Final22 1

Portfolio Management
CHAPTER-1
1.1. Executive summary 1.2. Introduction 1.3. Industry profi e 1.!. Company profi e
1.1. E"EC#TI$E %#&&AR'
RGMCET, Autonomous, Nandyal
In the present competitive scenario every individual very much interest to invest their savings on market instrument, which gives higher returns, with minimum risk. The un-trade participates adopted by share market agents and lacks of awareness about the market, the individual investors are facing lot of problems in the share market.
Selecting the investment avenues involves a great deal of risk & need artistic skill. Portfolio management deals with the analysis of individual securities as well as with the theory & practice of optimally combining securities into portfolios.
This study is related to know the systematic risk & unsystematic risk of selected company scripts and to find out optimal portfolio, which gave optimal return at a minimi e risk to the investor.
!alculated the annual returns and risks from past data of "# companies $ero $onda, Infosys, S%I, &ndhra %ank, T&T& '(T()S, *IT*, T!S, $!* T+!$, &'&)& )&,& and I!I!I.
Selected the optimal portfolio by using Sharpe-s single inde. model, which depends on the e.cess return over beta. In this study optimal portfolio includes $!* T+!$, T!S, T&T& '(T()S, and &ndhra bank.
Investing through portfolio investor can achieve investment ob/ective 0 1constant return with lower risk or high return with constant risk2. $aving the negative beta scripts is beneficial when market is bearish, positive beta scripts give more returns when market is bullish but continuously tailoring may not achieve investment ob/ective. 1.2. I(TR)*#CTI)(+ &eanin,+ & portfolio is a collection of assets. The assets may be physical or financial like Shares, %onds, 3ebentures, Preference Shares, etc. The individual investor or a fund manager would not like to put all his money in the sere s of one company that would amount to great risk. $e would therefore, follow the age old ma.im that one should not put all the eggs into one basket. %y doing so, he can achieve ob/ective to
ma.imi e portfolio return and at the same time minimi ing the portfolio risk by diversification. Portfolio management is the management of various financial assets which comprise the portfolio. Portfolio management is a decision 0 support system that is designed with a view to meet the multi-faced needs of investors. &ccording to Securities and +.change %oard of India Portfolio 'anager is defined as4 1portfolio means the total holdings of securities belonging to any person2. P)RT-).I) &A(A/ER means any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client 5whether as a discretionary portfolio manager or otherwise6 the management or administration of a portfolio of securities or the funds of the client. *I%CRETI)(AR' P)RT-).I) &A(A/ER means a portfolio manager who e.ercises or may, under a contract relating to portfolio management e.ercises any degree of discretion as to the investments or management of the portfolio of securities or the funds of the client. -#(CTI)(% )- P)RT-).I) &A(A/E&E(T+ To frame the investment strategy and select an investment mi. to achieve the desired investment ob/ectives To provide a balanced portfolio which not only can hedge against the inflation but can also optimi e returns with the associated degree of risk
To make timely buying and selling of securities To ma.imi e the after-ta. return by investing in various ta. saving investment instruments. %TR#CT#RE 0 PR)CE%% )- T'PICA. P)RT-).I) &A(A/E&E(T In the small firm, the portfolio manager performs the /ob of security analyst. In the case of medium and large si ed organi ations, /ob function of portfolio manager and security analyst are separate.
RESEARCH (e.g. Security Analysis)
PORTFOLIO MANAGERS
OPERATIONS (e.g. buying and selling of Securities)
CLIENT S
CHARACTERI%TIC% )- P)RT-).I) &A(A/E&E(T+
Individuals will benefit immensely by taking portfolio management services for the following reasons4 7hatever may be the status of the capital market, over the long period capital markets have given an e.cellent return when compared to other forms of investment. The return from bank deposits, units, etc., is much less than from the stock market. The Indian Stock 'arkets are very complicated. Though there are thousands of companies that are listed only a few hundred which have the necessary li8uidity. +ven among these, only some have the growth prospects which are conducive for investment. It is impossible for any individual wishing to invest and sit down and analy e all these intricacies of the market unless he does nothing else. +ven if an investor is able to understand the intricacies of the market and separate chaff from the grain the trading practices in India are so complicated that it is really a difficult task for an investor to trade in all the ma/or e.changes of India, look after his deliveries and payments. This is further complicated by the volatile nature of our markets which demands constant reshuffling of portfolios. T'PE% )- P)RT-).I) &A(A/E&E(T+ 1. *I%CRETI)(AR' P)RT-).I) &A(A/E&E(T %ER$ICE 1*P&%2+ In this type of service, the client parts with his money in favor of the manager, who in return, handles all the paper work, makes all the decisions and gives a good return on the investment and charges fees . In the 3iscretionary Portfolio RGMCET, Autonomous, Nandyal 4
'anagement Service, to ma.imi e the yield, almost all portfolio managers park the funds in the money market securities such as overnight market, "9 days treasury bills and :# days commercial bills. ;ormally, the return of such investment varies from "< to "9 percent, depending on the call money rates prevailing at the time of investment.
2. ()(-*I%CRETI)(AR' P)RT-).I) &A(A/E&E(T %ER$ICE 1(*P&%2+
The manager functions as a counselor, but the investor is free to accept or re/ect the manager=s advice> the paper work is also undertaken by manager for a service charge. The manager concentrates on stock market instruments with a portfolio tailor-made to the risk taking ability of the investor.
I&P)RTA(CE )- P)RT-).I) &A(A/E&E(T+ +mergence of institutional investing on behalf of individuals. & number of financial institutions, mutual funds and other agencies are undertaking the task of investing money of small investors, on their behalf. ?rowth in the number and si e of ingestible funds 0 a large part of household savings is being directed towards financial assets.
Increased market volatility 0 risk and return parameters of financial assets are continuously changing because of fre8uent changes in government=s industrial and fiscal policies, economic uncertainty and instability. ?reater use of computers for processing mass of data. Professionali ation of the field and increasing use of analytical methods 5e.g. 8uantitative techni8ues6 in the investment decision 0 making *arger direct and indirect costs of errors or shortfalls in meeting portfolio ob/ectives 0 increased competition and greater scrutiny by investors.
%TEP% I( P)RT-).I) &A(A/E&E(T+ Specification and 8ualification of investor ob/ectives, constraints, and preferences in the form of an investment policy statement. 3etermination and 8ualification of capital market e.pectations for the economy, market sectors, industries and individual securities. &llocation of assets and determination of appropriate portfolio strategies for each asset class and selection of individual securities. Performance measurement and evaluation to ensure attainment of investor ob/ectives.
'onitoring portfolio factors and responding to changes in investor ob/ectives, constrains and @ or capital market e.pectations. )ebalancing the portfolio when necessary by repeating the asset allocation, portfolio strategy and security selection. CRITERIA -)R P)RT-).I) *ECI%I)(%+ In portfolio management emphasis is put on identifying the collective importance of all investor-s holdings. The emphasis shifts from individual assets selection to a more balanced emphasis on diversification and risk-return interrelationships of individual assets within the portfolio. Individual securities are important only to the e.tent they affect the aggregate portfolio. In short, all decisions should focus on the impact which the decision will have on the aggregate portfolio of all the assets held. Portfolio strategy should be molded to the uni8ue needs and characteristics of the portfolio=s owner. 3iversification across securities will reduce a portfolio=s risk. If the risk and return are lower than the desired level, leverages 5borrowing6 can be used to achieve the desired level. *arger portfolio returns come only with larger portfolio risk. The most important decision to make is the amount of risk which is acceptable. RGMCET, Autonomous, Nandyal 6
The risk associated with a security type depends on when the investment will be li8uidated. )isk is reduced by selecting securities with a payoff close to when the portfolio is to be li8uidated. !ompetition for abnormal returns is e.tensive, so one has to be careful in evaluating the risk and return from securities. Imbalances do not last long and one has to act fast to profit from e.ceptional opportunities.
3#A.ITIE% )- P)RT-).I) &A(A/ER+ ". %)#(* /E(ERA. 4()5.E*/E+ Portfolio management is an e.citing and challenging /ob. $e has to work in an e.tremely uncertain and confliction environment. In the stock market every new piece of information affects the value of the securities of different industries in a different way. $e must be able to /udge and predict the effects of the information he gets. $e must have sharp memory, alertness, fast intuition and self-confidence to arrive at 8uick decisions.
A. A(A.'TICA. A6I.IT'+ $e must have his own theory to arrive at the intrinsic value of the security. &n analysis of the security=s values, company, etc. is s continuous /ob of the portfolio manager. & good analyst makes a good financial consultant. The analyst can know the strengths, weaknesses, opportunities of the economy, industry and the company.
3. &AR4ETI(/ %4I..%+ $e must be good salesman. $e has to convince the clients about the particular security. $e has to compete with the stock brokers in the stock market. In this conte.t, the marketing skills help him a lot.
!. E"PERIE(CE+ In the cyclical behaviors of the stock market history is often repeated, therefore the e.perience of the different phases helps to make rational decisions. The e.perience of the different types of securities, clients, market trends, etc., makes a perfect professional manager.
1.3. I(*#%TR' PR)-I.E+ )n ine %toc7 Tradin, ItBs hard to believe that at one time, no one placed an order without talking to a broker. ItBs even harder to imagine that the average person had no access to the web for their RGMCET, Autonomous, Nandyal 8
personal use before ":C:. %usinesses used it> in fact, !ompuServe became a leader in providing services to the financial industry by linking commercial feeds together to provide a 8uote system and financial information to 7all Street. History %efore ":C:, when !ompuServe marketed 'icro ;+T to consumers, no individual used the net, /ust businesses. 'icro ;+T, the retail branch of !ompuServe, found an outlet at )adio Shack and soon gained wide appeal and it accounted for over D# percent of the companyBs income by the year ":9C when it took back the parent name, !ompuServe. The Source, its competitor that also started in ":C:, grew rapidly. $owever, !ompuServe bought them out in ":9:. Imagine the enthusiasm of %ernie ;ewcomb when Phil Porter shared his idea about trading stock on a personal computer back in ":9#. ;ewcomb understood programming and developed the necessary one to successfully trade a stock. & dentist in 'ichigan made the first stock trade on ,uly "", ":9E. This was the first trade for the company TradeFPlus. It took : more years before the company was named the fastest growing company in Silicon Galley and by "::H, TradeFPlus received the new name +-Trade ?roup. (ther companies entered the market for consumer trading. Iirst (maha Securities, Inc. became a clearing broker in ":9E. It changed its name to &ccutrade. *ater when they were part of a holding company in ":9C the name changed again to TransTerra !ompany Inc ":9C and eventually became &meriTrade in "::H. It offered the first order system via the touch-tone phone in ":99. Slowly the necessity of the broker started to seem less important. %ernie ;ewcomb and Phil Porter split as partners and Porter started a new company, +-Trade ?roup. +-Trades Securities was a subsidiary and the primary reason for the company. It offered services to the public that allowed trading on both &merica (nline and !ompuServe. *ater when the firm grew dramatically, by "::H, it went public and the changed the name to +FTrade Iinancial. The market gets bullish for
the "::#Bs. This fact, coupled with the lower cost of Internet access started to drive the uses of the Internet. !ommunication via email and total access to the web made the transition easy for millions of people. ;ow, they no longer had to call a broker or schedule an appointment. The 7eb was open A< hours a day and the market was hot. %y ,anuary of "::H, &meriTrade introduced J&ccutrade for 7indowsJ and developed the first e%roker. 3iscount brokerage houses grew, as did online trading. Schwab, one of the innovators of discount brokerage services, offered the first A<-hour 8uotation service to clients in ":9#. %y the year "::H, they offered live trading on the web. (ther companies also /umped into the action. The &merican public fell in love with online trading because even an idiot could make money in the stock market RGMCET, Autonomous, Nandyal 9
during the e.cessively bullish "::#Bs. The cost of a trade was dramatically lowered. &t first, a KA< trade was magnificent. $owever, as companies grew more web-based the price dropped. 7hen the market went south in "::: and early A###, web brokers slashed even more at the cost of the trade to maintain clients Today, (nline stock trading accounts are owned by most people that invest. +ven if they use the services of a broker, they normally have the option of trading stock on their own, via the Internet. Investment avenues There are a large number of investment avenues for savers in India. Some of them are marketable and li8uid, while others are non-marketable. Some of them are highly risky while some others are almost risk less. Investment avenues can be broadly categori ed under the following head. ". A. E. <. D. H. !orporate securities +8uity shares. Preference shares. 3ebentures@%onds. 3erivatives. (thers.
Corporate %ecurities ,oint stock companies in the private sector issue corporate securities. These include e8uity shares, preference shares, and debentures. +8uity shares have variable dividend and hence belong to the high risk-high return category> preference shares and debentures have fi.ed returns with lower risk. The classification of corporate securities that can be chosen as investment avenues can be depicted as shown below4
!"uity S#ares )(
$reference s#ares
%onds
&arrants
'eri(ati(es
Enter t8e 9or d of on ine stoc7 :ro7in, and a eviate your stoc7 :ro7in, experience. Stock %roking in India The domain of capital market, when observed carefully, displays a vast network of scopes. The articles you often come across are targeted for the traders in the stock market. 'ost people are attracted by the li8uidity of the stock market and thus prefer to be a trader. %ut traders are not the sole participants of a stock market. RGMCET, Autonomous, Nandyal 1
& close look will reveal the true e.panse of this market. Ior those who have flair for stock market, stock broking is the best option. Investing on financial products on behalf of corporate and private clients entails a blend of good effort, specific personality traits and relevant educational backing. It is worth noting that stock broking profession is befitting only for those individuals, who are decisive and have a natural inclination to take risks. Stock broker has a variety of services to choose from. There are broadly three types of services, namely, 3iscretionary, &dvisory and +.ecutional. 3iscretionary services include managing the client-s investments. These types of brokers have the right to take investment decisions without consulting the respective client. &dvisory, as the name suggests, involves offering of advice and options to the client. &nd it up to the will of the client, to follow the advice. *astly, the e.cecutional service is simply buying and selling of shares as per the client-s choice. The pressure involved in performing these tasks, mandates the following technical skills and personality traits to be ac8uired by the broker. Personality traits4L &bility to work in a hectic in a hectic, pressured, constantly changing environment 'aturity and confidence when dealing with people 'aking important decisions 8uickly Technical skills4 L +.cellent mathematical and analytical skills.L %asic computer skillsL &ptitude for research and financial writing. &part from the aforementioned skills and traits there are certain courses, e.clusively for brokers are found to be useful. In India the courses for stock broking available are4 L Post-graduate membership course in capital market and financial services L (ne-year Post-?raduate 3iploma in fundamentals of capital market development. L !ertificate !ourses L !hartered Iinancial &nalyst +8uity )esearch $ere is a brief directory of the Institutes imparting courses for brokers. L %ombay Stock +.changeBs %S+ Training Institute, 'umbai L Institute of !ompany Secretaries of India, ;ew 3elhi L Institute of !hartered Iinancial &nalysts of India 5I!I&I6 %efore taking the leap as a broker, it is advisable to observe the market and the broking services keenly. This can be done by gaining e.perience as a sub-broker> the previous stage of being a broker. & sub-broker needs to have passed the MIIth standard to be eligible for his /ob. Nnowing the broking industry as a sub-broker is a recommendation by all the e.ponents of financial market. &n aspiring broker must be finicky in choosing the broking house with which he will register himself. The broking house plays a pivotal role in shaping the skills of a sub-broker.
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The skills gained during the course of the sub-broking subse8uently impacts the individual-s professional when he becomes a broker. &ngel, a noted name in the Indian broking industry, holds a vast base of sub-brokers. 7ith a nation-wide presence, &ngel is capable of providing a seamless training program for all its subbrokers. There company has also planned to launch e.tensive training programs for the sub-broker shortly. These programs will conducted by the veterans of the industry to render more e.tensive knowledge. In spite of all such supports for an aspiring broker, consistency is indispensable necessary to make broking as a career. (ne might face a series of failures in the beginning, but all it takes to be successful is the patience to stick to it and learn from the failures. )n ine %toc7 6ro7er in India The share market is no more ruled by handful financial e.ecutives. It is now in easy reach of any person interested to /oin the market and reap money. The blatant evidence of this growing interest in the stock market is the massive increase in the volume of traders. 7ith the increasing number of investors every single day, the preferred mode of stock broking has also shown a new shift to the online stock broking. )ather than being burnt by the hassles of communicating with the broker personally, traders invariably choose to log on to the brokers site and en/oy the online share trading. )eaping money from shares is no more a tough /ob for the investors. 3espite the fact that online stock broking provides mobility and safety to the trader, one must find the task of choosing a suitable online stock broker still a riddle. !hoice of a perfect online broker can be perfect only when it matches every minute wants of an investor. 7ith ample of stock brokers offering their online platforms, it is the task of a trader wishing to enter the market to be cautious in tasking the right pick. &lthough the services of all the online brokers are apparently similar, the difference is observed in e.tras. It is advisable to select the most user friendly platform for online trading to ensure easy and speedy trading. %rokerage fees are also essential and differ among the online brokers. &n investor should check if the fee charged is a flat or varies with the volume of trade. (nce the suitable broker is identified the trader can get into the business by opening an online account. (pening the online account will be offer a trader, a username and password to access the account at ease. There are surely certain prere8uisites associated with the online account opening which are intimated to the trader before opening an account. RGMCET, Autonomous, Nandyal 12
+very trader, though grappling the same market, has uni8ue demands while trading. & single platform for all is never considered a good characteristic of a perfect broker. Gisit www.angelbroking.com and read the detailed information for online stock trading. Nnow about the variety of online platforms provided to cater the client needs. C)&PA(' PR)-I.E
A:out #s
)ay securities and Iinancial Services is a professionally managed stock broking firm, having diverse e.pertise in financial services industry and providing investment solutions to a large group of retail and $;I investors and catering to the financial needs of the investors. 7e are a one stop shop for all your finance & investment management solutions delivered with the most personali ed & professional attitude and transparent & ethical business practices. 7e are an innovative financial services company offering a full suite of easyto-use online brokerage, investment related solutions, delivered at a competitive price. 7e empower individuals to take control of their financial futures by providing the products, tools and services they need to meet their near and long-term investing goals. The company is a member of ;S+, %S+, '!M, '!M-SM, and &'II and a 3epository Participant with ;S3*. !IS is also a distributor of 'utual Iunds, %onds, IP(Bs and other retail financial products.
)ur $ision; &ission < P8i osop8y &ission

)ay Securities and Iinancial ServicesBs mission is to protect and promote the wealth of all its stakeholders by providing trustworthy, best in class financial products and services.
$ision
To be IndiaBs financial services company of choice recogni ed for its reliability, innovation, responsiveness to customers and e.emplary citi enship.
P8i osop8y
'arkets are Intelligent and not volatile. 'arkets are futuristic not historical. Galuation is the key to timely investment. Smart money always moves towards a clear vision. & good market has enough sectors in it.
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)ur %tren,t8 and $a ues )ur %tren,t8

(ur research team offers financial information, analysis and investment guidance, news & views and is designed to meet the re8uirements of everyone from a learner to a tech savvy and well informed investor. It is involved in fundamental, technical, company> sector and economy specific research amalgamated with a strong and well networked marketing team that helps deliver current & up to date market information at your doorstep. (ur Gast ;etwork, Sound )esearch %ased &dvice, !omplete Investment Solutions and $assle free Trading & (perational platform is the key to success.
$a ues
Innovation and pursuit of e.cellence in )esearch, &dvisory and Investments. Integrity, $onesty, Iairness, (penness and Transparency in our conduct and transactions. 7e recogni e, respect and value the diversity within the organi ation and our customers. +arned Trust, Iaith and %elief of Investors. 7e value and support our staff, and committed to developing them in order to deliver our vision for policing. (ur staff plays a key role in shaping and improving the service delivered by us. (ur staff understands BwhatB they need to deliver and the BstandardsB we e.pect of them. 7e have accountability for performance at all levels of the organi ation. +ffective communication network system which share and provide the right information at the right time to our customers. 7e )espect &ll, Take )esponsibility, Think Positively, )espond )apidly and +n/oy to 7ork.
)ur Team
(ur team represents a skill set that is mutually e.clusive & collectively e.haustive. 7e aim to continuously innovate & reinvent ourselves to be in synch with the everchanging environment. (ur 'anagement team consists of leading financial industry veterans who have pioneered and helped shape /ust about every facet of the online brokerage business since its infancy in the "::#s. 7e are a group of passionate, independent thinkers who never stop thinking about ways to improve trading for the self-directed investor and who donBt mind shaking up the status 8uo to spur a change for the better. )ead on to learn more about the individuals who make up our management team, or better yet, drop us a line to find out what our )ay Securities and Iinancial Services team can do for you.
)fferin,s
'ake the right investments, Powered with the right tools from )ay Securities and Iinancial Services
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Portfolio Management %toc7 Tradin,

Invest online in any domestic stock listed on ;S+ or %S+. Trade 8uickly and conveniently with an online e.perience that is smart, fast and dynamic.
IP) Investments
Start early, invest in IP(s online, e8uipped with thorough fundamental research on upcoming IP(s.
*erivatives
&ccess a wide array of investments including oil and energy, gold and other metals, interest rates, indices, grains, currencies and more. (ptimi e your investment strategy through diversification and leverage, and be responsive to market conditions and economic events nearly A< hours a day, H days a week. Pursue a wide range of options trading strategies with competitive commissions andcontract fees, fast ways to enter even multi-legged orders, and a variety of ways to getinformation and track your holdings.
Currency Tradin,0 -orex Tradin,

*earn how to add currency trading to your stock, options and futures investment strategy. Trade fore. for hedging as well as arbitrage opportunities.
Commodity Tradin,
(ptimi e your investment strategy through diversification and leverage, and access a wide array of investments listed on '!M and ;!3+M including oil, energy, gold, other precious metals, grains and more.
&utua -unds Tradin,

?et access to the top mutual funds from leading fund families and the tools to help identify which might be right for you.
ET- Tradin,
3iscover how +.change Traded Iunds 5+TIs6 can add diversity to your portfolio. )ay Securities and Iinancial Services offers A#O +TIs as well as all of the tools and resources you need to find +TIs that align with your investment strategy.
58y #s Profit from strai,8tfor9ard; afforda: e pricin,

ItBs only natural4 7hen investing, youBre hoping for a return and that can be more difficult to come by with sky-high commissions and hidden fees. 7ith )ay Securities and Iinancial Services you can be sure, you are trading with one of the most professionally run and transparent brokerages in the country.
&a7e t8e ri,8t trades; po9ered 9it8 t8e ri,8t too s

7hether you are an active trader or /ust starting out, )ay Securities and Iinancial RGMCET, Autonomous, Nandyal 15
Services provides you easy to use customi ed tools to fit your investment goals. )ay Securities and Iinancial Services offers a single online window for all your investment needs - trade easily in stocks, commodities, currencies, IP(, mutual funds etc. (ur website offers one of the fastest trade e.ecutions with live charts, technical analysis capabilities and real time buy-sell signals. 7ith )ay Securities and Iinancial Services youBll have innovation at your fingertips.
Invest smart y :ased on independent; o:=ective researc8

7hen you have access to independent third-party research, it means you have a chance to make more informed trades based on the opinions of industry leaders. It means more control over your trading decisions. )ay Securities and Iinancial Services not only provides you free access to its in-house research, an opportunity to network with other investors@traders like yourself but also gives you real-time access to research and advice from leading sources.
Trade confident y 9it8 outstandin,; persona i>ed support

+veryoneBs trading e.perience is different. It only makes sense that everyone would need a different level of support. &t )ay Securities and Iinancial Services, no matter how much 5or how little6 service you need, youBll get it. 7hether you want knowledgeable phone support, access to call and trade facility or instant online answers, youBll always have )ay Securities and Iinancial Services backing you and your investments. ;ow this is value beyond moneyP
5ays to -und
7ays to Iund your )ay Securities and Iinancial Services (nline Investment &ccount
E ectronic -undin,
Qou can transfer funds online from your savings bank account to your )ay Securities and Iinancial Services trading account or vice versa. 7e have banking tie-ups with some of the leading banks for this including I!I!I %ank, $3I! %ank, &.is %ank, %ank of India, !orporation %ank, Narnataka %ank, (riental bank of !ommerce 5(%!6, South Indian %ank, Gi/aya %ank , Qes %ank etc. These funds are available to you for trading on a realtime basis, as soon as they are credited by your bank to your trading account.
Cheque
!he8ue funding of your online brokerage accounts is easy with )ay Securities and Iinancial Services. !he8ue must be drawn from that bank account the cancelled che8ue of which was provided during the account opening with )ay Securities and Iinancial Services !he8ue must be payable to J)ay Securities and Iinancial Services Securities Pvt. *tdJ Qou can re8uest the che8ue to be picked up from your location by dropping a mail at helpdeskRsense.street.com It takes about A< hours for the che8ue to get cleared and the funds to reflect in your ledger RGMCET, Autonomous, Nandyal 16
Trans er Sto!"s
Qou can also fund your )ay Securities and Iinancial Services margin account with your !ategory & stocks 5as defined in )ay Securities and Iinancial ServicesBs !ategory & Stocks *ist6. This can be done as follows4 %y transferring stocks from other 3P accounts to your )ay Securities and Iinancial Services margin account via 3IS 53epository Instruction Slip6 or by transferring them to your )ay Securities and Iinancial Services demat account, in case you have already provided )ay Securities and Iinancial Services with the P(& on your demat account It takes <9 hrs for the credit to show in your margin account & hair cut of EES is applicable on !ategory & stocks 5as defined in )ay Securities and Iinancial ServicesBs !ategory & list6 i.e. HHS of the stock value is available to you for trading. To carry out the above actions, you can drop a mail to helpdeskRsesnse.stree.com or call )ay Securities and Iinancial Services customer care at 'enu item
CHAPTER-2 Revie9 of iterature
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RE$IE5 )- .ITERAT#RE P)RT-).I) 6#I.*I(/+ Portfolio decisions for an individual investor are influenced by a wide variety of factors. Individuals differ greatly in their circumstances and therefore, a financial programme well suited to one individual may be inappropriate for another. Ideally, an individual=s portfolio should be tailor-made to fit one=s individual needs. Investor?s C8aracteristics+ &n analysis of an individual=s investment situation re8uires a study of personal characteristics such as age, health conditions, personal habits, family responsibilities, business or professional situation, and ta. status, all of which affect the investor=s willingness to assume risk. %ta,e in t8e .ife Cyc e+ (ne of the most important factors affecting the individual=s investment ob/ective is his stage in the life cycle. & young person may put greater emphasis on growth and lesser emphasis on li8uidity. $e can afford to wait for reali ation of capital gains as his time hori on is large. -ami y responsi:i ities4 The investor=s marital status and his responsibilities towards other members of the family can have a large impact on his investment needs and goals. Investor?s experience+ The success of portfolio depends upon the investor=s knowledge and e.perience in financial matters. If an investor has an aptitude for financial affairs, he may wish to be more aggressive in his investments. Attitude to9ards Ris7+ & person=s psychological make-up and financial position dictate his ability to assume the risk. 3ifferent kinds of securities have different kinds of risks. The higher the risk, the greater the opportunity for higher gain or loss. RGMCET, Autonomous, Nandyal 19
.i@uidity (eeds+ *i8uidity needs vary considerably among individual investors. Investors with regular income from other sources may not worry much about instantaneous li8uidity, but individuals who depend heavily upon investment for meeting their general or specific needs, must plan portfolio to match their li8uidity needs. *i8uidity can be obtained in two ways4 ". %y allocating an appropriate percentage of the portfolio to bank deposits, and A. %y re8uiring that bonds and e8uities purchased be highly marketable. Tax considerations+
Since different indi(iduals) de*ending u*on t#eir inco+es) are sub,ected to different +arginal rates of ta-es) ta- considerations beco+e +ost i+*ortant factor in indi(idual.s *ortfolio strategy. /#ere are differing ta- treat+ents for in(est+ent in (arious 0inds of assets. T#me Hor#$on%
In investment planning, time hori on becomes an important consideration. It is highly variable from individual to individual. Individuals in their young age have long time hori on for planning, they can smooth out and absorb the ups and downs of risky combination. Individuals who are old have smaller time hori on, they generally tend to avoid volatile portfolios.
Individua ?s -inancia ):=ectives+ In the initial stages, the primary ob/ective of an individual could be to accumulate wealth via regular monthly savings and have an investment programmed to achieve long term capital gains. %afety of Principa +
The protection of the rupee value of the investment is of prime importance to most investors. The original investment can be recovered only if the security can be readily sold in the market without much loss of value. Assurance of Income+ T3ifferent investors have different current income needs. If an individual is dependent of its investment income for current consumption then income received now in the form of dividend and interest payments become primary ob/ective. Investment Ris7+ &ll investment decisions revolve around the trade-off between risk and return. &ll rational investors want a substantial return from their investment. &n ability to understand, measure and properly manage investment risk is fundamental to any intelligent investor or a speculator. Ire8uently, the risk associated with security investment is ignored and only the rewards are emphasi ed. &n investor who does not fully appreciate the risks in security investments will find it difficult to obtain continuing positive results.
P)RT-).I) A(A.'%I4 Garious groups of securities when held together behave in a different manner and give interest payments and dividends also, which are different to the analysis of individual securities. & combination of securities held together will give a beneficial result if they are grouped in a manner to secure higher return after taking into consideration the risk element. There are two approaches in construction of the portfolio of securities. They are Traditional approach 'odern approach TRA*ITI)(A. APPR)ACH+
21
Traditional approach was based on the fact that risk could be measured on each individual security through the process of finding out the standard deviation and that security should be chosen where the deviation was the lowest. Traditional approach believes that the market is inefficient and the fundamental analyst can take advantage of the situation. Traditional approach is a comprehensive financial plan for the individual. It takes into account the individual needs such as housing, life insurance and pension plans. Traditional approach basically deals with two ma/or decisions. They are a6 b6 3etermining the ob/ectives of the portfolio Selection of securities to be included in the portfolio
&)*ER( APPR)ACH+ 'odern approach theory was brought out by 'arkowit and Sharpe. It is the combination of securities to get the most efficient portfolio. !ombination of securities can be made in many ways. 'arkowit developed the theory of diversification through scientific reasoning and method. 'odern portfolio theory believes in the ma.imi ation of return through a combination of securities. The modern approach discusses the relationship between different securities and then draws inter-relationships of risks between them. 'arkowit gives more attention to the process of selecting the portfolio. It does not deal with the individual needs. THE %HARPE I(*E" &)*E.+ The investor always likes to purchase a combination of stock that provides the highest return and has lowest risk. $e wants to maintain a satisfactory reward to risk ratio. Traditionally, analysis paid more attention to the return aspects of the stocks. ;ow a day-s risk has received increased attention and analysis and analysts are providing estimates of risk as well as return. Sharpe has developed a simplified model to analy e the portfolio. $e assumed that the return of a security is linearly related to a single inde. like the market inde.. Strictly speaking, the market inde. should consist of all the securities trading on the e.change. In the absence of it, a popular inde. can be treated as a surrogate for the market inde.. %I(/.E I(*E" &)*E. !asual observation of the stock process over a period of time reveals that most of the stock prices move with the market inde.. 7hen Sense. increases, stock prices also RGMCET, Autonomous, Nandyal 22
tend to increase and vice-versa. This indicates that some underlying factors affect the market inde. as well as the stock prices. Stock prices are related to the market inde. and this relationship could be used to estimate the return on stock. Towards this purpose, the following e8uation can be used4 To simplify analysis, the single inde. model assumes that there is only " macroeconomics factor that causes the systematic risk affecting all stock return and this factor can be represented by the rate of return on a market inde., such as the S&P D##. &ccording to this model, the return of any stock can be decomposed into the e.pected e.cess return of the individual stock due to firm-specific factors, commonly denoted by its alpha coefficient, the return due to macroeconomics events that affect only the firm. Specifically, the return of stock is4 )i U V O W)m O ei
7here )i U e.pected return on security i V U intercept of the straight line or alpha co-efficient W U slope of the straight line or beta co-efficient )m U the rate of return on market inde. ei U error term. The term ARm represents the stock-s return due to the movement of the market modified by the stock-s beta, while ei represents the unsystematic risk or the security due to firm specific factors. 'acroeconomics events, such as interest rates or the cost of labor causes the systematic risk that affects the returns of all stocks, and the firm specific events are the une.pected microeconomic events that affect the returns of specific firms, such as the death of key people of the lowering of the firm-s credit rating. That would affect the firm, but unsystematic risk due to firm specific factors of a portfolio can be reduced to ero by diversification. The inde. model is based on the following4 'ost stocks have a positive covariance because they all respond similarly to macroeconomic factors. $owever, some firms are more sensitive to these factors than others, and this firm-specific variance is typically denoted by its beta which measures its variance compared to the market for one or more economic factors. !ovariances among securities results from differing responces to macroeconomics factors. $ence the covariance of each stock can be found by multiplying their beta and the market variance> !ov5)i.)k6 U Wi Wk SA
23
The last e8uation greatly securities reduce the computations re8uired to determinate covariance because the covariance of the securities within a portfolio must be calculated using historical returns, and the covariance of each possible pair of securities in the portfolio must be calculated independently. 7ith this e8uation, only the betas of the individual securities and the market variance need to be estimated to calculate covariance of securities. $ence, the inde. model greatly reduces the number of calculations that would otherwise have to be made for a large portfolio of securities.
%HARPEBs optima portfo io Sharpe had provided a model for the selection of appropriate securities in a portfolio. The selection of any stock is directly related to is e.cess return 0 beta ratio. Ri CRf 0 Ai 7here, )i U the e.pected return on stock I Rf U the return on a risk less asset Ai Uthe e.pected change in the rate of return on stock I associated with one unit change in the market return. The e.cess return is the difference between the e.pected return on the stock and the risk less rate of interest such as the rate offered on the government security of Treasury bill. The e.cess return to beta ratio measures the additional return on security 5e.cess of the risk less asset return6 per unit of systematic risk of nondiversifiable risk. This ratio provides a relationship between potential and reward. The steps for finding out the stocks to be included in the optimal portfolio are given below> ". Iinding out the 1e.cess return to beta2 ratio for each stock under consideration. A. )ank them from the highest to lowest. E. Proceed to calculate cD for all the stocks according to the ranked order using the fallowing formula.
24
<. The calculated values of cD start declining after a particular ci and that point id taken as the cut-off point and that stock ratio is the cut-off ratio ci &AR4)5ITE &)*E.+ 'arkowit model is a theoretical framework for analysis of risk and return and their relationships. $e used statistical analysis for the measurement of risk and mathematical programming for selection of assets in a portfolio in an efficient manner. 'arkowit approach determines for the investor the efficient set of portfolio through three important variables i.e. )eturn Standard deviation !o-efficient of correlation 'arkowit model is also called as a 1Iull !ovariance 'odel1. Through this model the investor can find out the efficient set of portfolio by finding out the tradeoff between risk and return, between the limits of ero and infinity. &ccording to this theory, the effects of one security purchase over the effects of the other security purchase are taken into consideration and then the results are evaluated. 'ost people agree that holding two stocks is less risky than holding one stock. Ior e.ample, holding stocks from te.tile, banking and electronic companies is better than investing all the money on the te.tile company=s stock. 'arkowit had given up the single stock portfolio and introduced diversification. The single stock portfolio would be preferable if the investor is perfectly certain that his e.pectation of highest return would turn out to be real. In the world of uncertainty, most of the risk adverse investors would like to /oin 'arkowit rather than keeping a single stock, because diversification reduces the risk. A%%#&PTI)(%+ &ll investors would like to earn the ma.imum rate of return that they can achieve from their investments. &ll investors have the same e.pected single period investment hori on. &ll investors before making any investments have a common goal. This is the avoidance of risk because Investors are risk-averse. Investors base their investment decisions on the e.pected return and standard deviation of returns from a possible investment. RGMCET, Autonomous, Nandyal 25
Perfect markets are assumed 5e.g. no ta.es and no transaction costs6 The investor assumes that greater or larger the return that he achieves on his investments, the higher the risk factor surrounds him. (n the contrary when risks are low the return can also be e.pected to be low. The investor can reduce his risk if he adds investments to his portfolio. &n investor should be able to get higher return for each level of risk 1by determining the efficient set of securities1. &n individual seller or buyer cannot affect the price of a stock. This assumption is the basic assumption of the perfectly competitive market. Investors make their decisions only on the basis of the e.pected returns, standard deviation and covariance of all pairs of securities. Investors are assumed to have homogenous e.pectations during the decisionmaking period The investor can lend or borrow any amount of funds at the risk less rate of interest. The risk less rate of interest is the rate of interest offered for the treasury bills or ?overnment securities. Investors are risk-averse, so when given a choice between two otherwise identical portfolios, they will choose the one with the lower standard deviation. Individual assets are infinitely divisible, meaning that an investor can buy a fraction of a share if he or she so desires. There is a risk free rate at which an investor may either lend 5i.e. invest6 money or borrow money.
There is no transaction cost i.e. no cost involved in buying and selling of stocks. There is no personal income ta.. $ence, the investor is indifferent to the form of return either capital gain or dividend. RGMCET, Autonomous, Nandyal
26
THE E--ECT )- C)&6I(I(/ T5) %EC#RITIE%+ It is believed that holding two securities is less risky than by having only one investment in a person=s portfolio. 7hen two stocks are taken on a portfolio and if they have negative correlation then risk can be completely reduced because the gain on one can offset the loss on the other. This can be shown with the help of following e.ample4 I(TER- ACTI$E RI%4 THR)#/H C)$ARIA(CE+ !ovariance of the securities will help in finding out the inter-active risk. 7hen the covariance will be positive then the rates of return of securities move together either upwards or downwards. &lternatively it can also be said that the inter-active risk is positive. Secondly, covariance will be ero on two investments if the rates of return are independent. $olding two securities may reduce the portfolio risk too. The portfolio risk can be calculated with the help of the following formula4 CAPITA. A%%ET PRICI(/ &)*E. 1CAP&2+ 'arkowit , 7illiam Sharpe, ,ohn *intner and ,an 'ossin provided the basic structure of !apital &sset Pricing 'odel. It is a model of linear general e8uilibrium return. In the !&P' theory, the re8uired rate return of an asset is having a linear relationship with asset=s beta value i.e. undiversifiable or systematic risk 5i.e. market related risk6 because non market risk can be eliminated by diversification and systematic risk measured by beta. Therefore, the relationship between an assets return and its systematic risk can be e.pressed by the !&P', which is also called the Security 'arket *ine.
)p )p Mf "- Mf )f )m
U )f MfO )m5"- Mf6 U Portfolio return U the proportion of funds invested in risk free assets U the proportion of funds invested in risky assets U )isk free rate of return U )eturn on risky assets
Iormula can be used to calculate the e.pected returns for different situations, like mi.ing risk less assets with risky assets, investing only in the risky asset and mi.ing the borrowing with risky assets. THE C)(CEPT+ RGMCET, Autonomous, Nandyal 27
&ccording to !&P', all investors hold only the market portfolio and risk less securities. The market portfolio is a portfolio comprised of all stocks in the market. +ach asset is held in proportion to its market value to the total value of all risky assets. Ior e.ample, if Satyam Industry share represents "DS of all risky assets, then the market portfolio of the individual investor contains "DS of Satyam Industry shares. &t this stage, the investor has the ability to borrow or lend any amount of money at the risk less rate of interest. E,.+ assume that borrowing and lending rate to be "A.DS and the return from the risky assets to be A#S. There is a tradeoff between the e.pected return and risk. If an investor invests in risk free assets and risky assets, his risk may be less than what he invests in the risky asset alone. %ut if he borrows to invest in risky assets, his risk would increase more than he invests his own money in the risky assets. 7hen he borrows to invest, we call it financial leverage. If he invests D#S in risk free assets and D#S in risky assets, his e.pected return of the portfolio would be )pU )f MfO )m5"- Mf6 U 5"A.D . #.D6 O A# 5"-#.D6 U H.AD O " U "H.ADS
if there is a ero investment in risk free asset and "##S in risky asset, the return is )pU )f MfO )m5"- Mf6 U # O A#S U A#S
if -#.D in risk free asset and ".D in risky asset, the return is )pU )f MfO )m5"- Mf6 U 5"A.D . -#.D6 O A# 5".D6 U -H.ADO E# U AE.CDS RI%4 A(* E"PECTE* RET#R(+ There is a positive relationship between the amount of risk and the amount of e.pected return i.e., the greater the risk, the larger the e.pected return and larger the chances of substantial loss. (ne of the most difficult problems for an investor is to estimate the highest level of risk he is able to assume.
28
)isk is measured along the hori ontal a.is and increases from the left to right. +.pected rate of return is measured on the vertical a.is and rises from bottom to top. The line from # to ) 5f6 is called the rate of return or risk less investments commonly associated with the yield on government securities.
The diagonal line form ) 5f6 to +5r6 illustrates the concept of e.pected rate of return increasing as level of risk increases.
T'PE% )- RI%4%+ )isk consists of two components. They are ". Systematic )isk A. Xn-systematic )isk 1. %ystematic Ris7+ Systematic risk is caused by factors e.ternal to the particular company and uncontrollable by the company. The systematic risk affects the market as a whole. Iactors affect the systematic risk are economic conditions political conditions sociological changes The systematic risk is unavoidable. Systematic risk is further sub-divided into three types. They are a6 'arket )isk b6 Interest )ate )isk c6 Purchasing Power )isk a2 &ar7et Ris7+ RGMCET, Autonomous, Nandyal 29
(ne would notice that when the stock market surges up, most stocks post higher price. (n the other hand, when the market falls sharply, most common stocks will drop. It is not uncommon to find stock prices falling from time to time while a company=s earnings are rising and vice-versa. The price of stock may fluctuate widely within a short time even though earnings remain unchanged or relatively stable. :2 Interest Rate Ris7+ Interest rate risk is the risk of loss of principal brought about the changes in the interest rate paid on new securities currently being issued. c2 Purc8asin, Po9er Ris74 The typical investor seeks an investment which will give him current income and @ or capital appreciation in addition to his original investment. 2. #n-systematic Ris7+ Xn-systematic risk is uni8ue and peculiar to a firm or an industry. The nature and mode of raising finance and paying back the loans, involve the risk element. Iinancial leverage of the companies that is debt-e8uity portion of the companies differs from each other. &ll these factors Iactors affect the un-systematic risk and contribute a portion in the total variability of the return. 'anagerial inefficiently Technological change in the production process &vailability of raw materials !hanges in the consumer preference *abour problems
The nature and magnitude of the above mentioned factors differ from industry to industry and company to company. They have to be analy ed separately for each industry and firm. Xn-systematic risk can be broadly classified into4 a6 %usiness )isk b6 Iinancial )isk a. 6usiness Ris7+ %usiness risk is that portion of the unsystematic risk caused by the operating environment of the business. %usiness risk arises from the inability of a firm to maintain its competitive edge and growth or stability of the earnings. The volatibility in stock prices due to factors intrinsic to the company itself is known as %usiness risk. %usiness risk is concerned with the difference between revenue and earnings before interest and ta.. %usiness risk can be divided into. RGMCET, Autonomous, Nandyal 3
i6. Internal %usiness )isk Internal business risk is associated with the operational efficiency of the firm. The operational efficiency differs from company to company. The efficiency of operation is reflected on the company=s achievement of its pre-set goals and the fulfillment of the promises to its investors.
ii6.+.ternal %usiness )isk +.ternal business risk is the result of operating conditions imposed on the firm by circumstances beyond its control. The e.ternal environments in which it operates e.ert some pressure on the firm. The e.ternal factors are social and regulatory factors, monetary and fiscal policies of the government, business cycle and the general economic environment within which a firm or an industry operates. :. -inancia Ris7+ It refers to the variability of the income to the e8uity capital due to the debt capital. Iinancial risk in a company is associated with the capital structure of the company. !apital structure of the company consists of e8uity funds and borrowed funds. E$A.#ATI)( )- P)RT-).I)+ Portfolio manager evaluates his portfolio performance and identifies the sources of strengths and weakness. The evaluation of the portfolio provides a feed back about the performance to evolve better management strategy. +ven though evaluation of portfolio performance is considered to be the last stage of investment process, it is a continuous process. There are number of situations in which an evaluation becomes necessary and important. i. %e f $a uation: &n individual may want to evaluate how well he has done. This is a part of the process of refining his skills and improving his performance over a period of time.
ii.
Eva uation of &ana,ers: & mutual fund or similar organi ation might want to evaluate its managers. & mutual fund may have several managers each 31
running a separate fund or sub-fund. It is often necessary to compare the performance of these managers. iii. Eva uation of &utua -unds: &n investor may want to evaluate the various mutual funds operating in the country to decide which, if any, of these should be chosen for investment. & similar need arises in the case of individuals or organi ations who engage e.ternal agencies for portfolio advisory services. Evaluation of Groups: &cademics or researchers may want to evaluate the performance of a whole group of investors and compare it with another group of investors who use different techni8ues or who have different skills or access to different information.
iv.
(EE* -)R E$A.#ATI)( )- P)RT-).I): 7e can try to evaluate every transaction. 7henever a security is brought or sold, we can attempt to assess whether the decision was correct and profitable. 7e can try to evaluate the performance of a specific security in the portfolio to determine whether it has been worthwhile to include it in our portfolio. 7e can try to evaluate the performance of portfolio as a whole during the period without e.amining the performance of individual securities within the portfolio.
(EE* < I&P)RTA(CE+ Portfolio management has emerged as a separate academic discipline in India. Portfolio theory that deals with the rational investment decision-making process has now become an integral part of financial literature.
Investing in securities such as shares, debentures & bonds is profitable well as e.citing. 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. 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 as P()TI(*I(. !reation of portfolio helps to reduce risk without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory & practice of optimally combining securities into portfolios.
32
The modern theory is of the view that by diversification, risk can be reduced. The investor can make diversification either by having a large number of shares of companies in different regions, in different industries or those producing different types of product lines. 'odern theory believes in the perspective of combinations of securities under constraints of risk and return. P)RT-).I) RE$I%I)(+ The portfolio which is once selected has to be continuously reviewed over a period of time and then revised depending on the ob/ectives of the investor. The care taken in construction of portfolio should be e.tended to the review and revision of the portfolio. Iluctuations that occur in the e8uity prices cause substantial gain or loss to the investors. The investor should have competence and skill in the revision of the portfolio. The portfolio management process needs fre8uent changes in the composition of stocks and bonds. In securities, the type of securities to be held should be revised according to the portfolio policy. &n investor purchases stock according to his ob/ectives and return risk framework. The prices of stock that he purchases fluctuate, each stock having its own cycle of fluctuations. These price fluctuations may be related to economic activity in a country or due to other changed circumstances in the market. If an investor is able to forecast these changes by developing a framework for the future through careful analysis of the behavior and movement of stock prices is in a position to make higher profit than if he was to simply buy securities and hold them through the process of diversification. 'echanical methods are adopted to earn better profit through proper timing. The investor uses formula plans to help him in making decisions for the future by e.ploiting the fluctuations in prices. -)R&#.A P.A(%+ The formula plans provide the basic rules and regulations for the purchase and sale of securities. The amount to be spent on the different types of securities is fi.ed. The amount may be fi.ed either in constant or variable ratio. This depends on the investor=s attitude towards risk and return. The commonly used formula plans are ". &verage )upee Plan A. !onstant )upee Plan E. !onstant )atio Plan <. Gariable )atio Plan RGMCET, Autonomous, Nandyal 33
A*$A(TA/E%+ %asic rules and regulations for the purchase and sale of securities are provided. The rules and regulations are rigid and help to overcome human emotion. The investor can earn higher profits by adopting the plans. & course of action is formulated according to the investor=s ob/ectives. It controls the buying and selling of securities by the investor. It is useful for taking decisions on the timing of investments
*I%A*$A(TA/E%+ The formula plan does not help the selection of the security. The selection of the security has to be done either on the basis of the fundamental or technical analysis. It is strict and not fle.ible with the inherent problem of ad/ustment. The formula plans should be applied for long periods, otherwise the transaction cost may be high. +ven if the investor adopts the formula plan, he needs forecasting. 'arket forecasting helps him to identify the best stocks.
34
CHAPTER-3
RE%EARCH *E%I/( < &ETH)*).)/' 3.1. (eed for t8e study 3.2. ):=ectives t8e study 3.3. .imitations of t8e study 3.!. &et8odo o,y
35
3.1. (EE* -)R THE %T#*'+ The investor today is looking at investing in securities, which would give him better returns than an ordinary savings bank account or fi.ed deposits though at a certain amount of risk. +very person saves money by postponing consumption because future is uncertain. So they have to search out for efficient investment opportunities. There is a saying 1putting all eggs in one basket is always dangerous2 selecting two or more securities or assets and constructing a portfolio is essential to spread the risk so study of portfolio analysis is needed.
36
3.2. )6FECTI$E% )- THE %T#*'+ The ob/ectives of the study are as follows4 To study the investment pattern and its related risks & returns. To find out optimal portfolio, which gave optimal return at a minimi e risk to the investor.
To see whether the selected portfolios is yielding a satisfactory and constant return to the investor. To understand, analy e and select the best portfolio and suggest the investor.
37
3.3. %C)PE )- THE %T#*'+
This study covers the S$&)P+-s single inde. model. The study covers the calculation of e.cess returns over beta of different securities in order to find out which scripts includes in the optimal portfolio. &lso the study includes the calculation of individual Standard 3eviation of securities and ends at the calculation of weights of individual securities involved in the portfolio. These percentages help in allocating the funds available for investment based on risky portfolios.
3.!. .I&ITATI)(% )- THE %T#*'
This study has been conducted purely to understand Portfolio 'anagement for investors.
38
!onstruction of Portfolio is restricted to S$&)P+-s single inde. model. Gery few selected scripts @ companies are analy ed from ;S+ listings.
3ata collection was strictly confined to secondary source. ;o primary data is associated with the pro/ect. This study is not described the selection of new scripts3&T& !(**+!TI(; '+T$(3S
39
3.G. &ETH)*).)/' Primary co ection met8ods+ ;o primary data is used in this study. %econdary co ection met8ods+ The secondary collection methods includes the lectures of the superintend of the department of market operations and so on., also the data collected from the news, maga ines of the IS+ and different books issues of this study. %amp in, met8od+ !onvenience sampling. %amp es+ ST&T+ %&;N (I I;3I& $+)( $(;3& T!-S *IT* $!* T+!$ I;I(SQS T&T& '(T()S &'&)& )&,& %&TT+)I+S I;3XST)I&* !)+3IT I;G+ST'+;TS !()P()&TI(; (I I;3I&
CHAPTER&'
(ATA ANAL)SIS * INTERPRETATION
41
%6I return; ris7 and :eta ca cu ation+

return1x mont8 (ifty 2 %6I 5063.0 =an 7 0 2135 4803.4 fe: 2 -5.1283 2055.6 5124.4 marc8 7 6.6837 2048.1 5280.1 apri 5 3.0378 2075.45 5015.7 may 2 -5.0079 2243.5 5155.5 =une 2 2.7872 2416.1 =u y au, sep oct nov dec 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 2387.78 2698.42 3005.1 3200.45 3145 2484.55
return1y 2
0 -3.71897 -0.36486 1.335384 8.097039 7.693336 -1.17214 13.00957 11.36517 6.500616 -1.73257 -21
xy
0 19.0720 2.43862 4.05672 40.5492 21.4431 4.50107 19.3922 66.7690 44.5748 2.16185 49.6438
x2
0 26.2995 44.6728 9.22867 25.0791 7.76867 14.7460 2.22193 34.5143 47.0187 1.55694 5.58844
'-'
1.66772 5.38669 2.03257 0.33233 6.42932 4 6.02562 1 2.83985 11.3418 6 9.69745 4 4.8329 3.40028 22.6677
1'-' 2H
2.781275 29.01638 4.131351 0.110444 41.3362 36.30811 8.064762 128.6377 94.04061 23.35692 11.56193 513.8253
I"J
16.824
I'J
20.01259
I"'J
179.625
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218.695 1
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893.1711
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(Y-Y ) N- 1
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&;;X&* ST;3&)3 3+GI&TI(;UE".A"<: n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U #.CCH9
HER) H)(*A return ;ris7 < :eta ca cu ation return1x mont8 (ifty 2 HH 5063.0 =an 7 0 1616.75 4803.4 1661.32 -e: 2 -5.1283 5 5124.4 1929.82 marc8 7 6.6837 5 5280.1 apri 5 3.0378 1952 5015.7 may 2 -5.0079 1883.9 5155.5 1985.77 =une 2 2.7872 5 Fu y Au, %ep )ct (ov *ec 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 1923.75 1801.45 1789 1852.05 1928.45 1789
return1y 2
0 2.757074 16.1618 1.149068 -3.48873 5.407665 -3.12347 -6.35737 -0.69111 3.524315 4.125159 -7.2312
xy
0 14.1391 108.021 8 3.49072 1 17.4712 3 15.0724 3 11.9943 9.47639 4.06019 24.1663 5.14726 17.0944 6
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
1.01943 1.73764 1 15.1423 6 0.12963 4 4.50816 4.38823 1 -4.1429 7.37681 1.71054 2.50488 2 3.10572 5 8.25063
1'-' 2H
1.039245 3.019395 229.2912 0.016805 20.32353 19.25657 17.16361 54.4173 2.925959 6.274432 9.645528 68.07289
I"J
16.824
I'J
12.2332
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140.499 7
I"HJ
218.695 1
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Z5Q-Q 6[ 43
;- "
ST&;3&)3 3+GI&TI(;U H.AHAC &;;X&* ST;3&)3 3+GI&TI(;UA".H:<: n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U #.HEAA
HC. TECH return; ris7 and :eta ca cu ation+ return1x return1y (ifty 2 HH 2 xy x2 '-' 5063.0 7 0 339.9 0 0 0 1.01943 4803.4 - 26.2995 1.73764 2 -5.1283 344.65 1.39747 14.1391 3 1 5124.4 108.021 44.6728 15.1423 7 6.6837 368.15 6.818512 8 2 6 5280.1 3.49072 9.22866 0.12963 5 3.0378 369 0.230884 1 7 4 5015.7 17.4712 25.0791 2 -5.0079 379.55 2.859079 3 3 4.50816 5155.5 15.0724 7.76867 4.38823 2 2.7872 375.5 -1.06705 3 4 1 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 373.425 400.05 404.375 427.25 392.36 443.75 -0.5526 7.129946 1.081115 5.656878 -8.16618 13.09767 11.9943 9.47639 4.06019 24.1663 5.14726 17.0944 6 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1 -4.1429 7.37681 1.71054 2.50488 2 3.10572 5 8.25063
mont8 =an -e: marc8 apri &ay Fune Fu y Au, %ep )ct (ov *ec
1'-' 2H
1.039245 3.019395 229.2912 0.016805 20.32353 19.25657 17.16361 54.4173 2.925959 6.274432 9.645528 68.07289
I"J
16.824
I'J
28.48572
I"'J
54.6895
I"HJ
218.695 1
I1'-'2HJ
312.7375
5T"-T#6F"## RGMCET, Autonomous, Nandyal 44
&;;X&* )+TX); U YYYYYYYY. U E#.DDE" T# ST&;3&)3 3+GI&TI(; U Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;U D.EEA# &;;X&* ST;3&)3 3+GI&TI(;U"9.<C# n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U #.#CDH
45
TC % return; ris7 and :eta ca cu ation+ return1x return1y (ifty 2 TC ?% 2 xy x2 '-' 5063.0 7 0 762.75 0 0 0 3.30073 4803.4 13.0434 26.2995 2 -5.1283 743.35 -2.54343 8 3 5.84416 5124.4 51.3410 44.6728 4.38071 7 6.6837 800.45 7.681442 1 2 4 5280.1 - 9.22866 5 3.0378 795.25 -0.64963 1.97351 7 3.95036 5015.7 19.6002 25.0791 2 -5.0079 764.125 -3.91386 6 3 7.21459 5155.5 - 7.76867 2 2.7872 762 -0.2781 0.77512 4 3.57882 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 792.775 856.8 897.55 970.975 1053.47 5 1114.2 4.038714 8.076062 4.756069 8.180603 8.496614 5.764256 15.5088 8 12.0382 9 27.9413 5 56.0945 5 10.6018 13.6266 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1 0.73798 6 4.77533 4 1.45534 1 4.87987 5 5.19588 6 2.46352 8
1'-' 2H
10.89481 34.15417 19.19065 15.60537 52.05033 12.80798 0.544623 22.80381 2.118017 23.81318 26.99723 6.068971
I"J
16.824
I'J
39.60874
I"'J
168.590 7
I"HJ
218.695 1
I1'-'2HJ
227.0491
5T"-T#6F"## &;;X&* )+TX);UYYYYYYYU<H.#CH T#
ST&;3&)3 3+GI&TI(; U
Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;U <.D<EA RGMCET, Autonomous, Nandyal 46
&;;X&* ST;3&)3 3+GI&TI(;U"D.CE9 n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U #.DC:D
A&ARA RAFA return; ris7 and :eta ca cu ation+ return1x (ifty 2 A&6 5063.0 7 0 162 4803.4 2 -5.1283 155.275 5124.4 7 6.6837 160 5280.1 5 3.0378 175.225 5015.7 2 -5.0079 168.35 5155.5 2 2.7872 172.975 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 194.05 191.3 207.45 206.775 186.325 182.7
return1y 2
0 -4.15123 3.042988 9.515625 -3.92353 2.747253 12.18384 -1.41716 8.442237 -0.32538 -9.88998 -1.94553
xy
0 21.2888 20.3386 4 28.9072 5 19.6486 6 7.65723 7 46.7866 2 2.11244 49.5971 5 2.23113 12.3404 5 4.59919 9
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
1.18993 5.34116 1.85306 8.32569 7 5.11346 1.55732 4 10.9939 1 2.60709 7.25230 9 1.51531 11.0799 3.13545
1'-' 2H
1.41593 28.52802 3.433831 69.31722 26.14743 2.425259 120.8661 6.796913 52.59598 2.296158 122.7643 9.83107
I"J
16.824
I'J
14.27914
I"'J
206.820 4
I"HJ
218.695 1
I1'-'2HJ
446.4182
5T"-T#6F"## &;;X&* )+TX); UYYYYYYYYYYU "A.C9 T#
47
ST&;3&)3 3+GI&TI(; U Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;UH.EC# &;;X&* ST;3&)3 3+GI&TI(;UAA.#H9 n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U #.:DC<
.IT. return; ris7 and :eta ca cu ation+ return1x (ifty 2 .IT. 5063.0 7 0 51.6 4803.4 2 -5.1283 45.75 5124.4 7 6.6837 51.05 5280.1 5 3.0378 58.05 5015.7 2 -5.0079 59.35 5155.5 2 2.7872 64.9 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 66.6 69.9 69.875 67.875 59.375 61.1
return1y 2
0 -11.3372 11.5847 13.71205 2.239449 9.351306 2.619414 4.954955 -0.03577 -2.86225 -12.523 2.905263
xy
0 58.1406 8 77.4295 41.6554 5 -11.215 26.0642 8 10.0587 7.38592 3 0.21012 19.6265 15.6258 9 6.86801
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
1.71741 13.0546 9.86729 2 11.9946 4 0.52204 2 7.63389 9 0.90200 7 3.23754 8 1.75317 4.57966 14.2404 1.18785 6
1'-' 2H
2.949487 170.423 97.36346 143.8714 0.272528 58.27641 0.813617 10.48172 3.073614 20.9733 202.7898 1.411002
I"J
16.824
I'J
20.60888
I"'J
198.440 8
I"HJ
218.695 1
I1'-'2HJ
712.6993
48
5T"-T#6F"## &;;X&* )+TX);UYYYYYYYYYU"9.<"# T#
ST&;3&)3 3+GI&TI(; U
Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;U 9.#<: &;;X&* ST;3&)3 3+GI&TI(;U AC.99E
n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ TATA &)T)R% return; ris7 and :eta ca cu ation+ U #.9H9
49
return1x (ifty 2 T& 5063.0 7 0 789.5 4803.4 2 -5.1283 711.9 5124.4 7 6.6837 766.975 5280.1 5 3.0378 789.25 5015.7 2 -5.0079 776.35 5155.5 2 2.7872 771.95 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 808.825 941.75 1059.07 5 1149 1239 1233
mont8 =an -e: marc8 apri may =une Fu y Au, %ep )ct (ov *ec
return1y 2
0 -9.82901 7.736339 2.904267 -1.63446 -0.56675 4.776864 16.43433 12.45819 8.4909 7.832898 -0.48426
xy
0 50.4061 5 51.7079 3 8.82279 1 8.18523 9 1.57968 18.3434 2 24.4972 4 73.1904 58.2222 6 9.77368 1.14478 9
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
4.00994 13.8389 3.72639 7 1.10568 5.64441 -4.5767 0.76692 2 12.4243 9 8.44824 7 4.48095 8 3.82295 6 -4.4942
1'-' 2H
16.07964 191.5165 13.88604 1.222518 31.85931 20.94615 0.588169 154.3655 71.37288 20.07898 14.61499 20.19787
I"J
16.824
I'J
48.11931
I"'J
283.166 9
I"HJ
218.695 1
I1'-'2HJ
556.7285
5T"-T#6F"## &;;X&* )+TX);UYYYYYYYYU DH."C< T#
ST&;3&)3 3+GI&TI(; U
Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;U C.""<
&;;X&* ST;3&)3 3+GI&TI(;UA<.H<<
n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U "."#DD
51
A(6 return; ris7 and :eta ca cu ation+ return1x (ifty 2 A(6 5063.0 7 0 108.65 4803.4 2 -5.1283 99.85 5124.4 7 6.6837 103.6 5280.1 5 3.0378 120.6 5015.7 2 -5.0079 130.8 5155.5 136.82 2 2.7872 5 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 139.7
mont8 Fan -e: marc8 apri may =une =u y au, %ep )ct nov dec
return1y 2
0 -8.0994 3.755633 16.40927 8.457711 4.606269 2.101224
xy
0 41.5362 1 25.1018 49.8492 5 42.3554 12.8387 5 8.06881 7 15.2049 6.96438 103.897 6 4.75460 9 8.97894 7
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
3.64908 11.7485 0.10655 12.7601 8 4.80862 8 0.95718 6 1.54786 6.55134 6 4.83453 11.5029 3 7.45956 -7.4473
1'-' 2H
13.31581 138.0269 0.011353 162.8223 23.1229 0.916204 2.395868 42.92014 23.37271 132.3174 55.64502 55.46232
153.95 10.20043 152.12 5 -1.18545 175.17 5 15.15201 168.5 162.1 -3.81048 -3.79822
I"J
16.824
I'J
43.789
I"'J
220.911 1
I"HJ
218.695 1
I1'-'2HJ
650.3289
5T"-T#6F"## &;;X&* )+TX);UYYYYYYY..U T# <".EC"
ST&;3&)3 3+GI&TI(; U
ST&;3&)3 3+GI&TI(;U 9.AD# &;;X&* ST;3&)3 3+GI&TI(;UA9.D9# RGMCET, Autonomous, Nandyal 52
n ZMQ 0 5ZM F ZQ6
6ETAJ
n ZM[ - 5ZM6[
J#.:"<
53
I(-)%'% return; ris7 and :eta ca cu ation+ return1x I(-)%' mont8 (ifty 2 % 5063.0 Fan 7 0 2553.4 4803.4 fe: 2 -5.1283 2479.5 5124.4 marc8 7 6.6837 2737 5280.1 apri 5 3.0378 2720.85 5015.7 may 2 -5.0079 2622.55 5155.5 =une 2 2.7872 2725.1 =u y au, sep oct nov dec 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 2813 2786.55 2893.5 3091 3025.625 3243
return1y 2
0 -2.89418 10.38516 -0.59006 -3.61284 3.910316 3.22557 -0.94028 3.838079 6.825644 -2.11501 7.184466
xy
0 14.8422 4 69.4120 4 1.79253 18.0927 7 10.8989 7 12.3863 7 1.40159 22.5482 7 46.8035 7 2.63905 5 -16.984
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
2.10141 4.99559 8.28375 3 2.69147 5.71425 1.80891 1 1.12416 5 3.04168 1.73667 4 4.72423 9 4.21642 5.08306 1
1'-' 2H
4.415903 24.95587 68.62057 7.243996 32.65261 3.27216 1.263746 9.251831 3.016038 22.31843 17.77817 25.83751
I"J
16.824
I'J
25.21686
I"'J
177.445 2
I"HJ
218.695 1
I1''2HJ
220.6268
5T"-T#6F"## &;;X&* )+TX);UYYYYYYYY U AC.## T#
ST&;3&)3 3+GI&TI(; U
Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;U <.<C9 RGMCET, Autonomous, Nandyal 54
&;;X&* ST;3&)3 3+GI&TI(;U"D.D"E: n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U #.CA9A
55
ICICI return; ris7 and :eta ca cu ation+ return1x (ifty 2 ICICI 5063.0 7 0 841.175 4803.4 2 -5.1283 836.5 5124.4 7 6.6837 913.4 5280.1 5 3.0378 956.125 5015.7 2 -5.0079 880.15 5155.5 2 2.7872 811 5353.5 5433.3 5752.5 6146.9 5 6070.2 5 5926.7 5
3.8401 1.4906 5.8749 6.8571 -1.2477 -2.363 882.6 967.5 1064.175 1125.5 1185.125 1121.55
return1y 2
0 -0.55577 9.193066 4.677578 -7.94614 -7.85662 8.828607 9.619307 9.992248 5.76268 5.297645 -5.36441
xy
0 2.85016 61.4443 6 14.2098 8 39.7935 1 21.8982 33.9023 4 14.3386 7 58.7032 8 39.5148 6.61026 12.6814 1
x2
0 26.2995 3 44.6728 2 9.22866 7 25.0791 3 7.76867 4 14.7460 2 2.22192 9 34.5142 5 47.0187 1 1.55693 8 5.58844 1
'-'
2.63735 3.19312 6.55571 7 2.04022 9 10.5835 -10.494 6.19125 7 6.98195 7 7.35489 8 3.12533 2.66029 6 8.00176
1'-' 2H
6.955613 10.19601 42.97742 4.162533 112.0102 110.1233 38.33166 48.74772 54.09453 9.76769 7.077174 64.02821
I"J
16.824
I'J
31.6482
I"'J
248.929 9
I"HJ
218.695 1
I1'-'2HJ
508.4721
5T"-T#6F"## &;;X&* )+TX);UYYYYYYYYY U EE.EE"D T#
ST&;3&)3 3+GI&TI(; U
Z5Q-Q 6[ ;- "
ST&;3&)3 3+GI&TI(;U H.C:9 &;;X&* ST;3&)3 3+GI&TI(;U AE.DDA RGMCET, Autonomous, Nandyal 56
n ZMQ 0 5ZM F ZQ6 %+T& U n ZM[ - 5ZM6[ U ".#<9<
Optimal portfolio:
1KH2#( %'%T& RI%4
C)&PA('
RET#R(
6ETA1A2
%T*$1K2
5)i-)f6@ W
1Ri-Rf2
HC. TECH TC% TATA &)T)R% A(6 I(-)%'% ICICI .IT. %6I A&ARA RAFA HH
30.563 46.076 56.085 49.371 27.0071 33.33 18.41 16.3724 12.778 10.654
0.0756 0.5795 1.1055 0.8175 0.7283 1.04 0.8689 0.7768 0.9574 0.6322
17.6297 15.738 25.247 28.58 15.513 23.552 27.884 31.214 22.068 21.695
298.4523 8 65.70491 8 43.49615 6 50.60672 8 26.09789 9 24.35576 9 11.98066 5 10.77806 4 4.990599 5 4.198038 6
310.8063 247.6846 637.411 816.8164 240.6532 554.6967 777.5175 974.3138 486.9966 470.673
22.563 38.076 48.085 41.371 19.0071 25.33 10.41 8.3724 4.778 2.654
57
!ontdY
11Ri-Rf2D A20 KH
AH0KH
I11RiRf2DA20 H
K IAH0KH
C#T )--1cD2
%CA.E% )5EI/HT%1Ei 2
5EI/HT%1"i2
0.005488 1 0.089085 2 0.083396 6 0.041405 6 0.057522 0 0.047491 1 0.011633 5 0.006675 1 0.009393 2 0.003564 8
1.84E-05 0.001356 0.001917 0.000818 0.002204 0.00195 0.000971 0.000619 0.001882 0.000849
0.005488 0.094573 0.172482 0.219376 0.276898 0.324389 0.336022 0.342698 0.352091 0.355656
1.84E05 0.00137 4 0.00327 3 0.00411 0.00631 4 0.00826 4 0.00923 5 0.00985 4 0.01173 6 0.01258 5
1.696069 17.47599 35.6219 41.12772 26.44882 32.22455 31.93858 31.49667 25.53296 24.17776
0.072182 0.11284 0.013657 0.009487 0.208166
34.67546 54.20661 6.560533 4.557392 100
!XT(II )&T+ 5cF64
P+)!+;T I;G+ST+3 I; +&!$ S+!X)ITQ4
58
7$+)+ \i U
59
!.2. I(TERPRETATI)(+
OPTIMAL PORT FOLIO
6.5
4.5 34.6
HC L TEC H TC S TATA MOTORS ANB
54.2
$ere calculated risk & return for selected scrips by 1sharp single. model To find annual return we used the formula 5t"-t#6F"## U YYYY.. t# here t# U intial month share value t" U last month share value )i U annual return )f U 9S Irom the above calculations it is found that optimal portfolio Irom the above calculations it is found that optimal portfolio on $!* T+!$UE<.HS T!SUD<.H T&T& '(T()SUH.DS & &;%U<.DS
%y investing these type we will get more returns.
61
CHAPTER-G G.1. -indin,s G.2. %u,,estions < conc usion
G.1 -I(*I(/% +
C)&PA(' RET#R( 6ETA1A2 %T*$1K2
HC. TECH TC% TATA &)T)R% A(6 I(-)%'% ICICI .IT. %6I A&ARA RAFA
30.563 46.076 56.085 49.371 27.0071 33.33 18.41 16.3724 12.778
0.0756 0.5795 1.1055 0.8175 0.7283 1.04 0.8689 0.7768 0.9574
17.6297 15.738 25.247 28.58 15.513 23.552 27.884 31.214 22.068
62
HH
10.654 0.6322 21.695
63
G.2. %#//E%TI)(%+ Investors can minimi e the unsystematic risk by investing up to "# securities. 7hen market is %earish sell the high %eta securities it reduces the loss to the portfolio. %y having the negative %eta securities investor can earn profits even the market is %earish.
64
G.3. C)(C.#%I)( Ior any investment the factors to be conceder are return in investment and risk associated that investment diversified in the investment in to different assets can reduced the risk . %y following modern portfolio theorem risk can be reduced for a re8uired return.
65
6I6.I)/RAPH'
1. %EC#RIT' A(A.'%I% A(* P)RT-).I) &A(A/E&E(T -dona d.E.-is8er;Rona d.F.Fordan 2. I($E%T&E(T% -7illiam .I.Sharpe,gordon,, &lle.ander and ,effery.G.%aily E. P)RT-).I)&A(A/E&E(T -Strong ).&
5E6%ITE% $I%ITE* www.mc.india.com www.ncde..com www.finance.yahoo.com www.financiale.press.com www.nseindia.com www.bseindia.com www.indiainfoline.com
(E5% PAPER% +conomic Times %usiness line
66

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Portfolio Management

1.1. E"EC#TI$E %#&&AR'

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RESEARCH (e.g. Security Analysis)

OPERATIONS (e.g. buying and selling of Securities)

2. ()(-*I%CRETI)(AR' P)RT-).I) &A(A/E&E(T %ER$ICE 1(*P&%2+

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

)ur $ision; &ission < P8i osop8y &ission

RGMCET, Autonomous, Nandyal

)ur %tren,t8 and $a ues )ur %tren,t8

RGMCET, Autonomous, Nandyal

Portfolio Management %toc7 Tradin,

Currency Tradin,0 -orex Tradin,

&utua -unds Tradin,

58y #s Profit from strai,8tfor9ard; afforda: e pricin,

&a7e t8e ri,8t trades; po9ered 9it8 t8e ri,8t too s

Invest smart y :ased on independent; o:=ective researc8

Trade confident y 9it8 outstandin,; persona i>ed support

CHAPTER-2 Revie9 of iterature

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

3.3. %C)PE )- THE %T#*'+

3.!. .I&ITATI)(% )- THE %T#*'

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

%6I return; ris7 and :eta ca cu ation+

5T"-T#6F"## &;;X&* )+TX); U YYYYYYYY.U "H.ECA< T#

ST&;3&)3 3+GI&TI(;U:.#"A RGMCET, Autonomous, Nandyal 42

5T"-T#6F"## &;;X&* )+TX); U YYYYYYYY. U"#.H<D T#

ST&;3&)3 3+GI&TI(; U RGMCET, Autonomous, Nandyal

5T"-T#6F"## RGMCET, Autonomous, Nandyal 44

RGMCET, Autonomous, Nandyal

5T"-T#6F"## &;;X&* )+TX);UYYYYYYYU<H.#CH T#

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RGMCET, Autonomous, Nandyal

RGMCET, Autonomous, Nandyal

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RGMCET, Autonomous, Nandyal

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