keshava final
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INTRODUCTION:
Though the first stock exchange in India was established over a
hundred years ago, investment in equity started becoming popular in India
only in the late 1970s because of the forced dilution of the foreign equity
holdings in well- managed multinational companies. The eighties saw a steady
growth of the equities cult with increasing larger number of companies
tapping the stock market to meet their resources needed. The liberalization
process and opening up of the Indian economy, which began in the eighties,
picked up speed with the presentation of the union budget in July 1991. The
budgets ever since have confirmed the Governments resolve to integrate
the Indian economy with the world economy , despite temporary disruptions
in the environment now and then .What is more important is that the returns
in the Indian stock markets, even in dollar terms , have been at par with the
best in the world in the last 10 years, boosting the confidence of the
international investors . There is little doubt that we all are into a new era of
the economic growth and prosperity, where financial securities would be thebest avenue for investing our savings.
We know, however that investing in stocks and shares is at best a
high risk proposition. Many of us have been raised on the belief that investing
in shares is different from gambling and is therefore something to be shunned.
There is a little doubt that stock markets can be treacherous. The history of
stock markets the world over is replete with booms and busts; of overnightmillionaires and instant paupers. The Indian stock market has been no
different.
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Is investing in shares therefore chasing a chimera?
The Indian stock markets are being rapidly professionalized. The
entry of young, first generation brokers and several banks sponsored mutual
funds is transforming the competitive structure of the market. The anticipated
entry of Private Indian and foreign companies mutual funds would accentuate
the competition further. These developments imply that individual investors
would have to play against increasingly more sophisticated players in the
market.
1.1 INVEST IN WHAT YOU KNOW
Investors often behave in a typically restless and fickle manner,
never satisfied with what they have- always looking for the next hot stock.
This outlook is usually translated into cumbersome portfolios with an
unmanageably large number of scrip. Most of us believe that diversification is
good since it reduce risk. Isnt that what we have always been taught?
The efforts of various financial scholars who studied all this stuff in
the fifties, sixties and seventies, showed that after a point there is no further
risk reduction gained by adding more assets, but instead transaction and
other costs increase. The Ideal number of investments recommended by
different experts ranges between twelve and twenty, without getting into the
merits of these arguments and their methodologies for measuring risk, the key
points Is that most of the researcher came to the conclusion that beyond a
limit, there is no further gain in diversification.
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At the same time, the risk reduction implies the selection of
investments whose performances are not correlated. If all investments are in
the steel industry, then there is no real diversification, since all the stocks will
be highly correlated i.e. likely to move in the same direction at the time.
Hence we tend to spread our stocks across industries. Even here certain
industries could be closely linked. For example, the white goods and
automobile segments which are both dependent on consumer spending may
have similar boom bust cycles, which will in turn have a significant
correlation with the fortunes of companies making steel flats. Hence, a further
diversification of investment spread across these segment is unlikely to help in
reducing risk.
Keeping track of a vast number of scripts can be nightmarish,
especially in the Indian context. For an investor whose business is not stocks,
even reading all the balance sheets is a laborious chore not to mention
keeping abreast of half yearly results, company announcements, industry
outlooks, etc. as a result we are sometime unaware of bad news, or find outtoo late. The larger number of companies we invest in the higher the chances
of being out of touch with their performances.
It all goes back to the psychology of individual. Any investor will be
far more prudent with an investment that is worth 10-15% of their assets than
one, which accounts for mere 1%. The chances are that they will evaluate
their options more critically, thereby improving their hit rate.
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1.2 INDIA: THE PROMISE OF GROWTH:
The economy of the India is 4th
largest in the world as measured byPurchasing Power Priority (PPP). When measured in USD exchange rate
terms, it is the 10th largest in the world, with a GDP of US $1.0 trillion (2007).
India is the second fastest growing major economy in the world, with a GDP
growth rate of 9.2%at the end of second quarter of 2008-09. However, Indias
huge population results in a per capita income of $3400 at PPP and $820 at
nominal. The World Bank classifies India as a low income economy.
The economy diverse and encompasses agricultural, handicrafts,
textile, manufacturing and a multitude of services. Although two-third of
Indian workforce still earns their livelihood directly or indirectly through
agriculture, services are a growing sector playing an increasingly important
role of Indias economy. The advent of digital age and the large number
young and educated populace fluent in English, is gradually transforming
India as a important back office destination for global companies for
outsourcing of their customer services and technical support. India is a major
exporter of highly skilled workers in software and financial services and
software engineering. Other sectors like manufacturing; Pharmaceutical,
biotechnology, nanotechnology, telecommunication, shipbuilding and
aviations are showing strong potential with higher growth rates.
India followed a socialist inspired approaches for most of its independent
history, with strict Government control over provide sector participation,
Foreign Trade and Foreign Direct Investment (FDI). However, since the early
1990s, India has gradually opened up its market through economic reforms
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by reducing Government control on Foreign Trade and Foreign Direct
Investment (FDI). The privatization of publicly owned industries and the
opening of certain sectors to private and Foreign interests as proceeded slowly
amid political debate.
The India forces a burgeoning population and the challenge of
reducing economic and social inequality. Poverty remains a serious problem,
although it has declined significantly since independence, mainly due to
Green Revolution and economic reforms.
SELECTED ECONOMIC INDICATORS:
India remained relatively unscathed from the 1997-98 Asian
Financial Sector crises and has maintained a healthy growth rate of over
5%despite recession in major world economics over the past 2 years. This
demonstrates the size, strength and resilience of the Indian economy. Were it
not for the resilience of China and India, the world would have been in deep
recession in 2008.
The sectoral composition of GDP reflects a transition. While the
agricultural and industrial sectors have continued to grow, the services sector
has grown at a significantly higher pace it currently contributes nearly half
of the Indias GDP.
On the external front, cumulative foreign investment inflows have
been US$ 50 billion since 1991.This includes over US$28 billion of foreign
direct investment (FDI) and about US$22.6 billion in portfolio investment.
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Licensing has been removed from all but six sectors .The Indian
government is determined to remove any remaining road blocks, real or
perceived .India has one of the most transparent and liberal FDI regimes
among the emerging developing economics .The union government has been
continuously opening up new sectors to foreign investment , while enhancing
FDI limits in others. The year 2002 saw the opening up of the defense, print
media, housing and real estate and urban mass transportation sectors.
SECTORAL OVERVIEW
AGRICULTURE:
Two thirds of Indias population lives in rural areas. Agriculture in
India is one of the most prominent sectors in its economy .Agriculture and
allied sectors like forestry; logging and fishing accounted for 19.9% of the
GDP in 2005 and employed 62% of the countrys population .It accounts for
8.56% of Indias exports. About 43% of Indias geographical area is used for
agricultural activity. Despite a steady decline of its share in the GDP,
agriculture is still the largest economic sector and plays a significant role in
the overall socio- economic development of India.
The performance of the agricultural sector has continuously been
improving (over many decades), helping the country achieve a surplus in food
grains production. This has been facilitated through new agricultural
techniques and tools acquired by Indian farmers, mechanization, use of high
yielding varieties of seeds, increasing use of fertilizers and irrigation
facilities , on going operational research in the countrys numerous
agricultural universities and colleges ,etc. With liberalization of trade in
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agricultural commodities, India enjoys a competitive advantage in a number
of agricultural and processed food products exports.
Agriculture accounts for 62 per cent of total employment
MANUFACTURING
India has moved from an agrarian to a manufacturing and services
led economy. The manufacturing sector accounted for 19.3% of the total
GDP. The country has built a diversified industrial base comprising
traditional handicrafts, small, medium and large manufacturing companies and
high technology oriented products. The industrial output has grown to
approx US$ 65 billion.
The country has emerged as an important global manufacturing hub-
many multinational corporations (MNCs) like Pepsi, General Electric (GE),
General Motors(GM), Ford , Suzuki, Hyundai, Gillette, LG etc. Have
followed Indias economic liberation process from close quarters and set up
successful operations in the country in recent years. They have been able to
leverage cost advantages while adhering to global manufacturing facilities.
Companies in the manufacturing sector have consolidated around
their area of core competence by tying up with foreign companies to acquire
new technologies, management expertise and access to foreign markets. The
cost benefits associated with manufacturing in India, have positioned India as
a preferred destination for manufacturing and sourcing for global markets.
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SERVICES
The services sector currently accounts for almost half of the
countrys GDP. Expanding at a rate of 8-10% per annum, services are the
fastest growing sector in the Indian economy. In fact, the growth in Indias
GDP, despite the global slowdown, is attributed largely to its strong
performance. Indias exports of services have been growing at close to 20%
per annum, increasing their share in world exports to 1.5%, compared to the
dismal share of merchandise exports at only 0.8%. The service sector accounts
for 60.7% of the total GDP.
Availability of highly skilled workers has encouraged many
international companies to carry out their research and development activities
in India. IT, biotech, tourism, health, financial services and education hold the
promise of sustainable high growth. To give a perspective:
The Indian IT industry has grown from US$ 0.8 billion in 1994-95 to US$
10.1 billion in 2001-02. Domestic software has grown at 46% while
software exports have grown at 62% over the last 5 years.
The last decade has seen the Indian entertainment industry grow
exponentially. The key drivers for this have been technology and the
governments recognition of the importance of the sector. The industry is
expected to grow at a compound annual growth rate (CAGR) of 27%.
Revenues are increased from US$ 3 billion in 2002 to US$ 10 billion in
2005.
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Information Technology Enabled Services (ITES) with elements like call
centers; back office processing, content development and medical
transcription is the key to rapid growth. The sector has an employment
potential of 1.1 million by 2008.
Infrastructures
The infrastructure sector in India, traditionally reserved for the
government, is progressively being opened up for private sector participation.
According to the India infrastructure report (IIR), currently 5.5% of the GDP
is invested in the infrastructure sector. This needs to be increased to 7% in the
next three years and gradually to 8%, by which time the annual investment in
infrastructure facilities is going to treble or rise even more, from the current
level of RS. 6000 Billion.
PORTS
The country has a 7500 km long coastline dotted with numerous
major and minor ports. The areas that have been identified for participation
and investment by the private sector include leasing out existing assets of the
ports, construction of additional assets such as container terminals, cargo
berths, handling equipment, repair facility, captive power plants and captive
facilities for port based industries. Foreign investment up to 100 per cent
equity participation is permitted in ports through the automatic route for
construction and maintenance of ports and harbors.
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A number of private companies have already set up port facilities n
the country. Two Greenfield ports that are Pipavav and Mundra in Gujarat
have been set up through private participation and these have been able to
compete with existing major ports. Many multinational and domestic players
have taken over existing port has been taken over by an Australian port major.
ROADS
India has the first largest road network in the world, spanning 3.38
million kilometers. Most of the private investment in thus sector has
traditional been through the build-operate-transfer schemes. However, now
many new projects are being bid out on toll collection mechanism.
Currently the National Highways Authority of India (NHAI) is
implemented the Development Project (NHDP) is largest ever highway
development project to be undertaken in the country. The project involves
widening of over 13000 km of highways in the country. The investment for
this project is estimated at USS 13.2 billion at 1999 prices, the project has
been broken up into a large number of smaller segments, many of which have
been commissioned. Currently work has been completed on 1976 kilometers
and another 5222 kilometers of length is under construction.
AIRPORTS
There are 449 airports/airstrips in the country. Among these, the
Airports Authority of India (AAI) owns and manages 5 international airports,
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87 domestic airports and 28 civil enclaves at Defense Airfields and provides
air traffic services over the entire Indian airspace and adjoining oceans areas.
In 1998-99, these airports/civil enclaves handled 4.20 lakh aircraft
movements involving 24.17 million domestic and 12.83 million international
passengers and 221 thousand metric tones of domestic cargo and 468
thousand metric tones of international cargo. 51 percent of traffic was handled
at the international airports at Mumbai and Delhi. Presently various airlines
are operating through 61 airports. The remaining is lying unutilized at best
handling occasional aircrafts operations.
POWER
Power sector, hitherto, had been funded mainly through budgetary
support and external borrowings. But given the budgetary support limitation
due to growing demands from other sectors, particularly social sector and the
severe borrowing constraints, a new financing strategy was enunciated in
1991 allowing private enterprise a larger role in the power sector.
Presently, restructuring and regulatory reforms include bringing
about reforms in the State Electricity Boards (SEBs) through establishment of
the State Electricity Regulatory Commissions. Reforms are progressing
steadily in the sector and privatizations of SEBs have already begun. The
government is a one-time settlement of dues of SEBs. In effect, a large
amount of liquidity will be injected in the sector.
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The ministry of power has also formulated a blue print to provide
reliable, affordable and quality power to all users in the country i.e. power on
demand by 2012. This requires huge increase in generation capacity, up
gradation of existing generation facility and also the transmission and
distribution network.
TELECOMMUNICATION:
Indias telecommunication network ranks among the top ten countries
in the world and one of the largest telecom network in Asia. One of the largest
worlds largest and fastest growing telecom markets, the country has aninvestment potential estimated at US$69 billion by 2010.
Despite a strong base of a billion people, the countrys teledensity per
hundred population has grown from 7.08 in march 2004 to 8.95 in ,march
2005 and to a level of 12.74 in march 2006 and estimated to grow 15% by
2010. The government had allowed private participation in cellular services in
1992.the sector witnessed partial de-regulation between 1994 and 1999. The
government announced the new telecom policy (NTP) in 1999 to further de-
regulate sector with respect to services like basic, international long distance
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(ILD),national long distance (NLD) and wireless in local loop(WLL)among
others.
FINANCIAL SECTOR
The far-reaching changes in the Indian economy since liberalization
in the early 1990s have had a deep impact on the Indian financial sector. The
financial sector has gone through a complex and sometimes painful process of
restructuring, capitalizing on new opportunities as well as responding to new
challenges. During the last decade, there has been a broadening and deepening
of financial markets. Several new instruments and products have been
introduced .existing sectors have been opened to new private players. This
has given a strong impetus to the development and modernization of the
financial sector. New player have adopted international best practices and
modern technology to offer a more sophisticated range of financial services
to corporate and retail customers. This process has clearly improved the range
of financial service providers available to Indian customers.
The entry of new players has led to even existing players upgrading
their products offerings and distribution channels. This continued to be
witnessed in 2002-03 across key sectors like commercial banking and
insurance, where private players achieved significant success.
These changes have taken place against a wider systemic backdrop
of easing of controls on interest rates and their realignment with market rates ,
gradual reduction in resource pre-emption by the government, relaxation of
stipulation on concessional lending and removal of access to concessional
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resources for financial institutions. Over the past few years, he sector has also
witnessed substantial progress in regulation and supervision.
Financial intermediaries have gradually moved to internationally
norms for income recognition, asset classification and provisioning and capital
adequacy. This process continued in 2002-03, with RBI announcing
guidelines for risk based supervision and consolidated supervision. While
maintaining its soft interest rate stance, RBI cautioned banks against taking
large interest rate risks, and advocated a move towards a floating rate interest
rate structure. The past decade was also an eventful one for the Indian capital
markets.
DISINVESTMENT
The government over the past decade has been increasingly
redefining its role from being a provider of goods and services to that of a
policy maker and facilitator. Towards this objective, the government has been
consistently divesting its stake in various public sector undertakings (PSUs).
Between 1991 and 2003, the government divestment process had
yielded US$6.3 billion to the national exchequer.
1.3.CURRENT SCENARIO OF THE INDIAN ECONOMY
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The second half of 2003 saw an upsurge in optimism with a bountiful
monsoon emerging after 3 years of deficient rainfall. Expectations rose and
consumer confidence soared on the assumption that the economy would now
capitalize on its intrinsic strengths .GDP is now expected to grow .there is
again renewed optimism that it can reach its recognized potential of more than
8% pa if the second phase of reforms is carried out in a time bound manner
over the next few years.
Amidst this upbeat mood, the flip side has to be kept in mind. In the
Indian Economic survey tabled in parliament at the end of February 2003, the
Finance Ministry had stated that fiscal consolidation has to be given a priority
so that funding to the private sector is not crowed out. The Economic Survey
called for a cut in untargeted subsidies and encouraging public investment in
physical and social infrastructure .it has also recommended streamlining the
tax system to shore up revenues .The areas earmarked for rationalization of
subsidies are food, fertilizers, liquefied petroleum gas (LPG) and kerosene.
The savings rate in the country has overtaken the rate of investment
in 2001-02 for the first time since 1975.savings are 24% of the GDP while
domestic investment is 23.7% as of a year ago. This confirms the widely held
view that investments have been subdued for the past few years.
During the past year or so the rupee has been strengthening against
the US$. In July 2002 the rupee traded at 48.67% to the dollar .In February
2004 it is trading at 45.30.
The external debt situation has improved significantly in recent years
and the external debt-GDP ratio decreased from 28.7% at end of March 1991
to 21% currently.
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And India now aims at emerging as an economic superpower in the
coming decades.
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RESEARCH DESIGN
EFFECT OF DIVERSIFYING PORTFOLIO RISK IN
STOCK MARKET .is a study that was conducted for 20 stocks listed in the
national stock Exchange. It covers a period of 1 year from a 1 st April 2008 to
31st march 2009. The stocks represent a wide cross section of industries and
most of them have been part of the NIFTY although some have been
dropped from the NIFTY during its periodic reconstitution .the current Nifty
was not chosen because many of the stocks currently constituting them have
not been traded for the previous years.
The basis of portfolio analysis is that the portfolios, which are the
combinations of individual securities, do not take the characteristics of their
individual components .portfolio analysis considers the determination of
future risk and return in holding various types / categories of securities.
The aim of the paper is to analyze the securities in a portfolio and to
help an investor to reduce risk through proper diversification.
While on the topic of return we should also consider the subject of
risk-both portfolio risk and the individual risk of the security.
Diversification can help to reduce portfolio risk by eliminating un-
systematic risk for which investors are not rewarded .investors are rewarded
for taking market risk. Because diversification averages the returns of the
assets within the portfolio, it attenuates the potential highs (and lows).
Diversification among companies, industries and asset classes affords the
investor the greatest protection against business risk, financial risk and
volatility.
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Finally, in a large portfolio of common stocks, the unsystematic risk
associated with one stock typically has no impact on the unsystematic risk
associated with any other stock; this conclusion is derived from the definition
of an unsystematic risk. Consequently, the portion of the return on a stock,
which arises from the unsystematic risk, would tend to offset the portion,
which arises from the unsystematic risk for another stock in the portfolio .in a
portfolio of thirty or more stocks, it would be reasonable to expect that the
effects of unsystematic risk on various stocks would offset each other, thereby
eliminating the risk arising from this source.
Analytical and quantitative method is used for the research study.
Information is secondary in nature was collected through various secondary
sources. The data has been collected from the published records of the
companies , various trade journals, news papers like economic times,
business standards etc .magazines like business world, business standards,
business today and various text books on investment, portfolio management
etc.
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Title of the study:
A Study on EFFECT OF DIVERSIFYING PORTFOLIO RISK IN
STOCK MARKET.
Statement of the Problem:
Intelligent investing is about how effectively an investor is able to
balance risk and return. The basis of portfolio analysis is that portfolios, which
are the combinations of individual securities, do not take the characteristics of
their individual components. The principle of diversification involves
investigating portfolio of securities to ensure that losses in some will offset by
gain in others, thereby reducing the risk on return. The study focuses on the
effect of diversifying the risk of portfolio.
In general, the problem is if the number of securities in a portfolio
increases, say up to 20, will diversification reduce the unsystematic risk measured by standard deviation, and with any further diversification will it
result only in marginal reduction of portfolio risk.
NEED FOR STUDY
The need for the study is to analyze the securities in a portfolio and
to help an investor to reduce risk through proper diversification.
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Objectives of the study:
To understand the diversification of risk
To examine. whether diversification of stocks in a portfolio reduces
the un systematic risk
To examine the effect of diversification beyond a certain limit.
To offer suggestions based on study.
SCOPE OF THE RESEARCH
The scope of this research would include dissemination of
information relating to diversification of stocks in a portfolio and contributing
to a better understanding the context, resources, structure, systems, process,
and reforms of this diversification to the investors.
METHODOLOGY
The methodology followed in literature survey and preparation of
subtracts as under:
By visiting various libraries and with reference given in various
articles in magazines, literature survey was undertaken. Bibliography list from
the book was prepared with consulting of project guide the area and topic was
selected. The relevant articles was studied from various publications and
abstract was prepared for the purpose.
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After discussing with guide about the literature survey the topic of
study was finally given a clear cut shape with the specific objectives
methodology to be followed both for collection and analysis of the data.
RESEARCH TYPE
Since the evaluation of the data has to be conducted on the
information collected from the secondary sources the type of research carried
out will be the analytical in nature .Since the data will be expressed in terms
of quantity/numbers Quantitative research will be used.
SAMPLING PLAN
SAMPLING TECHNIQUE: The sampling technique used was non
probabilistic judgment sampling.
SAMPLE UNIT : The sample units are the closing share prices of Indian
companies that are included in the National Stock Exchanges broad based
index- NIFTY.
SAMPLE SIZE: 20 companies closing share prices.
SOURCES OF DATA
Preparation of project report pre supposes a good knowledge of the
subject and the topic, which is selected for a detailed analysis. This requires
and extensive survey of literatures available in the form of
News papers/ Magazines
Books/published articles
Trade journals
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Company records
In house publications of institutions
Data released by national statistical organization.
RESEARCH TOOLS USED FOR THE ANALYSIS
For all the variables the collected data was arranged in a tabular
form. Relevant statistical tools were used for analyzing the obtained data.
The inferences were drawn using the analysis.
Mean
Standard deviation
Variance
Covariance
LIMITATION OF THE RESEARCH
One of the limitations of the research is the time span of period
selected & time available for the study.
Research Scope limitations results in using a limited number of
companies.
The conclusions are based on the area & the number of companies
selected.
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Skewness of the study.
LAYOUT OF THE CHAPTER
CHAPTER 1 INTRODUCTION
CHAPTER 2 RESEARCH DESIGN
CHAPTER 3 PROFILES OF THE COMPANIES
CHAPTER 4 ANALYSIS & INTERPRETATION OF DATA
CHAPTER 5 SUMMARIES OF FINDINGS, CONCLUSIONS &
RECOMMENDATIONS
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ANALYSIS OF THE COMPANIES USED IN THE RESEARCH
The portfolios of securities are based on the companies from the NSE
NIFTY index. A brief introduction of the National Stock Exchange is given
below
THE NSE ORGANISATION
The National Stock Exchange of India Limited has genesis in the
report of the High Powered Study Group on Establishment of New Stock
Exchanges, which recommended promotion of a National Stock Exchange by
financial institutions to provide access to investors from all across the country
on an equal footing. Based on the recommendations NSE was promoted by
leading Financial Institutions at the behest of the Government of India and
was incorporated in November 1992 as tax-paying company.
On its recognition as a stock exchange under the securities contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
wholesale Debt market (WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November 1994 and operations
in Derivatives segments commended in June 2000.
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S & P CNX NIFTY
S & P CNX Nifty is a well diversified 50 stock index accounting
for 23 sectors of the economy. It is used for a variety of purposes such as
benchmarking fund portfolios, index based derivatives and index funds.
S & P CNX Nifty is owned and managed by India Index Services
and Products Ltd. (IISL) which is a joint venture between NSE and CRISIL.
IISL is Indias first specialized company focused upon the index as a core
product. IISL have a consulting and licensing agreement with Standard &
Poors (S&P) who are world leaders in index services.
The total traded value of all Nifty stocks is approximately 70% of the
traded value of all stocks on the NSE.
Nifty stocks represent about 59% of the total market capitalization.
Impact cost of the S& P CNX Nifty for portfolio size of Rs. 5 million is
0.10%.
S & P CNX Nifty is professionally maintained and is ideal for derivatives
trading.
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TABLE 1
CONSTITUENT COMPANIES LIST OF NSE NIFTY as on MAY 2009
Company Name Industry Symbol
Asia Brown Boveri
Ltd.
Electrical Equipment ABB
Associated Cement
Companies Ltd.
Cement & Cement
Products
ACC
Bajaj Auto Ltd. Automobiles 2 and
3 Wheelers
BAJAJ AUTO
Bharati Tele
Ventures Ltd.
Telecommunication
Services
BHARTIARTL
Bharat Petroleum
Corporation Ltd.
Refineries BPCL
Cipla Ltd. Pharmaceuticals CIPLA
Dabur India Ltd. Personal Care DABUR
Dr. Reddys
Laboratories Ltd.
Pharmaceuticals DRREDDY
GAIL (INDIA)
LIMITED
Gas GAIL
Glaxosmithkline
Pharmaceuticals
India Ltd.
Pharmaceuticals GLAXO
Grasim Industries
Ltd.
Cement & Cement
Products
GRASIM
Gujarat Ambuja
Cements Ltd.
Cement & Cement
Products
GUJAMBCEM
HCL Technologies
Ltd.
Computers
Software
HCLTECH
Housing Finance Housing HDFC
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Development
Finance Corporation
Ltd.
HDFC Bank Ltd. Banks HDFC BANK Hero Honda Motors
Ltd.
Automobiles 2 and
Wheelers
HERO HONDA
Hindalco Industries
Ltd
Aluminum HINDALCO
Hindustan Lever Ltd. Diversified HINDLEVER
Hindustan Petroleum
Corporation Ltd.
Refineries HINDPETRO
ICICI BankingCorporation Ltd.
Banks ICICI BANK
Infosys Technologies
Ltd.
Computers
Software
INFOSYSTCH
Indian
Petrochemicals
Corporation Ltd.
Petrochemicals IPCL
ITC Ltd. Cigarettes ITC
Reliance Petroleum Refineries RPL
Larsen & Turbo Engineering LT
Maruti Udyog Ltd. Automobile 4
Wheelers
MARUTI
Mahindra &
Mahindra Ltd.
Automobile 4
Wheelers
M & M
Mahanagar
Telephone Nigam
Ltd.
Telecommunication
Services
MTNL
National Aluminum
Company Ltd.
Aluminium NATIONALUM
Oil & Natural Gas
Corporation Ltd.
Oil Exploration ONGC
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STERLITE
Industries Ltd.
Metals STER
Punjab & National
Bank
Banks PNB
Ranbaxy
Laboratories Ltd
Pharmaceuticals RANBAXY
Reliance Energy Ltd. Power REL
Reliance Industries
Ltd.
Refineries RELIANCE
Steel Authority of
India Ltd.
Steel & Steel
Products
SAIL
Satyam ComputerServices
Computers Software
SATYAMCOMP
State Bank of India Banks SBIN
SIEMENS Electricals
Equipments
SIEMENS
Sun Pharmaceutical
Industries Ltd.
Pharmaceuticals SUNPHARMA
Suzlon Energy Electrical Equipment SUZLON
Tata power Co. Ltd. Power TATAPOWER Reliance
Communication
Telecommunication RCOM
Tata Engineering &
Locomotive Co.
Automobile 4
Wheelers
TATA MOTORS
Tata Consultancy
Service
Computer Service TCS
Tata Iron and Steel
Company Ltd.
Steel & Steel
Products
TATASTEEL
Videsh Sanchar
Nigam ltd.
Telecommunication
Service
VSNL
Wipro Ltd. Computers
Software
WIPRO
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TABLE 2
CONSTITUENT COMPANIES LIST OF 20 SELECTED NSE NIFTY as
on MAY 2009
S.NO SYMBOL COMPANIES
1 A ACC
2 B ABB
3 C INFOSYS4 D HEROHONDA
5 E BRITANNIA
6 F MARUTI
7 G HDFC BANK
8 H ITC
9 IHIDUSTAN
LEVER
10 J BHEL
11 K TATAPOWER
12 L VSNL
13 M BAJAJ AUTO
14 N ONGC
15 O RANBAXY
16 P RELIANCE
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17 Q TATASTEEL
18 R M & M
19 S WIPRO
20 T TCS
A BRIEF INTRODUCTION TO THE COMPANIES ARE GIVEN
BELOW
ASSOCIATED CEMENT COMPANIES LTD. (ACC)
(Cement & Cement Product industry)
Associated Cement Companies (ACC) one of the leading cement
producers in India came into existence consequent to the amalgamation of tencement companies in 1936. Manufacturing and marketing of cement, ready
mix concrete, refractorys and refractory products are the main business of
ACC. Further the company is also into consultancy and engineering service.
ACCS manufacturing base consist 14 cement plants spread well all over
India. The total cement capacity of ACC stands at 161.47 lakh tones at March
31, 2008.
In Jan. 1999, the company came out with rights issue to fund its capex
projects involving modernization/ expansion of existing plants and creation of
new capacity at Wadi. The company meets around 83% of its power
requirements from its captive power plants. The captive power plant at Jamul
and Kymore with an capacity of 25 MW each was commissioned in Nov,
1999. The 15 MW captive power plants stake in favor of Gujrat Ambuja
Group. Notably, Gujrath Ambuja group is the most efficient and aggressive
cement group in India. The disinvestment was done in phases at Rs. 370 per
share.
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ACChas completed the modernization and expansion of the Chanda
and Madukkarai cement plants for increasing their capacities to around 1
MTPA each. These plants started production from 1 September 2000 and 1
October 2000 respectively. The company has completed divestment of its
stake in Float glass India Ltd. (13% stake in 2001-02) International Ferrites
Ltd. (35% stake in 2002-03) and Bridgestone ACC India Ltd. (19% stake in
2002 03). Further it has also sold its stake (500,000 Equity shares) in Tata
Industries In 2001-02. The company is making all efforts to hive off the ACC
Nihon Casting, a 100% subsidiary of ACC manufacturing alloy steel casting
but has not met success yet. At the same time of existing from non-core
businesses the company has not failed to invest in core activities it has
acquired 76.01% stake in Eternit Everest from Etex Group in Feb 2002.
ASEA BROWN BOVERI LTD. (ABB) Electrical Equipment Industry
ABB Ltd. Is a global provider of power and automation technologies
that enable utility and industry customers to improve performance while
lowering environmental impact? Effective January 1, 2008, in order to
streamline its structure and improve operational performance, the company
put into place two divisions: Power Technologies and Automation
Technologies. The Power Technologies division serves electric, gas and
water utilities, as well as industrial and commercial customers, with a range of
products, systems and services for power transmissions, distribution and
power plant automation. The automation Technologies division provides
products, systems, software and services for the automation and optimization
of industrial and commercial processers. Key technologies include
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measurement and control, instrumentation, process analysis, drives and
motors, power electronics, robots and low-voltage products.
For the six months ended 6/30/09, revenues rose 1% to $9.27 billion.
Net income from continuing operation totaled $ 207 million, vs. a loss of $14
million. Revenues reflect increased power products orders. Net income
benefited from higher margin services business.
Market Cap (Intraday): 11.96B
The net profit of the company increased by 45% to Rs. 540mm in
F12/00 as compared to Rs. 372mm in the previous year. The companys
future prospects are closely linked to investments in the power and industrial
sectors. ABB is planning to sell mass market products like low voltage
switches, fuses and circuit breakers and wiring accessories.
INFOSYS Computer Software Industry
Infosys Technologies Limited is an information technology (IT)
Services Company founded in Pune, India in 1981 by N.R. Narayan Murthy
and six of his colleagues. In 1983, Infosys moved its headquarters to
Bangalore, the capital of Karnataka. It operates nine development centers in
India and has over 30 offices worldwide. Annual revenues for fiscal year
2009 exceeded US $3.1 billion with a market capitalization of over US$30
billion. With over 72,000 employees worldwide, Infosys is one of Indias
largest companies.
Infosys Technologies Ltd (Infosys) was incorporated on July 2, 1987
as a private ltd company. It became public limited company on June 1992 and
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subsequently the name was also changed Infosys Technologies Ltd... Infosys
is one of Indias leading information technologies (IT) services companies. It
is mainly engaged custom software development, maintenance, re-engineering
services, e-commerce and internet consulting as well as dedicated offshore
software development center for certain clients, of space under construction.
The total employee strength up to March 2009 was 72000, as against 9831 on
March 2001. Infosys Technologies came out with an IPO in Feb. 1993.
In 2008 Infosys acquired the 25% stake Citibank had in its BPO
offshoot Progeon, making it a wholly owned subsidiary of Infosys and
changed the name to Infosys BPO Ltd. An investment of Rs. 9,500 ( 100
shares at an issue price of Rs 95) in the initial public offering of Infosys in
1993 ( Rs. 9,500 was approximately $300 according to the 1993 exchange
rate) would now be worth Rs. 29,440.000 ($665,235 according to the 2009
exchange rate) after adjusting for stock splits and bonuses. This is a 3000-
fold increase in rupee terms over a 14 year period (1993 2009 ) and does
not include the dividends that the company has paid out.
In 2001 02 the company has signed up 116 new clients and had a
total client base of 293 at the end of the year. The companys product
FINACLE, is an integrated core banking solution that is centralized, multi
currency and multi language enabled, functionally rich, and addresses both
retail and corporate banking requirements. The product is having a market
share of over 60% among the Indian banks. FINACLE was ranked among thetop 3 best selling retail banking systems in the world by IBS. The companys
banking business Unit has consolidated its position in African market, and has
also expanded in the Middle East.
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It is also planning to foray into Business Process Management and a
separate company is being formed. The company also plans to focus
aggressively on mobile commerce (M commerce) in the next few years.
Recently the GOI has raised the investment limit in an Indian Company for
FII from 49% to the maximum level approved under the FDI and the
maximum limit for the software industry as approved by FDI is 100% at
present, the company is in the plan of increasing the limit of such investment
to 100%.
HERO HONDA Automobile Industry
Hero Honda Motorcycles is the Worlds biggest manufacturer of
motorcycles (by quantity). Hero Honda is a 50: 50 Joint venture that began in
1984 between the Hero group of India and Honda from Japan. It has been the
worlds biggest manufacturer of 2 wheeler motorized vehicles since 2001,
when it produced 1.3 million motorbikes in a single year. Hero Hondas
Splendor is the worlds largest selling motorcycle. Its 2 plants are in
Dharuhera and Gurgaon, both in Haryana, India. It specializes in dual use
motorcycles that are low powered but very fuel efficient.
India has the largest number of two wheelers in the world with 41.6
million vehicles. India has a mix of 30 percent automobiles and 70 percent
two wheelers in the country. India was the second largest two wheeler
manufacturer in the world starting in the 1950s with the birth of Automobile
Products of India (API) that manufactured scooters.
The business growth of Hero Honda has been phenomenal
throughout its early days. The Munjal family started a modest busies of
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bicycle components. Hero Group expanded so big that by 2002 they had sold
86 million bicycles producing 16000 bicycles a day.
The hero group also took a venture in other segments like exports,
financial services, information technology, which includes customer response
services and software development. Further expansion is expected in the
areas of Insurance and Telecommunication.
The Hero Groups phenomenal growth is the result of constant
innovations, a close watch on costs and the dynamic leadership of the Group
Chairman, characterized by a culture of entrepreneurship, of right attitudes
and building stronger relationships with investors, partners, vendors and
dealers and customers.
BRITANNIA INDUSTRIES LTD. Food and Food Processing Industry
Food major Britannia Industries (BIL), is one of the leading
producers of biscuits and other bakery products. Group Danone is one of the
leading players in bakery products business. The association with Groupe
Danone has been a good technological support to BIL. The company is
jointly controlled by Groupe Danone of France, which is holding 22% stake.
Britannia enjoys a prominent position in the industry. Over the last couple of
years, it has trimmed down. The company rationalized its products portfolio
by reducing the products from 35 to around 25. In October 1999, the
company has issued bonus shares in the ratio of 1: 2. Britannia is the market
leader in the 1.2 million tone Indian biscuits industry with a 60% share. It
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mainly caters to the premium segment. With the launch of Tiger brand, it has
taken a plunge in the low end category, taking competition head on with
Parle which is the leader in this segment. The company has also diversified
with dairy and bakery products to enter the butter, cheese and ghee markets.
Britannia has built on enviable retail distribution network which services
400,000 retail outlets in 2200 towns with the help of 2,500 distributors. The
company is aggressively expanding its network with a bias towards the rural
market.
In Dec. 2000, Britannia dropped its plans to enter the mineral water
segment. The mineral water segment in India is growing at around 50%
annually and is dominated by Bisleri and Bailey. BIL has acquired the trade
mark KWALITY, the Chef Device and several other trademarks owned by
Kwality Biscuits of Bangalore for a consideration of Rs 30 crore. It has also
agreed in principle to acquire 49% equity of Kwality Biscuits. The
transaction is expected to be completed during the current financial year.
The company has agreed to acquire 49% equity of snako Bisc (P) Ltd.
Along with the trademark NUTRINE in respect of Bakery Product etc. and
several other trademarks along with copyrights and designs. In March 2002,
the Company entered into a joint venture with the Fonterra Cooperative
Group, New Zealand. BIL will be transferring its existing dairy business to
the new joint venture.
MARUTI UDYOG Ltd
Maruti Udyog Ltd. Is one of Indias leading automobile
manufacturers and the market leader in the car segment, both in terms of
volume of vehicles sold and revenue earned? Until recently, 18.28% of the
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company was owned by the government, and 54.2% by Suzuki of Japan. The
Indian government held an initial public offering of 25% of the company in
June of 2003. As of May 10, 2009 govt. of India sold its complete share to
other financial institutions. With this, govt. of India no longer has any stake
in Maruti Udyog.
Maruti Udyog Limited (MUL) was established in February 1981,
though the actual production commenced in 1983. Through 2004, Maruti has
produced over 5 million vehicles. Marutis are sold in India and various
several other counties, depending upon export orders. Cars similar to Marutis
(but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and
other South Asian countries.
The company annually exports more than 30,000 cars and has an
extremely large domestic market in India selling over five hundred thousand
cars annually. Maruti 800, till 2004, was the Indias largest selling compact
car ever since it was launched in 1983. More than a million units of this car
have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.
Due to the large number of Maruti 800s sold in the Indian market,
the term Maruti is commonly used to refer to this compact car model.
HOUSING DEVELOPMENT FINANCE CORPOATION LTD (HDFC)
HDFC Bank one amongst the first of the new generation, tech-savvy
commercial banks of India, was set up in August 1994 after the Reserve Bank
of India allowed setting up the Banks in the private sector. The Bank was
promoted by the Housing Development Finance Corporation Limited, a
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premier housing finance company (Set up in 1977) of India. Net profit for the
year ended March 31, 2009 is Rs 1,141.5 crore (Rs11.41 billion) compared to
Rs. 870.8 crore (8.7 billion) last year. 2008 results press release
Incorporated in Oct, 1977 as public limited company Housing
Development Finance Corporation (HDFC) was promoted by the Industrial
Credit and Investment Corporation of India with initial equity reservation for
the International Finance Corporation (Washington) and his Royal Highness,
the Aga Khan. The corporation provides housing loans to individuals,
corporate and developers. It is also a co coordinator of the coalition of
housing finance institutions in Asia and the Pacific, a public and private sector
partnership project, funded by the United nations Development Program me
(UNDP). The company which has been working closely with National
Housing Bank to frame appropriate foreclosure norms so that securitization of
housing debt is possible.
Currently (2009), HDFC Bank has over 600 branches located in
over 300 cities of India, and all branches of the bank are linked on an online
real time basis. The bank offers many innovative products & services to
individuals, corporate, trust governments, partnerships, financial institutions,
mutual funds and insurance companies. The bank also has over 1600 ATMs.
In the next few months the number of branches and ATMs should go up
subsequently.
ITC LTD Cigarettes Industry
ITC Ltd. A leading FMCG Cigarette major is one of the most
valuable companies of India. Even though ITC is renowned for its cigarette
business it also has business interest in Hotels; Paperboards, Paper&
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packaging; agri exports and some other FMCG products like branded
packaged food, safety matches, Incense Sticks and Greeting Cards etc. Being
the pioneer of 1910, it has diversified its brands across products categories.
Its successful luxury filter brands of its parent company Benson & Hedges and
555. ITC was incorporated on August 24, 1910 under the name of Imperial
Tobacco company of India Limited.
The Company celebrated its 16th birthday on August 24, 1926, by
purchasing the plot of land situated at 37, chowringhee, Kolkata, for the sum
of Rs. 310,000 This decision of the company was historic in more ways than
one. It was to mark the beginning of a long and eventful journey into Indias
future. The companys headquarters building, Virginia House, which came
up on that plot of land two years later, would go on to become one of
Kolkatas most venerated landmarks.
The Companys ownership progressively Indianised, and the name
of the Company was changed to I.T.C Limited in 1974. Currently British
American Tobacco Company (UK) controls 31.7% equity stake in ITC.
Though the first six decades of the Companys existence were primarily
devoted to the growth and consolidation of the Cigarettes and Leaf tobacco
business, the seventies witnessed the beginnings of a corporate transformation
that would usher in momentous changes in the life of the company.
The companys technology, productivity, quality and manufacturing
processes are comparable to the best in the world. The company has recently
forayed into lifestyle retailing business with its launch of Wills range of
casual and formal wear products. It has also spun off its Information
Technology business into a wholly owned subsidiary to more aggressively
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pursue emerging opportunities. ITC is one of the largest exporters of Indian
agri commodities.
At Canada, Tikaria and Madhukkarai were commissioned during
the year 2002 03. In 2000, Tata group has exited from the company by
divesting their 14% equity.
HINDUSTAN LEVER LTD (HLL) Diversified Industry
Three subsidiaries, Vanaspati Manufacturing company (HVM),
Lever Brothers India Limited (LBIL), United Traders Limited (UTL) merged
to form Hindustan Lever Ltd. (HLL) 1958 Hindustan Lever Research Centre
started functioning.
HLL has achieved market leadership in soaps and detergents as well
as hair and skin care products and is the second largest manufacturer of dentalcare products. HLL is also market leader in tea, processed coffee, ice cream
and frozen desserts, tomato based products, jams and quashes.
HLL has over 36,000 employees, and has created 2 lakh indirect
jobs. Its operations are spread across 70 locations in India. There are over 50
factories, of which 28 are in backward areas. The operations involve 2000
suppliers and associates and 7000 stockiest and agent. In addition to gaining
leadership in Indian market, HLL has emerged as a major exporter. Its is a
Super Star Trading House, an honor that only seven Indian companies enjoy.
With a portfolio of soaps, detergents, tea, tomato bases products, cosmetic,
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agri products, leather products and marine products, HLLs exports turnover
in the year 2000 was Rs 1800 crores.
International Best foods (IBF) are amalgamated with the company.
As per the scheme of amalgamation two equity shares of HLL is allotted for
every three equity shares of IBF. The company has signed an agreement with
ICI India, a subsidiary of ICI plc, UK, for sale of Nickel Catalyst business and
Adhesives business, a sub unit of specialty chemicals Divisions of the
companys Chemicals and Agri operations for a consideration of Rs. 21 crore
and Rs 9 crores respectively. The company has expanded the installed
capacity of Soaps during the year 2002-03 by 5822 tonnes taking the total
capacity to 219416 tonnes. Expansion has also went on during 2002-03 in
respect of personal products by 13961 (total capacity 87920 tonnes ) tonnes,
Glycerine by 666 tonnes ( total capacity 6655 tonnes ) and Fatty acids by 4167
tonnes ( total capacity 48333 tonnes).
BHEL BHARAT HEAVY ELECTRICALS LTD.
BHEL is the largest engineering and manufacturing enterprise in
India in the energy related /infrastructure sector, today. BHEL was
established more than 40 years ago, ushering in the indigenous Heavy
Electrical Equipment industry in India a dream that has been more than
realized with a well recognized track record of performance. The company
has been earning profits continuously since 1971 72 and playing dividends
since 1976 77.
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BHEL manufactures over 180 products under 30 major product
groups and caters to core sectors of the Indian Economy Viz., Power
Generation & Transmission, Industry, Transportation, Telecommunication,
Renewable Energy, etc. The wide network of BHELs 14 manufacturing
divisions, four power sector regional centers, over 100 project sites, eight
service centers and 18 regional offices, enables the company to promptly
serve its customers and provide them with suitable products, systems and
services efficiently and at competitive prices. The high level of quality &
reliability of its products is due to the emphasis on design, engineering and
manufacturing to international standards by acquiring and adapting some of
the best technologies from leading companies in the world, together with
technologies developed in its own R & D centers.
BHEL has acquired certifications to Quality Management Systems
(ISO 9001), Environmental Management Systems (ISO 14001) and
Occupational health & Safety Management Systems (OHSAS 18001) and is
also well on its journey towards Total Quality Management.
BHELs operations are organized around three business sectors,
namely power, industry including transmission, Transportation,
Telecommunication & Renewable Energy and Overseas Business. This
enables BHEL to have a strong customer orientation, to be sensitive to his
needs and respond quickly to the changes in the market.
The greatest strength of BHEL is its highly skilled and committed
42,600 employees. Every employee is given an equal opportunity to develop
himself and grow in his career. Continuous training and retraining, career
planning, a positive work culture and participative style of management all
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companys client base consists of around 280 large customers connected with
a load of 500 mw.
TEC have Hydel plants at Bhira, Bhivpuri and Khopoli, and thermal
power plant at Trombay. The Total capacity is 1778mw. A combination of
hydel and thermal enables TEC to charge lower tariff to clients, since the
variables cost of generating hydel power is only a small fraction of the cost of
thermal. TEC have highly depreciated old plants and hence it is investing in
modernization. It incurs low T & D loses due to few customers and lower risk
of theft and pilferage among HT users. In FY 2000, the companys T & D
losses stood at 2.17% which is lowest in the country.
The CAGR of the company for the past ten years stands at 14% with
most of plants of the company almost fully utilized; the incremental revenues
are coming from R & M. The company is also aggressive on adding
additional capacities in and out of Mumbai. However, lower off take by
BSES after the commissioning of the Dahanu plant has also led to a marginal
decline in sales volumes.
VIDESH SANCHAR NIGHAM LIMITED (VSNL)
Videsh Sanchar Nigma Ltd is a global Indian Telecommunications
Company. VSNL is a provider of international wholesale voice services, and
a wholesale voice over Internet protocol provider. VSNL was Indias sole
telecom carrier for international calls unit 2002. While domestic calls are
carried by Mahanagar Telephone Nigam Limited (MTNL) Bharat Sanchar
Nigam Limited (BSNL) and private companies, international calls were routed
through VSNL. It also provided bandwidth for Internet service providers.
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In 2002 the Indian Government privatized VSNL. The Tata Group
group acquired a controlling stake in VSNL and the government holds a
minority stake. The Indian government owns approximately 26 percent of
VSNLs equity and the Tata Group about 45 percent. The balance is held
between various overseas equity holders, including ADR holders, Indian,
institutions and the Indian public.
The company offers its products and services under the brand name
Tata Indicom in India. The company stock is now traded on the Bombay
Stock Exchange and also trades in the United States as an American
Depository Receipt (ADR) under the ticker symbol VSL. Revenues for the
financial year 2006 stood at approximately US $1.03 billion.
Videsh Sanchar Nigam Ltd. (VSNL) is no longer the sole provider of
international log distance services in India. The lucrative monopoly once
provided about 90% of the companys sales. VSNL is the countrys leading
ISP, although its share of that market is decreasing, too. VSNL hopes to enter
the domestic long distance phone market, and it is building up its network
infrastructure. Before opening the international long distance market to
competition, the government of India sold a 25% stake in VSNl, with
management control, to the Tata conglomerate in 2002. VSNL is buying a
stake in fixed line operator Tata Teleservices. The government still owns
about 26% of VSNL; a unit of the Tata Group owns 46%.
BAJAJ AUTO LTD
Bajaj Auto is a major Indian automobile manufacturer. It is Indias
largest and the worlds 4the largest two and three wheeler maker. It is based
in Pune, Maharashtra, with plants in Waluj near Aurangabad, Akurdi and
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Chakan, near Pune. Bajaj Auto makes and exports motor scooters,
motorcycles and the auto rickshaw. It is widely believed that Bajaj is headed
for a de merger into 2 separate companies; Bajaj Auto and Bajaj Finance. It
is expected that sum of the parts created, will be worth more than the current
whole, as was the case in the de merger of Reliance Industries.
Bajaj Auto came into existence on November 29, 1945 as M/s
Bachraj Trading Corporation Private Limited. It started off by selling
imported two and three wheelers in India. In 1959, it obtained license from
the Government of India to manufacture tow and three wheelers and it went
public in 1960. In 1970, it rolled out its 100,000 vehicle. In 1977, it managed
to produce and sell 1000,000 vehicles in single financial year. In 1985, it
started producing at Waluj in Aurangabad. In 1986, it managed to produce
and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its
ten millionth vehicles and produced and sold 1 million vehicles in a year.
The company over the last decade has successfully changed its image
from a scooter manufacturer to a two wheeler manufacturer, product range
ranging from scooter to scooter to Motorcycle. Its real growth in numbers has
come in the last 4 years after successful introduction of a few models in the
motorcycle segment.
The company is headed by Rahul Bajaj who is worth more than US $
1.5 billion
OIL AND NATURAL GAS CORPORATION LIMITED
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Oil and Natural Gas Corporation Limited (ONGC) (incorporated on
June 23, 1993) is a public sector petroleum company based in Dehradun,
India. It is a Fortune Global 500 company, and contributes 77% of Indias
crude oil production and 81% of Indias natural gas production. It is the
highest profit making corporation in India. It was set up as commission on
August 14, 1956. Indian government holds 74.14% equity stake in this
company.
ONGC is engaged in exploration and production activities. It is
involved in exploring and exploiting hydrocarbons in 26 sedimentary basins
of India. It produces about 30% of Indias crude oil. It owns and operates
more than 11,000 kilometers of pipelines in India. Until recently (march
2009) it was the largest company in terms of market cap in India.
RANBAXY LABORATORIES LTD Pharmaceuticals industry
Incorporated in Jun61 as a private limited company, Ranbaxy
Laboratories (RLL) manufactures and markets pharmaceutical dosage forms
(for human health care), animal health care products, bulk drugs and
intermediates, diagnostics, laboratory chemicals and reagents. It is the largest
exporter of bulk drugs and pharmaceutical dosage forms in India. For several
years, it has consistently been winning export awards, the last one being the
top Trishul award form CHEMEXCIL in Nov 92.RILL has three successful
overseas joint ventures in Nigeria, Malaysia and Thailand. A joint venture
incorporated in India with Eli Lilly a leading original research company in
pharmaceuticals was began its operations.
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Fortune Global 500 company and is the largest private sector company in
India.
Backward vertical integration has been the cornerstone of the
evolution and growth of Reliance. Starting with textiles in the late seventies,
Reliance pursued a strategy of backward vertical integration in polyester,
fibre intermediates, plastics, petrochemicals, petroleum refining and oil and
gas exploration and production - to be fully integrated along the materials and
energy value chain.
The Groups activities span exploration and production of oil and
gas, petroleum refining and marketing petrochemicals (polyester, fibre,
intermediates, plastics and chemicals), textiles and retail. Reliance enjoy
global leadership in its businesses, being the largest polyester yarn and fibre
producer in the world and among the top five to ten producers in the world in
major petrochemical products.
The Group exports products in excess of USD 7 billion to more than
100 countries in the world. There are more than 25000 employees on the rolls
of Group companies. Major Group Companies are Reliance Industries Limited
(including main subsidiaries Reliance Petroleum Limited and Reliance Retail
Limited), Indian Petrochemicals Corporation limited and Reliance Industrial
Infrastructure Limited
Tata Iron and Steel Company Limited
Tata Steel, Formerly known as TISCO (Tata Iron and Steel Company
Limited) is a steel company based in Jamshedpur, India.
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Its main plant is located in Jamshedpur, Jharkhand, though with its
recent acquisitions, the company has become a multinational with operations
in various countries. The registered office of Tata Steel is in Mumbai. In the
year 2000, the company was recognized as the worlds lowest-cost producer
of steel. The company was also recognized as the worlds best steel producer
by World Steel Dynamics in 2005. The company is listed on BSE NSE.
Tata Steel annually produces 9 million tones of steel. Its turnover in
fiscal year 2007-08 was Rs. 17,144 crores (consolidated turnover was 22,518
crores).
The companys operating profit (PBT) in the same year was Rs. 5932
crores while its PAT was Rs. 3734.62 crores; it produced a record-breaking
5.0 million tones of salable steel in its Jamshedpur works that year.
Tata steel rapidly expanding its production capacity and plans to
produce 100 MTPA (million tones of steel per annum) by 2015. It acquired
Singapores NatSteel in August 2004, which added 2 million tones to its
installed annual capacity. Tata augmented its steel making capacity in
Jamshedpur by 1 MTPA in September 2005. In February 2005, Tata Steel
acquired the steel-making operations of Singapores NatSteel Ltd., winning
access to its operations in seven countries, including two steel processing
plants in China and capacity addition of 2.0 MTPA. In the same year it
acquired Thailands Millennium Steel PCL that also had a capacity of 1.7
million tones p.a. In March 2008, it acquired two steel making units in
Vietnam through its subsidiary NatSteel Asia, thereby inching forward to take
4th spot in world steel companies ranking.
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Mahindra and Mahindra Limited
Tech Mahindra Ltd. (tech M) formerly known as a Mahindra British
Telecom (MBT) is a joint venture between Mahindra and Mahindra Limited
(M&M) and British Telecommunications Plc (BT), UK with M&M holding
57% and BT holding 43% of equity. Tech Mahindra has its headquarters at
Pune, India. Tech Mahindra commenced operations as a Software Services
company in 1988 and focuses on providing services to the global telecom
industry. Today it is the leading telecom solution provider in India. Tech
Mahindra Limited (formerly known a Mahindra-British Telecom Limited) is
the global leader in providing end-to-end IT services and solutions to the
Telecom industry. Over 18000 professionals services clients across various
telecom segments, from multiple offshore development centers across 7 cities
in India and UK and 13 sales offices across Americas, Europe and Asia-
Pacific.
Having serviced premium telecom companies worldwide, for nearly
two decades, Tech Mahindra combines deep domain expertise in OSS
(Operations Support Systems) and BSS (Business Support Systems) Systems,
Intellectual leadership and a global workforce advantage to provide services to
leading players in the telecom ecosystem. Tech Mahindra provides a wide
variety of services ranging from IT strategy and consulting to system
integration, design, application development, implementation, maintenance
and product engineering. Through a rich Telecom heritage, Tech Mahindra
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has built long-term sustainable relationships with telecom customers through
delivery of IT services that help them achieve significant ROI and the greatest
competitive advantage in the telecom marketplace.
Committed to quality, Tech Mahindra adds value to client businesses
through well-established methodologies, tools and techniques backed by its
stringent quality processes. Tech Mahindra is ISO 9001:2000 certified and is
also assessed at SEI-CMMi Level 5 and SEI-PCMMi Level 5. Tech Mahindra
is also BS7799 Certified.
Majority owned by Mahindra & Mahindra, Indias fifth largest
commercial group, in partnership with BT Plc (BT), Europes second largest
telecom service provider, Tech Mahindra has grown rapidly to becom the 8th
largest software exporter in India (Nasscom 2005).
WIPRO COMPUER Software Industry
Wipro commenced operations as an agro based industry and is now
a diversified, integrated company in information technology, Finance,
Insurance, Banking Manufacturing, Healthcare, Retail, Utilities, Telecom,
Datacom.
Wipro Technologies is an IT service company established in 1980 in
India. It is a subsidiary Wipro Limited (incorporated 1946, in operation since
1945). It is headquartered in Bangalore. It is the third largest IT service
company in India. It has 68000 employees as of Apr 2009, inclusive of its
BPO arm which it acquired in 2002.
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Wipro Technologies has over 300 customers across USA, Europe
and Japan including 50 of the Fortune 500 companies. Some of its customers
are Boeing, Cisco, Ericsson, IBM, Microsoft, Prudential, Seagate, Sony, Sun
Microsystems and Toshiba.sss It is listed on the New York Stock Exchange
and it is part of its TMT (Technology media telecom) index.
With revenue in the excess of US $ 3 billion, Wipro is one of India
major information technology companies. Wipro has dedicated development
centres and offices across India, Europe, North America and Asia Pacific.
Wipro is providing services of IT & IS consulting for E business
Transformation, electric Commerce, Web Enabling, ERP, Data Warehousing
and Customer Relationship Management. It has entered into a financial joint
venture with Bickman Instrumental, US; to form Wipro began to manufacture
bio-analytical instruments in India. Wipro Lighting is a major diversification
of Wipro, manufacturing and marketing lighting products for households and
the commercial and industrial markets.
Wipro has set up an overseas design centre, Odyssey 21 for
undertaking projects and product developments in advanced technologies for
overseas clients. Five of Wipros manufacturing and development facilities
secured the ISO 9001 certification during 1994-95. Wipro Info Tech and
Wipro systems were amalgamated with Wipro in Apr. 94. Wipro Info Tech
spun off its peripherals services division in to new legal entity, Wipro e
peripherals Sep 2000. In Feb, 2001, Wipro became the first software
technology and Services Company in India to be certified for ISO 14001
certification for complying with three major software development and
technology centers in Bangalore. The company has strong software
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engineering processes & also achieved ISO 9000 certification. Wipro is the
first software company to get SEI Level 5 & also implemented Six Sigma
TQM practices of software projects and support functions.
The Company also has reached an agreement to purchase the equity
interest in Netkracker Limited held by venture capital funds of ICICI group
for a total consideration of Rs 30 million. Consequent to the purchase of
equity interest, Netkracker becomes a subsidiary of the company. The Fluid
Power business and Netkracker will be combined and renamed as Wipro Fluid
Power Limited.
TATA CONSULTANCY SERVICE LIMITED
Tata consultancy Services Limited (TCS Limited) is an Indian
information technology, consulting, services and business process
outsourcing organization which commenced operations in 1968. As of 2008.
It is Asias largest IT services firm with annualized revenues of over US $ 4
billion and has the largest number of employees among all the Indian IT
companies with strength of over 95,000 for fiscal year 2005 06, it posted a
net profit of Rs. 3,709 crore.
TCS is part of one of Asias largest conglomerates and most
respected groups, the Tata Group, which has interest in areas such as energy,
telecommunication, financial services, chemicals, engineering and materials.
TCS has proved its ability to compete with global giants like IBM
and Accenture by being a joint contractor in the ABN Amro deal, one of the
biggest outsourcing deals in Europe worth 1.8bn ($ 2.2bn). Through this deal
TCS has caught the attention of top InfoTech companies of the world.
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TCS is trying hard to move up the value chain by expanding services
offerings, deepening domain expertise, adding new vertical segments, and
broadening its client base. TCS finds it challenging to differentiate with other
Indians IT companies as well who are largely alike in service offerings,
pricing, workforce quality, skill set, execution delivery, and client servicing.
As the size and complexity of the projects increase, TCS will be required to
take more risks. For the larger deals it will have to compete with the top
global players.
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ANALYSIS AND INTERPRETATION FOR DATA
Intelligent investing is about how effectively investors are able to
balance their risk and return. Since risk is commensurate with return,
achieving investment goal would mean earning the maximum possible
investment income (return) within the level of risk acceptable to them.
The finance theory does offer a free lunch: the reduction in risk that
obtainable through diversification. An investor who spreads the wealth
among many investments can reduce the volatility of the portfolio, provided
only that the underlying investments are imperfectly correlated.
Diversification is a lunch that has not only remained free, but has grown
more lavish over the years. While many investors may wish to take active
positions on the basis of their own opinions and information, all investors
should carefully consider the extra risk that is involved in small concentrated
portfolios.
4.1 PORTFOLIO THEORY
HENRY MARKOWITZ laid the foundation to the portfolio theory in
1951. He began with a simple observation that since almost all investors
invest in several securities rather than just one, there must one some benefit
from investing in a portfolio of several securities. Defining the variability of
return as an appropriate measure of risk of a portfolio, he provided
justification for diversification of investment. He showed that in general,
investing in several securities would reduce the variability of returns and
hence the riskiness of a portfolio.
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4.2.1 ALTERNATIVE MEASURE OF RISK
One of the best known measures of risk is the variance or standard
deviation of expected return. It is a statistical measure of the dispersion of
returns around the expected value whereby a larger variance or standard
deviation indicate greater dispersion
Although there are numerous potential measures of risk, we will use the
variance or standard deviation of return because
The measure is somewhat intuitive
It is a correct and widely recognized measure
It is used in most of the theoretical asset pricing models.
4.2.2 PORTFOLIO RISK
Just as the individual investment is measured by the variance of itsreturn, the risk of the portfolio too is measured by the variance of its return.
4.3 DEFINITION OF RETURN
The rate of return on an investment for a period (say one year) is defined as
follows
Rate of Return = annual income + (ending price beginning price)
Beginning price
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4.4.1 THE IMPACT OF DIVERSIFICATION
Diversification reduces the unsystematic risk. As is explained in
portfolio theory, one can reduce risk by adding stocks in a portfolio. If the
rates of return of individual securities are not perfectly positively correlated,
diversification results in risk reduction. Empirical studies have shown that
high benefits of diversification are obtained by forming a portfolio of 10-15
securities thereafter gains of diversification are negligible.
As explained earlier, each individual stock price movement is a
combination of stock related events and events affecting overall economy, or
market. With diversification, events relating to individual stocks tend to
cancel each other and one is left with only events common to the entire
economy. Hence the risk captured in index is systematic risk of market risk.
4.4.2 DIVERSIFICATION IN STOCKS
Diversification offers investors a way to reduce risk. It is possible to
have a diversified portfolio of