Summer Internship project on

Equity Portfolio Management

Submitted by

Ajit Kumar Reg. No 1221402

Christ University Institute of Management

INTRODUCTION OF STOCK MARKET

Journey of Indian Stock market: Indian stock market is one of the oldest markets in Asia. It has a history of nearly 200 years ago. In 1830 when East India Company was the dominant institution business on corporate stocks and shares in Bank and cotton presses used to take place in Bombay. In the period of 1840 and 1850 trading list broaden and half a dozen brokers recognized by banks and merchants. By 1850 there was a rapid development in the market and commercial enterprise and brokerage business attracted many businesses into the field and by this time number of stock brokers increased up to 60. In 1860-61 American Civil war broke out and cotton supply from United States of Europe was stopped and this was the time when Share Mania in India begun and it lead to increase in number of brokers from 200 to 250. After the end of the American Civil war the brokers found a place in a street which is now appropriately called as Dalal Street, where they would conveniently assemble and transact their business. This started growing on like anything and in the year 1887 they agreed to establish in Bombay the Native Share and the Stock Brokers Association which is alternatively known as The Stock Exchange. In the year 1895 the Stock market acquired a premise in the same street which was further inaugurated in the year 1899 and finally the Asia oldest stock Exchange at Bombay was formulated. In India Bombay Stock Exchange (BSE) and National Stock Exchange of India Limited (NSE) are the major exchanges. In addition to this there are 24 regional stock Exchanges. The BSE and NSE accounts for 80% of total equity volume traded in India. At NSE around 1500 stocks are listed with a total market cap of around Rs 9,21,500 crore, on the other hand BSE has over 6000 stocks and has a market capitalization of around Rs 9,68,000 crore. Most of the important stocks are traded on both of the exchanges with different settlement charges. The primary index of BSE comprises of top 30 stocks while NSE has the S&P NSE 50 index which consists of 50 stocks.

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About Bombay Stock Exchange: Bombay Stock Exchange (BSE) is located on Dalal Street, Mumbai, India. It is the 10 th largest stock Exchange in the world by market Capitalization. It was established in the year 1875. Over the past 137 years it has facilitated the growth of Indian corporate sector by providing it an efficient capital-raising platform. It provides a transparent and efficient market for trading in equity, debt instruments, derivatives, mutual funds. More than 5000 companies are listed on this stock exchange making it worlds No 1 exchange in terms of listed members. Its popular equity index - The S&P BSE SENSEX [Formerly SENSEX ] it is India's most widely tracked stock market benchmark index. Hours of operation
Session Pre-open Trading Session Timing 09:00 09:15 09:15 Trading Session Position Transfer Session 15:30 15:30 15:50 15:50 Closing Session Option Exercise Session 16:05 16:05

About National Stock Exchange: National Stock Exchange (NSE) located at Mumbai, India is the 11th largest in the world stock after BSE by market capitalization. It was founded in the year 1992. NSE is much more technologically advanced meets international benchmarks and standards. It has 1652 listings as of July 2012 with a market capitalization of US$1 trillion.
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 The NSE's key index is the S&P CNX Nifty, known as the NSENIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization. Currently, NSE has the following major segments of the capital market: Equities

Equities Indices Mutual Funds Exchange Traded Funds Initial Public Offerings Security Lending and Borrowing Scheme

Derivatives

Equity Derivatives Currency Derivatives Interest Rate Futures

Debt

Retail Debt Market Wholesale Debt Market Corporate Bonds

OVERVIEW OF THE COMPANY About the Company: 2.1 INTRODUCTION:In the middle of 1999, when e-commerce was just about starting in India, Sameer Gehlaut and his close IIT Delhi friend Rajiv Rattan got together and bought a defunct securities company with a NSE membership and started offering brokerage services. A Few months later, their friend Saurabh Mittal also joined them.

By December 1999, the company embarked on its journey to build one of the first online platforms in India for offering internet brokerage services. In January 2000, the 3 founders incorporated Indiabulls Financial Services and made it as the flagship company.

In mid 2000, Indiabulls Financial Services received venture capital funding from Mr. L.N. Mittal &Mr. Harish Fabiani. In late 2000, Indiabulls Securities, a subsidiary of Indiabulls Financial Services started offering online brokerage services and simultaneously opened physical offices across India.

By 2003, Indiabulls securities had established a strong plan India presence and client base through its offices and on the internet.

In September 2004, Indiabulls Financial Services went public with an IPO at Rs 19 a share.

In late 2004, Indiabulls Financial Services started its financing business with consumer loans.

In March 2005, Indiabulls Properties Private Ltd, a subsidiary of Indiabulls Financial Services, participated in government auction of Jupiter Mills, a defunct 11 acre textile mill owned by NTC
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in Lower Parel, Mumbai. Indiabulls Properties private Ltd won the mill in auction and that purchase started Indiabulls real estate business. A few months later, Indiabulls Real Estate company pvt ltd bought Elphinstone mill in Lower Parel, another textile mill auctioned by NTC.

With real estate business gaining size, Indiabulls Financial Services demerged the real estate business under Indiabulls Real Estate and each shareholder of Indiabulls Financial Services received additional share of Indiabulls Real Estate through the demerger. Subsequently, Indiabulls Financial Services also demerged Indiabulls Securities and each shareholder of Indiabulls Financial Services also received a share of Indiabulls Securities.

In year 2007, Indiabulls Real Estate incorporated a 100% subsidiary, Indiabulls Power, to build power plants and started work on building Nashik & Amrawati thermal power plants. Indiabulls Power went public in September 2009.

Today, Indiabulls Group has a net worth of Rs 19,320 Crore & has a strong presence in important sectors like financial services, power & real estate through independently listed companies and Indiabulls Group continues its journey of building businesses with strong cash flows.

Vision To be the largest and most profitable financial services organization in Indian retail Market. To become one stop shop for all non banking financial products and services for the retail customers.

Mission Rapidly increase the number of client relationships to be a clear market leader, to provide our Clients a very broad array of product and services.

It became a Public Limited Company on February 27,2004 and the name of our Company was changed to M/s. Indiabulls Financial Services Limited. The Company was promoted by three engineers from IIT Delhi, and has attracted more than Rs.700 million as investments from venture capital, private equity and institutional investors such as LNM India Internet Ventures Ltd., Transatlantic Corporation Ltd. Farallon Capital Partners, L.P., R R Capital Partners L.P., and Infinity Technology Trustee Pvt. Ltd. and has developed significant relationships with large commercial banks such as Citibank, HDFC Bank, Union Bank, ICICI Bank, ABN Amro Bank, Standard Chartered Bank, Lord Krishna Bank and IL&FS. The Company and our subsidiaries have facilities from the above mentioned banks and financial institutions aggregating to Rs. 1760 million. The Company headquarters are co-located in Mumbai and Delhi, allowing it to access the two most important regions for Indian financial markets, the Western region including Mumbai, rest of Maharashtra and Gujarat; and the Northern region, including the National Capital Territory of Delhi, nearby cities, parts of Haryana, Uttar Pradesh and Punjab; and access the highly skilled and educated workforce in these cities. The Marketing and Sales efforts are headquartered out of Mumbai, with a regional headquarter in Delhi; and its back office, risk management, internal finances etc. are headquartered out of Delhi, allowing our Company to scale these processes efficiently for the nationwide network.

2.2. MAIN OBJECTS OF THE COMPANY The main objects to be pursued by the Company on its incorporation are: 1. To hold investments in various step-down subsidiaries for investing, acquiring, holding, purchasing or procuring equity shares, debentures, bonds, mortgages, obligations, securities of any kind issued or guaranteed by our Company. 2. To provide financial consultancy services; to provide investment advisory services on the internet or otherwise; provide financial consultancy in the area of personal and corporate finance; publish books and CD ROMs and information related to the above.

3. To conduct the business of sale, purchase, distribution and transfer of shares, debts, instruments and hybrid financial instruments and to perform all related, incidental, ancillary and allied services. 4. To conduct depository participant services; to conduct de-materialization and rematerialization of shares; set up depository participant centers at various regions in India and to perform all related, incidental, ancillary and allied services. 5. To receive funds, deposits and investments from the public, Government agencies, financial institutions and corporate bodies; grant advances and loans; conduct advisory services related to banking activities, project financing, funding of mergers and acquisition activities; fund management and activities related to money market operations. 6. To carry on the business of portfolio management services, investment advisory services; custodial services; asset management services; leasing and hire purchase; mutual fund services and to act as brokers of real estate and financial instruments. 7. To carry on the business of financing; provide lease and hire purchase services; to provide consultancy in the area of lease and hire purchase financing. 8. To operate mutual funds; receive funds from investors; equity or debt instrument research activity instrument in debt and/or equity instruments.

2.3. CREDIT RATING Indiabulls Securities Limited has been granted PR1+ rating for its unsecured short term borrowing program of Rs. 200million. Vide letter dated May 5, 2004 the rating agency has increased the unsecured short term borrowing limit to Rs. 320 million maintaining the PR1+ rating. ISL also enjoys A+ rating for medium to long term unsecured borrowing program of Rs.200 million. The Rating to the company has been assigned by Credit Analysis Research Limited. As for the present issue of equity shares of our Company, credit rating is not required.

2.4.

ORGANIZATIONAL STRUCTURE

Indiabulls Financial Services Limited

Mr.Gagan Banga (CEO) Mr. Ashwini Kumar (DMD) Mr. O.P. Agrawal (COO) Narendra Gehlaut (MD) Mr. Ranjit Gupta (CEO) Mr.Mehul Johnson (President) Mr. Divyesh Shah (CEO) Mr. Vijay Babbar (DMD)

Indiabulls Real Estate Limited

INDIA BULLS GROUP

Indiabulls Power Limited

Indiabulls Securities Limited

Fig 2.1 Organisational Structure of Indiabulls

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2.5.

DEPARTMENTS IN THE ORGANIZATION

Senior Vice President

Regional Manager

Branch Manager Senior Sales Manager

Support System

Sales Function

Back office Executive

RM/SRM

Local Comliance Officer

Dealer ARM

Fig 2.2 Showing different Department in the Organisation

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2.6.

INDIABULLS GROUPS

Indiabulls Groups

Indiabulls Financial Services

Indiabulls Real Estate

Indiabulls Power

Indiabulls Securities

Fig 2.3 Showing Indiabulls into different Services

Indiabulls is one of the country's leading business houses with business interests in Power, Financial Services, Real Estate and Infrastructure. Indiabulls Group companies are listed in Indian and overseas financial markets. The Net worth of the Group is Rs 16,844 Crore and the total planned capital expenditure of the Group by 2013-14 is Rs 35,000 Crore.

2.7.

PRODUCTS/SERVICES OF EACH GROUP OF INDIABULLS

2.7.1. Indiabulls Power :

It is currently developing Thermal Power Projects with an aggregate capacity of 5400 MW. The first unit is expected to go on stream in May 2012. The net worth of Indiabulls Power is Rs 3,919 Crore. The company has a total capital expenditure of Rs 27,500 Crore. The company has been assigned 'BBB' rating.

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Indiabulls Power

Amravati Thermal Power Project

Nasik Thermal Power Project

2.7.2. Indiabulls Financial Services: It is one of Indias leading non-banking finance companies providing Home Loans and Commercial Vehicle Loans. The company has a net worth of Rs 4,661 crore with an asset book of Rs 19,796 Crore. The company has disbursed loans over Rs 50,000 Crore to over 3,00,000 customers till Amongst its date. financial services and banking peers, Indiabulls Financial Services ranks amongst the top few companies both in terms of net worth and capital adequacy. Indiabulls Financial Services has been assigned AA+ rating and has presence in over 87 cities and towns with a total branch network of 170 branches.

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Indiabulls Financial Services

Housing Finance

Commercial Vehicle Loans

Property Loan

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2.7.3 Indiabulls Real Estate:

It is among India's top Real Estate companies with development projects spread across residential complexes, integrated townships, commercial office complexes, hotels, malls, Special Economic Zones (SEZs) and infrastructure development. Indiabulls Real Estate partnered with Farallon Capital Management LLC of USA to bring the first FDI into real estate in the country. The company has a net worth of Rs 7,505 Crore and has purchased prime land, mostly in the metros and other Tier 1 cities worth Rs 4,000 Crore in government auctions alone. Indiabulls Real Estate is currently developing 61 million sqft into premium quality, high-end commercial, residential and retail spaces. The company has been assigned 'A+' rating.

Indiabulls Real Estate

Residential Golf City (Navi Mumbai) Sierra (vizag) Centrum Park (Gurgaon) Greens (Chennai) Township (Sonepat)

Commercial Worli (Mumbai) Mint (Thane) Mega Mall (Vadodara) Mega Mail (Jodhpur) Mega Mall (Kota)

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I.7.4. Indiabulls Securities:

It is one of India's leading capital markets companiesproviding securities broking and advisory services. Indiabulls Securities also provides depository services, equity research services and IPO distribution to its clients and offers commodities trading through a separate company. These services are provided both through on-line and off-line distribution channels. Indiabulls Securities is a pioneer of on-line securities trading in India. Indiabulls Securities in-house trading platform is one of the fastest and most efficient trading platforms in the country. Indiabulls Securities has been assigned the highest rating BQ-1 by CRISIL.

Indiabulls Securities

Capital

Derivatives

Intraday

cash

Futures

Options

Forwords

Swaps

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3.1 INTRODUCTION
A portfolio is a combination of securities with different risk and return characteristics and collectively it becomes the portfolio of the investor. Dont Put all your eggs in one basket Portfolio help in reducing risk without sacrificing return Portfolio Management is the process of creation and maintenance of investment portfolio Portfolio management is a complex process which tries to make investment activity more rewarding and less risky. Different phases in Portfolio management process are: Analysis Selection Revision Evaluation

A portfolio refers to a group of securities that are kept together as an investment. Investors make investment in various securities to diversify the investment to make it risk averse. A large number of portfolios can be created by using the securities from desired set of securities obtained from initial phase of security analysis. By selecting the different sets of securities and varying the amount of investments in each security, various portfolios are designed. After identifying the range of possible portfolios, the risk-return characteristics are measured and expressed quantitatively. It involves the mathematically calculation of return and risk of each portfolio.

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 A portfolio is selected on the basis of input from previous phase Portfolio Analysis. The main target of the portfolio selection is to build a portfolio that offer highest returns at a given risk. The portfolios that yield good returns at a level of risk are called as efficient portfolios. The set of efficient portfolios is formed and from this set of efficient portfolios, the optimal portfolio is chosen for investment.

3.2. RESEARCH PROBLEM:

To identify the stock market investment approach and techniques to help investor in selection of script to create portfolio.

3.3. OBJECTIVE OF THE STUDY

1. To maximize return and minimize the risk of the investor. 2. To diversify the investment in order to reduce the risk. 3. To suggest the investor that in what kind of strategy they should invest according to the risk profile.

3.4 SCOPE OF THE STUDY:

Research design: Research design is exploratory in nature as the basic objective is to identify the stocks and methods to create the portfolio. Data collection: Primary data: Primary data is collected by me regularly through various online websites.

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3.5. LIMITATION OF THE PROJECT The time duration of the project was not sufficient. The companies are selected on the basis of beta factor which is historical in nature.

It does not measure the actual risk of the investor.

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4.1 DATA ANALYSIS AND INTERPRETATION

The different sectors of my portfolio are the following: Pharmaceutical Computer Software Energy Cement Mining Automobiles Telecommunication FMCG Banks and Financial Services Engineering & construction

In the above portfolio companies under different industries are segregated on the basis of beta factor. Keeping the objective and nature of investor in consideration they can be classified into three types: 1. Investor who is willing to take minimum risk and at the same time he expects minimum return. 2. Investor who is willing to take moderate risk and at the same time he expects moderate return 3. Investor who is willing to take maximum risk and at the same time he expects maximum return. Technically we can classify investor as defensive, moderate and aggressive depending upon the beta function which is also called as systematic risk.

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So when beta is less than 1 the investor is termed as defensive ,when beta is equal to 1 the investor is termed as moderate and lastly when beta is greater than 1 the investor is called as aggressive. In the portfolio large and mid capitalization companies are selected and they are segregated on the basis of beta factor which is the volatility of the companys stock price compared to market index.

4.2. INDUSTRY OUTLOOK: 1. Pharmaceutical:

Weightage to the industry: Overweight (in terms of Beta) There is a large opportunity presented by Pharma sector in India. Indias strength in generics is hard to replicate due to quality and quantity of available skilled manpower. Indian pharma players are at the cusp of rapid growth as because of vast pipeline of drugs going off-patent and developed world is keen to cut health care cost.

2. Computer Software:

Weightage to the industry: Neutral (in terms of Beta)

The IT industry seems to look resilient in the present context. The Indian currency is getting depreciated and is around Rs58 against Dollar. As major part of software is exported outside in US and Europe it has a great potential within it but on the other hand because of RBI regulation Indian currency is supposed to get stronger in coming days.

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3. Energy:

Weightage to the industry: Neutral (in terms of Beta)

There are huge price deregulations of diesel from the government and it is believed that the total subsidy burden on oil PSUs will come down during the course of the year.

4. Cement:

Weightage to the industry: Underweight (in terms of Beta)

Cement industry is facing over capacity issues and a decline in demand. Also the regulator taking a strong view against pricing discipline, the profits of the sector are expected to stay muted.

5. Mining:

Weightage to the industry: Underweight (in terms of Beta)

The mining industry has a heavy regulation from government and a lot of clearances are needed in order to start the project. This industry is not showing a good output and so it bearish in nature.

6. Automobiles:

Weightage to the industry: Neutral (in terms of Beta)

The raw material prices have come done which would boost margins on the other hand Auto-loans are getting cheaper. The SUVs market and agricultural vehicle are bullish in nature due to lesser competition and higher pricing power.
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7. Telecommunication

Weightage to the industry: Neutral (in terms of Beta)

The regulatory hurdles and competition pressures seem to reduce and the companies have a positive outlook. The companies have started to slowly rise their tariffs rates on the other hand they are sharing the resource which in turn together will rise their profit.

8. FMCG:

Weightage to the industry: Overweight (in terms of Beta)

The FMCG has always in demand because of diversified product such as cigarettes, consumer durables, branded garments as the growth in this segment is disproportionately higher than in relation to increase in disposable income.

9. Banks and Financial Services

Weightage to the industry: Overweight (in terms of Beta)

The reversal in interest rate cycle will assist in managing asset quality better and would lead to increase in credit growth. Private sector would be highly preferable compared to public sector because of better management quality and services.

10. Engineering & construction

Weightage to the industry: Underweight (in terms of Beta)

There is a significant slowdown in order inflow because of higher interest rate and it will take some time before the activity reviews.
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In the portfolio investor are separated as aggressive, defensive and moderate depending on beta and respective weightage are given to each companies depending upon the outlook of the industry. There are three strategy under each index that is large cap and mid cap companies and they are: Aggressive Defensive Moderate 4.3. For Large Cap Companies Defensive:
SCRIPT
Cipla Ltd. Tata Consultancy Services Ltd. Sun Pharmaceutical Industries HCL Technologies Ltd. Power Grid Corporation of India UltraTech Cement Ltd. Coal India Ltd. Bajaj Auto Ltd. I T C Ltd. ACC Ltd.

Sector

BETA
0.13 0.14 0.20 0.25 0.31 0.52 0.55 0.67 0.70 0.78

Wi
0.05 0.15 0.05 0.15 0.05 0.05 0.05 0.20 0.20 0.05 1

Price on 28/06/12 Price on 26/05/13

379.75 1575.75 818.95 792.84 105.8 1868.95 309.1 1799.55 304.53 1159.2 409.85 1369.35 956.1 684.25 110.3 1908.4 319 1895.7 313.83 1247.65

Return
7.57 -6.74 18.10 -6.97 3.02 4.03 0.34 0.28 6.61 5.79

Investment Increase in sum Final Worth

5000.00 15000.00 5000.00 15000.00 5000.00 5000.00 5000.00 20000.00 20000.00 5000.00 100000.00 378.50 -1011.00 905.00 -1045.50 151.00 201.50 17.00 56.00 1322.00 289.50 5378.50 13989.00 5905.00 13954.50 5151.00 5201.50 5017.00 20056.00 21322.00 5289.50 101264.00

PHARMACEUTICALS COMPUTERS - SOFTWARE PHARMACEUTICALS COMPUTERS - SOFTWARE POWER CEMENT AND CEMENT PRODUCTS MINING AUTOMOBILES - 2 AND 3 WHEELERS CIGARETTES CEMENT AND CEMENT PRODUCTS

Table no: 4.1

The return from the large cap defensive strategy is 1.26%

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 Moderate:

SCRIPT
Tata Power Co. Ltd. NMDC Ltd. Bharti Airtel Ltd. Grasim Industries Ltd. HDFC Bank Ltd. GAIL (India) Ltd. Maruti Suzuki India Ltd. Ambuja Cements Ltd. Reliance Industries Ltd. HDFC

SECTOR
POWER MINING TELECOMMUNICATION CEMENT BANKS GAS AUTOMOBILES CEMENT REFINERIES FINANCE - HOUSING

BETA
0.85 0.87 0.86 0.95 0.95 0.88 0.97 0.98 1.03 0.95

Wi
0.06 0.09 0.15 0.05 0.15 0.05 0.20 0.06 0.06 0.13 1.00

Price on 28/06/12 Price on 26/05/13

96.4 137.1 290.82 2813.3 624.1 318.25 1274.61 173.45 764.4 813.95 88.1 118.05 309.15 2991.8 715.05 324.5 1666.28 185.6 843.4 915.66

Return
-8.61 -13.89 6.3 6.34 14.57 1.96 30.73 7 10.333 12.5

Investment Increase in sum Final Worth

6000.00 9000.00 15000.00 5000.00 15000.00 5000.00 20000.00 6000.00 6000.00 13000.00 100000 -516.6 -1250.1 945 317 2185.5 98 6146 420 619.98 1625 5483.40 7749.90 15945.00 5317.00 17185.50 5098.00 26146.00 6420.00 6619.98 14625.00 110589.78

Table no: 4.2 The return from the large cap moderate company is 10.59%

Aggressive:

SCRIPT
Oil & Natural Gas Corporation Ltd. Sesa Goa Ltd. ICICI Bank Ltd. Tata Steel Ltd. Hindalco Industries Ltd. Bharat Heavy Electricals Ltd. Tata Motors Ltd. State Bank of India DLF Ltd. Larsen & Toubro Ltd.

SECTOR
OIL EXPLORATION/PRODUCTION MINING BANKS STEEL AND STEEL PRODUCTS ALUMINIUM ELECTRICAL EQUIPMENT AUTOMOBILES BANKS CONSTRUCTION ENGINEERING

BETA
1.13 1.26 1.27 1.27 1.35 1.41 1.45 1.46 1.56 1.72

Wi Price on 28/06/12 Price on 26/05/13 Return Investment Increase in sum Final Worth
0.05 0.05 0.20 0.10 0.14 0.07 0.15 0.20 0.02 0.02 1.00
Table no: 4.3

311.4 155.4 1027.99 1027.99 91.5 177 269.15 2032.97 234.7 1366.2

334.95 163.8 1211.67 1211.67 110.5 203.85 295.8 2129.8 215.3 1467.55

7.56 5.41 17.87 17.87 20.77 15.17 9.9 4.76 -8.27 7.42

5000.00 5000.00 20000.00 10000.00 14000.00 7000.00 15000.00 20000.00 2000.00 2000.00 100000.00

378.00 270.50 3574.00 1787.00 2907.80 1061.90 1485.00 952.00 -165.40 148.40

5378.00 5270.50 23574.00 11787.00 16907.80 8061.90 16485.00 20952.00 1834.60 2148.40 112399.20

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The return from the large cap aggressive company is 12.39%

For Mid Cap Companies: Defensive:

SCRIPT

Sector

BETA
0.42 0.71 0.27 0.6 0.12

Wi
0.4 0.1 0.15 0.1 0.25

Investment Price on 28/06/12 Price on 26/05/13 % Return Increase Final Worth

40000 10000 15000 10000 25000 336.68 285.03 58.21 62.36 632.32 349.8 296.65 48.85 108.3 708.55 3.90 4.08 -16.08 73.67 12.06 1558.75 407.68 -2411.96 7366.90 3013.90 41558.75 10407.68 12588.04 17366.90 28013.90 109935.27

Reliance Capital Ltd. FINANCE Tata Chemicals Ltd. CHEMICALS - INORGANIC Sintex Industries Ltd. PLASTIC AND PLASTIC PRODUCTS Reliance Communications Ltd. TELECOMMUNICATION - SERVICES JSW Steel Ltd. STEEL AND STEEL PRODUCTS

Table no: 4.4

The return from the mid cap defensive company is 10.99%

Moderate:

SCRIPT

Sector

BETA
0.87 0.83 0.89 0.89 1.01

Wi
0.15 0.325 0.175 0.1 0.25

Investment Price on 28/06/12 Price on 26/05/13

15000 32500 17500 10000 25000 117.62 2436.1 23.34 285.69 790.32 155.95 2660.35 23.26 232.3 1079.15

% Return
32.59 9.21 -0.34 -18.69 36.55

Increase Final Worth

4888.20 2991.72 -59.98 -1868.81 9136.49 19888.20 35491.72 17440.02 8131.19 34136.49 115087.61

United Phosphorus Ltd. PESTICIDES AND AGROCHEMICALS Oracle Financial Services Software COMPUTERS Ltd. - SOFTWARE Ashok Leyland Ltd. AUTOMOBILES Bharat Forge Ltd. CASTINGS/FORGINGS Aditya Birla Nuvo Ltd. DIVERSIFIED

Table no: 4.5

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The return from the mid cap moderate company is 15.08%

Aggressive:

SCRIPT

Sector

BETA
1.25 1.23 1.11 1.14 1.61

Wi
0.1 0.3 0.15 0.15 0.3

Investment Price on 28/06/12 Price as on 26/05/13

10000 30000 15000 15000 30000 20.2 83.63 52.91 680.03 20.55 21.8 85.45 60.7 948.71 27.15

% Return
7.92 2.18 14.72 39.51 32.12

Increase Final Worth

792.08 652.88 2208.47 5926.50 9635.04 10792.08 30652.88 17208.47 20926.50 39635.04 119214.96

GMR Infrastructure Ltd. CONSTRUCTION IDBI Bank Ltd. BANKS Steel Authority of India Ltd.STEEL Tech Mahindra Ltd. COMPUTERS IFCI Ltd. FINANCIAL INSTITUTION

Table no: 4.6

The return from the mid cap aggressive company is 19.21%

Under this portfolio 4 strategies have been made keeping in consideration the risk and return profile of the investor.

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Strategy 1

Capitalisation Large Cap Aggressive Mid Defensive Large Moderate Mid Moderate Large Aggressive Mid Aggressive Large Defensive Mid Defensive

Percentage Ratio 70 30 60 40 60 40 70 30

Risk Profile Balanced

Strategy 2

Medium

Strategy 3

High

Strategy 4

Low

Table no: 4.7

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EXPLANATION OF EACH STRATEGY:

Investment taken: Rs100000 Beta: Strategy: Assigned as per the Industry outlook. Depends upon the risk return profile of the investor.

Strategy 1: Under this strategy the risk profile of the investor is BALANCED by assigning 70% weightage to large market cap aggressive companies and 30% weightage is given to mid cap defensive companies. 70% portfolio is high risk and 30% low risk and provides stability to the portfolio The return from this portfolio is 5.7%. Here the risk of the investor is little giving him a favorable return.

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SCRIPT Aggressive
Oil & Natural Gas Corporation Ltd. Sesa Goa Ltd. ICICI Bank Ltd. Tata Steel Ltd. Hindalco Industries Ltd. Bharat Heavy Electricals Ltd. Tata Motors Ltd. State Bank of India DLF Ltd. Larsen & Toubro Ltd.

SECTOR 70%
OIL EXPLORATION MINING BANKS STEEL AND STEEL PRODUCTS ALUMINIUM ELECTRICAL EQUIPMENT AUTOMOBILES BANKS CONSTRUCTION ENGINEERING

BETA
1.13 1.26 1.27 1.27 1.35 1.41 1.45 1.46 1.56 1.72

Wi
0.035 0.035 0.14 0.07 0.098 0.049 0.105 0.14 0.014 0.014

Return
7.57 -6.74 18.10 -6.97 3.02 4.03 0.34 0.28 6.61 5.79

Investment
3500 3500 14000 7000 9800 4900 10500 14000 1400 1400

Final Return
3764.95 3264.1 16534 6512.1 10095.96 5097.47 10535.7 14039.2 1492.54 1481.06

Defensive
Reliance Capital Ltd. Tata Chemicals Ltd. Sintex Industries Ltd. Reliance Communications Ltd. JSW Steel Ltd.

30%
FINANCE CHEMICALS - INORGANIC PLASTIC PRODUCTS TELECOMMUNICATION STEEL AND STEEL PRODUCTS 0.42 0.71 0.27 0.6 0.12 0.12 0.03 0.045 0.03 0.075 1 3.90 4.08 -16.08 73.67 12.06 12000 3000 4500 3000 7500 100000 12467.63 3122.30 3776.41 5210.07 8404.17 105797.66

Table no: 4.8

Strategy 2: Under this strategy the risk profile of the investor is MEDIUM by assigning 60% weightage to large market cap moderate companies and 40% weightage is given to mid cap moderate companies.40% of the portfolio is being invested in those companies which are undervalued and have capacity to give higher returns. The return from this portfolio is 12.38%. Here the risk of the investor is little high giving him a good return.

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SCRIPT Large Moderate

Tata Power Co. Ltd. NMDC Ltd. Bharti Airtel Ltd. Grasim Industries Ltd. HDFC Bank Ltd. GAIL (India) Ltd. Maruti Suzuki India Ltd. Ambuja Cements Ltd. Reliance Industries Ltd. Housing Development Finance Corp

SECTOR 60%
POWER MINING TELECOMMUNICATION - SERVICES CEMENT AND CEMENT PRODUCTS BANKS GAS AUTOMOBILES - 4 WHEELERS CEMENT AND CEMENT PRODUCTS REFINERIES FINANCE - HOUSING

BETA
0.85 0.87 0.86 0.95 0.95 0.88 0.97 0.98 1.03 0.95

Wi
0.036 0.054 0.09 0.03 0.09 0.03 0.12 0.036 0.036 0.078

Return
-8.61 -13.89 6.3 6.34 14.57 1.96 30.73 7 10.333 12.5

Investment
3600 5400 9000 3000 9000 3000 12000 3600 3600 7800

Final Worth
3290.04 4649.94 9567 3190.2 10311.3 3058.8 15687.6 3852 3971.988 8775

Mid Moderate
United Phosphorus Ltd. Oracle Financial Services Software Ashok Leyland Ltd. Bharat Forge Ltd. Aditya Birla Nuvo Ltd.

40%
PESTICIDES AND AGROCHEMICALS COMPUTERS - SOFTWARE AUTOMOBILES - 4 WHEELERS CASTINGS/FORGINGS DIVERSIFIED 0.87 0.83 0.89 0.89 1.01 0.06 0.13 0.07 0.04 0.1 1 32.59 9.21 -0.34 -18.69 36.55 6000 13000 7000 4000 10000 100000 7955.28 14196.69 6976.01 3252.48 13654.60 112388.91

Table no: 4.9

Strategy 3:

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Under this strategy the risk profile of the investor is HIGH by assigning 60% weightage to large market cap aggressive companies and 40% weightage is given to mid cap aggressive companies. Such kind of portfolio is best suited for higher risk capacity investor. The return from this portfolio is 15.12%. Here the risk of the investor is high giving him a very good return.

SCRIPT Large Aggressive

Oil & Natural Gas Corporation Sesa Goa Ltd. ICICI Bank Ltd. Tata Steel Ltd. Hindalco Industries Ltd. Bharat Heavy Electricals Tata Motors Ltd. State Bank of India DLF Ltd. Larsen & Toubro Ltd.

SECTOR 60%
OIL EXPLORATION MINING BANKS STEEL AND STEEL PRODUCTS ALUMINIUM ELECTRICAL EQUIPMENT AUTOMOBILES BANKS CONSTRUCTION ENGINEERING

BETA
1.13 1.26 1.27 1.27 1.35 1.41 1.45 1.46 1.56 1.72

Wi
0.03 0.03 0.12 0.06 0.084 0.042 0.09 0.12 0.012 0.012

Return
7.56 5.41 17.87 17.87 20.77 15.17 9.9 4.76 -8.27 7.42

Investment
3000 3000 12000 6000 8400 4200 9000 12000 1200 1200

Final Worth
3226.80 3162.30 14144.40 7072.20 10144.68 4837.14 9891.00 12571.20 1100.76 1289.04

Mid Aggressive
GMR Infrastructure Ltd. IDBI Bank Ltd. Steel Authority of India Tech Mahindra Ltd. IFCI Ltd.

40%
CONSTRUCTION BANKS STEEL AND STEEL PRODUCTS COMPUTERS - SOFTWARE FINANCIAL INSTITUTION 1.25 1.23 1.11 1.14 1.61 0.04 0.12 0.06 0.06 0.12 1 7.92 2.18 14.72 39.51 32.12 4000 12000 6000 6000 12000 100000 4316.83 12261.15 6883.39 8370.60 15854.01 115125.5048

Table no: 4.10

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Strategy 4: Under this strategy the risk profile of the investor is LOW by assigning 70% weightage to large market cap defensive companies and 40% weightage is given to mid cap defensive companies. Such kind of portfolio is best suited for risk averse investor.

The return from this portfolio is 3.86%. Here the risk of the investor is very low giving him a good but lesser return.

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SCRIPT large Defensive

Cipla Ltd. TCS Sun Pharmaceutical Industries Ltd. HCL Technologies Ltd. Power Grid Corporation of India Ltd. UltraTech Cement Ltd. Coal India Ltd. Bajaj Auto Ltd. I T C Ltd. ACC Ltd.

SECTOR 70%
PHARMACEUTICALS COMPUTERS - SOFTWARE PHARMACEUTICALS COMPUTERS - SOFTWARE POWER CEMENT AND CEMENT PRODUCTS MINING AUTOMOBILES - 2 AND 3 WHEELERS CIGARETTES CEMENT AND CEMENT PRODUCTS

BETA
0.13 0.14 0.20 0.25 0.31 0.52 0.55 0.67 0.70 0.78

Wi
0.035 0.105 0.035 0.105 0.035 0.035 0.035 0.14 0.14 0.035

Return
7.57 -6.74 18.10 -6.97 3.02 4.03 0.34 0.28 6.61 5.79

Investment
3500.00 10500.00 3500.00 10500.00 3500.00 3500.00 3500.00 14000.00 14000.00 3500.00

Final Worth
3764.95 9792.3 4133.5 9768.15 3605.7 3641.05 3511.9 14039.2 14925.4 3702.65

Mid Defensive

30%
0.42 0.71 0.27 0.6 0.12 0.12 0.03 0.045 0.03 0.075 1 3.90 4.08 -16.08 73.67 12.06 12000.00 3000.00 4500.00 3000.00 7500.00 100000 12467.63 3122.30 3776.41 5210.07 8404.17 103865.3819

Reliance Capital Ltd. FINANCE Tata Chemicals Ltd. CHEMICALS - INORGANIC Sintex Industries Ltd. PLASTIC AND PLASTIC PRODUCTS Reliance Communications TELECOMMUNICATION Ltd. - SERVICES JSW Steel Ltd. STEEL AND STEEL PRODUCTS

Table no: 4.11

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An inference from the Strategy:

% Return
16 14 12 10 8 6 4 2 0 Low Balanced Medium High % Return

Table no: 5.1

The above graph shows the risk and return of an investor. It is largely clearly from the graph that the investor who is less exposed to risk, receives less return i.e. 3.8%. The investor who is balanced in his risk return appetite gets a little high return i.e. 5.79%. Whereas the investor who is medium in his risk return profile gets a much higher return i.e. 12.39% compared to low and balanced risk investor. Lastly the investor who is at a higher stake gets a maximum return i.e. 15.13%.

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FINDING:
The Research shows that the return is directly proportional to risk i.e. as the risk increases return also increases. The Beta factor can be used as a reliable parameter to segregate companies on the basis of volatility as because it is aligned with the theory of high risk high return. The investors show a little confidence on mid cap companies but the research shows that they can also yield good return if a portfolio is made properly. The mix portfolio comprised of different index gives higher return compared to single portfolio of aggressive, moderate or defensive strategy.

LEARNING The importance of well planned investment rather than unplanned investment based on recommendations from anyone. Importance of long term investment over short term investment. A return of the past does not guarantee future returns. This is a common mistake amongst a new investor.

CONCLUSION: The risk and return of the investor is very well diversified not only in different sectors but
in large cap as well as mid cap companies and their return is quite good compared to individual aggressive, moderate or defensive portfolio.

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SUGGESTION:
The investor requires a centralized equity research so that they can have a better guidance about the market related to different scripts. The manager should better understand the risk appetite of the investor before suggesting any strategy.

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BIBLIOGRAPHY

1.

http://www.indiabulls.com/

2. http://en.wikipedia.org/wiki/Indiabulls 3. https://en.wikipedia.org/wiki/Stock_market

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