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PORTFOLIO MANAGEMENT IN STOCK MARKETING

AT KOTAK SECURITIES
PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENT FOR THE AWARD OF THE DEGREE OF P.B.SIDDHARTHA
COLLAGE OF ART & SCIENCE

BY
G.ABISHIEK
REGD.NO:-Y12MBA155017

SCHOOL OF MANAGEMENT STUDIES
PARVATHANENI BRAHMAIAH SIDDHARTHA COLLAGE OF ART & SCIENCE
Accredited by NAAC with A Grade and Affiliated to KRISHNA UNIVERSITY













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ACKNOWLEDGEMENT

Acknowledgement is due to many, without whose valuable help the project would not have been
success . my sincere thanks to Dr.RAJESH.C.JAMPALA P.B.SIDDHARTHA COLLEGE OF
ARTS & SCIENCE for providing all necessary faculties to complete this dissertation
Support and faculties were essential indicators for creating this documentation. I would
therefore, like to express my guide to Ms.KALPANA MADAM , P.B.SIDDHARTHA
COLLEGE OF ARTS & SCIENCE , for her guidance encouragement and support at all stages
of the project work.
I express my deep sense of gratitude and sincere guide Mr. MIR SUJATH HUSSAIN GARU,
for the voluble guidance and constant encouragement throughout the course of this work. Her
exemplary and patience, concern and understanding have resulted in completion of this work to
my fullest satisfaction
I endow my sincere thanks for her kind cooperation and inspiration
Finally I take this opportunity to convey my sincere thanks to all those to have directly and
indirectly contributed for successfully complication of this my project


G.ABISHIEK

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DECLARATION


This id to certify on a study on portfolio management and security analysis in kotak securities is
a bonafide work done by me and it is not being submitted for the award of any other degree.












G.ABISHIEK
( Y12MBA155017)












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CONTENTS


CHAPTERS PAGE NOS.

CHAPTER 1 6 - 13
INTRODUCTION
- Need for the study
- Scope for the study
- Objectives of the study
- Methodology and tools
- Limitations of the study
CHAPTER 2 14 - 29
REVIEW OF LITERATURE
- About the literature
- Different types
- Organizations survey theory

CHAPTER 3 30 - 38
- INDUSTRY PROFILE

CHAPTER 4 39 - 54
- Company Profile

CHAPTER 5 55 - 93

- DATA ANALYSIS AND
INTERPRETATION

CHAPTER 6 94 - 99

- FINDING SUGGESTIONS AND CONCLUSIONS
BIBLIOGRAPHY



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ABSTACT


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.
Five different companies are chosen for the study- WIPRO, ICICI, RELIANCE, RANBAXY,
and ITC.
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.







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CHAPTER - I
INTRODUCTION








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INTRODUCTION TO THE STUDY
A portfolio is a collection of investments held by an institution or a private individual. In
building up an investment portfolio a financial institution will typically conduct its own
investment analysis, whilst a private individual may make use of the services of a
financial advisor or a financial institution which offers portfolio management services.
Holding a portfolio is part of an investment and risk-limiting strategy called
diversification. By owning several assets, certain types of risk (in particular specific risk)
can be reduced. The assets in the portfolio could include stocks, bonds, options,
warrants, gold certificates, real estate, futures contracts, production facilities, or any
other item that is expected to retain its value. Portfolio management involves deciding
what assets to include in the portfolio, given the goals of the portfolio owner and
changing economic conditions. Selection involves deciding what assets to purchase,
how many to purchase, when to purchase them, and what assets to divest. These
decisions always involve some sort of performance measurement, most typically
expected return on the portfolio, and the risk associated with this return (i.e. the
standard deviation of the return). Typically the expected returns from portfolios,
comprised of different asset bundles are compared.
The Portfolio management is a continuous process. It is a dynamic activity. The
following are the basic operations of a portfolio management.
a) Monitoring the performance of portfolio by incorporating the latest market conditions.
b) Identification of the investors objective, constraints and preferences.
c) Making an evaluation of portfolio income (comparison with targets and achievement).
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d) Making revision in the portfolio.
e) Implementation of the strategies in tune with investment objectives.
NEED OF THE STUDY
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

assemble 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

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.



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OBJECTIVES OF THE STUDY
- To study the investment pattern and its related risks & returns.
- To find out optimal portfolio, that gives optimal return at a minimized risk to the
investor.
- To check whether the selected portfolios are yielding a satisfactory and constant return to
the investor over a period of time.
The main objective of investment portfolio management is to maximize the returns from the
investment and to minimize the risk involved. Moreover, risk in price or inflation erodes the
values of money and hence investment must provide a protection against inflation.

Return
Portfolio management is technique of investing in securities. The ultimate object of investment
in the securities is return. Hence, the first objective of portfolio management is getting higher
return.

Capital Growth
Some investors do not need regular returns. Their object of portfolio management is that not only
their current wealth is invested in the securities; they also want a channel where their future
incomes will also be invested.

Liquidity
Some investors prefer that the portfolio should be such that whenever they need their money,
they may get the same.

Maintaining the Purchasing Power
Inflation eats the value of money, i.e., purchasing power. Hence, one object of the portfolio is
that it must ensure maintaining the purchasing power of the investor intact besides providing the
return.

Risk Reduction through Diversification
It is the perhaps most important object of the portfolio management. All other objectives
(mentioned above) can be achieved even without portfolio, i.e., through investment in a single
security, but reduction (without sacrificing the return) is possible only through portfolio.
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SCOPE OF THE STUDY:

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.

IMPORTANCE OF THE STUDY
A project is a collection of tasks designed to create a new product, infrastructure, service or
result within a specified period. A project portfolio is a collection of projects. A company may
have several project portfolios of technology, quality-control and human resource projects.
Project portfolio management is the centralized management of project portfolios and the
responsibility of the project or portfolio management office (PMO).
Basics: Structure
The PMO structure depends on the company size and the number of ongoing projects. For
example, a large public-sector organization may have several PMOs staffed with dozens of
employees, while a small business may have an informal PMO structure of mainly part-time
staff. The PMO manager usually reports to senior management, such as the chief operating
officer. PMO staff may include portfolio managers, project managers and project analysts, along
with administrative staff.

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Coordination
The PMO is usually the central coordinating office for a company's projects. It makes resource-
allocation decisions after considering the impact on the entire company. For example, it may
move resources between two projects to ensure they are both on schedule. Similarly, it may
move equipment or funds between resource-constrained projects to ensure timely project
completion.
Implementation
PMOs play an important role in the portfolio implementation process, which usually begins with
a list of viable projects. PMO analysts may use cost/benefit analysis to whittle down this list to
one or two projects that generate the most return. Cost/benefit analysis determines the net cost or
benefit of undertaking a project. The next step is to determine if there are enough capital and
human resources on hand to manage the existing projects. In addition to allocating resources
among projects, PMOs may lend out experienced project managers to serve as internal
consultants and mentors on critical projects. They can bring a fresh perspective to problems and
work with the project team to resolve these problems.
Issues
PMOs do not guarantee project success. For example, a project may fall behind schedule because
of last-minute changes demanded by the client or if product testing uncovers a quality problem
that requires a major redesign. PMOs are cost centers, which mean that they do not make any
money. Therefore, they have to control costs and add value to ongoing projects to maintain
management support. A successful PMO is supportive, not intrusive. It fits within the corporate
culture and serves as a knowledgeable resource for project staff.






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RESEARCH METHODOLOGY OF THE STUDY:

Research design or research methodology is the procedure of collecting, analyzing and
interpreting the data to diagnose the problem and react to the opportunity in such a way where
the costs can be minimized and the desired level of accuracy can be achieved to arrive at a
particular conclusion.
The methodology used in the study for the completion of the project and the fulfillment of the
project objectives, is as follows:
- Market prices of the companies have been taken for the years of different dates, there by
dividing the companies into 5 sectors.
- A final portfolio is made at the end of the year to know the changes (increase/decrease) in
the portfolio at the end of the year.

DATA COLLECTIONS:
Primary data:
The primary data information is gathered from KOTAK SECURITIES by interviewing KOTAK
SECURITIES executives.
Secondary data:
The secondary data is collected from various financial books, magazines and from stock lists of
various newspapers and KOTAK SECURITIES as part of the training class undertaken for
project.


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LIMITATION OF THE STUDY
- This study has been conducted purely to understand Portfolio Management for
investors.
- Construction of Portfolio is restricted to two companies based on Markowitz model.
- Very few and randomly selected scripts / companies are analyzed from BSE listings.
- Detailed study of the topic was not possible due to limited size of the project.
- There was a constraint with regard to time allocation for the research study i.e. for a
period of 45 days.










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CHAPTER - II
LITERATURE REVIEW














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It is essential for individuals to invest wisely for the rainy days and to make their future secure.

What is a Portfolio?

A portfolio refers to a collection of investment tools such as stocks, shares, mutual funds, bonds,
cash and so on depending on the investors income, budget and convenient time frame.
Following are the two types of Portfolio:

1. Market Portfolio
2. Zero Investment Portfolio

What is Portfolio Management?

The art of selecting the right investment policy for the individuals in terms of minimum
risk and maximum return is called as portfolio management.

Portfolio management refers to managing an individuals investments in the form of bonds,
shares, cash, mutual funds etc so that he earns the maximum profits within the stipulated time
frame.

Portfolio management refers to managing money of an individual under the expert guidance of
portfolio managers.
In a laymans language, the art of managing an individuals investment is called as portfolio
management.


Types of Portfolio Management

Portfolio Management is further of the following types:

Active Portfolio Management: As the name suggests, in an active portfolio management
service, the portfolio managers are actively involved in buying and selling of securities to ensure
maximum profits to individuals.
Passive Portfolio Management: In a passive portfolio management, the portfolio manager
deals with a fixed portfolio designed to match the current market scenario.
Discretionary Portfolio management services: In Discretionary portfolio management
services, an individual authorizes a portfolio manager to take care of his financial needs on his
behalf. The individual issues money to the portfolio manager who in turn takes care of all his
investment needs, paper work, documentation, filing and so on. In discretionary portfolio
management, the portfolio manager has full rights to take decisions on his clients behalf.
Non-Discretionary Portfolio management services: In non discretionary portfolio
management services, the portfolio manager can merely advise the client what is good and bad
for him but the client reserves full right to take his own decisions.
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Who is a Portfolio Manager?

An individual who understands the clients financial needs and designs a suitable investment
plan as per his income and risk taking abilities is called a portfolio manager. A portfolio manager
is one who invests on behalf of the client.
A portfolio manager counsels the clients and advises him the best possible investment plan
which would guarantee maximum returns to the individual.
A portfolio manager must understand the clients financial goals and objectives and offer a tailor
made investment solution to him. No two clients can have the same financial needs.

Roles and Responsibilities of a Portfolio Manager

A portfolio manager is one who helps an individual invest in the best available investment plans
for guaranteed returns in the future.

Let us go through some roles and responsibilities of a Portfolio manager:

A portfolio manager plays a pivotal role in deciding the best investment plan for an
individual as per his income, age as well as ability to undertake risks.

A portfolio manager is responsible for making an individual aware of the various
investment tools available in the market and benefits associated with each plan.

A portfolio manager is responsible for designing customized investment solutions
for the clients.

A portfolio manager must keep himself abreast with the latest changes in the
financial market.






RISK
Risk is uncertainty of the income / capital appreciations 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 rights choices 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.
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The two major types of risks are
Systematic or market related risk.
Unsystematic or company related risks.

Systematic 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.


Unsystematic risks

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 components of risks to a considerable extents by investing in a large portfolio of
securities. The unsystematic risk stems from inefficiency magnitude of those factors different
from one company to another.


RETURNS ON PORTFOLIO

Each security in a portfolio contributes returns 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.
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 returns. 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.

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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, however, 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 risk by choosing an appropriate
portfolio.


Portfolio Theories
MARKOWITZ THEORY
Markowitz approach determines for the investor the efficient set of portfolio through 3 important
variables, i.e., Standard Deviation, Covariance and Co-efficient of Correlation. Markowitz model
is called the Full Covariance Model. Through this method, the investor can with the use of
computer, find out the efficient set of portfolio by finding out the tradeoff between risk and
return between the limits of zero to infinity. According to this theory, the effects of one security
purchase over the effects of the other security purchase are taken into consideration and then the
results are evaluated.

Assumption under Markowitz Theory
Markowitz theory is based on the modern portfolio theory under several assumptions.
The assumptions are:-
1. The market is efficient and all investors have in their knowledge all the facts about the stock
market and so on investor can continuously make superior returns either by predicting past
behavior of stocks through technical analysis the intrinsic value of shares. Thus all investors
are in equal category.
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2. All investor before making any investment have a common goal. This is the avoidance of risk
because they are risk averse.
3. All investors would like to earn the maximum rate of return that they can achieve from their
investments.
4. The investors base their decisions on he expected rate of return of an investment. The
expected rate of return can be found out by finding out the purchase price of a security
divided by the income per year and by adding annual capital gains. It is also necessary to
know the standard deviation of the rate of return, which is begin offered on the investment.
The rate of return and standard deviation are important parameters for finding out whether
investment is worthwhile for a person.
5. Markowitz brought out the theory that it was useful insight to find out how the security
returns are correlated to each other. By combining the assets in such way that they give the
lowest risk maximum returns could be brought out by the investor.
6. From the above it is clear that investor assumes that while making an investment he will
combine his investments in such a way that he gets a maximum return and is surrounded by
minimum risk.
7. The investor assumes that greater or larger the return that he achieves on his investments, the
higher the risk factor that surrounds him. On the contrary when risks are low the return can
also be expected to be below.
8. The investor can reduce his risk if he adds investments to his portfolio.
9. An investor should be able to get higher for each level of risk by determining the efficient
set of securities.

THE SHARPE INDEX MODEL
The investor always likes to purchase a combination of stock that provides the highest return and
has lowest risk. He wants to maintain a satisfactory reward to risk ratio. Traditionally analysis
paid more attention to the return aspect of the stocks. Now a days risk has received increased
attention and analysts are providing estimates of risk as well as return.
Sharp has developed a simplified model to analyze the portfolio. He assumed that the return
of a security is linearly related to a single index like the market index. Strictly speaking, the
market index should consist of all the securities trading on the exchange.
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In the absence of it, a popular index can be treated as a surrogate for the market index.

SINGLE INDEX MODEL
Casual observation of the stock prices over a period of time reveals that most of the stock prices
move with the market index. When sensex increases, stock prices also tend to increase and vice-
versa. This indicates that some underlying factors affect the market index as well as the stock
prices. Stock prices are related to the market index and the relationship could be used to estimate
the return on stock. Towards this purpose, the following equation can be used.




i m i i j
e R a a R + + =
Where R = Expected return on security I
i
a = Intercept of the straight line or alpha co-efficient
i
a = Slope of straight line or beta co-efficient
R
m
= The rate of return on marker index
e
i
= Error team

Corner Portfolio
The entry or exit of a new stock in the portfolio generates a series of corner portfolio. In a one
stock portfolio, itself is the corner portfolio. In a two stock portfolio, the minimum attainable risk
(variance) and the lowest return would be the corner portfolio. As the member of stocks
increases in a portfolio, the corner portfolio would be the one with lowest return and risk
combination.

Sharpes Optimal Portfolio
Sharpe has provided a model for the selection of appropriate securities in a portfolio. The
selection of any stock is directly related to its excess return beta ration.
i a / Rf Ri
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Where, Ri = The expected return on stock i
Rf = The return on a risk less asset
i a = The expected change in the rate of return on stock I associated with one unit
changer in the market return.

The excess return is the difference between the expected return on the stock and the risk less rate
of interest such as the rate offered on the government security or Treasury bill. The excess return
to beta ratio measures the additional return on security (excess of the risk less asset return) per
unit of systematic risk or non-diversifiable risk. This ratio provides a relationship between
potential risk and reward.

The steps for finding out the stocks to be included in the optimal portfolio are given below:
1. Finding out the excess return to beta ratio for each stock under consideration.
2. Rank them from the highest to the lowest
3. Proceed to calculate C for all the stocks according to the ranked order using the following
formula.
( ) ( ) ei / i N 1 / ei / i Rf Ri N m Ci
2 2 2 2
o | o + o | o =
4. The calculated values of Ci start declining after a particular Ci and that point is taken as
the cut-off point and that stock ratio is the cut-off ratio.

Capital Asset Price Theory
We have seen that diversifiable risk can be eliminated by diversification. The remaining risk
portion is the un-diversifiable risk i.e., market risk. As a result, investors are interested in
knowing the systematic risk when they search for efficient portfolios. They would like to have
assets with low beta coefficient i.e., systematic risk. Investors would opt for high beta co-
efficient only if they provide high rate of return. The risk were averse nature of the investors is
the underlying factor for this behavior. The capital asset pricing theory helps the investors top
understand and the risk and return relationship of the securities. It also explains how assets
should be priced in the capital market.

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The CAPM Theory
Markowitz, William Sharpe, John Lintner and Jan Mossin provided the basis structure for the
CAPM model. It is a model of linear general equilibrium return. In the CAPM theory, the
required rate of return of an asset is having a linear relationship with assets beta value i.e.,
undiversifiable or systematic risk.


Lending and Borrowing
Here, it is assumed that the investor could borrow or lend any amount of money at risk less rate
of interest. When this opportunity is given to the investors, they can mix risk free assets with the
risk assets in a portfolio to obtain in desired rate of risk return combination.


The expected return on the combination of risky and risk free combination
R
p
= R
f
X
f
+ R
m
(1 X
f
)
Where, R
p
= Portfolio return
X
f
= The proportion of funds invested in risk free assets
1 X
f
= The proportion of funds invested in risk assets.
R
f
= Risk free rate of return
R
m
= Return on risky assets
This formula can be used to calculate the expected returns for different situation like mixing risk
less assets with risky assets, investing only in the risky asset and mixing the borrowing with risk
assets.






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The Concept
According to CAPM, all investors hold only the market portfolio and risk less securities. The
market portfolio is a portfolio comprised of all stocks in the market. Each asset is held in
proportion to its market value to the all risky assets. For example, if Reliance Industry share
represents 20% of all risky assets, then the market portfolio of the individual investor contains
20% of Reliance Industry shares. At this stage, the investor has the ability to borrow or lend any
amount of money at the risk less rate of interest. The efficient frontier of the investor is given in
figure.
The figure shows the efficient of the investor. The investor prefers any point between B & C
because, with the same level of risk they face on line BA, they are liable to get superior profits.
The ABC lines show the investors portfolio of risky assets. The investors can combine risk less
asset either by lending or borrowing. This is shown in figure,

The line R
f
S represent all possible combination of risk less and risky asset. The S portfolio
does not represent any risk less asset but the line R
f
S gives the combination of both. The
portfolio along the path R
f
S is called lending portfolio i.e., some money is invested in the risk
less asset or may b deposited in the bank for a fixed rate of interest if it crosses the point S, it
becomes borrowing portfolio. Money is borrowed and invested in the risky asset. The straight
lines are called Capital Market Line (CML). It gives the desirable set of investment opportunities
between risk free and risky investments. The CML represents linear relationship between the
required rates of return for efficient portfolio and their standard deviations.

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( )
( )
p
m
f m f
p
R R R
R E o
o
+
=
E(R
p
) = Portfolios expected rate of return
R
m
= Expected return on market portfolio
m
o = Standard deviation of market portfolio
p
o = Standard deviation of the portfolio
For a portfolio on the capital market line, the expected rate of return in excess of the risk free rate
is in proportion to the standard deviation of the market portfolio. The slope of the line gives the
price of the risk. The slope equals the risk premium for the market portfolio R
m
R
f
divided by
the risk or standard deviation of the market portfolio. Thus, the expected return of an efficient
portfolio is Expected return = Price of time + (Price of risk X amount of risk)
Price of time is the risk free rate of return. Price of risk is the premium amount higher and above
the risk free return.
Security Market Line
The Capital Market Line measures the risk-return relationship of an efficient portfolio. But, it
does not show the risk- return trade off for other portfolio and individual securities. Inefficient
portfolios lie below the capital market line and the risk-return relationship cannot be established
with the help of his capital market line. Standard deviation includes the systematic and
unsystematic risk. Unsystematic risk can be diversified and it is not related to the market. If the
unsystematic risk is eliminated, then the matter of concern is systematic risk alone. This
systematic risk could be measured by beta. The beta analysis is useful for individual securities
and portfolio whether efficient or inefficient.
When an additional security is added to the market portfolio, an additional risk is also added to
it. The variance of a portfolio is equal to the weighted sum of the covariance of the individual
securities in the portfolio. If we add an additional security to the market portfolio, its marginal
contribution to the variance of the market is the covariance between the securitys return and
market portfolios return.
If the security is included, the covariance between the security and the market measures the risk.
Dividing it by standard deviation of market portfolio Cov
m
/ lm o can standardize covariance.
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This shows the systematic risk of the security, and then the expected return of the security is
given by the equation.
m im
m
f m
f i
/ V Cov
R R
R R o
o

=
This equation can be rewritten as follows:
| |
f m
m
2
im
f i
R R
Cov
R R
o
=
The first term of the equation is nothing but the beta coefficient of the stock. The beta coefficient
of the equation of SML is same as the beta of the market (Single index) model. In equilibrium,
all efficient and inefficient portfolio lie along the security market line, The SML line helps to
determine the expected return for a given security beta. In other words, when betas are given, we
can generate expected returns for the given securities. This is explained in figure. If we assume
the expected market risk premium to be 8% and the risk free rate of return to be 7%, we can
calculate expected return for A, B, C and D securities using the formula.
( ) ( ) | |
f m 1 i
R R E Rf R E | + =

Present Validity of CAPM
The CAPM is greatly appealing at an intellectual level, logical and rational. The basic
assumptions on which the model is built raise, some doubts in the minds of the investors. Yet,
investment analysis has been more creative in adapting CAPM for their uses.
1. The CAPM focuses on the market risk, makes the investors to think about the
riskyness of the assets in general CAPM provides basic concept, which is truly
fundamental values.
2. The CAPM has been useful in the selection of securities and portfolio. Securities with
higher returns are considered to be undervalued and attractive for buy. The below
normal excepted return yielding securities are considered to be overvalued and
suitable for sale.
3. In the CAPM, it has been assumed that investors consider only the market risk. Given
the estimate of the risk free rate, the beta of the firm, stock and the required market
rate of return, one can find out the expected returns for a firms security. This
expected return could be used as an estimate of the cost of retained earnings.
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4. Even through CAPM has been regarded as useful tools to financial analysis; it has it
won critics too. They point out, when the model is ex-ante; the inputs also should be
ex-ante, i.e. based on the expecat5ions of the f8re. Empirical test and analysis have
used ex-post i.. Past data only:
5. The historical data regarding the market return, risk free rate of return and betas vary
differently for different periods. The various methods used to estimate these inputs
also affect the beta value. Since the inputs cannot be estimated precisely, the expected
return found out through the CAPM model is also subjected to criticism.
Arbitrage pricing theory
Arbitrage pricing theory is one of the tools used by the investors and portfolio managers. The
capital asset pricing theory explains the returns of the securities on the basis of their respective
bets. According to the previous model, the investor chooses the investment on the basis of
expected return and variance. The alternative model deployed in asset pricing by Stephen Ross is
known as Arbitrage Pricing Theory. The APT explains the nature of equilibrium in the asset
pricing in a less complicated manner with fewer assumptions compare to CAPM.
The Assumptions
1. The investors have homogeneous expectations.
2. The investor are risk averse and utility maxi misers
3. Perfect competition prevails in the market and there is no transaction cost.
The APT theory does not assume:
a) Single period investment horizon
b) No taxes
c) Investors can borrow and lend at risk free rate of interest and
d) The selection of the portfolio is based on the mean and variance analysis.
These assumptions are present in CAPM theory.

Arbitrage portfolio
According to the APT theory an investor tries to find out the possibility to increase returns from
his portfolio without increasing the funds in the portfolio. He also likes to keep the risk at the
same level.
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For example, the investor holds A, B and C securities and he wants to change in proportion of
securities can be denoted by X,
b
X and
C
X . The increase in the investment in security A could be
carried out only if he reduces the proportion of investment either in B or C because it has already
stated that the investor tries to earn more income without increasing his financial commitment.
Thus, arbitrage portfolio. If X indicates the change in proportion,
0 X X X
C B A
= A + A + A

The factor sensitivity indicates the responsiveness of a securitys return to a particular factor.
The sensitiveness of securities to any factor is the weighted average of the sensitivities of the
securities, weighted being the changes made in the proportion. For example, bA, bB and bC are
sensitive in an arbitrage portfolio the sensitive become zero.
0 X b X b X b
C C B B A A
= A + A + A



APT and CAPM
The simplest form of APT model is consistent with the simple form of the CAPM model, when
only one factor is taken into consideration, the APT can be stated as.


I i 0 i
b R +
It is similar to the capital market line equation:
) R R ( R R
F m i f i
+ | = , Which is similar to CAPM MODEL?
APT is more general and less restrictive than CAPM, in APT, the investor has no need to hold
the market portfolio because it does not make use of the market portfolio concept. The portfolios
are constructed on the basis of the factors eliminate arbitraged profits. APT is based on the law
of one price to hold for all possible portfolio combinations.
The APT model takes on to account of the impact of numerous factors on the security. The
|Macro economic factors are taken into consideration and it is closer to reality then CAPM.

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The market portfolio is well defined conceptually. In APT model, factors are not well specified.
Hence, the investor finds it difficult to establish equilibrium relationship. The well defined
market portfolio is a significant advantage of the CAPM leading to the wide usage of the model
in the stock market.
The factors that have impact on one group of securities may not affect other group securities.
There is a lack of constituency in the measurement of the APT model. Further, the influences of
the factors are not independent of each other. It may be difficult to identify the influence
corresponds exactly to each factor. Apart from this, not all variable that exerts influence on
factor measurable.






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CHAPTER - III
INDUSTRY PROFILE









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HISTORY OF STOCK EXCHANGE

The only stock exchanges operating in the 19 the century were those of Bombay set up in 1875
and Ahmadabad set up in 1894. These were organized as voluntary non-profit-making
association of brokers to regulate and protect their interests. Before the control on securities
trading become a central subject and the Bombay securities contracts (control) Act of 1925 used
to regulate trading in securities. Under this Act, the Bombay stock exchange was recognized in
1927 and Ahmadabad in 1937

During the war boom, a number of stock exchanges were organized even in Bombay,
Ahmadabad and other centers, but they were not recognized. Soon after it became a central
subject, central legislation was proposed and a committees and public discussion, the securities
contracts (regulation) Act became law in 1956.


DEFINITION OF STOCK EXCHANGE

Stock exchange means anybody or individuals whether incorporated or not, constituted for the
purpose of assisting, regulating or controlling the business of buying, selling or dealing in
securities.

It is an association of member brokers for the purpose of self-regulation and protecting the
interests of its members.

It can operate only if it is recognized by the Government under the securities contracts
(regulation) Act, 1956. The recognition is granted under section 3 of the act by the central
government, Ministry of Finance.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

Securities and Exchange Board of India (SEBI) set up as an autonomous regulatory authority by
the government of India in 1988 to protect the interests of investors in securities and to promote
the development of, and to regulate the securities market and for matters connected therewith or
incidental thereto. It is empowered by two acts namely the SEBI Act, 1992 and the securities
contract (regulation) Act, 1956 to perform the function of protecting investors rights and
regulating the capital markets.
Securities and Exchange Board of India (SEBI) regulatory reach has been extended to more areas
and there is a considerable change in the capital market. SEBI's annual report for 1997-98 has
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stated that throughout its six-year existence as a statutory body, it has sought to balance the twin
objectives of investor protection and market development. It has formulated new rules and
crafted regulations to foster development. Monitoring and surveillance was put in place in the
Stock Exchanges in 1996-97 and strengthened in 1997-98.
SEBI was set up as an autonomous regulatory authority by the government of India in 1988 to
protect the interests of investors in securities and to promote the development of, and to regulate
the securities market and for matters connected therewith or incidental thereto. It is empowered
by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to
perform the function of protecting investors rights and regulating the capital markets.

OBJECTIVES OF SEBI
The promulgation of the SEBI ordinance in the parliament gave statutory status to SEBI in 1992.
According to the preamble of the SEBI, the three main objectives are: -
To protect the interests of the investors in securities.
To promote the development of securities market.
To regulate the securities market.
FUNCTIONS OF SEBI

Regulating the business in Stock Exchange and any other securities market.

Registering and regulating the working of Stock Brokers, Sub-Brokers, Share Transfer
Agents, Bankers to the issue, Trustees to trust deeds, Registrars to an issue, Merchant
Bankers, Underwriters, Portfolio Managers, Investment Advisers and such other
Intermediaries who may be associated with securities market in any manner.

Registering and regulating the working of collective investment schemes including
Mutual Funds.

Promoting and regulating self-regulatory organizations.

Prohibiting fraudulent and unfair trade practices in the securities market.
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Promoting investor's education and training of intermediaries in securities market.

Prohibiting Insiders Trading in securities.

Regulating substantial acquisition of shares and take-over of companies.

Calling for information, understanding inspection, conducting enquiries and audits of the
Stock Exchanges, Intermediaries and Self-Regulatory organizations in the securities
market.

Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich
heritage. Popularly known as "BSE", it was established as "The Native Share & Stock
Brokers Association" in 1875. BSE has played a pioneering role in the Indian Securities
Market - one of the oldest in the world. Much before actual legislations were enacted,
BSE had formulated comprehensive set of Rules and Regulations for the Indian Capital
Markets. It also laid down best practices adopted by the Indian Capital Markets after
India gained its Independence.
BSE is the first stock exchange in the country to obtain permanent recognition in 1956 from
the Government of India under the Securities Contracts (Regulation) Act, 1956. The base year of
SENSEX is 1978-79. From September 2003, the SENSEX is calculated on a free-float market
capitalization methodology. The "free-float Market Capitalization-Weighted" methodology is
a widely followed index construction methodology on which majority of global equity
benchmarks are based.
The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The
systems and processes of the Exchange are designed to safeguard market integrity and enhance
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transparency in operations. During the year 2004-2005, the trading volumes on the Exchange
showed robust growth.
The Exchange is professionally managed under the overall direction of the Board of
Directors. The Board comprises eminent professionals, representatives of Trading
Members and the Managing Director of the Exchange. The Board is inclusive and is
designed to benefit from the participation of market intermediaries.







NATIONAL STOCK EXCHANGE OF INDIA LIMITED


The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access to
investors from all across the country on an equal footing. Based on the recommendations, NSE
was promoted by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the
country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in
April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June
1994. The Capital Market (Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.
The national stock exchange of India ltd is the largest stock exchange of the country. NSE is
setting the agenda for change in the securities markets in India. For last 5 years it has played a
major role in bringing investors from 347 cities and towns online, ensuring complete
transparency, introducing financial guarantee to settlements, ensuring scientifically designed and
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professionally managed indices and by nurturing the dematerialization effort across the
country.NSE is a complete capital market prime mover. Its wholly owned subsidiaries, National
securities clearing corporation ltd (NSCCL) provides cleaning and settlement of securities, India
index services and products ltd (IISL) provides indices and index services with a consulting and
licensing agreement with Standard & Poors (S&P), and IT ltd forms the technology strength that
NSE works on.



OBJECITVES OF NATIONAL STOCK EXCHANGE

To establish a nationwide trading facility for equities, debt instruments and hybrids.
To ensure equal access to investors all over the country through appropriate
communication network.
To provide a fair, efficient and transparent securities market to investors using an
electronic communication network.
To enable shorter settlement cycle and book entry settlement system.
To meet current international standards of securities market.

PROMOTERS OF NATIONAL STOCK EXCHANGE

IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda, Canara Bank, Corporation Bank, Indian
Bank, Oriental Bank of Commerce, Union Bank of India, Punjab National Bank, Infrastructure
Leasing and Financial Services, Stock
Holding Corporation of India and SBI Capital Market are the promoters of NSE.






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NSE-NIFTY

The National Stock Exchange on April 22, 1996 launched a new Equity Index. The NSE-50.
The new Index which replaces the existing NSE-100 Index is expected to serve as an appropriate
Index for the new segment of futures and options.

"Nifty" means National Index for Fifty Stock.

The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate
market capitalization of around Rs.1,70,000 crores. All companies included in the Index have a
market capitalization in excess of Rs.500crores each and should have traded for 85% of trading
days at an impact cost of less than 1.5%.

The base period for the index is the close of prices on Nov 3, 1995, which makes one year of
completion of operation of NSE's capital market segment. The base value of the Index has been
set at 1000.

NSE-MIDCAP INDEX

The National Stock Exchange Midcap Index or the Junior Nifty comprises 50 stocks that
represents 21 board Industry groups and will provide proper representation of the madcap
segment of the Indian Capital Market. All stocks in the Index should to establish a
nationwide trading facility for equities, debt instruments and hybrids.

To ensure equal access to investors all over the country through appropriate
communication network.

To provide a fair, efficient and transparent securities market to investors using an
electronic communication network.

To enable shorter settlement cycle and book entry settlement system.

To meet current international standards of securities market.



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STOCK EXCHANGES IN INDIA
S.No NAME OF THE STOCK EXCHANGE
YEAR

1. Bombay Stock Exchange 1875
2. Hyderabad Stock Exchange. 1943
3. Ahmadabad Share and Stock Brokers Association. 1957
4. Calcutta Stock Exchange Association Limited. 1957
5. Delhi Stock Exchange Association Limited. 1957
6. Madras Stock Exchange Association Limited. 1957
7. Indoor Stock Brokers Association. 1958
8. Bangalore Stock Exchange. 1963
9. Cochin Stock Exchange. 1978
10. Pune Stock Exchange Limited. 1982
11. U.P Stock Exchange Association Limited. 1982
12. Ludhiana Stock Exchange Association Limited. 1983
13. Jaipur Stock Exchange Limited. 1984
14. Gauhathi Stock Exchange Limited. 1984
15. Mangalore Stock Exchange Limited. 1985
16. Maghad Stock Exchange Limited, Patna. 1986
17. Bhubaneswar Stock Exchange Association Limited. 1989
18. Over the Counter Exchange of India, Bombay. 1989
19. Saurasthra Kutch Stock Exchange Limited. 1990
20. Vadodara Stock Exchange Limited. 1991
21. Coimbatore Stock Exchange Limited. 1991
22. Meerut Stock Exchange Limited. 1991
23. National Stock Exchange Limited. 1992
24. Integrated Stock Exchange. 1999





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CHAPTER -IV
COMPANY PROFILE








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OUR STORY



The Kotak Mahindra Group is one of Indias leading financial institutions, offering
complete financial solutions that encompass every sphere of life.
OUR MANAGEMENT

Know the board of directors at the Kotak Mahindra Group and meet some of the most
knowledgeable and recognized names in the financial world.
OUR INITIATIVES


Kotak Mahindra supports a number of humanitarian and charitable projects in India as
part of our social initiatives.
Corporate Responsibility:
Community investment and development
Kotak Mahindra views Corporate Social Responsibility as an investment in society and in
its own future. Kotak uses the power of its human and financial capital to help in
transforming communities into vibrant, desirable places for people to live. The group
leverages its core competencies in three areas:
Sustainability An integral part of all Kotak Mahindra Group activities is to be consistently
responsible to shareholders, clients, employees, society and the environment.
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The Kotak Mahindra Group:
Kotak Mahindra is one of Indias leading financial institutions offering complete
financial solutions that encompass every sphere of life. From commercial banking, to Stock
broking, to mutual funds, to life insurance, to investment banking the group caters to the
financial needs of individuals and corporate.
The group has net worth of around Rs.3100crore, employs around 9,600 people in its
various businesses and has a distribution network of branches, franchisees, representative offices
in New York, London, Dubai and Mauritius. The Group services around 2.2million customer
accounts.
Vision:
The global Indian financial services brand: Our customers will enjoy the benefits of
dealing with a global Indian brand that best understands their needs and delivers customized
pragmatic solutions across multiple platforms. We will be a world group. Our technology and
best practices will be benchmarked along international lines while our understanding of
customers will be uniquely Indian. We will be more than a repository of our customers savings.
We, the group, will be a single window to every financial service in a customers universe.
The most preferred employer in financial services: A culture of empowerment and spirit
of enterprise attracts bright minds with an entrepreneurial streak to join us and stay with us.
Working with a home-grown, professionally-managed company, which has partnerships with
international leaders, gives our people a perspective that is universal as well as unique.
The most trusted financial services company: We will create an ethos of trust across all
our constituents. Adhering to high standards of compliance and corporate governance will be an
integral part of building trust.
Value Creation: Value creation rather than size alone will be our business driver.
Kotak Securities Ltd. 100% subsidiary of Kotak Mahindra Bank is one of the oldest and largest
broking firms in the industry.
41 | P a g e

Our offerings include stock broking through the branch and Internet, Investments in IPO, Mutual
Funds and portfolio management service.



Our Accolades Include:
- UTI MF CNBC TV 18 Financial Advisor Awards Best performing Equity Broker
(National) for the year 2009
- Finance Asia Award (2009)- Bet Brokerage Firm In India
- Best Brokerage firm in India by Asia money in 2008,2007&2006
- Best Performing firm in India by Asia money in 2008,2007&2006
- Best performing Equity Broker in India- CNBC Financial Advisor Awards 2008
- Avaya Customers Responsiveness Awards (2007 & 2006) in Financial Services Sector
- The Leading Equity House In India in Thomson Extel Surveys Awards For the year 2007
- Euro money Award (2007 & 2006) Best Provider of portfolio Management: Equities
- Euro money Award (2005) Best Equities House In India
We have been the first in providing many products and services which have now become
industry standards. Some of them are:
- Facility of Margin Finance to the customer
- Investing in IPOs and Mutual Funds on the phone
- SMS alerts before execution of depository transactions
- Mobile application ta track portfolios

We have a fully-fledged research division involved in Macro Economic Studies, Sectorial
research and Company Specific Equity Research combined with a strong and well networked
sales force which helps deliver current and up to date market information and news.
We are also a depository participant with National Securities Depository Limited (NSDL) and
Central Depository Services Limited (CDSL), providing dual benefit services wherein the
investors can avail our brokerage services for executing the transactions and the depository
42 | P a g e

services for settling them. We process more than 400000 trades a day which is much higher even
spans over 331 cities with 843 outlets.
Kotak Securities Limited has Rs.2599 Crore of assets under Management (AUM) as of 30
th
June,
2009. The portfolio Management from Kotak Securities comes as an answer to those who would
like to grow exponentially on the crest of the stock market, with the backing of an expert.

Kotak Mahindra Group
Kotak Mahindra is one of Indias leading financial organizations, offering a wide range of
financial services that encompass every sphere of life. From commercial banking, to stock
broking, to mutual funds, to life insurance , to investment banking, the group has a net worth of
over Rs.6,799 crore and has a distribution network of branches, franchises, representative offices
and satellite offices across cities and towns in India and offices in New York, London, San
Francisco, Dubai, Maurities and Singapore. The group services around 6.4 million customer
accounts.

Kotak Securities Ltd.;
Kotak Securities Ltd. Is one of the oldest and leading stock broking houses in India with a
market Kotak Securities Ltd. has also been the largest in IPO Distribution.
The accolades that Kotak Securities has been graced with include:
- Finance Asia Award (2009)- Best Brokerage Firm In India
- Best performing Equity Broker in India CNBC TV 18 Optimix Financial Advisory
Awards,2008
- Best Brokerage Firm in India By Asia money 2007
- the Leading Equity House in India in Thomson Extel Surveys Awards for the year
2007
- Euro money Award (2006 & 2007) = Best Provide of Portfolio Management : Equities
- Avaya Customer responsiveness Awards (2006) in Financial Institution Sector
- Asia Money Award (2006) Best Broker In India
- The company has a full fledged research division involved in Macro Economic
Studies, Sect oral research and company Specific Equity Research combined with a
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strong and well networked sales force which helps deliver current and up to date market
information and news.
Kotak securities Ltd is also a depository participant with National securities Depository Limited
(NSDL) and Central Depository Services Limited (cdsl), providing dual benefit services wherein
the investors can use the brokerage services company for executing the transactions and the
depository services for settling them.
Kotak Securities has 843 outlets servicing over 8.5 lakhs customer accounts and coverage of 331
cities. Kotaksecurities.com, the online division of Kotak Securities Limited Offers Internet
Broking services and also online IPO and Mutual fund Investments.
Our History:
The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited.
This company was promoted by Uday Kotak, Sidney A.A.Pinto and kotak & Company.
Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and thats when the
company changed its name to kotak Mahindra Finance Limited.
Since then its been a steady and confident journey to growth and success
1986
Kotak Mahindra Finance Limited starts the Activity of Bill Discounting.
1987
Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market.
1990
The auto Finance division is started.
1991
The Investment Banking Division is started,. It takes over FICOM, one of Indias largest
financial retail marketing networks.

1992
It enters the funds Syndication sector.
1995
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Brokerage and Distribution businesses incorporated into a separate company Kotak securities.
Investment banking division incorporated into a separate company kotak Mahindra Capital
Company.
1996
The Auto Finance Business is hived off into a separate company Kotak Mahindra Prime
limited (formerly known as Kotak Mahindra Primus limited). Kotak Mahindra takes as
significant stake in ford vehicles.
1998
It was entered in to the mutual fund market with the launch of Kotak Mahindra Asset
Management Company
2000
Kotak Mahindra ties up with Old Mutual plc. For the Life Insurance business. Kotak Securities
launches its on-line broking site (now www.kotaksecurities.com).Commencement of
private equity activity through setting up of Kotak Mahindra Venture Capital Fund.
2001
Matrix sold to Friday Corporation Launches Services.
2003
Kotak Mahindra Finance Ltd. Converts to a commercial bank the first Indian company to do so.

2004
Launches India Growth Fund, a private equity fund.

2005
Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime (formerly
known as kotak Mahindra Primus Limited) and sells Ford credit Kotak Mahindra.
It was Launched a Real estate fund.
2006
Bought the 25% stake held by Goldman Sachs in kotak Mahindra capital Company and Kotak
Securities.
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Kotak group Products & Services:
Bank
Life Insurance
Mutual Fund
Car Finance
Securities
Institutional Equities
Investment Banking
Kotak Mahindra International
Kotak Private equity
Kotak Realty Fund





Kotak Securities Ltd. Is Indias leading Stock broking house with a market share of around
8.5% as on 31
st
March. Kotak Securities Ltd. Has Been the Largest in IPO distribution.
The accolades that Kotak Securities has been graced with include: Prime Ranking Award (2003-
04) Largest Distributor of IPOs, Finance Asia Award (2004) Indias best Equity House.
Finance Asia Award (2005) Best Broker in India. Euro Money Award (2005)-Best Equities
House in India. Euro Money award (2006) Best Provider of portfolio Management: Equities.
The companies has a full-fledged research division involved in Macro Economic studies,
Sectoral research and Company Specific Equity Research combined with a strong and well
networked sales force which helps deliver current and up to date market information and news.
Kotak Mahindra Ltd is also a depository participant with National Securities Depository Limited
(NSDL) and Central Depository Services Limited (CDSL), providing dual benefit the
transactions and the depository services for settling them.
Kotak Securities has 195 branches servicing more than 2, 20,000 customers and coverage of 231
cities. Kotaksecyrities.com the online division of kotak securities limited offer internet broking
services and also online IPO and mutual fund investment.
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Corporate profile:
Kotak Mahindra is one of Indias leading financial institutions, offering complete financial
solutions that encompass every sphere of life. From commercial banking, to stock broking, to
mutual funds, to life insurance, to investment banking, the group caters to the financial needs of
individuals and corporate.

As on June 30, 2006, the group has a net worth of over rRs.2,840 crore, the AUM across the
group is around 182.3 billion and employs over 7,800 employees in its various businesses. With
a presence in 264 cities in India and offices in New York, London, Dubai and Mauritius, it
services a customer base of over 1.6 million.


The group specializes in offering top class financial services, catering to every segment of the
industry. The various group companies include:
- Kotak Mahindra capital Company Limited
- Kotak Mahindra Securities Limited
- Kotak Mahindra Inc.
- Kotak Mahindra (international) Limited
- Global Investments Opportunities Fund Limited
- Kotak Mahindra (UK) Limited
- Kotak Securities Limited
- Kotak Mahindra Old Mutual Life Insurance Limited
- Kotak Mahindra Asset Management Company Limited
- Kotak Mahindra Investment Limited
- Kotak Mahindra Private Equity Trustee Limited.
About kotak securities limited
Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and
distribution arm of the Kotak Mahindras Group. The company was set up in 1994. Kotak
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Securities is a corporate member of both The Bombay Stock Exchange and The national Stock
Exchange of India Limited. Its operations include stock broking and distribution of various
financial products including private and secondary placement of debt and equity and mutual
funds. Currently, Kotak Securities is one of the Largest broking houses in India with wide
geographical reach. The company has four main areas of business: (1) Institutional Equities, (2)
Retail, (3) portfolio Management and (4) Depositary Services.



- Institutional Business:
This division primarily covers secondary market broking. It caters to the needs of foreign
and Indian institutional investors in Indian equities (both local shares and GDRs).
The division also incorporates a comprehensive research cell with sectoral analysts who
cover all the major areas of the Indian economy.


- Client Money Management:
This division provides professional portfolio management services to high net-worth
individuals and corporates. Its expertise in research and stock broking gives the company
the right perspective from which to provide its clients with investment advisory services.

- Retail distribution of financial producers:
Kotak Securities has a comprehensive retail distribution network, comprising
approximately 7000 agents, 13 branches and over 20franchisees across India. This
network is used for the distribution and placement of arrange of financial products that
includes company fixed deposits, mutual funds, Initial Public Offerings, secondary debt
and equity and small savings schemes.
- Depositary Services:
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Kotak Securities is a depository participant with the National Securities Depositary
Limited and Central Depository Services (India) limited for trading and settlements of
dematerialized shares.
Kotak Securities width, volume and equity of offerings regularly earn it accolades from
industry monitors. In recent times, these have included:
- Euro Money Award (2005): Best Equities House in India
- Finance Asia Award (2005): Best Broker in India
- Finance Asia Award(2004): Indias Best Equity House
- Euro Money (2004): Best Equity House in India
- Prime Ranking Award (2003-2004):Largest Distributor of IPOs
- Asia money (2004):Best Equity House in India
Kotak institutional Equities:
Kotak Institutional equities, among the top institutional brokers in India .it mainly covers
secondary market broking and the marketing of equity offerings, including IPOs, to domestic
and foreign institutional investors. Its full- fledged research division comprises 18 analysts
engaged in macro economic studies, industry and company specific research.
Kotak Institutional Equities has full financial services capability, which includes derivatives,
facilitating market access through affiliates and the distinctive offering of corporate access to
investors. The division services over 250 clients including FIIs, pension and mutual funds. The
division has sales desks in Mumbai. London and New York, with the India desk also servicing
clients in Hong Kong, Singapore, Japan and Australia.
Trading System:
NSE introduced for the first time in India, fully automated screen based trading. It uses a
modern, fully computerized trading system designed to offer investors across the length and
breadth of the country a safe and easy way to invest.
The NSE trading system called National Exchange for Automated Trading (NEAT) is a fully
automated screen based trading system, which adopts the principle of an order driven market.
The Futures and Options Trading System provides a fully automated trading environment for
screen-based, floor-less trading on a nationwide basis and an online monitoring and surveillance
mechanism. The systems support an order driven market and provides complete transparency of
trading operations.
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Orders, as and when they are received, are first time stamped and then the orders are stored in
different books. Orders are stored in price-time priority in various books in the following
sequence:
o Best Price
o Within Price, by time priority
Products:
o S& P CNX Nifty futures
o S& P CNX Nifty options
o CNXIT futures
o CNXIT options
o BANK Nifty futures
o BANK Nifty options
o Futures on Individual Securities
o options on Individual Securit

CHAPTER-V
DATA ANALYSIS
AND
INTERPRETATION


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PORTFOLIO MANAGEMENT CONCEPTUAL FRAME WORK
Portfolio analysis believes in the maximization of return through a combination of securities. The
modern portfolio theory discusses the relationship between different securities and then draws
inter-relationship of risks between them. It is not necessary to achieve success only by trying to
get all securities of minimum risk. The theory states that by combining a security of low risk
with another security of high risk, success can be achieved by an investor in making a choice of
investment outlets.


Average Returns: The arithmetic average measures the central tendency. The purpose of
computing an average value for a set of observations is to obtain a single value, which is
representative of all the items. The main objective of averaging is to arrive at a single value
which is a representative of the characteristics of the entire mass of data and arithmetic average
or mean of a series(usually denoted by x) is the value obtained by dividing the sum of the values
of various items in a series (sigma x) divided by the number of items (N) constituting the series.
Thus, if X1,X2..Xn are the given N observations. Then
X= X1+X2+.Xn
N

RETURN Current price-previous price *100
Previous price









51 | P a g e

Average Returns of The Company:
Table No 1
S. No. Security Average
1 WIPRO 1.84
2 ICICI 8.48
3 RELIANCE 11.76
4 RANBAXY 23.06
5 ITC -1.76

Average Return = N / Ri R =


Where

R = Average Return
Ri = Return of the Security I for the year T
N = Number of Years


INTERPRETATION

In this particular securities the RANBAXY Company had highest
Average returns is 23.06 compare to the remaining companies. For
instance the reason behind their high sales or expanded business. The ITC
Company had lowest returns is -1.76 compare to other companies, the
reason behind there is low sales. Other securities are earning medium
range returns such as Wipro, ICICI and Reliance.

52 | P a g e

STANDARD DEVIATION: The concept of standard deviation was first suggested by Karl
pearson in 1983. It may be defined as the positive square root of the arithmetic mean of the
squares of deviations of the given observations from their arithmetic mean. In short S.D may be
defined as Root Mean Square Deviation from Mean It is by far the most important and widely
used measure of studying dispersions.
For a set of N observations X1,X2..Xn with mean X,
Deviations from Mean: (X1-X),(X2-X),.(Xn-X)
Mean-square deviations from Mean: = 1/N (X1-X)2+(X2-X)2+.+(Xn-X)2
=1/N sigma(X-X)2
Root-mean-square deviation from means i.e.,
VARIANCE:
The square of standard deviation is known as Variance.
Variance is the square root of the standard deviation:
Variance = (S.D) 2
Where, (S.D) is standard deviation

Standard Deviation of the Companies:

Table No 2
S. No. Security Std dev
1 WIPRO 65.49
2 ICICI 72.11
3 RELIANCE 86.30
4 RANBAXY 96.62
5 ITC 33.59



2
) R R ( 1 n / 1 D . S =
T = 1


53 | P a g e




FIGURE NO 2




INTERPRETATION
Based on above calculations Standard deviations like that Ranbaxy is highest i.e., 96.62 and ITC
is lower i.e., 33.59 where other securities are having medium standard deviation. Other securities
are earning medium range such as Wipro, ICICI and Reliance.










54 | P a g e




CORRELATION: Correlation is a statistical technique, which measures and analyses the
degree or extent to which two or more variables fluctuate with reference to one another.
Correlation thus denotes the inter-dependence amongst variables. The degrees are expressed by a
coefficient, which ranges between 1 and +1. The direction of change is indicated by (+) or (-)
signs. The former refers to a sympathetic movement in a same direction and the later in the
opposite direction.
Karl Pearsons method of calculating coefficient (r) is based on covariance of the
concerned variables. It was devised by Karl Pearson a great British Biometrician.
This measure known as Pearson an correlation coefficient between two variables (series)
X and Y usually denoted by r is a numerical measure of linear relationship and is defined as the
ratio of the covariance between X and Y (written as Cov(X,Y) to the product of standard
deviation of X and Y.
Symbolically
r = Cov (X,Y)
SD of X,Y
= xy/N = XY
SD of X,Y N
Where x =X-X, y=Y-Y
xy = sum of the product of deviations in X and Y series calculated with reference to their
arithmetic means.

X = standard deviation of the series X.
Y = standard deviation of the series Y.





55 | P a g e






CORRELATION CO-EFFICIENT BETWEEN THE SECURITIES
Security Wipro ICICI Reliance Ranbaxy ITC
Wipro 1 0.3787 0.2774 0.9333 0.6444
ICICI 1 0.3093 0.8050 0.3911
Reliance 1 0.4326 0.7980
Ranbaxy 1 0.7445
ITC 1

Formula
Correlation Co-efficient b . a / ) ab ( COV ) ab n ( o o = A
Where COV (ab) = RB RB )( RA RA ( 1 n / 1

PORTFOLIO WEIGHTS: Table No 3
S.NO PORTFOLIO CORRELATION WEIGHT
OF A
WEIGHT OF
B
1 Wipro & ITC 0.6444 -0.1120 1.1120
2 Wipro & Ranbaxy 0.9333 1.89 -0.89
3 Wipro & ICICI 0.3787 0.5770 0.423
4 Wipro & Reliance 0.2774 0.683 0.317
5 ITC & Ranbaxy 0.7445 1.228 -0.228
6 ITC & ICICI 0.3911 0.959 0.041
7 ITC & Reliance 0.7980 1.300 -0.30
8 Ranbaxy & ICICI 0.8050 -0.123 1.123
9 Ranbaxy & Reliance 0.4326 0.401 0.599
10 ICICI & Reliance 0.3093 0.627 0.373

Formula
Weight of a (Wa) = ) b . a . nab 2 ( ) b a /( ) a nab b ( b
2 2
o o o + o o o o
Weight of b (Wb) = 1 Wa

56 | P a g e




Portfolio Risk: Table No 4

S.NO COMBINATION PORTFOLIO
RISK
1 Wipro & ITC

33.10
2 Wipro & Ranbaxy

109.27
3 Wipro & ICICI

56.84
4 Wipro & Reliance

58.54
5 ITC & Ranbaxy

11.69
6 ITC & ICICI

33.47
7 ITC & Reliance

23.82
8 Ranbaxy & ICICI

69.76
9 Ranbaxy & Reliance

23.62
10 ICICI & Reliance

63.09

Formula:

WaWb . b . a . nab . 2 Wb b Wa a p
2 2 2 2
o o + o + o = o
Where:

Risk Portfolio p
b & a Secutiry between Coeffient n Correlatio nab
b Security of Weight Wb
a Security of Weight Wa
b Security of deviation drad tan S b
a Securitiy of deviation drard tan S a
= o
=
=
=
= o
= o


57 | P a g e




Portfolio Return: Table No 5

S.NO COMBINATION PORTFOLIO
RETURN
1 Wipro & ITC

-2.1632
2 Wipro & Ranbaxy

-17.045
3 Wipro & ICICI

4.648
4 Wipro & Reliance

4.984
5 ITC & Ranbaxy

-7.418
6 ITC & ICICI

-1.340
7 ITC & Reliance

-5.816
8 Ranbaxy & ICICI

6.686
9 Ranbaxy & Reliance

16.291
10 ICICI & Reliance

9.703

Formula:
Rp = (Ra X Wa) + (Rb X Wb)
Where:
Ra = Average Return of Security a
Rb = Average Return of Security b
Wa = Weight of Security a
Wb = Weight of Security b
Rp = Portfolio Return


58 | P a g e


59 | P a g e


Portfolio Risk & Return: Table No 6

S.NO COMBINATION PORTFOLIO
RISK
Portfolio
Return
1 Wipro & ITC

33.10 -
2.1632
2 Wipro & Ranbaxy

109.27 -
17.045
3 Wipro & ICICI

56.84
4.648
4 Wipro & Reliance

58.54
4.984
5 ITC & Ranbaxy

11.69 -
7.418
6 ITC & ICICI

33.47 -
1.340
7 ITC & Reliance

23.82 -
5.816
8 Ranbaxy & ICICI

69.76 6.686
9 Ranbaxy &
Reliance

23.62
16.291
10 ICICI & Reliance

63.09 9.703












60 | P a g e



FIGURE NO 3



INTERPRETATION
The combination of Portfolio Risk & Portfolio Return, In this particular combination of WIPRO
& RANBAXY Company had highest Portfolio risk is 109.27 compare to the remaining
companies. The ITC & RANBAXY Company had lowest risk is 11.69 compare to other
companies.
Based on above calculations Portfolio Return like that RANBAXY & RRELIANCE are highest
i.e., 16.29 and WIPRO & RANBAXY are lowest i.e., -17.04 where other Co. are having medium
returns.







61 | P a g e

PORTFOLIO SELECTION, REVISION & EVALUATION
Portfolio Selection
Portfolio analysis provides the input for next phase in portfolio management, which is portfolio
selection. The proper goal of portfolio construction is to generate a portfolio that provides the
highest returns at a given level of risk. The inputs from portfolio analysis can be used to identify
the set of efficient portfolios. From this the optimal portfolio must be selected for investment.
Harry Markowitz portfolio theory provides both the conceptual framework and analytical tools
for determining the optimal portfolio in a disciplined and objective way.
So, out of the various combinations (related to five companies), the optimal portfolio is Ranbaxy
& Reliance, as this portfolio has minimum risk of 23.62% with maximum return of 16.291%.
Hence, I can say that it is better to invest in these portfolios.
Portfolio revision
Economy and financial markets are dynamic, change take place almost daily. As time passes
securities which were once attractive may lease to be so. New securities with promise of high
return and low risk may emerge. The investor now has to revise his portfolio in the light of
developments in the market. This leads to purchase of some new securities and sale of some of
the existing securities and their proportion in the portfolio changes as a result of the revision.
The revision has to be scientifically and objectively so as to ensure the optimality of the revised
portfolio, it important as portfolio analysis and selection.

Portfolio Evaluation
The objective of constructing a portfolio and revising me t periodically is to earn maximum
returns with minimum risk. Portfolio evaluation is the process, which is concerned with
assessing the performance of the portfolio over a selected period of time in terms of returns and
risk. This involves quantities measurement of actual return realized. Alternative measures of
performance evaluation have been developed by investor and portfolio managers for their use.
It provides a mechanism for identifying weakness in the investment process and improving them.
The portfolio management process is an ongoing process to portfolio construction, continues
with portfolio revision and evaluation. The evaluation provides the necessary feedback for better
designing of portfolio the next time and around. Superior performance is achieved thorough
continual refinement of portfolio management skills.
62 | P a g e


CALCULATION OF AVERAGE RETURNS OF COMPANIES

WIPRO

Year Opening
Share price
(P0)
Closing
Share price
(P1)
(P1 P0) (P1 P0)/
P0*100
2007-08
2008-09
2009-10
2010-11
2011-12
538.55
571.60
488.75
330.85
671.50
559.40
432.10
245.90
706.95
441.40
20.85
-139.50
-242.85
376.10
-230.10
3.87
-24.40
-49.69
113.67
-34.27
Total Return 9.18

Returns are calculated as below

Return of 07-08
= (P1-P0)/P0*100 = (559.40-538.55)/538.55*100 = 3.87
Return of 08-09
= (P1-P0)/P0*100 = (432.10-571.60)/571.60*100 = -24.40
Return of 09-10
= (P1-P0)/P0*100 = (245.90-488.75)/488.75*100 = -49.69
Return of 10-11
= (P1-P0)/P0*100 = (706.95-330.85)/330.85*100 = 113.67
Return of 11-12
= (P1-P0)/P0*100 = (441.40-671.50)/671.50*100 = -34.27

Average Return = 9.18/5 = 1.84











63 | P a g e


ICICI

Year Opening
Share price
(P0)
Closing
Share price
(P1)
(P1 P0) (P1-P0)/
P0*100
2007-08
2008-09
2009-10
2010-11
2011-12
591.75
865.85
879.60
479.20
951.95
853.35
769.40
332.80
952.50
1016.35
261.60
-96.42
-546.80
473.75
64.40
44.20
-11.13
-96.27
98.86
6.76
Total Return 42.42

Returns are calculated as below

Return of 07-08
= (P1-P0)/P0*100 = (853.35-591.75)/591.75*100 = 44.20
Return of 08-09
= (P1-P0)/P0*100 = (769.40-865.85)/865.85*100 = -11.13
Return of 09-10
= (P1-P0)/P0*100 = (332.80-879.60)/879.60*100 = -96.27
Return of 10-11
= (P1-P0)/P0*100 = (952.50-479.20)/479.20*100 = 98.86
Return of 11-12
= (P1-P0)/P0*100 = (1016.35-951.95)/951.95*100 = 6.76

Average Return = 42.42/5 = 8.48














64 | P a g e



RELIANCE

Year Opening
Share price
(P0)
Closing
Share price
(P1)
(P1 P0) (P1- P0) /
P0*100
2007-08
2008-09
2009-10
2010-11
2011-12
615.45
509.75
1430.55
695.20
1137.40
494.20
1250.85
515.55
999.05
606.75
-121.25
741.10
-915.00
303.85
-530.65
-19.70
145.38
-68.96
43.71
-46.65
Total Return 58.78

Returns are calculated as below

Return of 07-08
= (P1-P0)/P0*100 = (494.20-615.45)/615.45*100 =-19.70
Return of 08-09
= (P1-P0)/P0*100 = (1250.85-509.75)/ 509.75*100 = 145.38
Return of 09-10
= (P1-P0)/P0*100 = (515.55-1430.55)/ 1430.55*100 = -68.96
Return of 10-11
= (P1-P0)/P0*100 = (999.05-695.20)/ 695.20*100 = 43.71
Return of 11-12
= (P1-P0)/P0*100 = (606.75-1137.40)/ 1137.40*100 = -46.65
Average Return = 58.78/5 = 11.76









65 | P a g e



RANBAXY

Year Opening
Share price
(P0)
Closing
Share price
(P1)
(P1 P0) (P1-P0)/
P0*100
2007-08
2008-09
2009-10
2010-11
2011-12
472.50
371.95
479.75
166.00
443.30
351.90
438.45
165.70
475.40
452.20
-120.60
66.50
-314.05
309.40
8.90
-25.52
17.88
-65.46
186.38
2.01
Total Return 115.29

Returns are calculated as below

Return of 07-08
= (P1-P0)/P0*100 = (351.90-472.50)/ 472.50*100 = -25.52
Return of 08-09
= (P1-P0)/P0*100 = (438.45-371.95)/ 371.95*100 = 17.88
Return of 09-10
= (P1-P0)/P0*100 = (165.70-479.75)/ 479.75*100 = --65.46
Return of 10-11
= (P1-P0)/P0*100 = (475.40-166.00)/ 166.00*100 = 186.38
Return of 11-12
= (P1-P0)/P0*100 = (452.20-443.30)/ 443.30*100 = 2.01

Average Return = 115.29/5 = 23.06


66 | P a g e

ITC (Indian Tobacco Corporation)


Year Opening
Share price
(P0)
Closing
Share price
(P1)
(P1 P0) (P1-P0)/
P0*100
2007-08
2008-09
2009-10
2010-11
2011-12
203.75
160.05
219.90
188.90
265.85
151.15
206.25
184.85
263.05
172.40
-52.60
46.20
-35.05
74.15
-93.45
-25.81
28.86
-15.94
39.25
-35.15
Total Return -8.79

Returns are calculated as below

Return of 07-08
= (P1-P0)/P0*100 = (151.15-203.75)/ 203.75*100 = -25.81
Return of 08-09
= (P1-P0)/P0*100 = (206.25-160.05)/ 160.05*100 = 28.86
Return of 09-10
= (P1-P0)/P0*100 = (184.85-219.90)/ 219.90*100 = -15.94
Return of 10-11
= (P1-P0)/P0*100 = (263.05-188.90)/ 188.90*100 = 39.25
Return of 11-12
= (P1-P0)/P0*100 = (172.40-265.85)/ 265.85*100 = -35.15

Average Return = -8.79/5 = -1.76

67 | P a g e

CALCULATION OF STANDARD DEVIATIONS

WIPRO

Year Return (R)
Avg. Rtn. ( ) R R R ( R R )
2

2007-08
2008-09
2009-10
2010-11
2011-12
3.87
-24.40
-49.69
113.67
-34.27
1.84
1.84
1.84
1.84
1.84
2.03
-26.24
-51.53
111.83
-36.11
4.12
688.54
2655.34
12505.95
1303.93
(R) = 9.18
( R R )
2

17157.88
Average Return = (R)/N = 9.18/5 = 1.84
Variance = 1/N 1 ( R R )
2
= 1/5 1 (17157.88) = 4289.47
Standard Deviation = 47 . 4289 = 65.49

ICICI

Year Return (R)
Avg. Rtn. ( ) R R R ( R R )
2

2007-08
2008-09
2009-10
2010-11
2011-12
44.20
-11.13
-96.27
98.86
6.76
8.48
8.48
8.48
8.48
8.48
35.72
-19.61
-104.75
90.38
-1.72
1275.92
384.55
10972.56
8168.54
-2.96
(R) = 42.42
( R R )
2

20798.61
Average Return = (R)/N = 42.42/5 = 8.48
Variance = 1/N 1 ( R R )
2
= 1/5 1 (20798.61) = 5199.65
Standard Deviation = 65 . 5199 = 72.11












68 | P a g e

RELIANCE

Year Return (R)
Avg. Rtn. ( ) R R R ( R R )
2

2007-08
2008-09
2009-10
2010-11
2011-12
-19.70
145.38
-68.96
43.71
-46.65
11.76
11.76
11.76
11.76
11.76
-31.46
133.62
-80.72
31.95
-58.41
989.73
17854.30
6515.72
1020.80
3411.73
(R) = 58.78
( R R )
2

29792.28
Average Return = (R)/N = 58.78/5 = 11.76
Variance = 1/N 1 ( R R )
2
= 1/5 1 (29792.28) = 7448.07
Standard Deviation = 07 . 7448 = 86.30
RANBAXY

Year Return (R)
Avg. Rtn. ( ) R R R ( R R )
2

2007-08
2008-09
2009-10
2010-11
2011-12
-25.52
17.88
-65.46
186.38
2.01
23.06
23.06
23.06
23.06
23.06
-48.58
-5.18
-88.52
163.32
-21.05
2360.02
26.83
7835.79
26673.42
443.10
(R) = 115.29
( R R )
2

37339.16

Average Return = (R)/N = 115.29/5 = 23.06
Variance = 1/N 1 ( R R )
2
= 1/5 1 (37339.16) = 9334.79
Standard Deviation = 79 . 9334 = 96.62

ITC

Year Return (R)
Avg. Rtn. ( ) R R R ( R R )
2

2007-08
2008-09
2009-10
2010-11
2011-12
-25.81
28.86
-15.94
39.25
-35.15
-1.76
-1.76
-1.76
-1.76
-1.76
-24.05
30.62
-14.18
41.01
-33.39
578.40
937.58
201.07
1681.82
1114.89
(R) = -8.79
( R R )
2

4513.76

Average Return = (R)/N = -8.79/5 = -1.76
Variance = 1/N 1 ( R R )
2
= 1/5 1 (4513.76) = 1128.44
Standard Deviation = 44 . 1128 = 33.59

69 | P a g e

CALCULATION OF CORRELATIONS


1. CORRELATION BETWEEN WIPRO & ITC

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
2.03
-26.24
-51.53
111.83
-36.11
-24.05
30.62
-14.18
41.01
-33.39
-48.82
-803.47
730.69
4586.15
1205.71
( )( ) RB RB RA RA 5670.26

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(5670.26) = 1417.56

59 . 33 49 . 65 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 1417.56/65.49*33.59 = 0.6444

INTERPRETATION

In this combination, as per the calculations and the study, WIPRO bears a Standard deviation of
65.49 and where as ITC bears a Standard deviation of 33.59. The Correlation of Coefficient
between WIPRO & ITC is 0.644















70 | P a g e


2. CORRELATION BETWEEN WIPRO & RANBAXY

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
2.03
-26.24
-51.53
111.83
-36.11
-48.58
-5.18
-88.52
163.32
-21.05
-98.62
135.92
4561.43
18264.07
760.12
( )( ) RB RB RA RA 23622.92

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(23622.92) = 5905.73

62 . 96 49 . 65 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 5905.73/65.49*96.62 = 0.9333

INTERPRETATION

Investors have another alternative with this combination. The Standard deviation of WIPRO is
65.49 and for RANBAXY is 96.62. The Correlation of Coefficient between WIPRO &
RANBAXY is 0.933



















71 | P a g e



3. CORRELATION BETWEEN WIPRO & ICICI

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
2.03
-26.24
-51.53
111.83
-36.11
35.72
-19.61
-104.75
90.38
-1.72
72.51
514.56
5397.76
1107.19
62.11
( )( ) RB RB RA RA 7154.13

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(7154.13) = 1788.53

11 . 72 49 . 65 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 1788.53/65.49*72.11 = 0.3787


INTERPRETATION

In this combination, as per the calculations and the study, WIPRO bears a Standard deviation of
65.49 and where as ICICI bears a Standard deviation of 72.11. The Correlation of Coefficient
between WIPRO & ICICC is 0.3787
















72 | P a g e

4. CORRELATION BETWEEN WIPRO & RELIANCE

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
2.03
-26.24
-51.53
111.83
-36.11
-31.46
133.62
-80.72
31.95
-58.41
-63.86
-3506.19
4159.50
3572.97
2109.18
( )( ) RB RB RA RA 6271.60

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(6271.60) = 1567.90

30 . 86 49 . 65 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 1567.90/65.49*86.30 = 0.2774


INTERPRETATION

Investors have another alternative with this combination. The Standard deviation of WIPRO is
65.49 and for RELIANCE is 86.30 The Correlation of Coefficient between WIPRO &
RELIANCE is 0.2774


73 | P a g e

5. CORRELATION BETWEEN ITC & RANBAXY

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
-24.05
30.62
-14.18
41.01
-33.39
-48.58
-5.18
-88.52
163.32
-21.05
1168.35
-158.61
1255.21
6697.75
702.86
( )( ) RB RB RA RA 9665.56

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(9665.56) = 2416.39

62 . 96 59 . 33 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 2416.39/33.59*96.62= 0.7445





INTERPRETATION

In this combination, as per the calculations and the study, ITC bears a Standard deviation of
33.59 and where as RANBAXY bears a Standard deviation of 96.62. The Correlation of
Coefficient between ITC & RANBAXY is 0.7445

















74 | P a g e

6. CORRELATION BETWEEN ITC & ICICI

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
-24.05
30.62
-14.18
41.01
-33.39
35.72
-19.61
-104.75
90.38
-1.72
-859.07
-600.46
1485.35
3706.48
57.43
( )( ) RB RB RA RA 3789.73

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(3789.73) = 947.43

11 . 72 59 . 33 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 947.43/33.59*72.11= 0.3911




INTERPRETATION

In this combination, as per the calculations and the study, ITC bears a Standard deviation of
33.59 and where as ICICI bears a Standard deviation of 72.11. The Correlation of Coefficient
between ITC & ICICI is 0.3911
75 | P a g e

7. CORRELATION BETWEEN ITC & RELIANCE

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
-24.05
30.62
-14.18
41.01
-33.39
-31.46
133.62
-80.72
31.95
-58.41
756.61
4091.44
1144.61
1310.27
1950.31
( )( ) RB RB RA RA 9253.24

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(9253.24) = 2313.31

30 . 86 59 . 33 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 2313.31/33.59*86.30= 0.7980




INTERPRETATION

In this combination, as per the calculations and the study, ITC bears a Standard deviation of
33.59 and where as RELIANCE bears a Standard deviation of 86.30. The Correlation of
Coefficient between ITC & RELIANCE is 0.7980.


















76 | P a g e


8. CORRELATION BETWEEN RANBAXY & ICICI

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
-48.58
-5.18
-88.52
163.32
-21.05
35.72
-19.61
-104.75
90.38
-1.72
-1735.28
101.57
9272.47
14760.86
36.21
( )( ) RB RB RA RA 22435.83

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(22435.83) = 5608.96

11 . 72 62 . 96 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 5608.96/96.62*72.11= 0.8050





INTERPRETATION

In this combination, as per the calculations and the study, RANBAXY bears a Standard deviation
of 96.62 and where as ICICI bears a Standard deviation of 72.11. The Correlation of Coefficient
between RANBAXY & ICICI is 0.8050.




77 | P a g e

9. CORRELATION BETWEEN RANBAXY & RELIANCE

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
-48.58
-5.18
-88.52
163.32
-21.05
-31.46
133.62
-80.72
31.95
-58.41
1528.33
-692.15
7145.33
5218.07
1229.53
( )( ) RB RB RA RA 14429.11

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(14429.11) = 3607.28

30 . 86 62 . 96 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 3607.28/96.62*86.30 = 0.4326




INTERPRETATION

In this combination, as per the calculations and the study, RANBAXY bears a Standard deviation
of 96.62 and where as RELIANCE bears a Standard deviation of 86.30. The Correlation of
Coefficient between RANBAXY & RELIANCE is 0.4326.


















78 | P a g e




10. CORRELATION BETWEEN ICICI & RELIANCE

Year
RA RA RB RB
( )( ) RB RB RA RA
2007-08
2008-09
2009-10
2010-11
2011-12
35.72
-19.61
-104.75
90.38
-1.72
-31.46
133.62
-80.72
31.95
-58.41
-1123.75
-2620.29
8455.42
2887.64
100.46
( )( ) RB RB RA RA 7699.48

COVARIANCE (COVab) = 1/n-1 ( )( ) RB RB RA RA
= 1/5-1(7699.48) = 1924.87

30 . 86 11 . 72 = = b a o o

Correlation Coefficient (n ~ab) = COVab/ b . a o o
= 1924.87/72.11*86.30 = 0.3093





INTERPRETATION

In this combination, as per the calculations and the study, ICICI bears a Standard deviation of
72.11 and where as RELIANCE bears a Standard deviation of 86.30. The Correlation of
Coefficient between ICICI & RELIANCE is 0.3093.












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CALCULATION OF PORTFOLIO WEIGHTS

FORMULA

( ) b . a . nab 2 b a / a . nab b b Xa
2 2
o o o + o o o o =

Xb = 1 Xa

1. CALCULATION OF WEIGHT OF WIPRO & ITC

Where, Xa = WIPRO, Xb = ITC

Xa = 33.59(33.59 (0.6444)65.49)/65.49
2
+33.59
2
-(2*0.6444*65.49*33.59)

= -289.26/2582.11 = -0.1120

Xb = 1 Xa = 1 (-0.1120) = 1.1120

Xa = -11.20%, Xb = 111.20%

INTERPRETATION

In this combination, as per the calculations and the study, WIPRO bears a proportion of -
0.1120and where as ITC bears a proportion of 1.1120

2. CALCULATION OF WEIGHT OF WIPRO & RANBAXY

Where, Xa = WIPRO, Xb = RANBAXY

Xa = 96.62(96.62 (0.9333)65.49)/65.49
2
+96.62
2
-(2*0.9333*65.49*96.62)

= 3429.83/1813.18 = 1.89

Xb = 1 Xa = 1 1.89 = -0.89

Xa = 189%, Xb = -89%

INTERPRETATION

According to this combination, the portfolio weights of WIPRO & RANBAXY are 1.89 and -
0.89 respectivly.




80 | P a g e


3. CALCULATION OF WEIGHT OF WIPRO & ICICI

Where, Xa = WIPRO, Xb = ICICI

Xa = 72.11(72.11 (0.3787)65.49)/65.49
2
+72.11
2
-(2*0.3787*65.49*72.11)

= 3411.44/5911.98 = 0.5770

Xb = 1 Xa = 1 0.5770 = 0.423

Xa = 57.7%, Xb = 42.3%

INTERPRETATION

In this combination, as per the calculations and the study, WIPRO bears a proportion of -0.577
and where as ICICI bears a proportion of 0.423.

4. CALCULATION OF WEIGHT OF WIPRO & RELIANCE

Where, Xa = WIPRO, Xb = RELIANCE

Xa = 86.30(86.30(0.2774)65.49)/65.49
2
+86.30
2
(2*0.2774*65.49*86.30)

= 5879.88/8601.02 = 0.683

Xb = 1 Xa = 1 0.683 = 0.317

Xa = 68.3%, Xb = 31.7%

INTERPRETATION

Investors have another alternative with this combination. The proportion of investments for
WIPRO is 0.683 and for RELIANCE is 0.317.








81 | P a g e

5. CALCULATION OF WEIGHT OF ITC & RANBAXY

Where, Xa = ITC, Xb = RANBAXY

Xa = 96.62(96.62(0.7445)33.59)/33.59
2
+96.62
2
(2*0.7445*33.59*96.62)

= 6919.17/5631.21 = 1.228

Xb = 1 Xa = 1 1.228 = -0.228

Xa = 122.8%, Xb = -22.8%

INTERPRETATION

Here in this combination, the proportional weight of ITC is 1.228 and RANBAXY is -0.228.

6. CALCULATION OF WEIGHT OF ITC & ICICI
Where, Xa = ITC, Xb = ICICI

Xa = 72.11(72.11(0.3911)33.59)/33.59
2
+72.11
2
(2*0.3911*33.59*72.11)

= 4252.54/4433.51= 0.959

Xb = 1 Xa = 1 0.959= 0.041

Xa = 95.9%, Xb = 4.1%

INTERPRETATION

The combination of ITC and ICICI gives the proportion of investment as 0.959 and 0.041.

7. CALCULATION OF WEIGHT OF ITC & RELIANCE
Where, Xa = ITC, Xb = RELIANCE

Xa = 86.30(86.30(0.7980)33.59)/33.59
2
+86.30
2
(2*0.7980*33.59*86.30)

= 5134.43/3949.47 = 1.300

Xb = 1 Xa = 1 1.300 = -0.3

Xa = 130%, Xb = -30%

INTERPRETATION In this combination, ITCS proportional weight is 1.300 and
RELIANCES proportional weight is -0.30.

82 | P a g e

8. CALCULATION OF WEIGHT OF RANBAXY & ICICI
Where, Xa = RANBAXY, Xb = ICICI

Xa = 72.11(72.11(0.8050)96.62)/96.62
2
+72.11
2
(2*0.8050*96.62*72.11)

= -408.86/3317.97 = -0.123

Xb = 1 Xa = 1 (-0.123) = 1.123

Xa = -12.3%, Xb = 112.3%

INTERPRETATION

Investors have another alternative with this combination. The proportion of investment for
RANBAXY is -0.123 and for ICICI is 1.123.

9. CALCULATION OF WEIGHT OF RANBAXY & RELIANCE
Where, Xa = RANBAXY, Xb = RELIANCE

Xa = 86.30(86.30(0.4326)96.62)/96.62
2
+86.30
2
(2*0.4326*96.62*86.30)

= 3840.54/9568.81 = 0.401

Xb = 1 Xa = 1 0.401 = 0.599

Xa = 40.1%, Xb = 59.9%

INTERPRETATION

The combination of RANBAXY and RELIANCE gives the proportion of investment as 0.401
and 0.599.

10. CALCULATION OF WEIGHT OF ICICI & RELIANCE
Where, Xa = ICICI, Xb = RELIANCE

Xa = 86.30(86.30(0.3093)72.11)/72.11
2
+86.30
2
(2*0.3093*72.11*86.30)

= 5522.88/8797.94= 0.627

Xb = 1 Xa = 1 0.627 = 0.373

Xa = 62.7%, Xb = 37.3%

INTERPRETATION
In this combination, as per the calculations and the study, ICICI bears a proportion of 0.627 and
where as RELIANCE bears a proportion of 0.373.
83 | P a g e

PORTFOLIO RISK: Risk on portfolio is different from the risk on individual securities. This
risk is reflected by in the variability of the returns from zero to infinity. The expected return
depends on probability of the returns and their weighted contribution to the risk of the portfolio.

CALCULATION OF PORTFOLIO RISK

FORMULA

WaWb b a nab Wb b Wa a p . . 2
2 2 2 2
o o o o o + + =

Where
a o = Standard Deviation of Security a

b o = Standard Deviation of Security b

Wa = Weight of Security a

Wb = Weight of Security b

nab = Correlation Coefficient between Security a & b

p o = Portfolio Risk



1. WIPRO & ITC
59 . 33 49 . 65 = = b a o o , Wa = -0.1120, Wb = 1.1120, nab = 0.6444

p o = 65.49
2
*-0.1120
2
+33.59
2
*1.1120
2
+ 2(0.6444*65.49*33.59*-0.1120*1.1120)

10 . 33 88 . 1095 = =

INTERPRETATION
In this combination as per the calculations and the study; The Wipro bears proportion of
investment -0.1120 and ITC 1.1120, which is more than when compared to Wipro. The Standard
deviation i.e. risks are 65.49 and 33.59 with returns of Wipro 1.84, and -1.76 ITC In this
combination there are high risks but returns are very low. Investors who are willing to take high
risk can invest in Wipro.

84 | P a g e

2. WIPRO & RANBAXY
62 . 96 , 49 . 65 = = b a o o , Wa = 1.89, Wb = -0.89, nab = 0.9333

p o = 65.49
2
* 1.89
2
+ 96.62
2
* -0.89
2
+ 2(0.9333*65.49*96.62*1.89*-0.89)

27 . 109 65 . 11941 = =

INTERPRETATION
The Portfolio weights of Wipro 1.89 and -0.89 of Ranbaxy, the standard deviation of Wipro and
Ranbaxy are 65.49, 96.62 which are reduced to 109.27 the investors who are willing to take risk
can invest in Ranbaxy because its returns are 1.84 which is more than wipro 23.06.

3. WIPRO & ICICI
11 . 72 , 49 . 65 = = b a o o , Wa = 0.577, Wb = 0.423, nab = 0.3787

p o = 65.49
2
* 0.577
2
+ 72.11
2
* 0.423
2
+ 2(0.3787*65.49*72.11*0.577*0.423)

84 . 56 31 . 3231 = =

INTERPRETATION
The Portfolio weights of Wipro and ICIC are 0.5770 and 0.423 and their standard deviations are
65.49 and 72.11which is reduced to 56.84 the returns of Wipro and ICIC are 1.84 and 8.48 The
Portfolio return of this combination is 4.64. The investors are suggesting investing in Wipro
because it is giving high return compare to ICIC.

4. WIPRO & RELIANCE
30 . 86 , 49 . 65 = = b a o o , Wa = 0.683, Wb = 0.317, nab = 0.2774

p o = 65.49
2
*0.683
2
+86.30
2
*0.317
2
+2(0.2774*65.49*86.30*0.683*0.317)

54 . 58 04 . 3428 = =

INTERPRETATION
In this combination the portfolio weights are 0.683 and 0.317 and the standard deviations of
WIPRO and RELIANCE are 65.49and 86.30 which is reduced to 58.54. The returns are 1.84
and 11.76. In this combination the investors are suggested to go for WIPRO because its risk and
returns are moderate.

85 | P a g e

5. ITC & RANBAXY
62 . 96 , 59 . 33 = = b a o o , a = 1.228, Wb = -0.228, nab = 0.7445

p o = 33.59
2
*1.228
2
+96.62
2
*-0.228
2
+2(0.7445*33.59*96.62*1.228*-0.228)

69 . 11 87 . 136 = =
INTERPRETATION
The Portfolio weights of ITC & RANBAXY are 1.228 and -0.228 the standard deviations are
33.59 and 96.62 which is reduced to 11.69, the returns are ITC & RANBAXY are -1.76 and
23.06. Investors who are willing face high risk can invest in RANBAXY because its returns are
more than ITC.

6. ITC & ICICI
11 . 72 , 59 . 33 = = b a o o , Wa = 0.959,Wb = 0.041, nab = 0.3911

p o = 33.59
2
*0.959
2
+72.11
2
*0.041
2
+2(0.3911*33.59*72.11*0.959*0.041)

47 . 33 90 . 1120 = =
INTERPRETATION
The Portfolio weights of ITC & ICICI 0.95, 0.041 and the standard deviations are 33.59 and
72.11which are reduced to 33.47 and returns are -1.76 and 8.48. It is suggested to investors to
invest in ICICI because it is giving fair returns when compared to ITC.

7. ITC & RELIANCE
30 . 86 , 59 . 33 = = b a o o , Wa = 1.300, Wb = -0.3, nab = 0.7980

p o = 33.59
2
*1.300
2
+86.30
2
*-0.3
2
+2(0.7980*33.59*86.30*1.300*-0.3)

82 . 23 82 . 567 = =
INTERPRETATION
The Portfolio Weights of ITC & RELIANCE are 1.30 and -0.30 and standard deviations are
33.59 and 86.30 and returns of ITC & RELIANCE are -1.76 and 11.76 This combination is not
that much good risks are very high when compared to the returns, investors who will face high
risk can invest in ITC.


86 | P a g e

8. RANBAXY & ICICI
11 . 72 , 62 . 96 = = b a o o , Wa = -0.123, Wb = 1.123, nab = 0.8050

p o = 96.62
2
*-0.123
2
+72.11
2
*1.123
2
+2(0.8050*96.62*72.11*-0.123*1.123)

76 . 69 01 . 4867 = =

INTERPRETATION
The Portfolio weights are -0.123 and 1.123 the standard deviations i.e. risks are 96.62 and 72.11,
the returns are 23.06 and 8.48. In this Combination RANBAXY is the best option to invest.

9. RANBAXY & RELIANCE
30 . 86 , 62 . 96 = = b a o o , Wa = 0.401, Wb = 0.599, nab = 0.4326

p o = 96.62
2
*0.401
2
+86.30
2
*0.599
2
+2(0.4326*96.62*86.30*0.401*0.599)

62 . 23 90 . 557 = =


INTERPRETATION
The Portfolio weights of 0.401 and 0.59 and the standard deviations are 96.62 and 86.30, the
returns are 23.06 and 11.76. In this combination The RANBAXY is giving moderate reruns with
moderate standard deviation when compared to RELIANCE because it is having high risk.


1. ICICI & RELIANCE
30 . 86 , 11 . 72 = = b a o o , Wa = 0.627, Wb = 0.373, nab = 0.3093
p o = 72.11
2
*0.627
2
+86.30
2
*0.373
2
+2(0.3093*72.11*86.30*0.627*0.373)

09 . 63 71 . 3980 = =

INTERPRETATION
The Portfolio weights are 0.627 and 0.373 of ICICC & RELIANCE the weights suggests that
invest more in ICICC but the Standard deviations are 72.11 and 86.30 and returns are 8.48 and
11.76 the ICIC is the best option to invest





87 | P a g e

PORTFOLIO RETURN: Each security in a portfolio contributes returns in the proportion of its
investment in security. Thus the portfolio of expected returns, from each of the securities with
weights representing the proportionate share of security in the total investments.

Calculation of Portfolio Return

Rp = (Ra * Wa) + (Rb * Wb)

Where,
Ra = Average Return of Security a
Rb = Average Return of Security b
Wa = Weight of Security a
Wb = Weight of Security b
Rp = Portfolio Return


Portfolios Ra Wa Rb Wb Rp= (Ra*Wa)+(Rb*Wb)
WIPRO & ITC
WIPRO & RANBAXY
WIPRO & ICICI
WIPRO & RELIANCE
ITC & RANBAXY
ITC & ICICI
ITC & RELIANCE
RANBAXY & ICICI
RANBAXY & RELIANCE
ICICI & RELIANCE
1.84
1.84
1.84
1.84
-1.76
-1.76
-1.76
23.06
23.06
8.48
-0.1120
1.89
0.577
0.683
1.228
0.959
1.300
-0.123
0.401
0.627
-1.76
23.06
8.48
11.76
23.06
8.48
11.76
8.48
11.76
11.76
1.1120
-0.89
0.423
0.317
-0.228
0.041
-0.30
1.123
0.599
0.373
-2.1632
-17.045
4.648
4.984
-7.418
-1.340
-5.816
6.686
16.291
9.703







88 | P a g e




CHAPTER VI
FINDINGS, SUGGESTIONS & CONCLUSION























89 | P a g e

FINDINGS

I) The combination of WIPRO & ITC portfolio risk is 33.10. Which suggest the
investor to go for portfolio investment rather than individual investment.
II) The portfolio risk of two companies (WIPRO & RANBAXY) is 109.27. Which
suggest the investor to go for portfolio investment rather than individual investment.
(OR)
The WIPRO & RANBAXY has got negative values of returns and the risk was very
high 109.27 thus we can say the risk factors is very high level compare to returns.
III) The portfolio risk of WIPRO & ICICI is 56.84 which reduce the risk of individual
stocks. (OR) WIPRO & ICICI has got the returns was 4.648 and risk was 56.84 thus
we can say the risk is very high level compare to returns.
IV) The combined portfolio risk is 58.54. i.e., WIPRO & RELIANCE. It reduces the risk
of the investor and gets higher returns if he invests in portfolio
V) The portfolio risk of ITC & RANBAXY is 11.69. Which reduce the risk instead of
investing in individual companies
VI) The portfolio risk of ITC & ICICI is 33.47. Which suggest the investor to go for
portfolio investment rather than individual investment.
VII) The proportional risk of ITC & RELLIANCE is 23.82. Which suggest the investor to
go for portfolio investment rather than individual investment.
VIII) The portfolio risk is 69.76. Which reduce the risk of individual stocks.
IX) The portfolio risk of RANBAXY and RELIANCE is 23.62 it reduces the risk of the
investor and gets higher returns if he invests in portfolio
X) The portfolio risk of ICICI and RELIANCE is 63.09 it reduces the risk of the investor
and gets higher returns if he invests in portfolio

90 | P a g e

The investor who bears high risk will be getting high returns.

The investor has to maintain the portfolio of diversified sectors stocks rather than investing
in a single sector of different stocks.

People who are investing in portfolios mostly depend on the advice of their friends,
relatives, financial advisers.

Most of the investor invests in basic necessities. They plan to invest in insurance (LIC,
GIC) and pension fund as these give guarantied returns and are less risky.

Most of the investors feel that inviting in stock/capital market is of high risk therefore they
dont invest in them.

SUGGESTIONS

Before investing in shares, should look at type of shares, you want to buy and the way in which
you want to deal on the stock market.

Three main routes for investing in shares
- Invest your capital in a single company
- Invest your capital in a number of different companies, a portfolio of shares.
- Invest indirectly and spread your risk through collective investment such as investment
trust and unit trust
- The investor is able to know the risk and return of the shares by using the analysis.
- The investor who takes high risk involves taking of high returns.
- The investor who will not take risk involves taking of less returns.
- The investor to be a moderate person involves taking of optimum risk or return.
- A small investor can maintain a portfolio with diversified stocks rather than investing in a
few stocks, which he feels are good.
91 | P a g e

- The investor should include all those securities, which are undervalued in their portfolio,
and remove those securities that are overvalued.
- The risk and return of all securities and individual a desired combination in his portfolio.
This can be done using CAPM and Markowitz model.
- The investor can have a complete idea about the performance of the company by
analyzing the financial ratios and will be able to calculate its intrinsic worth.

CONCLUSION


- ICICI, RELIANCE and RANBAXY are good enough to invest because there returns are
good when compared to WIPRO & ITC.

- As per as Standard Deviations RELIANCE has Highest risk security and Next highest
risk securities are WIPRO & RANBAXY. ITC & ICICIC are having moderate risks.

- As per as Correlation concerned the securities of RANBAXY & ICICI are the good
combinations because they are having normal returns with normal risk

The investor who bears high risk will be getting high returns.

The investor has to maintain the portfolio of diversified sectors stocks rather than investing
in a single sector of different stocks.

People who are investing in portfolios mostly depend on the advice of their friends,
relatives, financial advisers.

Most of the investor invests in basic necessities. They plan to invest in insurance (LIC,
GIC) and pension fund as these give guarantied returns and are less risky.

Most of the investors feel that inviting in stock/capital market is of high risk therefore they
dont invest in them.
92 | P a g e


BIBLIOGRAPHY

Books
DONALD FISHER & RONALD J.JORDON, SECURITIES ANALYSIS
AND PROTFOLIO MANAGEMENT, 6
TH
EDITION.
V.K. BHALLA, INVESTMENTS MANAGEMENT
-S.CHAND PUBLICATIONS
PORTFOLIO MANAGEMENT BY KEVIN
V.A. AVADHANI, INVESTMENT MANAGEMENT.
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
- PUNITHAVATHY PANDIAN

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http://www.religare.com
http://www.investopedia.com
http://www.google.com