs 2,273

crore in 1999-2000 (April –

August 1999). NSE has around 1500 shares listed with a total market capitalization of around

Rs 9, 21,500 crore.

The BSE has over 6000 stocks listed and has a market capitalization of around Rs 9, 68,000

crore. Most key stocks are traded on both the exchanges and hence the investor could buy

them on either exchange. Both exchanges have a different settlement cycle, which allows

investors to shift their positions on the bourses. The primary index of BSE is BSE Sensex

comprising 30 stocks. NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks.

The BSE Sensex is the older and more widely followed index.

It facilitates more efficient processing, automatic order matching, faster execution of trades

and transparency; the scrip's traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F'

and 'Z' groups. The 'A' group shares represent those, which are in the carry forward system

(Badla). The 'F' group represents the debt market (fixed income securities) segment. The 'Z'

group scrip's are the blacklisted companies. The 'C' group covers the odd lot securities in 'A',

'B1' & 'B2' groups and Rights renunciations. The key regulator governing Stock Exchanges,

Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in

Indian secondary and primary market is the Securities and Exchange Board of India (SEBI)

Ltd.

Brief History of Stock Exchanges

Do you know that the world's foremost marketplace New York Stock Exchange (NYSE),

started its trading under a tree (now known as 68 Wall Street) over 200 years ago? Similarly,

India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its origin

to as far as 125 years when it started as a voluntary non-profit making association.

News on the stock market appears in different media every day. You hear about it any time it

reaches a new high or a new low, and you also hear about it daily in statements like 'The BSE

Sensitive Index rose 5% today'. Obviously, stocks and stock markets are important. Stocks of

Public limited companies are bought and sold at a stock exchange. But what really are stock

exchanges? Known also as the stock market or bourse, a stock exchange is an organized

marketplace for securities (like stocks, bonds, options) featured by the centralization of

supply and demand for the transaction of orders by member brokers, for institutional and

individual investors.

The exchange makes buying and selling easy. For example, you don't have to actually go to a

stock exchange, say, BSE - you can contact a broker, who does business with the BSE, and

he or she will buy or sell your stock on your behalf.

Market Basics

Electronic trading

Electronic trading eliminates the need for physical trading floors. Brokers can trade from

their offices, using fully automated screen-based processes. Their workstations are connected

to a Stock Exchange's central computer via satellite using Very Small Aperture Terminus

(VSATs). The orders placed by brokers reach the Exchange's central computer and are

matched electronically.

Exchanges in India

The Bombay Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) are

the country's two leading Exchanges. There are 20 other regional Exchanges, connected via

the Inter-Connected Stock Exchange (ICSE). The BSE and NSE allow nationwide trading via

their VSAT systems.

Index

An Index is a comprehensive measure of market trends, intended for investors who are

concerned with general stock market price movements. An Index comprises stocks that have

large liquidity and market capitalization. Each stock is given a weight age in the Index

equivalent to its market capitalization. At the NSE, the capitalization of NIFTY (fifty selected

stocks) is taken as a base capitalization, with the value set at 1000. Similarly, BSE Sensitive

Index or Sensex comprises 30 selected stocks. The Index value compares the day's market

capitalization vis-à-vis base capitalization and indicates how prices in general have moved

over a period of time.

Execute an order

Select a broker of your choice and enter into a broker-client agreement and fill in the client

registration form. Place your order with your broker preferably in writing. Get a trade

confirmation slip on the day the trade is executed and ask for the contract note at the end of

the trade date.

Need a broker

As per SEBI (Securities and Exchange Board of India.) regulations, only registered members

can operate in the stock market. One can trade by executing a deal only through a registered

broker of a recognized Stock Exchange or through a SEBI-registered sub-broker.

Contract note

A contract note describes the rate, date, time at which the trade was transacted and the

brokerage rate. A contract note issued in the prescribed format establishes a legally

enforceable relationship between the client and the member in respect of trades stated in the

contract note. These are made in duplicate and the member and the client both keep a copy

each. A client should receive the contract note within 24 hours of the executed trade.

Corporate Benefits/Action.

Split

A Split is book entry wherein the face value of the share is altered to create a greater number

of shares outstanding without calling for fresh capital or altering the share capital account.

For example, if a company announces a two-way split, it means that a share of the face value

of Rs 10 is split into two shares of face value of Rs 5 each and a person holding one share

now holds two shares.

Buy Back

As the name suggests, it is a process by which a company can buy back its shares from

shareholders. A company may buy back its shares in various ways: from existing

shareholders on a proportionate basis; through a tender offer from open market; through a

book-building process; from the Stock Exchange; or from odd lot holders.

A company cannot buy back through negotiated deals on or off the Stock Exchange, through

spot transactions or through any private arrangement.

Settlement cycle

The accounting period for the securities traded on the Exchange. On the NSE, the cycle

begins on Wednesday and ends on the following Tuesday, and on the BSE the cycle

commences on Monday and ends on Friday. At the end of this period, the obligations of each

broker are calculated and the brokers settle their respective obligations as per the

Rules, bye-laws and regulations of the Clearing Corporation. If a transaction is entered on the

first day of the settlement, the same will be settled on the eighth working day excluding the

day of transaction. However, if the same is done on the last day of the settlement, it will be

settled on the fourth working day excluding the day of transaction.

Rolling settlement

The rolling settlement ensures that each day's trade is settled by keeping a fixed gap of a

specified number of working days between a trade and its settlement. At present, this gap is

five working days after the trading day. The waiting period is uniform for all trades. In a

Rolling Settlement, all trades outstanding at end of the day have to be settled, which means

That the buyer has to make payments for securities purchased and seller has to deliver the

securities sold. In India, we have adopted the T+5 settlements cycle, which means that a

transaction entered into on Day 1 has to be settled on the Day 1 + 5 working days, when

funds pay in or securities pay out takes place.

Short selling

Short selling is a legitimate trading strategy. It is a sale of a security that the seller does not

own, or any sale that is completed by the delivery of a security borrowed by the seller. Short

sellers take the risk that they will be able to buy the stock at a more favorable price than the

price at which they "sold short."

Auction

An auction is conducted for those securities that members fail to deliver/short deliver during

pay-in. Three factors primarily give rise to an auction: short deliveries, un-rectified bad

deliveries, and un-rectified company objections.

Separate market for auctions

The buy/sell auction for a capital market security is managed through the auction market. As

opposed to the normal market where trade matching is an on-going process, the trade

matching process for auction starts after the auction period is over.

Shares are not bought in the auction

If the shares are not bought at the auction i.e. if the shares are not offered for sale, the

Exchange squares up the transaction as per SEBI guidelines. The transaction is squared up at

the highest price from the relevant trading period till the auction day or at 20 per cent above

the last available Closing price whichever is higher. The pay-in and pay-out of funds for

auction square up is held along with the pay-out for the relevant auction.

Bad Delivery

SEBI has formulated uniform guidelines for good and bad delivery of documents. Bad

delivery may pertain to a transfer deed being torn, mutilated, overwritten, defaced, or if there

are spelling mistakes in the name of the company or the transfer. Bad delivery exists only

when shares are transferred physically. In "Demat" bad delivery does not exist.

Company Profile

Way2Wealth

Way2Wealth is a premier Investment Consultancy Firm that has been launched with the aim

of making investing simpler, more understandable and profitable for the investors.

Way2Wealth brings a wide range of product offerings from Fixed Income Securities, Life

Insurance and Mutual Funds to Equity and Derivatives (on the National Stock Exchange) for

the convenience and benefit of it customers. Way2Wealth has over 40 easily accessible

Investment Outlets spread across 20 major towns and cities in the country

Mission:

Way2Wealth is a premier Investment Consultancy Firm, launched with the mission “to be the

pre-eminent destination for personalized financial solutions helping individuals creates

wealth”.

Philosophy:

We believe that “our knowledge combined with our investors trust and involvement will lead

to the growth of wealth and make it an exciting experience”

Heritage:

Sivan Securities started in 1984, has a long and illustrious track record of being amongst the

premier Financial Intermediaries in the country as well as being an incubator for IT start-up

firms. The Venture Capital division came to be known as Global Technology Ventures (GTV

has provided venture capital to companies such as Keshena Technologies, Mind Tree, Vega

etc.) and the Financial Intermediary Division was spun off as Way2Wealth in the year 2000.

Way2Wealth is promoted by Sivan Securities and Global Technology Ventures Ltd. Over the

years, Sivan has developed a strong reputation for navigating its investors through all the ups

and downs in the Market. Way2Wealth has inherited these same values in addition to a base

of 75,000 individual customers, over 300 corporate/institutional clients. Other companies in

the group include Amalgamated Bean Coffee Trading Company Ltd. (one of the largest

Coffee Exporters in India) and Café Coffee Day, a chain of youth hangout coffee parlors.

Way2Wealth has a very credible management team, who has well over 100 man-years of

experience amongst themselves.

The Way2Wealth Research Desk:

Research is at the core of our advice. We believe that sound investments Decision are made

on sound analysis of facts, past performance and credible Market information. Our research

cell focuses on providing data and analysis.

To help customers make sound investment Decision. The Research cell is managed by a

highly qualified team that is handpicked and trained extensively in the proprietary

Way2Wealth Investment Philosophy centered on finding the best investment solutions for our

customers. Based in the commercial capital enables the team to have a pulse of the trends

allowing dissemination of the most up-to-date and latest information. The Way2Wealth

research cell measures up to international standards of technology and on-site resources.

Investment Outlets:

Way2Wealth Investment outlets are designed to be places where retail investors can come in

touch with Investment opportunities in an atmosphere of convenience and comfort. The look

and feel of the offices across India projects a consistent branch image for the company. The

features that enable a unique facility for retailing financial services include among others:

Easily visible branches set up in the commercial spaces of potential investment zones ranging

between 750sft to 1000sft.Most branches are located in the ground floor sporting huge glass

frontage promoting easy accessibility and reflecting our attitude of complete transparency.

The major portion of the branch area dedicated for customer use. The furniture is in CKD

formats to add flexibility in using the branch for Investors purposes.

Connectivity to NSE for trading facilities:

• Information to our customers.

• Each branch comprises of trained and qualified Investment advisors to take care of the

needs of the customers.

The Way2Wealth Planner – Your Personal Investment Guide:

Every investor has unique needs. So we have created a wide range of services, where you

will always find exactly what you are looking for. Aiding you in this effort is the

quintessential Way2Wealth Investment Planner. These hand-selected planners are made up of

professionals with the expertise and experience to meet your unique financial needs. These

financial planners reflect our commitment to provide financial advice based solely on your

objectives without traditional conflicts of interest.

The Way2Wealth advantage:

Personalized Investment Solutions: All our customers receive individual attention Full

choice of Investments: Mutual funds, Life Insurance, Fixed Income Instruments, Equity and

Derivatives

Unbiased advice:

We do not have any products of our own Processing support: We take care of all your paper

work and provide service at your doorstep. Investor eligibility criteria: Customers with a

minimum investment amount as low as Rs. 2500 per month can avail of our services.

This unique Way2Wealth concept can be easily experienced through the innovative and

customer friendly network of Investment outlets that spans 20 major towns and cities in the

country.

Work environment:

Way2Wealth is a growing organization, which is an ideal place for individuals with high

ambitions. The working atmosphere is highly charged with a young and energetic team of

qualified professionals. The average age of the team is 28. Further it provides an environment

where conventions, protocols do not come in the way of good ideas. Being in the knowledge

industry we associate a high premium to the quality of training.. The holistic Training on

investment avenues, sales, presentation skills, which are done periodically to personally

enrich each individual Trust and Integrity are the values most sought out by our customers. In

addition, every individual who can also identify with the Way2Wealth philosophy “Our

knowledge

Combined with our customers trust and involvement will lead to the growth of wealth in an

exciting manner” can look forward to a long and illustrious career in the company. At

Way2Wealth, the model investors are our employees themselves. In the process of creating

wealth for our investors, the rewards structure ensures that our employees themselves are also

creating wealth.

Network:

In Delhi, Mumbai, Hyderabad, Chennai and Bangalore . Additionally the company has a

network of 50 Investment outlets Headquartered in Bangalore, Way2Wealth has five regional

offices located with the state of the art infrastructure to cater to the needs of retail investors.

These outlets are spread across more than 20 major towns and cities in the country.

About way2wealth logo:

The word “Way” brings focus to the mind. It gives direction. “Wealth” denotes stability,

discipline and long term. Blue symbolizes Knowledge. We are in a Knowledge industry.

Knowledge is limitless, so is the sky and sea, both of which are blue in color. Knowledge

applied leads to creation of wealth for our Investors. Hence, the color blue for knowledge.

Red symbolizes Trust. Red is the color of blood and the heart. Trust is a matter of the heart.

Our knowledge bears fruit only when the investor places his Trust in us. Yellow symbolizes

Excitement and also the Involvement of the investor. Yellow is a vibrant color, which evokes

feelings of excitement. We strive to make investing an exciting and involving experience for

our investors. Green symbolizes Growth. Growth in Nature is visible in the form of plants

and trees; all of which are green. Knowledge, Trust and Excitement should ultimately lead to

Growth of the investors’ wealth. Hence, the color green has been chosen for Growth.

Conceptual Frame Work

Portfolio Management:

Portfolio theory was introduced by Harry Markowitz (1952) with his paper on “portfolio

Selection. Before this work, investors focused on assessing the risks and benefits of

individual securities.

Tobin (1958) expanded on Markowitz’s work and added a risk-free asset to the analysis in

order to leverage or de-leverage, as appropriate, portfolio on the ‘’Efficient frontier” leading

to the concepts of a super-efficient portfolio and the capital market line. With leverage,

portfolios on the capital market line could outperform portfolios on the “efficient frontier”

Sharpe (1964) then prepared a capital asset pricing model that noted that all investors should

hold the market portfolio, whenever leveraged or de-leveraged, with positions on the risk-free

asset .In 1990, Markowitz, along with Merton miller and William Sharpe, shared a Nobel

Prize

For their work on a theory for portfolio selection. Portfolio theory provides a context to help

understand the interactions of systematic risk and reward. It has helped to shape how

institutional portfolios are managed and fostered the use of passive investment management

techniques. It led to the use of portfolio management in numerous other areas, especially

Concept of Portfolio:

In simple term Portfolio can be defined as combination of securities that have Return and

Risk characteristics of their own. Portfolio may or may not take on the aggregate

characteristics of their individual parts. Portfolio is the collection of financial or real assets

such as equity shares, debentures, bonds, treasury bills and property etc. Portfolio is a

combination of assets or it consists of collection of securities. These holdings are the result of

individual preferences, decisions of the holders regarding risk, return and a host of other

considerations.

Portfolio management concerns the construction & maintenance of a collection of

investment. It is investment of funds in different securities in which the total risk of the

portfolio is minimized. While expecting maximum return from it. It primarily involves

reducing risks rather that increasing return. Return is obviously important though, and the

ultimate objective of portfolio manager is to achieve a chosen level of return by incurring the

least possible risk.

Introduction to Portfolio Management:

Investing in securities such as shares, debentures and bonds is profitable as well as exciting.

It indeed it involves a great deal of risk. It is rare to find investors investing their entire

savings in a single security. Instead, they tend to invest in a group of securities. Such, group

of securities is called a Portfolio Creation of a Portfolio helps to reduce risk without

sacrificing returns.

Definition:

“Portfolio management is the process of building, managing and assessing an inventory

of company products and projects. ...”

Portfolio Management:

An investor considering investment in securities is faced with the problem of choosing from

among a large number of securities. His choice depends upon the risk-return characteristics of

individual securities. He would attempt to choose the most desirable securities and like to

allocate his 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 portfolio or group of securities. The risk and

return characteristics of Portfolios differ from those of individual securities combining to

form a Portfolio. The investor tries to choose the optimal portfolio taking into consideration

the risk-return characteristics of all possible portfolios.

As the economic and financial environment keeps changing the risk-return characteristics of

individual securities as well as portfolio also change. An investor invests his funds in a

portfolio expecting to get a good return with less risk to bear.

Portfolio Management comprises all the processes involved in the creation and maintenance

of an investment portfolio. It deals specifically with Security analysis, Portfolio analysis,

Portfolio selection, Portfolio revision and Portfolio evaluation.

Need for Portfolio Management:

Portfolio management is a process encompassing many activities of investments in assets and

securities. It is a dynamic and flexible concept and involves regular and systematic analysis,

judgment and actions. The objective of this service is to help the unknown and investors with

the expertise of professionals in investment portfolio management. It involves construction of

portfolio based upon the investors’ objective, constraints, and preferences for a risk and

returns and tax liability. The portfolio reviewed and adjusted from time to time in tune with

the market conditions. The evaluation of portfolio is to be done in terms of targets set for risk

and return. The changes in the portfolio are to be effected to meet the changing conditions.

Portfolio construction refers to the allocation of surplus funds in hand among the variety of

financial assets open for investment. Portfolio theory concerns itself with the principals

governing such allocation. The modern view of investment is oriented more towards the

assembly of proper combinations of individual securities to form investment portfolios. A

combination of securities held together will give a beneficial result if they are grouped in a

manner to secure a high return after taking into consideration the risk element.

The modern theory is of the view that by diversification, risk can be reduced. Diversification

can be made by the investor either by having a large number of shares of companies in

different regions, in different industries are those producing different types of product lines.

Modern theory believes in the perspective of combination of securities under constraints of

risk and return.

Aim:

The aim of Portfolio Management is to achieve the maximum return from a portfolio which

has been delegated to be managed by an individual manager or financial institution. The

manager has to balance the parameters which define a good investment ie security, liquidity

and return. ...

Objectives of Portfolio Management:

The objective of portfolio management is to invest in securities in such a way that:

Maximizes one's Return and

Minimizes risks

In order to achieve one's investment objectives.

A good portfolio should have multiple objectives and achieve a sound balance among them.

Any one objective should not be given undue importance at the cost of others.

Safety of the Investment:

The first important objective of a portfolio, no matter who owns it, is to ensure that the

investment is absolutely safe. Other considerations like Income, Growth, etc., only come

into the picture after the safety of the investments is ensured.

Investment safety or minimization of risks is one of the important objectives of

portfolio management. There are many types of risks, which are associated with

investment in equity stocks, including super stocks. We should keep in mind that there is

no such thing as a Zero-Risk investment. Moreover, relatively Low-Risk investments give

correspondingly lower returns.

Stable Current Returns:

Once investments safety is guaranteed, the portfolio should yield a steady current

income. The current returns should at least match the opportunity cost of the funds of the

investor. What we are referring is current income by way of interest or dividends, not

capital gains.

Appreciation in the value of capital

A good portfolio should appreciate in value in order to protect the investor from any

erosion in purchasing power due to inflation. In other words, a balanced

Portfolio must consist certain investments, which tend to appreciate in real value after

adjusting for inflation.

Marketability:

A good portfolio consists of investments, which can be marketed without

difficulty. If there are too many unlisted or inactive shares in our portfolio, we will have

to face problems in encasing them, and switching from one investment to another. It is

desirable to invest in companies listed on major stock exchanges, which are actively

traded.

Liquidity:

The portfolio should ensure that there are enough funds available at short notice to

take care of the investor's liquidity requirements. It is desirable to keep a line of credit

from a bank fro use in case it become necessary to participate in Right Issues, or for any

other personal needs.

Tax Planning:

Since taxation is an important variable in total planning. A good portfolio should

enable its owner to enjoy a favourable tax shelter. The portfolio should be developed

considering not only income tax, but capital gains tax, and gift tax, as well. What a good

portfolio aims at is tax planning, not tax evasion or tax avoidance.

Elements of portfolio management

Portfolio management is on-going process involving the following basic takes.

a. Identification of investor’s objectives, constraints and preferences.

b. Strategies are to be developed and implemented in tune with investment

policy formulated.

c. Review and monitoring of the performance of the portfolio

d. Finally the evaluation of portfolio.

Sebi Guidelines to the Portfolio Managers:

On 7th January 1993 the Securities Exchange Board of India issued regulations to the

portfolio managers for the regulation of portfolio management services by merchant bankers.

They are as follows:

♦ Portfolio management services shall be in the nature of investment or

consultancy management for an agreed fee at client’s risk.

♦ The portfolio manager shall not guarantee return directly or indirectly the fee

should not be depended upon or it should not be return sharing basis.

♦ Various terms of agreements, fees, disclosures of risk and repayment should

be mentioned.

♦ Clients' funds should be kept separately in client wise account, which should

be subject to audit.

♦ Manager should report clients at intervals not exceeding 6 months.

♦ Portfolio manager should maintain high standard of integrity and not desire

any benefit directly or indirectly form client’s funds.

♦ The client shall be entitled to inspect the documents.

♦ Portfolio manger shall not invest funds belonging to clients in balancing, bills

discounting and lending operations.

♦ Client money can be invested in money and capital market instruments.

♦ Settlement on termination of contract as agreed in the contract.

♦ Client’s funds should be kept in a separate bank account opened in scheduled

commercial bank.

♦ Purchase or Sale of securities shall be made at prevailing market price.

♦ Portfolio managers with his client are fiduciary in nature. He shall act both as

an agent and trustee for the funds received.

Data analysis and interpretation

Calculation of Average Returns of Companies

Calculation of Average Returns of WIPRO

Table-1

Year Opening share

price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

(Returns)

2009-2010529.05 233.4 -295.65 -55.88

2010-2011 233.4 680 446.6 191.342011-2012 685 491.25 -193.75 -28.282012-2013

496.8 398.7 -98.1 -19.742013-2014 399 394.5 -4.5 -1.127

Total Return 86.31Source: NSE/Products/Equities/Historical Data/ Security-wise High/low Archives.

Average Return = 86.31/5=17.26

Interpretation:

By the comparison of the past five years data the Wipro has got negative Return in four out of

five years. In the year 2010-2011 Wipro has given more profits. Due to the improvement of

the share market in the year 2010-2011 it is recovering from the financial crises. Hence it has

given more profits in that year.

TCS

TABLE-2

Year Opening

share price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 1077 477.9 -599.1 -55.622010-2011 480 750.25 270.25 56.32011-2012 754.8 1165.65 410.85 54.432012-2013 1167 1160.65 -6.35 -0.542013-2014 1161 1255.85 94.85 8.16

Total Return 62.73

Source: NSE/Products/Equities/Historical Data/ Security-wise High/low Archives.

Average Return =62.73/5=12.54

Interpretation:

By the comparison of the past five years data TCS has given good results in two years and the

returns are fluctuating. In 2010-2011, 2011-2012 TCS has given positive returns and

remaining years negative.

STATE BANK OF INDIA

TABLE-3

Year Opening share

price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 2380 1288 -1092 -45.882010-2011 1329 2269 940 70.722011-2012 2175 2811.9 636.9 29.282012-2013 2832.7 1619.05 -1213.7 -42.842013-2014 1629 2385.5 756.5 46.43

Total Return 57.71



Interpretation:

By seeing the graph above the list shows that SBI Company returns is negative in the year

2009-2010 and 2012-2013, other years are positive returns with increasing year by year (high

in 2010-2011).

ICICI

TABLE-4

Year

Opening

share price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 1240 448.1 -791.9 -63.86

2010-2011 450 877 427 94.88

2011-2012 877 1145.1 268.1 30.57

2012-2013 1154 684.65 -469.35 -40.67

2013-2014 690.15 1138.25 448.1 64.92

Total Return

85.84



Interpretation:

By seeing the above graph ICICI BANK Company has got the highest returns in the year

2010-2011 and negative returns in the year 2009-2010 and 2012-2013 and other years were

positive returns. In the year 2011-2012 return was low.

SAGAR CEMENT

TABLE-5

Year Opening

share price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 418.6 150.1 -268.5 -64.14

2010-2011 142.65 172.3 29.65 20.78

2011-2012 172.2 150.8 -21.4 -12.42

2012-2013 145.2 147.45 2.25 1.54

2013-2014 147 290.2 143.2 97.41

Total Return

43.17



Interpretation: On comparison of the past five years data it has known that except in the

year Sagar cement has given fluctuating returns. In the year 2013-2014 it has got highest

return. In the year 2010-2011 returns are moderate and later in all the years it is got negative .

JKC CEMENT

TABLE-6

Year Opening

share price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

P0*100

2009-2010 218.15 42.3 -175.85 -80.62010-2011 42.3 147.9 105.6 249.642011-2012 148 145.7 -2.3 -1.552012-2013 144.5 101 -43.5 -30.12013-2014 100 360.35 260.35 260.35

TotalReturn 397.74


Average Return = 397.74/5=79.54

Interpretation:

The above the diagram shows that JKC Company returns is positive in the year 2010-2011-

2013-2014 (its increased more than 100%) and other years are negative returns.

RANBAXY

TABLE-7

Year Opening share

price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 428 252.55 -175.45 -40.99

2010-2011 252 517.95 265.95 105.53

2011-2012 518.5 598.65 80.15 15.45

2012-2013 602.25 404.9 -197.35 -32.7

2013-2014 403.9 503 99.1 24.53

Total Return

71.82Source: NSE/Products/Equities/Historical Data/ Security-wise High/low Archives.


Interpretation:

By the comparisons of past five years data Ranbaxy company has got highest returns in the

year 2010-2011. In the year 2009-2010 the returns are negative. In 2013-2014 the returns are

moderate.

CIPLA

TABLE-8

Year Opening share

price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 215 186.6 -28.4 -15.21

2010-2011 187 335.05 148.05 44.18

2011-2012 338 369.8 31.8 8.59

2012-2013 370.9 319.9 -51 -15.94

2013-2014 320.9 4141.25 93.5 22.53

Total Return 44.15

Source: NSE/Products/Equities/Historical Data/ Security-wise High/low Archives

.Average Return =44.15/5=8.83

Interpretation:

The above the diagram shows that CIPLA Company returns is positive in the year 2010-

2011(its increased more than 100%) 2009-2010, 2012-2013 years are negative returns.

MTNL

TABLE-9

Year Opening share

price

(p0)

Closing

Share

Price(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 193.85 79.15 -114.7 -59.162010-2011 79.75 73.70 -6.05 -7.582011-2012 74 55 -19 -25.672012-2013 54.30 22.80 -31.5 -58.012013-2014 22.96 26.4 3.44 14.98 Total Return -135.44


Average Return = -135.44/5=-27.09

Interpretation:

The above the diagram shows that MTNL Company returns is positive in the year 2013-2014

and other years are negative returns(In 2012-2013 high lie negative) .

BHARTI AIRTEL

TABLE-10

Year Opening share

price

(p0)

Closing

Share

Price

(p1)

(p1-p0) (p1-p0)/

p0*100

2009-2010 1000 715.50 -284.5 -28.452010-2011 715 329.75 -385.25 -53.882011-2012 329.85 358.80 28.95 8.772012-2013 360.90 343.50 -17.4 -4.822013-2014 344.50 317.50 -27 -7.83 Total Return -86.21


Average Return =-86.21/5=-17.24

Interpretation:

The above the diagram shows that AIRTEL Company returns is positive in the year 2011-

2012, and other years are negative returns(In 2010-2011 high lie negative) .

Calculation Of Standard Deviation

WIPRO

TABLE-11

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D2

2009-2010 -55.88 17.26 -73.14 5349.4596

2010-2011 191.34 17.26 174.08 30303.846

2011-2012 -28.28 17.26 -45.54 2073.8916

2012-2013 -19.74 17.26 -37 1369

2013-2014 -1.127 17.26 -18.387 338.08177

Variance 9858.56

Sd 99.29 Variance = 9858.56

Standard Deviation =√ 99.29

TCS

TABLE-12

Year Total

Average(R)

Average

Returns

Deviation(d)

R-R`

D2

2009-2010 -55.62 12.54 -68.16 4645.782010-2011 56.3 12.54 43.76 1914.93762011-2012 54.43 12.54 41.89 1754.77212012-2013 -0.54 12.54 -13.08 171.08642013-2014 8.16 12.54 -4.38 19.1844

Variance 2126.44Sd 46.11

Variance = 2126.44


SBI

TABLE-13

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -45.88 11.54 -57.42 3297.05642010-2011 70.72 11.54 59.18 3502.27242011-2012 29.28 11.54 17.74 314.70762012-2013 -42.84 11.54 -54.38 2957.18442013-2014 46.43 11.54 34.89 1217.3121

Variance 2822.1332

Sd 53.123754

Variance = 2822.13


ICICI BANK

TABLE-14

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -63.86 17.17 -81.03 6565.86092010-2011 94.88 17.17 77.71 6038.84412011-2012 30.57 17.17 13.4 179.562012-2013 -40.67 17.17 -57.84 3345.46562013-2014 64.92 17.17 47.75 2280.0625

Variance 4602.4483

Sd 67.841346

Variance = 4602.44

Standard Deviation = √67.84

SAGAR CEMENT

TABLE-15

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -64.14 8.63 -72.77 5295.47292010-2011 20.78 8.63 12.15 147.62252011-2012 -12.42 8.63 -21.05 443.10252012-2013 1.54 8.63 -7.09 50.26812013-2014 97.41 8.63 88.78 7881.8884

Variance 3454.5886 Sd 58.775748

Variance = 3454.58


JKC CEMENTS

TABLE-16

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -80.6 79.54 -160.14 25644.822010-2011 249.64 79.54 170.1 28934.012011-2012 -1.55 79.54 -81.09 6575.58812012-2013 -30.1 79.54 -109.64 12020.932013-2014 260.35 79.54 180.81 32692.256

Variance 26466.901 sd 162.686511

Variance = 26466.90


RANBAXY

TABLE-17

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -40.99 14.35 -55.34 3062.51562010-2011 105.53 14.35 91.18 8313.79242011-2012 15.45 14.35 1.1 1.212012-2013 -32.7 14.35 -47.05 2213.70252013-2014 24.53 14.35 10.18 103.6324

Variance 3423.71323

Sd 58.5125049

Variance = 3423.71


CIPLA

TABLE-18

Year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -15.21 8.831 -24.041 577.9696812010-2011 44.18 8.831 35.349 1249.55182011-2012 8.59 8.831 -0.241 0.0580812012-2013 -15.94 8.831 -24.771 613.6024412013-2014 22.53 8.831 13.699 187.662601

Variance 657.211151 sd 25.6361298

Variance = 657.21


MTNL

TABLE-19

year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -59.16 -27.091 -32.069 1028.420762010-2011 -7.58 -27.091 19.511 380.6791212011-2012 -25.67 -27.091 1.421 2.0192412012-2013 -58.01 -27.091 -30.919 955.9845612013-2014 14.98 -27.091 42.071 1769.96904

Variance 1034.26818 sd 32.1600401

Variance = 1034.26


BHARTI AIRTEL

TABLE-20

year

Total

Average(R)

Average

Returns

Deviation(d)

R-R` D22009-2010 -28.45 -17.24 -11.21 125.66412010-2011 -53.88 -17.24 -36.64 1342.48962011-2012 8.77 -17.24 26.01 676.52012012-2013 -4.82 -17.24 12.42 154.25642013-2014 -7.83 -17.24 9.41 88.5481

Variance 596.869575 Sd 24.4309143

Variance = 596.86

Standard Deviation =√24.43

GRAPHICAL REPRESENTATION OF “STANTARD DEVIEATION”

INTERPETITION:

Base on the above calculations standard deviation of JKC cement is highest i.e. 162.68 and

Airtel is lower i.e. 24.43.Where other securities are having moderate standard deviation.

Other securities are earning moderate range such as Wipro Ltd, TCS, SBI Bank, Sagar

Cement, Ranbaxy Laboratories ltd, CIPLA and MTNL.

Calculation Expected Returns And Standard Deviation

Company name Expected returns(%) standard deviation(%)

I.T

WIPRO 17.26 99.29

TCS 12.54 46.11

BANKING

SBI 11.54 56.11

ICICI 17.17 66.84

CEMENT

SAGAR 8.63 58.77

JKC 79.54 162.68

PHARMACEUTICAL

RANBAXY 14.25 58.51

CIPLA 8.83 25.63

TELECOM

MTNL -27.09 32.16

BHARTI AIRTEL -17.24 24.43

INTERPRETITON:

Calculation Of Correlation Between Two Company

WIPRO&TCS

TABLE-21

Year Dev.Of

WIPRO(dx)

Dev. Of

TCS(dy)

Product of dev (dx)

(dy)2009-2010 -73.14 -68.16 4985.22242010-2011 174.08 43.76 7617.74082011-2012 -45.54 41.89 -1907.67062012-2013 -37 -13.08 483.962013-2014 -18.387 -4.38 80.53506

TOTAL dx.dy=11259.7877

correlation of coefficient= 2.45

SBI&ICICI

TABLE-22

Year Dev.Of

SBI(dx)

Dev. Of

ICICI(dy)

Product of dev (dx)

(dy)2009-2010 -57.42 -81.03 4652.74262010-2011 59.18 77.71 4598.87782011-2012 17.74 13.4 237.7162012-2013 -54.38 -57.84 3145.33922013-2014 34.89 47.75 1665.9975

TOTAL dx.dy=14300.67

correlation of coefficient=3.96

SAGAR&JKC CEMENTS

TABLE-23

Year Dev.Of

SAGAR(dx)

Dev. Of

JKC(dy)

Product of dev (dx)

(dy)2009-2010 -72.77 -160.14 11653.38782010-2011 12.15 170.1 2066.7152011-2012 -21.05 -81.09 1706.94452012-2013 -7.09 -109.64 777.3476

2013-2014 88.78 180.81 16052.3118 dx.dy=32256.70

Correlation of coefficient=3.37

RANBAXY&CIPLA

TABLE-24

Year Dev.Of

RANBAXY(dx)

Dev. Of

CIPLA(dy)

Product of dev (dx)

(dy)2009-2010 -55.34 -24.041 1330.428942010-2011 91.18 35.349 3223.121822011-2012 1.1 -0.241 -0.26512012-2013 -47.05 -24.771 1165.475552013-2014 10.18 13.699 139.45582

TOTAL dx.dy=5858.21

Correlation of coefficient=3.90

MTNL&AIRTEL

TABLE-25

Year Dev.Of

MTNL(dx)

Dev. Of

AIRTEL(dy)

Product of dev (dx)

(dy)2009-2010 -32.069 -11.21 359.493492010-2011 19.511 -36.64 -714.883042011-2012 1.421 26.01 36.960212012-2013 -30.919 12.42 -384.013982013-2014 42.071 9.41 395.88811

TOTAL dx.dy=-306.55

Correlation of coefficient= - 0.43

INTERPRETITION:

The above graph shows that, BANKING Sector is having a high coefficient of correlation

compared with other companies.

Portfolio Weights

TABLE-26

Company Portfolio WeightWIPRO&TCS 1.87SBI&ICICI 1.45SAGAR&JKC CEMENTS 1.16RANBAXY&CIPLA 1.68MTNL&AIRTEL 0.6

INTERPRETITION: The above the diagram show that the portfolio Weights of two securities.

In security A the IT sectors will be high risk and high returns But less risk and good returns in

telecom sector. While in security B telecom sector is high And IT sector will be less

Calculation of Portfolio Risk

TABLE-27

Company Portfolio Risk

WIPRO&TCS 86.31

SBI&ICICI 190.23

SAGAR&JKC 154.01

RANBAXY&CIPLA 94.57

MTNL&AIRTEL 19.12

-

INTERPETITION:

By the study of companies risk and returns it show that the portfolio risk is high in IT sector

Which have more risk and more returns for some period of time its not consistence and

same will be occur for other sectors also.

Calculation Of Portfolio Return

Company Portfolio Risk

WIPRO&TCS 8.43

SBI&ICICI 19.7

SAGAR&JKC 90.88

RANBAXY&CIPLA 5.08

MTNL&AIRTEL -21.17

INTERPRETITION:

The studying of above it show that high portfolio returns are high in cement sectors and less

portfolio returns pharmaceutical & IT sector and TELECOM sector are negative returns.

Correlation Coefficient Between The Companies

Company Name Coefficient Of Correlation

IT

WIPRO

2.45

TCS

BANKING

SBI

3.96

ICICI

CEMENT

SAGAR

3.37

JKC

PHARMACEUTICAL

RANBAXY

3.9

CIPLA

TELECOM

MTNL

- 0.43

BHARTI AIRTEL

INTERPRETITION:

The above graph shows that, BANKING Sector is having a high coefficient

of correlation.

PORTFOLIO RETURNS AND RISK OF COMPANIES

Company Name Returns(%) Risks(%)

IT

WIPRO

8.43 86.51

TCS

BANKING

SBI

19.7 190.2

ICICI

CEMENT

SAGAR

90.08 154

JKC

PHARMACEUTICAL

RANBAXY

5.08 94.57

CIPLA

TELECOM

MTNL

-21.17 19.12

BHARTI AIRTEL

Findings

When we form the optimum of two securities by using minimum variance equation, then the

returns of the portfolio may decrease in order to reduce the portfolio risk .

• From the study ,we can observe that correlation coefficient are positive in every

sector . it indicates that movement of those script moves in same direction .Hence

risk averse investor can not invest in this script and maximum their have loss in

turbulence conditions .Hence returns are low .

• Correlation coefficient between every companies is highly positive which inferences

the script moving in same direction either increases or decrease .investor who will

take the risk can invest here to get good returns in case of bullish market .

• We can find from the study that ,portfolio risk was high in IT sector where risk was

low in pharma sector .Being high risk in IT sector ,investor are caution while in

investing here .investor can prefer to invest in pharma sector as risk was low as

comparative with other sectors .How ever returns also vary

With risk factor .Higher the risk higher the returns vice – versa.

• During the period of the study ,portfolio returns calculated was good in Cement

sector and moderate in banking sector .But investor could have accumulated loss if

at all they invest in Telecom sector .

• By comparing standard deviation with expect returns during the period of study ,we

can conclude that SBI only having good returns with respect risk factor .So investor

can prefer to invest in these company with respect current risk factor .where as

expected returns was negative with MTNL &AIRTEL with respect to low standard

deviation .this indicate that high risk and low returns ,So investor are cautions while

investing in these companies .

• In this situation optimum weight of SAGAR&JKC are 0.75and 0.25 respectively

.The portfolio risk was 94.57 which is lesser than individual risk.

• Of two companies .Hence ,it is recommended it invest the major proportion of the

funds in SAGAR ,in odder to reduce the risk .

• With respect to risk and returns sector wise ,we can find that cement sector is very

good returns followed by banking sector where as Telecom sector gave negative

returns .

• In the year 2011-2012 high returns for every company which remaining 4years

Except SAGAR CEMENT .

• SAGAR CEMENT got high returns in the year 2009-2010 is 201.

• SAGAR CEMENT got zero returns in the year 2013-2014 this is the least

negative returns.

• In IT sector the risk is low and returns are high ,here we seen in WIPRO& TCS

company .

• Every company has got the correlation coefficient is positive in every sector .

• In TELECOM sector MTNL &AIRTEL companies returns are negative with risk

factor .

• The portfolio weight of WIPRO&RANBAXY company are negative because of

market conditions.

• It have high risk , returns are vice-versa.

Suggestions

• Correlation coefficient between all companies are positive .it indicates that

movement of those script moves in same direction .Hence risk averse investor can

invest in these and minimize their loss in turbulence conditions .How ever returns are

low.

• Correlation coefficient between SBI&ICICI is highly positive which inferences that

both script moving in the same direction either increase or decrease .investor who will

take risk can invest here to get good returns in case of bullish market .But in adverse

conditions, there is a possibility of huge loss if script moves in downwards.

• Being high risk in cement sector ,investors are cautions while in investing here

investor s can prefer to invest in banking sector as low as comparative with other

sectors .How returns also vary with risk factor .High the risk high the returns vice –

versa. .

• Even thought portfolio in the banking sector is good ,but the returns are low when

compared to risk .And SBI returns are more compared to the ICICI ,investor are

suggested to invest in SBI than ICICI.

• Cement sector posted very good result followed by banking sector where as Telecom

sector gave negative returns with respect to risk and return. so investors are suggested

to invest in Cement and Banking sector and cautions in other sector.

• Combination of portfolio in Telecom sector is in suggestive because they have

negative returns.

• While investing it should be noted that the returns will be gained over the medium

and long term investments.

• Ask the stockbroker for information about the Company’s profile, Performance and

Economic forecasts before buying or selling any shares.

• Investors should follow the market updates and follow experts’ tips.

• The investor has to consider both risk and returns of the company before investing in

it.

Bibliography

Text books

• Punithavathi Pandian, Security Analysis and Portfolio Management,

Published by McGraw-Hill, , 8th Edition.2007.

• V.A.Avadhani,Security Analysis and Portfolio Management, Published by

Himayala Publishing house Pvt.Ltd.9th Revised Editon.2011.

Websites

• www.bseindia.com

• www.nseindia.com

• www.indianinfoline.com

• www.indiabulls.com

• www.capitalmarket.com

http://www.indianinfoline.com/

http://www.nseindia.com/

http://www.bseindia.com/

Education

Port folio management