EQUITY PORTFOLIO MANAGEMENT

Aim: To manage an equity portfolio of 15 stocks and match its performance with an index

Objectives: To know stock selection process To create a portfolio which would try to eliminate the unsystematic or business - specific risk. To try to match the performance of an index

Approach: Firstly, 15 stocks which belong to different industries were chosen These stocks were placed in a single portfolio which contained 100 shares of each company At periodical intervals the portfolio was revised and reset. Then the performance was tracked and compared as against SENSEX This process was done for a period for a month and half

EXECUTIVE SUMMARY This paper is an attempt to look at a simulated portfolio at real time price levels. A portfolio of equity stocks were created such that each of the stocks came from different industries, thereby reasonably eliminating the firm-specific risk. This portfolio was operated for a period of month and a half. There were frequent revisions done once in 15 days. The revision basically dealt with changing the stocks which were making losses and being replaced with another companys stock in the same industry.

Discussions: The paper mostly contains tabulated data which would express the performance of the simulated portfolio: I)

1st revision September 9th to September 24th Sensex value absolute change percentage change portfolio value absolute change percentage change 682642 16831 16052 -779 -4.628 646935 -35707 -5.231

The above table gives a summary for the period for first 15 days from september 9th to September 24th. The percentage change in sensex is (4.6%) and the portfolios return is (5.2%). It clearly shows that it is really difficult to beat the market performance. The strong losers of the period were: State bank of mysore Aditya birla TCS

II)

2nd revision september 24th to october 9th Sensex value absolute change percentage change portfolio value absolute change percentage change 530851 16052 17082 1030 6.417 555265 24414 4.599

In the 2nd revision period from september 24th to october 9th, the markets picked up and the sensex has grown by 6.4% and the portfolios performance has gone up to 4.5%. The top gainers in this revision were: III) Dr.reddy labs ING vysya ITC

3rd revision october 9th to october 25th Sensex value absolute change percentage change portfolio value absolute change percentage change 558964 17082 17096 14 0.082 573544 14580 2.608

In this revision, astonishingly the teams portfolio has performed, 2.6%, better than the sensexs performance, 0.08%. It is not very usual that an investor can beat the performance of the market or the index. The key performers of this revision are: Ranbaxy labs Zee entertainment ITC TVS motors

Key findings and Conclusion: In all the revisions we saw above, the portfolio did not make a significant gain compared to the market. Hence it is always concluded that a portfolio which is created by imitating the index could be better than any other portfolio. In this case atleast if the portfolio cannot beat the market, it can atleast match the market or the indexs performance. Another research finding also suggests that it is always advisable to have a longer investment horizon than a smaller one. A stock with good fundamentals and a potential to grow can perform or outbeat the markets performance. It is required for an investor to choose stocks with less correlation so that they can reduce the cyclical effect and movement of the market. Limitations of the paper: The investment made into the portfolio was not uniform Every revision had different amounts of funds being invested. Only the number of shares were limited to 100 everytime it was bought and sold.