Documente Academic
Documente Profesional
Documente Cultură
INTRODUCTION
Portfolios are combinations of assets held by the investors. These
combinations may be of various asset classes like equity and debt and of different
issuers like Government bond and corporate debt or of various instruments like
discount bonds, warrants, debentures and Blue chip equity or scrips of emerging blue
chip companies.
The traditional Portfolio Theory aims at the selection of such securities
that would fit in well with the asset preferences, need and choice of investor. Modern
Portfolio Theory postulates that maximization of return and or minimization of risk
will yield optimal returns and choice and attitudes of investors are only a starting
point for investment decision and that vigorous risk-return analysis is necessary for
optimization of returns. The return on portfolio is weighted average of returns of
individual stocks and the weights are proportional to each stocks percentages in the
total portfolio.
Portfolio analysis includes portfolio construction, and performance of
portfolio. All these are part of the subject of portfolio Management which is a
dynamic concept, subject to daily and hourly changes based on information flows,
money flows and economic and non-economic forces operating in the country on the
markets and securities
METHODOLOGY
Research design or research methodology is the procedure of collecting, analyzing
and interpreting the data to diagnose the problem and react to the opportunity in such
a way where the costs can be minimized and the desired level of accuracy can be
achieved to arrive at a particular conclusion.
Publications
Period of study:
For different companies, financial data has been collected from the year 2009-2013.
Selection of Companies:
Companies selected for analysis are
MARUTI
ACC
ICICI
RELIANCE
TCS
LIMITATIONS
Very few and randomly selected scripts / companies are analyzed from BSE Listings.
Detailed study of the topic was not possible due to limited size of the project.
PORTFOLIO REVISION
The portfolio which is once selected has to be continuously reviewed over a period of
time and then revised depending on the objectives of the investor. The care taken in
construction of portfolio should be extended to the review and revision of the portfolio.
Fluctuations that occur in the equity prices cause substantial gain or loss to the investors.
The investor should have competence and skill in the revision of the portfolio. The
portfolio management process needs frequent changes in the composition of stocks and
bonds. In securities, the type of securities to be held should be revised according to the
portfolio policy.
An investor purchases stock according to his objectives and return risk framework.
The prices of stock that he purchases fluctuate, each stock having its own cycle of
fluctuations. These price fluctuations may be related to economic activity in a country or due
to other changed circumstances in the market.
If an investor is able to forecast these changes by developing a framework for the
future through careful analysis of the behaviour and movement of stock prices is in a position
to make higher profit than if he was to simply buy securities and hold them through the
process of diversification. Mechanical methods are adopted to earn better profit through
proper timing. The investor uses formula plans to help him in making decisions for the.
future by exploiting the fluctuations in prices
EVALUATION OF PORTFOLIO
Portfolio manager evaluates his portfolio performance and identifies the sources of
strengths and weakness. The evaluation of the portfolio provides a feed back about the
performance to evolve better management strategy. Even though evaluation of portfolio
performance is considered to be the last stage of investment process, it is a continuous
process. There are number of situations in which an evaluation becomes necessary and
important.
i.
Self Valuation: An individual may want to evaluate how well he has done. This is a
part of the process of refining his skills and improving his performance over a period
of time.
ii.
iii.
Evaluation of Mutual Funds: An investor may want to evaluate the various mutual
funds operating in the country to decide which, if any, of these should be chosen for
investment. A similar need arises in the case of individuals or organizations who
engage external agencies for portfolio advisory services.
iv.
PORTFOLIO THEORIES
MARKOWITZ MODEL:
Markowitz model is a theoretical framework for analysis of risk and return and
their relationships.
Return
Standard deviation
Co-efficient of correlation
10
holding stocks from textile, banking and electronic companies is better than investing
all the money on the textile companys stock.
Markowitz had given up the single stock portfolio and introduced
diversification. The single stock portfolio would be preferable if the investor is
perfectly certain that his expectation of highest return would turn out to be real. In the
world of uncertainty, most of the risk adverse investors would like to join Markowitz
rather than keeping a single stock, because diversification reduces the risk.
ASSUMPTIONS:
All investors would like to earn the maximum rate of return that they can
achieve
from their investments.
All investors have the same expected single period investment horizon.
All investors before making any investments have a common goal. This is the
avoidance of risk because Investors are risk-averse.
Investors base their investment decisions on the expected return and standard
deviation of returns from a possible investment.
The investor assumes that greater or larger the return that he achieves on his
investments, the higher the risk factor surrounds him. On the contrary when
risks are low the return can also be expected to be low.
The investor can reduce his risk if he adds investments to his portfolio.
An investor should be able to get higher return for each level of risk by
determining the efficient set of securities.
11
Investors make their decisions only on the basis of the expected returns,
standard deviation and covariances of all pairs of securities.
Investors are assumed to have homogenous expectations during the decisionmaking period.
The investor can lend or borrow any amount of funds at the risk less rate of
interest. The risk less rate of interest is the rate of interest offered for the
treasury bills or Government securities.
Individual assets are infinitely divisible, meaning that an investor can buy a
fraction of a share if he or she so desires.
There is a risk free rate at which an investor may either lend (i.e. invest)
money or borrow money.
There is no personal income tax. Hence, the investor is indifferent to the form
of return either capital gain or dividend.
12
Rp
Rp
Portfolio return
Xf
1- Xf =
Rf
Rm
Formula can be used to calculate the expected returns for different situations, like
mixing risk less assets with risky assets, investing only in the risky asset and mixing
the borrowing with risky assets.
13
THE CONCEPT
According to CAPM, all investors hold only the market portfolio and risk less
securities. The market portfolio is a portfolio comprised of all stocks in the market.
Each asset is held in proportion to its market value to the total value of all risky assets.
Rf
Ai
14
index and this relationship could be used to estimate the return on stock. Towards the
purpose, the following equation can be used:
Ri = a+a iRm+ei
Where R=expected return on security i
a = intercept of the straight line or alpha co-efficient
ai
16
Portfolio Management
17
PORTFOLIO MANAGEMENT
A portfolio is a collection of assets. The assets may be physical or financial like
Shares, Bonds, Debentures, Preference Shares, etc. The individual investor or a fund manager
would not like to put all his money in the shares of one company that would amount to great
risk. He would therefore, follow the age old maxim that one should not put all the eggs into
one basket. By doing so, he can achieve objective to maximize portfolio return and at the
same time minimizing the portfolio risk by diversification.
Portfolio management is the management of various financial assets which comprise the
portfolio.
Portfolio management is a decision support system that is designed with a view to
meet the multi-faced needs of investors.
According to Securities and Exchange Board of India Portfolio Manager is defined as:
Portfolio means the total holdings of securities belonging to any person.
STRUCTURE / PROCESS OF TYPICAL PORTFOLIO MANAGEMENT
In the small firm, the portfolio manager performs the job of security analyst.
In the case of medium and large sized organizations, job function of portfolio manager and
security analyst are separate.
RESEARCH
(E.g. Security
Analysis)
PORTFOLIO
MANAGERS
CLIENTS
18
OPERATIONS
(E.g. buying and
Selling of
Securities)
19
20
investors needs or other life circumstances change, the portfolio has the
flexibility to accommodate such changes.
Financial analysis:
He should evaluate the financial statement of company in order to understand,
their net worth future earnings, prospectus and strength.
Study of industry:
He should study industry to know its future prospects, technical changes etc,
required for investment proposal he should also see the problems of the industry.
22
A portfolio manager in the Indian context has been Brokers (Big brokers) who
on the basis of their experience, market trends, insider trader, helps the limited
knowledge persons.
Registered merchant bankers can acts as portfolio managers. Investors must
look forward, for qualification and performance and ability and research base of the
portfolio managers
RISK
23
Business risk:
As a holder of corporate securities (equity shares or debentures), you are
exposed to the risk of poor business performance. This may be caused by a variety of
factors like heightened competition. Emergence of new technologies, development of
substitute product, shifts in consumer preferences, inadequate supply of essential
inputs, changes in government al policies, and so on.
Financial Risk:
It refers to the variability of the income to the equity capital due to the debt capital.
Financial risk in a company is associated with the capital structure of the company.
Capital structure of the company consists of equity funds and borrowed funds.
Based on the below pyramid diagram the type of risks will be described
1. Systematic Risk:
Systematic risk is caused by factors external to the particular company and
uncontrollable by the company. The systematic risk affects the market as a whole.
Factors affect the systematic risk are
25
economic conditions
political conditions
sociological changes
The systematic risk is unavoidable. Systematic risk is further sub-divided into three
types. They are
Market Risk
a) Market Risk:
One would notice that when the stock market surges up, most stocks post higher
price. On the other hand, when the market falls sharply, most common stocks will
drop. It is not uncommon to find stock prices falling from time to time while a
companys earnings are rising and vice-versa. The price of stock may fluctuate widely
within a short time even though earnings remain unchanged or relatively stable.
b). Interest Rate Risk:
Interest rate risk is the risk of loss of principal brought about the changes in the
interest rate paid on new securities currently being issued.
c). Purchasing Power Risk:
The typical investor seeks an investment which will give him current income and / or
capital appreciation in addition to his original investment.
2. Un-systematic Risk:
Un-systematic risk is unique and peculiar to a firm or an industry. The nature and
mode of raising finance and paying back the loans, involve the risk element. Financial
leverage of the companies that is debt-equity portion of the companies differs from
26
each other. All these factors affect the un-systematic risk and contribute a portion in
the total variability of the return.
Managerial inefficiently
Labour problems
The nature and magnitude of the above mentioned factors differ from industry
to industry and company to company. They have to be analyzed separately for each
industry and firm. Un-systematic risk can be broadly classified into:
Business Risk
Financial Risk
BUSINESS RISK:
Business risk is that portion of the unsystematic risk caused by the operating
environment of the business. Business risk arises from the inability of a firm to
maintain its competitive edge and growth or stability of the earnings. The volatibility
in stock prices due to factors intrinsic to the company itself is known as Business risk.
Business risk is concerned with the difference between revenue and earnings before
interest and tax. Business risk can be divided into.
FINANCIAL RISK:
It refers to the variability of the income to the equity capital due to the debt
capital. Financial risk in a company is associated with the capital structure of the
company. Capital structure of the company consists of equity funds and borrowed
funds.
RETURN ON PORTFOLIO:
Each security in a portfolio contributes return in the proportion of its
investment in security. Thus the portfolio expected returns is the weighted average of
the expected return, from each of securities, with weights representing the proportions
share of the security in the total investment. Why does an investor have so many
securities in his total investment? Why does an investor have so many securities in
this portfolio? If the security ABC gives the maximum return why not he invests in
that security all his funds and thus maximize return? The answer to these questions
lies in the investors perception of risk attached in investments. Objectives of income,
safety, appreciation, liquidity and hedge against loss of values of money etc. this
pattern of investment in different asset categories, types of investment, etc., would all
be described under the caption of diversification, which aims at the reduction or even
elimination of non-systematic risks and achieve the specific objectives of investors.
RISK ON PORTFOLIO:
28
The expected returns from individual securities carry some degree of risk.
Risk on the portfolio is different from the risk on the individual securities. The risk is
reflected in the variability of the returns from zero to infinity. Risk of the individual
assets or a portfolio is measured by the variance of its return. The expected return
depends on the probability of the returns and their weighted contribution to the risk of
the portfolio. These are two measures of risk in this context one is the absolute
deviation and other standard deviation.
Most investors invest in portfolio of assets, because as to spread risk by not
putting all eggs in one basket. Hence, what really mater to them are not the risk and
return of stocks in isolation, but the risk and return of the portfolio as a whole. Risk is
mainly reduced by Diversification.
RISK RETURN ANALYSIS:
All investment has some risk. Investment in shares of companies has its own
risk or uncertainty; these risks arise out of variability of yields and uncertainty of
appreciation or depreciation of shares prices, losses of liquidity etc. The risk over time
can be represented by the variance of the returns. While the returns over time is
capital appreciation plus payout, divided by the purchase price of the share.
Normally, the higher the risk that the investor takes, the higher is the return.
There is, how ever, a risk less return on capital of about 12% which is the bank, rate
charged by the R.B.I or long term, yielded on government securities at round 13% to
14%. This risk less return refers to lack of variability of return and no uncertainty in
the repayment or capital. But other risks such as loss of liquidity due to parting with
money etc., may however remain, but are rewarded by the total return on the capital,
Risk-return is subject to variation and the objectives of the portfolio manager are to
reduce that variability and thus reduce the risky by choosing an appropriate portfolio.
Traditional approach advocates that one security holds the better, it is according to the
modern approach diversification should not be quantity that should be related to the
quality of scripts which leads to quality of portfolio.
29
Risk is measured along the horizontal axis and increases from the left to right.
Expected rate of return is measured on the vertical axis and rises from bottom to
top.
The line from 0 to R (f) is called the rate of return or risk less investments
commonly associated with the yield on government securities.
The diagonal line form R (f) to E(r) illustrates the concept of expected rate of
return increasing as level of risk increases.
30
Experience has shown that beyond the certain securities by adding more securities
expensive.
31
INDUSTRY PROFILE
32
Except in those deals meant for delivery on a spot basis, all the rest are to be put
through by the registered brokers of a Stock Exchange. The securities Contracts
(Regulation) rules of 1957 laid down the condition for such trading, the treading
hours, rules of trading, settlement of disputes, etc. as between the members and of the
members with reference to their clients.
HISTORY OF STOCK EXCHANGES IN INDIA
The origin of the Stock Exchange in India can be traced back to the later half
of 19 century. After the American Civil War (1860-61) due to the share mania of the
public, the number of brokers dealing in shares increased. The brokers Organized an
informal association tin Mumbai named "The Native Stock and Share Brokers
association in 1875"
Increased activity in trade and commerce during the First World War and
Second World War resulted in an increase in the stock trading. The Growth of Stock
Exchanges suffered a set after the end of World War. World wide depression affected
them most of the Stock Exchanges in the early stages had a speculative nature of
interest to regulate the speculative nature of stock exchange working.
In that
direction, securities and Contract Regulation Act 1956 was passed, this gave powers
of Central Government to regulate the stock exchanges. Further to develop secondary
makes in the country, stock exchanges are Mumbai, Chennai, Delhi, Hyderabad,
Ahmadabad and Indore. The Bangalore Stock Exchange was recognized in 1963. At
present there are 23 Stock Exchanges.
Till recent past, floor trading took place in all the Stock Exchanges. In the
floor trading system the trade takes place through open outcry system during the
official trading hours. Trading posts are assigned for different securities where by and
sell activities of securities took place. This system needs a face - to - face contact
among the traders and restricts the trading volume. The speed of the new information
reflected on the prices was rather then the investors.
The setting up of NSE and OTCEI (Over the counter change of India with the
screen based trading facility resulted in more and more Sock exchanges turning
towards the computer based trading. BSE introduced the screen based trading system
in 1995, which known as BOLT (Bombay on - Line Trading System).
34
safeguards the investors against unfair trade practices. It settles the disputes between
members brokers, investors and brokers.
REGULATORY FRAME WORK:
This Securities Contract Regulation Act, 1956 and securities and Exchange
hoard of India (SEBI) Act, 1992, provides a comprehensive legal framework. A 3-tier
retaliatory structure comprising the ministry of finance, SEBI and the Governing
Boards of the Stock Exchanges regulates the functioning of Stock Exchanges.
Ministry of finance: The Stock Exchange division of the Ministry of Finance
has powers related to the application of the provision of the SCR Act and licensing of
dealers in the other area. According to SEBI Act, The ministry of Finance has the
appellate and the supervisory power over the SEBI It has powered to grant
recognition to the stock Exchanges and regulation of their operations. Ministry of
finance has the power to approve the appointments of executive chiefs and the
nominations of the public representatives in the Governing Boards of the Stock
Exchanges. It has the responsibility of preventing undesirable speculation.
The Securities and Exchange Board of India: The securities and Exchange
Board of India even though established in the year 1988, received statutory powers
are vested in the hands of SEBI. SEBI has the powers to regulate the business of
Stock exchanges, other security and mutual funds. Registration and regulation of
market intermediaries are also carried out By SEBI. It has responsibility to prohibit
the fraudulent unfair trade practices and insider dealings.
monitored by the SEBI has the multi pronged duty to promote the healthy growth of
the capital market and protect the investors.
The Governing Board: The Governing Board of the Stock exchange consists
36
companies with a good credit rating so that there would be no problem in getting there
interest warrants and repayment of principal. Convertible are now popular both with
companies and investors as they have advantages of both fixed income up to a period
and capital appreciation later on due to conversion into equity.
STOCK EXCHANGES
The stock markets in India are regulated by the central government
under the Securities Contracts (Regulation) Act, 1956 which provides for the
recognition of stock exchanges, supervision and control of recognized stock
exchanges, regulation of contracts in securities, listing of securities, transfer of
securities, and many other related functions. The Securities and Exchange Board of
India Act, 1992 provides for the establishment of the Securities and Exchange
Board of India (SEBI) to protect investors interest in securities and promote and
regulate the securities market.
38
Badla Mechanism
Badla was allowed in the specified group of shares of BSE. This specified
group was also known as the forward group as one could buy or sell shares in it
39
without physical delivery. The carry forward session (badla session) was held on
every Saturday at BSE.
THE NATIONAL STOCK EXCHANGE OF INDIA
The stock markets witnessed many institutional changes in the 1990s. One of
them was the establishment of NSE, a modern stock exchange which brought with it
the best global practices.
The National Stock Exchange (NSE) becomes operational in the capital
market segment on third November 1994 in Mumbai. The genesis of the NSF lies in
the recommendations of the pharwani committee (1991). Apart from the NSE it had
recommended for the established of National Stock market system also, the
committee pointed out some major defects in the Indian Stock market. The defects
specified are.
Luck of liquidity in most of the markets in terms of depth and breadth.
Lack of ability to develop markets for debt.
Lack of infrastructures facilities and outdated trading system.
Lack of transparency in the operations that affect investor's confidence.
Outdated settlement system that are inadequate to cater to the growing
volume, leading to delays.
Lack of single market due to the inability of various stock exchanges to
function cohesively with legal structure and regulatory framework.
The main objectives of NSE are the follows:
. To establish a nation wide trading facility for equities, debt instruments and
hybrids.
To ensure equal access investors all over the country through appropriate
communication network.
To provide a fair, efficient and transparent securities market to investors using
an electronic communication network.
To enable shorter settlement cycle and book entry settlement system.
To meet current international standards of securities market.
40
Promoters of NSE: IDBI, ICICI, IFCI, LIC, GIC, SBI, Bank of Baroda.
Canara Bank, Corporation Bank, Indian, Oriental Bank of commerce. Union Bank of
India, Punjab National Bank, Infrastructure Leasing and Financial Services, Stock
Holding Corporation of India and SBI capital market are the promoters of NSE.
MEMBERSHIP: Membership is based on factors such as capital adequacy,
corporate structure, track record, education, experience etc. admission is a two - stage
process with applicants requiring going through a written examination followed by an
interview. A committee consisting of experienced people from the industry to assess
the applicant's capability to operate as an exchange member, interviews candidates.
The exchange admits members separately to whole self Debt Market (WDM) segment
and the capital market segment. Only corporate members are admitted on the debt
market segment whereas individuals and firms are also eligible on the capital market
segment. Eligibility criteria for trading membership on the segment of WDM are as
follows.
The persons eligible to become trading members are bodies corporate, companies
institutions including subsidiaries of banks engaged in financial services and such
other persons or entities as may be permitted from time to time by RBI/SEBI
i.
ii.
iii.
ii.
iii.
The two experienced director in a corporate applicant or trading member should hold
minimum of 5% of the capital of the company.
42
COMPANY PROFILE
43
COMPANY PROFILE
Incorporated in 1993, Net worth Stock Broking Limited (NSBL) has been a
listed company at Bombay Stock Exchange (BSE), Mumbai since 1995.
A Member, at the National Stock Exchange of India (NSE) and Bombay Stock
Exchange, Mumbai (BSE) on the Capital Market and Derivatives (Futures & Options)
segment, NSBL has been traditionally servicing Institutional clients and in the recent
past has forayed into retail broking, establishing branches across the country. Presence
is being marked in the Middle East, Europe and the United States too, as part of our
attempts to cater to global markets. We are a Depository participant at Central
Depository Services India (CDSL) with plans to become one at National Securities
Depository (NSDL) by the end of this quarter. We have our customers participating in
the booming commodities markets with our membership at the Multi Commodity
Exchange of India (MCX) and National Commodity & Derivatives Exchange
(NCDEX), through Networth Stock.Com Ltd. With its strong support and business
units of research, distribution & advisory, NSBL aims to become a one-stop solution
to the broking and investment needs of its clients, globally.
Strong team of professionals experienced and qualified pool of human
resources drawn from top financial service & broking houses form the backbone of
our sizeable infrastructure. Highly technology oriented, the companys scalability of
operations and the highest level of service standards has ensured rapid growth in the
number of locations & the clients serviced in a very short span of time. Networth, as
each one of our 400 plus and ever growing team members are addressed, is a
44
45
PMS
Corporate finance
Net trading
Depository services
46
Commodities Broking
Infrastructure
All of 107 branches and franchisees are fully wired and connected to hub at
Corporate office at Mumbai. Add on branches also will be wired and
connected to central hub
1993: Networth Started with 300 Sq.ft. of office space & 10 employees
2006: Spread over 42 cities (around 70,000 Sq.ft of office space) with over 107
branches & employee strength over 400
Market & research
Focusing on your needs
Every investor has different needs, different preferences, and different viewpoints.
Whether investor prefer to make own investment decisions or desire more in-depth
assistance, company committed to providing the advice and research to help you
succeed.
Networth providing following services to their customers,
Daily Morning Notes
Market Musing
Company Reports
Theme Based Reports
Weekly Notes
IPOs
Sector Reports
Stock Stance
Pre-guarter/Updates
Bullion Tracker
F&O Tracker
48
QUALITY POLICY
To achieve and retain leadership, Networth shall aim for complete customer
satisfaction, by combining its human and technological resources, to provide superior
quality financial services. In the process, Networth will strive to exceed Customers
expectations.
As per the quality policy, Networth will:
49
Key Personnel:
in the
capital markets.
we have sought to provide premium financial services and information, so that the
power of investment is vested with the client. We equip those who invest with us to
make intelligent investment decisions, providing them with the flexibility to either tap
into our extensive knowledge and expertise, or make their own decisions. We made
our debut into the financial world by servicing Institutional clients, and proved its
high scalability of operations by growing exponentially over a short period of time.
50
51
NetworthStock.ComLtd.[NSCL]
NSCL is the commodities arm of NSBL. It is a member at the Multi Commodity
Exchange of India (MCX) and National Commodity & Derivatives Exchange
(NCDEX) and is backed by solid research & analytics in Commodities.
NetworthSoftTechLtd.[NSL]
NSL is an ISO 9001:2000 Certified Company. It is into Application Development &
maintenance. Building & Implementation of packaged software across various
functions within the Financial Services Industry is at its core. It also provides data
center services which include hosting of websites, applications & related services. It
combines a unique delivery model infused by a distinct culture of customer
satisfaction.
52
Values
Responsive
Trustworthy
Creative
Courageous
Approach
Customers:- Passionate about our customers' success, delighting them with the
quality of our service
53
CHAPTER V
DATA ANALYSIS & INTERPRETATIONS
54
MARUTI SUZIKI:
Year
(P0)
(P1)
D
2010
4.5
924
992
2011
5
992
520
2012
3.5
520
1560
2013
6
1560
1421
2014
7.5
1421
935
AVERAGE RETURN
(P1-P0)
68
-472
1,040
-139
-486
D+(P1-P0)/ P0*100
11.86
-42.58
203.50
-2.91
-26.70
28.63
ACC CEMENTS:
Year
(P0)
(P1)
D
2010
20
1074
1028
2011
20
1028
478
2012
23
478
872
2013
30.5
872
1076
2014
11
1076
1136
AVERAGE RETURN
(P1-P0)
-46
-550
394
204
60
D+(P1-P0)/
P0*100
15.72
-33.50
105.43
53.89
16.58
31.62
(P1-P0)
332
-783
428
269
-461
D+(P1-P0)/
P0*100
46.93
-52.61
106.54
42.71
-26.26
23.46
ICICI BANK:
Year
(P0)
(P1)
D
2010
899
1231
2011
1231
448
2012
448
876
2013
876
1145
2014
1145
684
AVERAGE RETURN
10
11
11
12
14
RELIANCE:
55
Year
(P0)
(P1)
D
2010
11
638
1424
2011
13
1424
615
2012
13
615
1089
2013
7
1089
1058
2014
8
1058
692
AVERAGE RETURN
(P1-P0)
786
-809
474
-31
-366
D+(P1-P0)/
P0*100
134.20
-43.81
90.07
4.15
-26.59
31.60
(P1-P0)
-77
-288
511
415
-4
D+(P1-P0)/
P0*100
-1.25
-40.65
227.81
75.33
13.66
54.98
TCS:
Year
(P0)
(P1)
D
2010
11.5
604
527
2011
14
527
239
2012
14
239
750
2013
20
750
1165
2014
14
1165
1161
AVERAGE RETURN
56
Scrip
Maruti
ACC
ICICI
Reliance
TCS
28.63
31.62
23.46
31.60
54.98
1/n (R-R)2
MARUTI:
57
Year
Return (R)
11.86
-42.58
203.50
-2.91
-26.70
2010
2011
2012
2013
2014
(R-R)
-16.77
-71.21
174.87
-31.54
-55.33
(R-R)2
281.37
5071.44
30578.32
995.00
3061.93
39988.07
__
2
7997.613162
= 89.43
ACC CEMENTS:
Year
Return (R)
15.72
-33.50
105.43
53.89
16.58
2010
2011
2012
2013
2014
(R-R)2
252.99
4241.19
5447.07
496.04
226.39
10663.68
__
2
Standard Deviation =
Variance
2132.73
= 46.18
ICICI BANK:
Year
Return (R)
(R-R)
(R-R)2
2010
2011
2012
2013
2014
46.93
-52.61
106.54
42.71
-26.26
23.46
23.46
23.46
23.46
23.46
23.47
-76.07
83.07
19.25
-49.72
550.79
5786.30
6901.42
370.44
2472.37
16081.33
TOTAL
__
Variance = 1/n (R-R)2 = 1/5 (16081.33) = 3216.26
3216.26
= 56.712
RELIANCE:
Year
Return (R)
2010
2011
2012
2013
2014
134.20
-43.81
90.07
4.15
-26.59
(R-R)
31.60
31.60
31.60
31.60
31.60
102.59
-75.42
58.47
-27.45
-58.20
TOTAL
(R-R)2
10525.48
5687.50
3418.68
753.52
3386.93
23772.11
__
Variance = 1/n.(R-R)2 = 1/5 (23772.11) = 4754.42
Standard Deviation = Variance = 4754.42
= 68.95
TCS:
Year
Return (R)
2010
2011
-1.25
-40.65
54.98
54.98
59
(R-R)
-56.23
-95.63
(R-R)2
3161.63
9144.91
2012
2013
2014
227.81
75.33
13.66
54.98
54.98
54.98
172.83
20.35
-41.32
TOTAL
__
Variance = 1/n-1 (R-R)2 = 1/5 (44297.76) = 8859.55
60
29869.34
414.26
1707.62
44297.76
Scrip
Risk (%)
Maruti
89.43
ACC
ICICI
46.18
56.71
Reliance
68.95
TCS
94.13
CALCULATION OF CORRELATION:
Covariance (COV ab) = 1/n (RA-RA)(RB-RB)
Correlation Coefficient = COV ab/a*b
YEAR
2010
2011
2012
2013
2014
(RA-RA)
(RB-RB)
-16.77
-71.21
174.87
-31.54
-55.33
-15.91
-65.12
73.80
22.27
-15.05
61
(RA-RA) (RB-RB)
266.8016
4637.777
12905.9
-702.541
832.5818
17940.52
= 3588/(89.43)(46.18) = 0.868
YEAR
(RA-RA)
2010
2011
2012
2013
2014
(RB-RB)
-16.77
-71.21
174.87
-31.54
-55.33
23.47
-76.07
83.07
19.25
-49.72
(RA-RA) (RB-RB)
-393.672
5417.093
14527.01
-607.117
2751.403
21694.71
YEAR
(RA-RA)
2010
2011
2012
2013
2014
(RB-RB)
-16.77
-71.21
174.87
-31.54
-55.33
102.59
-75.42
58.47
-27.45
-58.20
(RA-RA) (RB-RB)
-1720.92
5370.647
10224.35
865.886
3220.33
17960.29
(RA-RA)
2010
2011
2012
2013
2014
(RB-RB)
-16.77
-71.21
174.87
-31.54
-55.33
-56.23
-95.63
172.83
20.35
-41.32
(RA-RA) (RB-RB)
943.1817
6810.131
30221.75
-642.018
2286.617
39619.66
YEAR
2010
2011
2012
2013
2014
(RA-RA)
(RB-RB)
-15.91
-65.12
73.80
22.27
-15.05
23.47
-76.07
83.07
19.25
-49.72
(RA-RA) (RB-RB)
-373.288
4953.869
6131.276
428.6658
748.1454
11888.67
a = 46.18; b = 56.71
= 2378/ (46.18) (56.71) = 0.908
YEAR
(RA-RA)
2010
2011
2012
2013
2014
(RB-RB)
-15.91
-65.12
73.80
22.27
-15.05
102.59
-75.42
58.47
-27.45
-58.20
(RA-RA) (RB-RB)
-1631.81
4911.394
4315.295
-611.375
875.6534
7859.158
(RA-RA)
(RB-RB)
-15.91
-65.12
73.80
22.27
-15.05
-56.23
-95.63
172.83
20.35
-41.32
64
(RA-RA) (RB-RB)
894.3435
6227.785
12755.41
453.3085
621.7637
20952.61
YEAR
(RA-RA)
2010
2011
2012
2013
2014
(RB-RB)
23.47
-76.07
83.07
19.25
-49.72
102.59
-75.42
58.47
-27.45
-58.20
(RA-RA) (RB-RB)
2407.774
5736.688
4857.337
-528.333
2893.74
15367.21
(RA-RA)
(RB-RB)
23.47
-76.07
83.07
19.25
-49.72
-56.23
-95.63
172.83
20.35
-41.32
65
(RA-RA) (RB-RB)
-1319.62
7274.282
14357.61
391.7367
2054.72
22758.72
(RA-RA)
(RB-RB)
102.59
-75.42
58.47
-27.45
-58.20
-56.23
-95.63
172.83
20.35
-41.32
TOTAL
66
(RA-RA) (RB-RB)
-5768.68
7211.911
10105.13
-558.705
2404.91
13394.56
Wa =
a2 + b2 - 2nab*a*b
Wb = 1 Wa
WEIGHTS OF MARUTI & OTHER COMPANIES:
MARUTI & ACC
a = 89.43
b = 46.18
nab = 0.868
Wa =
46.18 [46.18-(0.868*89.43)]
89.432 + 46.182 2(0.868)* 89.43* 46.18
Wa =
-1452.14
2960.850
Wa = -0.49
Wb = 1 Wa
Wb = 1- (-0.49) = 1.49
Wa =
-1120.17
2541.35
Wa = -0.44
Wb = 1 Wa
Wb = 1- (-0.19) = 1.44
67
Wa =
1165.37
5574.37
Wa = 0.21
Wb = 1 Wa
Wb = 1-0.21 =0.79
Wa =
939.07
1015.41
Wa = 0.924
Wb = 1 Wa
= 1-0.924 = 0.075
56.71 [56.71-(0.908*46.18)]
46.182 + 56.712 2(0.908)* 46.18*56.71
Wa =
838.09
592.75
Wa = 1.413
Wb = 1 Wa
= 1- 1.413 = -0.413
Wa =
3146.12
3670.74
Wa =0.85
Wb = 1 Wa = 1- 0.85 = 0.15
b = 94.13
nab = 0.964
Wa =
94.13 [94.13-(0.964*46.18)]
46.182 + 94.132 2(0.964)* 46.18*94.13
Wa =
4670
2612.18
Wa =
1.78
Wb = 1 Wa = 1- 1.78 = -0.78
b = 68.95
nab = 0.785
Wa =
68.95 [68.95-(0.785*56.71)]
56.712 + 68.952 2(0.785)* 56.71*68.95
Wa =
1684.63
1831.184
Wa = 0.919
Wb = 1 Wa = 1- 0.919 = 0.08
Wa =
94.13 [94.13-(0.852*56.71)]
56.712 + 94.132 2(0.852)* 56.71*94.13
Wa =
4312.38
2980.337
Wa = 1.446
Wb = 1 Wa = 1-1.446 = -0.446
94.13 [94.13-(0.413*68.95)]
68.952 + 94.132 2(0.413)* 68.95*94.13
Wa =
6180
8253.60
Wa = 0.748
Wb = 1 Wa
= 1- 0.748 = 0.251
(89.43*-0.49)2+ () 2+2
*(46.18)*(-0.49)*(1.49)*(0.868)
1420.394 = 37.68%
RP
(89.43*-0.44)2+(56.71*1.44)2+2(89.43)
**(1.44)*(0.855)
2722.28
= 52.17%
RP
(89.43*0.21)2+(68.95*0.79)2+2(89.43)
**(0.79)*(0.582)
72
4510.475
= 67.16%
)2+2(89.43)***(0.075)*(0.941)
RP =
7976
= 89.308%
RP =
2031.047
= 45.067%
b = 68.95
Wa= 0.85
Wb= 0.15
nab = 0.505
RP =
(46.18*0.85)2+(68.95*0.15)2+2(46.18
**(0.15)*(0.505)
2057.80
= 45.362%
(46.18*1.78)2+(94.13*-0.78)2+2(46.18)**(-0.78)*(0.964)
511.61
= 22.61%
(56.71*0.919)2+(68.95*0.081)2+2(56.71)
**(0.081)*(0.785)
3204.3
= 56.60%
b = 94.13
Wa
= 1.446
Wb
= -0.446
nab = 0.852
RP =
(0.852)
2620.675
= 51.19%
RP =
4224.66
= 65%
75
WA= weight of A
RB= return of B
WB= weight of B
WA=--0.49
RB=31.62
WB=1.49
76
Rp = (28.63*-0.49) + (31.62*1.49)
Rp = (-14.03 + 47.11)
Rp = 33.08%
WA=-0.44
RB=23.46
WB=1.44
Rp = (28.63*0.-0.44) + (23.46*1.44)
Rp = (-12.59 + 33.78)
Rp = 21.2%
WA=0.21
RB= 31.60
WB=0.79
Rp = (28.63*0.21) + (31.60*0.79)
Rp = (6.0123+24.96)
Rp = 30.97%
WA=0.924
RB= 54.98
WB= 0.075
Rp = (28.63*0.924) + (54.98*0.075)
Rp = (26.45+4.12)
Rp = 30.57
77
WA=1.413
RB= 23.46
WB= -0.413
Rp = (31.62*1.413) + (23.46*-0.413)
Rp = 44.67 - 9.68
Rp = 35%
WA=0.85
RB= 31.60
WB=0.15
Rp = (31.62*0.85) + (31.60*0.15)
Rp = (26.877+4.74)
Rp = 31.617%
WA=1.78
RB= 54.98
WB= -0.78
Rp = (31.62*1.78) + (54.98*-0.78)
Rp = (56.28-42.88)
Rp = 13.39%
WA=0.919
RB=31.60
WB=0.081
Rp = (23.46*0.919) + (31.60*0.081)
78
Rp = (21.55+2.55)
Rp = 24.10%
WA=1.446
RB=54.98
WB= -0.446
Rp = (23.46*1.446) + (54.98*-0.446)
Rp = 33.92 24.52
Rp = 9.4%
WA=0.748
RB=54.98
WB=0.251
Rp = (31.60*0.748) + (54.98*0.251)
Rp = (23.63 + 13.79)
Rp = 37.43%
79
Scrip A
Maruti
Maruti
Maruti
Maruti
ACC
ACC
ACC
ICICI
ICICI
Reliance
Scrip B
ACC
ICICI
Reliance
TCS
ICICI
Reliance
TCS
Reliance
TCS
TCS
Portfolio Return
33.08%
21.2%
30.97%
30.57%
35%
31.61%
13.39%
24.10%
9.4%
37.43%
80
Portfolio Risk
37.68%
52.17%
67.16%
89.3%
45.06%
45.36%
22.61%
56.60%
51.19%
65%
CHAPTER VI
81
82
FINDINGS
Investors would be able to achieve when the returns of shares and debentures
Resultant would be known as diversified portfolio. Thus portfolio construction would
address itself to three major via, selectivity, timing and diversification. In case of
portfolio management, negatively correlated assets are most profitable. A rational
investor would constantly examine his chosen portfolio both for average return and
risk.
Individual risks on the selected stocks including Maruti, ACC, ICICI, Reliance
& TCS are 89.43%, 46.18%, 56.71%, 68.95% and 94.13% respectively.
Correlation between all the companies is positive which means all the
combinations of portfolios are at good position to gain in future.
Portfolios Returns of Reliance & TCS (37.43%) followed by ACC & ICICI
(35%) and Maruti & ACC (33.08%) stood on the top while Portfolio Returns
of ICICI & TCS (9.4%) , Maruti & ICICI (21.2%) and ICICI & Reliance
(24.10) stood at the bottom.
Portfolios Risk of Maruti & TCS (89. 3%) followed by Reliance & Maruti
(67%) and Reliance & TCS (65%) are very high while Portfolio Risks of ACC
& TCS (22.61%) , Maruti & ACC (37.68%) stood at the bottom.
83
SUGGESTIONS
All the stocks under consideration have given positive return which indicates
the positive performance of the stock market, specially the SENSEX stocks.
TCS has been the outstanding performer with a return of nearly 55%. This
indicates that Investors can be assured of good returns in the long run by
investing in blue chip companies. Rest of the stocks has given average returns
ranging from 24% to 32%.
Comparing the individual risks, TCS and Maruti are risky securities compared
to the other securities like Reliance, ACC and ICICI and it suggested that the
investors should be careful while investing in these securities.
The investors who require minimum return with low risk can invest in ICICI
and ACC.
It is recommended that the investors who require high risk with high return
should invest in TCS.
All the investors who invest in the securities are ultimately benefited by
investing in selected scripts of Industries.
Investors are advised to invest in Portfolios of Reliance & TCS (37.43%)
followed by ACC & ICICI (35%) and Maruti & ACC (33.08%) which have
given the maximum returns.
Low Risk investors are advised to keep away from Maruti & TCS (risk of 89.
3%) and prefer the Portfolios of ACC & TCS (22.61%) , Maruti & ACC
(37.68%) which have the least risk.
84
Never invest on the basis of an insider trader tip in a company which is not
sound (insider trader is person who gives tip for trading in securities based on
prices sensitive up price sensitive un published information relating to such
security).
knowledge.
Shuffle the portfolio and replace the slow moving sector with active
ones, investors were shatter when the technology, media, software, stops, have taken a
down slight.
Never fall to magic of the scripts dont confine to the blue chip
companys look out for other portfolio that ensure regular dividends.
In the same way never react to sudden raise or fall in stock market index such
fluctuations in movement minor corrections in stock market held in consolidation of
market their by reading out a weak player often taste on wait for the dust and dim to
settle to make your move.
85
CONCLUSIONS
This service renders optimum returns to the investors by proper selection and
continuous shifting of portfolio from one scheme to another scheme of from one plan
to another plan within the same scheme.
Greater Portfolio Return with less Risk is always is an attractive combination for the Investors.
86
BIBLIOGRAPHY
Books referred:
Web-site:
www.nseindia.com,http://www.answers.com/topics/national_stock_exchange_of_i
ndia.
www.bseindia.com,http;//www.answers.com/topics/bombay
_stock_exchange_of_india.
www.money control.com/nifty/nse
www.moneycontrol.com/sensex/bse
www.networthdirect.com
87