INTRODUCTION:

Investing in securities such as shares, debentures and bonds is profitable as well as

exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific
knowledge as well as artistic skill. In such investments, both rational as well as emotional
responses are involved. Investing in financial securities is now considered to be one of
the best avenues for investing ones savings while it is acknowledged to be one of the
most risky avenues of investment.
It is rare to find investors investing their entire savings in a single security. Instead, they
tend to invest in a group of securities. Such a group of securities is called a portfolio.
Creation of a portfolio helps to reduce risk without sacrificing returns. Portfolio
management deals with the analysis of individual securities as well as with the theories
and practice of optimally combining securities into portfolios. n investor who
understands the fundamental principles and analytical aspects of portfolio management
has a better chance of success.
!
NEED FOR THE STUDY
It is "he study of analysis of portfolio management. "he analysis of portfolio
management provides the information to investor how to invest the savings in
various securities and the way how to get maximum returns from the securities and
how to decrease the risk which lies in securities.
"he technical approach to investment is essentially a reflection of the idea that prices
move in trends, which are determined by the changing attitudes of investors toward a
variety of economic, monetary, political, and psychological forces. "he art of
analysis of portfolio management is to identify trend changes at an early stage and to
maintain an investment posture until the weight of the evidence indicates that the
trend has reversed.
#
OBJECTIVES OF THE STUDY
!. "o understand the portfolio selection process
#. "o study the frontier techni$ue in the portfolio selection
%. "o study the process of generation of investible securities in portfolio
&. "o understand the process of calculating risk of selected securities in portfolio
%
SCOPE OF THE PROJECT
"he pro'ect provides the information regarding the portfolio management that is
how to analy(e the portfolio, how to construct the portfolio and the factors which
influence while constructing a portfolio. nalysis of portfolio management will helps to
the investor in getting good returns and decreases the risk. "he pro'ect analysis considers
the mission of the company and wealth maximi(ation concept of the investor.

LIMITATIONS:
"he data is collected from the primary and secondary sources and there is sub'ected to
slight variation than what the study includes in reality.
)ence accuracy and correctness can be measured only to the extent of what the sample
group has furnished.
"his study has been conducted purely to understand portfolio management for investor*
Construction of portfolio is restricted to two companies based on markwit(
model.
+ery few and randomly selected scripts,companies are analy(ed.
-ata collection was strictly confined to secondary source. .o primary data is
associated with the pro'ect.
-etailed study of the topic was not possible due to limited si(e of the pro'ect
"here was constraint with regard to the time allocation for the research study i.e.
for a period of two months.
&

METHODOLOGY OF THE STUDY
"he data collection of the study consists of two kinds of data
1. Primary s!r"#s $ %a&a:
/hich is first hand in nature, can be collected through.
. 0eeting with concerned peoples.
. Personal observation.
'. M#&(%s $ "))#"&i* $ &(# %a&a.
.secondary data* /hich is already exists
.
. 1inancial management text books .
. Printed materials.
. 2ournals 3 maga(ines.
. .ews papers.
. "ext books.
. /orld wide webs.

4
INDUSTRY PROFILE
5ombay Stock 6xchange 7imited is the oldest stock exchange in sia with a rich
heritage. Popularly known as 85S68, it was established as 8"he .ative Share 3 Stock
5rokers ssociation8 in !9:4. 5S6 has played a pioneering role in the Indian Securities
0arket ; one of the oldest in the world. 0uch before actual legislations were enacted,
5S6 had formulated comprehensive set of <ules and <egulations for the Indian Capital
0arkets. It also laid down best practices adopted by the Indian Capital 0arkets after
India gained its Independence.
+ision*
86merge as the premier Indian stock exchange by establishing global benchmarks8
5S6 is the first stock exchange in the country to obtain permanent recognition in
!=4> from the ?overnment of India under the Securities Contracts @<egulationA ct,
!=4>."he 6xchangeBs pivotal and pre;eminent role in the development of the Indian
capital market is widely recogni(ed and its index, SENSEX, is tracked worldwide.
SENSEX, first compiled in !=9> was calculated on a 80arket Capitali(ation;/eighted8
methodology of %C component stocks representing a sample of large, well;established
and financially sound companies. "he base year of S6.S6D is !=:9;:=. 1rom September
#CC%, the S6.S6D is calculated on a free;float market capitali(ation methodology. "he
"free-float Market Capitalization-Weighted" methodology is a widely followed index
construction methodology on which ma'ority of global e$uity benchmarks are based.
"he launch of S6.S6D in !=9> was later followed up in 2anuary !=9= by introduction of
5S6 .ational Index @5ase* !=9%;9& E !CCA. It comprised of !CC stocks listed at five
>
ma'or stock exchanges in India at 0umbai, Calcutta, -elhi, hmedabad and 0adras. "he
5S6 .ational Index was renamed as 5S6;!CC Index from Fctober !&, !==> and since
then it is calculated taking into consideration only the prices of stocks listed at 5S6. "he
6xchange launched dollar;linked version of 5S6;!CC index i.e. -ollex;!CC on 0ay ##,
#CC>. "he 6xchange constructed and launched on #:th 0ay, !==&, two new index series
vi(., the B5S6;#CCB and the B-F776D;#CCB indices. "he launch of 5S6;#CC Index in !==&
was followed by the launch of 5S6;4CC Index and 4 sectoral indices in !===. In #CC!,
5S6 launched the 5S6;PSG Index, -F776D;%C and the countryBs first free;float based
index ; the 5S6 "6CK Index. "he 6xchange shifted all its indices to a free;float
methodology @except 5S6 PSG indexA.
"he 6xchange has a nation;wide reach with a presence in &!: cities and towns of India.
"he systems and processes of the 6xchange are designed to safeguard market integrity
and enhance transparency in operations. -uring the year #CC&;#CC4, the trading volumes
on the 6xchange showed robust growth.
"he 6xchange provides an efficient and transparent market for trading in e$uity, debt
instruments and derivatives. "he 5S6Bs Fn 7ine "rading System @5F7"A is a proprietary
system of the 6xchange and is 5S ::==;#;#CC# certified. "he surveillance and clearing 3
settlement functions of the 6xchange are ISF =CC!*#CCC certified.
"he 6xchange is professionally managed under the overall direction of the 5oard of
-irectors. "he 5oard comprises eminent professionals, representatives of "rading
0embers and the 0anaging -irector of the 6xchange. "he 5oard is inclusive and is
designed to benefit from the participation of market intermediaries.
5S6 as a brand is synonymous with capital markets in India. "he 5S6 S6.S6D is the
benchmark e$uity index that reflects the robustness of the economy and finance. It was
the H
1irst in India to introduce 6$uity -erivatives
1irst in India to launch a 1ree 1loat Index
1irst in India to launch GSI version of 5S6 Sensex
1irst in India to launch 6xchange 6nabled Internet "rading Platform
:
1irst in India to obtain ISF certification for Surveillance, Clearing 3 Settlement
B5S6 Fn;7ine "rading System @5F7"A has been awarded the globally
recogni(ed the Information Security 0anagement System standard
5S::==;#*#CC#.
1irst to have an exclusive facility for financial training
0oved from Fpen Futcry to 6lectronic "rading within 'ust 4C days
."IF.7 S"FCJ 6DC).?6 F1 I.-I 7I0I"6-
"he .ational Stock 6xchange of India 7imited has genesis in the
report of the )igh Powered Study ?roup on 6stablishment of .ew Stock 6xchanges,
which recommended promotion of a .ational Stock 6xchange by financial institutions
@1IsA to provide access to investors from all across the country on an e$ual footing. 5ased
on the recommendations, .S6 was promoted by leading 1inancial Institutions at the
behest of the ?overnment of India and was incorporated in .ovember !==# as a tax;
paying company unlike other stock exchanges in the country.
Fn its recognition as a stock exchange under the Securities Contracts @<egulationA ct,
!=4> in pril !==%, .S6 commenced operations in the /holesale -ebt 0arket @/-0A
segment in 2une !==&. "he Capital 0arket @6$uitiesA segment commenced operations in
.ovember !==& and operations in -erivatives segment commenced in 2une #CCC.
"he national stock exchange of India ltd is the largest stock exchange of the country. .S6
is setting the agenda for change in the securities markets in India. 1or last 4 years it has
played a ma'or role in bringing investors from %&: cities and towns online, ensuring
complete transparency, introducing financial guarantee to settlements, ensuring
scientifically designed and professionally managed indices and by nurturing the
demateriali(ation effort across the country.
.S6 is a complete capital market prime mover. Its wholly owned subsidiaries, .ational
securities cleaning corporation ltd @.SCC7A provides cleaning and settlement of
securities, India index services and products ltd @IIS7A provides indices and index
9
services with a consulting and licensing agreement with Standard 3 Poors @S3PA, and I"
ltd forms the technology strength that .S6 works on.
"oday, .S6 is one of the largest exchanges in the world and still forging ahead. t .S6,
we are constantly working towards creating a more transparent, vibrant and innovative
capital market.
COMPANY PROFILE
R#)i+ar# E*&#r,ris#s Limi&#%
<eligare 6nterprises 7imited @<67A, is one of the leading integrated financial services
groups of India. "he company offers a diverse bou$uet of services ranging from e$uities,
commodities , insurance broking to wealth management, portfolio management services,
personal financial services, investment banking and institutional broking services. "he
services are broadly clubbed across three key business verticals; <etail, /ealth
management and the Institutional spectrum. <eligare 6nterprises 7imited is the holding
company for all its businesses, structured and being operated through various subsidiaries.
A-!& R#)i+ar#
"he vision is to build <eligare as a globally trusted brand in the financial services domain
and present it as the BInvestment ?ateway of IndiaB. ll employees of the group guided by
an experienced and professional management team are committed to providing financial
care, backed by the core values of diligence and transparency.
<67 offers a multitude of investment options and a diverse bou$uet of financial services
with its pan India reach in more than !44C locations across more than &>C cities and towns.
<67 also currently operates from !C countries globally following its ac$uisition of
7ondonBs oldest brokerage 3 investment firm, )ichens, )arrison 3 Co. plc.
/ith a view to expand, diversify and introduce offerings benchmarked against global best
practices, <eligare operates its 7ife Insurance business in partnership with the global ma'or
H egon. 1or its wealth management business, <eligare has partnered with ustralia based
=
financial services ma'or;0ac$uarie. <eligare has also partnered with +istaar 6ntertainment
to launch IndiaBs first S65I approved 1ilm 1und offering a uni$ue alternative asset class of
investments.
<eligare Securities 7imited @<S7A, a !CCK subsidiary of <eligare 6nterprises 7imited is a
leading e$uity and securities firm in India. "he company currently handles si(eable
volumes traded on .S6 and in the realm of online trading and investmentsL it currently
holds a reasonable share of the market. "he ma'or activities and offerings of the company
today are 6$uity 5roking, -epository Participant Services, Portfolio 0anagement Services,
International dvisory 1und 0anagement Services, Institutional 5roking and <esearch
Services. "o broaden the gamut of services offered to its investors, the company offers an
online investment portal armed with a host of revolutionary features.
<S7 is a member of the .ational Stock 6xchange of India, 5ombay Stock 6xchange of
India, -epository Participant with .ational Securities -epository 7imited and Central
-epository Services @IA 7imited, and is a S65I approved Portfolio 0anager.
<eligare has been constantly innovating in terms of product and services and to offer
such incisive services to specific user segments it has also started the .<I, 1II, ).I and
Corporate Servicing groups. "hese groups take all the portfolio investment decisions
depending upon a clients risk , return parameter.
<eligare has a very credible <esearch and nalysis division, which not only caters to
the need of our Institutional clientele, but also gives their valuable inputs to investment
dealers.
<eligare has ac$uired 7otus India sset 0anagement Company and has rechristened its
sset management business as <eligare sset 0anagement Company @PA 7imited.
R#)i+ar# Ass#& Ma*a+#m#*& Cm,a*y:
7otus ; leading 0C in India with a total of !,:=,:># unit holders and G0 of
<s.&44>.#> crores. It has 4C S65I approved schemes and operations out of ># offices
across >C cities in India @data as on %C
th
.ovember, #CC9A.
!C
<eligare sset 0anagement Company @PA 7imited is a wholly owned subsidiary of
<eligare Securities 7imited @<S7A, which in turn is a !CCK subsidiary of <eligare
6nterprises 7imited.Institutions, 5anks and the Corporate have their own uni$ue
investment needs. <eligare recogni(es this and strives to offer a superlative investment
experience for institutions and 1IIs globally and would like to be seen as their preferred
investment gateway.
I*s&i&!&i*a) Br.i*+ S#r/i"#s
/ith the mission to institutionali(e and implement a process driven approach, the
Institutional 5roking Services at <eligare cater to the investment needs of leading
corporate houses and institutions. 5acked by incisive research, this division would like to
be seen as a one stop investment gateway and knowledge repository for its clients,
servicing their uni$ue and sophisticated needs.
I*/#s&m#*& Ba*.i*+
Fur Investment 5anking business offered through <eligare Capital 0arkets 7imited
@<C07A, a wholly owned subsidiary of the holding company, <eligare 6nterprises
7imited, deals in merchant banking, transaction advisory and corporate finance servicing
the Corporate, 6ntrepreneurs and Investors.
I*s!ra*"# A%/isry
<eligare Insurance 5roking 7imited @<I57A, a <eligare 6nterprises 7imited venture is one
of IndiaBs leading insurance broking firms, with one of the largest retail networks in the
country. "he company holds a composite brokerBs license operating in the 7ife, ?eneral and
<einsurance domains.
O!r C#*&ra) L#a%#rs(i, T#am
0r. Sunil ?odhwani
0anaging -irector 3 ?roup C6F, <eligare 6nterprises 7imited
!!
0r. Shachindra .ath
?roup Chief Fperating Ffficer, <eligare 6nterprises 7imited
0r. nil Saxena
?roup Chief 1inance Ffficer, <eligare 6nterprises 7imited
T(# R#)i+ar# E%+#
/e serve you with a diligent, transparent 3 process driven approach and ensure that your
money gets the care it deserves.
N (i%%#* ,r$i&s.
/e ensure that a part of the broking at <eligare Portfolio 0anagement Services is through
external broking houses. "his means that your portfolio is not churned needlessly. Gsing
more broking firms gives us access to a larger number of reports and analysis, enabling us
to make better, more informed decisions. 1urthermore, your portfolio is customi(ed to suit
your investment ob'ectives.
Dai)y %is")s!r#s.
<eligare Portfolio 0anagement Services gives you daily updates on your investment. Mou
can pinpoint where your money is being invested, #&x:, instead of waiting till the end of
the month to keep track.
N "(ar+# &i)) y! ,r$i&
So sure are we of our approach to Portfolio 0anagement that we do not charge you for our
services, until your investments start showing profit. /ith customi(ed investment options
<eligare Portfolio 0anagement Services invites you to invest across five broad portfolios
to suit your investment needs.
!#
.
!%
<eligare Securities 7imited
6$uity 5roking
Fnline Investment Portal
Portfolio 0anagement Services
-epository Services
<eligare Commodities 7imited
Commodity 5roking
<eligare Capital 0arkets 7imited
Investment 5anking
Proposed Institutional 5roking
<eligare <ealty 7imited
In house <eal 6state 0anagement Company
<eligare Insurance 5roking 7imited
7ife Insurance
?eneral Insurance
<einsurance
<eligare rts Initiative 7imited
5usiness of rt
?allery launched ; arts;i
<eligare +enture Capital 7imited
Private 6$uity and Investment 0anager
<eligare sset 0anagement
<eligare sset 0anagement Company @PA 7imited is a
wholly owned subsidiary of <eligare Securities 7imited
@<S7A, which in turn is a !CCK subsidiary of <eligare
6nterprises 7imited.
R#)i+ar# E*&#r,ris#s Limi&#%
!&
Nam#
<eligare is a 7atin word that translates as Bto bind togetherB. "his name has been chosen to
reflect the integrated nature of the financial services the company offers.
Sym-)
"he <eligare name is paired with the symbol of a four;leaf clover. "raditionally, it is
considered good fortune to find a four;leaf clover as there is only one four;leaf clover for
every !C,CCC three;leaf clovers found.
1or us, each leaf of the clover has a special meaning. It is a symbol of )ope. "rust. Care.
?ood 1ortune.
1or the world, it is the symbol of <eligare.
!. "he first leaf of the clover represents )ope. "he aspirations to succeed. "he
dream of becoming. Ff new possibilities. It is the beginning of every step and the
foundation on which a person reaches for the stars.
#. "he second leaf of the clover represents "rust. "he ability to place ones own faith
in another. "o have a relationship as partners in a team. "o accomplish a given
goal with the balance that brings satisfaction to all, not in the binding, but in the
bond that is built.
%. "he third leaf of the clover represents Care. "he secret ingredient that is the
cement in every relationship. "he truth of feeling that underlines sincerity and the
triumph of diligence in every aspect. 1rom it springs true warmth of service and
the ability to adapt to evolving environments with consideration to all.
&. "he fourth and final leaf of the clover represents ?ood 1ortune. Signifying that
rare ability to meld opportunity and planning with circumstance to generate those
often looked for remunerative moments of success.
0#y Mi)#s&*#s a*% U,%a&#s
!4
<eligare Capital 0arkets 7imited @<C07A has applied for a fresh broking
license for trading;cum;clearing member in cash Segment of .S6 and
5S6, and 13F Segment of .S6 and the same shall be used to operate the
Institutional broking business which is currently being operated through
<eligare Securities 7imited @<S7A
"hrough an indirect subsidiary <eligare Capital 0arkets International
@GJA 7imited @<C0IAL <C07, has ac$uired 7ondons oldest brokerage
firm, )ichens, )arrison 3 Co. Plc. "he ac$uisition provides <eligare an
opportunity of creating a global distribution and execution platform within
emerging countries for the investment banking and institutional business.
<C0I received approval from the 1inancial Services uthority @1SA for
a change in control of )ichens, )arrison 3 Co Plc and declared
acceptance of its open cash offer for )ichens, )arrison 3 Co Plc
unconditional in all respects. +alid acceptances of the Fffer have been
received, representing approximately ==.=! per cent of the existing issued
share capital of )ichens.
<C07 was the sole and exclusive advisor to the Singh family for the
<anbaxy -aiichi deal
<eligare 1invest 7imited @<17A announced its first commercial vehicles
financing partnership by entering into a strategic tie;up with Jumar
0otors. "he partnership will be on an Nexclusive basis, for both Jumar
0otors and <eligare 1invest, in the category of light commercial vehicles
@% wheeler categoryA.
!>
<17 appointed Javi rora as President ; Consumer 1inance. "he
company is effectively putting together a growth strategy in the area of
Personal 7oans, 0ortgages and Commercial +ehicle 1inancing
<17 is also aggressively setting up a pan India chain of retail stores under
the 1inmart brand to distribute Insurance, loans and mutual fund products
C<ISI7 has reaffirmed its rating on the short term debt issuance programs
of <eligare Securities 7imited, the e$uity broking subsidiary at NP! and
has removed it from N<ating watch with negative implications.
egon <eligare 7ife Insurance Company 7imited commenced its
operations with #4 operational offices across the country the ownership
structure of this 2+ is H <eligare 6nterprises &&K, 6?F. .+ #>K and
5ennett Coleman %CK.
"he 0utual 1und 5usiness @0CA H <eligare egon sset 0anagement
Company Private 7imited @<eligare 6?F. 0CA, a 4C;4C 2+ between
<eligare and egon, filed for a final license with S65I for commencing
operations shortly.
Visi* a*% Missi*
Visi* ; "o build <eligare as a globally trusted brand in the financial services domain and
present it as the NInvestment ?ateway of IndiaB.
Missi* ; Providing complete financial care driven by the core values of diligence and
transparency.
Bra*% Ess#*"# ; Core brand essence is -iligence and <eligare is driven by ethical and
dynamic processes for wealth creation.
!:
INTRODUCTION OF PORTFOLIO MANAGEMENT
INTRODUCTION:
,r&$)i is a collection of investments held by an institution or a private
individual. In building up an investment portfolio a financial institution will typically
conduct its own investment analysis, whilst a private individual may make use of the
services of a financial advisor or a financial institution which offers portfolio
management services. )olding a portfolio is part of an investment and risk;limiting
strategy called diversification. 5y owning several assets, certain types of risk @in
particular specific riskA can be reduced. "he assets in the portfolio could include stocks,
bonds, options, warrants, gold certificates, real estate, futures contracts, production
facilities, or any other item that is expected to retain its value.
Portfolio management involves deciding what assets to include in the portfolio,
given the goals of the portfolio owner and changing economic conditions. Selection
involves deciding what assets to purchase, how many to purchase, when to purchase
them, and what assets to divest. "hese decisions always involve some sort of performance
measurement, most typically expected return on the portfolio, and the risk associated with
this return @i.e. the standard deviation of the returnA. "ypically the expected returns from
portfolios, comprised of different asset bundles are compared.
"he uni$ue goals and circumstances of the investor must also be considered. Some
investors are more risk averse than others. 0utual funds have developed particular
techni$ues to optimi(e their portfolio holdings.
"hus, portfolio management is all about strengths, weaknesses, opportunities and
threats in the choice of debt vs. e$uity, domestic vs. international, growth vs. safety
and numerous other trade;offs encountered in the attempt to maximi(e return at a
given appetite for risk.
!9
As,#"&s $ Pr&$)i Ma*a+#m#*&:
5asically portfolio management involves
proper investment decision making of what to buy 3 sell
Proper money management in terms of investment in a basket of assets so as
to satisfy the asset preferences of investors.
<educe the risk and increase returns.
OBJECTIVES OF PORTFOLIO MANAGEMENT:
"he basic ob'ective of Portfolio 0anagement is to maximi(e yield and minimi(e risk.
"he other ancillary ob'ectives are as per needs of investors, namely*
<egular income or stable return
ppreciation of capital
0arketability and li$uidity
Safety of investment
0inimi(ing of tax liability.
NEED FOR PORTFOLIO MANAGEMENT:
"he Portfolio 0anagement deals with the process of selection securities from the number
of opportunities available with different expected returns and carrying different levels of
risk and the selection of securities is made with a view to provide the investors the
maximum yield for a given level of risk or ensure minimum risk for a level of return.
Portfolio 0anagement is a process encompassing many activities of investment in assets
and securities. It is a dynamics and flexible concept and involves regular and systematic
analysis, 'udgment and actions. "he ob'ectives of this service are to help the unknown
investors with the expertise of professionals in investment Portfolio 0anagement. It
!=
involves construction of a portfolio based upon the investors ob'ectives, constrains,
preferences for risk and return and liability. "he portfolio is reviewed and ad'usted from
time to time with the market conditions. "he evaluation of portfolio is to be done in terms
of targets set for risk and return. "he changes in portfolio are to be effected to meet the
changing conditions.
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. "he modern view of investment is oriented towards the
assembly of proper combinations held together will give beneficial result if they are
grouped in a manner to secure higher return after taking into consideration the risk
element.
"he modern theory is the view that by diversification, risk can be reduced. "he investor
can make diversification either by having a large number of shares of companies in
different regions, in different industries or those producing different types of product
lines. 0odern theory believes in the perspectives of combination of securities under
constraints of risk and return.
ELEMENTS:
Portfolio 0anagement is an on;going process involving the following basic tasks.
Identification of the investors ob'ective, constrains and preferences which help
formulated the invest policy.
Strategies are to be developed and implemented in tune with invest policy
formulated. "his will help the selection of asset classes and securities in each
class depending upon their risk;return attributes.
<eview and monitoring of the performance of the portfolio by continuous
overview of the market conditions, companys performance and investors
circumstances.
1inally, the evaluation of portfolio for the results to compare with the targets and
needed ad'ustments have to be made in the portfolio to the emerging conditions
and to make up for any shortfalls in achievements @targetsA.
#C
S"(#ma&i" %ia+ram $ s&a+#s i* ,r&$)i ma*a+#m#*&:
Specification and
$uantification of
investor
ob'ectives,
constraints, and
preferences
Portfolio policies
and strategies
Capital market
expectations
<elevant
economic, social,
political sector
and security
considerations
0onitoring investor
related input factors
Portfolio construction
and revision asset
allocation, portfolio
optimi(ation, security
selection,
implementation and
execution
0onitoring
economic and
market input factors
ttainment of
investor
ob'ectives
Performance
measurement
#!
Pr"#ss $ ,r&$)i ma*a+#m#*&:
"he Portfolio Program and Asset Management Program both follow a disciplined
process to establish and monitor an optimal investment mix. "his six;stage process helps
ensure that the investments match investors uni$ue needs, both now and in the future.
1. IDENTIFY GOALS AND OBJECTIVES:
/hen will you need the money from your investmentsO /hat are you saving your
money forO /ith the assistance of financial advisor, the n!estment Profile
"#estionnaire will guide through a series of $uestions to help identify the goals and
ob'ectives for the investments.
'. DETERMINE OPTIMAL INVESTMENT MI1:
Fnce the n!estment Profile "#estionnaire is completed, investors optimal
investment mix or asset allocation will be determined. n asset allocation represents
the mix of investments @cash, fixed income and e$uitiesA that match individual risk
and return needs. "his step represents one of the most important decisions in your
portfolio construction, as asset allocation has been found to be the ma'or determinant
of long;term portfolio performance.
##
2. CREATE A CUSTOMI3ED INVESTMENT POLICY STATEMENT
/hen the optimal investment mix is determined, the next step is to formali(e our
goals and ob'ectives in order to utili(e them as a benchmark to monitor progress and
future updates.
4. SELECT INVESTMENTS
"he customi(ed portfolio is created using an allocation of select P10 1unds.
6ach P10 1und is designed to satisfy the re$uirements of a specific asset class, and
is selected in the necessary proportion to match the optimal investment mix.
4 MONITOR PROGRESS
5uilding an optimal investment mix is only part of the process. It is e$ually important
to maintain the optimal mix when varying market conditions cause investment mix to
drift away from its target. "o ensure that mix of asset classes stays in line with
investors uni$ue needs, the portfolio will be monitored and rebalanced back to the
optimal investment mix
5. REASSESS NEEDS AND GOALS
2ust as markets shift, so do the goals and ob'ectives of investors. /ith the flexibility
of the Portfolio Program and Asset Management Program, when the investors needs
or other life circumstances change, the portfolio has the flexibility to accommodate
such changes.
RIS0:
<isk refers to the probability that the return and therefore the value of an asset or security
may have alternative outcomes. <isk is the uncertainty @todayA surrounding the eventual
outcome of an event which will occur in the future. <isk is uncertainty of the
income,capital appreciation or loss of both. ll investments are risky. "he higher the risk
taken, the higher is the return. 5ut proper management of risk involves the right choice of
investments whose risks are compensation.
RETURN:
<eturn;yield or return differs from the nature of instruments, maturity period and the
creditor or debtor nature of the instrument and a host of other factors. "he most important
factor influencing return is risk return is measured by taking the price income plus the
price change.
#%
PORTFOLIO RIS0:
<isk on portfolio is different from the risk on individual securities. "his risk is reflected
by in the variability of the returns from (ero to infinity. "he expected return depends on
probability of the returns and their weighted contribution to the risk of the portfolio.
RETURN ON PORTFOLIO:
6ach security in a portfolio contributes returns in the proportion of its investment in
security. "hus the portfolio of expected returns, from each of the securities with weights
representing the proportionate share of security in the total investments.
RIS0 6 RETURN RELATIONSHIP:
"he risk,return relationship is a fundamental concept in not only financial analysis, but in
every aspect of life. If decisions are to lead to benefit maximi(ation, it is necessary that
individuals,institutions consider the combined influence on expected @futureA return or
benefit as well as on risk,cost. "he re$uirement that expected return,benefit be
commensurate with risk,cost is known as the 8risk,return trade;off8 in finance.
ll investments have some risks. n investment in shares of companies has its own risks
or uncertainty. "hese risks arise out of variability of returns or yields and uncertainty of
appreciation or depreciation of share prices, loss of li$uidity etc. and the overtime can be
represented by the variance of the returns. .ormally, higher the risk that the investors
take, the higher is the return.
#&
TYPES OF RIS0S:
<isk consists of two components. "hey are
1. Systematic <isk
2. Gn;systematic <isk
1. SYSTEMATIC RIS0:
Systematic risk refers to that portion of total variability in return caused by factors
affecting the prices of all securities. 6conomic, Political and sociological changes are
sources of systematic risk. "heir effect is to cause prices of nearly all individual common
stocks and,or all individual bonds to move together in the same manner.
i. Mar.#& Ris.:
+ariability in return on most common stocks that are due to basic sweeping changes in
investor expectations is referred to as market risk. 0arket risk is caused by investor
reaction to tangible as well as intangible events.
ii. I*&#r#s& ra&#7Ris.:
Interest Hrate risk refers to the uncertainty of future market values and of the si(e of
future income, caused by fluctuations in the general level of interest rates.
iii. P!r"(asi*+7P8#r Ris.:
Purchasing power risk is the uncertainty of the purchasing power of the amounts to be
received. In more events everyday terms, purchasing power risk refers to the impact of or
deflation on an investment.
'. UNSYSTEMATIC RIS0:
Gnsystematic risk is the portion of total risk that is uni$ue to a firm or industry.
1actors such as management capability, consumer preferences, and labor strikes Cause
systematic variability of return in a firm. Gnsystematic factors are largely independent of
factors affecting securities markets in general. 5ecause these factors affect one firm, they
must be examined for each firm.
#4
Gnsystematic risk that portion of risk that is uni$ue or peculiar to a firm or an
industry, above and beyond that affecting securities markets in general. 1actors such as
management capability, consumer preferences, and labor strikes can cause unsystematic
variability of return for a companys stock.
i. B!si*#ss Ris.:
5usiness risk is a function of the operating conditions faced by a firm and the variability
these conditions in'ect into operating income and expected dividends.
5usiness risk can be divided into two broad categories
a. Internal 5usiness <isk
b. 6xternal 5usiness <isk
a. Internal business risk is associated with the operational efficiency of the firm. "he
operational efficiency differs from company to company. "he efficiency of operation
is reflected on the companyNs achievement of its pre;set goals and the fulfillment of
the promises to its investors.
-. 6xternal business risk is the result of operating conditions imposed on the firm by
circumstances beyond its control. "he external environments in which it operates
exert some pressure on the firm. "he external factors are social and regulatory factors,
monetary and fiscal policies of the government, business cycle and the general
economic environment within which a firm or an industry operates.
ii. Fi*a*"ia) Ris.:
1inancial risk is associated with the way in which a company finances its activities.
1inancial risk is avoided risk to the extent that management has the freedom to decide to
borrow or not to borrow funds. firm with no debit financing has no financial risk
#>
ROLE OF PORTFOLIO MANAGEMENT IN INDIA
"here was a time when portfolio management was an elite practice beyond the reach of
ordinary people, in India. "he scenario has changed drastically. Portfolio management is
now a familiar term and is widely practiced in India. "he theories and concepts relating to
portfolio management now find their way to the frontpages of financial news papers and
the cover pages of investment 'ournals in India.
In the beginning of nineties India embarked on a programme of economic liberali(ation
and globali(ation. "his reform has made the Indian capital markets active. "he Indian
stock markets are steadily moving towards higher efficiency, with rapid computeri(ation,
increasing market transparency, with rapid computeri(ation, increasing market
transparency , better infrastructure, better customer service, closer integration and higher
volumes. "he markets are dominated by large institutional investors with their diversified
portfolios.
Professional portfolio management, backed by competent research, began to be practiced
by mutual funds, investment consultants and big brokers. "he securities exchange board of
India, the stock market regulatory body in India, is supervising the whole process with a
view to making portfolio management a responsible professional service to be rendered
by experts in the field.
/ith the advent of computers the whole process of portfolio management has become $uite
easy. "he computer can absorb large amount of data, perform the computations accurately
and $uickly give out the results in any desired form.Portfolios now include not only
domestic securities but also foreign securities. -iversification has become international.
In this context, financial investment cannot be conceived of with out portfolio
management. nother significant development in the field of investment management is
the introduction of derivative securities such as options and futures. "he trading in
derivative securities, their valuation, etc. have broadened the scope of investment
management.
#:
ANALYSIS OF PORTFOLIO MANAGEMENT:
A*a)ysis $ Pr&$)i ma*a+#m#*&:
nalysis of Portfolio management8 is nothing but management of portfolio of an
investor. "he ob'ective is to analyse all the products available in details for an investor .
nalysis of portfolio management includes analysis of various products available to the
investor like mutual funds, insurance, fixed deposits, saving bank account and other
portfolio management services.
I 9 MUTUAL FUNDS:
INTRODUCTION
Investments goals vary from person to person. /hile somebody wants security, others
might give more weightage to returns alone. Somebody else might want to plan for his
childBs education while somebody might be saving for the proverbial rainy day or even life
after retirement. /ith ob'ectives defying any range , it is obvious that the products re$uired
will vary as well.
Indian 0utual 1unds industry offers a plethora of schemes and serves broadly all tupe of
investors. "he range of products includes e$uity funds, debt, li$uid, gilt and balanced
funds. "here are also funds meant exclusively for young and old, small and large investors.
0oreover, the setup of a legal structure, which has enough teeth to safeguard investors
intersts, ensures that the investors are not cheated out of their hard earned money. ll in
all, benefits provided by them cut across the boundaries of investor category and thus
create for them, a universal appeal.
Investors of all categories could choose to invest on their own in multiple options but opt
for 0utual 1unds for the sole reason that all benefits come in a package."he 0utual 1und
industry is having its hands full to cater to various needs of the investors by coming up with
#9
new plans, schemes and options with respect to rate of returns, dividend fre$uency and
li$uidity.
In view of the growing competition in the 0utual 1unds industry, it was felt necessary to
study the investors orientation towards 0utual 1unds i.e. their pattern of risk apetite and
preferences in various schemes, plans and options in order to provide a better service,"he
study is an attempt in that direction.
ABOUT MUTUAL FUNDS:
0utual 1und is a trust that pools the savings of a number of investors who share a
common financial goal. "he money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. "he income earned through
these investments and the capital appreciation realised are shared by its unit holders in
proportion to the number of units owned by them. "hus a 0utual 1und is the most suitable
investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
"he flow chart below describes broadly the working of a 0utual 1und.
0utual fund is a body corporate registered with the Securities and 6xchange 5oard of
India @S65IA that pools up the money from individual,corporate investors and invests the
#=
same on behalf of the investors,unit holders, in e$uity shares, ?overnment securities,
5onds, Call 0oney 0arkets etc, and distributes the profits. In the other words, a 0utual
1und allows investors to indirectly take a position in a basket of assets.
0utual 1und is a mechanism for pooling the resources by issuing units to the investors and
investing funds in securities in accordance with ob'ectives as disclosed in offer document.
Investments in securities are spread among a wide cross;section of industries and sectors
thus the risk is reduced. -iversification reduces the risk because all stocks may not move in
the same direction in the same proportion at same time. Investors of mutual funds are
known as unit holders.
"he investors in proprotion to their investments share the profits of losses. "he mutual
funds normally come out with a number of schemes with different investment ob'ectives
which are launched from time to time. 0utual 1und is re$uired to be registered with
Securities 6xchange 5oard of India @S65IA which regulates securities markets before it can
collect funds from the public.
ORGANISATION OF A MUTUAL FUND:
"here are many entities involved and the diagram below illustrates the organi(ational set up
of a 0utual 1und*
%C
0utual 1unds diversify their risk by holding a portfolio of instead of only one asset. "his is
because by holding all your money in 'ust one asset, the entire fortunes of your portfolio
depend on this one asset. 5y creating a portfolio of a variety of assets, this risk is
substantially reduced.
0utual 1und investments are not totally risk free. In fact, investing in 0utual 1unds
contains the same risk as investing in the markets, the only difference being that due to
professional management of funds the controllable risks are substantially reduced. very
important risk involved in 0utual 1und investments is the market risk. /hen the market is
in doldrums, most of the e$uity funds will also experience a down turnoverL the company
specific risks are largely eliminated due to professional fund management.
. TYPES OF MUTUAL FUNDS:
"here are many types of mutual funds available to the investor.
O,#*7#*%#% M!&!a) F!*%s:
n open;end fund is one that has units available for sale and repurchase at all times. n
investor can buy or redeem units from the fund itself at a price based on the net asset
value @.+A per unit.
C)s#%7#*%#% M!&!a) F!*%s:
closed;end fund is one that has units available for fixed no of times. It does not allow
investors to buy or redeem units directly from the funds.
E:"(a*+#7&ra%#% $!*%s
relatively recent innovation, the exchange;traded fund or 6"1, is often structured as an
open;end investment company. 6"1s combine characteristics of both mutual funds and
closed;end funds. 6"1s are traded throughout the day on a stock exchange, 'ust like closed;
end funds, but at prices generally approximating the 6"1Bs net asset value. 0ost 6"1s are
index funds and track stock market indexes.
%!
Shares are issued or redeemed by institutional investors in large blocks @typically of
4C,CCCA. 0ost investors purchase and sell shares through brokers in market transactions.
5ecause the institutional investors normally purchase and redeem in in kind transactions,
6"1s are more efficient than traditional mutual funds.
6xchange;traded funds are also valuable for foreign investors who are often able to buy
and sell securities traded on a stock market, but who, for regulatory reasons, are limited in
their ability to participate intraditional G.S. mutual funds.
E;!i&y $!*%s
6$uity funds, which consist mainly of stock investments, are the most common type of
mutual fund. 6$uity funds hold 4C percent of all amounts invested in mutual funds in the
Gnited States. Fften e$uity funds focus investments on particular strategies and
certaintypes of issuers.
B*% $!*%s
5ond funds account for !9K of mutual fund assets. "ypes of bond funds include term
funds, which have a fixed set of time @short;, medium;, or long;termA before they
mature.0unicipal bond funds generally have lower returns, but have tax advantages and
lower risk.
)igh;yield bond funds invest in corporate bonds, including high;yield or 'unk bonds /ith
the potential for high yield, these bonds also come with greater risk.
F!*%s $ $!*%s
1unds of funds @1o1A are mutual funds which invest in other underlying mutual funds @i.e.,
they are funds comprised of other fundsA. "he funds at the underlying level are typically
funds which an investor can invest in individually. fund of funds will typically charge a
management fee which is smaller than that of a normal fund because it is considered a fee
charged for asset allocation services. "he fees charged at the underlying fund level do not
pass through the statement of operations, but are usually disclosed in the fundBs annual
report, prospectus, or statement of additional information.
%#
"he fund should be evaluated on the combination of the fund;level expenses and
underlying fund expenses, as these both reduce the return to the investor.
H#%+# $!*%s
)edge funds in the Gnited States are pooled investment funds with loose S6C regulation
and should not be confused with mutual funds. Some hedge fund managers are re$uired to
register with S6C as investment advisers under the Investment dvisers ct. "he ct does
not re$uire an adviser to follow or avoid any particular investment strategies, nor does it
re$uire or prohibit specific investments. )edge funds typically charge a management fee of
!K or more, plus a 8performance fee8 of #CK of the hedge fundBsprofits. "here may be a
8lock;up8 period, during which an investor cannot cash in shares.
M!&!a) F!*% &y,#s a""r%i*+ & i*/#s&m#*& "(ar+#s:
La% $!*%s:
"he charges made by the fund 0anagers to the investors to cover distribution
,sales,marketing expenses are often called Q7oadsR. In India, S65I has defined a Q7oadR as
the one H time fee payable by the investor to allow the fund to meet initial issue expenses
including brokers ,agents ,distributors commissions, advertising and marketing expenses.
1unds that charge front;end @7oad charged at the time of investors entry in the schemeA.
5ack;end @7oad charged at the time of investors exit from the schemeA, or deferred loads
@7oad charges to the scheme over a period of timeA are called 7oad 1unds.
N 6 La% F!*%s:
1unds that make no charges, mentioned above for sales expenses are called .o;7oad funds
%%
Ta: 6 E:#m,& F!*%s:
/hen a fund invests in tax;exempt securities, it is called "ax;exempt fund. In India, after
the !=== Gnion ?overnment 5udget all of the dividend income received from any of the
mutual funds is tax;free in the hands of the investor.
N* 6 Ta: #:#m,& $!*%s:
6xcept e$uity mutual fund schemes are tax;exempt investment avenues. /hile other funds
are taxable for distributable income.
M!&!a) F!*% &y,#s a""r%i*+ & i*/#s&m#*& -<#"&i/#:
0utual 1unds , Schemes can also be classified on the basis of the nature of their Portfolio
and investment ob'ective i.e., whether they invest in e$uities or fixed income securities or
some combination of both.
6$uity 1und is the one in which much of the portfolio is invested in corporate securities
and -ebt 1und is the one in which much of the portfolio is invested in ?ilt and money
market securities.
In an Fpen;ended 0utual 1und, there are no limits on the total si(e of the corpus. Investors
are permitted to enter and exit the open;ended 0utual 1und at any point of time at a price
that is linked to the net asset value @.+A.
In case of Closed;ended funds, the total si(e of the corpus is limited by the si(e of the
initial offer.
%&
II 9 INSURANCE
"he pooling of fortuitous losses by transfer of such risks to insurers, who agree to
indemnify insureds for such losses, to provide other pecuniary benefits on their
occurrence, or to render services connected with the risk.
Insurance has its basic characteristics they are*
P)i*+ $ )ss#s:
It refers to the spread of loss of many one to many, in order to substitute actual loss with
average loss. "hus pooling techni$ue involves sharing of losses and also prediction of
future losses.
Fr&!i&!s Lss#s:
It pays fortuitous or accidental losses. Insurance covers unforeseen and unexpected or
accidental losses, which have been grouped under fortuitous losses and are unintentional
and occur due to a chance factor.
Tra*s$#r $ Ris.:
Insurance essentially involves transfer of risk from insured to the insurer. Since an insurer
is in a better financial position then individual insureds, he indemnifies the insured for
losses due to premature death, poor health, disability, theft or loss of property etc.
I*%#m*i$i"a&i*:
Indemnification means restoring the insured to his financial position prior to suffering a
loss.
%4
CLASSIFICATION OF INSURANCE BUSSINESS:
"he insurance business was nationali(ed in !=4>. Insurance business may be classified
broadly in two categories
Li$# i*s!ra*"# -!ssi*#s:
Qlife insurance business8 means the business of effecting contracts of insurance upon
human life, including any contract whereby the payment of money is assured on death
@except death by accident onlyA or the happening of any 7ife Insurance Corporation of
India was established under 7ife Insurance Corporation ct,!=4> to carry on 7ife Insurance
5usiness. ccordingly, the 7ife Insurance business was conducted only by the 7ife
Insurance Corporation of India. 5ut now the 7ife Insurance Corporation ct,!=4> has been
amended and private companies are also allowed to carry on 7ife Insurance 5usiness.
Gnder 7ife Insurance contracts, the insurance company, in consideration of some regular
payment called premium guarantees to pay to the policy holder, or nominee, on reaching a
certain age or his death, whichever is earlier, a certain sum of money called policy amount.
G#*#ra) i*s!ra*"# -!si*#ss:
?eneral Insurance covers all types of insurances except life insurance, such as fire
insurance, marine insurance, accident insurance etc. common characteristic of all types
of general insurance is that a policy covers one year. "he premium paid by the policy
holder provides protection to him for one year commencing with the date of payment of
premium. If there is no damage or loss during the year, there is no claim and, of course, the
premium paid is not refunded.
%>
THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT=
1>>>:
n ct to provide for the establishment of an uthority to protect the interests of holders of
insurance policies, to regulate, promote and ensure orderly growth of the insurance industry
and for matters connected therewith or incidental there to and f urther to amend the ct,
!=%9, the 7ife Insurance Corporation ct, !=4> and the ?eneral Insurance
5usiness@.ationalisationA ct, !=:#..
@!A "his ct may be called the Insurance <egulatory and -evelopment uthority ct,
!===.
@#A It extends to the whole of India.
@%A It shall come into force on such date as the Central ?overnment may, by notification in
the Ffficial ?a(ette, appoint* Provided that different dates may be appointed for different
provisions of this ct and any reference in any such provision to the commencement of this
ct shall be construed as a reference to the coming into force of that provision.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
Es&a-)is(m#*& a*% i*"r,ra&i* $ A!&(ri&y.7
@!A /ith effect from such date as the Central ?overnment may, by notification, appoint,
there shall be established, for the purposes of this ct, an uthority to be called 8the
Insurance <egulatory and -evelopment uthority8.
@#A "he uthority shall be a body corporate by the name aforesaid having perpetual
succession and a common seal with power, sub'ect to the provisions of this ct, to ac$uire,
hold and dispose of property, both movable and immovable, and to contract and shall, by
the said name, sue or be sued.
%:
@%A "he head office of the uthority shall be at such place as the Central ?overnment may
decide from time to time.
@&A "he uthority may establish offices at other places in India.
Cm,si&i* $ A!&(ri&y:
"he uthority shall consist of the following members, namely*;
@aA a ChairpersonL
@bA not more than five whole;time membersL
@cA not more than four part;time members, to be appointed by the Central ?overnment from
amongst persons of ability, integrity and standing who have knowledge or experience in
life insurance, general insurance, actuarial science, finance, economics, law, accountancy,
administration or any othe discipline which would, in the opinion of the Central
?overnment, be useful to the uthority.
Provided that the Central ?overnment shall, while appointing the Chairperson and the
whole;time members, ensure that at least one person each is a person having knowledge or
experience in life insurance, general insurance or actuarial science, respectively.
%9
III9 Sa/i*+s Ba*. A""!*&
Saving 5ank account @S5 accountA is meant to promote the habit of saving among
thepeople. It also facilitates safekeeping of money. In this scheme fund is allowed to be
withdrawn whenever re$uired, without any condition. )ence a savings account is a safe,
convenient and affordable way to save your money. 5ank deposits are fairly safe because
banks are sub'ect to control of the <eserve 5ank of India with regard to several policy and
operational parameters. 5ank also pays you a minimal interest for keeping your money
with them.
F#a&!r#s:
"he minimum amount to open an account in a nationali(ed bank is <s !CC. If che$ue books
are also issued, the minimum balance of <s 4CC has to be maintained. )owever in some
private or foreign bank the minimum balance is <s 4CC or more and can be up <s. !C,CCC.
Fne che$ue book is issued to a customer at a time.
Savings account can be opened either individually or 'ointly with another individual. In a
'oint account only the sign of one account holder is needed to write a che$ue. 5ut at the
time of closing an account, the sign of the both the account holders are needed.
R#&!r*:
"he interest rate of savings bank account in India varies between #.4K and &K. In Savings
5ank account, bank follows the simple interest method. "he rate of interest may change
from time to time according to the rules of <eserve 5ank of India. Fne can withdraw
his,her money by submitting a che$ue in the bank and details of the account, i.e the 0oney
deposited, withdrawn along with the dates and the balance, is recorded in a passbook.
A%/a*&a+#s:
ItBs much safer to keep your money at a bank than to keep a large amount of cash in your
home. 5ank deposits are fairly safe because banks are sub'ect to control of the <eserve
%=
5ank of India with regard to several policy and operational parameters. "he federal
?overnment insures your money. Saving 5ank account does not have any fixed period for
deposit. "he depositor can takemoney from his account by writing a che$ue to somebody
else or submitting a che$ue directly. .ow most of the banks offer various facilities such as
"0 card, credit card etc. "hrough debit,"0 card one can take money from any of the
"0 centres of the particular bank which will be open #& hours a day. "hrough credit card
one can avail shopping facilities from any shop which accept the credit card. nd many of
the banks also give internet banking facility through with one do the transactions like
withdrawals, deposits, statement of account etc
H8 & ,#*
Savings 5ank ccount can be opened in the name of an individual or in 'oint names of the
depositors by filling up the appropriate forms. minor who have completed ten years of
age can also open and operate the account. t the time of opening an account one must
submit the documents like photocopy of passport or 6lectoral card, Postal identification
cards as address proof and two passport si(e photos.
0ost banks also re$uire an introduction for opening an S5 account. "he introduction may
be obtained either from an existing account holder or from a respectable citi(en, well
known to the bank, who should normally call on the bank and sign in the column specially
provided for the purpose of introduction in the account opening form.
&C
IV 9 Fi:#% D#,si&
fixed deposit is meant for those investors who want to deposit a lump sum of money for
a fixed periodL say for a minimum period of !4 days to five years and above, thereby
earning a higher rate of interest in return. Investor gets a lump sum @principal S interestA at
the maturity of the deposit. 5ank fixed deposits are one of the most common savings
scheme open to an average investor. 1ixed deposits also give a higher rate of interest than a
savings bank account.
"he facilities vary from bank to bank. Some of the facilities offered by banks are
overdraft @loanA facility on the amount deposited, premature withdrawal before maturity
period @which involves a loss of interestA etc. 5ank deposits are fairly safer because banks
are sub'ect to control of the <eserve 5ank of India.
F#a&!r#s:
5ank deposits are fairly safe because banks are sub'ect to control of the <eserve 5ank of
India @<5IA with regard to several policy and operational parameters. "he banks are free to
offer varying interests in fixed deposits of different maturities. Interest is compounded once
a $uarter, leading to a somewhat higher effective rate. "he minimum deposit amount
varies with each bank. It can range from as low as <s. !CC to an unlimited amount with
some banks. -eposits can be made in multiples of <s. !CC,. 5efore opening a 1- account,
try to check the rates of interest for different banks for different periods. It is advisable to
keep the amount in five or ten small deposits instead of making one big deposit. In case of
any premature withdrawal of partial amount, then only one or two deposit need be
prematurely encashed. "he loss sustained in interest will, thus, be less than if one big
deposit were to be encashed. Check deposit receipts carefully to see that all particulars have
been properly and accurately filled in. "he thing to consider before investing in an 1- is
the rate of interest and the inflation rate. high inflation rate can simply chip away your
real returns.
&!
R#&!r*s:
"he rate of interest for 5ank 1ixed -eposits varies between & and !! per cent, depending
on the maturity period @durationA of the 1- and the amount invested. Interest rate also
varies between each bank. 5ank 1- does not provide regular interest income, but a lump;
sum amount on its maturity. Some banks have facility to pay interest every $uarter or every
month, but the interest paid may be at a discounted rate in case of monthly nterest. "he
Interest payable on 1ixed -eposit can also be transferred to Savings 5ank or Current
ccount of the customer. "he deposit period can vary from !4, %C or &4 days to %, >
months, ! year, !.4 years to !C years.
A%/a*&a+#s
5ank deposits are the safest investment after Post office savings because all bank deposits
are insured under the -eposit Insurance 3 Credit ?uarantee Scheme of India. It is possible
to get a loans up to:4; =CK of the deposit amount from banks against fixed deposit
-uration Interest rate @KA per annum
!4;%C days & ;4 K
%C;&4 days &.#4;4 K
&>;=C days &.:4;;4.4 K
=!;!9C days 4.4;>.4 K
!9!;%>4 days 4.:4;>.4 K
!;# years >;9 K
#;% years >.#4;9 K
%;4 years >.:4;9
&#
receipts. "he interest charged will be #K more than the rate of interest earned by the
deposit. /ith effect from .M. !==9;==, investment on bank deposits, along with other
specified incomes, is exempt from income tax up to a limit of <s.!#, CCC,; under Section
9C7. lso, from .M. !==%;=&, bank deposits are totally exempt from wealth tax. "he !==4
1inance 5ill Proposals introduced tax deduction at source @"-SA on fixed deposits on
interest incomes of <s.4CCC,; and above per annum.
H8 & a,,)y
Fne can get a bank 1- at any bank, be it nationalised, private, or foreign. Mou have to open
a 1- account with the bank, and make the deposit. )owever, some banks insist that you
maintain a savings account with them to operate a 1-. /hen a depositor opens an 1-
account with a bank, a deposit receipt or an account statement is issued to him, which can
be updated from time to time, depending on the duration of the 1- and the fre$uency of the
interest calculation. Check deposit receipts carefully to see that all particulars have been
properly and accurately filled in.
Fi:#% %#,si& ra&#s i* ,!-)i" a*% ,ri/a&# s#"&r -a*.s
P!-)i" S#"&r Ba*.s
&%
Fixed Deposit Rates in Public Sector Banks
Bank Name
15-
29
Days
30-
45
Days
46-
60
Days
61-
90
Days
91-
120
Days
120-
179
Days
180-
270
Days
271-
364
Days
1-2
Years
2-3
Years
3-5
Years
Up to
5
Years
Wit
e!!e"t
!rom
#$$aa%a&
Bank
5.00 5.50 6.50 6.50 7.00 7.00 8.00 8.00 9.50 10.00 10.50 11.00 1-4-99
#n&ra Bank 5.50 5.50 7.00 7.00 8.00 8.00 9.50 9.50 10.00 10.50 11.00 11.00 1-4-99
Bank o!
Baro&a
5.00 5.00 6.00 6.00 6.00 6.00 7.00 7.00 8.00 9.51 10.50 10.50 5-4-99
Bank o! 'n&ia 5.00 5.00 5.50 6.50 6.50 6.50 7.00 7.00 8.00 9.50 10.00 10.00 21-7-99
(anara Bank 5.00 5.00 6.00 6.00 6.50 6.50 7.50 7.50 9.00 9.50 10.00 10.00 16-8-99
(entra$ Bank 5.00 6.00 6.50 6.50 7.00 7.00 8.50 8.50 9.50 9.50 10.50 10.50 12-3-99
Dena Bank 6.00 6.00 6.25 6.25 6.75 6.75 7.75 7.75 9.00 10.00 10.50 10.50 9-8-99
'n&ian Bank 5.00 5.00 7.00 7.00 8.00 8.00 8.50 8.50 10.00 10.50 11.00 11.00 17-5-99
'n&ian
)*erseas
Bank
5.00 5.00 6.00 6.00 7.50 7.50 8.00 8.00 9.50 10.00 10.50 10.50 1-4-99
)rienta$ Bank 5.00 5.00 6.50 6.50 7.00 7.00 8.00 8.00 9.50 10.00 10.5 10.5 1-4-99
+,n-a% . /in&
Bank
6.00 6.00 6.50 6.50 7.00 7.00 8.00 8.00 9.50 10.00 10.5 10.5 18-5-99
/tate Bank o!
0y&era%a&
5.00 5.00 6.50 6.50 7.00 7.00 8.00 8.00 9.50 9.50 10.50 10.50 15-3-99
/tate Bank o!
'n&ia
5.00 5.00 5.50 5.50 5.50 5.50 7.00 7.00 9.00 9.50 10.50 10.50 15-3-99
/tate Bank o!
1ysore
5.00 5.00 5.50 5.50 5.50 5.50 7.00 7.00 9.00 9.50 10.50 10.50 5-3-99
/.B.2 5.00 6.00 6.50 7.00 8.00 8.00 8.00 8.00 9.00 10.00 10.50 10.50 -
/yn&i"ate
Bank
5.00 5.50 7.00 7.00 7.25 7.25 8.00 8.00 10.00 10.50 11.25 11.25 15-3-99
U.B.' 5.00 5.00 6.00 6.50 7.00 7.00 8.00 8.00 9.00 10.00 10.5 10.5 1-4-99
Nort 1a$a%ar
3rameen
Bank
5.00 7.00 8.00 8.00 10.00 10.00 10.00 10.00 10.50 11.00 11.00 12.00 1-12-99
4i-aya Bank 5.00 6.00 7.00 7.00 8.00 8.00 9.00 9.00 9.50 10.50 11.00 11.00 8-3-99
Private Sector 5anks
Fixed Deposit Rates in Private Sector Banks
Name o! te
Bank
15-
29
&ays
30-
45
Days
46-
60
Days
61-
90
Days
91-
120
Days
120-
179
Days
180-
270
Days
271-
364
Days
1 -2
Years
2 - 3
Years
3 - 5
Years
Up to
5
Years
Wit
e!!e"ti*e
!rom
Bank o! 1a&,ra 5.50 6.50 6.50 7.50 8.50 8.50 9.50 9.50 10.00 10.50 11.00 11.00 16-8-99
(ent,rion Bank 6.50 8.00 8.25 8.50 9.25 9.25 10.25 10.25 10.50 11.25 11.25 11.25 24-6-99
&&
(ity Union Bank 5.00 6.00 7.00 8.00 9.00 9.00 10.00 10.00 10.50 10.50 10.00 10.00 1-6-99
3$o%a$ 2r,st
'n&ia
6.50 8.00 8.00 8.00 9.25 9.25 10.00 10.00 - - 11.25 11.50 18-8-99
0.D.5.( Bank 5.00 8.00 8.00 8.00 9.00 9.00 10.00 10.00 10.00 10.00 10.00 - 10-4-99
'.(.'.(.' Bank 5.00 6.00 7.00 7.00 8.00 8.00 10.00 10.00 10.50 10.50 10.50 10.50 1-8-99
'.D.B.'. 5.00 8.00 8.00 8.00 9.00 9.00 9.50 9.50 - - 10.50 - 21-8-99
'n&,s'n& Bank 5.50 8.00 8.00 8.00 9.00 9.00 10.00 10.00 - 11.25 11.25 11.25 2-8-99
6or& 7risna
Bank
5.50 5.50 8.00 8.00 8.00 8.00 9.50 9.50 11.25 11.25 11.25 11.25 1-5-99
2ami$na&,
1er"anti$e Bank
6.00 6.00 7.50 7.50 9.50 9.50 10.50 10.50 11.00 11.00 11.50 11.50 7-5-99
(ato$i" /yrian
Bank
6.00 6.00 8.00 8.00 8.50 8.50 9.00 9.00 10.00 10.50 11.00 11.00 19-4-99
Dana $aksmi
Bank
7.00 7.00 8.00 8.00 9.00 9.00 9.50 9.50 10.50 11.00 11.50 11.50 1-9-99
5e&era$ Bank 5.00 5.00 7.00 7.00 7.50 7.50 8.00 8.00 9.50 10.00 10.75 10.75 1-9-99
8.. 7. Bank 5.50 5.50 7.00 7.00 9.25 9.25 10.00 10.00 10.25 10.50 11.00 11.00
15-12-
99
/o,t 'n&ian
Bank
5.00 5.00 7.00 7.00 7.50 7.50 8.50 8.50 9.50 10.25 10.75 10.75 15-9-99
Ne&,n9a&i
Bank
6.00 6.00 8.00 8.00 9.00 9.00 10.00 10.00 10.50 11.50 11.50 11.50 1-4-99
4ysya Bank 5.75 5.75 7.25 7.25 8.25 8.50 9.00 9.00 10.50 10.75 11.00 11.00 2-8-99
2imes Bank 6.00 8.00 8.00 8.00 9.00 9.00 10.00 10.00 10.5 10.5 10.5 - 16-8-99
U.2.'. Bank 5.50 8.00 8.00 8.00 9.00 9.00 - - - - 11.5 11.5 1-5-99
V 9 Pr&$)i Ma*a+#m#*& S#r/i"#s
Portfolio 0anagement Services @P0SA has two new offerings, the ?rowth Scheme and the
rbitrage Scheme, aimed at investors with low to moderate risk appetite seeking to
maximise returns on investments in this challenging economic environment.-edicated
wealth managers will help the investors to carefully understand their financial goals and
&4
advise them with the right product mix. It has robust portfolio management software that
enables the entire construction, monitoring and risk management processes. It relieves
investors from all the administrative hassles by using proactive reporting measures.
P0S is fast gaining eminence as an investment avenue of choice for )igh .etworth
Investors. /hile offering a range of speciali(ed investment strategies to capitali(e on
opportunities in the market, /ealthBs P0S combines competent fund management,
dedicated research and state of art technology, thereby ensuring a rewarding experience for
all clients. It will ensure that investors with uni$ue needs, varying risk appetite and
focussed financial goals can maximise returns on investments and also get multiple
conveniences and benefits even in todayBs challenging financial environment.8
/ealth P0S offers several benefits to investors. /e professionally manage e$uity
investments with an aim to deliver consistent return while having a prudent eye on risk. /e
have a well;defined investment philosophy 3 strategy, which acts as a guiding principle in
defining the investment universe. /e understand the dynamics of e$uity as an asset class
and track investments continuously to maximi(e the returns. -edicated wealth managers
will act as one;point contact, bestow personali(ed service and ensure that investors receive
periodic account performance reports.8
/ealth 0anagement is a new generation India venture targeted towards bringing a tangible
change to managing personal and family wealth. It recognises the essence of personal
savings and the need for financial understanding leading to long term peace of mind.
"ailoring uni$ue solutions and providing access to our $uality people both locally and
globally in order to provide a truly international standard within a proven risk management
and governance framework is the declared motto.
Strong proprietary research underpinned by proactive advice and communication will mean
our clients will be kept abreast and comfortable at all times. /e seek to make a difference
and bring financial advice in an answerable and responsible manner to deserving people
who aspire to be financially secure and safe.
"he rbitrage Scheme is formulated to generate consistent reurns on a regular basis under
low risk environment to outperform the fixed income bearing financial instruments by
&>
reasonably good margin. "he scheme is recommended for investors with very low;risk
profile desiring higher li$uidity and looking for regular, consistent and reasonable returns
to outperform inflation with reasonably good margin on a short @> month 3 aboveA to
longer time hori(on. Gnder this scheme, the minimum ticket si(e has been kept at <s. 4C
lacs for individuals 3 <s. ! crore for the corporate clients.
"he ?rowth Scheme is formulated to primarily invest in e$uity or e$uity related
instruments to grow the wealth of the investor with medium to longer time hori(on. "he
scheme is suggested for investors with moderate risk appetite having inclination for better
than market returns on the portfolio during medium to long term perspective of !9 to %>
months. "he minimum ticket si(e for this scheme is <s. !C lacs 3 <s. #C lacs for individual
3 corporate investors respectively.
Ar-i&ra+# S"(#m# ? I*/#s&m#*& S&ra&#+y:
"he ob'ective is to provideconsistent, positive returns by taking advantage of mispricing
across different segments of financial marketsL e.g., spot v,s futureL .S6 v,s 5S6 capital
marketsL future v,s future, etc. It is a directionHneutral arbitrage portfolio scheme. "he
portfolio manager will enter into simultaneous transactions of long;position in one market
segment and short;position in other market segment, eventually creating a hedge. It
envisages index arbitrage where .ifty or any other index is bought,sold and the underlying
component basket of shares are sold,bought to lock in a profit in cash,future segment. It
envisages various derivative strategies 3 special situation arbitrage opportunities such as
dividend arbitrage 3 buy;back arbitrage. It offers extensive use of in;house developed
statistical 3 technical software to enhance the returns. It also provides optimal use of
algorithmic trading system to ensure fast, seamless 3 efficient execution of various
strategies to maximi(e the returns.
Gr8&( S"(#m# ? I*/#s&m#*& S&ra&#+y:
"he ob'ective is to provide unbiased e$uities investment strategy based on rigorous
fundamental analysis, while taking cogni(ance of market conditions 3 movements. It seeks
to use a combination of 8top;down8 and 8bottom;up8 approach to arrive at a basket of
investment;worthy stocks. It offers $ualitative buy;and;hold strategy based on
&:
fundamentals and flexible style T large cap with long;term visionL fine balance between
value and growth stocks and mid;cap value investingL and use of hedging strategies to limit
the downside loss in market from time to time. "he cash component is parked in li$uid
funds, bank deposit, any other li$uid money market instruments. It is diversified across
sectors and stocks with no concentration risk with priority to $uality management with
intent of good corporate governance.
7 E*% 7
/ealth brings together a uni$ue combination of attributes ; combining comprehensive
knowledge base of one of IndiaBs most dynamic full services brokerage houses with the
highly responsive service 3 specialist wealth management expertise of an international
financial servicesB giant. "he company takes pride in a strong talent pool with rich
international 3 onshore experience. Senior professionals drawn from globally reputed
0.C institutions are at the helm of its affairs providing focussed leadership 3 ensuring a
holistic /ealth 0anagement approach.
In /ealth 0anagement, it offers 1inancial Planning, /ealth Creation dvisory and In;
house <esearch. In /ealth Creation, it offers P0S Schemes, Portfolio dvisory, 6$uity 3
-erivatives "rading, Commodity "rading, Currency "rading, -epository Services, 0utual
1unds 3 IPFs, 1ixed Income Products, Structured Products, <eal 6state 1unds, <isk;free
rbitrage Products, 7ife 3 .on;7ife Insurance Products, lternate sset Classes and
International Investment Products. Consistent with its global strategy, this partnership
enables the 2+ to focus on clients and distribution strengths

I*&r%!"&i* $ I*/#s&m#*& ,r"#ss:
"he investment process will be dealt in all its aspects. "he investment process helps the
entrepreneur to make a clear assessment of the rate of return on his investments in a
short and long;term basis*
C(ara"&#ris&i"s $ I*/#s&m#*&
&9
"he entrepreneur has to weigh the alternative investment process in accordance with his
preferences to achieve his business goal. "he principal characteristics of investment are*
i. Ris.:
<isk is inherent in any investment. "his risk may relate to loss of capital, delay in
repayment of capital, non payment of interest, or variability of returns.
ii. R#&!r*:
ll investments are characteri(ed by the expectation of a return. In fact, investments are
made with the primary ob'ective of deriving a return. "he return may be received in the
form of yield plus capital appreciation.
iii. Sa$#&y:
the safety of an investment implies the certainty of return of capital with out loss of
money or time. Safety is another feature which an investor desires for his investments.
i/. Li;!i%i&y:
an investment which is easily saleable or marketable with out loss of money and with out
loss of time is said to process li$uidity.
I*/#s&m#*& Pr$i)# $ a* E*&r#,r#*#!r
"he investment process of an entrepreneur is multi;dimensional. )e invests in land and
building, machinery and tools, procuring raw material, marketing etc. "he entrepreneur
has to evaluate each process in an in;depth manner to gain from the investment decision.
C)assi$i"a&i*
Investment proposals are broadly classified as follows:
!.<eplacement Investments
#. 0oderni(ation Investments
%. <ationali(ation Investments
&. 6xpansion Investments
4. .ew Product Investments
>. <esearch and -evelopment Investments
:. 0arketing and sales investments
9. )uman resource development investments
=. /elfare investments
!C. Fbligatory investments
&=
U&i)i&y $ I*/#s&m#*&
Investments play a vital role in the overall economic development. In fact, the $uantum
of investment decides the process and direction of growth. In case of manufacturing
enterprises investment determines its performance.
5roadly, the utility of investment is directed towards development, profit, Power, wealth,
capital generation and social good.
INVESTMENT PROCESS
/e follow a bottom;up approach to building a portfolio, which means that we pick
individual companies on a case;by;case basis on their own merits, rather than allocate
portfolio N$uotas, or invest based on sector momentum. "o be successful with this
approach, it is imperative that we should have comprehensive coverage of the stocks we
analy(e. /e need e$uity research analysts, supporting the analysts are Nsector
specialists.
Sector specialists are support analysts, which means that they track aggregate sectors,
help build valuation models, and do preliminary ground;work on companies.

6ach primary research analyst focuses on companies within a few select sectors. "heir
research companies both $ualitative and $uantitative elements. Perhaps the most
important aspect on the $ualitative side is their meetings with management, where a lot
of information on the health of a company can be extracted that may not be be found
purely by analy(ing a balance sheet. 5eyond management, they also speak to suppliers,
distributors, customers, competitors, and other stakeholders to get a sense of a companys
potential.
Ff course, the $uantitative aspects of our e$uity research process form the backbone of
our investment decision. "hey include building valuation frame works for the companys
industry and the company itself, comprehensive balance sheet and income statement
analysis, and trying to understand the macro;variables that could influence the stock price
Hfactors that affect the overall economy and the companys sector, as well as currency
risks, interest rate changes, etc.
4C
Gltimately the investment decision rests with the portfolio manager. /hen the elements
of this holistic approach are in place, the analysts float their stock recommendations to
portfolio manager and he take the final call.
"he investment process is generally described in four stages. "hese stages are*
!. Investment policy,
#. Investment analysis,
%. +aluation of securities, and
&. Portfolio construction.
Portfolio construction re;$uires knowledge of the different aspects of securities. "hese
are briefly recapitulated here, consisting of safety and growth of principal li$uidity of
assets after taking into account the stage involving investment timing,selection
investment, al;location of savings to different investments and feedback of portfolio as
given in the table below*
T(# Pr"#ss $ I*/#s&i*+
I . I*/#s&m#*& P)i"y
-etermination of ingestible wealth
-etermination of portfolio ob'ectives Identification of potential investment assets
Consideration of attributes of investment assets
llocation of wealth to asset categories.
4!
II. I*/#s&m#*& Va)!a&i*
+aluation of stocks
+aluation of -ebentures and bonds
+aluation of other assets
III. I*/#s&m#*& A*a)ysis
IV. Pr&$)i C*s&r!"&i*
-etermination of diversification level Consideration of investment timing Selection of
investment assets llocation of ingestible wealth to investment assets 6valuation of
portfolio for feedback.
Pr&$)i C*s&r!"&i*
In todayBs financial marketplace, a well;maintained portfolio is vital to any investorBs
success. s an individual investor, you need to know how to determine an asset
allocation that best conforms to your personal investment goals and strategies. In other
words, your portfolio should meet your future needs for capital and give you peace of
4#
mind. Investors can construct portfolios aligned to their goals and investment strategies
by following a systematic approach. )ere we go over some essential steps for taking such
an approach.

S&#, 1: %#&#rmi*i*+ &(# A,,r,ria&# Ass#& A))"a&i*
scertaining the individual financial situation and investment goals is the first task in
constructing a portfolio. Important items to consider are age, how much time you have to
grow your investments, as well as amount of capital to invest and future capital needs.
single college graduate 'ust beginning his or her career and a 44;year;old married person
expecting to help pay for a childBs college education and plans to retire soon will have
very different investment strstigies.
second factor to take into account is your personality and risk tolerance. Is he the kind
of person who is willing to risk some money for the possibility of greater returnsO
6veryone would like to reap high returns year after year, but if you are unable to sleep at
night when your investments take a short;term drop, chances are the high returns from
those kinds of assets are not worth the stress.
s you can see, clarifying your current situation and your future needs for capital, as well
as your risk tolerance, will determine how your investments should be allocated among
different asset classes. "he possibility of greater returns comes at the expense of greater
risk of losses @a principle known as the risk,return tradeoffA ; you donBt want to eliminate
risk so much as optimi(e it for your uni$ue condition and style. 1or example, the young
person who wonBt have to depend on his or her investments for income can afford to take
greater risks in the $uest for high returns. Fn the other hand, the person nearing
retirement needs to focus on protecting his or her assets and drawing income from these
assets in a tax;efficient manner.
C*s#r/a&i/# Vs. A++r#ssi/# I*/#s&rs
?enerally, the more risk you can bear, the more aggressive your portfolio will be,
devoting a larger portion to e$uities and less to bonds and other fixed;income securities.
Conversely, the less risk thatBs appropriate, the more conservative your portfolio will be.
4%
)ere are two examples* one suitable for a conservative investor and another for the
moderately aggressive investor.
"he main goal of a conservative portfolio is to protect its value. "he allocation shown
above would yield current income from the bonds, and would also provide some long;
term capital growth potential from the investment in high;$uality e$uities.
moderately aggressive portfolio satisfies an average risk tolerance, attracting those
willing to accept more risk in their portfolios in order to achieve a balance of capital
growth and income.
S&#, ': A"(i#/i*+ &(# Pr&$)i D#si+*#% i* S&#, 1

Fnce youBve determined the right asset allocation, you simply need to divide your capital
between the appropriate asset classes. Fn a basic level, this is not difficult* e$uities are
e$uities, and bonds are bonds.
4&
5ut you can further break down the different asset classes into subclasses, which also
have different risks and potential returns. 1or example, an investor might divide the
e$uity portion between different sectors and market caps, and between domestic and
foreign stock. "he bond portion might be allocated between those that are short term and
long term, government versus corporate debt and so forth.

S&#, 2: R#ass#ssi*+ Pr&$)i @#i+(&i*+s
Fnce you have an established portfolio, you need to analy(e and rebalance it periodically
because market movements may cause your initial weightings to change. "o assess your
portfolioBs actual asset allocation, $uantitatively categori(e the investments and determine
their valuesB proportion to the whole.
"he other factors that are likely to change over time are your current financial situation,
future needs and risk tolerance. If these things change, you may need to ad'ust your
portfolio accordingly. If your risk tolerance has dropped, you may need to reduce the
amount of e$uities held. Fr perhaps youBre now ready to take on greater risk and your
asset allocation re$uires that a small proportion of your assets be held in riskier small;cap
stocks.
6ssentially, to rebalance, you need to determine which of your positions are over
weighted and underweighted. 1or example, say you are holding %CK of your current
assets in small;cap e$uities, while your asset allocation suggests you should only have
!4K of your assets in that class. <ebalancing involves determining how much of this
position you need to reduce and allocate to other classes.
S&#, A: R#-a)a*"i*+ S&ra&#+i"a))y
Fnce you have determined which securities you need to reduce and by how much, decide
which underweighted securities you will buy with the proceeds from selling the over
weighted securities.
/hen selling assets to rebalance your portfolio, take a moment to consider the tax
44
implications of read'usting your portfolio. Perhaps your investment in growth stocks has
appreciated strongly over the past year, but if you were to sell all of your e$uity positions
to rebalance your portfolio, you may incur significant capital gains taxes. In this case, it
might be more beneficial to simply not contribute any new funds to that asset class in the
future while continuing to contribute to other asset classes. "his will reduce your growth
stocksB weighting in your portfolio over time without incurring capital gains taxes.
t the same time, always consider the outlook of your securities. If you suspect that those
same over weighted growth stocks are ominously ready to fall, you may want to sell in
spite of the tax implications. nalyst opinions and research reports can be useful tools to
help gauge the outlook for your holdings. nd tax;loss selling is a strategy you can apply
to reduce tax implications.
Im,r&a*"# $ Di/#rsi$i"a&i*.
"hroughout the entire portfolio construction process, it is vital that you remember to
maintain your diversification above all else. It is not enough simply to own securities
from each asset classL you must also diversify within each class. 6nsure that your
holdings within a given asset class are spread across an array of subclasses and industry
sectors.
s we mentioned, investors can achieve excellent diversification by using mutual funds
and 6"1s. "hese investment vehicles allow individual investors to obtain the economies
of scale that large fund managers en'oy, which the average person would not be able to
Produce with a small amount of money.
DATA ANALYSIS AND INTERPRETATION
I& s(8s &(# "a)"!)a&i* $ E:,#"&#% R#&!r* a*% S&a*%ar%
D#/ia&i*:
a9 E:,#"&#% r#&!r*:
4>
"he expected return on a portfolio is the weighted average of the returns of individual
assets, where each assetBs weight is determined by its weight in the portfolio.
T(# $rm!)a is:
/here
6E is stands for expected
<pE <eturn on the portfolio
/aE /eight of asset n where n may stand for asset a, bUetc.
<aE <eturn on asset n where n may stand for asset a, bUetc
-9 S&a*%ar% %#/ia&i*:
"he portfolio standard deviation @VpA measure the risk associated with the expected return
of the portfolio.
T(# $rm!)a is
"he term rab represents the correlation between the returns of investments a and b. "he
correlation coefficient, r, will always reduce the portfolio standard deviation as long as it
is less than S!.CC.
Company name
Expected return (%)
Standard deviation (%)
CEMENT
GACL
LNT
19.03
63.69
6.91
6.1!
4:
E BR,9 C D@a1 E BRa9E F D@a1 E BRa9E
G
,
C HB8
a
'
G
'

F 8
a
'
G
'
F '8
a
8
-
r
a-
G
a
G
-9
"#$%M$CE&T'C$(
RANBAXY
CIPLA
9.0!
)*.!
+.*!
!.+3
TE(EC,M
MTNL
BHARTI ARTL
13.-1
1!.1*
1-.9-
1!6.1
.$N/'N0
ING VYSYA
ICICI
1!.+6
+9.+3
6*.!
3*.*3
'.T.
WIPRO
SATYAM
)13.6*
16.*!
3+.-6
+0.+1
I& s(8s &(# "a)"!)a&i* $ Pr&$)i R#&!r*s a*% Ris.s $
Cm,a*i#s:
RIS0:
<isk refers to the probability that the return and therefore the value of an asset or security
may have alternative outcomes. <isk is uncertainty of the income,capital appreciation or
loss of both. ll investments are risky. "he higher the risk taken, the higher is the return.
49
RETURN:
<eturn;yield or return differs from the nature of instruments, maturity period and the
creditor or debtor nature of the instrument and a host of other factors. "he most important
factor influencing return is risk return is measured by taking the price income plus the
price change.
Company name %eturn1 (%) %i121 (%)
CEMENT
GACL
LNT
3*.!33* ++.!3
"#$%M$CE&T'C$(
RANBAXY
CIPLA
)0.61! +*.63
TE(EC,M
MTNL
BHARTI ARTL
!3.99 !!.+

.$N/'N0
ING VYSYA
ICICI
+*.3!09 3*.*1
'.T.
WIPRO
SATYAM
)1.1- !*.+-
4=
I& s(8s &(# "a)"!)a&i* $ "rr#)a&i* "#$$i"i#*& -#&8##* &(#
"m,a*i#s:

Correlation coefficient:
"he correlation coefficient is obtained by dividing the covariance by the product of the
standard deviation of the two securities. "o facilitate comparison covariance can be
standardi(ed.
I& s(8s &(# "a)"!)a&i* $ A/#ra+# r#&!r* $ "m,a*i#s:
Company name Corre3ation coe44icient (r)
CEMENT
GACL
LNT
0.66
"#$%M$CE&T'C$(
RANBAXY
CIPLA
0.6
TE(EC,M
MTNL
BHARTI ARTL
0.9
.$N/'N0
ING VYSYA
ICICI
0.+
'.T.
WIPRO
SATYAM
0.1-
>C
r
AB
Co!
AB
" V

V
5
0&5$%$T $M.&5$ CEMENT (T6 (0$C():
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& '().$$ &$&.*+ '&,.*+ *+.#-
#$$&%#$$) &$(.'$ )$'.++ ,+.)+ &'.'*
#$$)%#$$+ )$+.$$ -,.($ %&#+.)$ %*$.&+
#$$+%#$$( *$.$$ ')'.&$ ('.&$ -(.(&
#$$(%#$$- ')).*$ '',.&+ %#+.)+ %'-.+*
TOTAL RETURN
>4.14
A!era.e ret/rn ,+.'+"+ ',.$&
LARSEN AND TOUBRO (LNT):
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& #'&.-$ +#-.&+ &'&.(+ ')(.--
#$$&%#$$) +&$.$$ ,*#.$$ )+#.$$ *+.#*
#$$)%#$$+ ,**.-$ '*)).#$ *++.+$ *(.+&
#$$+%#$$( '*)+.$$ '))#.,+ %)$#.$+ %#'.-,
#$$(%#$$- ')$$.$$ '-$&.#$ &$&.#$ #'.((
TOTAL RETURN
21I.A4
A!era.e ret/rn &'*.)+"+ (&.(,
RANBAXY LABORATORIES:
>!
$vera8e return < = %:N
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& +,-.*$ '$,*.#$ +$$.)$ *&.-'
#$$&%#$$) ''$$.'$ '#+'.)$ '+'.&$ '&.-+
#$$)%#$$+ '#+#.$$ &(#.&+ %**,.(+ %-'.$(
#$$+%#$$( &().)$ &,'.*+ #-.)+ -.+&
#$$(%#$$- &,&.$$ &),.'+ %)&.*+ ''.'(
TOTAL RETURN
A4.J>
A!era.e ret/rn )+.$,"+ ,.$#
CIPLA:
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& ,$).$$ '&'-.#+ )'&.#+ )+.-'
#$$&%#$$) '&&,.$$ &'-.#+ %'$#'.-+ %-(.&'
#$$)%#$$+ &#$.$$ ))&.)$ '#&.)$ &*.+(
#$$+%#$$( ))+.$$ #+$.-$ %',).&$ %)&.((
#$$(%#$$- #+&.)$ #&,.&$ %').'$ %+.+(
TOTAL RETURN
7A1.'5

A!era.e ret/rn %)'.#("+ %*.#+
MTNL:
>#
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& ,+.'+ '&-.-$ )#.++ )).-#
#$$&%#$$) '&,.'$ '+).,$ '+.*$ ''.&(
#$$)%#$$+ '+(.$$ ')).#$ ''.*$ -.+(
#$$+%#$$( ')+.#$ ')#.*+ %#.&+ %'.(#
#$$(%#$$- ')&.$$ '+#.&+ ,.&+ (.+)
TOTAL RETURN
5I.45
A!era.e ret/rn (*.+("+ '&.-'
BHARTI ARTL:
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& #&.+$ '$+.'$ *'.($ &)-.#&
#$$&%#$$) '$(.#+ #'+.($ '$,.&+ '$#.,#
#$$)%#$$+ #'*.,$ &)+.-$ '#(.*$ +-.,&
#$$+%#$$( &)*.,$ (#*.*+ #-,.,+ *$.#)
#$$(%#$$- (&+.$$ *(#.*$ ##-.*$ &+.*-
TOTAL RETURN
5'A.1>

A!era.e ret/rn (#).',"+ '#+.'*
ING VYSYA:
>%
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& #+#.$+ +),.$$ #,(.,+ ''-.*'
#$$&%#$$) +($.$$ +*+.-+ #+.-+ ).($
#$$)%#$$+ +*+.$$ '(#.#+ %)##.-+ %-#.#(
#$$+%#$$( '().+$ '+-.)+ %-.$+ %).#,
#$$(%#$$- '+,.$$ '*+.'+ #(.'+ '(.)+
TOTAL RETURN
5'.21
A!era.e ret/rn (#.&'"+ '#.)(
ICICI:
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& ')'.-$ #,+.-$ '+).$$ '$*.(*
#$$&%#$$) #,,.-$ &-$.-+ -'.$+ #&.-'
#$$)%#$$+ &-).*+ +*).-$ #$,.*+ ++.,*
#$$+%#$$( +*(.#+ *,$.)$ &$).'+ +'.**
#$$(%#$$- **,.$$ ,+$.#+ ('.#+ (.*,
TOTAL RETURN
'AK.1A

A!era.e ret/rn #)-.')"+ ),.)&
WIPRO:
>&
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& '()).)$ '-&-.($ ,&.# +.(-
#$$&%#$$) '-)).)$ -)*.$$ %,,(.)$ %+-.'#
#$$)%#$$+ -+&.$$ )(&.)+ %#*,.++ %&*.)+
#$$+%#$$( )().$$ ($).++ ')$.++ &$.#,
#$$(%#$$- ($-.,$ ++).&+ %+&.++ %*.*'
TOTAL RETURN
75I.A'
A!era.e ret/rn %(*.)#"+ %'&.(*
SATYAM COMP:
7ear
,penin8
19are price
("0)
C3o1in8
19are price
("1) ("1)"0)
("1)"0):
"0;100
#$$#%#$$& #*$.'$ &(-.&+ *-.#+ &'.'+
#$$&%#$$) &-$.$$ )$,.,$ &,.,$ '$.-*
#$$)%#$$+ )'#.$$ -&-.*$ &#+.*$ -,.$*
#$$+%#$$( -)$.-$ )*&.,+ %#+(.-+ %&).((
#$$(%#$$- )*(.$$ )-).,+ %''.$+ %#.#-
TOTAL RETURN
IA.JI

A!era.e ret/rn *).$*"+ '(.*#
CALC0LATION O1 STAN2AR2 23VIATION:
>4
Standard -eviation E W +ariance
GUJARAT AMBUJA CEMENT LTD:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
d
!
#$$#%#$$& *+.#- ',.$& ((.#) )&*-.-)
#$$&%#$$) &'.'* ',.$& '#.'+ ')-.(#
#$$)%#$$+ %*$.&+ ',.$& %('.&# &-($.')
#$$+%#$$( -(.(& ',.$& +-.($ &&'-.-(
#$$(%#$$- %'-.+* ',.$& %&(.(( '&)&.,(

T,T$(
=d
!
<1!9-.!!
Variance '"n%' 456
#
7 '"+%' 4'#,+-.##7 +(.,'
Stan6ar6 2e!iation Variance &#&,.&$+ +(.,'
LARSEN & TOUBRO:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
6
!
#$$#%#$$& ')(.-- (&.(, *&.$* (,$#.#,
#$$&%#$$) *+.#* (&.(, #'.+, )((.'&
#$$)%#$$+ *(.+& (&.(, ##.*) +#'.(-
#$$+%#$$( %#'.-, (&.(, %*+.)* -&$(.*&
#$$(%#$$- #'.(( (&.(, %)#.$& '-((.+#

T,T$(
=d
!
<16963.++
Variance '"n%' 456
#
7 '"+%' 4'(,(&.))7 )#)$.*(
Stan6ar6 2e!iation Variance )#)$.*( (+.'
>>
+ariance E !,n;! @Xd
#
A
RANBAXY LABORATORIES:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
6
!
#$$#%#$$& *&.-' ,.$# -).(, ++-*.($
#$$&%#$$) '&.-+ ,.$# ).-& ##.&-
#$$)%#$$+ %-'.$( ,.$# *$.$* ()'#.*'
#$$+%#$$( -.+& ,.$# %'.), #.##
#$$(%#$$- ''.'( ,.$# #.') ).+*

T,T$(
=d
!
<1!0!0.*
Variance '"n%' 456
#
7 '"+%' 4'#$#$.+*7 &$$+.')+
Stan6ar6 2e!iation Variance &$$+.')+ +).*#
CIPLA:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
6
!
#$$#%#$$& )+.'- %*.#+ +&.,( #,''.(*
#$$&%#$$) %-(.&' %*.#+ %(*.$( )(&#.'(
#$$)%#$$+ &*.+( %*.#+ )(.*' #','.'*
#$$+%#$$( %)&.(( %*.#+ %&+.)' '#+&.*-
#$$(%#$$- %+.+( %*.#+ %#.(, -.#)

T,T$(
=d
!
<10996.13
Variance '"n%' 456
#
7 '"+%' 4'$,,(.'&7 #-),.$&#+
Stan6ar6 2e!iation Variance #-),.$&#+ +#.)
MTNL:
>:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
d
!
#$$#%#$$& )).-# '&.-# &' ,('
#$$&%#$$) ''.&( '&.-# %#.&( +.+-
#$$)%#$$+ -.+( '&.-# %(.'( &-.,+
#$$+%#$$( %'.(# '&.-# %'+.&) #&+.&#
#$$(%#$$- (.+) '&.-# %-.'* +'.++

T,T$(
=d
!
<1!91.39
Variance '"n%' 456
#
7 '"+%' 4'#,'.&,7 &##.*)-+
Stan6ar6 2e!iation Variance &##.*)-+ '-.,-
BHARTI ARTL:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
6
!
#$$#%#$$& &)-.#& '#+.'* ###.$+ ),&$(.#$
#$$&%#$$) '$#.,# '#+.'* %##.#( ),+.+'
#$$)%#$$+ +-.,& '#+.'* %(-.#+ )+##.+(
#$$+%#$$( *$.#) '#+.'* %)).,) #$',.($
#$$(%#$$- &-.+, '#+.'* %*-.+, -(-#.$'

T,T$(
=d
!
<6+01.**
Variance '"n%' 456
#
7 '"+%' 4()$'+.**7 '($$&.,-
Stan6ar6 2e!iation Variance '($$&.,- '#(.+'
ING VYSYA:
7ear %eturn (%) $v8. %eturn d< 6
!
>9
(%> ) (%)%>)
#$$#%#$$& ''-.*' '#.)( '$+.&+ ''$,*.(#
#$$&%#$$) ).($ '#.)( %-.*( ('.-*
#$$)%#$$+ %-#.#( '#.)( %*).-# -'--.)*
#$$+%#$$( %).#, '#.)( %'(.-+ #*$.+(
#$$(%#$$- '(.)+ '#.)( &.,, '+.,#

T,T$(
=d
!
<1*63+.36
Variance '"n%' 456
#
7 '"+%' 4'*(&).&(7 )(+*.+,
Stan6ar6 2e!iation Variance )(+*.+, (*.#+
ICICI:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
d
!
#$$#%#$$& '$*.(* ),.)& +,.#+ &)'$.+(
#$$&%#$$) #&.-' ),.)& %#+.-# (('.+#
#$$)%#$$+ ++.,* ),.)& (.++ )#.,$
#$$+%#$$( +'.** ),.)& #.)+ (.$$
#$$(%#$$- (.*, ),.)& %)#.+) '*$,.(+

T,T$(
=d
!
<6030.63
Variance '"n%' 456
#
7 '"+%' 4($&$.(&7 '+$-.(+-+
Stan6ar6 2e!iation Variance '+$-.(+-+ &*.*&
WIPRO:
>=
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
d
!
#$$#%#$$& +.(- %'&.(* ',.&+ &-).)#
#$$&%#$$) %+-.'# %'&.(* %)&.)) '**-.$&
#$$)%#$$+ %&*.)+ %'&.(* %#).-- ('&.++
#$$+%#$$( &$.#, %'&.(* )&.,- ',&&.&(
#$$(%#$$- %*.*' %'&.(* %).*- #&.-#

T,T$(
=d
!
<+*3!.0*
Variance '"n%' 456
#
7 '"+%' 4)*&#.$*7 '#$*.$#
Stan6ar6 2e!iation Variance '#$*.$# &).-(
SATYAM:
7ear %eturn (%)
$v8. %eturn
(%> )
d<
(%)%>)
d
!
#$$#%#$$& &'.'+ '(.*# ').&& #$+.++
#$$&%#$$) '$.-* '(.*# %(.$) &(.)*
#$$)%#$$+ -,.$* '(.*# (#.#( &*-(.&'
#$$+%#$$( %&).(( '(.*# +'.)* #$+$.',
#$$(%#$$- %#.#- '(.*# ',.$, &().)&

T,T$(
=d
!
<63!.-6
Variance '"n%' 456
#
7 '"+%' 4(+&#.-(7 '(&&.',
Stan6ar6 2e!iation Variance '(&&.', )$.)'
CALC0LATION O1 CORR3LATION B3TW33N TWO COMPANI3S:

:C
Covariance (C,?a@) < 1:(n)1) (=dx.dy)
GACL & LNT:
7E$%
6ev. ,4
0$C(
(dx)
6ev. ,4 (NT
(dy)
"roduct o4 dev.
(dx)(dy)
#$$#%#$$& ((.#) *&.$* ++$&.#',#
#$$&%#$$) '#.'+ #'.+, #(#.&'*+
#$$)%#$$+ %('.&# ##.*) %')$$.+)**
#$$+%#$$( +-.( %*+.)* %),#&.()*
#$$(%#$$- %&(.(( %)#.$& '+)$.*',*


T,T$(
=dx. dy <
9*!.160-
COVa8 '"4+%'74,*#.'($-7

#)+.+)
Correlation of coefficient #)+.+)"4+(.,'74(+.'#7 $.$((
I*&#r,r#&a&i*:
"he prime ob'ective of this combination is to reduce risk of portfolio. 7east preference is
given to the portfolio returns. s per the calculations ?C7, bears a proportion of C.4:
whereas 7." bears a proportion of C.&%. "he standard deviations of the companies are
4>.=! for ?C7 and >4.!# for 7.".
"his combination yields a return of a return of %9.#%%9 and a risk of &&.#%
respectively.
RANBAXY & CIPLA:
7E$% 6ev. ,4
0$C(
6ev. ,4 (NT
(dy)
"roduct o4 dev.
(dx)(dy)
:!
Corre3ation o4 coe44icient < C,?a@ : A
a
; A
@
(dx)
#$$#%#$$& -).(, +&.,( )$&$.#-#)
#$$&%#$$) ).-& %(*.$( %&#'.,#&*
#$$)%#$$+ *$.$* )(.*' &-)*.+))*
#$$+%#$$( %'.), %&+.)' +#.-($,
#$$(%#$$- #.') #.(, %+.-+((


T,T$(
=dx. dy <
-03.*9--
COVa8 '"4+%'74-+$&.*,--7 '*-+.,-
Correlation of coefficient '*-+.,-"4+).*#74+#.)&7 $.(+
I*&#r,r#&a&i*:
s per the calculations <.5DM, bears a proportion of C.&& whereas CIP7 bears a
proportion of C.4>. "he standard deviations of the companies are 4&.9# for <.5DM
and 4#.&% for CIP7.
"his combination yields a return of a return of ;.>4!# and a risk of &9.>%
respectively. "he investors shall not invest in this combination as there is negative return
and there is not much difference in their standard deviation.
MTNL & BHARTI ARTL:
7E$% 6ev. ,4 6ev. ,4 (NT "roduct o4 dev.
:#
0$C(
(dx)
(dy)
(dx)(dy)
#$$#%#$$& &' ###.$+ (**&.++
#$$&%#$$) %#.&( %##.$( +#.$('(
#$$)%#$$+ %($'( %(-.#+ )').#(
#$$+%#$$( %'+.&) %)).,) (*,.&-,(
#$$(%#$$- %-.'* %*-.+, (#*.*,(#


T,T$(
=dx. dy <
*66*.1+-+
COVa8 '"4+%'74*((*.')-)7 #'(-.$)
Correlation of coefficient #'(-.$)"4'-.,-74'#(.+'7
I*&#r,r#&a&i*:
"he proportion of investment for 0".7 is ;!.!4 and for 5)<"I <"7 #.!4. 5)<"I
<"7 bears a ma'or proportion which is dominating one. "he standard deviations of the
two companies are >:.=: and !#>.4! respectively.
"his combination yields a return of #4%.== and a risk of #4#.&4. hence investor
should invest his ma'or proportion in 5)<"I <"7 in order to minimi(e risk.
ING VYSYA & ICICI:
7E$%
6ev. ,4
0$C(
(dx)
6ev. ,4 (NT
(dy)
"roduct o4 dev.
(dx)(dy)
#$$#%#$$& '$+.&+ +,.#+ (#)'.,*-+
#$$&%#$$) %-.*( %#+.-# #$#.'+,#
#$$)%#$$+ %*).-# (.++ %++).,'(
#$$+%#$$( %'(.-+ #.)+ %)'.$&-+
#$$(%#$$- &.,, %)#.+) %'(,.-&)(


T,T$(
=dx. dy <
6-*.+*6
COVa8 '"4+%'74+(-*.)+*(7 ')',.('
Correlation of coefficient ')',.('"4(*.#+74&*.*&7 $.+)
:%
'nterpretationB
In this situation optimum weights of I.? +MSM and ICICI are C.C% and C.=:
respectively. "he portfolio risk is %9.9!, which is lesser than the individual risks of two
companies. )ence, it is recommended to invest the ma'or proportion of the funds in
ICICI, in order to reduce the portfolio risk.
WIPRO & SATYAM:
7E$%
6ev. ,4
0$C(
(dx)
6ev. ,4 (NT
(dy)
"roduct o4 dev.
(dx)(dy)
#$$#%#$$& ',.&+ ').&& #--.#*++
#$$&%#$$) %)&.)) %(.$) #(#.&&-(
#$$)%#$$+ %#).-- (#.#( %'+)#.'*$#
#$$+%#$$( )&.,- +'.)* ##(&.+-+(
#$$(%#$$- %).*- ',.$, %,#.,(*&


T,T$(
=dx. dy <
116*.0*0!
COVa8 '"4+%'74''(*.$*$#7 #&&.(#
Correlation of coefficient #&&.(#"4&).-(74)$.)'7 $.'-
I*&#r,r#&a&i*:
"he proportion of investments for /IP<F is C.4= and for S"M0 it is C.&!. "he
standard deviations of the companies are %&.:> and &C.&! respectively.
"his combination yields a return of ;!.!:4 with a risk of #9.&:.
C$(C&($T',N ,C ",%TC,(', DE'0#TSB
:&
2eri!in. t9e :ini:/: ri;< =ortfolio> t9e follo?in. for:/la i; /;e6:

W9ere>
Xa i; t9e =ro=ortion of ;ec/rit@ A
X8 i; t9e =ro=ortion of ;ec/rit@ B
Aa ;tan6ar6 6e!iation of ;ec/rit@ A
A8 ;tan6ar6 6e!iation of ;ec/rit@ B
ra8 correlation co%efficient 8et?een ABB
GACL & LNT:
4(+.'#7
#
% $.$((4+(.,'7 4(+.'#7
Xa
4+(.,'7
#
C 4(+.'#7
#
%# 4$.$((7 4+(.,'7 4(+.'#7
$.+-
X8 '% Xa
'% $.+-
$.)&
RANBAXY & CIPLA:
:4
/a E @ bA
#
; rab @ aA @VbA
@aA
#
S @bA
#
H #rab @aA @bA
4+#.)&7
#
- $.(+4+).*#7 4+#.)&7
Xa
4+).*#7
#
C 4+#.)&7
#
%# 4$.(+7 4+).*#7 4+#.)&7
$.))
X8 '%Xa
'%$.)) $.+(
MTNL & BHARTI ARTL:
4'#(.+'7
#
D $.,+ 4'-.,-7 4'#(.+'7
Xa
4'-.,-7
#
C 4'#(.+'7
#
D #4$.,+7 4'-.,-7 4'#(.+'7
%'.'+
X8 ' D Xa
'% 4%'.'+7
#.'+
ING VYSYA & ICICI:
4&*.*&7
#
D $.+)4(*.#+7 4&*.*&7
Xa
4(*.#+7
#
C 4&*.*&7
#
D # 4$.+)7 4(*.#+7 4&*.*&7
$.$&
X8 ' D Xa
' D $.$&
$.,-
WIPRO & SATYAM:
:>
4)$.)'7
#
D $.'-4&).-(7 4)$.)'7
Xa
4&).-(7
#
C 4)$.)'7
#
D # 4$.'-7 4&).-(7 4)$.)'7
$.+,
X8 ' D X8
' D $.+,
$.)'
CALCULATION OF PORTFOLIO RISK:
Cor tEo 1ecuritie1B
"wo securities portfolio is a portfolio which consists two securities. In two securities
portfolio the investment takes place in companies securities.
/here,
V
P
E portfolio risk
Da E proportion of investment in security
Db E proportion of investment in security 5
<!# E correlation co;efficient between security ! 3 #
Va E standard deviation of security !
Vb E standard deviation of security #
::
A
P
E W@a
#
Y@DaA
#
S b
#
Y@DbA
#
S #rabYaYbYDaYDbA
Fr &(r## s#"!ri&i#s:
"hree securities portfolio consists of three securities or which invests in three securities.
T(# $))8i*+ $rm!)a is !s#% $r s&a*%ar% %#/ia&i*:

GACL & LNT:
A= E4$.+-7
#
;4+(.,'7
#
C4$.)&7
#
;4(+.'#7
#
C#4$.+-74$.)&74$.$((74+(.,'74(+.'#7
E',+(.#+,')+
)).#&
RANBAXY & CIPLA:
A= E4$.))7
#
;4+).*#7
#
C4$.+(7
#
;4+#.)&7
#
C#4$.))74$.+(74$.(+74+).*#74+#.)&7
E#&().+&-&)*
)*.(&
MTNL & BHARTI ARTL:
A= E4%'.'+7
#
;4'-.,-7
#
C4#.'+7
#
;4'#(.+'7
#
C#4%'.'+74#.'+74$.,+74'-.,-74'#(.+'7
E(&-#,.&(+,&
:9
A= E44Aa7
#
4Xa7
#
C4A87
#
4X87
#
C 4Ac7
#
4Xc7
#
C #4Xa74X874ra874Aa74A87 C
#4Xa74Xc74rac74Aa74Ac7 C #4X874Xc74r8c74A874Ac77
#+#.)+
ING VYSYA & ICICI:
A= E4$.$&7
#
;4(*.#+7
#
C 4$.,-7
#
;4&*.*&7
#
C#4$.$&74$.,-74$.+)74(*.#+74&*.*&7
E'+$(.')$*),
&*.*'

WIPRO & SATYAM:
A= E4$.+,7
#
;4&).-(7
#
C 4$.)'7
#
;4)$.)'7
#
C#4$.+,74$.)'74$.'-74&).-(74)$.)'7
E*'$.(#&&*&+
#*.)-
CALCULATION OF PORTFOLIO RETURN:
R= W
'
R
'
C W
#
R
#
4for t?o ;ec/ritie;7
R= W
'
R
'
C W
#
R
#
C W
&
R
&
4for t9ree ;ec/ritie;7
:=
W9ere>
W'> W#> W& are t9e ?ei.9t; of t9e ;ec/ritie;
R'> R#> R& are t9e 3F=ecte6 ret/rn;
GACL & LNT:
R= 4$.+-74',.$&7 C 4$.)&74(&.(,7
&*.#&&*
RANBAXY & CIPLA:
R= 4$.))74,.$#7 C 4$.+(74%*.#+7
%$.(+'#
MTNL & BHARTI ARTL:
R= 4%'.'+74'&.'-7 C 4#.'+74'#+.'*7
#+&.,,
ING VYSYA & ICICI:
R= 4$.$&74'#.)(7 C 4$.,-74),.)&7
)*.&#$,
WIPRO & SATYAM:
R= 4$.+,74%'&.(*7 C 4$.)'74'(.*#7
% '.'-+
SUGGESTIONS:
9C
Select your investments on economic grounds.
Public knowledge is no advantage.
5uy stock with a disparity and discrepancy between the situation of the firm ; and
the expectations and appraisal of the public @Contrarian approach vs. Consensus
approachA.
5uy stocks in companies with potential for surprises.
"ake advantage of volatility before reaching a new e$uilibrium.
7isten to rumors and tips, check for yourself.
-ont put your trust in only one investment. It is like Qputting all the eggs in one
basket Q. "his will help lesson the risk in the long term.
"he investor must select the right advisory body which is has sound knowledge
about the product which they are offering.
Professionali(ed advisory is the most important feature to the investors.
Professionali(ed research, analysis which will be helpful for reducing any kind of
risk to overcome.
CONCLUSIONS:
9!
/hen we form the optimum of two securities by using minimum variance e$uation, then
the return of the portfolio may decrease in order to reduce the portfolio risk.
"he combination of securities will lead to increase the returns for that we have to follow
appropriate techni$ues and always the combination of securities should decrease the risk.
BIBLIOGRAPHY
9#
.oo21 re4erredB
Security analysis and portfolio management ; +.. vadhani
Security analysis and portfolio management ; 1ischer 3 2ordan
Investment decisions ; +.J. 5halla
Security analysis 3 portfolio management ; <obbins
Portfolio management H S.Jevin
@#-si&#s:
www.geo'it.com
www.investopedia.com
www.capitalmarket.com
www.icicidirect.com
www.bse.com
www.nse.com


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