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SREE RAMA ENGINEERING COLLEGE,TIRUPATI 1 P a g e A STUDY ON SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT WITH REFERENCE TO "DOHA BROKERAGE AND FINANCIAL SERVICES" PROJECT REPORT Submitted to Jawaharlal Nehru Technological University Ananthapur in partial fulfillment of the requirements for the award of the degree
SREE RAMA ENGINEERING COLLEGE,TIRUPATI 1 P a g e A STUDY ON SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT WITH REFERENCE TO "DOHA BROKERAGE AND FINANCIAL SERVICES" PROJECT REPORT Submitted to Jawaharlal Nehru Technological University Ananthapur in partial fulfillment of the requirements for the award of the degree
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SREE RAMA ENGINEERING COLLEGE,TIRUPATI 1 P a g e A STUDY ON SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT WITH REFERENCE TO "DOHA BROKERAGE AND FINANCIAL SERVICES" PROJECT REPORT Submitted to Jawaharlal Nehru Technological University Ananthapur in partial fulfillment of the requirements for the award of the degree
Droits d'auteur :
Attribution Non-Commercial (BY-NC)
Formats disponibles
Téléchargez comme DOCX, PDF, TXT ou lisez en ligne sur Scribd
SREE RAMA ENGINEERING COLLEGE,TIRUPATI 1 | P a g e
A STUDY ON SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT WITH REFERENCE TO DOHA BROKERAGE AND FINANCIAL SERVICES
PROJECT REPORT Submitted to JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY Ananthapurm in partial fulfillment of the requirements For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION By MISS. P.DIVYA Roll No: 104C1E0048
Under the guidance of Mr. K. ASHOK KUMAR MBA Assistant professor
DEPARTMENT OF MANAGEMENT STUDIES SREE RAMA ENGINEERING COLLEGE (Affiliated to JNTU Ananthapur and recognized by AICTE, New Delhi) RAMI REDDY NAGAR, KARAKAMBADI ROAD TIRUPATHI Ph: 0877 2285539, FAX: 0877 2285536. (2010-2012)
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 2 | P a g e
DEPARTMENT OF MANAGEMENT STUDIES SREE RAMA ENGINEERINGCOLLEGE (Affiliated to JNTU Ananthapur and recognized by AICTE, New Delhi) RAMI REDDY NAGAR, KARAKAMBADI ROAD, TIRUPATHI.
CERTIFICATE
This is to certify that the project work entitled, A Study on SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT WITH REFERENCE TO DOHA BROKERAGE AND FINANCIAL SERVICES, submitted by MISS.P.DIVYA (Roll no: 104C1E0048) to Jawaharlal Nehru Technological University, Ananthapur, for the award of the degree of Master of Business Administration Is a record of bonafide research work carried out under my guidance.
The study is his Original work and it has not previously formed the basis for the award of any Degree, Diploma, or other similar titles. The project report represents an independent work on the part of candidate.
Faculty Guide Head of the department
MR. K.ASHOK KUMAR MR. K.S.SIVAREDDY MBA MBA, M.PHILL (Ph.d) Assistant professor, Department of Management Studies Department of Management Studies Sree Rama Engineering college, Sree Rama Engineering college, Tirupati
EXTERNAL EXAMINER
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 3 | P a g e
PLACE: DATE:
DECLARATION
I heard by declared that the project report entitled A study on SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT WITH REFERENCE TO DOHA BROKERAGE AND FINANCIAL SERVICES submitted by P.DIVYA 104C1E0048 is a project work done under the guidance of K.Ashok Kumar, Asst professor Deportment of managent studies, Sree rama engineering college, Tirupati. As a part of the JNTU Ananthapurm Curriculum for MBA IV sem is my Original work and the data has been collected from the Authentic sources. Further I declared the has been prepared and submitted for academic purpose.
Place: Date :
(P.DIVYA) (Regd no: 104C1E0048)
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 4 | P a g e
ACKNOWLEDGEMENT
Preparing a report is never the work of single person and when attempting to acknowledge the contributions of other, one always runs risk of omitting some important contribution. None the less, the attempt must be made because this report has been helpful comments I have received along the way from my project guide and other faculty members. Encouraging advice and words of wisdom when things seemed to do away Mrs. N.Roopalatha reddy Garu Head of the Department, Dean of Sree Rama Engineering College, Tirupati helped meet my project objective and match the time and resource framework and giving his valuable suggestions for making an project successful completion. My heartfelt thanks to MR. RAMU., Sr officer-S&D., of DOHA BROKERAGE AND FINANCIAL SERVICES For his valuable suggestions. I am thankful to Mr.PRATHAP Assistant Professor, Sree Rama Engineering College, and Tirupathi for his valuable suggestion and guidance in every moment of my project. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 5 | P a g e I express my sincere gratitude to MR. K.ASHOK KUMAR, Assistant professor, Sree Rama Engineering College, Tirupati, for being my project guide and giving me timely guidance throughout the project report. I would like to acknowledge my sincere thanks to college management for giving me this opportunity. I would like to thank Doha people for giving me an opportunity to work on this project. I am thankful to all my classmates & friends who helped directly or indirectly in completion of my project work. Last but not the least, I am extremely thankful to my parents and family members, for giving moral support and encouragement to complete the project..
(P.DIVYA) (Rollno: 104C1E0048)
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 6 | P a g e
CONTENTS Chapter name Chapter name Page no I Introduction
1.1 Industry profile
1.2 company profile
II Review of literate
2.1 Meaning
2.2 Need &Importance
2.3 Methods of the study
2.4 Other
III Research methodology & objectives
3.1 Need for the study
3.2 Objectives of the study
3.3 Scope of the study
3.4 Limitations of the study
3.5 Methodology of the study
IV Data analysis & Interpretation V Findings recommendations & conclusion 5.1 Findings 5.2 Recommendations 5.3 Conclusion
VI Annexure & bibliography
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 7 | P a g e
LIST OF TABLES
S.NO TOPIC PAGE NO 1 Calculation of return of ICICI
69 2 CALCULATION OF RETURN OF HDFC
71
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 8 | P a g e
LIST OF CHARTS S.NO TOPIC PAGE NO 1 Correlation between CIPLA&BAJAJ
99
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 9 | P a g e
CHAPTER-I INTRODUCTION
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 10 | P a g e
INTRODUCTION Portfolio management is a process encompassing many activities of investment is assets and securities. It is a dynamic and flexible concept and involves regular and systematic analysis, judgment, and action. A combination of securities held together will give a beneficial result if they grouped in a manner to secure higher returns after taking into consideration the risk elements The main objective of the Portfolio management is to help the investors to make wise choice between alternate investments without a post trading shares. Any portfolio management must specify the objectives like Maximum returns, Optimum Returns, Capital appreciation, Safety etc., in the same prospectus. This service renders optimum returns to the investors by proper selection and continuous shifting of portfolio from one scheme to another scheme of from one plan to another plan within the same scheme. Four different companies are chosen for the study- WIPRO, DR.REDDY LABORATIVES LTD, ACC, and HERO HONDA AUTOMOBILES. The companies chosen for the study are some of the top performers in the securities market. The study gives the returns offered by the companies of various securities are compared and conclusions are brought out which produces large and better portfolio combinations for the investors. Portfolio management and investment decision as a concept came to be familiar with the conclusion of second world war when thing can be in the stock market can be liberally ruined the fortune of individual, companies ,even government s it was then discovered that the investing in various scripts instead of putting all the money in a single securities yielded weather return with low risk percentage, it goes to the credit of HARYMERKOWITZ, 1991 noble laurelled to have SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 11 | P a g e pioneered the concept of combining high yielded securities with these low but steady yielding securities to achieve optimum correlation coefficient of shares. Portfolio management refers to the management of portfolios for others by professional investment managers it refers to the management of an individual investors portfolio by professionally qualified person ranging from merchant banker to specified portfolio company.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 12 | P a g e
CHAPTER-I INDUSTRY& COMPANY PROFILE
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 13 | P a g e
Introduction A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services such as investment funds and loans. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, banc assurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients. The level of government regulation of the banking industry varies widely, with countries such as Iceland, having relatively light regulation of the banking sector, and countries such as China having a wide variety of regulations but no systematic process that can be followed typical of a communist system. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472. History Origin of the word The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk covered by a SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 14 | P a g e green tablecloth. However, there are traces of banking activity even in ancient times, which indicates that the word 'bank' might not necessarily come from the word 'banco'. In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Romethat of the Imperial Mint. The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza () means both a table and a bank. Traditional banking activities Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM. Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 15 | P a g e Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to. Entry regulation Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank license to operate. Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's orderalthough money lending, by itself, is generally not included in the definition. Unlike most other regulated industries, the regulator is typically also a participant in the market, i.e. a government-owned (central) bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licenses banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank. Definition The definition of a bank varies from country to country. Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as: - conducting current accounts for his customers - paying cheques drawn on him, and - Collecting cheques for his customers. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 16 | P a g e In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organized or regulated. The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions: - "banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation). - "banking business" means the business of either or both of the following: 1. receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period; 2. paying or collecting cheques drawn by or paid in by customers .
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 17 | P a g e Accounting for bank accounts Bank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. This means you credit a credit account to increase its balance, and you debit a debit account to decrease its balance. This also means you debit your savings account every time you deposit money into it (and the account is normally in deficit), while you credit your credit card account every time you spend money from it (and the account is normally in credit). However, if you read your bank statement, it will say the oppositethat you credit your account when you deposit money and you debit it when you withdraw funds. If you have cash in your account, you have a positive (or credit) balance; if you are overdrawn, you have a negative (or deficit) balance. The reason for this is that the bank, and not you, has produced the bank statement. Your savings might be your assets, but the bank's liability, so they are credit accounts (which should have a positive balance). Conversely, your loans are your liabilities but the bank's assets, so they are debit accounts (which should also have a positive balance). Where bank transactions, balances, credits and debits are discussed below, they are done so from the viewpoint of the account holderwhich is traditionally what most people are used to seeing. Economic functions 1. Issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash. 2. Netting and settlement of payments banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 18 | P a g e be presented with, and pay payment instruments. This enables banks to economize on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them. 3. Credit intermediation banks borrow and lend back-to-back on their own account as middle men. 4. Credit quality improvement banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to rise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. 5. Maturity transformation banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets) Law of banking Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customerdefined as any entity for which the bank agrees to conduct an account. The law implies rights and obligations into this relationship as follows: 1. The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank. 2. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 19 | P a g e 3. The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer. 4. The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account. 5. The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship. 6. The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank. 7. The bank must not disclose details of transactions through the customer's account unless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it. 8. The bank must not close a customer's account without reasonable notice, since cheques are outstanding in the ordinary course of business for several days. These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank- customer relationship. Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules. The requirements for the issue of a bank license vary between jurisdictions but typically include: 1. Minimum capital 2. Minimum capital ratio 3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers 4. Approval of the bank's business plan as being sufficiently prudent and plausible.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 20 | P a g e Types of banks Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations. Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. Types of retail banks - Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses. - Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners. - Community development banks: regulated banks that provide financial services and credit to under-served markets or populations. - Postal savings banks: savings banks associated with national postal systems. - Private Banks: banks that manage the assets of high net worth individuals. - Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks. - Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 21 | P a g e initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralized distribution network, providing local and regional outreachand by their socially responsible approach to business and society. - Building societies and Landesbanks: institutions that conduct retail banking. - Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments. - Islamic banks: Banks that transact according to Islamic principles. Types of investment banks - Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions. - Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies. Both combined - Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are much diversified groups that, among other services, also distribute insurance hence the term banc assurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity. Other types of banks - Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 22 | P a g e must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 23 | P a g e
COMPANY PROFILE
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 24 | P a g e Introduction
Established in 1992, as one of the first corporate brokerages in India, The Doha Brokerage & Financial Services Ltd (formerly Select Securities Ltd), is the flagship company of the DBFS group. Doha Brokerage & Financial Services Ltd is focused on creating utmost value for its customers, consistently by drawing on our collective expertise, resources and global exposure. To serve our customers better, the company has gone beyond the traditional brokerage business, and offers a wide range of services, which include total wealth management and investment solutions. With a pan Indian presence, which comprises over 180 branches across major cities, as well as in Dubai and Doha in the Middle East, DBFS is always closer to its customers.
The Team - Mr. R Seetharaman, Chairman (Nominee- Doha Bank) - Mr. K V Samuel, Vice Chairman (Nominee- Doha Bank) - Mr. Prince George, Managing Director & CEO - Mr. Binny C. Thomas, Whole-time Director (Dubai) - Mr. Sekhar M, Whole-time Director - Mr. Suresh Yezhuvath, Whole-time Director Core Strengths Research and Advisory Capabilities The competent, professional research team of DBFS is always committed to building and managing the financial assets of its customers. By providing security information and trading calls on a real time basis through trading terminals, DBFS is always committed to remain a step ahead of other brokerage firms.
Technology innovations The brokerage industry, today, is driven by sophisticated technology. The IT and telecom revolution has brought in a brave new world in knowledge sharing and customer service. DBFS SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 25 | P a g e is always committed to bring the best of these conveniences to its customers. The group has acquired the latest cutting-edge technology for front end trading and back office processing. This enhances quality and speed of services. This also enables centralized monitoring and risk management up to client level, online back office support at the branch level and real time customer support through internet. Qualified, trained and motivated manpower DBFS employs a large number of qualified professionals who are motivated and adequately trained to service the customers efficiently and competently. Distribution network DBFS has a network of over 180 branches. Thus, the company is poised to reach out to more customers, offer the most competitive brokerage and terms to its customers. As the company has already invested in a technology platform which is scalable to any new location without additional investment, the group is gearing up to increase the branch network exponentially.
Corporate Vision Vision We want to remain as the leading, trusted total financial services provider, wherever we operate, by maintaining superior technological and service standards, and by keeping trust and transparency as our core values. Mission We are committed to create and enhance wealth for corporate and retail customers, by delivering cutting-edge financial solutions which suit their specific need Future Plans The promise of a better future DBFS is always keen in stretching its horizons to explore into newer areas of services and solutions. Because, in a fast paced world, customer expectations and requirements are growing, at an equal pace. To take on the challenging needs, DBFS is rolling out a host of new products and services. The company is gearing up to widen its presence, both in India and overseas, with the support of its strategic partner. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 26 | P a g e
Services Internet Trading DBFS has a state-or-the-art internet trading platform with cutting-edge technological excellence. TRADE easy, the internet trading platform of the group has almost all the features of a Brokers terminal. Commodities & Forex Trading As a trading member of DGCX, Dubai, Select Commodities DMCC offers trading in commodities and forex for its customers. The group has membership in all premier commodity exchanges in India, namely NCDEX, NMCE and MCX. The company facilitates futures trading for various agricultural commodities and other commodities including gold, silver, rubber, cardamom, pepper etc. which are actively traded. Custodial - Depository Services Select Stock Brokers Ltd. is a Depository Participant with Central Depository Services Ltd. (CDSL). CDSL is one of only two depositories in India for electronic holding of securities. The Company extends depository services to its trading clients as well as non-trading clients. The custodial services include electronic holding of securities, Demat, Remat, pledge, unpledge etc. and market and off-market transfers, transmission, transposition etc. Mutual Funds & Insurance Products DBFS, being a total solutions provider for the varied investment needs of the retail investors, distributes Mutual Fund products of almost all major AMCs. Application Forms of NFOs are available with the branches.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 27 | P a g e Portfolio Management DBFL Ltd. is a SEBI registered Portfolio Manager with an excellent track record of performance. The group has a highly professional, experienced and result-oriented research team which analyzes the markets and manages the customers funds accordingly in order to ensure optimum results. DBFS Portfolio Managers have been able to consistently out-perform the bench-mark indices. Trading in Equities & Derivatives DBFS has membership in both NSE and BSE. The group has been permitted to operate in the cash as well as derivative segments of NSE and BSE. Online trading in Cash Market and FAO are available at all the branches. Connectivity is provided at the Branches by way of V-Sat or VPN / Broad Band. The group services both retail and institutional customers. SERVICES RENDERED BY DBFS
Institutional Distribution Services Depository Services Commodities Broking Services International Equity & Commodities Wealth Management Services Investment Banking
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 28 | P a g e
CHAPTER 2 REVIEW OF LITERATURE
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 29 | P a g e
REVIEW OF LITERATURE
PORTFOLIO:
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 return is a weighted average of the expected return of its securities, the contribution of each security the portfolios expected returns depends on its expected returns and its proportionate share of the initial portfolios market value. It follows that an investor who simply wants the greatest possible expected return should hold one security; the one which is considered to have a greatest expected return. Very few investors do this, and very few investment advisors would counsel such and extreme policy instead, investors should diversify, meaning that their portfolio should include more than one security.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 30 | P a g e OBJECTIVES OF PORTFOLIOMANAGEMENT:
The main objective of investment portfolio management is to maximize the returns from the investment and to minimize the risk involved in investment. Moreover, risk in price or inflation erodes the value of money and hence investment must provide a protection against inflation.
Secondary objectives:
The following are the other ancillary objectives:
Regular return. Stable income. Appreciation of capital. More liquidity. Safety of investment. Tax benefits.
Portfolio management services helps investors to make a wise choice between alternative investments with pit any post trading hassles this service renders optimum returns to the investors by proper selection of continuous change of one plan to another plane with in the same scheme, any portfolio management must specify the objectives like maximum returns, and risk capital appreciation, safety etc in their offer.
Return From the angle of securities can be fixed income securities such as:
(a) Debentures partly convertibles and non-convertibles debentures debt with tradable Warrants. (b) Preference shares (c) Government securities and bonds (d) Other debt instruments SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 31 | P a g e
(2) Variable income securities (a) Equity shares (b) Money market securities like treasury bills commercial papers etc.
Portfolio managers has to decide up on the mix of securities on the basis of contract with the client and objectives of portfolio
NEED FOR PORTFOLIO MANAGEMENT:
Portfolio management is a process encompassing many activities of investment in assets and securities. It is a dynamic and flexible concept and involves regular and systematic analysis, judgment and action. 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 a portfolio based upon the investors objectives, constraints, preferences for risk and returns and tax liability. The portfolio is 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 returns. The changes in the portfolio are to be effected to meet the changing condition.
Portfolio construction refers to the allocation of surplus funds in hand among a variety of financial assets open for investment. Portfolio theory concerns itself with the principles governing such allocation. The modern view of investment is oriented more go towards the assembly of proper combination of individual securities to form investment portfolio.
A combination of securities held together will give a beneficial result if they grouped in a manner to secure higher returns after taking into consideration the risk elements.
The modern theory is 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 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 32 | P a g e regions, in different industries or those producing different types of product lines. Modern theory believes in the perspective of combination of securities under constraints of risk and returns
PORTFOLIO MANAGEMENT PROCESS:
Investment management is a complex activity which may be broken down into the following steps:
1) Specification of investment objectives and constraints:
The typical objectives sought by investors are current income, capital appreciation, and safety of principle. The relative importance of these objectives should be specified further the constraints arising from liquidity, time horizon, tax and special circumstances must be identified.
2) choice of the asset mix :
The most important decision in portfolio management is the asset mix decision very broadly; this is concerned with the proportions of stocks (equity shares and units/shares of equity- oriented mutual funds) and bonds in the portfolio.
The appropriate stock-bond mix depends mainly on the risk tolerance and investment horizon of the investor.
ELEMENTS OF PORTFOLIO MANAGEMENT:
Portfolio management is on-going process involving the following basic tasks:
Identification of the investors objectives, constraints and preferences. Strategies are to be developed and implemented in tune with investment policy formulated. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 33 | P a g e Review and monitoring of the performance of the portfolio. Finally the evaluation of the portfolio Risk: Risk is uncertainty of the income /capital appreciation or loss or both. All investments are risky. The higher the risk taken, the higher is the return. But proper management of risk involves the right choice of investments whose risks are compensating. The total risks of two companies may be different and even lower than the risk of a group of two companies if their companies are offset by each other.
SOURCES OF INVESTMENT RISK:
Business risk: As a holder of corporate securities (equity shares or debentures), you are exposed to the risk of poor business performance. This may be caused by a variety of factors like heightened competition, emergence of new technologies, development of substitute products, shifts in consumer preferences, inadequate supply of essential inputs, changes in governmental policies, and so on.
Interest rate risk: : The changes in interest rate have a bearing on the welfare on investors. As the interest rate goes up, the market price of existing firmed income securities falls, and vice versa. This happens because the buyer of a fixed income security would not buy it at its par value of face value o its fixed interest rate is lower than the prevailing interest rate on a similar security. For example, a debenture that has a face value of RS. 100 and a fixed rate of 12% will sell a discount if the interest rate moves up from, say 12% to 14%.while the chances in interest rate have a direct bearing on the prices of fixed income securities, they affect equity prices too, albeit some what indirectly.
The two major types of risks are:
Systematic or market related risk.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 34 | P a g e Unsystematic or company related risks.
Systematic risks affected from the entire market are (the problems, raw material availability, tax policy or government policy, inflation risk, interest risk and financial risk). It is managed by the use of Beta of different company shares.
The unsystematic risks are mismanagement, increasing inventory, wrong financial policy, defective marketing etc. this is diversifiable or avoidable because it is possible to eliminate or diversify away this component of risk to a considerable extent by investing in a large portfolio of securities. The unsystematic risk stems from inefficiency magnitude of those factors different form one company to another.
RETURNS ON PORTFOLIO:
Each security in a portfolio contributes return in the proportion of its investments in security. Thus the portfolio expected return is the weighted average of the expected return, from each of the securities, with weights representing the proportions share of the security in the total investment. Why does an investor have so many securities in his portfolio? If the security ABC gives the maximum return why not he invests in that security all his funds and thus maximize return? The answer to this questions lie in the investors perception of risk attached to investments, his objectives of income, safety, appreciation, liquidity and hedge against loss of value of money etc. this pattern of investment in different asset categories, types of investment, etc., would all be described under the caption of diversification, which aims at the reduction or even elimination of non-systematic risks and achieve the specific objectives of investors
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 35 | P a g e RISK ON PORTFOLIO :
The expected returns from individual securities carry some degree of risk. Risk on the portfolio is different from the risk on individual securities. The risk is reflected in the variability of the returns from zero to infinity. Risk of the individual assets or a portfolio is measured by the variance of its return. The expected return depends on the probability of the returns and their weighted contribution to the risk of the portfolio. These are two measures of risk in this context one is the absolute deviation and other standard deviation.
Most investors invest in a portfolio of assets, because as to spread risk by not putting all eggs in one basket. Hence, what really matters to them is not the risk and return of stocks in isolation, but the risk and return of the portfolio as a whole. Risk is mainly reduced by Diversification.
RISK RETURN ANALYSIS:
All investment has some risk. Investment in shares of companies has its own risk or uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or depreciation of share prices, losses of liquidity etc
The risk over time can be represented by the variance of the returns. While the return over time is capital appreciation plus payout, divided by the purchase price of the share.
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Normally, the higher the risk that the investor takes, the higher is the return. There is, how ever, a risk less return on capital of about 12% which is the bank, rate charged by the R.B.I or long term, yielded on government securities at around 13% to 14%. This risk less return refers to lack of variability of return and no uncertainty in the repayment or capital. But other risks such as loss of liquidity due to parting with money etc., may however remain, but are rewarded by the total return on the capital. Risk-return is subject to variation and the objectives of the portfolio manager are to reduce that variability and thus reduce the risky by choosing an appropriate portfolio.
Traditional approach advocates that one security holds the better, it is according to the modern approach diversification should not be quantity that should be related to the quality of scripts which leads to quality of portfolio.
Experience has shown that beyond the certain securities by adding more securities expensive. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 37 | P a g e
Simple diversification reduces:
An assets total risk can be divided into systematic plus unsystematic risk, as shown below:
Unsystematic risk is that portion of the risk that is unique to the firm (for example, risk due to strikes and management errors.) Unsystematic risk can be reduced to zero by simple diversification.
Simple diversification is the random selection of securities that are to be added to a portfolio. As the number of randomly selected securities added to a portfolio is increased, the level of unsystematic risk approaches zero. However market related systematic risk cannot be reduced by simple diversification. This risk is common to all securities.
Persons involved in portfolio management:
Investor: Are the people who are interested in investing their funds?
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 38 | P a g e Portfolio managers:
Is a person who is in the wake of a contract agreement with a client, advices or directs or undertakes on behalf of the clients, the management or distribution or management of the funds of the client as the case may be. Discretionary portfolio manager:
Means a manager who exercise under a contract relating to a portfolio management exercise any degree of discretion as to the investment or management of portfolio or securities or funds of clients as the case may be . The relation ship between an investor and portfolio manager is of a highly interactive nature
The portfolio manager carries out all the transactions pertaining to the investor under the power of attorney during the last two decades, and increasing complexity was witnessed in the capital market and its trading procedures in this context a key (uninformed) investor formed ) investor found him self in a tricky situation , to keep track of market movement ,update his knowledge, yet stay in the capital market and make money , there fore in looked forward to resuming help from portfolio manager to do the job for him .The portfolio management seeks to strike a balance between risks and return. The generally rule in that greater risk more of the profits but S.E.B.I. in its guidelines prohibits portfolio managers to promise any return to investor. Portfolio management is not a substitute to the inherent risks associated with equity investment.
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Who can be a portfolio manager?
Only those who are registered and pay the required license fee are eligible to operate as portfolio managers. An applicant for this purpose should have necessary infrastructure with professionally qualified persons and with a minimum of two persons with experience in this business and a minimum net worth of Rs. 50lakhs. The certificate once granted is valid for three years. Fees payable for registration are Rs 2.5lakhs every for two years and Rs.1lakhs for the third year. From the fourth year onwards, renewal fees per annum are Rs 75000. These are subjected to change by the S.E.B.I.
The S.E.B.I. has imposed a number of obligations and a code of conduct on them. The portfolio manager should have a high standard of integrity, honesty and should not have been convicted of any economic offence or moral turpitude. He should not resort to rigging up of prices, insider trading or creating false markets, etc. their books of accounts are subject to inspection to inspection and audit by S.E.B.I... The observance of the code of conduct and guidelines given by the S.E.B.I. are subject to inspection and penalties for violation are imposed. The manager has to submit periodical returns and documents as may be required by the SEBI from time-to- time.
.Functions of portfolio managers:
Advisory role: advice new investments, review the existing ones, identification of objectives, recommending high yield securities etc. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 40 | P a g e
Conducting market and economic service: this is essential for recommending good yielding securities they have to study the current fiscal policy, budget proposal; individual policies etc further portfolio manager should take in to account the credit policy, industrial growth, foreign exchange possible change in corporate laws etc.
Financial analysis: he should evaluate the financial statement of company in order to understand, their net worth future earnings, prospectus and strength.
Study of stock market : he should observe the trends at various stock exchange and analysis scripts so that he is able to identify the right securities for investment
Study of industry: he should study the industry to know its future prospects, technical changes etc, required for investment proposal he should also see the problems of the industry.
Decide the type of port folio: keeping in mind the objectives of portfolio a portfolio manager has to decide weather the portfolio should comprise equity preference shares, debentures, convertibles, non-convertibles or partly convertibles, money market, securities etc or a mix of more than one type of proper mix ensures higher safety, yield and liquidity coupled with balanced risk techniques of portfolio management.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 41 | P a g e A portfolio manager in the Indian context has been Brokers (Big brokers) who on the basis of their experience, market trends, Insider trader, helps the limited knowledge persons. Registered merchant bankers can acts as portfolio managers Investors must look forward, for qualification and performance and ability and research base of the portfolio managers.
Techniques of portfolio management:
As of now the under noted technique of portfolio management: are in vogue in our country 1. equity portfolio: is influenced by internal and external factors the internal factors effect the inner working of the companys growth plans are analyzed with referenced to Balance sheet, profit & loss a/c (account) of the company. Among the external factor are changes in the government policies, Trade cycles, Political stability etc. 2. equity stock analysis: under this method the probable future value of a share of a company is determined it can be done by ratios of earning per share of the company and price earning ratio
EPS == PROFIT AFTER TAX NO: OF EQUITY SHARES
PRICE EARNING RATIO= MARKET PRICE E.P.S (earnings per share) SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 42 | P a g e
One can estimate trend of earning by EPS, which reflects trends of earning quality of company, dividend policy, and quality of management. Price earning ratio indicate a confidence of market about the company future, a high rating is preferable
The following points must be considered by portfolio managers while analyzing the securities.
1. Nature of the industry and its product: long term trends of industries, competition with in, and out side the industry, Technical changes, labour relations, sensitivity, to Trade cycle. 2. Industrial analysis of prospective earnings, cash flows, working capital, dividends, etc.
3. Ratio analysis: Ratio such as debt equity ratios current ratios net worth, profit earning ratio, return on investment, are worked out to decide the portfolio.
The wise principle of portfolio management suggests that Buy when the market is low or BEARISH, and sell when the market is rising or BULLISH.
Stock market operation can be analyzed by: a) Fundamental approach :- based on intrinsic value of shares b) Technical approach:-based on Dowjones theory, Random walk theory, etc.
Prices are based upon demand and supply of the market. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 43 | P a g e
i. Traditional approach assumes that ii. Objectives are maximization of wealth and minimization of risk. iii. Diversification reduces risk and volatility. iv. Variable returns, high illiquidity; etc.
Capital Assets pricing approach (CAPM) it pays more weight age, to risk or portfolio diversification of portfolio.
Diversification of portfolio reduces risk but it should be based on certain assessment such as:
Trend analysis of past share prices.
Valuation of intrinsic value of company (trend-marker moves are known for their Uncertainties they are compared to be high, and low prompts of wave market trends are constituted by these waves it is a pattern of movement based on past).
The following rules must be studied while cautious portfolio manager before decide to invest their funds in portfolios.
1. Compile the financials of the companies in the immediate past 3 years such as turn over, gross profit, net profit before tax, compare the profit earning of company with that of the industry average nature of product manufacture service render and it future demand ,know about the promoters and their back ground, dividend track record, bonus shares in the past 3 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 44 | P a g e to 5 years ,reflects companys commitment to share holders the relevant information can be accessed from the RDC(registrant of companies)published financial results financed quarters, journals and ledgers.
2. Watch out the highs and lows of the scripts for the past 2 to 3 years and their timing cyclical scripts have a tendency to repeat their performance ,this hypothesis can be true of all other financial ,
3. The higher the trading volume higher is liquidity and still higher the chance of speculation, it is futile to invest in such shares whos daily movements cannot be kept track, if you want to reap rich returns keep investment over along horizon and it will offset the wild intra day trading fluctuations, the minor movement of scripts may be ignored, we must remember that share market moves in phases and the span of each phase is 6 months to 5 years.
a. Long term of the market should be the guiding factor to enable you to invest and quit. The market is now bullish and the trend is likely to continue for some more time.
b. UN tradable shares must find a last place in portfolio apart from return; even capital invested is eroded with no way of exit with no way of exit with inside.
How at all one should avoid such scripts in future?
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 45 | P a g e (1) Never invest on the basis of an insider trader tip in a company which is not sound (insider trader is person who gives tip for trading in securities based on prices sensitive up price sensitive un published information relating to such security).
(2) Never invest in the so called promoter quota of lesser known company
(3) Never invest in a company about which you do not have appropriate knowledge.
(4) Never at all invest in a company which doesnt have a stringent financial record your portfolio should not a stagnate
(4) Shuffle the portfolio and replace the slow moving sector with active ones , investors were shatter when the technology , media, software , stops have taken a down slight.
(5) Never fall to the magic of the scripts dont confine to the blue chip companys, look out for other portfolio that ensure regular dividends.
(6) In the same way never react to sudden raise or fall in stock market index such fluctuation is movement minor corrections in stock market held in consolidation of market their by reading out a weak player often taste on wait for the dust and dim to settle to make your move .
PORT FOLIO MANAGEMENT AND DIVESIFICATOIN:
Combinations of securities that have high risk and return features make up a portfolio. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 46 | P a g e
Portfolios may or may not take on the aggregate characteristics of individual part, portfolio analysis takes various components of risk and return for each industry and consider the effort of combined security.
Portfolio selection involves choosing the best portfolio to suit the risk return preferences of portfolio investor management of portfolio is a dynamic activity of evaluating and revising the portfolio in terms of portfolios objectives It may include in cash also, even if one goes bad the other will provide protection from the loss even cash is subject to inflation the diversification can be either vertical or horizontal the vertical diversification portfolio can have script of different companys with in the same industry. In horizontal diversification one can have different scripts chosen from different industries. CEMENT INDUSTRY .TEXTILE INDUSTRY
ACC CEMENT JK CEMENT ULTRA TECH BIRLA CEM VISHNU CEM PRIYA CEM RAM CO CEM
It should be an adequate diversification looking in to the size of portfolio. Traditional approach advocates the more security one holds in a portfolio , the better it is according to modern approach diversification should not be quantified but should be related to the quality of scripts which leads to the quality and portfolio subsequently experience can show that beyond a certain number of securities adding more securities become expensive.
Investment in a fixed return securities in the current market scenario which is passing through a an uncertain phase investors are facing the problem of lack of liquidity combined with minimum returns the important point to both is that the equity market and debt market moves in opposite direction .where the stock market is booming, equities perform better where as in depressed market the assured returns related securities market out perform equities.
It is cyclic and is evident in more global market keeping this in mind an investor can shift from fixed income securities to equities and vise versa along with the changing market scenario , if the investment are wisely planned they , fetch good returns even when the market is depressed most , SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 48 | P a g e important the investor must adopt the time bound strategy in differing state of market to achieve the optimum result when the aim is short term returns it would be wise for the investor to invest in equities when the market is in boom & it could be reviewed if the same is done.
Maximum of returns can be achieved by following a composite pattern of investment by having, suitable investment allocation strategy among the available resources.
Never invest in a single securities your investment can be allocated in the following areas:
1. Equities:-primary and secondary market. 2. Mutual Funds 3. Bank deposits 4. Fixed deposits & bonds and the tax saving schemes The different areas of fixed income are as:-
Fixed deposits in company Bonds Mutual funds schemes
with an investment strategy to invest in debt investment in fixed deposit can be made for the simple reason that assured fixed income of a high of 14-17% per annum can be expected which is much safer then investing a highly volatile stock market, even in comparison to banks deposit which gives a maximum return of 12% per annum, fixed deposit s in high profile esteemed will performing companies definitely gives a higher returns. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 49 | P a g e
BETA: The concept of Beta as a measure of systematic risk is useful in portfolio management. The beta measures the movement of one script in relation to the market trend*. Thus BETA can be positive or negative depending on whether the individual scrip moves in the same direction as the market or in the opposite direction and the extent of variance of one scrip vis--vis the market is being measured by BETA. The BETA is negative if the share price moves contrary to the general trend and positive if it moves in the same direction. The scrips with higher BETA of more than one are called aggressive, and those with a low BETA of less than one are called defensive. It is therefore it is necessary, to calculate Betas for all scrips and choose those with high Beta for a portfolio of high returns.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 50 | P a g e
INVESTMENT DECISIONS
Definition of investment: According to F. AMLING Investment may be defined as the purchase by an individual or an Institutional investor of a financial or real asset that produces a return proportional to the risk assumed over some future investment period. According to D.E. Fisher and R.J. Jordon, Investment is a commitment of funds made in the expectation of some positive rate of return. If the investment is properly undertaken, the return will be commensurate with the risk of the investor assumes.
Concept of Investment:
Investment will generally be used in its financial sense and as such investment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period of time. Investment is a commitment of a persons funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of the value of his principal capital. Many types of investment media or channels for making investments are available. Securities ranging from risk free instruments to highly speculative shares and debentures are available for alternative investments. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 51 | P a g e All investments are risky, as the investor parts with his money. An efficient investor with proper training can reduce the risk and maximize returns. He can avoid pitfalls and protect his interest. There are different methods of classifying the investment avenues. A major classification is physical Investments and Financial Investments. They are physical, if savings are used to acquire physical assets, useful for consumption or production. Some physical assets like ploughs, tractors or harvesters are useful in agricultural production. A few useful physical assets like cars, jeeps etc., are useful in business.
Many items of physical assets are not useful for further production or goods or create income as in the case of consumer durables, gold, silver etc. among different types of investment, some are marketable and transferable and others are not. Examples of marketable assets are shares and debentures of public limited companies, particularly the listed companies on Stock Exchange, Bonds of P.S.U., Government securities etc. non-marketable securities or investments in bank deposits, provident fund and pension funds, insurance certificates, post office deposits, national savings certificate, company deposits, private limited companies shares etc. The investment process may be described in the following stages: Investment policy: The first stage determines and involves personal financial affairs and objectives before making investment. It may also be called the preparation of investment policy stage. The investor has to see that he should be able to create an emergency fund, an element of liquidity and quick convertibility of securities into cash. This stage may, therefore be called the proper time of identifying investment assets and considering the various features of investments.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 52 | P a g e investment analysis:
After arranging a logical order of types of investment preferred, the next step is to analyze the securities available for investment. The investor must take a comparative analysis of type of industry, kind of securities etc. the primary concerns at this stage would be to form beliefs regarding future behavior of prices and stocks, the expected return and associated risks . Investment valuation:
Investment value, in general is taken to be the present worth to the owners of future benefits from investments. The investor has to bear in mind the value of these investments. An appropriate set of weights have to be applied with the use of forecasted benefits to estimate the value of the investment assets such as stocks, debentures, and bonds and other assets. Comparison of the value with the current market price of the assets allows a determination of the relative attractiveness of the asset allows a determination of the relative attractiveness of the asset. Each asset must be value on its individual merit.
Portfolio construction and feed-back:
Portfolio construction requires knowledge of different aspects of securities in relation to safety and growth of principal, liquidity of assets etc. In this stage, we study, determination of diversification level, consideration of investment timing selection of investment SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 53 | P a g e assets, allocation of invest able wealth to different investments, evaluation of portfolio for feed- back.
INVESTMENT DECISIONS- GUIDELINES FOR EQUITY INVESTMENT
Equity shares are characterized by price fluctuations, which can produce substantial gains or inflict severe losses. Given the volatility and dynamism of the stock market, investor requires greater competence and skill-along with a touch of good luck too-to invest in equity shares. Here are some general guidelines to play to equity game, irrespective of weather you aggressive or conservative.
Adopt a suitable formula plan. Establish value anchors. Assets market psychology. Combination of fundamental and technical analyze. Diversify sensibly. Periodically review and revise your portfolio.
Requirement of portfolio:
1. Maintain adequate diversification when relative values of various securities in the portfolio change.
2. Incorporate new information relevant for return investment. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 54 | P a g e
3. Expand or contrast the size of portfolio to absorb funds or with draw funds.
4.Reflect changes in investor risk disposition. . Qualitiles For successful Investing:
An investor tends to choose that portfolio, which yields him maximum return by applying utility theory. Utility Theory is the foundation for the choice under uncertainty. Cardinal and ordinal theories are the two alternatives, which is used by economist to determine how people and societies choose to allocate scare resources and to distribute wealth among one another.
The former theory implies that a consumer is capable of assigning to every commodity or combination of commodities a number representing the amount of degree of utility associated with it. Were as the latter theory, implies that a consumer needs not be liable to assign numbers SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 55 | P a g e that represents the degree or amount of utility associated with commodity or combination of commodity. The consumer can only rank and order the amount or degree of utility associated with commodity.
In an uncertain environment it becomes necessary to ascertain how different individual will react to risky situation. The risk is defined as a probability of success or failure or risk could be described as variability of out comes, payoffs or returns. This implies that there is a distribution of outcomes associated with each investment decision. Therefore we can say that there is a relationship between the expected utility and risk. Expected utility with a particular portfolio return. This numerical value is calculated by taking a weighted average of the utilities of the various possible returns. The weights are the probabilities of occurrence associated with each of the possible returns. MARKOWITZ MODEL
THE MEAN-VARIENCE CRITERION
Dr. Harry M.Markowitz is credited with developing the first modern portfolio analysis in order to arrange for the optimum allocation of assets with in portfolio. To reach this objective, Markowitz generated portfolios within a reward risk context. In essence, Markowitzs model is a theoretical framework for the analysis of risk return choices. Decisions are based on the concept of efficient portfolios.
A portfolio is efficient when it is expected to yield the highest return for the level of risk accepted or, alternatively, the smallest portfolio risk for a specified level of expected return. To SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 56 | P a g e build an efficient portfolio an expected return level is chosen, and assets are substituted until the portfolio combination with the smallest variance at the return level is found. At this process is repeated for expected returns, set of efficient portfolio is generated.
ASSUMPTIONS:
1. Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period. 2. Investors maximize one period-expected utility and posses utility curve, which demonstrates diminishing marginal utility of wealth. 3. Individuals estimate risk on the risk on the basis of the variability of expected returns. 4. Investors base decisions solely on expected return and variance or returns only. 5. For a given risk level, investors prefer high returns to lower return similarly for a given level of expected return, Investors prefer risk to more risk.
Under these assumptions, a single asset or portfolio of assets is considered to be efficient if no other asset or portfolio of assets offers higher expected return with the same risk or lower risk with the same expected return.
THE SPECIFIC MODEL
In developing his model, Morkowitz first disposed of the investment behavior rule that the investor should maximize expected return. This rule implies that the non-diversified single security portfolio with the highest return is the most desirable portfolio. Only by buying SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 57 | P a g e that single security can expected return be maximized. The single-security portfolio would obviously be preferable if the investor were perfectly certain that this highest expected return would turn out be the actual return. However, under real world conditions of uncertainty, most risk adverse investors join with Markowitz in discarding the role of calling for maximizing expected returns. As an alternative, Markowitz offers the expected returns/variance of returns rule.
Markowitz has shown the effect of diversification by reading the risk of securities. According to him, the security with covariance which is either negative or low amongst them is the best manner to reduce risk. Markowitz has been able to show that securities which have less than positive correlation will reduce risk without, in any way bringing the return down. According to his research study a low correlation level between securities in the portfolio will show less risk. According to him, investing in a large number of securities is not the right method of investment. It is the right kind of security which brings the maximum result. CONSTRUCTION OF THE STUDY
Purpose of the study:
The purpose of the study is to find out at what percentage of investment should be invested between two companies, on the basis of risk and return of each security in comparison. These percentages helps in allocating the funds available for investment based on risky portfolios. Implementation of study: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 58 | P a g e For implementing the study,8 securitys or scripts constituting the Sensex market are selected of one month closing share movement price data from Economic Times and financial express from Jan 3 rd to 31 st Jan 2008.
In order to know how the risk of the stock or script, we use the formula, which is given below: ------------ Standard deviation = variance
n _ Variance = (1/n-1) (R-R) ^2 t =1 Where (R-R) ^2=square of difference between sample and mean. n=number of sample observed. After that, we need to compare the stocks or scripts of two companies with each other by using the formula or correlation co-efficient as given below. n _ _
Co-variance (COVAB) = 1/n (RA-RA) (RB-RB) t =1 (COV AB) SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 59 | P a g e Correlation-Coefficient (P AB) = --------------------- (Std. A) (Std. B) Where (RA-RA) (RB-RB) = Combined deviations of A&B (Std. A) (Std B) =standard deviation of A&B COVAB= covariance between A&B n =number of observation The next step would be the construction of the optimal portfolio on the basis of what percentage of investment should be invested when two securities and stocks are combined i.e. calculation of two assets portfolio weight by using minimum variance equation which is given below. FORMULA (Std. b) ^2 pab (Std. a) (Std. b) Xa =------------------- ---------------------------------- (Std. a) ^2 + (std. b) ^2 2pab (Std. a) (Std. b) Where Std. b= standard deviation of b Std. a = standard deviation of a Pab= correlation co-efficient between A&B The next step is final step to calculate the portfolio risk (combined risk) ,that shows how much is the risk is reduced by combining two stocks or scripts by using this formula: ___________________________________ p= X1^21^2+X2^22^2+2(X1)(X2)(X12)1 Where SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 60 | P a g e X1=proportion of investment in security 1. X2=proportion of investment in security 2. 1= standard deviation of security 1. 2= standard deviation of security 2. X12=correlation co-efficient between security 1&2. p=portfolio risk
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Chapter III
Research methodology & objectives
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INTRODUCTION TO PORTFOLIO MANAGEMENT:
Portfolio management and investment decision as a concept came to be familiar with the conclusion of second world war when thing can be in the stock market can be liberally ruined the fortune of individual, companies ,even government s it was then discovered that the investing in various scripts instead of putting all the money in a single securities yielded weather return with low risk percentage, it goes to the credit of HARYMERKOWITZ, 1991 noble laurelled to have pioneered the concept of combining high yielded securities with these low but steady yielding securities to achieve optimum correlation coefficient of shares.
Portfolio management refers to the management of portfolios for others by professional investment managers it refers to the management of an individual investors portfolio by professionally qualified person ranging from merchant banker to specified portfolio company.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 63 | P a g e Definition by SEBI:
A portfolio management is the total holdings of securities belonging to any person. Portfolio is a combination of securities that have returns and risk characteristics of their own; port folio may not take on the aggregate characteristics of their individual parts. Thus a portfolio is a combination of various assets and /or instruments of investments. Combination may have different features of risk and return separate from those of the components. The portfolio is also built up of the wealth or income of the investor over a period of time with a view to suit is return or risk preference to that of the port folio that he holds. The portfolio analysis is thus an analysis is thus an analysis of risk return characteristics of individual securities in the portfolio and changes that may take place in combination with other securities due interaction among them and impact of each on others.
Security analysis is only a tool for efficient portfolio management; both of them together and cannot be dissociated. Portfolios are combination of assets held by the investors.
These combination may be various assets classed like equity and debt or of different issues like Govt. bonds and corporate debts are of various instruments like discount bonds, debentures and blue chip equity nor scripts of emerging Blue chip companies.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 64 | P a g e Portfolio analysis includes portfolio construction, selection of securities revision of portfolio evaluation and monitoring of the performance of the portfolio. All these are part of the portfolio management
The traditional portfolio theory aims at the selection of such securities that would fit in will with the asset preferences, needs and choices of the investors. Thus, retired executive invests in fixed income securities for a regular and fixed return. A business executive or a young aggressive investor on the other hand invests in and rowing companies and in risky ventures.
The modern portfolio theory postulates that maximization of returns and minimization of risk will yield optional returns and the choice and attitudes of investors are only a starting point for investment decisions and that vigorous risk returns analysis is necessary for optimization of returns.
Portfolio analysis includes portfolio construction, selection of securities, and revision of portfolio evaluation and monitoring of the performance of the portfolio. All these are part of the portfolio management. IMPORTANCE & NEED OF STUDY Portfolio management or investment helps investors in effective and efficient management of their investment to achieve this goal. The rapid growth of capital markets in India has opened up new investment avenues for investors. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 65 | P a g e The stock markets have become attractive investment options for the common man.But the need is to be able to effectively and efficiently manage investments in order to keep maximum returns with minimum risk. Hence this study on PORTFOLIO MANAGEMENT & INVESTMENT DECISION to examine the role process and merits of effective investment management and decision. OBJECTIVES OF THE STUDY:
To study the investment pattern and its related risks & returns In The Doha brokerage services
To find out optimal portfolio of The Doha brokerage services Housing Development Finance Corporation Limited, which gave optimal return at a minimize risk to the investor in DBFS.
To see whether the portfolio risk is less than individual risk on whose basis the portfolios are constituted
To see whether the selected portfolios is yielding a satisfactory and constant return to the investor
To understand, analyze and select the best portfolio
SCOPE OF STUDY: This study covers the Markowitz model. The study covers the calculation of correlations between the different securities in order to find out at what percentage funds should be invested among the companies in the portfolio. Also the study includes the calculation of individual Standard Deviation 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 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 66 | P a g e
LIMITATIONS OF THE STUDY 1. Construction of Portfolio is restricted to two companies based on Markowitz model. 2. Very few and randomly selected scripts / companies are analyzed from BSE listings. 3. Data collection was strictly confined to secondary source. No primary data is associated with the project. 4. Detailed study of the topic was not possible due to limited size of the project. 5. There was a constraint with regard to time allocation for the research study i.e. for a period of two months.
METHODOLOGY AND FRAMEWORK DATA COLLECTION METHODS The data collection methods include both the primary and secondary collection methods. Primary collection methods: This method includes the data collection from the personal discussion with the authorized clerks and members of the DBFS financial services. Secondary collection methods: 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, magazines and different books issues of this study Superintend
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Data analysis & Interpretation
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CALCULATION OF AVERAGE RETURN OF COMPANIES: _ Average Return (R) = (R)/N (P0) = Opening price of the share (P1) = Closing price of the share D = Dividend WIPRO:
Year (P0) (P1) D (P1-P0) D+(P1-P0)/ P0*100 2006-2007 188.20 490.60 20 302.40 171.3 2007-2008 490.60 548.00 20 57.40 15.77 2008-2009 548.00 890.45 20 342.45 66.14 2009-2010 890.45 688.75 17 -20.17 -20.74 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 70 | P a g e 2010-2011 688.75 9.5 1.45 1.45 1.958
TOTAL RETURN 234.428
Average Return = 234.428/5 = 46.885
DIAGRAMATIC PRESENTATION
RETURN
COMPANY RETURN WIPRO 9.12 DR.REDDY 3.916 ACC 51.614 HEROHONDA 46.885 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 71 | P a g e
CALCULATION OF STANDARD DEVIATION:
Standard Deviation = Variance __ Variance = 1/n (R-R) 2
Correlation Coefficient = COV ab/oa*ob oa = 22.86 ; ob = 70.23 = 2,697/(22.86)(70.23) = 0.28 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 76 | P a g e
CALCULATION OF PORTFOLIO RISK OF WIPRO & OTHER COMPANIES:
WIPRO (a) & DR.REDDY (b):
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 81 | P a g e oa = 22.86 ob = 46.66 Wa = 0.78 Wb = 0.23 nab = -0184
R P = (22.86*0.78.) 2 +(46.66*0.23) 2 +2(22.86)(46.66)(0.78(0.23)(-0.184)
= 355.6 18.86%
WIPRO (a) &ACC (b):
oa = 22.86 ob = 47.27 Wa = 1.11 Wb = -0.11 nab = 0.25
R P = (22.86*1.11) 2 +(47.27*-0.11) 2 +2(22.86)(47.27)(1.11)(-0.11)(0.25)
= 551.2 23.5%
WIPRO (a) & HERO HONDA (b):
oa = 22.86 ob = 70.23 Wa= 0.98 Wb=0.02 nab = 028
R P = (22.86*0.98) 2 (70.23*0.02) 2 +2(22.86)(70.23)(0.98)(0.02)(0.28)
= 525 = 22.85%
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CALCULATION OF PORTFOLIO RISK OF DR REDDY & OTHER COMPANIES
DRREDDY (a) & ACC (b):
oa = 46.7 ob = 47.3 Wa=0.52 Wb= 0.48 nab = 0.74
R P = (46.7*0.52) 2 +(47.3*0.48) 2 +2(46.7)(47.3)*(0.52)*(0.48)*(0.74)
= 1,922.80 = 43.85%
DRREDDY (a) & HERO HONDA (b):
oa = 46.67 ob = 70.23 Wa = 1.48 Wb= -0.48 nab = 0.37
R P = (46.67*1.48) 2 +(70.23*-0.48) 2 +2(46.67)(70.23)*(1.48)*(-048)*(0.37)
= 234.89 = 15.33%
CALCULATION OF PORTFOLIO RISK OF ACC & OTHER COMPANIES
ACC(a) &HEROHONDA (b): oa = 47.3 ob = 70.23 Wa= 1.20 Wb = -0.20 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 83 | P a g e nab = 0.79
R P = (47.3*1.20) 2 +(70.23*-0.20) 2 +2(47.3)(70.23)*(1.20)*(-0.20)*(0.79)
= 1,764.84 = 42%
CALCULATION OF PORTFOLIO RETURN:
Rp=(RA*WA) + (RB*WB)
Where Rp = portfolio return RA= return of A WA= weight of A RB= return of B WB= weight of B
CALCULATION OF PORTFOLIO RETURN OF WIPRO & OTHER COMPANIES:
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 84 | P a g e WIPRO (a) & DR.REDDY (b):
RA= 4.6 WA=0.77 RB=0.67 WB=0.23 Rp = (4.6*0.77) + (0.67*0.23) Rp = (3.542 + 0.1541) Rp = 3.6961%
WIPRO (a) &ACC (b):
RA= 4.6 WA=1.11 RB= 42.02 WB=-0.11 Rp = (4.6*1.11) + (42.02*-0.11) Rp = (5.106+4.622) Rp = 0.484
WIPRO (a) & HERO HONDA (b):
RA= 4.6 WA=0.98 RB= 32.498 WB=0.02 Rp = (4.6*0.9) + (32.498*0.02) Rp = (4.508 + 0.6499) Rp = 5.16% CALCULATION OF PORTFOLIO RETURN OF DR REDDY & OTHER COMPANIES
DRREDDY (a) & ACC (b): RA= 0.67 WA=0.52 RB=42.02 WB=0.48 Rp = (0.67*0.52) + (42.02*0.48) Rp = (.3487+20.139) Rp = 20.5%
DRREDDY (a) & HERO HONDA (b):
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 85 | P a g e RA= 0.67 WA=1.48 RB=32.498 WB=-0.48 Rp (0.67*1.48) + (32.498*-0.48) Rp (0.9916-15.599) Rp -14.60%
CALCULATION OF PORTFOLIO RETURN OF ACC & OTHER COMPANIES
ACC(a) &HEROHONDA (b): RA= 42.02 WA=1.20 RB=32.498 WB=-0.20 Rp = (42.02*1.20) + (32.498*-0.20) Rp = (50.424-6.499) Rp = 43.92%
Interpretations The analytical part of the study for the 6 years period reveals the following interpretations, Wipro with acc: Portfolio weights for wipro and ACC are (1.11)and (-0.11) respectively. This indicates that the investors who are interested to take more risk they can invest in this combination, and also can get high returns.
Dr reddy & herohonda: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT SREE RAMA ENGINEERING COLLEGE,TIRUPATI 87 | P a g e In this combination as per the calculation & the study of portfolio weights of dr reddy and herohonda are (1.48) and (-0.48) respectively. Here the standard deviation of drreddy &herohonda are (46.66) and (70.23) respectively. Returns are (0.67) is for dr reddy (32.43) is for herohonda.In this, position invest in hero Honda is high risk as well as high returns also up to (32.43) when compared to dereddy. Dr reddy&acc: The portfolio of weights of the both (0.52)is drreddy (.048) is for acc. The standard deviation of dr reddy is (46.66) and (47.27) for acc. The returns of drreddy is (0.67) and (42.02) is acc. According to this combination investor can invest acc, this is more risk as well as more returns can get up to (42.02). If investor wants less risk he has to invest in acc.Dr reddy is a low risk as well as low returns also. Acc&herohonda: According to this combination of the portfolio weights are (1.20) in acc and (-0.20) is herohonda. The standard deviation of acc is less than herohonda 47.27>70.23. if the investor wants to take low risk, acc is the better option. And the return point of view herohonda is providing more returns that of acc. According to this combination if the investor wants to get returns then he has to take the more risk. This is the good combination for investors for investing in the acc&herohonda. For more profits. Greater Portfolio Return with less Risk is always is an attractive combination for the Investors.
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Findings recommendations & Conclusion
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FINDINGS
As the average return of securities, ACC, HEROHONDA and are HIGH, it is suggested that investors who show interest in these securities taking risk into consideration.
As the risk of the securities ACC, HEROHONDA and BHEL are risky securities it suggested that the investors should be careful while investing in these securities.
The investors who require minimum return with low risk should invest in WIPRO & DR.REDDY.
It is recommended that the investors who require high risk with high return should invest in ITC and HEROHONDA.
The investors are benefited by investing in selected scripts of Industries.
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SUGGESTION
The investors who are risk averse can invest their funds in the portfolio combination of,ACC,HEROHONDA AND WIPRO proportion. The investors who are slightly risk averse are suggested to invest in WIPRO, DR. REDDY, ACC as the combination is slightly low risk when compared with other companies.
The analysis regarding the compaines ACC, HEROHONDA has howed a wise investment in public and in private sector with an increasing trend where as corporate sector has recorded a decreasing trends income which denotes an increasing trend throught out the study period.
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CONCLUSIONS
The analytical part of study for the 5 years reveals the following as for as:
As far as the average return of the company is concerned ACC, , HEROHONDA is high with an average return of 48.41%. WIPRO, DR.REDDY is getting low returns. HEROHONDA securities are performing at medium returns.
As far as the correlation is concerned the securities DR.REDDY are high correlated with minimum portfolio risk. The investor who is risk averse will have to invest in this combination which gives good return with low risk.
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Annexure & Bibliography
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Annexure
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BIBILOGRAPHY
1.SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT -donald.E.Fisher,Ronald.J.Jordan
2.INVESTMENTS -William .F.Sharpe,gordon,J Allexander and Jeffery.V.Baily