OPTIMAL PORTFOLIO CONSTRUCTION WITH NSEs NIFTY SCRIPS AN ANALYTICAL RESEARCHVIGNESHWARAN.A.M 11MBA049 1120400101Under the guidance of

Mr. SENTHIL KUMAR.A ASSISTANT PROFESSOR (SRG)

KCTBS1 VIGNESHWARAN A M 25-04-2013

PORTFOLIO PORTFOLIO is Collection of investments all owned by

the same individual or organization. These investments often include stocks, which are investments in individual businesses; bonds, which are investments in debt that are designed to earn interest; and mutual funds, which are essentially pools of money from many investors that are invested by professionals or according to indices. Portfolio diversifying the financial assets or investments to

minimize the risk.

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OPTIMAL PORTFOLIO Optimal Portfolio in which the risk-reward combination is such that it yields the maximum returns (provides the highest utility) possible under the current and anticipated circumstances. Its mathematical formulation was provided the University of California's noble laureate economist Harry Markowitz (born 1927) in 1952

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INTRODUCTION This research paper will tell us how to create an optimal portfolio with nifty scrips using Sharpes Single Index Model. This paper will create the optimal portfolio where the

returns are maximum with given risk. This paper also creates a predictive model and compare it

with the actual existing model.

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COMPANY PROFILE COMPANY NAME: NIRMAL BANG SECURITIES PVT.

LTD No. of Employees : 300 No. of Offices : 180 No. of Sub-brokers : 242

Terminals with Sub-brokers: 4905 VIGNESHWARAN A M 25-04-2013

MANAGEMENTDirectors

D M Bang, K M Bang

Chief Executive Officer S V Chalapathi M Chief Compliance Officer S Kamdar

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PRODUCTS & SERVICES Trading (Equity/Derivative/Commodity)

IPOs Depository Services Arbitrage Margin Financing Sale of Mutual Funds Online TradingVIGNESHWARAN A M 25-04-2013

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PROBLEM STATEMENT In Highly fluctuating market condition the investors

werent able to identify the scripts with maximum return and minimum given risk and they werent able to diversify their risky investments. This study would help them to construct the optimal

portfolio for their investments which can earn more return with minimum given risk

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ObjectivesPrimary To construct the portfolio with the NSEs NIFTY scrips which will give maximum return with given level of risk. using SHARPEs SINGLE INDEX MODEL .

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Secondary To calculate the excess return of each scrips. To calculate the excess return to risk ratio. To calculate the unsystematic risk of each risk.

To identify the cut-off rate i.e. C* To measure the accuracy of the predicted model by

comparing with actual existing model.

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PROPOSED RESEARCH METHODOLOGY Type of Research : Analytical Research Type of Data Source of Data

: Secondary data : www.nseindia.com www.moneycontrol.com www.nirmalbang.com : 1st January 2007 31st December 2011 (5 years)

Period of study

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TOOLS :Proposed Tools: For constructing the optimal portfolio the following tool is used (Descriptive tool) Sharpes Single Index Model The statistical tests applied for analysis to compare the

predictive model & actual model include: (Statistical tool) Correlation t- Test.

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SHARPEs SIM Vs Markowitz MPT SHARPEs SINGLE

MARKOWITZ

INDEX MODEL [2n+(n(n-1)/2)] For 50 scrips 1325 inputs required. The complexity increases with the number of scrips.

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MODERN PORTFOLIO THEORY [3n+2] For 50 scrips 152 inputs required Simplified Model of MPT Comparatively less complex for more 25-04-2013 number of scrips.

THANK YOU

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