SEPTEMBER 14, 2018

FD PROJECT REPORT
SUBMITTED TO PROF. SANJAY DHAMIJA

BY GROUP 9
BATCH II
Table of Contents
Introduction .......................................................................................................................... 3
Objective 1: ........................................................................................................................... 4
Objective 2: ........................................................................................................................... 5
Objective 3: ........................................................................................................................... 5
Objective 4: ........................................................................................................................... 7
Introduction
The project involves creation of a portfolio, hedging and increment and reduction of Beta. Thus,
we divide this report in four sections, one each for the four given objectives. The excel file
containing all the calculations has been attached.

For creation of the portfolio and calculation of Beta, National Stock Exchange has been
considered the benchmark and adjusted closing prices of NSE have been considered to calculate
returns.

Standard deviation: Standard deviation has been taken over the five years period by calculating
STDEV for daily returns and multiplying it by the square root of the number of days.

Stocks Chosen: TCS, Reliance, Maruti, Hindustan Unilever and Asian Paints have been chosen
to make the portfolio. Beta has been calculated using the following formula.

Figure 1- (a)= Beta of TCS; (b)

Computation of Beta

The overall value of the portfolio has been kept close to 10,00,000 Rs. According to this, the
weights of the stocks have been distributed among the five stocks and number of shares has been
selected appropriately. The portfolio value has been calculated as the weighted average of
adjusted closing prices of all the stocks.

VSTOCK = ADJUSTED CLOSING PRICE (as on 1st August 2018)*(NUMBER OF SHARES)

Value of Portfolio = VTCSWTCS+VRELIANCEWRELIANCE+VMARUTIWMARUTI+VAPWAP +VHULWHUL

Beta of Portfolio = BTCSWTCS+BRELIANCEWRELIANCE+BMARUTIWMARUTI+BAPWAP+BHULWHUL

 Figure- 2

Figure 2 shows the calculation of Beta of a portfolio. It can be observed that there are 102 shares
of TCS, 190 of Reliance, 24 of Maruti, 120 of HUL and 100 of Asian Paints, contributing to
20%, 23%, 22%, 21% and 14% of the portfolio value respectively. From the calculations, the
portfolio Beta came out to be 0.806, which implies that we have a stock choice which is less
volatile with respect to the market.

Objective 1:
Contract Size 75
NIFTY Future (opening price) as on 1st August,
2018 for expiry of 30th August, 2018 11,379.95
Spot Price on 1st August, 2018 11,346.20
Spot Price on 30th August, 2018 11,676.80
Value of one Future Contract of NIFTY 853,496.25
Beta of Portfolio 0.8063
Value of Portfolio 1,000,262.11

No. of Contracts to be Shorted 0.945

Thus the number of contracts to shorted are to be
considered as 1

https://tradingeconomics.com/india/government-bond-yield
Risk Free Rate 8.05%
 Index Value as on 30th August, 2018 11,676.80
Index Return 2.91%
Portfolio Return 2.48%
Gain on Portfolio 24,781.70
Gain/Loss on a Future (296.90)
Gain/Loss on total contracts shorted (22,267.50)
Total Gain 2,514.20

Total Value of Portfolio 1,002,776.32

Objective 2:
The objective 1 was to increase the beta by 0.3. Beta is simply a proxy for the systematic risk of
an asset compared to the risk of the market overall. A portfolio beta is therefore simply a
weighted average of the betas of each asset held in the portfolio. To increase the Beta of the
portfolio we must buy future contracts or go long on the appropriate number of futures.

Beta of Portfolio 0.806301393

Increase Beta by 0.3
Increased Beta 1.106301393
Value of Portfolio 1000262.114
Contract Size 75
NIFTY Future (opening price) as on 1st August, 2018 for expiry of 30th August,
2018 11379.95
Spot Price on 1st August, 2018 11346.2
Spot Price on 30th August, 2018 11676.8
Value of one Future Contract 853496.25
Risk Free Rate 8.05%

No. of Contracts to go long 3.5159E-01

No. of Contracts to go long 1.0000E+00

Index Value as on 30th August, 2018 11676.85

Index Return 2.91%
Portfolio Return 2.48%
Gain on Portfolio 24781.70257
Gain/Loss on a future contract 22263.75
Gain/Loss on total future contracts go long on 2.2264E+04
Total Gain 47045.45257

Total Value of Portfolio 1047307.566

Objective 3:
The objective was to decrease the beta by 0.3. A portfolio beta is a weighted average of the betas
of each asset held in the portfolio. To decrease the beta of the portfolio, we must sell future
contracts or go short on the appropriate number of futures.

Beta of Portfolio 0.806301393

Decrease Beta by 0.3
Decreased Beta 0.506301393
Value of Portfolio 1000262.114
Contract Size 75
NIFTY Future (opening price) as on 1st August, 2018 for expiry of 30th August,
2018 11379.95
Spot Price on 1st August, 2018 11346.2
Spot Price on 30th August, 2018 11676.8
Value of one Future Contract 853496.25
Risk Free Rate 8.05%

No. of Contracts to short 3.5159E-01

No. of Contracts to short 1.0000E+00

Index Value as on 30th August, 2018 11676.85

Index Return 2.91%
Portfolio Return 2.48%
Gain on Portfolio 24781.70257
Gain/Loss on a future contract -22263.75
Gain/Loss on total future contracts -2.2264E+04
Total Gain 2517.95257

Total Value of Portfolio 1002780.066

Objective 4:
The objective was to go long on NIFTY and hedge our portfolio. In this case, we found strike
price and put premium on 30th Aug as 12,300rs. And 899 rs. in first case and 11700 and 338.3
rs. In second case. The first case was In the money and second case was also In the money. In
both cases, we hedged to found the total gain of 46,740rs. and 1740rs. On put option.
Case 1
Beta of Portfolio 0.806301393
Value of Portfolio 1,000,262
NIFTY 50 Option Contract Size 75
NIFTY put option (opening price) as on 1st August, 2018
for expiry of 30th August, 2018 (PE) 899.10
Strike Price 12,300.00
Spot Price on 1st August, 2018 11,346.20
Spot Price on 30th August, 2018 11,676.80
Value of one Option Contract 67432.5
Risk Free Rate 8.05%

Index Value as on 30th August, 2018 11,676.85

Index Return 2.91%
Portfolio Return 2.48%
Gain on Portfolio 24,781.70
Gain/Loss on a put option 623.20
Gain/Loss on total put option contracts go long on 46,740.00
Total Gain 71,521.70

Total Value of Portfolio 1,071,783.82

Case 2
Beta of Portfolio 0.806
Value of Portfolio 1,000,262.11
NIFTY 50 Option Contract Size 75
NIFTY put option (opening price) as on 1st August, 2018
for expiry of 30th August, 2018 (PE) 338.3
Strike Price 11700
Spot Price on 1st August, 2018 11,346.20
Spot Price on 30th August, 2018 11,676.80
Value of one Future Contract 25,372.50
Risk Free Rate 8.05%

Index Value as on 30th August, 2018 11,676.85

Index Return 2.91%
Portfolio Return 2.48%
Gain on Portfolio 24,781.70
Gain/Loss on a put option 23.20
Gain/Loss on total put option contracts go long on 1,740.00
Total Gain 26,521.70

Total Value of Portfolio 1,026,783.82