fundamental and technical analysis of steel sector in india
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1. INDUSTRY PROFILE
The Indian broking industry is one of the oldest
trading industries that have been around even before
the establishment of the BSE in 1875. Despite
passing through number of changes in the post
liberalization period, the industry has found its way
onwards sustainable growth. With the purpose of gaining a deeper understanding about
the role of the Indian stock broking industry in the countrys economy, we present in this
section some of the industry insights gleaned from analysis of data received through
primary research.
For the broking industry, we started with an initial database of over 1,800 broking
firms that were contacted, from which 464 responses
were received. The list was further short listed based on
the number of terminals and the top 210 were selected
for profiling. 394 responses, that provided more than
85% of the information sought have been included for
this analysis presented here as insights. All the data for
the study was collected through responses received
directly from the broking firms. The insights have been
arrived at through an analysis on various parameters, pertinent to the equity broking
industry, such as region, terminal, market, branches, sub brokers, products and growth
areas.
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Some key characteristics of the sample 394 firms are:
On the basis of geographical concentration, the West region has the maximumrepresentation of 52%. Around 24% firms are located in the North, 13% in the
South and 10% in the East
3% firms started broking operations before 1950, 65% between 1950-1995 and
32% post 1995.
On the basis of terminals, 40% are located at Mumbai, 12% in Delhi, 8% in
Ahmadabad, 7% in Kolkata, 4% in Chennai and 29% are from other cities
From this study, we find that almost 36% firms trade in cash and derivatives and
27% are into cash markets alone. Around 20% trade in cash, derivatives and
commodities
In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade
at both exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and
45% at both, whereas in the debt market, 31% trade at NSE, 26% at BSE and
43% at both exchanges
Majority of branches are located in the North, i.e. around 40%. West has 31%,
24% are located in South and 5% in East
In terms of sub-brokers, around 55% are located in the South, 29% in West, 11%
in North and 4% in East
Trading, IPOs and Mutual Funds are the top three products offered with 90%
firms offering trading, 67% IPOs and 53% firms offering mutual fund transactions
In terms of various areas of growth, 84% firms have expressed interest in
expanding their institutional clients, 66% firms intend to increase FII clients and
43% are interested in setting up JV in India and abroad
In terms of IT penetration, 62% firms have provided their website and around
94% firms have email facility
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2. COMPANY PROFILE
2.1. BACKGROUND AND INCEPTION OF THE COMPANY
India Infoline was originally incorporated by
Mr. Nirmal Jain (Chairman and Managing
Director) on October 18, 1995 as Probity
Research and Services Private Limited at Mumbai
under the Companies Act, 1956 with Registration
No. 11 93797. India Infoline commenced
operations as an independent provider of
information, analysis and research covering Indian
businesses, financial markets and economy, to institutional customers. India Infoline
became a public limited company on April 28, 2000 and the name of the Company was
changed to Probity Research and Services Limited. The name of the Company was
changed to India Infoline.com Limited on May 23, 2000 and later to India Infoline
Limited on March 23, 2001.
In 1999, India Infoline.com identified the potential of the Internet to cater to a
mass retail segment and transformed our business model from providing information
services to institutional customers to retail customers. Hence India Infoline launched
Internet portal, www.indiainfoline.com in May 1999 and started providing news and
market information, independent research, interviews with business leaders and other
specialized features.
In May 2000, the name of India Infoline was changed to India Infoline.com
Limited to reflect the transformation of our business. Over a period of time, India
Infoline.com has emerged as one of the leading business and financial information
services provider in India.
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In the year2000, India Infoline leveraged its position as a provider of financial
information and analysis by diversifying into transactional services, primarily for online
trading in shares and securities and online as well as offline distribution of personal
financial products, like mutual funds and RBI Bonds. These activities were carried on by
our wholly owned subsidiaries.
India Infoline broking services were launched under the brand name of
5paisa.com through our subsidiary. India Infoline Securities Private Limited and
www.5paisa.com, the e-broking portal was launched for online trading in July 2000. It
combined competitive brokerage rates and research, supported by Internet technology
besides investment advice from an experienced team of research analysts. India
Infoline also offer real time stock quotes, market news and price charts with multiple
tools for technical analysis.
Milestones
1995
Incorporated as an equity research and consulting firm with a client base that includedleading FIIs, banks, consulting firms and corporates.
1999
Restructured the business model to embrace the internet; launched
archives.indiainfoline.com mobilized capital from reputed private equity investors.
2000
Commenced the distribution of personal financial products; launched online equity
trading; entered life insurance distribution as a corporate agent. Acknowledged by
Forbes as Best of the Web and ...must read for investors.
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2004
Acquired commodities broking license launched Portfolio Management Service.
2005
Listed on the Indian stock markets.
2006
Acquired membership of DGCX launched investment banking services.
2007
Launched a proprietary trading platform; inducted an institutional equities team; formed
a Singapore subsidiary raised over USD 300 million in the group, launched consumer
finance business under the Money line brand.
2008
Launched wealth management services under the IIFL Wealth brand set up India
Infoline Private Equity fund, received the Insurance broking license from IRDA,
received the venture capital license, received in principle approval to sponsor a mutual
fund, received Best broker- India award from Finance Asia, Most Improved
Brokerage- India award from Asia money.
2009
Received registration for a housing finance company from the National Housing Bank;
received Fastest growing Equity Broking House - Large firms in India by Dun &
Bradstreet.
2010
IIFL Securities Pvt. Ltd. (Singapore), received in-prnciple approval from the Singapore
Stock Exchange, IIFL Securities Ceylon (Pvt.) Ltd. (Srilanka), received in-principle
approval for membership of the Colombo Stock Exhange for Stock broking.
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2.2. NATURE OF THE BUSINESS CARRIED
India Infoline Limited is listed on both the leading stock exchanges in India, viz.
the stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also
a member of both the exchanges. It combined competitive brokerage rates and
research, supported by Internet technology besides investment advice from an
experienced team of research analysts. India Infoline also offer real time stock quotes,
market news and price charts with multiple tools for technical analysis.
The India Infoline group, comprising the holding company. India Infoline Ltd
and its wholly subsidiaries, straddle 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, Govt. of
India bonds and other small savings instruments to loan products and Investment
banking. India Infoline also owns and manages the websiteswww.indiainfoline.com and
www.5paisa.com. The company has a network of 976 business locations (branches and
sub-brokers) spread across 365 cities and towns. It has more than 800,000 customers.
2.3. VISION, MISSION AND QUALITY POLICY
VISION STATEMENT:
India Infoline vision is to be the most respected company
in the financial services space.
MISSION STATEMENT:
To become a full-fledged financial services
Company known for its quality of advice, personalized service and cutting-
edge technology.
QUALITY POLICY:
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To become a full-fledged financial services Company
known for its quality of advice, personalized service and cutting-edge
technology.
2.4. PRODUCTS/SERVICE PROFILE
The survey also revealed that in the past couple of years, apart from trading, the
firms have started offering various investment related value added services. The
sustained growth of the economy in the past couple of years has resulted in broking
firms offering many diversified services related to IPOs, mutual funds, company
research etc. However, the core trading activity is still the predominant form of
business, forming 90% of the firms in the sample. 67% firms are engaged in offering
IPO related services. The broking industry seems to have capitalized on the growth of
the mutual fund industry, which was pegged at 40% in 2006. More than 50% of the
sample broking houses deal in mutual fund investment services. The average growth in
assets under management in the last two years is almost 48%. Company research is
another lucrative area where the broking firms offer their services; more than 33% of
the firms are engaged in providing company research services. Additionally, a host of
other value added services such as fundamental and technical analysis, investment
banking, arbitrage etc are offered by the firms at different levels.
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Equities
Life
InsuranceCommodities
Mutual
Funds
Online Media &
Content
Other IncomeFinancing & Investing
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OVERVIEW OF PRODUCTS AND SERVICES
Equities: India Infoline provided the prospect of researched investing to
its clients, which was hitherto restricted only to the institutions. Research for the
retail investors did not exist prior to India Infoline leveraged technology to bring
the convenience of trading to the investors location of preference (residence or
office) through computerized access. India Infoline made it possible for clients to
view transaction costs and ledger updates in real time.
PMS (Portfolio Management Services): It is a product wherein an
equity investment portfolio is created to suit the investment objectives of a client.
India Infoline invests customer resources into stocks from different sectors,
depending on customer risk-return profile. This service is particularly advisable
for investors who cannot afford to give time or dont have that expertise for day-
to-day management of their equity portfolio.
Research: Sound investment decisions depend up on reliable
fundamental data and stock selection techniques. India Infoline Equity Research
is proud of its reputation. Equity investment professionals routinely use their
research and models as integral tools in their network.
Commodities: India Infoline extension into commodities trading
reconciles its strategic intent to emerge as a one stop solutions financial
intermediary. Its experience in securities broking has empowered it with requisite
skills and technologies. Increased offering: The Companies commodities
business provides a contra-cyclical alternative to equities broking. The Company
was among the first to offer the facility of commodities trading in Indias young
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commodities market (the MCX commenced operations only in 2003). Average
monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs
20.02 billion. The commodities market has several products with different and
non-correlated cycles. On the whole, the business is fairly insulated against
cyclical gyrations in the business.
INSURANCE: An entry to this segment helped complete the clients
product basket; concurrently, it graduated the company into a one stop retail
financial solutions provider. To ensure maximum reach to customers across
India, they have employed a multi pronged approach and reach out to customers
via their Network, Direct and Affiliate channels. The Companies entry into the
insurance sector de-risked the Company from a predominant dependence on
broking and equity-linked revenues. The annuity based income generated from
insurance intermediation result in solid core revenues across the tenure of the
policy.
MOTGAGES: During the year under review, India Infoline acquired a 75%
stake in Mind tree Consultancy Services to mark its foray into the business of
mortgages and other loan products distribution. The business is still in the
investing phase and at the time of the acquisition was present only in the cities of
Mumbai and Pune. The Company brings on board expertise in the loans
business coupled with existing relationships across a number of principles in the
mortgage and personal loans businesses. Indiainfoline now has plans to roll the
business out across its pan-Indian network to provide it with a truly national scale
in operations.
MUTUAL FUNDS: India Infoline offers customer a host of mutual fund
choices under one roof, backed by in-depth research and advice from research
house and tools configured as investor friendly.
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WEALTH MANAGEMENT SERVICE: Imagine a financial firm with the
heart and soul of a two-person organization. A world-leading wealth
management company that sits down with customer to understand their needs
and goals. They offer customer a dedicated group for giving them the most
personal attention at every level.
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NEWSLETTERS: The Daily Market Strategy is the morning dose on the
health of the markets. Five intra-day ideas, unless the markets are really choppy
coupled with a brief on the global markets and any other cues, which could
impact the market. Occasionally an investment idea from the research team and
a crisp round up of the previous day's top stories. That's not all. As a subscriber
to the Daily Market Strategy, the customer even gets research reports of India
Infoline research team on a priority basis.
2.5. AREA OF OPERATION- GLOBAL/ NATIONAL/ REGIONAL
GLOBAL: China, Brazil, Dubai, Russia, Singapore, UK, USA
NATIONAL: Delhi, Andra Pradesh, Karnataka, Assam, Gujarat, Tamil
Nadu
REGIONAL: Bangalore head office:
#31/9, Krimson Square, 2nd floor, Hosur Main Road, Bangalore 560068.
The India Infoline group, comprising the holding company, India
Infoline Limited and its wholly-owned subsidiaries, straddle 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 The company has a network
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of 976 business locations (branches and sub-brokers) spread across 365
cities and towns. It has more than 800,000 customers.
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2.6. OWNERSHIP PATTERN:
Promoters Share
Institutional Investors Share (if any)
Foreign institutional investor Share (if any)
Share of retail investor (if any)
Governments Share (if any)
Others
Share Holding Pattern
Particulars No. of Shares(Mn)
% Holdings
Total Promoter Holdings 91.36 31.3
Total Govt Holding (Promoter + Non Promoter) 0.00 0.0
Total Domestic Institutions (Banks/ FI + MF / UTI) 34.00 11.7
Total Foreign Holdings (FII+NRI holdings) 104.49 35.8
Total Non Promoter Corporate Holdings 10.06 3.5
Total Public & Others (Individuals + HUF + Clearingmembers)
51.88 17.8
Total 291.79 100
Our promoters and promoter group together holds 33.75% of post issue
Equity shares. As a result of their shareholding they will have the ability to influence
most matters, which require the approval of our shareholders. In addition the collectivelyhave the ability to block any special resolution by shareholders.
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2.7. COMPETITORS INFORMATION:
KOTAK SECURITIES
Kotak Mahindra is one of India's leading banking and financial services
organizations, offering a wide range of financial services that encompass
every sphere of life. The group has a net worth of over Rs. 100.6 billion and
has a distribution network of branches, franchisees, representative offices and
satellite offices across cities and towns in India, and offices in New York,
London, San Francisco, Dubai, Mauritius and Singapore servicing around 8
million customer accounts.Kotak Securities has been awarded as the best
broker in India by Finance Asia for 2010 and 2009.
KARVY
KARVY is a premier integrated financial services provider, and ranked
among the top five in the country in all its business segments, services over 16
million individual investors in various capacities, and provides investor services
to over 300 corporate, comprising the who is who of Corporate India. Karvy
has a professional management team and ranks among the best in
technology, operations and research of various industrial segments.
ICICI DIRECT
ICICI Web Trade Limited (IWTL) maintains www.icicidirect.com (herein
after referred to as the "Website") whereas IWTL is an affiliate of ICICI Bank
Limited and the Website is owned by ICICI Bank Limited. IWTL has launched
and established an online trading service on the Website.
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HDFC SECURITY
HDFC security is the subsidiary of HDFC (Housing Development
Financial Corporation). www.hdfcsec.com would have an exclusive discretion
to decide the customers who would be entitled to its online investing services.
www.hdfcsec.com also reserves the right to decide on the criteria based on
which customers would be chosen to participate in these services .The present
web site (www.hdfcsec.com) contains features of services that they
offer/propose to offer in due course. The launch of new services is subject to
the clearance of the regulators. i.e. SEBI, NSE and BSE.
INDIABULLS SECURITIES LIMITED
India bulls Securities Limited was incorporated as GPF Securities
Private Limited on June 9, 1995. The name of the company was changed to
Orbis Securities Private Limited on December 15, 1995 to change the profile of
the company and subsequently due to the conversion of the company into a
public limited company; the name was further changed to Orbis Securities
Limited on January 5, 2004. The name of the company was again changed toIndia bulls Securities Limited on February 16, 2004 so as to capitalize on the
brand image of the term India bulls in the company name. ISL is a corporate
member of capital market & derivative segment of The National Stock
Exchange of India Ltd. At present, ISL accounts for approximately 3% of the
total daily turnover of the Exchange with 32,359 client relationships and 70
branches spread across the country as of April 30, 2004.
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Results on the Basis of charges:
There are the two type of the transaction:-
1. Intra-day based
2. Delivery based
Comment: - According to the survey HDFC securities charge maximum brokerage as
compare to others whereas India Infoline Ltd. charges only 0.20 paisa on maximum
investment.
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2.8. INFRASTRUCTURAL FACILITIES:
Our main offices are located approximately 4,000square feet of office space
located in Mumbai, India. India Infoline braches collectively occupy an additional 10,000
square feet of office space located throughout India. The company has a network of 976
business locations (branches and sub-brokers) spread across 365 cities and towns. It
has more than 800,000 customers.
The Table below shows the changes in the Registered Office of the Company since
Incorporation:
Previous Address New Address Date of Change Reason for
Change
#280-C, Agarwal
Market, Vile
Pane(East),
Mumbai-400057
#1, Snehdeep,
Gokhale Road, Vile
Parle(East),
Mumbai- 400057
August 6, 1999Requirement of
More Floor Space
#1, Snehdeep,
Gokhale Road, Vile
Parle(East),
Mumbai- 400057
#24, 1st floor, Nirlon
Complex,
Off Western
Express Highway,
Goregaon(E),
Mumbai-400063
Jan 15, 2001Requirement of
More Floor Space
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2.9. ACHIEVEMENTS/ AWARDS
Incorporated on October 18, 1995 as Probity Research & Services.
Launched Internet portal www.indiainfoline.com in May 1999.
Commenced distribution of personal financial products like Mutual Funds and
RBI Bonds in April 2000.
Launched online trading in shares and securities branded as www.5paisa.com in
July 2000.
Standard life insurance agency business in December 2000 as a Corporate
Agent of ICICI Prudential Life Insurance.
Became depository participants of NSDL in September 2001.
Launched stock messaging service in May 2003.
Acquired commodities broking license in March 2004.
Launched portfolio management services in August 2004.
Listed on NSE and BSE on May 17, 2005.
Acquired NBFC license in May 2005.
Acquired 75% stake holding in Money tree Consultancy Services, which is a
distribution of Mortgages and other Loan products, in October 2005.
Acquired 100% equity of Marchmont Capital Advisors Pvt. Ltd. in December
2005 through which we have ventured in to Merchant Banking.
DSP Merrill Lynch Capital subscribed to convertible bonds aggregating Rs. 80
crores in December 2005.
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Bennett Coleman & Co Ltd. (BCCL) invested Rs. 20 crores in India Infoline by
way of preferential allotment in December 2005.
Became a depository participant of CDSL in June 2006.
Merger of India Infoline Securities Private Limited with India Infoline in January
2007.
Entered into an alliance with Bank of Baroda for Baroda e-trading in February
2007.
CLSA Institutional equities team joined us in 2007.
Formed Singapore subsidiary IIFL (Asia) Pvt. Ltd. in 2007.
Mr. Arun K. Purvar joined as independent director in March 2008.
Received Best Broker of India award by Finance Asia in June 2008.
Received Venture Capital license from SEBI in September 2008.
Received in-principle approval from SEBI for sponsoring Mutual Funds in
November 2008.
Received Insurance broking license from IRDA in December 2008.
Received registration for Housing Finance Company from NHB in February 2009.
Entered into a strategic agreement with Interactive Brokers, LLC (USA) to
provide our client direct market access to over 80 global exchanges in 18
countries in July 2009.
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2.10. WORK FLOW MODEL (End to End)
The process to examining how work creates or adds value to the ongoingprocess in a business.
(Discuss the work flow from acquiring raw materials for the production to sellingfinished product to the consumer. Each step should be explained with a flowchart).
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Commoditie
Equities
Mutual
Insurance
Information andadvice
Execution
and Service
CUSTOMERSINDIA
INFOLINE LIMITED
DEMAT ACCOUNT
EQUITIES DERIVATIVES COMMODITIES
DEPOSITORY
PARTICIPANTS
CUSTOMERS PLACING ORDERS
BSE
NSE
CONFIRMATION
BUY/SELL SHARES Dr. or Cr.
TRADING
ACCOUNT OF
CUSTOMERS
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2.11. FUTURE GROWTH AND PROSPECTUS
The asset base will continue to grow at an annual rate of about 30 to 35%
over the next few years as investors shift their assets from banks and other traditional
avenues. Some of the older public and private sector players will either close shop or be
taken over. Out of ten public sector players five will sell out, close down or with stronger
players in three to four years. In private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.
But this does not mean there is no room for other players. The market will
witness a flurry of new players entering the arena. There will be a large number of offers
from various asset management companies in the time to come. Some big names like
Fidelity, Principal and Old Mutual etc. are looking at Indian market seriously. One
important reason for it is that most major players already have presence here and
hence these big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this would
enable it to hedge risk and this in turn would be reflected in its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes totrade in derivatives. Importantly, many market players have called on the regulator to
initiate the process immediately, so that the mutual funds can implement the changes
that are required to trade in Derivatives.
Reforms have marked the entry of many of the global insurance measures into
the Indian market in the form of joint ventures with Indian companies. Some of the key
names are: AIG, New York Life, Alliance, Prudential, Standard Life, Sun Life Canada
and Old Mutual. The entry of new player has rejuvenated and monopoly player LIC,which has responded to the competition in an admirable fashion by launching new
product and improving service standard.
The ability to successfully implement our growth strategy and expansion plan.
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The ability to respond to technological changes.
Changes in laws and regulations relating to the industry in which we operate.
Changes in political and social condition in India.
The ability to successful launches the new products.
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3. MCKINSEY'S 7S framework
McKinseys 7S Model
Mckinsey's 7S framework of the 7 S's the first three that is strategy, Structure
and System are considered as the 'Hard S's' and the remaining four i.e. Staff, Style,
Skills and Subordinate goals are considered as 'Soft S' s since they are less tangible
and more cultural in nature.
1. Structure: Flow Structure
A company's structure affects its strategic planning and its ability to change.
A company's structure may have a customer or geographical focus. It contains the
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salient features of the organizational chart and interconnections within the
organization.
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S. Sriram,
Head- Technology
R.Venkataraman
Executive DirectorHarshad Apte,
Head -Marketing
Kalpesh Shah
Head-Risk/Compliance
Anil Mascarenhas
Head-News
Sandeep Vig Arora
VP-PMS & Institutional Sales
Komal Parikh
Company Secretary
Upendra JaiswalHead -Accounts
Sanjay Nayak
Head-Back Office Depository service
Toral Munshi
VP- Research
Nirmal Jain Chairman & managing
Seshadri Bharathan
Head-Distribution & Insurance
Dharmesh Pandya
Head Commodities
Mukesh Singh
VP- Broking
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SOUTH INDIA'S ORGANIZATION STRUCTURE:
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Andhra Pradesh
Manager
Karnataka Head
KeralaKarnataka Tamilnadu Manager
Divisional Manager,Bangalore
Rest of KarnatakaManager
Territory Manager
Branch Manager
Front Office Executive
Assistant Manager
Back Office Executive
K. Sridhar
South India Manager
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2. Skill: Interpersonal Skill
The skill is closely related to staff are the distinctive abilities and talents that a
company possesses. Skills may range from ability of a staff to speak Spanish to an
understanding of the statistics to computer literacy etc.
Their management team has hands on experience in financial services,
especially targeted at retail sales and relationship management. They have a strong
technical team comprising of qualified engineers and trained personnel. The in
house team has been responsible for developing several MIS software and
requirements. They believe that they have put in place a working environment that
brings out their people's entrepreneurial energy.
3. Style : Organizational Culture
The Culture or Style is the aggregate of behaviors, thoughts, beliefs and symbols
that is conveyed to the people throughout an organization over time. Since it is very
hard to change a company's ingrained culture, it is important to bear in mind when
developing a new strategy.
They have developed a team of Customer Relationship Managers across
India to handle key customer accounts. These people are experienced in financial
services and have undergone in-house training. This allows them to offer unbiased
advice on not only equities but also on other investment products like mutual funds
ensure that the customer has a single point contact with us.
4. Strategy : Business strategy
Strategy refers to those actions that a company plans in response to or inanticipation of changes in its external environment, its customers and its
competitors. It is a plan or course of action leading to the allocations of an
organization's finite resources to reach identified goals.
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Our business plan is to become the leading investment advisor and
intermediary for financial services in India. The key driver is to increase our
customer base in all our products, give them a platform of choice to transact and
support them with quality research. The elements of our strategy include: One
Stop Shop from advice to transactions.
We have emerged as one of India's leading financial information Internet
portal in India. We distribute mutual funds and life insurance products through our
branches as well as directly through our sales team.
These factors allow us to provide our customers with an integrated online
as well as offline solution to fulfill all their financial information and transaction
needs. We believe that our ability to offer multiple products across broking to
insurance to mutual funds to commodities to small savings differentiates us from
our competition. This also offers significant cross selling opportunities which will
help in improving margins as incremental revenue will entail lower customer
acquisition and promotion costs.
Multi channel delivery model
We intend providing a single convenient and reliable platform from which
our users can obtain information, trade online or purchase offline a wide range of
personal financial products. Our branches have been opened in cities after a
detailed study of demographics and investment patterns in different cities.
Expand our retail network
We have a retail branch network of 976 branches at 365 locations across
India to provide an alternative channel for our customers to transact with us and to
support our online services. It has more than 8,00,000 customers.
These branches allow our customers the opportunity to purchase personal
financial products and trade at such branches with the assistance of our staff. We
propose to set up additional 25 branches in 14 cities across India to have a
network of 1000 branches strengthen our geographic reach.
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Leverage our content advantage for value added offerings
We believe that the key to successful investment is research. We have
invested considerable resource in building our research domain skills. Our top
management has hands on experience in equity research. We will continue to
expand the breadth and depth of research and content on Indian business and
finance.
This research advantage will enable us to acquire customers in high value
added product offerings especially PMS.
Continuous investments in technology platform
We have leveraged the power for technology to offer an integrated platform
to the customer to transact. We will continue to invest in such technologies that
could enhance customer experience while interacting with us. We have facilitated
integrated trading and depositary accounts for the customer, payment gateways
with multiple banks, online Internet enabled back office and MIS. We believe that
our technology investments will be key driver in scaling of the business.
Acquisition and Takeover
We strongly believe that to become a market leader in the investment
advisory and intermediation space, we have to expand our business. In our
endeavor to do so and as per our business strategy we may pursue inorganic
growth.
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5. System: Open System
The procedures both formal and informal, by which an organization operates
and gathers information constitutes the system of the company. This model is
concerned with the systems that allocate the control money and materials as well as
gather information.
They manage the risk associated with their broking operations through use of
internally developed credit algorithms implemented through fully automated risk
management software and selective direct monitoring of certain operating
parameters. Their automated risk management procedures rely primarily on
internally developed risk management system and system provided by their
vendors. They have developed a team of customer Relationship Managers across
India to handle key customer account. These people are experienced in financial
services and have undergone in-house training. This allows them to offer unbiased
advice on not only equities but also on other investment products like mutual funds
and insurance. Apart from advice, they are trained to customer queries as they
ensure that the customer has a single point contact with us.
They intend providing a single convenient and reliable platform from which
their can obtain information, trade online or purchase offline a wide range of
personal financial products. Their branches have been opened in cities after a
detailed study of demographics and investment patterns. Their offline network today
increased by 45.9% to Rs 13,947 crore from the level of Rs 9,559 crore. account for
trading in the NSE cash market as on December 2009 and The average monthly
derivative trading in terms of value, on the NSE has increased by 86.6% to Rs
72,618 crore in December 2009 from Rs 38,906 crore recorded in January 2009.
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6. Staff: Knowledge s taff
Staff means the human resource systems which include appraisal, training,
wages and the intangibles such as employee motivation, morale and attitude. With
a motivation workforce companies are able to adapt well and compete.
Their Human Resource Policy on the philosophy of Owner Mindset. They
believe that the key to their continued growth lied in unleashing the entrepreneurial
energy of their employees. They encourage all employees to behave more as
owners of their departments rather than employees. Their people are highly driven
and work towards increasing India Info lines brand and market share across
product lines.
They have developed extensive in-house training modules. In addition,
various Asset Companies and ICICI PRUDENTIAL LIFE INSURANCE COMPANY
LIMITED train their staff. They lay emphasis on on the job training where an
experienced and senior person mentors a junior executive.
In addition to salary, their employees get performance-based incentives on
a quarterly basis. They have also implemented an employee stock option plan. India
Infoline Ltd has informed BSE that the Compensation/ Remuneration Committee of
the Board at its meeting on December 10, granted 10,45,000 Employee Stock
Options to the identified employees under the ESOP Scheme, 2008 of the company
through circular resolution.
As on December 31, 2009 the total employee strength of the company and
their subsidiaries was 15,600.
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7. Shared Values:
Vision:
To be the most respected financial services company in India.
Mission:
One stop shop for all financial requirements.
India Infoline believes in building an entrepreneurial workforce and wants to
inculcate the essentials of an entrepreneur in all team members.
5 essentials of an entrepreneur are: Energy, Execution, Efforts, Ethics, and
Excellence
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4. SWOT ANALYSIS
STRENGTHS
Original Research
Integrated Technology Platform
One Stop Shop
Pan- India Distribution Network
India Infoline and 5paisa.com have developed into Brands
WEAKNESSES
Lack of Banking arm to complete the bank broker-depository chain
Insignificant presence in institutional segment
OPPORTUNITIES
Changing demographics with higher disposable income and
increasingly complex financial instruments will drive demand for
investment advisory services
Rapid penetration of internet and computers means that technology
enabled financial services will gain market share
THREATS
Economic Slowdown
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Volatile movement in indices and events like May 17, 2004
Stock Markets falls will have a cascading effect on our mutual fund
mobilization
Increase/decrease in interest rates can affect our debt/income fund
mobilizations
Future changes in personal taxation rules can impact insurance
sales
Increasing competition from large and particularly foreign players.
ANALYSIS OF FINANCIAL STATEMENT
Balance Sheetas at March 31, 2010
As at 31.03.2010 As at 31.03.2009
SOURCES OF
FUNDS
Shareholders'
funds
Share Capital 570,429,550 566,800,000
Share Application
Money4,021,350
Reserves and
Surplus
15,474,528,88
4
14,766,666,18
4
Equity Share
Warrants
16,048,979,78
4113,700,000
15,447,166,18
4
Minority Interest 182,150,290 3,124,594,226
Loan Funds
Secured Loans 3,621,096,151 17,044,854
Unsecured Loans 11,555,829,409
15,176,925,560
501,031,242 518,076,096
Total 31,408,055,634 19,089,836,506
APPLICATION OF
FUNDS
Goodwill(On
Consolidation) 1,388,970 1,388,970
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Fixed Assets
(Including
Intangibles)
Gross Block 5,029,023,414 3,509,285,055
Less : Accumulated
depreciation and
amortization
(997,809,442) (728,867,502)
Net Block 4,031,213,972 2,780,417,553
Capital Work-In-
Progress340,870,546 4,372,084,518 71,118,197 2,851,535,750
Investments 4,819,628,047 3,149,730,892
Deferred Tax Assets 157,650,915 119,662,342
Less: Deferred Tax
Liabilities(771,568) 156,879,347 (401,340) 119,261,002
Current Assets,Loans and
Advances
Sundry Debtors 6,097,719,596 1,141,660,097
Cash and Bank
Balances8,056,914,669 6,269,219,758
Stock on Hand 692,388,323 1,337,237,279
Loans and
Advances
23,129,632,33
7
13,617,942,88
4
37,976,654,92
5
22,366,060,01
8Less: Current
Liabilities &
Provisions
Current Liabilities 12,881,965,85
67,429,958,258
Provisions 3,036,614,317 1,968,310,424
15,918,580,17
39,398,268,682
Net Current Assets 22,058,074,75
2
12,967,791,33
6
Miscellaneous
Expenditure (to the
extent not written
off)
- 128,556
Total 31,408,055,634 19,089,836,506
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Key Ratios
Years Mar-10 Mar-09
Debt-Equity Ratio = Total Liabilities / Total Capital 0.2 0.1
Current Ratio = Current Assets / Current Liabilities 1.0 1.1
P/E Ratio = Price per Share / Earnings per Share 23.7 18.0
Dividend Yield = Dividend per Share / Current Share Price 2.6 4.8
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5. LEARNING EXPERIENCE
The following are the areas where I have got the experience like:
Marketing: Its me who has got the experience in India Infoline about marketing
that how to sell Equities, Commodities and Insurance policies.
Human Resource Management: Its me who has learnt that how employees are
recruited for various departments.
Finance: Its me who learnt about shareholders, insurance, loan and credit
facilities.
Research and Development: They have introduced performance appraisal
system and payment of incentives for development of employees.
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CHAPTER-1
INTRODUCTION
PORFOLIO CONSTRUCTION ON MARKOWITZ MODEL
Portfolio is a combination of securities such as stocks, bonds and money
market instruments. The process of blending together the broad asset classes so as to
obtain optimum return with minimum risk is called Portfolio Construction.
Diversification of investments helps to spread risk over many assets. A diversification of
securities gives the assurance of obtaining the anticipated return o the portfolio. In a
diversified portfolio, some securities may not perform as expected, but others may
exceed the expectation and making the actual return of the portfolio reasonably close to
the anticipated one. Keeping a portfolio of single security may lead to a greater
likelihood of the actual return somewhat different from that of the expected return.
Hence, it is a common practice to diversify securities in the portfolio.
APPROACHES IN PORTFOLIO CONSTRUCTION
Commonly, there are two approaches in the construction of the portfolio of
securities viz. traditional approach and Markowitz efficient frontier approach. In the
traditional approach, investors needs in terms of income and capital appreciation are
evaluated and appropriate securities are selected to meet the needs of the investor. The
common practice in the traditional approach is to evaluate the entire financial plan of the
individual. In the modern approach, portfolios are constructed to maximize the expected
return for a given level of risk. It views portfolio construction in terms of the expected
return and the risk associated with obtaining the expected return.
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1. TRADITIONAL APPROACH
The traditional approach basically deals with two major decisions. They are:
a) Determining the objectives of the portfolio.
b) Selection of securities to be included in the portfolio.
Normally, this is carried out in four to six steps. Before formulating the objectives,
the constraints of the investor should be analyzed. Within the given frame work of
constraints, objectives are formulated. Then based on the objectives, securities are
selected. After that, the risk and return of the securities should be studied. The
investor has to assess the major risk categories that he or she is trying to minimize.
Compromise on risk and non-risk factors has to be carried out. Finally relative
portfolio weights are assigned to securities like bonds, stocks and debentures and
then diversification is carried out.
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STEPS IN TRADITIONAL APPROACH
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Analysis of Constraints
Determination of Objectives
Selection of Portfolio
Bond and Common stock Bond Common stock
Assessment of risk and return
Diversification
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1. Analysis of constraints:
The constraints normally discussed are: income needs, liquidity, time
horizon, safety, tax considerations and the temperament.
Income needs: The income needs depend on the need for income in
constant rupees and current rupees. At the same time inflation may erode
the purchasing power, the investor may like to offset the effect of the
inflation and so, needs income in constant rupees.
Liquidity: Liquidity need of the investment is highly individualistic of the
investor. If the investor prefers to have high liquidity, then funds should be
invested in high quality short term debt maturity issues such as money
market funds, commercial papers and shares that are widely traded.
Safety of the principal: Another serious constraint to be considered by the
investor is the safety of the principal value at the time of liquidation.
Investing in bonds and debentures is safer than investing in the stocks.
Even among the stocks, the money should be invested in regularly traded
companies of longstanding. Investing money in the unregistered finance
companies may not provide adequate safety.
Time Horizon: Time horizon is the investment-planning period of the
individuals. This varies from individual to individual. Individuals risk and
return preferences are often described in terms of his life cycle. The
stages of life cycle determine the nature of investment.
Tax consideration: Investors in the income tax paying group consider the
tax concession s they could get from their investments. For all practical
purpose, they would like to reduce the taxes.
Temperament: The temperament of the investor himself poses a
constraint in framing his investment objectives. Some investors are risk
lovers or takers who would like to take up higher risk even for low returns.
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While some investors are risk averse, who may not be willing to undertake
higher level of risk even for higher level of return?
2. Determination of Objectives:
Portfolios have the common objective of financing present and future
present and future expenditures from a large pool of assets. The return that the
investor requires and the degree of risk he is willing to take depend upon the
constraints. The objectives of portfolio range from income to capital appreciation.
The common objectives are stated below:
Current income
Growth in income
Capital appreciation
Preservation of capital
The investor in general would like to achieve all the four objectives; nobody wouldlike to lose his investment. But, it is not possible to achieve all the four objectives
simultaneously. If the investor aims at capital appreciation, he should include risky
securities where there is an equal likelihood of losing the capital. Thus, there is a
conflict among the objectives.
3. Selection of Portfolio:
The selection of the portfolio depends on the various objectives of the
investor. The selection of portfolio under different objectives is dealt
subsequently.
Objectives and asset mix: If the main objective is getting adequate amount
of current income, 60% of the investment is made on Debts and 40% on
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equities. The proportions of investments on debt and equity differ
according to the individuals preferences. Money is invested in short term
debt and fixed income securities.
Growth of income and asset mix: here the investor requires a certain
percentage of growth in the income received from his investment. The
investors portfolio may consist of 60 to 100 percent equities and 0 to 40
percent debt instrument. The debt portion of the portfolio may consist of
concession regarding tax exemption.
Capital appreciation and asset mix: Capital appreciation means that the
value of the original investment increases over the years. Investment in
real estates like land and house may provide a faster rate of capital
appreciation but they lack liquidity. In the capital market, the values of the
shares are much higher than their original issue prices.
Safety of principal and asset mix: usually, the risk averse investors are
very particular about the stability of principal. According to the life cycle
theory, people in the third stage of life also give more importance to the
safety of the principal. All the investors have this objective in their mind.
No one likes to lose his money invested in different assets. But, the
degree may differ.
4. Risk and return analysis:
The traditional approach to portfolio building has some basic
assumptions. First, the individual prefers larger to smaller returns from securities. To
achieve this goal, the investor has to take more risk. The ability to achieve higherreturns is dependent upon his ability to judge risk and his ability to take specific
risks. The investor analyses the varying degrees of risk and constructs the portfolio.
At first, he establishes the minimum income that he must have to avoid hardships
under most adverse economic condition and the he decides risk of loss of income
that can be tolerated. The investor makes a series of compromises on risk and non-
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risk factors like taxation and marketability after he has assessed the major risk
categories which he is trying to minimize.
5. Diversification:
Once the asset mix is determined and the risk and returns are
analyzed, the final step is the diversification of portfolio. Financial risk can be minimized
by commitments to top quality bonds, but these securities offer poor resistance to
inflation. Stocks provide better inflation protection than bonds but are more vulnerable to
financial risks. Good quality convertibles may balance the financial risk and purchasing
power risk. According to the investors need for income and risk tolerance level portfolio
is diversified. In the bond portfolio, the investor has to strike a balance between the
short term and long term bonds. Short term fixed income securities offer more risk to
income and long term fixed income securities offer more risk to principal.
2. MODERN APPROACH
The traditional approach is a comprehensive financial plan for the individual. It
takes into account the individual needs such as housing, life insurance and pension
plans. But these types of financial planning approaches are not done in the Markowitz
approach. Markowitz gives more attention to the process of selecting the portfolio. His
planning can be applied more in the selection of common stocks portfolio than the bond
portfolio. The stocks are not selected on the basis of need for income or appreciation.
But the selection is based on the risk and return analysis. Return includes the market
return and dividend. The investor needs return and it may be either in the form of
market return or dividend. They are assumed to the indifferent towards the form ofreturn.
In the modern approach, the final step is asset allocation process that is to
choose the portfolio that meets the requirement of the investor. The risk taker i.e., who
are willing to accept a higher probability of risk for getting the expected return would
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choose high risk portfolio. Investor with lower tolerance for risk would choose low level
risk portfolio. The risk neutral investor would choose the medium level risk portfolio.
PORTFOLIO-MARKOWITZ MODEL
Harry Markowitz opened new vistas to modern portfolio selection by publishing
an article in the journal of finance in March 1952. His publication indicated the
importance of correlation among the different stocks returns in the construction of a
stock portfolio. Markowitz also showed that for a given level of expected return in a
group of securities, one security dominates the other. To find out this, the knowledge of
the correlation coefficients between all possible securities combinations is required.
THE MARKOWITZ MODEL
Most people agree that holding two stocks is less risky than holding one stock.
For example, holding stocks from textile, banking and electronic companies is better
than investing all the money on the textile companys stock. But building up the optimal
portfolio is very difficult. Markowitz provides an answer to it with the help of risk and
return relationship.
ASSUMPTIONS
i. The individual investor estimates risk on the basis of variability of returns.
ii. Investors decision is solely based on the expected return and variance of returns
only.
iii. For a given level of risk, investor prefers higher return to lower return. Likewise,
for a given level of return investor prefers lower risk than higher risk.
CONCEPT
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In developing his model, Markowitz had given up the single stock portfolio and
introduced diversification. The single security portfolio would be preferable if the
investor is perfectly certain that his expectation of highest return would turn out to be
real. In the world of uncertainty, most of the risk averse investors would like to join
Markowitz rather than keeping a single stock, because diversification reduces the risk.
CHAPTER-2
RESEARCH DESIGN
2.1 TITLE OF THE STUDY:
CONSTRUCTION OF A PORTFOLIO USING FIVE STOCKS (2009-11) BY
EMPLOYMENT OF MARKOWITZ MODEL.
2.2 STATEMENT OF THE PROBLEM
Portfolios are the advantage of reduction of risk and also of returns. This was
found out by Prof. Harry Markowitz a Nobel winner. The best beneficial effects ofportfolio will be felt when stock returns are negatively correlated and when
diversification is across different 15 industries.
In this project risk reduction diversification effect is examined by selecting 5
Stocks of selected Companies-
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1. Tata Steel
2. Bajaj Auto Finance
3. Ultra tech Cement
4. Tata Chemicals
5. Taj GVK
Belonging into different Sectors namely-
1. Steel
2. Automobiles
3. Cement
4. Chemicals
5. Hotels
Over a period of 25 months by employing the Financial Markowitz Model.
2.3 RESEARCH METHODOLOGY
This Consisted of the following Steps:
a) Random sampling of 5 companies in 5 different sectors.
b) Conversion of the Closing Prices of 5 different companies into Returns.
c) Determine Average Returns, Standard Deviation of the Returns, Variance of the
Returns and the co-variance between each pair of the Co.s.
d) Assumption of equal distribution of wealth and differential distribution in
subsequent stages.
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e) Quantification of the average returns of the portfolio and Risk of the Portfolio with
each distribution of wealth.
2.4 SCOPE OF THE STUDY
Scope of the study is to examine, is there any advantage in combining Securities
in different proportion and effect of such combination on portfolio output namely
Standard Deviation of the portfolio(Risk) and Returns of the portfolio(weighted average
returns).
This will be of great help to any investor in highlighting that instead of a focused
investment, a diversified investment is always better.
2.5 OBJECTIVES OF THE STUDY
Specific Objectives for the study are:-
a) Selection of Co.s (Tata Steel, Bajaj Auto Finance, Ultra tech cement, Tata
Chemicals, Taj GVK) and Industries (Steel, Auto, Cement, Chemicals, Hotels).
b) Selection of the study Period (2009-11).
c) Identification of returns of each Co., Variability of returns of each Co., Variability
of returns when 2 Co.s are taken together (, cov).
d) Identification of portfolio output when wealth is distributed among these Co.s.
e) Final Conclusions.
2.6 LIMITATIONS
a) As per original Markowitz Studies a Maximum of 50 different Industries are
required for proper Diversification but due to Constraints of time period and data
availability the Researcher has selected 5 Co.s belonging to different Industries.
b) A Monthly data base is employed fro analysis whereas the accuracy may be
improved with Weekly data base is employed.
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c) A sampling Scale of 3% was considered sufficient.
d) Sharpes Single Index Model is not attempted.
e) This research is only for academic interest.
2.7 METHODOLOGICAL ASSUMPTION
a) The Industries selected are assumed to represent Indian Economy.
b) Companies selected in each Industry are assumed to represent the industry in
full.
c) A Monthly Database is considered sufficient for this purpose.
2.8 EXPECTED CONTRIBUTION
Specific Monetary Contribution from a Study of this nature cannot be done
however qualitatively this study is enlightening an ordinary Investor regarding the
benefits of Diversification.
2.9 SAMPLING PLAN
Assuming 300days were Active Trading days for each Co. there were 900 trading
days out of which Systematic Sampling as resulted in Selection of 25 trading days. This
means:-
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a) Selection of Companies from different Sectors of the economy.
b) Recording of Closing Prices of Equity Shares of the Co. on a monthly basis.
c) Sampling Methodology is Systematic Sampling- every 30th day was selected.
d) Sampling Scale is 25/900 = approximately 3%.
2.10 FIELDWORKS AND RESEARCH
This analysis is extremely an In-house research activity did not involve in any
field work in the form of Customer introduce, recording or Visual observation. Similarly
No research Instrument such as questionnaire or Interview Scheduled recordings of any
help were employed at any stage.
2.11 TOOLS OF DATA COLLECTION
No Specific data collections Instrument such as Voice recorder or Photographic
device or Questionnaire or Interview Schedules were employed at any stage.
2.12 DEFINITION OF CONCEPTS
a) Arithmetic average returns () =
Where, x = Periodical Returns in %
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n = No. of Readings
b) Standard Deviation()=
This is described as the square root of the differences or deviations of
mean from individual values.
c) Covariance of Two Combination:
Covariance reflects the degree to which the returns of the two securities
vary or change together. A positive Covariance means that the returns of the two
securities move in the same directions whereas a negative covariance implies
that the returns of the two securities move in the opposite direction. The
covariance between the returns of any two securities 1 and 2 is calculated as
follows:
Cov12=
d) Rate of Return
The rate of return on an asset for a given period (usually a period of one
year) is defined as follows:
Return= Where, P1= Price at the end of the year
P0= Price at the beginning of the year
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e) Portfolio Risk()
Combination of two securities reduces the risk factor if less degree of
positive correlation between them. The portfolio risk is nil if the securities are
related negatively. This indicates that the risk can be eliminated if the securities
are perfectively negatively correlated. The standard deviation of the portfolio is
sensitive to 1) the proportions of funds devoted to each stock 2) the standard
deviation of each security 3) Co-variance between two stocks.
The change in portfolio proportions can change the portfolio risk.
= W121
2+W222
2+ W323
2+2W1W2 1 212+2W1W3 1 313+2W2W3 2 323
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CHAPTER-3
ANALYSIS OF DATA
TABLE-1:Closing Prices of 5 different Sectors
MONTHLY STEEL(A) AUTO(B) CEMENT( C) CHEMICALS(D) HOTEL (E)
Jan-09 184.60 474.75 395.95 153.15 45.15
Feb-09 172.80 535.05 470.10 124.10 42.65
Mar-09 205.90 618.45 551.35 141.55 47.65
Apr-09 238.10 641.65 570.20 171.55 56.25
May-09 405.35 1034.25 717.80 216.35 93.30
Jun-09 390.65 1003.05 689.60 217.35 76.75
Jul-09 462.35 1221.75 799.00 254.15 123.15
Aug-09 424.25 1215.70 761.80 248.20 119.95Sep-09 509.45 1494.75 799.60 281.35 128.95
Oct-09 471.55 1388.15 767.95 262.85 118.35
Nov-09 579.20 1570.45 836.65 281.15 152.80
Dec-09 614.80 1754.80 914.20 321.85 147.10
Jan-10 569.10 1747.70 930.00 296.85 144.15
Feb-10 574.35 1817.65 1040.05 288.00 153.05
Mar-10 632.05 2014.80 1154.85 328.15 157.70
Apr-10 618.85 2093.35 972.75 353.85 167.35
May-10 500.70 2209.35 921.75 321.55 154.00
Jun-10 485.65 2487.60 879.30 334.30 165.10
Jul-10 537.00 2688.00 863.90 336.80 160.00
Aug-10 522.70 2731.75 902.50 395.40 161.00
Sep-10 651.85 1469.90 1062.60 399.60 157.55
Oct-10 589.40 1510.95 1099.90 390.45 153.05
Nov-10 584.80 1576.60 1137.60 354.85 133.55
Dec-10 680.40 1541.00 1084.25 393.90 133.05
Jan-11 639.70 1245.95 1002.80 350.85 112.85
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TABLE-2:Conversion of Closing Prices into % returns using Formula
MONTHSINDEX RETURNS
A B C D E
Jan-09 0 0 0 0 0
Feb-09 -6.39 12.70 18.73 -18.97 -5.54
Mar-09 19.16 15.59 17.28 14.06 11.72
Apr-09 15.64 3.75 3.42 21.19 18.05
May-09 70.24 61.19 25.89 26.11 65.87
Jun-09 -3.63 -3.02 -3.93 0.46 -17.74Jul-09 18.35 21.80 15.86 16.93 60.46
Aug-09 -8.24 -0.50 -4.66 -2.34 -2.60
Sep-09 20.08 22.95 4.96 13.36 7.50
Oct-09 -7.44 -7.13 -3.96 -6.58 -8.22
Nov-09 22.83 13.13 8.95 6.96 29.11
Dec-09 6.15 11.74 9.27 14.48 -3.73
Jan-10 -7.43 -0.40 1.73 -7.77 -2.01
Feb-10 0.92 4.00 11.83 -2.98 6.17
Mar-10 10.05 10.85 11.04 13.94 3.04
Apr-10 -2.09 3.90 -15.77 7.83 6.12
May-10 -19.09 5.54 -5.24 -9.13 -7.98
Jun-10 -3.01 12.59 -4.61 3.97 7.21
Jul-10 10.57 8.06 -1.75 0.75 -3.09
Aug-10 -2.66 1.63 4.47 17.40 0.63
Sep-10 24.71 -46.19 17.74 1.06 -2.14
Oct-10 -9.58 2.79 3.51 -2.29 -2.86
Nov-10 -0.78 4.34 3.43 -9.12 -12.74
Dec-10 16.35 -2.26 -4.69 11.00 -0.37
Jan-11 -5.98 -19.15 -7.51 -10.93 -15.18
AVERAGE RETURNS = 6.35 = 5.52 = 4.24 = 3.98 = 5.27
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TABLE-3: Calculation of Standard Deviation A & B
MONTH A B
Jan-09 0 -6.35 40.31 0 -5.52 30.43
Feb-09 -6.39 -12.74 162.34 12.70 7.18 51.62
Mar-09 19.16 12.81 164.00 15.59 10.07 101.42
Apr-09 15.64 9.29 86.30 3.75 -1.77 3.12
May-09 70.24 63.89 4082.53 61.19 55.67 3099.09
Jun-09 -3.63 -9.98 99.51 -3.02 -8.53 72.82
Jul-09 18.35 12.01 144.12 21.80 16.29 265.26
Aug-09 -8.24 -14.59 212.85 -0.50 -6.01 36.14Sep-09 20.08 13.73 188.61 22.95 17.44 304.06
Oct-09 -7.44 -13.79 190.12 -7.13 -12.65 159.98
Nov-09 22.83 16.48 271.59 13.13 7.62 58.00
Dec-09 6.15 -0.20 0.04 11.74 6.22 38.71
Jan-10 -7.43 -13.78 189.95 -0.40 -5.92 35.06
Feb-10 0.92 -5.43 29.45 4.00 -1.51 2.29
Mar-10 10.05 3.70 13.67 10.85 5.33 28.41
Apr-10 -2.09 -8.44 71.19 3.90 -1.62 2.62
May-10 -19.09 -25.44 647.23 5.54 0.02 0.00
Jun-10 -3.01 -9.35 87.51 12.59 7.08 50.09
Jul-10 10.57 4.22 17.85 8.06 2.54 6.45
Aug-10 -2.66 -9.01 81.21 1.63 -3.89 15.12
Sep-10 24.71 18.36 337.06 -46.19 -51.71 2673.78
Oct-10 -9.58 -15.93 253.74 2.79 -2.72 7.42
Nov-10 -0.78 -7.13 50.83 4.34 -1.17 1.37
Dec-10 16.35 10.00 99.97 -2.26 -7.77 60.44
Jan-11 -5.98 -12.33 152.05 -19.15 -24.66 608.27
= 6.35 =7674.03 = 5.52 = 7711.98
= 17.88 = 17.93
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TABL E-4: Calculation of Standard Deviation C & D
MONTH C 2 D 2
Jan-09 0 -4.24 17.97 0 -3.98 15.81
Feb-09 18.73 14.49 209.89 -18.97 -22.94 526.46
Mar-09 17.28 13.04 170.15 14.06 10.08 101.70
Apr-09 3.42 -0.82 0.67 21.19 17.22 296.44
May-09 25.89 21.65 468.55 26.11 22.14 490.11
Jun-09 -3.93 -8.17 66.72 0.46 -3.51 12.35
Jul-09 15.86 11.62 135.13 16.93 12.95 167.83
Aug-09 -4.66 -8.90 79.13 -2.34 -6.32 39.91
Sep-09 4.96 0.72 0.52 13.36 9.38 87.98
Oct-09 -3.96 -8.20 67.20 -6.58 -10.55 111.34
Nov-09 8.95 4.71 22.15 6.96 2.99 8.91
Dec-09 9.27 5.03 25.30 14.48 10.50 110.25
Jan-10 1.73 -2.51 6.31 -7.77 -11.74 137.92
Feb-10 11.83 7.59 57.67 -2.98 -6.96 48.41
Mar-10 11.04 6.80 46.22 13.94 9.96 99.29
Apr-10 -15.77 -20.01 400.31 7.83 3.86 14.86
May-10 -5.24 -9.48 89.92 -9.13 -13.10 171.73
Jun-10 -4.61 -8.84 78.23 3.97 -0.01 0.00
Jul-10 -1.75 -5.99 35.89 0.75 -3.23 10.42
Aug-10 4.47 0.23 0.05 17.40 13.42 180.17
Sep-10 17.74 13.50 182.25 1.06 -2.91 8.49
Oct-10 3.51 -0.73 0.53 -2.29 -6.27 39.27
Nov-10 3.43 -0.81 0.66 -9.12 -13.09 171.46
Dec-10 -4.69 -8.93 79.73 11.00 7.03 49.40
Jan-11 -7.51 -11.75 138.10 -10.93 -14.91 222.18
= 4.24 2 =2379.26 =3.98 2= 3122.69
= 9.96 = 11.41
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TABLE-5: Calculation of Standard Deviation e
MONTH E 2
Jan-09 0 -5.27 27.74
Feb-09 -5.54 -10.80 116.73
Mar-09 11.72 6.46 41.68
Apr-09 18.05 12.78 163.36
May-09 65.87 60.60 3672.31
Jun-09 -17.74 -23.01 529.26
Jul-09 60.46 55.19 3045.82
Aug-09 -2.60 -7.87 61.87
Sep-09 7.50 2.24 5.00
Oct-09 -8.22 -13.49 181.91
Nov-09 29.11 23.84 568.42
Dec-09 -3.73 -9.00 80.95
Jan-10 -2.01 -7.27 52.89
Feb-10 6.17 0.91 0.82
Mar-10 3.04 -2.23 4.97
Apr-10 6.12 0.85 0.73
May-10 -7.98 -13.24 175.41
Jun-10 7.21 1.94 3.77
Jul-10 -3.09 -8.36 69.82
Aug-10 0.63 -4.64 21.55
Sep-10 -2.14 -7.41 54.91
Oct-10 -2.86 -8.12 65.99
Nov-10 -12.74 -18.01 324.29
Dec-10 -0.37 -5.64 31.83
Jan-11 -15.18 -20.45 418.18
= 5.27 2 = 9720.19
= 20.12
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TABLE-6: Calculation of Covariance between AB & AC
MONTH
Jan-09 -6.35 -5.52 35.05 -4.24 26.92
Feb-09 -12.74 7.18 -91.51 14.49 -184.60
Mar-09 12.81 10.07 128.91 13.04 167.02
Apr-09 9.29 -1.77 -16.43 -0.82 -7.63
May-09 63.89 55.67 3556.70 21.65 1383.02
Jun-09 -9.98 -8.54 85.17 -8.17 81.49Jul-09 12.00 16.28 195.47 11.62 139.54
Aug-09 -14.59 -6.02 87.76 -8.90 129.79
Sep-09 13.73 17.43 239.41 0.72 9.91
Oct-09 -13.79 -12.65 174.46 -8.20 113.05
Nov-09 16.48 7.61 125.45 4.71 77.55
Dec-09 -0.20 6.22 -1.27 5.03 -1.02
Jan-10 -13.78 -5.92 81.66 -2.51 34.62
Feb-10 -5.43 -1.52 8.24 7.59 -41.21
Mar-10 3.70 5.33 19.69 6.80 25.13
Apr-10 -8.44 -1.62 13.68 -20.01 168.84
May-10 -25.44 0.02 -0.54 -9.48 241.26Jun-10 -9.36 7.07 -66.18 -8.85 82.76
Jul-10 4.22 2.54 10.71 -5.99 -25.30
Aug-10 -9.01 -3.89 35.08 0.23 -2.06
Sep-10 18.36 -51.71 -949.34 13.50 247.83
Oct-10 -15.93 -2.73 43.45 -0.73 11.63
Nov-10 -7.13 -1.18 8.38 -0.81 5.79
Dec-10 10.00 -7.78 -77.76 -8.93 -89.27
Jan-11 -12.33 -24.67 304.18 -11.75 144.92
COVARIANCE AB = 164.60 AC = 114.17
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Cov12=
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TABLE-7: Calculation of Covariance between AD & AE
MONTH
Jan-09 -6.35 -3.98 25.27 -5.27 33.46
Feb-09 -12.74 -22.95 292.41 -10.81 137.71
Mar-09 12.81 10.08 129.09 6.45 82.64
Apr-09 9.29 17.21 159.89 12.78 118.69
May-09 63.89 22.13 1414.27 60.60 3871.74
Jun-09 -9.98 -3.52 35.10 -23.01 229.54
Jul-09 12.00 12.95 155.47 55.19 662.45
Aug-09 -14.59 -6.32 92.23 -7.87 114.80
Sep-0913.73 9.38 128.76 2.23 30.67
Oct-09 -13.79 -10.56 145.55 -13.49 186.02
Nov-09 16.48 2.98 49.14 23.84 392.84
Dec-09 -0.20 10.50 -2.14 -9.00 1.83
Jan-10 -13.78 -11.75 161.92 -7.28 100.28
Feb-10 -5.43 -6.96 37.78 0.90 -4.91
Mar-10 3.70 9.96 36.82 -2.23 -8.25
Apr-10 -8.44 3.85 -32.50 0.85 -7.17
May-10 -25.44 -13.11 333.50 -13.25 337.04
Jun-10 -9.36 -0.01 0.14 1.94 -18.13
Jul-10 4.22 -3.23 -13.65 -8.36 -35.30
Aug-10 -9.01 13.42 -120.95 -4.65 41.87
Sep-10 18.36 -2.92 -53.57 -7.41 -136.09
Oct-10 -15.93 -6.27 99.88 -8.13 129.45
Nov-10 -7.13 -13.10 93.39 -18.01 128.43
Dec-10 10.00 7.02 70.23 -5.64 -56.43
Jan-11 -12.33 -14.91 183.86 -20.45 252.21
COVARIANCE AD= 142.58 AE = 274.39
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TABLE-8: Calculation of Covariance between BC & BD
MONTH
Jan-09 -5.52 -4.24 23.40 -3.98 21.97
Feb-09 7.18 14.49 104.04 -22.95 -164.80
Mar-09 10.07 13.04 131.31 10.08 101.49
Apr-09 -1.77 -0.82 1.45 17.21 -30.45
May-09 55.67 21.65 1204.93 22.13 1232.16
Jun-09 -8.54 -8.17 69.73 -3.52 30.03
Jul-09 16.28 11.62 189.28 12.95 210.89
Aug-09 -6.02 -8.90 53.51 -6.32 38.02
Sep-09 17.43 0.72 12.59 9.38 163.46
Oct-09 -12.65 -8.20 103.72 -10.56 133.54Nov-09 7.61 4.71 35.82 2.98 22.70
Dec-09 6.22 5.03 31.27 10.50 65.27
Jan-10 -5.92 -2.51 14.88 -11.75 69.60
Feb-10 -1.52 7.59 -11.52 -6.96 10.56
Mar-10 5.33 6.80 36.21 9.96 53.06
Apr-10 -1.62 -20.01 32.44 3.85 -6.25
May-10 0.02 -9.48 -0.20 -13.11 -0.28
Jun-10 7.07 -8.85 -62.57 -0.01 -0.10
Jul-102.54 -5.99 -15.19 -3.23 -8.20
Aug-10 -3.89 0.23 -0.89 13.42 -52.23
Sep-10 -51.71 13.50 -698.09 -2.92 150.88
Oct-10 -2.73 -0.73 1.99 -6.27 17.10
Nov-10 -1.18 -0.81 0.95 -13.10 15.39
Dec-10 -7.78 -8.93 69.46 7.02 -54.64
Jan-11 -24.67 -11.75 289.89 -14.91 367.76
COVARIANCE BC = 67.43 BD = 99.46
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TABLE-9: Calculation of Covariance between BE & CE
MONTH
Jan-09 -5.52 -5.27 29.09 -4.24 23.40
Feb-09 7.18 -10.81 -77.61 14.49 104.04
Mar-09 10.07 6.45 64.97 13.04 131.31
Apr-09 -1.77 12.78 -22.60 -0.82 1.45
May-09 55.67 60.60 3373.17 21.65 1204.93
Jun-09 -8.54 -23.01 196.42 -8.17 69.73
Jul-09 16.28 55.19 898.62 11.62 189.28
Aug-09 -6.02 -7.87 47.33 -8.90 53.51
Sep-0917.43 2.23 38.93 0.72 12.59
Oct-09 -12.65 -13.49 170.67 -8.20 103.72
Nov-09 7.61 23.84 181.47 4.71 35.82
Dec-09 6.22 -9.00 -55.97 5.03 31.27
Jan-10 -5.92 -7.28 43.10 -2.51 14.88
Feb-10 -1.52 0.90 -1.37 7.59 -11.52
Mar-10 5.33 -2.23 -11.89 6.80 36.21
Apr-10 -1.62 0.85 -1.38 -20.01 32.44
May-10 0.02 -13.25 -0.28 -9.48 -0.20
Jun-10 7.07 1.94 13.71 -8.85 -62.57
Jul-10 2.54 -8.36 -21.20 -5.99 -15.19
Aug-10 -3.89 -4.65 18.08 0.23 -0.89
Sep-10 -51.71 -7.41 383.33 13.50 -698.09
Oct-10 -2.73 -8.13 22.16 -0.73 1.99
Nov-10 -1.18 -18.01 21.16 -0.81 0.95
Dec-10 -7.78 -5.64 43.90 -8.93 69.46
Jan-11 -24.67 -20.45 504.49 -11.75 289.89
COVARIANCE BE = 244.10 CE = 67.43
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TABLE-10: Calculation of Covariance between CD & DE
MONTH
Jan-09 -4.24 -3.98 16.88 -5.27 22.34
Feb-09 14.49 -22.95 -332.46 -10.81 -156.56
Mar-09 13.04 10.08 131.50 6.45 84.17
Apr-09 -0.82 17.21 -14.13 12.78 -10.49
May-09 21.65 22.13 479.12 60.60 1311.65
Jun-09 -8.17 -3.52 28.74 -23.01 187.95
Jul-09 11.62 12.95 150.55 55.19 641.50
Aug-09 -8.90 -6.32 56.23 -7.87 70.00
Sep-09 0.72 9.38 6.77 2.23 1.61
Oct-09 -8.20 -10.56 86.54 -13.49 110.60
Nov-09 4.71 2.98 14.03 23.84 112.18
Dec-09 5.03 10.50 52.79 -9.00 -45.26
Jan-10 -2.51 -11.75 29.51 -7.28 18.27
Feb-10 7.59 -6.96 -52.86 0.90 6.87
Mar-10 6.80 9.96 67.71 -2.23 -15.17
Apr-10 -20.01 3.85 -77.07 0.85 -16.99
May-10 -9.48 -13.11 124.30 -13.25 125.62
Jun-10 -8.85 -0.01 0.13 1.94 -17.14
Jul-10 -5.99 -3.23 19.37 -8.36 50.08
Aug-10 0.23 13.42 3.06 -4.65 -1.06
Sep-10 13.50 -2.92 -39.39 -7.41 -100.07
Oct-10 -0.73 -6.27 4.58 -8.13 5.93
Nov-10 -0.81 -13.10 10.64 -18.01 14.63
Dec-10 -8.93 7.02 -62.73 -5.64 50.40
Jan-11 -11.75 -14.91 175.21 -20.45 240.36
COVARIANCE CD = 36.63 DE = 112.14
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TABLE-11: Summary Table Returns and Standard Deviation
PORTFOLIO RETURNS() (%)
STANDARD DEVIATION
() (%)
A 6.35 7674.03 319.75 17.88
B 5.52 7711.98 321.33 17.93
C 4.42 2379.26 99.14 9.96
D 3.98 3122.69 130.11 11.41
E 5.27 9720.19 405.01 20.12
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TABLE-12: Summary Table of Covariance
COMBINATIONS COVARIANCE () (%)
AB164.60AC 114.17
AD 142.39
AE 271.39
BC 67.43
BD 99.46
BE 244.10
CD 36.63
CE 67.43
DE 112.14
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GRAPH-1: Showing Monthly prices of Tata Steel (01/01/2009 to
31/01/2011)
SL NO MONTH STEEL(A) SL NO MONTH STEEL(A) SL NO MONTH STEEL(A)
1 Jan-09 184.60 11 Nov-09 579.20 21 Sep-10 651.85
2 Feb-09 172.80 12 Dec-09 614.80 22 Oct-10 589.40
3 Mar-09 205.90 13 Jan-10 569.10 23 Nov-10 584.80
4 Apr-09 238.10 14 Feb-10 574.35 24 Dec-10 680.40
5 May-09 405.35 15 Mar-10 632.05 25 Jan-11 639.70
6 Jun-09 390.65 16 Apr-10 618.85
7 Jul-09 462.35 17 May-10 500.70
8 Aug-09 424.25 18 Jun-10 485.65
9 Sep-09 509.45 19 Jul-10 537.00
10 Oct-09 471.55 20 Aug-10 522.70
INTERPRETATION: The price of the TATA STEEL in the month of Jan-09 was Rs. 184.60 and
at the end of Jan-11 was Rs. 639.70. Within this period, the price was reduced to Rs.172.89
(Feb-09) and also increased to the extent of Rs. 680.40 (Dec-10).
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GRAPH-2: Showing Monthly prices of BAJAJ AUTO FINANCE
(01/01/2009 to 31/01/2011)
SL NO MONTH AUTO(B) SL NO MONTH AUTO(B) SL NO MONTH AUTO(B)1 Jan-09 474.75 11 Nov-09 1570.45 21 Sep-10 1469.90
2 Feb-09 535.05 12 Dec-09 1754.80 22 Oct-10 1510.95
3 Mar-09 618.45 13 Jan-10 1747.70 23 Nov-10 1576.60
4 Apr-09 641.65 14 Feb-10 1817.65 24 Dec-10 1541.00
5 May-09 1034.25 15 Mar-10 2014.80 25 Jan-11 1245.95
6 Jun-09 1003.05 16 Apr-10 2093.35
7 Jul-09 1221.75 17 May-10 2209.35
8 Aug-09 1215.70 18 Jun-10 2487.60
9 Sep-09 1494.75 19 Jul-10 2688.00
10 Oct-09 1388.15 20 Aug-10 2731.75
INTERPRETATION: The price of the BAJAJ AUTO FINANCE in the month of Jan-09 was Rs.
474.75 and at the end of Jan-11 was Rs. 1245.95. Within this period, there was no reduction in
the price and the price has been increased to the extent of Rs. 2731.75 (Aug-10).
EAST POINT COLLEGE OF HIGHER EDUCATION Page 67
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8/2/2019 Fundamental and Technical Analysis
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