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EXECUTIVE SUMMARY
In the present competitive scenario every individual very much interest
to invest their savings on market instrument, which gives higher returns, with
minimum risk. The untrade participate adopted by share market agents and lack
of awareness about the market the individual investor are facing lot of problems
in the share market.
The present liberalized, privatized and globalizes, economic scenario.
Providing the opportunity's to establish M N C's in the economy by individual
investor must control investment. While controlling portfolio, it needs to under
take scientific investigation about the individual portfolio management to get
benefited to the stock market. In present study a detailed investigation is
undertaken to study about portfolio management of investors in general and
portfolio investment in WIPRO,INFOSYS,SATHYAM,AMBUJACEMENT,
BAJAJAUTO, HDFC,HERO HONDA MOTORS, and BPCL in particular.
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CHAPTER 1
INTRODUCTION
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INVESTMENT DECISIONS
DEFINITION OF INVESTMENT
According to F.AMLING, "investment may be defined as the purchase
by an individual or institutional investor or a financial or real asset that produce
a return proportional to the risk assumed over some future investment period."
According to D.E FISHER and R.J.JORDAN, "investment is a
commitment of funds made in the expectation of some positive rate of return. if
the investment is properly undertaken. The return will be commensurate with
the risk investor assume".
CONCEPT OF INVESTMENT
Investment will be generally be used in its financial sense and as such
investment is an allocation of monetary resources to assets that are expected to
yield some gain or positive return over a given period. Investment is a
commitment of person's funds to derive future income in the form of interest,
dividends, rent, premiums, pension benefits or the appreciation of the value of
his principle capital.
Any investors would like to know the media or range of investment so
that he can use his discretion and save in those investments, which will give
them both security and stable return. The ultimate objective of the investor is to
derive a variety of investments that met his preference for risk and expected
return. The investor will select the portfolio, which will maximize his utility.
Another important consideration is the temperament and psychology of the
investor. It is not only the consideration of a portfolio that will promise the
highest expected return, but it is the satisfaction of the need of the investor.
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INVESTMENT PROCESS
The investment process may be described in the following stages.
1. INVESTMENT POLICY
The first stage determines and involves personal financial affairs and
objectives before making investment. It can also be called the preparation of the
investment policy stage. The investor has to see that he should be able to create
an emergency fund, an element of liquidity and quick convertibility of securities
into cash. This stage may, therefore, be called the proper time for identifying
investment assets and considering the various features of investment
.
2. INVESTMENT ANALYSIS
After arranging a logical order of types of investment. Preferred, the next
step is to analyze the securities available for investment. The investor must
make a comparative analysis of type of industry; kind of securities etc, the
primary concerns at this stage would be to form beliefs regarding future
behavior of prices and stocks, the expected return and associated risks.
3. INVESTMENT VALUATION
Investment value, in general is taken to be the present worth to the
owners of future benefits from investments. The investor has to bear in mind the
value of these investments. An appropriate stet of weights have to be applied
with the use of forecasted benefits to estimate the value of investment assets
such as stocks, debentures and bonds and other assets. Comparison of the value
with the current market price of the asset allows a determination of the relative
attractiveness of the asset. Each asset be valued on its individual merit.
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Type D: investor both stock picking and market timing skills
This type of investor would use the techniques used by both the type B
and type C investor. These investors would have the most active and aggressive
portfolio management strategies. Using their skills in identifying undervalued
scrip, they should hold concentrated portfolios. Portfolios and let the beta
fluctuate quiet sharply around the long run target value. A pitfall to be very
strenuously avoided is that of assuming that one has a skill, which one in reality
does not have. For example, a investor who does not have very good abilities in
scrip selection may still think that he does not have such skills. He should then
end up with an ill-diversified portfolio, which earns mediocre returns he would
have been better off with a passive portfolio.
QUALITIES FOR SUCCESFUL INVESTING
Contrary thing
Patience
Composure and
Flexibility.
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INTRODUCTION
Portfolio management is all about strengths, weaknesses, opportunity,
threats in the choice of debt vs. equity, domestic vs. international vs. growth vs.
safety, and numerous other trades-offs encountered in the attempt to maximize
return at a given appetite for risk.
A portfolio is a collection of securities. Since it is rarely desirable to
invest the entire funds of an individual or an institution in a single security, it is
essential that every security be view in portfolio context. Thus, it seems logical
that the expected return on a portfolio should depend on the expected return of
each of the security contained in the portfolio.
Portfolio analysis considers the determination of future risk and return in
holding various blends of individual securities. Portfolio expected return is a
weighted average of the expected return of individual securities but portfolio
variance, in short contrast, can be something less than a weighted average of a
security variance. As a result, an investor can sometimes reduce portfolio risk
by adding security will greater individual risk than any other security in the
portfolio. This is because risk depends greatly on the covariance among returns
of individual securities. Portfolios, which are combination of securities may or
may not take only aggregate characteristics of their individual parts.
WHAT IS DOES PORTFOLIO MANAGEMENT INVOLVE
Portfolio management involves establishing an integrated process,
which links programmers and project management with effective portfoliomanagement practices that support the successful delivery of the organizations
strategic objectives. The portfolio management process involves the collection
of pertinent information about all the programmer and project in an
organization, and relating that information to the business requirement and
capabilities of the organization. The outputs of portfolio management will be
informed decisions about choice of program and project, assignment of
priorities, reserves allocation, interdependencies, staffing and skill requirements
and deployment, risks and benefits, gaps and overlaps in the portfolio.
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OBJECTIVES OF THE PORTFOLIO MANAGEMENT
The objectives of portfolio management can be classified into two categories as
follows.
1) Basic objectives
a) To maximize yield
b) To minimize the risk
2) Secondary objectives
a) Regular return
b) Stable Income
c) Appreciation of capital
d) More liquidity
e) Safety of investment
f) Tax benefits
NEED FOR PORTFOLIO MANAGEMENT
Portfolio management is process encompassing many activities of
investment in assets and securities. It is a dynamic and flexible concept andinvolves regular and systematic analysis, judgment and actions. The objectives
of this service help the investors with the expertise of professional in investment
portfolio management. It involves construction of portfolio based upon the
investor's objectives, constraints and preferences for a risk, returns, and tax
liability. The portfolio reviewed and adjusted from time to time in tune with
market conditions. The evolution of portfolio is to be done in terms of targets
set for risk and return. The changes in the portfolio are to be effected to meetthe changing conditions.
Portfolio construction refers to the surplus funds in hand among the
verity of financial assets open for investment. Portfolio theory concerns itself
with the principal governing such allocation. The modern view of investment is
oriented more towards the assembly of proper combinations of individual
securities to force investment portfolio. A combination of securities held
together will give a beneficial result if they are grouped in a manner to secure a
high return after taking into consideration the risk element.
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ELEMENTS OF PORTFOLIO MANAGEMENT
Portfolio management is ongoing process involving the following basic tasks.
1. Identification of investor's objectives, constrains and preferences.
2. Strategies are to be developed and implemented in turn with
investment policy formulated.
3. Review and monitoring of the performance of the portfolio.
4. Finally the evaluation of portfolio.
IMPORTANTS OF PORTFOLIO MANAGEMENTS
Most organization operates in complex environment with many
programmers and project going on any one time. Portfolio management
provides the means to:
Establish a structure for selecting the right program and project
Assess weather requirements can be accommoMonthd with in existing
organization capability and capacity.
Allocate the right resources to the right program and project
Resolve conflicts and contentions for scarce and costly resources.
Identify and manage interdependencies between program and project
Assess the true implication of the aggregate level of program and project
risks.
PORTFOLIO ANALYSIS
A portfolio is a group of securities held together as investment. Investors
invest their funds in a portfolio of securities rather than in a single security
because they are risk averse. By constructing a portfolio, investors attempts to
spread risk by not putting all their eggs into one basket. Portfolio phase of
portfolio management consists of identifying the range of possible portfolios
that can be constituted from a given set of securities and calculating their return
& risk for further analysis.
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PORTFOLIO SELECTION
Portfolio analysis provides the input for next phase in portfolio
management, which is portfolio selection. The proper goal of portfolio analysis
can be to get high return at a given level of risks. The inputs from portfolio
analysis can be used to identify the set of efficient portfolios. From this set of
portfolio, optimal has to be selected for investment.
PORTFOLIO REVISION
Having constructed the optimal portfolio, the investor has to constantly
monitor the portfolio to ensure that it continues to be optimal. As the economy
and financial markets are dynamic, the changes take place almost daily. The
investor now has to revise his portfolio. The revision leads to purchase of new
securities and sale of some of the existing securities from the portfolio.
PORTFOLIO EVALUTION
The objective of construction a portfolio and revising it periodically is to
earn maximum return with minimum risk. Portfolio evolution is the process,
which is concerned with assessing the performance of a portfolio over selected
period in terms of return and risk. Portfolio evolution useful in yet another way.
It provided a mechanism of identifying weakness in the investment process and
for improving these deficient areas.
RISK
Risk refers to the possibility that the actual outcomes of an investment
will be differ from its expected outcome. More specifically, most investors are
concerned about the range of the possible outcome. Risk distinguished between
the expected return and the realize return from an investment. The expected
return is the uncertain future return that an investor expects to get from his
investment. The realized return is the certain return that an investor has actuallyobtained from his investments at the end of the holding period.
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RETURN ON PORTFOLIO
Each security in portfolio contributes returns in the proportion of its
investment. Thus the portfolio expected returns is the average of the expected
returns is weight representing the proportionate share of the security in the total
investment. Why an investor does have some many securities in his portfolio, if
the security ABC given the maximum returns, why not he the security all his
funds and thus maximum the return? The answers to this question lie in the
investor's perception of risk attached to investments his objectives of income,
safety, appreciation, liquidity andhedge against loss of value of money etc., this
pattern of investment in different asset categories, securities categories, types of
investment etc., would all be described under the caption of diversification
which aims at the reduction or even elimination of nonsystematic or company
related risk and achieve the specific objectives of investors.
PORTFOLIO RISK
Risk on a portfolio from risk on individual securities. The risk is
reflected in the variability of the return from zero to infinity. The expected
return depends on the probability of return and their weighted contribution of
the portfolio. There are two measures of risk in this context, one is the absolute
deviation and other is standard deviation. MARKOWITZ MODEL
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THE MEAN-VARIANCE CRITERION
Dr. Harry Markowitz is credited with developing the first modern
portfolio analysis model in order to arrange for the optimum allocation of assets
with in portfolio. To reach this objective Markowitz generated portfolios with in
a rewards risk context. In essence, Markowitz Model is theoretical frame work
for analysis of risk return choices. Decisions are based on the concept efficient
portfolio.
A portfolio is efficient when it is expected to yield the highest return for
the level of risk accepted or, alternatively, the smallest portfolio risk for a
specified level of expected return to build an efficient portfolio an expected
return level is chosen, and assets are substituted until the portfolio combination
with the smallest variance at the return level is founds. As this repeated for
other returns, set of efficient portfolio is generated.
ASSUMTIONS:-
The Markowitz Model is based on several assumptions regarding investor
behavior:
Investors consider each investment alternative as represented by a
probability distributed of expected returns over some holding period.
Investors maximize period-expected utility and posses utility curves,
which demonstrate diminishing marginal utility of wealth.
Individuals estimate risk on the basic of the variability of expected
returns.
Investor base decisions solely on expected return and variance returns
only.
For a given risk level, investors prefer high returns to lower returns.
Similarly for a given level of expected return. Investor prefers less risk
to more risk.
Under these assumptions, a single asset or portfolio assets is considered
to be "efficient" if no other asset or portfolio of assets offers higher
expected return with same risk or lower risk with the same expected
return.
Henry Markowitz has given the following formula for a two-security portfolio.
P=A
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COVABCorrelation Coefficient (Rab) = ------------------
(A)(B)
n
Co-variance (COVAB) =1/n (RA-RA) (RB-RB) T=1Where,
(RA-RA)(RB-RB)=combined deviations of A&B
(A)(B)=Standard deviation of A&B
COVAB = Covariance between A&B
N = no of observation
The next would be the construction of the optimal portfolio on the basis of whatpercentage of investment should be invested when two securities and stocks are
combined i.e., calculation of two assets portfolio weights by using minimum
variance equation, which is given bellow.
Where
WA =proportion of investment in A
WB = proportion of investment in BThe next and final step is to calculate the portfolio risk (combined risk)that
shows how much is the risk is reduced by combining two stocks or securities by
using this formula.
Formula:
p=A2+b2wb2+rabBwaWb
Where= Standard Deviation of Securities A
WA = portfolio of investment is securities A
= Standard Deviation of security B
WB= proportion of investment in security B
rab=Correlation coefficient between security A&B.
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CHAPTER-2
RESEARCH
METHODOLGY
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RESEARCH METHODOLOGY
The methodology adopted for this study deserves a special mention.
Firstly, the research studied various secondary sources of information. Then
after discussed with the companys managerial personnel, the mode and nature
of the data collected is explained in the following lines.
PRIMARY DATA
The lecturers given by the staff were used as the basis for the project.
The observation is various departments in the organization were the online
trading and various functions of the existing departments.
SECONDARY DATA
The information related to company and industry was obtained through
secondary sources such as company annual reports.
LIMITATIONS OF THE STUDY
The study has certain limitation/ constraints, which has led to the
obstruction of widening the scope and objective of the study.
Construction of the portfolio restricted to two-assets based in
Markowitz model.
The sample size is relatively small to conduct the study.
The present study reveals the movement share pricing and its
analysis for a limited period only.
Some assumptions have make to undertaken study whenever it is
difficult to get such information.
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OBJECTIVES OF THE STUDY
1. The main objective is analyzing the risk- return characteristics of
individual Securities in the portfolio.
2. To select of multiple securities for investing.
3. To suggest the best portfolio mix.
4. To compare the expected return with actual returns.
SCOPE OF THE STUDY
This study covers the Markowitz model. Here in, order to find out at
what percentage of funds should be invested among the companies in the
portfolio. In addition, the study includes the calculations of individual standard
deviations societies involved in the portfolio. These percentages help in
allocating the funds available for investment based on risky portfolios.
NEED OF THE STUDY
In the finance field, it is a common knowledge that money or finance is
scarce and the investors try to maximize their return. But, the return is higher, if
the risk is also higher. Return and risk go together and they have a tradeoff. The
art of investment is to see that the return is maximized with the minimum of
risk, which is inherent in invest
In the above discussion, we concentrated on the word "investment" and
for making invest we need to make securities analysis. Combination of
securities with different risk return characteristics will constitute the portfolio ofthe investor.
The portfolio is also built up out of the wealth or income of the investor
over a period, with a view to suit his risk or return preferences to that of the
portfolio analysis is thus an analysis of the risk characteristics of individual
securities in the portfolio and changes that may take. Place in the combination
with other securities due to interaction among themselves and impact of each ofthem on other.
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CHAPTER-3
COMPANY PROFILE
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COMPANY PROFILE
INDIA INFOLINE PROFILE
INDIA INFOLINE Ltd is listed on both the leading stock exchanges in
India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock
Exchange (NSE). The INDIA INFOLINE group, comprising the holding
company, INDIA INFOLINE Ltd and its subsidiaries, straddles the entire
financial services space with offerings ranging from Equity research, Equities
and derivatives trading, Commodities trading, Portfolio Management Services,
Mutual Funds, Life Insurance, Fixed deposits, GoI bonds and other small
savings instruments to loan products and Investment banking. INDIA
INFOLINE also owns and manages the websites, www.indiainfoline.com and
www.5paisa.com .
INDIA INFOLINE Ltd, being a listed entity, is regulated by SEBI
(Securities and Exchange Board of India). It undertakes equities research which
is acknowledged by none other than Forbes as 'Best of the Web' and 'a must
read for investors in Asia'. Tata AIG's research is available not just over the
internet but also on international wire services like Bloomberg (Code: IILL),
Thomson First Call and Internet Securities where it is amongst the most read
Indian brokers. Its various subsidiaries are in different lines of business and
hence are governed by different regulators. The subsidiaries of INDIA
INFOLINE Ltd are:
INDIA INFOLINE Ltd
INDIA INFOLINE Ltd is a 100% subsidiary of INDIA INFOLINELtd,
which is engaged in the businesses of Equities broking and Portfolio
Management Services. It holds memberships of both the leading stock
exchanges of India viz. the Stock Exchange, Mumbai (BSE) and the National
Stock Exchange (NSE). It offers broking services. A SEBI authorized Portfolio
Manager; it offers Portfolio Management Services to clients. These services are
offered to clients as different schemes, which are based on differing investmentstrategies made to reflect the varied risk-return preferences of clients.
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INDIA INFOLINE Commodities Pvt Ltd
INDIA INFOLINECommodities Pvt Ltd is a 100% subsidiary of INDIA
INFOLINELtd, which is engaged in the business of commodities broking. Our
experience in securities broking empowered us with the requisite skills and
technologies to allow us offer commodities broking as a contra-cyclical
alternative to equities broking.
We enjoy memberships with the MCX and NCDEX, two leading Indian
commodities exchanges, and recently acquired membership of DGCX. We have
a multi-channel delivery model, making it among the select few to online as
well as offline trading facilities.
INDIA INFOLINE Distribution Co Ltd (IILD)
India Infoline.com Distribution Co Ltd is a 100% subsidiary of INDIA
INFOLINELtd and is engaged in the business of distribution of Mutual Funds,
IPOs, Fixed Deposits and other small savings products. It is one of the largest
'vendor-independent' distribution houses and has a wide pan-India footprint of
over 232 branches coupled with a huge number of 'feet-on-street', which help
source and service customers across the length and breadth of India. Its unique
value proposition of free doorstep expert advice coupled with free pick-up and
delivery of cheques has been met with an enthusiastic response from customers
and fund houses alike. Our business has expanded to include the online
distribution of mutual funds, wherein users can view and compare different
product offerings and download application forms which they can later submitto the product provider.
Mortgages & Loans
IILD has also entered the business to distribution of mortgages and loan
products during the year 2005-2006. The business is still in the investing phase
and we plan to roll the business out across its pan-Indian network to provide itwith a truly national scale in operations.
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INDIA INFOLINE Insurance Services Ltd
INDIA INFOLINE Insurance Services Ltd is also a 100% subsidiary of
INDIA INFOLINELtd and is a registered Corporate Agent with the Insurance
Regulatory and Development Authority (IRDA).
It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Ltd,
which is India's largest private Life Insurance Company.
INDIA INFOLINE Investment Services Ltd
India Info line Investment Service Ltd is also a 100% subsidiary of
INDIA INFOLINELtd. It has an NBFC licence from the Reserve Bank of India
(RBI) and offers margin-funding facility to the broking customers.
INDIA INFOLINE Insurance Brokers Ltd
India Info line Insurance Brokers Ltd is a 100% subsidiary of India Info
line Ltd and is a newly formed subsidiary which will carry out the business of
Insurance broking. We have applied to IRDA for the insurance broking licence
and the clearance for the same is awaited
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THE MANAGEMENT
Mr. Nirmal Jai
Nirmal Jain is the founder and Chairman of INDIA INFOLINELtd. He
holds an MBA degree from IIM Ahmedabad, and is a Chartered Account (All
India Rank 2) and a Cost Accountant. He has had an impeccable professional
and academic track record. He started his career in 1989 with Hindustan lever
Limited. During his stint with Hindustan Lever, he handled a variety of
responsibilities, including exports and trading in agro-commodities with Rs.3bn
annual turnover. He then joined hands with two local brokers to set up their
equity research division, inquire, in 1994. His work set new standards for
equity research in India. In 1995, he founded his own independent financial
research company, now known as INDIA INFOLINE ltd.
Mr. R. Venkataraman
R. Venkataraman is the co-promoter and Executive Director of INDIA
INFOLINELtd. He holds a B.Tech degree in Electronics and Electrical
Communications Engineering from IIT Kharagpur and an MBA degree from
IIM Banglore. He has held senior managerial positions in various divisions of
ICICI Limited, including ICICI Securities Limited, their investment banking
joint venture with J P Morgan of USA and with BZW and Taib Capital
Corporation Limited. He has also held the position of Assistant Vice President
with G e capital services India Limited in their private equity division. He has
varied experience of more than 14 years in the financial services sector.
THE BOARD OF DIRECTORS
Apart from Nirmal Jain and R Venkataraman, the Board of Directors on
INDIA INFOLINE comprises.
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Mr. Sat Pal Khattar (Non Executive Director)
Mr. Sat Pal Khattar joined the Board with effect from April 20, 2001.
Mr. Sat Pal Khattar is a lawyer by profession. He was the founding partner of a
firm of solicitors in Singapore named Khattarwong and at present is a
Consultant in the said firm. He is also a director of a number of public
companies in Singapore and India. He is the Chairman of Network India', a
body sponsored by the Government of Singapore, which promotes two-way
business contacts betIten Singapore and Indian business interests.
Mr. Sanjiv Ahuja (Independent Director)
Mr. Sanjiv Ahuja joined the Board with effect from august 28, 2002.
Mr. Ahuja graduated from National University of Singapore with a degree in
Computer Science and is also a Certified Public Accountant. He started his
career in 1988 with Accenture (formerly Andersen Consulting and has worked
on several large projects particularly in the electronics and utilities industries.
He joined the Thakral Group of Companies in 1991 as the Chief Executive of
their electronics packaging and Warehousing Company in Singapore and has
also headed the group's Indian investments division. He started his own
investment advisory and consulting company in 2001, named Centennial
Management Consultants Private Limited, focusing on investment mediation
and investment management and advice. At present, he is also an Executive
Director with Corporate Brokers International Private Limited, a reputed
Singapore based mergers and acquisitions firm focusing on the SME space and
a board member of the Singapore Indian Chamber of Commerce and Industry, apost he has held since 2002. He is very familiar with the South Asian and south
East Asian Markets and has direct investment experience in a variety of
industries including real estate development, distribution and information
technology. Mr. Ahuja has an experience of more than 17 years.
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Mr. Nilesh Vikamsey (Independent Director)
Mr. Nilesh Shivji Vikamsey joined the Board with effect from February
11, 2005. Mr. Vikamsey qualified as a Chartered Accountants of India since
1985. He has a Diploma in Information System Audit from the institute of
Chartered Accountants of India in 2003. In 1985, Mr. Vikamsey was inducted
as partner in M/S Khimji Kunverji & Co., Chartered Accountants and was in
charge of the audit department till 1990 and thereafter also handles assignments
related to financial services, consultancy, investigations, mergers and
acquisitions, valuations etc. Mr. Vikamsey is a director of alpha Garments
Private Limited, English apparels Private Limited. HLB Technologies
(Mumbai) private limited, Miloni Consultants private limited &Chairman of
HLB India. Mr. Vikamsey is a member of the Accounting Standards Board and
erstwhile Member of the Vision & Restructuring Committee of Institute of
Chartered Accountants of India and member of Expert Committees of law and
Company Affairs, infotainment & Media and Economic & Business Reforms
formed by the Indian Merchants Chamber.
Mr. Kranti Sinha (Independent Director)
Mr. Kranti Sinha joined the Board with effect from January 27-2005.
Mr. Sinha graduated from the Agra University with a Masters degree. He
started his career in 1965 as a direct recruit Class I officer with life insurance
Corporation of India and has worked in various capacities and at different
locations throughout the country. He worked at various managerial levels and
rose through the hierarchy to serve as the Director and Chief Executive of LIC
Housing Finance Limited from August 1998 to December 2002 and
concurrently as the managing Director of LICHFL Care Homes (a whollyowned subsidiary of LIC Housing Finance Limited). He has also served as the
Deputy President of the Governing Council of Insurance institute of India and
as a member of the Governing council of National Insurance of Academy, Pune
apart from various other such bodies. He is currently the Managing Director of
The Global Institute for Financial and Education Services India) private Limited
(a wholly owned subsidiary of The Global Institute, LLC, USA). Mr. Sinha is
also on the Board of Directors of Hindustan Motors Limited, Larsen & TourboLimited and LICHFL Care Homes Limited.
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CHAPTER-4
DATA ANALYSIS
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ANALYSIS OF THE PORTFOLIO
ANALYSIS OF PORTFOLIO AMBUJA CEMENTS & INFOSYS LTD.
Calculations of standard deviation of Ambuja cements ltd for the year2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr 8.136094 0.6746 7.4614 55.67248May 0.016152 0.6746 -0.613 0.37576Jun -0.178417 0.6746 -0.853 0.72762July 0.089395 0.6746 0.5853 0.342576Aug 0.145967 0.6746 -0.5287 0.279523Sept -0.114122 0.6746 -0.7887 0.62204
Oct -0.040637 0.6746 -0.7152 0.51151Nov -0.03252 0.6746 -0.7071 0.4999Dec -0.14308 0.6746 -0.8176 0.66846Jan 0.13018 0.6746 -0.5445 0.296480Feb -0.05673 0.6746 -0.7313 0.53479Mar 0.1441 0.6746 -0.5305 0.28143
Total 8.0962 (R-R)2 = 60.8126
R 8.0962Average = -------- = ------------- = 0.6746
N 12
Variance = (1/n-1(R-R)2
T=1
= (1/12-1) (60.8126)
= 5.52842
_______Standard deviation = variance
________= 5.52842
= 2.35126
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Calculation of standard deviation of Infosys ltd for the year 2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr -0.16080 0.5380 -0.4146 0.1718May 0.190846 0.5380 -0.063 0.0396
Jun 0.04784 0.5380 -0.206 0.0424Jul -0.01553 0.5380 -0.2693 0.0725Aug 0.0565 0.5380 -0.1973 0.0389Sept 0.046569 0.5380 -0.2073 0.0429Oct -3.2777 0.5380 -3.5319 12.4714Nov -0.039019 0.5380 -0.2928 0.0857Dec 0.111966 0.5380 -0.1418 0.0201Jan -0.0401 0.5380 -0.2939 0.0863Feb -0.02124 0.5380 -0.275 0.0754Mar 0.05516 0.5380 -0.1987 0.0394
Total 3.0457 (R-R)2 = 13.1509
R 3.0457Average = ----------- = ------------ = 0.25380
N 12
Variance = (1/n-1) (R-R)2
T=1
= (1/12-1) (13.1509)
= 1.19542
______Standard deviation = variance
______= 1.1954= 1.09334
N
COVAB = 1/n (RA-RA) (RB-RB)T=1
= 1/12(.0465)6.0913)= 0.02574
COVAB
Rab = ------------(A)(B)
0.02574= -----------------------
(2.3512)(1.0933)
= 0.01001
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WEIGHTS:B (B-rabA)
Wa = -------------------------------A2+B2-2rabABAB
Wb = 1-WA
1.09334(1.09334)-(0.01001) (2.35123)Wa = ---------------------------------------------------------------
(2.35123)2+ (1.09334)2-2(0.01001)(2.35123)(1.09334)
1.1718573Wa = -----------------
6.556985Wa = 0.17818
Wb = 1-wa
= 1-0.178718
Wb = 0.82128
Portfolio risk
AMBUJA & INFOSYS
_____________________p = A2+b2wb2+rabBwaWba = 2.35123b=1.09334rab = 0.01001
Wa = 0.17818
Wb = 0.82128
p = (2.35123)2(0.17818)2 + (1.09334)2+(082128)2
+2(0.01001)(2.35123)(1.09334)(0.17818)(0.82128)
_____________________________p = (0.176574) + (0.806292)+(7.55394)
________p = 8.536813)
p = 2.9217%
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AMBUJA CEMENTS & INFOSYS LTD
As for calculation and study, AMBUJACEMENTS bears a proportion of
0.178718 and INFOSYS Ltd bears a proportion of 0.82128. The risk Of
INFOSYS is less than that of AMBUJA cements i.e., 2.35123> 1.09334, which
risk of 2.9217% when compared to the individual risk of both the companies is
high.
AMBUJA CEMENTS & BAJAJ AUTO Ltd
Calculations of standard deviating of Ambuja cements ltd. for the year
2009-10R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr 8.136094 0.6746 7.4614 55.67248May 0.016152 0.6746 -0.613 0.37576June -0.178417 0.6746 -0.853 0.72762July 0.089395 0.6746 0.5853 0.342576Aug 0.145967 0.6746 -0.5287 0.279523Sept -0.114122 0.6746 -0.7887 0.62204Oct -0.040637 0.6746 -0.7152 0.51151Nov -0.03252 0.6746 -0.7071 0.4999Dec -0.14308 0.6746 -0.8176 0.66846Jan 0.13018 0.6746 -0.5445 0.296480Feb -0.05673 0.6746 -0.7313 0.53479Mar 0.1441 0.6746 -0.5305 0.28143
Total 8.0962 (R-R)2=60.8126
R 60.8116Average = ------------- = ---------------- = 0.6746
N 12
Variance = (1/n-1(R-R)
2
T=1= (1/12-1) (60.8116)
= 5.52832
_______Standard deviation = variance
_______= 5.52832
= 2.35123
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Calculation of Standard deviation of BAJAJ AUTO Ltd for the year2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.Dev
Apr 0.0073 0.7656 -0.0692 0.00478May 0.11581 0.7656 0.0393 0.00154June 0.111245 0.7656 0.0347 0.00120July 0.05350 0.7656 -0.023 0.000529Aug -0.01962 0.7656 -0.0961 0.00923Sept 0.18461 0.7656 0.1081 0.0116Oct -0.00280 0.7656 -0.0793 0.00629Nov 0.16562 0.7656 0.0891 0.00793Dec -0.00556 0.7656 -0.082 0.00672Jan 0.06908 0.7656 -0.0075 0.000056Feb 0.19330 0.7656 0.1168 0.0136
Mar 0.0464 0.7656 -0.0301 0.000906Total 0.918895 (R-R)2=0.064381
R 0.918895Average = ----------- = ------------ = 0.07656
N 12
Variance = (1/n-1) (R-R)2
T=1
= (1/12-1) (0.064381)= 0.00585
______Standard deviation = variance
______= 0.00585
= 0.0765N
COVAB = 1/n (RA-RA) (RB-RB)
T=1=1/12(.0465) (7.4917)
=0.02901
COVABRab = ------------
(A)(B)
0.02901= ---------------------
(2.3512)(0.0765)= 0.16135
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WEIGHTS:
WA = weight of Ambuja cements
Wb = weight of Bajaj Auto ltd
B(B-rabA)Wa = -------------------------------
A2+B2-2rabABAB
(0.00585)( 0.00585) - (0.16135) (2.35123)Wa = ----------------------------------------------------------------------------------- (2.35123)2 + (0.00585)2-2(0.16135)(2.35123)(0.00585)
-0.3794Wa = -----------------
5.5239Wa = 0.0687
Wb = 1-wa
= 1-0.0687
Wb = 0.9313
Portfolio risk
AMBUJA & BAJAJ AUTO
_______________________p = A2+b2wb2+rabBwaWb
a = 2.35123b=0.00585 rab = 0.16135
Wa = 0.1396
Wb = 0.8604
p = (2.35123)2(0.1396)2+(0.00585)2+(0.9313)2
+2(0.16135) (2.35123) (0.00585) (0.0687) (0.9313)
_____________________p = (0.1072)+(7.2877)+(7.000)________
p = 14.3949
p = 3.7940%
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AMBUJA CEMENTS & BAJAJ AUTO
In the combination, the investors can invest their funds in accordance
with in this combination; the investment i.e., 0.1396 for Ambuja and the
remaining 0.8604 in Bajaj. The difference in weights exits because the risk of
Ambuja, which is 2.35123%, funds in this portfolio it is suggested that the
investor should invest portion of funds in Bajaj and divert the remaining funds
to Ambuja. In comparison the portfolio risk, which is 3.7904% is less the
individual risks of both the assets in the portfolio
INFOSYS LTD & ACC CEMENTS
Calculation of standard deviation of INFOSYS ltd for the year 2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr -0.16080 0.25380 -0.4146 0.1718May 0.190846 0.25380 -0.063 0.0396June 0.04784 0.25380 -0.206 0.0424July -0.01553 0.25380 -0.2693 0.0725Aug 0.0565 0.25380 -0.1973 0.0389Sept 0.046569 0.25380 -0.2073 0.0429
Oct -3.2777 0.25380 -3.5319 12.4714Nov -0.039019 0.25380 -0.2928 0.0857Dec 0.111966 0.25380 -0.1418 0.0201Jan -0.0401 0.25380 -0.2939 0.0863Feb -0.02124 0.25380 -0.275 0.0754Mar 0.05516 0.25380 -0.1987 0.0394
3.0457 (R-R)2=13.1509
R 3.0457Average = ----------- = ------------ = 0.25380
N 12
Variance = (1/n-1) (R-R)2
T=1= 1/12-1) (13.1509)
= 1.19542
______Standard deviation = variance
______= 1.1954= 1.09334
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Calculation of standard deviation of ACC for the year 2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr 06.206896 0.78075 -6.9875 48.8251
May 0.043490 0.78075 -0.7373 0.543611Jun -3.967729 0.78075 -4.7484 22.54730July 0.133905 0.78075 -0.6460 0.417316Aug 0.104965 0.78075 -0.6758 0.45670Sept 0.015104 0.78075 -0.7686 0.586143Oct -0.091836 0.78075 -0.8725 0.761256Nov 0.142760 0.78075 -0.638 0.407044Dec 0.04745 0.78075 -0.73325 0.53758Jan 0.065055 0.78075 -0.7157 0.512226Feb 0.093554 0.78075 -06872 0.47224Mar 0.25136 0.78075 -0.52934 0.08020
9.36905 (R-R)2=76.34659
R 9.36905Average = ----------- = ------------ = 0.78075
N 12
Variance = (1/n-1) (R-R)2T=1
= 1/12-1)(76.34659)= 6.93989
______Standard deviation = variance______
= 6.9398
= 2.6343
COVAB = 1/n (RA-RA)(RB-RB)T=1
= 1/12(6.0913)(6.8900)
= 3.8149
COVABRab = ------------
(A)(B)3.8149
= -----------------------(1.09334)(2.6343)
= 1.3246
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WEIGHTS: WA = weight of Infosys Ltd.
Wb = weight of ACC ltd
B (B-rabA)
Wa = -------------------------------A2+B2-2rabABABWb = 1-WA
(2.6346)(2.6346)-(1.3246)(1.09334)Wa = ------------------------------------------------------------
(1.09334)2+(2.6343)2-2(3.9497)(2.3513)(3.1378)
5.4914Wa = -------------
0.4797Wa = 11.4475
Wb = 1-WA
1-11.4475
Wb = 10.4475
Portfolio riskInfosys & ACC ltd
_____________________p = A2+b2wb2+rabBwaWbA = 1.09334b=2.6343 rab = 1.3246
Wa = 11.4475Wb = 10.4475
p = (1.09334)2(11.4475)2+(2.6343)2+(10.4475)2
+2(1.3246)(1.09334)(2.6343)(11.4475)(10.4475)
________p = 2.6614p = 1.6313%
INFOSYS & ACC Ltd
The proportion of the investment in this combination is 11.4475 for
INFOSYS and 10.4475 for ACC Ltd. The investor can invest a larger share of
funds in INFOSYS and a lesser part in ACC. This is because the risk of
INFOSTS, which is 1.09334, is less than the risk of ACC, which is 1.6313%
and investors generally tend to invest in less risk securities. Also the portfolio
standard deviation, which is less than the individual risks of both companies.
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ZEE TELEFILMS & HDFC Bank Ltd
Calculation of standard deviation of ZEE Telefilms Ltd for the year2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr -0.048188 0.15111 -0.19929 0.0397165May 0.068798 0.15111 -0.08232 6.776582Jun 0.1114285 0.15111 -0.03969 1.575296July 0.214836 0.15111 0.06372 4.060238Aug 1.052631 0.15111 0.90149 0.812684Sept -0.100026 0.15111 -0.25113 0.063066Oct -0.189376 0.15111 -0.34048 0.115926Nov 0.085583 0.15111 -0.06553 4.294180Dec 0.012911 0.15111 -0.13819 0.0190964Jan 0.041785 0.15111 -0.10933 0.011953
Feb 0.092207 0.15111 -0.05890 3.46563Mar 0.368043 0.15111 0.21693 0.047058
Total 1.81338 (R-R)2=21.2852345
R 1.813381Average = ----------- = ------------ = 0.15111
N 12
Variance = (1/n-1) (R-R)2T=1
= 1/12-1) (21.2852345)= 1.934827
______Standard deviation = variance
______= 1.93482
=1.39098
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Calculation of standard deviation of HDFC Ltd for the year 2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr -0.0142214 0.02802 -0.04224 0.00178
May -0.179123 0.02802 -0.04593 0.00211Jun 0.1830223 0.02802 0.155 0.024025July 0.0968 0.02802 0.06878 0.00473Aug -0.052331 0.02802 -0.08035 0.006456Sept 0.069284 0.02802 0.0418 0.00175Oct -0.1191860 0.02802 -0.1472 0.021667Nov 0.0861769 0.02802 0.05815 0.003381Dec 0.025438 0.02802 -2.62 6.8644Jan 0.072654 0.02802 0.4463 0.199183Feb -0.041476 0.02802 -0.06949 0.004829Mar 0.0481029 0.02802 0.020082 0.000403
Total 0.3363 (R-R)2=7.134714
R 0.3363Average = ----------- = ------------ = 0.02802
N 12
Variance = (1/n-1) (R-R)2
T=1= (1/12-1)(7.134714)
= 0.6486
______Standard deviation = variance
______= 0.6486
= 0.80536COVAB = 1/n(RA-RA)(RB-RB)
T=1= 1/12(0.10263)(2.61739)= 0.0244
COVABRab = ------------
(A)(B)
0.0244= -----------------------
(0.80536)(1.87122)
0.0244= -----------
1.50701= 0.01619
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WEIGHTS:
WA = weight of ZEE TelefilmsLtd.
Wb = weight of HDFC Bank Ltd
B(B-rabA)Wa = -------------------------------
A2+B2-2rabABABWb = 1-Wa
(1.87122)(1.87122)-(0.0937)(1.39398)Wa = ---------------------------------------------------------------
(1.39098)2+(1.87122)2-2(0.0937)(1.39098)(1.87122)Wa = 0.2199
Wb = 1-wa
1-0.2199
Wb = 0.7801
Portfolio risk
ZEE Telefilms & HDFC Bank Ltd
______________________p = A2+b2wb2+rabBwaWb
A = 1.39098b=1.87122 rab = 0.0937Wa = 0.2199
Wb = 0.7801
p = (1.39098)2(0.2199)2+(1.87122)2+(0.7801)2
+2(0.0937)(1.39098)(1.87122)(0.2199)(0.7801)
________p = 10.5907
p = 3.254%
ZEE& HDFC
THE SD of ZEE Telefilms is 0.2199% and the risk of HDFC is 0.7801%this means that risk of ZEE is less when compared to the risk of HDFC ittherefore suggests that investors can invest a greater percentage of their fundsin ZEE and the remaining funds in HDFC. The calculated weight also suggeststhe same. It shows that investors can invest up to 0.0937% in ZEE and a ratio ofin HDFC. If we combine both the securities the portfolio standard deviationstand at 3.2543%, which is the less than the individual risks of both the
companies.
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WIPRO Ltd & BPCL
Calculation of standard deviation of WIPRO Ltd for the year 2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr -0.058718 0.4074 -0.4661 0.2172May 0.1238618 0.4074 -0.2836 0.0804Jun 0.070699 0.4074 -0.3368 0.1134July -0.0321052 0.4074 -0.4395 0.1931Aug -0.5038775 0.4074 -0.9112 0.8302Sept 4.864864 0.4074 4.4574 19.8684Oct -0.024866 0.4074 -0.4322 0.1867Nov 0.1539617 0.4074 -0.2535 0.0442Dec 0.0982222 0.4074 -0.3092 0.0956Jan 0.14025 0.4074 -0.2654 0.0704
Feb -0.018396 0.4074 -0.4257 0.1812Mar 0.074134 0.4074 -0.3333 0.11108Total 4.8897 (R-R)2=22.0118
R 4.8897Average = ----------- = ------------ = 0.4074
N 12
Variance = (1/n-1) (R-R)2
T=1= (1/12-1)(22.0118)
= 2.0008
______Standard deviation = variance
_____= 2.0008
= 1.4144
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Calculation of standard deviation of BPCL Ltd for the year 2009-10
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr -0.0213453 0.8056 -0.8269 0.6837
May 0.108828 0.8056 -0.6968 0.4855Jun -0.0772613 0.8056 -0.8828 0.07793July -9.864864 0.8056 -9.0592 82.0691Aug .00220113 0.8056 -0.7833 0.6135Sept 0.1165745 0.8056 -0.6891 0.4748Oct -0.1034146 0.8056 -0.909 0.8262Nov 0.1333783 0.8056 -0.6223 0.3872Dec -0.020969 0.8056 -0.8265 0.6831Jan -0.0455069 0.8056 -0.8511 0.7243Feb 0.060975 0.8056 -0.7447 0.5545Mar -0.06171 0.8056 -0.8317 0.6917
Total 9.6674 (R-R)2=88.27153
R 9.6674Average = ----------- = ------------ = 0.8056
N 12
Variance = (1/n-1) (R-R)2
T=1= (1/12-1)(88.27153)= 8.02469
______
Standard deviation =variance______=8.02469
=2.83279
COVAB = 1/n(RA-RA)(RB-RB)T=1
=1/12(0.0090)(19.3346)=15.8176
COVABRab = ------------
(A)(B)15.8176
= -----------------------(1.4144)(2.83279)
15.8176
= ------------4..00670
= 3.94779
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WEIGHTS:WA=weight of WIPRO Ltd.
Wb=weight of BPCL Bank Ltd
B(B-rabA)
Wa = -------------------------------A2+B2-2rabABABWb = 1-Wa
(2.83279)( 2.83279)-(3.3870)-(1.4144)Wa = ---------------------------------------------------------------
(1.4144)2+(2.83279)2-2(3.3870)(1.4144)( 2.83279)Wa = -0.18832Wb = 1-waWb = 1-(-0.18832)
Wb = 1.18832
Portfolio risk
WIPRO & BPCL_____________________
p=A2+b2wb2+rabBwaWb
A = 1.4144b=2.83279rab = 3.3870
Wa = -0.18832
Wb = 1.18832
p = (1.4144)2(-0.18832)2+(2.83279)2+(1.18832)2
+2(3.3870)(1.4144)( 2.83279)( -0.18832)( 1.18832)
_____p = 3.4339165
p = 1.8531%
WIPRO & BPCLIn this combination of portfolio, the risk of BPCL is less when
compared to the risk of WIPRO i.e., -0.3296 < 1.3296. in addition, the
calculated proportion of investment is for BPCL. So it is suggest that investor
the large share of funds in BPCL, which is less risky, and the remaining funds
be diverted to WIPRO. The calculated portfolio risk, which is 2.3894%, is when
compared to the individual standard deviations of the companies in the
portfolio.
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HERO HONDA MOTORS & SATYAM Ltd
Calculation of standard deviation of HERO HONDA MOTORS Ltd for theyear 2009-10
R R R-R (R-R)2MONTH RETURNS AVERAGE DEVIATIONS Sq.DEVApr -0.91717 0.1230 -0.2147 0.460May 0.090729 0.1230 -0.0323 0.0104Jun 0.032678 0.1230 -0.0904 0.0817July 0.051113 0.1230 -0.0719 0.0516Aug 0.038291 0.1230 -0.0848 0.0719Sept 0.109118 0.1230 -0.0139 0.00193Oct -0.057533 0.1230 -0.1805 0.0325Nov 0.170474 0.1230 0.0474 0.0224Dec 0.035783 0.1230 -0.0873 0.0762
Jan -4.476744 0.1230 -4.5997 21.1572Feb 0.025144 0.1230 -0.0979 0.0958Mar 2.595936 0.1230 -2.4729 6.1152
Total 1.4771 (R-R)2=28.17683
R 1.4771Average = ----------- = ------------ = 0.12309
N 12
Variance = (1/n-1) (R-R)2
T=1= (1/12-1) (28.17683)= 2.5615
______Standard deviation = variance
_____= 2.5615
= 1.6004
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Calculation of standard deviation of SATYAM Ltd for the year 2009-10
R R R-R (R-R)2
MONTH RETURNS AVERAGE DEVIATIONS Sq.DEVApr -0.027754 0.7298 -0.7575 0.5738
May 0.1281094 0.7298 -0.6017 0.3620Jun 0.115384 0.7298 -0.6145 0.3776July 0.026771 0.7298 -0.7031 0.4943Aug 0.019326 0.7298 -0.7105 0.5048Sept 0.049568 0.7298 -0.6803 0.4628Oct 0.078462 0.7298 -0.6514 0.4243
Nov 0.071065 0.7298 -0.6588 0.4340Dec 0.130641 0.7298 -0.5992 0.3590Jan 8.03941 0.7298 0.3031 53.335Feb 0.028676 0.7298 -0.7012 0.4916Mar 0.105009 0.7298 -0.6248 0.3903
Total 8.7577 (R-R)2= 58.2095
R 8.7577Average = ----------- = ----------- = 0.7298
N 12
Variance = (1/n-1) (R-R)2
T=1= 1/12-1)(58.2095)= 5.2912
______
Standard deviation =variance______=5.2912
=2.30026COVAB = 1/n(RA-RA)(RB-RB)
T=1=1/12(2.9531)(0.0010)
= 0.2459
COVAB
Rab = ------------(A)(B)
0.2459= -----------------------
(2.5275)(2.30026)
0.2459= ------------
5.81325= 0.0422
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BAJAJ AUTO LTD AND TISCO
Calculation of Standard deviation of BAJAJ AUTO Ltd
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr 0.0073 0.7656 -0.0692 0.00478May 0.11581 0.7656 0.0393 0.00154June 0.111245 0.7656 0.0347 0.00120July 0.05350 0.7656 -0.023 0.000529Aug -0.01962 0.7656 -0.0961 0.00923Sept 0.18461 0.7656 0.1081 0.0116Oct -0.00280 0.7656 -0.0793 0.00629Nov 0.16562 0.7656 0.0891 0.00793Dec -0.00556 0.7656 -0.082 0.00672
Jan 0.06908 0.7656 -0.0075 0.000056Feb 0.19330 0.7656 0.1168 0.0136Mar 0.0464 0.7656 -0.0301 0.000906
Total 0.918895 (R-R)2=0.064381
R 0.918895Average = ----------- = ------------ = 0.07656
N 12
Variance = (1/n-1) (R-R)2
T=1= (1/12-1) (0.064381)
= 0.00585
______Standard deviation = variance
______= 0.00585
= 0.0765
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Calculation of Standard deviation of TISCO Ltd
R R R-R (R-R)2
Month Returns Average Deviations Sq.DevApr 09 -0.158310 0.02893 -0.18724 0.035058
May 09 0.055563 0.02893 0.02663 7.09156Jun 09 -0.06437 0.02893 -0.0933 8.70489July-09 0.082794 0.02893 0.05386 2.90089Aug-09 0.064441 0.02893 0.03551 1.26096
Sept 09 0.083120 0.02893 0.05419 2.93655Oct 09 -0.203359 0.02893 0.17442 0.30422Nov 09 0.019562 0.02893 -9.368 87.7594Dec 09 0.086571 0.02893 0.05764 3.32236Jan 10 0.058246 0.02893 0.029316 8.59076Feb 10 0.060837 0.02893 0.031907 1.01761
Mar 10 0.262117 0.02893 0.233187 0.054376 R= 0.347206 (R-R)2= 124.0200
R 00.34721Average = ----------- = ------------ = 0.02893
N 12
Variance = (1/n-1) (R-R)2
T=1= (1/12-1)(124.0200)= 11.273418
______Standard deviation = variance
______= 11.273418
= 3.35759N
COVAB = 1/n(RA-RA)(RB-RB)T=1
= 1/12(7.4917)(8.9518)
= 5.5864
COVABRab = ------------
(A)(B)
5.5864= --------------------(0.0765)(3.3575)
= 21.754
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WEIGHTS:WA = weight of Bajaj Auto ltd
Wb = weight of TISCO ltd
B(B-rabA)
Wa = -------------------------------A2+B2-2rabABABWb = 1-Wa
(3.3575)(3.3575)-( 21.754)( 0.0765)Wa = ---------------------------------------------------------------
(0.0765)2+(3.3575)2-2(21.754)( 0.0765)(3.3575)
9.60914Wa = --------------
99.81802
Wa = 0.09626Wb = 1-wa
1-0.09626
Wb = 0.90374
Portfolio risk
Bajaj Auto & TISCO ltd_____________________
p = A2+b2wb2+rabBwaWb
a = 3.3178b=3.3575 rab = 0.5302Wa = 0.09626
Wb = 0.90374
p = (3.1378)2(0.09626)2+(3.3575)2+(0.90626)2
+2(0.5302)(3.1378)(3.3575)(0.09626)(0.90374)
________p = 104.29230
p = 10.2123%
Bajaj Auto & TISCO ltd
In this portfolio the risk of Bajaj is less when compared to the risk of
TISCO (0.0962 < 0.90374). the proportion of investment arrived at is 3.3575 for
Bajaj and 3.1378 for TISCO.The calculated portfolio risk is 10.2123%, which is
much lesser when compared to the individual standard deviation of both the
companies involved in the portfolio.
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REPRESENTS TO TABLE 1& 2 CHART
CALCULATIONS OF AVERAGES & STANDARD DIVIATIONS
COMPANY NAME AVERAGES STANDARD DIVIATIONSAMBUJA Cements 0.6746 2.3512INFOSYS 0.2538 1.0933BAJAJ AUTO 0.0765 3.1378ACC Cements 0.7807 2.6343ZEE Telefilms 0.1511 1.3909HDFC Bank 0.0280 1.8712BPCL Ltd 0.8056 3.3131HERO HONDA 0.1230 2.5275TISCO Ltd 0.0289 3.3575SATYAM Ltd 0.7298 2.3002WIPRO 0.4074 21.035
AVERAGES
STANDARD DEVIATION
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CALCULATED CORRELATION COEFFICIENT & PORTFOLIO RISK
Company name Correlation co-efficient
Portfolio risk(%)
Ambuja & Infosys -0.01001 2.9217
Ambuja & Bajaj Auto 3.9497 3.7940
Infosys & ACC Cements 1.3246 1.6313
ZEE Telefilms& HDFC 0.0937 3.2543
WIPRO & BPCL 3.3870 2.3894
Hero Honda & Satyam 0.4229 1.6652
Bajaj Auto & TISCO 0.5302 10.123
Infosys & Hero Honda -0.186 4.8850
Correlation Co-efficient
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Portfolio risk (%)
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CHAPTER-5
FINDINGSAND
SUGGESTIONS
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FINDINGS
The analytical part of the study for the 12-month period reveals the following:-
As far as the average returns of the selected companies are concerned,AMBUJA Cements in performing well in isolation whereas WIPRO's
average return in isolation for the period of the study is very poor.
As far as the standard deviations of the selected companies are
concerned, WIPRO's standard deviation is very high whereas its returns
as discussed above are very low. So it can be concluded possess the too
highest standard deviation and its return is high . this means that higher
the risk higher will be the return. Another risky security in the selectedscrip's is BPCL. Rests of the scrip's in the study are moderately risky.
As far as the correlation co-efficient are concerned the selected only
negatively correlated scrip's as suggested by Markowitz. Accordingly
the best correlation coefficient is between WIPRO and BPCL, but the
portfolio risk with this combination is very high when compared to other
portfolio combination. Another set of portfolio that is negatively
correlated is INFOSYS and ACC. This combination's portfolio risk isless when compared to the risks of other portfolios. So the investors who
are very much concern about the risk, can invest their funds in this
combination. Rest of the portfolio combinations fall under the moderate
risk category.
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SUGGESTIONS
It is observed during the course of the project work most of the investors
are not practicing the techniques and tools that are available to conductcompany analysis, industry analysis and economic analysis to select a
best portfolio for investment. This is one of the reasons of getting loss in
investment business. Hence it is necessary to utilize the available tools
and techniques to select a best portfolio.
The stockbrokers and legislative body of stock market are not practicing
the professional methods available to give suggestions to the investors.
Generally their suggestions are based on experience and expectation. In
this project work few techniques and methodologies explained for the
selection of a best portfolio. The broker may take good decisions. If he
practiced the above said techniques and methodologies.
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ANNEXURESStock Price:
Code: 500180 company Name: HDFC Bank Ltd for the period: Apr2009 to Mar 2010
Month Open(Rs)
High(Rs)
Low(Rs)
Close(Rs)
No. ofshares
No oftrades
Net T/O(Rs)
Apr 09 774.10 810.90 766.23 791.54 131820 19811 497,589,419
May 09 781.65 801.20 775.20 795.56 184721 24290 802,016,771
Jun 09 852.36 860.50 841.63 844045 681013 38994 113,199,410
July-09 931.50 935.12 915.61 926.28 58834 26670 104,487,070
Aug-09 995.80 1033.2 978.85 1024.7 60784 14858 916,509,051
Sept 09 1109.2 1109.1 1085.6 1087.5 31332 51489 1,691,865,795
Oct 09 1088.2 1098.4 1065.3 1069.4 37753 25494 908,214,966Nov 09 1059.3 1087.6 1045.5 1078.6 289463 33156 1,328,529,706
Dec 09 950.40 950.85 903.63 932.12 180547 30578 1,411,164,800
Jan 10 938.70 966.52 938.85 948.4 209114 35820 1,245,772,799
Feb 10 1001.3 1031.1 990.58 1026.5 53127 24927 834,243,437
Mar 10 1140.1 1140.2 1098.6 1104.6 105720 22405 132,514,966
Stock Price:
Code: 500104 company Name: BPCL for the period: Apr 2009 to Mar 2010
Month Open(Rs)
High(Rs)
Low(Rs)
Close(Rs)
No. ofshares
No oftrades
Net T/O(Rs)
Apr 09 341.20 344.00 329.30 334.50 87178 70387 3,561,059,532
May 09 315.12 316.80 305.45 311.41 67789 10812 3,990,343,910
Jun 09 358.45 375.45 354.10 373.46 310464 10487 2,589,810,283
July-09 372.52 372.20 364.58 366.75 35827 76314 1,842,671,749
Aug-09 395.12 405.80 392.75 400.05 106645 58570 1,388,874,437
Sept 09 361.78 361.25 351.20 354.60 124178 52138 1,440,772,287Oct 09 343.45 342.95 335.40 336.80 34201 45062 1,167,564,466
Nov 09 358.47 365.15 356.15 359.90 351899 67924 2,490,202,161
Dec 09 303.80 317.75 301.25 310.20 178031 51851 1,888,413,318
Jan 10 308.70 308.28 300.05 302.20 94221 41649 1,472,749,153
Feb 10 340.78 348.96 336.74 338.80 119628 42611 1,670,249,778
Mar 10 354.10 363.90 352.41 359.93 188071 43423 1,885,908,555
Stock Price:
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Code: 507685 company Name: WIPRO Ltd for the period: Apr 2009 toMar 2010
Month Open
(Rs)
High
(Rs)
Low
(Rs)
Close
(Rs)
No. of
shares
No of
trades
Net T/O(Rs)
Apr 09 1528.2 1545.6 1520.8 1538.3 363728 154225 5,126,679,386May 09 1650.8 1658.9 1610.2 1629.3 156872 165361 5,316,744,258Jun 09 1813.5 1813.0 1791.4 1798.2 107920 181457 5,171,470,031July-09 1856.4 1863.4 1845.2 1847.5 101852 174315 4,658,310,328Aug-09 2090.7 2115.6 2080.3 2097.2 168522 193847 6,040,409,835
Sept 09 2180.5 2193.4 2161.4 2108.6 134237 126851 4,220,099,492Oct 09 2252.9 2265.4 2228.1 2240.3 103096 120772 4,196,674,755
Nov 09 2250.4 2255.1 2225.6 2244.2 245066 63377 2,726,008,230
Dec 09 2166.3 2166.2 2053.1 2078.3 825338 74438 2,296,473,466Jan 10 2000.1 2026.1 1996.9 2012.9 215746 64055 2,286,685,248Feb 10 2010.6 2056.3 2010.3 2049.8 169419 73197 1,954,909,436Mar 10 1937.2 1939.4 1911.4 1920.4 201982 79678 2,233,377,951
Stock Price:
Code: 500376 company Name: SATYAM Comp for the period: Apr2009 to Mar 2010
Month Open(Rs)
High(Rs)
Low(Rs)
Close(Rs)
No. ofshares
No oftrades
Net T/O(Rs)
Apr 09 350.62 358.54 347.60 355.70 1798538 468538 22,641,751,272
May 09 370.52 374.58 362.20 368.40 1840696 444189 19,506,000,996
Jun 09 407.50 410.52 406.85 409.12 602546 574158 22,294,443,088
July-09 411.25 413.69 407.52 409.56 771306 368697 14,758,107,133
Aug-09 434.25 436.85 431.50 431.50 376655 260571 11,555,526,857
Sept 09 456.21 463.80 452.78 459.20 263017 282647 14,516,536,732
Oct 09 493.58 493.00 482.52 483.52 490520 306451 15,876,396,671Nov 09 468.95 475.10 463.25 472.37 890641 235520 1,288,610,570
Dec 09 439.78 449.80 404.85 412.39 1569163 251684 11,286,192,805
Jan 10 463.58 471.20 457.35 412.50 545082 253018 11,091,579,203
Feb 10 465.20 473.00 457.00 470.10 1406483 194653 9,135,523,533
Mar 10 466.39 475.75 466.00 467.25 413037 226924 14,021,476,950
Stock Price:
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Code: 500376 company Name: BAJAJ Auto for the period: Apr 2009 toMar 2010
Month Open(Rs)
High(Rs)
Low(Rs)
Close(Rs)
No. ofshares
No oftrades
Net T/O(Rs)
Apr 09 2713.3 2750.5 2675.3 2736.6 45295 20175 724,230,943
May 09 2495.5 2520.5 2451.1 2473.5 60849 21064 1,400,056,764
Jun 09 2729.8 2750.5 2673.3 2687.5 21960 18436 667,326,493
July-09 2934.7 3020.6 2920.1 2998.3 151141 23591 866,585,258
Aug-09 2775.4 2822.3 2751.4 2799.8 48143 39059 1,340,301,400
Sept 09 2680.6 2711.8 2633.4 2644.7 87750 37880 1,427,303,984
Oct 09 2630.3 2645.5 2602.3 2618.3 17381 22066 765,590,345
Nov 09 2756.5 2776.5 2747.2 2762.5 30919 13316 498,433,323
Dec 09 2650.2 2695.4 2550.5 2616.6 102823 19219 876,440,694Jan 10 2430.1 2445.2 2408.5 2425.3 191702 20461 1,145,389,307
Feb 10 2425.8 2475.8 2425.0 2445.8 27944 14008 1,412,808,389
Mar 10 2204.5 2258.9 2204.5 2224.5 200275 8425 911,636,689
CHAPTER-7
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BIBLOGRAPHY
Investment Management Security & Portfolio Management
-PREETI SINGHPortfolio Management-S. KEVIN3. Security Analysis & Portfolio Management
-DONALD E.FISHER-RONALD J. JORDANSecurity Analysis & Portfolio Management
- A.V. AVADHANI5. .Security Analysis & Portfolio Management
- PUNITHAVATHY PANDIAN
WEBSITES
www.indiainfoline.com
www.nseindia.com
www.satyam.com
www.infosys.com
www.wipro.com
www.ambujacement.com
www.bajajauto.com
www.hdfc.com
www.herohondamotors.com
www.bpcl.com
www.equitymasters.com
http://www.indiainfoline.com/http://www.nseindia.com/http://www.satyam.com/http://www.infosys.com/http://www.wipro.com/http://www.ambujacement.com/http://www.bajajauto.com/http://www.hdfc.com/http://www.herohondamotors.com/http://www.bpcl.com/http://www.equitymasters.com/http://www.indiainfoline.com/http://www.nseindia.com/http://www.satyam.com/http://www.infosys.com/http://www.wipro.com/http://www.ambujacement.com/http://www.bajajauto.com/http://www.hdfc.com/http://www.herohondamotors.com/http://www.bpcl.com/http://www.equitymasters.com/