23-project portfolio management dimpal kumari

7/30/2019 23-Project Portfolio Management Dimpal Kumari

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WEST BENGAL UNIVERSITY OF TECHNOLOGY

SUMMER PROJECT REPORT

PORTFOLIO MANAGEMENT

FOR

SAHARA INDIA PARIWAR

By:

DIMPAL KUMARI

WBUT Registration No.: 101360710027 of 2010-2012

WBUT Roll No.-13600910023

ARMY INSTITUTE OF MANAGEMENT

KOLKATA
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TABLE OF CONTENTS

Sr.No. Contents PageNo.1. Acknowledgement 3

2. Executive Summary 4

3. Company Profile 5-8

4. Objectives 9

5. Methodology 10

6. Data Collection 11

7. Data Analysis 12-71

8. Conclusion 72-73

9. Limitations 74

10. Recommendations 75

11. Bibliography 76


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ACKNOWLEDGEMENT

IN EVERY STEP OF ACHIEVING ANYTHING CONCRETE,

THERE IS A NEED OF GUIDANCE, INSPIRATION AND HELP.

I consider it as a privilege to join the worlds largest family SAHARA INDIA

PARIWAR which provided me an opportunity to work as a summer trainee in their

most reputed organization.

I also express my deep sense of gratitude to CA. Santosh Kumar Mishra, CA. Charu

Agarwal for their admirable and valuable guidance, encouragement, and constructive

suggestions during the course of this project. I would also like to thank all the member

workers of SAHARA INDIA PARIWAR, who have lend their immense support and

helped during the course of my training.

And lastly I consider it as an opportunity to thank the clients of CMSD department,

who unknowingly helped me in acquiring knowledge regarding the project.

Yours Sincerely

DIMPAL KUMARI

ARMY INSTITUTE OF MANAGEMENT

KOLKATA


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EXECUTIVE SUMMARY

Portfolio Management is all about strengths, weaknesses, opportunities and

threats in the choice of debt vs. equity, domestic vs. international, growth vs.

safety and many other tradeoffs encountered in the attempt to maximize return

at a given level of risk.

The main objective of this project is to find out the combination of assets into

efficiently diversified portfolios to estimate both the expected risks and returns

for the investment portfolios. By combining the investments having dissimilar

price movements, portfolios risk could be reduced and expected rate of return

could be improved.

This project can contribute in assisting investors to get an insight into the exact

difference between different portfolio designs and plan their investments

accordingly.


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COMPANY PROFILE

I NTRODUCTION OF SAHARA PARIWAR:

Sahara India Pariwar is an Indian multi-business conglomerate with

diversified business interests that include F inance, Insurance, Mutual Fund,

Healthcare, I nf rastructure & Housing, Media & Enter tainment, Consumer

Products, Real Estate, Tour ism & Hospital i ty and Services & Tr ading.It owns

the New IPL team Sahara Pane Warriors and also sponsors the Indian Cricket

and Hockey teams.

Under the flagship real estate project Sahara City Homes chain of townships is

proposed to be across 217 cities in India. Recently Sahara has launched its

Sahara Grace brand of residential complex at Kochi. After Sahara Grace at

Gurgaon and Lucknow the Kochi project is the third under this brand which is

positioned to provide a product mix of apartments and penthouses to its

residents. Other ventures of Sahara real estate business are Sahara States

Lucknow, Gorakhpur, Hyderabad and Bhopal, Brand malls Sahara Ganj,

Lucknow and Sahara Mall, Gurgaon.
http://en.wikipedia.org/wiki/File:Saharindialogo.PNG


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Sahara India Pariwar

Type Private

Industry Conglomerate

Founded Gorakhpur,India(1978)

Founder(s) Subrata Roy

Headquarters Lucknow,India

Key people Subrata Roy(Chairman)

Products

Finance

Real Estate

Media&Entertainment

Tourism&Hospitality

Services&Trading

Website sahara. in
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Conglomerate_%28company%29http://en.wikipedia.org/wiki/Conglomerate_%28company%29http://en.wikipedia.org/wiki/Gorakhpurhttp://en.wikipedia.org/wiki/Gorakhpurhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Entrepreneurhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Real_Estatehttp://en.wikipedia.org/wiki/Real_Estatehttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Websitehttp://www.sahara.in/http://www.sahara.in/http://en.wikipedia.org/wiki/File:Saharindialogo.PNGhttp://www.sahara.in/http://en.wikipedia.org/wiki/Websitehttp://en.wikipedia.org/wiki/Tradinghttp://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Entertainmenthttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Real_Estatehttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Subrata_Royhttp://en.wikipedia.org/wiki/Entrepreneurhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Gorakhpurhttp://en.wikipedia.org/wiki/Conglomerate_%28company%29http://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Types_of_business_entity


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SAHARA INDIA FINANCIAL CORPORATION LIMITED

Sahara India Financial Corporation Limited, (SIFCL) is the flagship company of

Sahara India Group. Sahara India Financial Corporation Limited is the largest

deposit mobilization company in the private sector with the highest yearly

deposit level in India. It is the first Residuary Non-Banking Company (RNBC)

to be granted a certification of registration by the Reserve Bank of India.

CAPITAL MARKET SERVICE DIVISION (CMSD)

CMSD is a division of Sahara India Financial Corporation Limited established

with an objective to provide various fee based services to the investors in the

capital market .This division operates through a cluster of service centers and

collection centers. It deals in depository services with

National Securities Depository Ltd.

Central Depository Services


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Initial Product Offering by Capital Market Service Division

SAHARA INCOME FUND

Depositing your money in a savings account bank or fixed deposit will only

provide you safety, but the opportunity for your money to appreciate is limited.

Sahara Income Fund provides safety, highest credit quality, plus an opportunity

to earn steady and regular income.

SAHARA LIQUID FUND

Sahara Liquid Fund is a good parking place for your idle funds. It provides an

opportunity to generate returns on your idle funds with minimal risk and high

liquidity.

SAHARA GILT FUND

When you invest in Gilt Fund, your investment carries no Credit risk. You can

enjoy steady returns at a relatively low risk over a medium to long-term horizon.

SAHARA GROWTH FUND

Make your Investments grow with the benefit of Equities.

SAHARA TAX GAIN FUND

Sahara Tax Gain Fund is an Equity Linked Saving Scheme (ELSS) that not only

helps you save tax under section 88 of the Income Tax Act, 1961 but also has the

potential of long-term growth through investments in equities.


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OBJECTIVE OF THE STUDY

To provide basic idea of different stock market investment instruments to

investor.

To provide knowledge to investor about various type of risk associated with

various investment instruments.

To provide investor knowledge about P\E, P\BV and Beta that would help

them in selection of script and creation of portfolio.


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METHODOLOGY OF THE PROJECT

Research methodology is a very organized and systematic way through which a

particular case or problem can be solved efficiently.

It is a step-by-step logical process, which involves:

Defining a problem

Laying the objectives of the research

Sources of data

Methods of data collection

Data analysis & processing

Conclusions & Recommendations

Research inculcates scientific and inductive thinking and it promotes the

development of logical habits of thinking and organization.

Research problem:

To identify the Stock Market Investment Avenue and methods to help investor

in selection of script to create portfolio.

Research design:Research design is exploratory as the basic objective is to identify the stocks

and methods to create and protect portfolio.


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DATA COLLECTION

Primary data: - Primary data are collected by my regular tracking of the stock

price of various scripts selected.

Secondary data: - Secondary data are collected from various journals, websites

and financial news paper.


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ANALYSIS OF INVESTMENT

WHAT IS INVESTMENT?

Investment is the activity, which is made with the objective of earning some sort

of positive returns in the future. It is the commitment of the funds to earn future

returns and it involves sacrificing the present investment for the future return.

Every person makes the investment so that the funds he has, increases as

keeping cash with himself is not going to help as it will not generate any returns

and also with the passage of time, the time value of the money will come down.

As the inflation will rise, the purchasing power of the money will come down

and this will result that the investor who does not invest will become poorer as

he will not have any funds whose value has been increased. Thus every person

whether he is a businessman or a common man will make the investment with

the objective of getting future returns.

TYPES OF INVESTMENT

There are basically three types of investments from which the investors can

choose. The three kinds of investment have their own risk and return profile and

investor will decide to invest taking into account his own risk appetite. The

main types of investments are: -


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Economic investments:-

These investments refer to the net addition to the capital stock of the society.

The capital stock of the society refers to the investments made in plant,

building, land and machinery which are used for the further production of the

goods. These types of investments are very important for the development and

for the overall growth of the economy.

Financial Investments:-

This type of investment refers to the investments made in the marketable

securities which are of tradable nature. It includes the shares, debentures, bonds

and units of the mutual funds and any other securities which are covered under

the ambit of the Securities Contract Regulations Act definition of the word

security. The investments made in the capital market instruments are of vital

importance for the country economic growth as the stock market index is called

as the barometer of the economy.

General Investments:-

These investments refer to the investments made by the common investor in his

own small assets like the television, car, house, motor cycle. These types of

investments are termed as the household investments. Such types of investment

are important for the domestic economy of the country. When the demand in the

domestic economy boost the overall productions and the manufacturing in theindustrial sectors also goes up and this causes rise in the employment activity

and thus boost up the GDP growth rate of the country.


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CHARACTERISICS OF INVESTMENT

Certain features characterize all investments. The following are the main

characteristics feature if investments: -

1. Return: -

All investments are characterized by the expectation of a return. In fact,

investments are made with the primary objective of deriving a return. The return

may be received in the form of yield plus capital appreciation. The difference

between the sale price & the purchase price is capital appreciation. The dividend

or interest received from the investment is the yield. Different types of

investments promise different rates of return. The return from an investment

depends upon the nature of investment, the maturity period & a host of other

factors.

2. Risk: -

Risk is inherent in any investment. The risk may relate to loss of capital, delay

in repayment of capital, nonpayment of interest, or variability of returns. While

some investments like government securities & bank deposits are almost risk

less, others are more risky. The risk of an investment depends on the following

factors.

1. The longer the maturity period, the longer is the risk.2. The lower the credit worthiness of the borrower, the higher is the risk.

The risk varies with the nature of investment. Investments in ownership

securities like equity share carry higher risk compared to investments in debt

instrument like debentures & bonds.


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3. Safety: -

The safety of an investment implies the certainty of return of capital without

loss of money or time. Safety is another features which an investors desire for

his investments. Every investor expects to get back his capital on maturity

without loss & without delay.

4. Liquidity: -

An investment, which is easily saleable, or marketable without loss of money &

without loss of time is said to possess liquidity. Some investments like company

deposits, bank deposits, P.O. deposits, NSC, NSS etc. are not marketable. Some

investment instrument like preference shares & debentures are marketable, but

there are no buyers in many cases & hence their liquidity is negligible. Equity

shares of companies listed on stock exchanges are easily marketable through the

stock exchanges. An investor generally prefers liquidity for his investment,

safety of his funds, a good return with minimum risk or minimization of risk &maximization of return.


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IMPORTANCE

In the current situation, investment becomes necessary for everyone & it is

important & useful in the following ways:

1. Retirement planning: -

Investment decision has become significant as people retire between the ages of

55 & 60. Also, the trend shows longer life expectancy. The earning from

employment should, therefore, be calculated in such a manner that a portion

should be put away as a savings. Savings by themselves do not increase wealth;

these must be invested in such a way that the principal & income will be

adequate for a greater number of retirement years. Increase in working

population, proper planning for life span & longevity has ensured the need for

balanced investments.

2. Increasing rates of taxation: -

Taxation is one of the crucial factors in any country, which introduce an

element of compulsion, in a persons saving. In the form investments, there are

various forms of saving outlets in our country, which help in bringing down the

tax level by offering deductions in personal income.

For examples: -

Unit linked insurance plan

Life insurance

Post office cumulative deposit schemes etc.


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3. Rate of interest: -

It is also an important aspect for sound investment plan. It varies between

investment & another. This may vary between risky & safe investment, they

may also differ due different benefits schemes offered by the investments.

These aspects must be considered before actually investing. The investor has to

include in his portfolio several kinds of investments stability of interest is as

important as receiving high rate of interest.

4. Inflation: -

Since the last decade, now a days inflation becomes a continuous problem. In

these years of rising prices, several problems are associated coupled with a

falling standard of living. Before funds are invested, erosion of the resource will

have to be carefully considered in order to make the right choice of investments.

The investor will try & search outlets, which gives him a high rate of return in

form of interest to cover any decrease due to inflation. He will also have to

judge whether the interest or return will be continuous or there is a likelihood ofirregularity. Coupled with high rate of interest, he will have to find an outlet,

which will ensure safety of principal. Beside high rate of interest & safety of

principal an investor also has to always bear in mind the taxation angle, the

interest earned through investment should not unduly increase his taxation

burden otherwise; the benefit derived from interest will be compensated by an

increase in taxation.


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5. Income: -

For increase in employment opportunities in India, investment decisions have

assumed importance. After independence with the stage of development in the

country a number of organization & services came into being.

For example: -

The Indian administrative services

Banking recruitment services,

Expansion in private corporate sector,

Public sector enterprises,

Establishing of financial institutions, tourism, hotels, and education.

6. Investment channels: -

The growth & development of country leading to greater economic activity has

led to the introduction of a vast array of investment outlays. Apart from putting

aside saving in savings banks where interest is low, investor has the choice of a

variety of instruments. The question to reason out is which is the most suitable

channel? Which media will give a balanced growth & stability of return? The

investor in his choice of investment will give a balanced growth & stability of

return? The investor in his choice of investment will have try & achieve a

proper mix between high rates of return to reap the benefits of both.

For example: -

Fixed deposits in corporate sector

Unit trust schemes.


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EQUITY SHARES

Types of Equity Instruments:

Ordinary Shares

Ordinary shareholders are the owners of a company, and each share entitles the

holder to ownership privileges such as dividends declared by the company and

voting rights at meetings. Losses as well as profits are shared by the equity

shareholders. Without any guaranteed income or security, equity shares are a

risk investment, bringing with them the potential for capital appreciation in

return for the additional risk that the investor undertakes in comparison to debt

instruments with guaranteed income.

Preference Shares

Unlike equity shares, preference shares entitle the holder to dividends at fixed

rates subject to availability of profits after tax. If preference shares are

cumulative, unpaid dividends for years of inadequate profits are paid in

subsequent years. Preference shares do not entitle the holder to ownership

privileges such as voting rights at meetings.

Equity Warrants

These are long term rights that offer holders the right to purchase equity sharesin a company at a fixed price (usually higher than the current market price)

within a specified period. Warrants are in the nature of options on stocks.


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CLASSIFICATION IN TERMS OF MARKET CAPITALIZATION

Market capitalization is equivalent to the current value of a company i.e.

current market price per share times the number of outstanding shares. There are

Large Capitalization companies, Mid-Cap companies and Small-Cap

companies. Different schemes of a fund may define their fund objective as a

preference for Large or Mid or Small-Cap companies' shares. Large Cap

shares are more liquid and hence easily tradable. Mid or Small Cap shares may

be thought of as having greater growth potential. The stock markets generally

have different indices available to track these different classes of shares.

CLASSIFICATION IN TERMS OF ANTICIPATED EARNINGS

In terms of the anticipated earnings of the companies, shares are generally

classified on the basis of their market price in relation to one of the following

measures:

1. Price/Earnings Ratio is the price of a share divided by the earnings per

share, and indicates what the investors are willing to pay for the company's

earning potential. Young and/or fast growing companies usually have high P/E

ratios. Established companies in mature industries may have lower P/E ratios.

The P/E analysis is sometimes supplemented with ratios such as Market Price toBook Value and Market Price to Cash Flow per share.


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2. Dividend Yield for a stock is the ratio of dividend paid per share to current

market price. Low P/E stocks usually have high dividend yields. What matters

to fund managers is the potential dividend yields based on earnings prospects.

Based on companies' anticipated earnings and in the light of the investment

management experiences the world over, stocks are classified in the following

groups:

a) Cyclical Stocks are shares of companies whose earnings are correlated with

the state of the economy. Their earnings (and therefore, their share prices) tend

to go up during upward economic cycles and vice versa. Cement or Aluminium

producers fall into this category. These companies may command relatively

lower P/E ratios and have higher dividend payouts.

b) Growth Stocks are shares of companies whose earnings are expected to

increase at rates that exceed normal market levels. They tend to reinvest

earnings and usually have high P/E ratios and low dividend yields. Software orinformation technology company shares are an example of this type.

c) Value Stocks are shares of companies in mature industries and are expected

to yield low growth in earning. Fund managers try to identify such currently

under-valued stocks that in their opinion can yield superior returns later. A

cement company with a lot of real estate and a company with good brand namesare examples of potential value shares.


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FIXED INCOME INSTRUMENTS

Many instruments give regular income. Debt instruments may be secured by the

assets of the borrowers as generally in case of Corporate Debentures, or be

unsecured as is the case with Indian Financial Institution Bonds.

A debt security is issued by a borrower and is often known by the issuer

category, thus giving us Government Securities and Corporate Securities or FI

bonds. Debt instruments are also distinguished by their maturity profile. Thus,

instruments issued with short-term maturities, typically under one year, are

classified as Money Market Securities. Instruments carrying longer than one-

year maturities are generally called Debt Securities.

Most debt securities are interest-bearing. However, there are securities that are

discounted securities or zero-coupon bonds that do not pay regular interest at

intervals but are bought at a discount to their face value. A large part of the

interest-bearing securities are generally Fixed Income-paying, while there are

also securities that pay interest on a Floating Rate basis.


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A REVIEW OF THE INDIAN DEBT MARKET

The Wholesale Debt Market segment deals in fixed income securities and is fast

gaining ground in an environment that has largely focused on equities.

The Wholesale Debt Market (WDM) segment of the Exchange commenced

operations on June 30, 1994. This provided the first formal screen-based trading

facility for the debt market in the country.

This segment provides trading facilities for a variety of debt instruments

including Government Securities, Treasury Bills and Bonds issued by Public

Sector Undertakings/ Corporate/ Banks like Floating Rate Bonds, Zero Coupon

Bonds, Commercial Papers, Certificate of Deposits, Corporate Debentures,

State Government loans, SLR and Non-SLR Bonds issued by Financial

Institutions, Units of Mutual Funds and Securitized debt by banks, financial

institutions, corporate bodies, trusts and others.

Large investors and a high average trade value characterize this segment. Till

recently, the market was purely an informal market with most of the trades

directly negotiated and struck between various participants. The commencement

of this segment by NSE has brought about transparency and efficiency to the

debt market, along with effective monitoring and surveillance to the market.


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INSTRUMENTS IN THE INDIAN DEBT MARKET

CERTIFICATE OF DEPOSIT

Certificates of Deposit (CD) are issued by scheduled commercial banks

excluding regional rural banks. These are unsecured negotiable promissory

notes. Bank CDs have a maturity period of 91 days to one year, while those

issued by FIs have maturities between one and three years.

COMMERCIAL PAPER

Commercial paper (CP) is a short term, unsecured instrument issued by

corporate bodies (public & private) to meet short-term working capital

requirements. Maturity varies between 3 months and 1 year. This instrument

can be issued to individuals, banks, companies and other corporate bodies

registered or incorporated in India. CPs can be issued to NRIs on non-

repatriable and non transferable basis.

CORPORATE DEBENTURES

The debentures are usually issued by manufacturing companies with physical

assets, as secured instruments, in the form of certificates They are assigned a

credit rating by rating agencies. Trading in debentures is generally based on the

current yield and market values are based on yield-to-maturity. All publiclyissued debentures are listed on exchanges.


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FLOATING RATE BONDS (FRB)

These are short to medium term interest bearing instruments issued by financial

intermediaries and corporate. The typical maturity of these bonds is 3 to 5 years.

FRBs issued by financial institutions are generally unsecured while those from

private corporate are secured.

GOVERNMENT SECURITIES

These are medium to long term interest-bearing obligations issued through the

RBI by the Government of India and state governments. The RBI decides the

cut-off coupon on the basis of bids received during auctions. There are issues

where the rate is pre-specified and the investor only bids for the quantity. In

most cases the coupon is paid semi-annually with bullet redemption features.

TREASURY BILLS

T-bills are short-term obligations issued through the RBI by the Government of

India at a discount. The RBI issues T-bills for different tenures: now 91 -daysand 364-days. These treasury bills are issued through an auction procedure. The

yield is determined on the basis of bids tendered and accepted.

BANK/FI BONDS

Most of the institutional bonds are in the form of promissory notes transferable

by endorsement and delivery. These are negotiable certificates, issued by theFinancial Institutions or by commercial banks. These instruments have been

issued both as regular income bonds and as discounted long-term instruments

(deep discount bonds).


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PUBLIC SECTOR UNDERTAKINGS (PSU) BONDS

PSU Bonds are medium and long term obligations issued by public sector

companies in which the government share holding is generally greater than 51%.

Some PSU bonds carry tax exemptions. The minimum maturity is 5 years for

taxable bonds and 7 years for tax-free bonds. PSU bonds are generally not

guaranteed by the government and are in the form of promissory notes transferable

by endorsement and delivery. PSU bonds in electronic form (demat) are eligible

for repo transactions.

MUTUAL FUND SCHEMES

An investor can participant in various schemes floated by mutual fund instead

of buying equity shares. In mutual funds invest in equity shares & fixed income

securities. There are three broad types of mutual fund schemes.

Growth schemes

Income schemes

Balanced schemes

DEPOSITS

It is just like fixed income securities earn a fixed return. However, unlike fixed

income securities, deposits are negotiable or transferable. The important types

of deposits in India are:

Bank deposits

Company deposits

Postal deposits.


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TAX-SHELTERED SAVING SCHEMES

It provides benefits to those who participate in them. The most important tax

sheltered saving schemes in India is:

Employee provident fund scheme

Public provident fund schemes

National saving certificate

LIFE INSURANCE

In a broad sense, life insurance may be viewed as an investment. Insurance

premiums represent the sacrifice & the assured sum the benefit. In India, the

important types of insurance policies are:

Endowment assurance policy

Money back policy

Whole life policy

Premium back term assurance policy

REAL ESTATE

For the bulk of the investors the most important asset in their portfolio is a

residential house. In addition to a residential house, the more affluent investors

are likely to be interested in the following types of real estate:

Agricultural land

Semi-urban land.


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PRECIOUS OBJECTS

It is highly valuable in monetary terms but generally they are small in size. The

important precious objects are:

Gold & silver

Precious stones

FINANCIAL DERIVATIVES

A financial derivative is an instrument whose value is derived from the value of

underlying asset. It may be viewed as a side bet on the asset. The most import

financial derivatives from the point of view of investors are:

Options

Futures


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RISKRETURN OF VARIOUS INVESTMENT AVENUES

Every investment is characterized by return & risk. Investors intuitively

understand the concept of risk. A person making an investment expects to get

some return from the investment in the future. But, as future is uncertain, so is

the future expected return. It is this uncertainty associated with the returns from

an investment that introduces risk into an investment. Risk arises where there is

a possibility of variation between expectation and realization with regard to an

investment.

Meaning of Risk

Risk & uncertainty are an integrate part of an investment decision. Technically

risk can be defined as situation where the possible consequences of thedecision that is to be taken are known. Uncertainty is generally defined to

apply to situations where the probabilities cannot be estimated. However, risk &

uncertainty are used interchangeably.


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TYPES OF RISKS

1. Systematic risk: -

Systematic risk is non diversifiable & is associated with the securities market as

well as the economic, sociological, political, & legal considerations of prices of

all securities in the economy. The affect of these factors is to put pressure on all

securities in such a way that the prices of all stocks will more in the same

direction.

Example: -

During a boom period prices of all securities will rise & indicate that the

economy is moving towards prosperity. Market risk, interest rate risk &

purchasing power risk are grouped under systematic risk.

RISKS

SYSTAMATIC UNSYSTAMATIC

*Market Risk * Business Risk

* I nterest Rate Risk * F inancial Risk

* Purchasing power Risk


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1. SYSTEMATIC RISK

(A) Market risk

Market risk is referred to as stock variability due to changes in investors

attitudes & expectations. The investor reaction towards tangible and intangible

events is the chief cause affecting market risk.

(B) Interest rate risk

There are four types of movements in prices of stocks in the markets. These

may be termed as (1) long term, (2) cyclical (bull and bear markets), (3)

intermediate or within the cycle, and (4) short term. The prices of all securities

rise or fall depending on the change in interest rates. The longer the maturity

period of a security the higher the yield on an investment & lower the

fluctuations in prices.

(C) Purchasing Power risk

Purchasing power risk is also known as inflation risk. This risk arises out of

change in the prices of goods & services and technically it covers both inflation

and deflation periods. During the last two decades it has been seen that

inflationary pressures have been continuously affecting the Indian economy.

Therefore, in India purchasing power risk is associated with inflation and rising

prices in the economy.


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2. UNSYSTEMATIC RISK

The importance of unsystematic risk arises due to factors like labour strike,

consumer preferences and management policies. These uncertainties directly

affect the financing and operating environment of the firm.

(A) Business risk

Every corporate organization has its own objectives and goals and aims at a

particular gross profit & operating income & also accepts to provide a certain

level of dividend income to its shareholders. It also hopes to plough back some

profits. Once it identifies its operating level of earnings, the degree of variation

from this operating level would measure business risk.

Example: - If operating income is expected to be 15% in a year, business risk

will be low if the operating income varies between 14% and 16%. If the

operating income were as low as 10% or as high as 18% it would be said that

the business risk is high.

(B) Financial Risk: -

Financial risk in a company is associated with the method through which it

plans its financial structure. If the capital structure of a company tends to make

earning unstable, the company may fail financially. How a company raises

funds to finance its needs and growth will have an impact on its future earnings

and consequently on the stability of earnings.

Debt financing provides a low cost source of funds to a company, at the same

time providing financial leverage for the common stock holders. As long as the

earnings ofthe company are higher than the cost of borrowed funds, the earning

per share of common stock is increased. Unfortunately, a large amount of debt

financing also increases the variability of the returns of the common stock

holder & thus increases their risk. The variance in returns is the financial risk.


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33

RISK RETURN OF VARIOUS INVESTMENT ALTERNATIVES

Management

Decision

Required

Investment

Market

Risk

Business

Risk

Interest

Risk

Purchasing

Power

Risk

H Growth stock H H L L

HSpeculative

common stockH H L L

M Blue chips M M L L

MConvertible

preferred stockM M L L

LConvertible

debenturesM M L L

L Corporate bonds L L H H

L Government bonds L L H H

L Short-term bonds L L L H

LMoney market

fundsL L L H

O Life insurance L L L H

O Commercial banks L L L H

O Unit trusts L L L M-H

O Saving a/c L L L H

O Cash L L L H


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34

PORTFOLIO

Meaning of portfolio:

A combination of securities with different risk & return characteristics will

constitute the portfolio of the investor. Thus, a portfolio is the combination of

various assets and/or instruments of investments. The combination may have

different features of risk & return, separate from those of the components. The

portfolio is also built up out of the wealth or income of the investor over a

period of time, with a view to suit his risk and return preference to that of the

portfolio that he holds. The portfolio analysis of the risk and return

characteristics of individual securities in the portfolio and changes that may take

place in combination with other securities due to interaction among themselves

and impact of each one of them on others.

An investor considering investments in securities is faced with the problem ofchoosing from among a large number of securities. His choice depends upon the

risk and return characteristics of individual securities. He would attempt to

choose the most desirable securities and like to allocate is funds over this group

of securities. Again he is faced with the problem of deciding which securities to

hold and how much to invest in each. The investor faces an infinite number of

possible portfolios or groups of securities. The risk and return characteristics of

portfolio differ from those of individual securities combining to form a

portfolio. The investor tries to choose the optimal portfolio taking in to

consideration the risk return characteristics of all possible portfolios.


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As the economy and the financial environment keep changing the risk return

characteristics of individual securities as well as portfolios also change. This

calls for periodical review and revision of investment portfolios of investors. An

investor invests his funds in a portfolio expecting to get a good return consistent

with the risk that he has to bear. The return realized from the portfolio has to be

measured and the performance of the portfolio has to be evaluated.

It is evident that rational investment activity involves creation of an investment

portfolio. Portfolio management comprises all the processes involved in the

creation and maintenance of an investment portfolio. It deals specifically with

the security analysis, portfolio analysis, portfolio selection, portfolio revision

and portfolio evaluation. Portfolio management makes use of analytical

techniques of analysis and conceptual theories regarding rational allocation of

funds. Portfolio management is a complex process which tries to make

investment activity more rewarding and less risky.


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PORTFOLIO DESIGN

Before designing a portfolio one will have to know the intention of the investor

or the returns that the investor is expecting from his investment. This will helpin adjusting the amount of risk. This becomes an important point from the point

of view of the portfolio designer because if the investor will be ready to take

more risk at the same time he will also get more returns.

From the above discussion we can conclude that the investors can be of the

following three types:

1. Investors willing to take minimum risk and at the same time are also

expecting minimum returns.

2. Investors willing to take moderate risk and at the same time are also

expecting moderate returns.

3. Investors willing to take maximum risk and at the same time are also

expecting maximum returns.


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TYPES OF PORTFOLIO

In portfolio Design, we are considering only two types of portfolio. They are as

follow:

1. Random Portfolio

2. Sector Portfolio

1. RANDOM PORTFOLIO

Random portfolio consists of the scripts that are randomly selected by the

investor by its own knowledge and preference of the stocks. Here no analysis is

done of the script, they are selected on the tips and buts received by the

investors from the external sources.

Features of random portfolio

There is no method used for selection of the script in the portfolio.

Selection is based on the individual criteria for the scripts.

The investment is made for higher return in short term.

Generally in India most of the portfolio is selected according to this

random method as no investor himself in that much analysis of the script.

Advantages of random portfolio

Easier to keep a track on the market as not much time wasted in the

analysis.

This portfolio seems to have perform better in short term as script are

generally which are performing better at that time.

Tips are available everywhere for the investor to pouch.

It is the experience of the individual that can fetch him good return.


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Disadvantages of random portfolio

There is every chance that you may select a script that has a very bad

background in the market.

Not every time the tips pay off for you. You need to have strong reason to

select that script.

Such portfolios are not able to sustain when there is a crisis in the market.

There is a very high risk and return involve in such portfolio.

2. SECTOR SPECIFIC PORTFOLIO

Sector specific portfolio includes securities of those companies which are in the

same business. Sector portfolios are very useful when there is a particular sector

which is doing very good and has a bright future a head. Sector portfolio has the

securities of those companies that engage in same kind of business.

Features of sector portfolio

Script form the same group of companies that are in to the similar type of

business.

Maximum exposure to the industry/sector. So any news or event has the

direct effect on the portfolio.

Risk regarding the portfolio increases as it is expose to sector specific ups

and downs.

Useful investment tools for speculator and short-sellers.

It is better suited for the sectors which have been providing good revenue

in the near past.


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Advantages of sector portfolio

It is better suited to investors who are willing to take risk.

It provides better short term return than other portfolios.

It is easy to keep a watch on one sector rather than many. You can have a

good command over the things happening.

Limited exposure to other sectors keeps the portfolio safe from the

performance of other sectors in the economy.

Disadvantages of sector portfolio

It is a highly risky portfolio as risk associated with the sector directly

affects the performance of the portfolio.

These types of portfolios are not suited for long-term investor as risk

taken for the return can be too high.

There is always the possibly many scripts in the sector may not be giving

that much good attractive return as others. They may eat the profits from

other script.


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40

RANDOM PORTFOLIO

Random portfolio consists of the scripts that are randomly selected by the

investor by its own knowledge and preference of the stocks. Here there is no

analysis is done of the script, they are selected on the tips and buts received by

the investors from the external sources.

We are considering BETA factor to design ourRandom Portfolio.

Beta Factor Beta indicates the proportion of the yield of a portfolio to the

yield of the entire market (as indicated by some index). If there is an increase in

the yield of the market, the yield of the individual portfolio may also go up. If

the index goes up by 1.5% and the yield of your portfolio goes up by 0.9%, the

beta is 0.9/1.5 i.e. 0.6. in other words, beta indicates that for every 1 % increase

in the market yield, the yield of the portfolio goes up by 0.6%. High beta shares

do move higher than the market when the market rises and the yield of the funddeclines more than the yield of the market when the market falls. In the Indian

context a beta of 1.2% is considered very bullish.

You can be indifferent to market swings if you know your stocks well. Or you

can put your portfolio into neutral or bias for the upside if you're bullish or a

little for the downside if you're bearish. One way to do that is to have a mix of

stocks that have certain betas in your portfolio. When investors are bullish on

the market, they like to have high beta stocks in their portfolios because if

they're right, then their stocks go up faster than the market in general, and their

performance is better than the market. If investors are bearish on the market,

then they use the low beta or negative beta stocks because their portfolios will

go down less than the market and their performance will be better than the

general market.


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41

And if they want to be neutral, they can then make sure that they have stocks

with a beta of 1 or develop a portfolio that has stocks with betas greater than 1

and less than 1 so that they have the whole portfolio with an average beta of 1.

A beta for a stock is derived from historical data. This means it has no

predictive value for the future, but it does show that if the stock continues to

have the same price patterns relative to the market in general as it has in the

past, you've got a way of knowing how your portfolio will perform in relation to

the market. And with a portfolio with an average beta of 1, you can create your

own index fund since you'll move more or less in tandem with the market.

IINNTTEERRPPRREETTAATTIIOONN OOFF BBEETTAA

WWhheennBB == 11 mmeeaannss tthhaatt tthhee ssccrriipptt hhaass ssaammee vvoollaattiilliittyy aass ccoommppaarreedd ttoo mmaarrkkeett aanndd

ssuuiittaabbllee ffoorrmmooddeerraattee iinnvveessttoorrss..

WWhheenn BB>>11 mmeeaannss tthhaatt ssccrriipptt iiss mmoorree vvoollaattiillee aass ccoommppaarreedd ttoo mmaarrkkeett aanndd

ssuuiittaabbllee ffoorraaggggrreessssiivvee iinnvveessttoorrss..

WWhheenn BB


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42

SO BASED ON THIS BETA NOW WE WILL PREPARE THREE

PORTFOLIOS TO MATCH THE RISK TAKING CAPACITY OF AN

INVESTOR.

AGGRESSIVE MODERATE DEFENSIVE

PORTFOLIO


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DEFENSIVE PORTFOLIO

SR. NO. SCRIPTS BETA PRICE

ON 13-

06-2011

PORTFOLIO Wi

1 INFOSYS 0.84 2950.00 120,171.67 12.02

2 ITC 0.74 203.10 105,865.52 10.59

3 BHEL 0.81 2050.50 115,879.83 11.59

4 NTPC 0.72 187.00 103,004.29 10.30

5 TATA

POWER

0.55 1231.00 78,683.83 7.87

6 BAJAJ

AUTO

0.70 1334.90 100,143.06 10.01

7 CIPLA 0.66 327.55 94,420.60 9.44

8 HERO

HONDA

MOTORS

0.57 1715.00 81,545 8.15

9 WIPRO 0.83 408.00 118,741.06 11.87

10 HINDUSTAN

UNILEVER

0.57 308.40 81,545.06 8.15

6.99 10,00,000 100

Total Portfolio Beta = Wi * BETA

=10.09+7.83+9.38+7.41+4.32

7.01+6.23+4.65+9.85+4.65

=71.44~71


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RETURN ON INDIVIDUAL SCRIPTS

SR NO. SCRIPT BETA 13-06-11 13-07-11 RETURN

IN %

1 INFOSYS 0.84 2950.00 2786.00 -5.56

2 ITC 0.74 201.10 203.05 0.96

3 BHEL 0.81 2040.50 1947.10 -4.58

4 NTPC 0.72 187.00 188.75 0.93

5 TATA

POWER

CORP LTD.

0.55 1231.00 1283.00 4.22

6 BAJAJ

AUTO LTD.

0.70 1334.90 1445.95 8.31

7 CIPLA 0.66 327.55 322.70 -1.48

8 HERO

HONDA

MOTORS

0.57 1715.00 1876.10 9.39

9 WIPRO 0.83 408.00 412.75 1.16

10 HINDUSTAN

UNILEVER

0.57 308.40 331.20 7.39


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RETURN IN DEFENSIVE PORTFOLIO

TOTAL PORTFOLIO INVESTMENT = 10, 00,000

VALUE OF PORTFOLIO AS ON 13-07-2011 = 10, 15,290.99

TOTAL RETURN ON PORTFOLIO

= 10,15,290.99 - 1000000

= 15,290.99

TOTAL RETURN IN % TERM = 1.53 %
http://upload.wikimedia.org/wikipedia/commons/e/ee/Indian_Rupee_symbol.svghttp://upload.wikimedia.org/wikipedia/commons/e/ee/Indian_Rupee_symbol.svghttp://upload.wikimedia.org/wikipedia/commons/e/ee/Indian_Rupee_symbol.svg


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MODERATE PORTFOLIO

SR NO. SCRIPT BETA PRICE ON

13-06-11

PORTFOLIO Wi

1 JINDAL

STEEL &

POWER LTD

0.95 629.00 103,711.79 10.37

2 RELIANCE

INDUSTRIES

0.92 873.95 100,436.68 10.04

3 TCS 0.95 1189.20 103,711.79 10.37

4 MARUTI

SUZUKI

0.86 1150.00 93,886.46 9.39

5 BHARTI

AIRTEL

0.99 375.25 108,078.60 10.81

6 PNB 0.87 1100.00 94,978.16 9.50

7 SIEMENS

LTD.

0.98 862.50 106,986.90 10.70

8 TATA TELE.

LTD.

0.90 219.05 98,253.27 9.82

9 AMBUJA

CEMENT

0.87 135.30 94,978.16 9.50

10 ONGC 0.87 266.00 94,978.16 9.50

9.16 10,00,000 100

Total Portfolio Beta =Wi * BETA

= 9.85+9.24+9.85+8.08+10.70

8.26+10.49+8.84+8.27+8.27

=91.85~92


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47



IN %

1 JINDAL

STEEL

POWER

LTD.

0.95 625.10 640.05 2.39

2 RELIANCE

INDUSTRIES

0.92 922.60 868.00 -5.91

3 TCS 0.95 1189.20 1157.50 -2.66

4 MARUTI

SUZUKI

0.86 1150.00 1165.90 1.38

5 BHARTI

AIRTEL

0.99 372.25 396.70 6.57

6 PNB 0.87 1079.00 1142.00 7.01

7 SIEMENS

LTD.

0.98 862.50 923.00 -6.60

8 TATA

COMM.

LTD.

0.90 214.00 205.09 -4.16

9 AMBUJA

CEMENT

0.87 133.20 126.00 -5.40

10 ONGC 0.87 265.00 288.50 8.87


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48

RETURN IN MODERATE PORTFOLIO




= 10, 14,435.47 10,00,000

= 14,435.47

TOTAL RETURN IN % TERM = 1.44%


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AGGRESSIVE PORTFOLIO

SR NO. SCRIPT BETA PRICE

ON

13-06-11

PORTFOLIO Wi

1 ICICI BANK

LTD

1.41 1030.20 116,721.85 11.67

2 L & T 1.13 1689.90 93,543.05 9.35

3 HDFC

BANK

1.04 2353.15 86,092.71 8.61

4 TATA

STEEL

1.13 568.00 93,543.05 9.35

5 TATA

MOTORS

1.28 991.95 105,960.26 10.60

6 HCL TECH.

LTD.

1.09 501.00 90,231.78 9.02

7 IDEA

CELLULAR

LTD.

1.15 71.80 95,198.67 9.52

8 DLF LTD. 1.43 230.60 118,377.48 11.84

9 M & M 1.17 663.40 96,854.30 9.69

10 SBI 1.25 2238.95 103,476.82 10.35

12.08 10,00,000 100

Total Portfolio Beta = Wi * BETA

=16.45+10.57+8.95+10.56+13.56+16.93

11.33+12.20+9.8

= 121.27 ~ 121


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IN %

1 ICICI

BANK LTD

1.41 1030.20 1055.10 2.42

2 L & T 1.13 1689.90 1793.00 6.10

3 HDFC

BANK

1.04 2353.15 2505.00 6.45

4 TATA

STEEL

1.13 568.00 575.55 1.32

5 TATA

MOTORS

1.28 991.95 1038.00 4.64

6 HCL TECH.

LTD.

1.09 501.00 494.15 -1.37

7 IDEA

CELLULAR

LTD.

1.15 71.80 80.90 12.60

8 DLF LTD. 1.43 230.60 225.55 -2.19

9 M & M 1.17 663.40 713.65 7.57

10 SBI 1.25 2238.95 2433.00 8.66


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RETURN IN AGGRESSIVE PORTFOLIO




= 10,44,694.45 - 1000000

= 44,694.45

TOTAL RETURN IN % TERM =4.47 %


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INTERPRETATION OF RANDOM PORTFOLIO

he theoretical way we have seen that the Beta shows the movement or

change in the price of script vis--vis index. And a Beta >1 is more risky and

hence should give more return as compared to the script having Beta < 1. As the

person is taking more risk then he should get more return. But in our case we

have seen that Defensive portfolio has given more return as compared to

Moderate Portfolio.

subject to market

risk and anyone having long-term investment horizon should only enter into

equity market. This analysis that has been carried out was only for a period of

a month, so there are chances that in the long run Moderate portfolio would

outperform the Defensive portfolio.


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SECTOR PORTFOLIO

Sector specific portfolio includes securities of those companies that engage in

same kind of business. Sector portfolios are very useful when there is a

particular sector which is doing very good and has a bright future ahead.

We are considering IT Sector as ourSector Portfolio

INDUSTRY ANALYSIS

The Indian IT sector is growing rapidly and it has already made its presence felt

in all parts of the world. IT has a major role in strengthening the economic and

technical foundations of India. Indian professionals are setting up examples of

their proficiency in IT, in India as well as abroad.

The sector can be classified into 4 broad categories - IT Services, Engineering

Services, ITES-BPO Services, and E- Business.


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MARKET SHARE OF DIFFERENT IT COMPANIES


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COMPANY ANALYSIS

TCS Tata Consultancy Services

TCS was founded in 1968 and is one among the top 10 IT Companies India and

it has the highest staff strength of 111,000 employees. It first started as the Tata

Computer Center and acquired its present form after realizing the huge potential

of the IT services.

Company at glance

Industry: Software

52 Week High: 1247.00

52 Week Low: 763.00

Volume: 76,503

Face Value: 1.00

P/E Ratio: 29.79

EPS: 38.68
http://tech4world.net/wp-content/uploads/2011/01/TATA_Consultancy_Services_Logo.png


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One Month chart

The below given chart shows the performance of the script in the BSE for the

last month. It shows the volatility of the stock for the month of JUNE-JULY.


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FINANCIAL PERFORMANCE

For the

year

Mar07 Mar08 Mar09 Mar10 Mar11

Operating

Income

43.95 51.35 61.52 34.06 44.82

Net Profit 3757.29 4508.76 4696.21 5618.51 7569.99

Net Worth 8058.99 11004.81 13446.25 15116.62 19579.49

No. of

shares (in

lakhs)

9786.10 9786.10 9786.10 19572.21 19572.21

Adjusted

EPS(Rs)

37.10 43.64 56.01 28.97 38.56

Book

Value per

share(Rs)

82.35 111.43 136.38 76.72 99.53

Dividend

per

share(Rs)

11.50 14.00 14.00 20.00 14.00

Net Profit

Margin

(%)

25.00 24.11 20.74 24.13 25.44

Current

Ratio

1.93 1.98 1.83 1.49 2.41

Lt Debt

Equity

- 0.01 0.01 0.01 0.01


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WIPRO

It was a hydrogenated cooking fat company basically and now has IT, BPO and

R&D services which has its centers in about 50 countries. Started by Premji

Wipro not only ranks prominently among the top 10 IT companies India, but is

also ranked highly among the top 10 global outsourcing providers.

Company at glance

Industry: Information Technology

52 Week High: 499.90

52 Week Low: 384.00

Volume: 31,887

Face Value: 2.00

P/E Ratio: 20.93EPS: 19.73
http://tech4world.net/wp-content/uploads/2011/01/wipro_Logo.png


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One Month chart

The below given chart shows the performance of the script in the BSE for last

month. It shows the volatility of the stock for the Month of JUNE-JULY.


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FOR THE

YEAR

MAR07 MAR08 MAR09 MAR10 MAR11

Operating

Income

22.31 25.42 32.48 37.47 23.47

Net Profit 93.79 119.69 146.81 156.12 107.16

Net Worth 9,320.40 11,610.70 12,515.00 17,692.20 21,320.90

No. of

shares (in

lakhs)

14590.00 14615.00 14649.81 14682.11 24544.09

Adjusted

EPS (Rs.)

19.48 20.96 26.77 30.36 17.98

Book

Value Per

Share

(Rs.)

63.86 79.05 85.42 120.49 86.86

Dividend

Per Share

(Rs.)

6 6 4 6 4

Net Profit

Margin

(%)

20.34 17.19 13.53 20.97 17.96

Current

Ratio

1.68 2.54 1.10 1.33 1.45

Long

Term Debt

Equity

0.03 0.33 0.01 0.01 _


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INFOSYS

Infosys Technologies Ltd. started in the year 1981 and has today become a

global brand. In addition to being ranked among the top 10 IT Companies in

India, Infosys was also named by Forbes magazine as one among the Global

High Performers.

Company at glance

Industry: Information Technology

52 Week High: 5493.95

52 Week Low: 2660.55

Volume: 93,640

Face Value: 5.00

P/E Ratio: 23.98

EPS: 116.09
http://tech4world.net/tag-lines-of-top-50-companies.htmlhttp://tech4world.net/wp-content/uploads/2011/01/Infosys-logo.pnghttp://tech4world.net/tag-lines-of-top-50-companies.html


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One Month chart

The below given chart shows the performance of the script in the BSE for last

month. It shows the volatility of the stock for the month of JUNE-JULY.


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63


For the year 07-MAR 08-MAR 09-MAR 10-MAR 11-MAROperating

income

73.98 86.87 120.59 128.30 146.56

Net profit 230.20 273.57 353.75 368.40 442.13

Net worth 11,162 13,490 17,809 22,036 24,501

No. of

shares(in

lakhs)

5712.10 5719.96 5728.30 5738.25 5741.52

Adjusted

EPS(Rs.)

65.42 78.06 108.08 99.46 111.54

Book value

per

share(Rs.)

195.41 235.84 310.89 384.02 426.73

Dividend

per

share(Rs.)

11.50 33.25 23.50 25.00 60.00

Net profit

margin (%)

28.05 27.37 27.52 26.36 24.31

Current

ratio

4.96 3.30 4.71 4.28 5.11

Lt debt

equity

- - - - -


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RATIO ANALYSIS

PER SHARE RATIO

Reported Cash EPS Ratio

TCS WIPRO INFOSYS

Mar-07 41.90 21.95 74.44

Mar-08 50.76 24.08 87.69

Mar-09 52.18 23.94 113.70

Mar-10 31.02 37.31 115.19

Mar-11 41.37 20.18 125.11

Total 217.23 127.46 516.15

Average 43.45 25.50 103.23

Operating Profit per Share

TCS WIPRO INFOSYS

Mar-07 43.95 22.31 73.98

Mar-08 51.35 25.42 86.78

Mar-09 61.52 32.48 120.59

Mar-10 34.06 37.47 128.30

Mar-11 44.82 23.47 146.56

Total 235.70 141.15 556.21

Average 47.14 28.23 111.24


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Book Value per Share

TCS WIPRO INFOSYS

Mar-07 82.35 63.86 195.41

Mar-08 111.43 79.05 235.84

Mar-09 136.38 85.42 310.89

Mar-10 76.72 120.49 384.02

Mar-11 99.53 86.86 426.73

506.41 435.68 1552.89

Average 101.28 87.14 310.58

Net Operating Income per Share

TCS WIPRO INFOSYS

Mar-07 93.79 152.67 230.20

Mar-08 119.69 189.39 273.57

Mar-09 146.81 228.92 353.75

Mar-10 156.12 117.74 368.40

Mar-11 107.16 149.58 442.13

838.30 623.57 1668.05

Average 167.66 124.71 333.61


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Free Reserve per Share

TCS WIPRO INFOSYS

Mar-07 80.25 - 190.30

Mar-08 110.22 - 230.74

Mar-09 134.37 81.06 305.80

Mar-10 75.24 116.54 378.08

Mar-11 97.95 84.28 420.79

498.03 469.80 1525.71

Average 99.61 93.96 305.14

PER SHARE RATIO

0

50

100

150

200

250

300

350

TCS WIPRO INFOSYS

REPORTED CASH EPS RATIO

OPERATING PROFIT PER SHARE

BOOK VALUE PER SHARE

NET OPERATING INCOME PER

SHARE

FREE RESERVE PER SHARE


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PROFITABILITY RATIO

Operating Margin in %

TCS WIPRO INFOSYS

Mar-07 28.79 23.78 32.13

Mar-08 27.11 21,24 31.72

Mar-09 26.87 22.12 34.09

Mar-10 28.93 24.00 34.82

Mar-11 29.96 21.90 33.14

141.66 113.04 165.90

Average 28.33 22.61 33.18

Gross Profit Margin in %

TCS WIPRO INFOSYS

Mar-07 29.17 21.15 28.57

Mar-08 24.64 18.63 28.23

Mar-09 25.01 19.64 30.66

Mar-10 26.89 21.47 31.00

Mar-11 28.12 19.62 30.23

133.83 100.51 148.69

Average 26.77 20.10 28.74


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Net Profit Margin in%

TCS WIPRO INFOSYS

Mar-07 25.00 20.34 28.05

Mar-08 24.11 17.19 27.37

Mar-09 20.74 13.53 27.52

Mar-10 24.13 20.97 26.36

Mar-11 25.44 17.96 24.31

119.42 89.99 133.61

Average 23.88 18.00 26.72

Return on long term fund in %

TCS WIPRO INFOSYS

Mar-07 50.12 33.31 36.64

Mar-08 42.96 23.32 37.77

Mar-09 43.27 37.17 39.80

Mar-10 42.46 30.12 33.69

Mar-11 44.28 27.20 35.84

223.19 151.12 183.74

Average 44.64 30.22 36.75


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PROFITABILITY RATIO

0

5

10

15

20

25

30

35

40

45

TCS WIPRO INFOSYS

OPERATING MARGIN IN %

GROSS PROFIR MARGIN IN %

NET PROFIT MARGIN IN %

RETURN ON LONG TERM FUND IN %


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PORTFOLIO IN IT SECTOR

Average return Portfolio Wi

TCS 583.06 251,024.66 25.10

WIPRO 450.47 193,940.72 19.39

INFOSYS 1289.19 555,034.61 55.50

2322.72 10,000,00 100

PRICE ON PARTICULAR DATE

Company 13-06-11 13-07-11 RETURN IN

%

TCS 1189.20 1157.50 -2.67

WIPRO 408.00 412.75 1.16

INFOSYS 2848.50 2786.00 -2.20

TOTAL PORTFOLIO = 10, 00,000

TOTAL RETURN ON INVESTMENT

=Total return - Total Investment

=983336.59 1000000

= -16663.41

TOTAL RETURN ON INVESTMENT = - 1.67%
http://upload.wikimedia.org/wikipedia/commons/e/ee/Indian_Rupee_symbol.svghttp://upload.wikimedia.org/wikipedia/commons/e/ee/Indian_Rupee_symbol.svg


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71

INTERPRETATION OF SECTOR PORTFOLIO

that sector specific portfolio has perform negatively during theperiod of the report. That is due to the fact that there is a systematic risk involve

with the portfolio as lack of diversification. If we look at the performance of the

Sensex during this period then we will find that Sensex has perform better than

the sector portfolio. It is mainly due to diversification of risk as Sensex has the

30 scripts from different sectors, so any ups and downs in a sectors

performance will not affect the overall Sensex, that badly in the case of sector

portfolio.

plotted graph that all the three scripts in the sector portfolio

are following a same kind of trend in the given one month of the study. It is due

to the fact that they all belong to the same sector and they all face same

systematic risk as others in the sector. So the performance of the scripts rightly

indicates the need of diversification to remove the systematic risk from the

portfolio. As its gets highly risky investment such portfolio are rarely used by

investors in the general scenario.


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FINDING OF THE REPORT

Findings of the report gives the fruit of the all the analysis done on the research

of measuring and comparing performance of the portfolio with the market

portfolio.

RANDOM PORTFOLIO

After understanding the various concepts about what are the investments

option and what are the risks associated with the various investment avenues. It

is advisable to use the direct equity investment only if the investors have

adequate knowledge about selection of stocks.

The task does not end with the selection of script but they are also required to

pay close attention to the various happening in the economy that have direct or

indirect effect on stock market as the price of the script is affected

by two factors, one is company specific news and the other is economy specific

news. So any investor investing in the equity directly has to keep the close track

of the economy as well as the company in which they invest.

analytical capabilities

then one should avoid going for direct equity investment as the chances of loss

increases. And the other very important aspect is the regular monitoring of the

portfolio and reviewing is also an important aspect that one needs to pay close

attention to.


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73

SECTOR PORTFOLIO

study as there is

systemic risk as very high in the sector portfolio because of non diversification.

This portfolio has given -1.67% returns on the one month performance so it is

advisable for the investor not to go for such a high risky investment options.

All the individual scripts and the portfolio showing very steady chart, there is

very little movement in the performance chart.


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LIMITATIONS OF THE PROJECT

The time duration given to complete the report was not sufficient.

The report is basically made in the horizon of one months and the situation of

market is very dynamic so the conclusion or the return might not reflect the true

picture.


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RECOMMENDATIONS

From the above given findings and the conclusions of the study done by me,

here are the list of recommendations that comes out of the study.

portfolio is

highly risky option for investment. Here in the study it is providing negative

return. That shows that investors who want to have safe return must think twice

before selecting sector portfolio for a long term investment.

and volatility,

but for a long term prospect it becomes hard to fetch good return out of it as it is

hard to take use of high volatility.

maintain the higher

return and to make use of high volatility.


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BIBLIOGRAPHY

Books & Newspapers

1. Security analysis and Portfolio Management

-Prasanna Chandra

2. Economic Times

Web Bibliography

1. www.sahara.in

2. www.google.com

3. www.valueresearchonline.com

4. www.bizfinance.about.com

5. www.moneycontrol.com

6. www.stocks.about.com

23-project portfolio management dimpal kumari

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