ranjith complete project

PORTFOLIO MANAGEMENT SERVICES

The Project reportOn


At

(Finance)M RANJITH KUMAR(212611672010)

Project submitted in partial fulfillment for the award of the degree ofMASTER IN BUSINESS ADMINISTRATION

(2011-13)

GRAHAMBELL INSTITUTE OF TECHNOLOGY AND SCIENCEOsmania University , Hyderabad -500007

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DECLARATION

I hereby declare that this project report titled “PORTFOLIO MANAGEMENT SERVICES” at

Reliance Capital, submitted by me to the Department of GRAHAMBELL P.G COLLEGE, ,

Shamirpet Road, Secunderabad, is a bonafide work undertaken by me as a partial requirement of the

academic purpose for the grant of the Post Graduate degree of Master of Business Administration, and

it is not submitted to any other University or institution for the award of any degree/ diploma/certificate

of published any time before.

M RANJITH KUMAR Signature of the student

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CERTIFICATE

This is to certify that the Project Report titled “PORTFOLIO MANAGEMENT

SERVICES” with reference to Reliance Capital is submitted in partial requirement of the academic

purpose for the award of the Post Graduate degree of Master of Business Administration is submitted by

M RANJITH KUMAR under my guidance. This has not been submitted to any other University or

Institution for the award of any degree/diploma/certificate.

Signature of Associate Professor of Management

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ABSTRACT

Portfolio management can be defined and used in many a ways, because the basic meaning of the word is

“combination of the various things keeping intact”. So I considered and evaluated this from the perspective

of the investment part in the securities segment.

From the investor point of view this portfolio followed by him is very important since through this way one

can manage the risk of investing in securities and thereby managing to get good returns from the investment

in diversified securities instead of putting all the money into one basket. Now a day’s investors are very

cautious in choosing the right portfolio of securities to avoid the risks from the market forces and economic

forces. So this topic is chosen because in portfolio management one has to follow certain steps in choosing

the right portfolio in order to get good and effective returns by managing all the risks.

This topic covers the how a particular portfolio has to be chosen concerning all the securities individual

return and thereby arriving at the overall portfolio return. This also covers the various techniques of

evaluation of the portfolio with regarding to all the uncertainties and gives an edge to select the right one.

The purpose of choosing this topic is to know how the portfolio management has to be done in arriving at

the effective one and at the same time make aware the investors to choose the securities which they want to

put them in their portfolio. This also gives an edge in arriving at the right portfolio in consideration to

different securities rather than one single security. The project is undertaken for the study of my subject

thoroughly while understanding the different case studies for the better understanding of the investors and

myself.

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ACKNOWLEDGEMENT

I hereby, would like to deliver my vote of thanks to everyone who helped me and were a part of this

project study either directly and indirectly in completing my project work successfully.

I would like to thank Prof. MOHANRAO, Principal, Mr. Mahesh, Head of Department and all the

faculty members of GRAHAMBELL P.G COLLEGE for throughout support and encouragement in the

successful completion of my project.

I convey my heartful thanks to Mrs. Shailaja, Lecturer and Mrs. Ashwini, Lecturer in Finance

Department, for their essential guidance in planning, organizing and managing in the successful completion

of my project.

I convey my heartful thanks to Mr. Ramesh Kumar (Centre Head & Project Head, Reliance

Capital) for giving me an opportunity to undertake the project in their esteemed company. It is with his

cooperation and support that we are able to gain the knowledge and experience that are everlasting and the

entire staff for guiding me and extending their support in completion of my project successfully.

I am indebted to my family members and friends for their moral support and encouragement in

completing my project work.

Index

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CHAPTER

NOTITLE PAGE NO

1 INTRODUCTION 2

1.1 Importance of the study 4

1.2 Need for the study 5

1.3 Objective of the study 6

1.4 Research methodology 7

1.5 Scope of the study 8

1.6 Limitation of the Project 8

2 REVIEW OF LITERATURE 10

3 THE COMPANY PROFILE 33

4 DATA ANALYSIS AND INTERPRETATION 45

5 FINDINGS, SUGGESTIONS & CONCLUSIONS 74

6 BIBLIOGRAPHY 80

7 APPENDIX

7.1 QUESTIONNAIRE 87

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CHAPTER - I

INTRODUCTION

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INTRODUCTION


Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income, debt, cash,

structured products and other individual securities, managed by a professional money manager, which can

potentially be tailored to meet specific investment objectives.

Investment is the employment of funds with the aim of achieving additional income or growth in

value. The essential quality of an investment is that it involves ‘waiting’ for a reward. The term

‘Investment’ does not appear to be as simple as it has been defined. Investment has been further categorized

by financial experts and economists. It has also often been confused with the term ‘Speculation’. The

following discussion will give an explanation of the various ways in which investment is related or

differentiated from the financial and economic sensex and how speculation differs from investment.

However, it must be clearly established that investment involves long-term commitment.

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A combination of securities with different risk- return characteristics will constitute the portfolio

of the investor. A portfolio is a combination of various assets and/or instruments of investments. The

portfolio is also built up out of the wealth or income of the investor over a period of time with a view to suit

his risk and return preferences to that of the portfolio that he holds. The portfolio analysis is an analysis of

the risk-return characteristics of individual securities in the portfolio and changes that may take place in

combination with other securities due to interactions among themselves and impact of each one of them on

others.

As individuals are becoming more and more responsible for ensuring their own financial future,

portfolio or fund management has taken on an increasingly important role in banks ranges of offerings to

their clients. In addition, as interest rates have come down and the stock market has gone up and come down

again, clients have a choice of leaving their saving in deposit accounts, or putting those savings in unit trusts

or investment portfolios which invest in equities and/or bonds. Investing in unit trusts or mutual funds is one

way for individuals and corporations alike to potentially enhance the returns on their savings.

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IMPORTANCE OF THE STUDY

A portfolio is a collection of investments held by an institution or a private individual. Holding a

portfolio is part of an investment and risk-limiting strategy called diversification. By owning several assets,

certain types of risk (in particular specific risk) can be reduced. The assets in the portfolio could include

stocks, bonds, options, warrants, gold certificates, real estate, futures contracts, production facilities, or any

other item that is expected to retain its value.

A portfolio management service involves deciding what assets to include in the portfolio, given the

goals of the portfolio owner and changing economic conditions. Thus, portfolio management is all about

strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international,

growth vs. safety and numerous other trade-offs encountered in the attempt to maximize return at a given

appetite for risk.

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NEED FOR THE STUDY

Value and thereby create for the company is now considered the principal objective of a business

firm and in achieving such objective, proper and efficient management of finance is quite essential. The four

most vital and important aspects of portfolio management are:

1. Portfolio risk

2. Expected return

3. Systematic and unsystematic risk

4. Liquidity

In order to facilitate the realization of the objective of maximization of investor’s wealth, every

business firm should devote considerable attention towards the effective as well as efficient management of

investments. In the management of investments both risk and return are vital, to a great extent in creating

value of the company.

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OBJECTIVES OF THE STUDY

To study about the portfolio management services provided by Reliance Money.

To study about the interest and awareness of the general investors in stock market and their

investment choices and investment pattern.

To study the various stages involved in portfolio management services.

To study the benefits of creating an investment portfolio.

To study the investment pattern, its related risks & returns and finding out the optimal

portfolio with minimum risk associated to the investor.

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RESEARCH METHODOLOGY

Research design or research methodology is the procedure of collecting, analyzing and interpreting

the data to diagnose the problem and react to the opportunity in such a way where the costs can be

minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion.

A structures questionnaire is distributed to a sample size of 30 respondents of young and

middle aged working people to study their view on stock market, their preferred investment

choices and investment pattern.

Market prices of the companies have been taken for the years of different dates, there by

dividing the companies into 5 sectors.

A final portfolio is made at the end of the year to know the changes (increase/decrease) in the

portfolio at the end of the year.

SOURCES OF DATA

Primary Data: - Interviews

Structured interviews with the respondents of the questionnaire.

Collecting the values the shares of the company from the NSE website and doing the comparative

data analysis.

Secondary Data: - Referring to

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Case study

Company Brochures

Website of the company

Induction Handbooks

Other project works.

SCOPE OF THE STUDY

The scope of the study is limited to the objectives undertaken for the pursuance of this study. The

study is limited to the data collected from the primary and secondary sources. This study cannot be

generalized as the actual reality. The project is limited to the work undertaken at Reliance Money as a part

of the summer internship.

The actual purpose of this study is to satisfy the requirement of the award of the postgraduate degree

of Master in Business Administration.

LIMITATIONS OF THE PROJECT

This study has been conducted purely to understand Portfolio Management for investors and for

requirement for the grant of the postgraduate degree of Master in Business Administration.

This study is limited to the objectives defined for the purpose of this study. The conclusions

thereafter reflect the hypothetical analysis for the objectives defined.

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Construction of Portfolio is restricted to randomly selected company scrip’s based on Markowitz

Model of portfolio theory.

Detailed study of the topic was not possible due to limited size of the project.

The questionnaire analysis is based on the responses provided by the respondents.

There was a constraint with regard to time allocation for the research study i.e. for a period of 45

days.

CHAPTER - II

REVIEW OF LITERATURE

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LITERATURE REVIEW

According to the Webster’s dictionary, literature is “the writings that pertain to a particular branch of

learning, and printed matter”. And review means “to examine again, to study carefully”.

Therefore literature review is the printed matter which we study very carefully during our work. This

project is also a collection of insight into the different printed material.

PORTFOLIO THEORY - INTRODUCTION

Whether it’s retiring early, saving for children’s education, paying off a loan or to live a secured and

satisfied life everyone has dreams they can achieve by investing their savings. However, the question that

arises is that, should one leave his money tucked away in the bank or plough it into the stock market where

the potential for higher returns is greater but the chances of losing money is higher? Deciding where to

invest depends on one’s attitude towards risk (one’s capacity to take risk and one’s tolerance towards risk)

and the investment horizon and non-availability of guaranteed-return investment products.

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In such a scenario, investing in equity, which offers returns that are higher than the inflation rate,

help to build wealth and to improve the standard of living. It is fine that stock market fluctuates over time.

At present as far as the world economy is concerned it is on a boom. As soon as globalization and

liberalization has come into act it has well shaped the economy. India has turned out to be the hot

destination for the money investors and this has resulted growth in the sensex .It was never hoped before

that BSE will ever touch the mark of 16000 points. But only due to the new economic opportunities and the

confidence of people in India’s economic future it has been successfully lead to cross even 20000 points.

Investing in equity is the way to earn money and to fulfill the dreams. The risk involved with investing in

equity can be moderated by careful stock selection and close monitoring.

INVESTMENT AVENUES AND ALTERNATIVES

Investment alternatives vary from fixed income to variable income which includes RBI bonds,

government securities, fixed deposit, equity investments, property and so on.

In recent years the 6.5 percent tax-free RBI Bonds have become a very popular saving instrument --

especially amongst individuals. Till 1996, these bonds gave returns of 10 per cent. This came down to 9 per

cent and then 8 percent and then in 2003 it was reduced to 6.5 per cent (tax free). Nowadays, 8 percent

taxable Government of India bonds are also doing well to attract investors who want safe and higher yield.

However, with inflation at nearly 4.5%, the return offered by these instruments were still attractive.

However, with the scrapping of the tax-free bonds, safe investment options for individuals have become

very limited and people are now choosing to go with either post office saving schemes or equity related

instruments.

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Take a look at what is happening- Debt funds, which were said to be relatively risk-free, are giving

very less returns. Monthly Income Plans offered by mutual funds are also not attractive as their portfolio is

made up of 80 percent debt and 20 percent equity. With debt giving very less returns and returns from

equity becoming stagnant, the returns from MIPs are also very attractive. The returns offered by MIPs are

totally dependant upon the type of security and debt instruments held by the fund But with recent rally in the

stock market, very few people are now going for MIPs and have a very positive sentiment about the market

and would like to stay with the market for long. But continuously we still have a single question in mind:

So where should individuals park their money now?

"The 8 per cent taxable RBI Bonds seem to be one of the best options right now looking for safe

avenues."

The person in the 30 percent tax bracket, the 8 per cent RBI bonds will give returns of approximately

5.6 per cent. Though this is much lower than the previous 6.5 percent, it is still a better than most other

options. If you are a senior citizen, the Senior Citizens Savings scheme offering a 9 Percent yearly interest is

a good investment option. The scheme was announced in the Budget 2006-2007 and was meant for people

above the age of 60. However, this scheme has a maximum deposit limit of Rs. 15 lacs while RBI Bonds do

not have any limit. In this case, the term for deposit is five years with a facility for premature withdrawal.

The 9 percent returns are subject to tax, so if you are in the 30 percent tax bracket, you will effectively get

returns of 6.3 per cent.

Another option can be Floating Rate Bond Fund offered by mutual funds. Basically, these funds

invest in floating rate instruments and therefore have a direct correlation to interest rates. If interest rates go

up the returns from these funds rise and returns fall with a fall in interest rates. This is unlike debt funds,

where there is a reverse relationship between interest rates and returns. A rise in interest rates results in a fall

in returns. In the current scenario, these funds are likely to give returns of 5 percent to 5.5 percent.

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The dividends are tax-free in the hands of the investor and most importantly, there is complete liquidity.

Again, there is no limit on the amount that can be deposited. Also, there is hardly any volatility making it a

safe option. If you are willing to take a bit of risk, you can divide your portfolio in such a way that 60

percent is invested in floating rate bond funds and the remaining 40 percent in equity. That's like having an

MIP except that instead of 80 percent in debt and 20 percent in equity, here the 60 percent is in floating rate

bond funds. Such a portfolio can give you returns of aprox. 8.5 % to 9.5 %.

Investment Alternatives

(Fig – 1)

Non-marketable Financial Assets - A good portion of financial assets is represented by non-

marketable financial assets. These can be classified into the following broad categories:

Bank deposits

Post office deposits

Company deposits

Provident fund deposits

Equity Shares - Equity shares represent ownership capital. As an equity shareholder, you have an

ownership stake in the company. This essentially means that you have a residual interest in income and

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Equity SharesNon-Marketable Financial

Bonds

Money Market

Mutual FundSchemes

Life InsurancePolicies

Real Estate Precious Objects

Financial Derivatives

Investment Avenues


wealth. Perhaps, the most romantic among various investment avenues, equity shares are classified into the

following broad categories by stock market analysts:

Blue chip shares

Growth shares

Income shares

Cyclical shares

Speculative shares

Bonds - Bonds or debentures represent long-term debt instruments. The issuer of a bond promises to pay a

stipulated steam of cash flow. Bonds may be classified into the following categories:

Government securities

Government of India relief bonds

Government agency securities

PSU bonds

Debentures of private sector companies

Preference shares

Money Market Instruments - Debt instruments which have a maturity of less than one year at the time of

issue are called money market instruments. The important money market instruments are:

Treasury bills

Commercial paper

Certificates of deposits

Mutual Funds - Instead of directly buying equity shares and/or fixed income instruments, you can

participate in various schemes floated by mutual funds which, in turn, invest in equity shares and fixed

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

Equity schemes

Debt schemes

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Balanced schemes

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

represent the sacrifice and the assured sum the benefit. The important types of insurance policies in India

are:

Endowment assurance policy

Money back policy

Whole life policy

Term assurance policy

Real Estate - For the bulk of the investors the most important asset in their portfolio is a residential house.

In addition to a residential house, the more affluent investors are likely to be interested in the following

types of real estate:

Agricultural land

Semi-urban land

Time share in a holiday resort

Precious Objects - Precious objects are items that are generally small in size but highly valuable in

monetary terms. Some important precious objects are:

Gold and silver

Precious stones

Art objects

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

underlying asset. It may be viewed as a side bet on the asset. The most important financial derivatives from

the point of view of investors are:

Options

Futures

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Since every individual would like to earn return on their investment but where to invest has always

been a problem. There has always been a confusion as to which instrument to invest, which instrument will

give me higher returns, etc. Even now nuclear families are in and so are longer life spans. Even inflation is

increasing and so do the standard of life, medical costs, and other things. In such a scenario, one need to

think as to how he will take care of all his future needs and build up a corpus that will not only take care of

routine expenses but also provide for extra costs, especially of health care. One need to have a corpus of

funds, post-retirement, which will give him close to 100% of the salary to preserve the lifestyle he has

grown to enjoy.

Thus, portfolio management is all about strengths, weaknesses, opportunities and threats in the

choice of debt vs. equity, domestic vs. international, growth vs. safety and numerous other trade-offs

encountered in the attempt to maximize return at a given appetite for risk.

Aspects of Portfolio Management:

Basically portfolio management involves

A proper investment decision making of what to buy & sell.

Proper money management in terms of investment in a basket of assets so as to satisfy the

asset preferences of investors.

Reduce the risk and increase returns.

OBJECTIVES OF PORTFOLIO MANAGEMENT:

The basic objective of Portfolio Management is to maximize yield and minimize risk. The other ancillary

objectives are as per needs of investors, namely:

Regular income or stable return

Appreciation of capital

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Marketability and liquidity

Safety of investment

Minimizing of tax liability.

ELEMENTS:

Portfolio Management is an on-going process involving the following basic tasks.

Identification of the investors objective, constrains and preferences which help formulated the

invest policy.

Strategies are to be developed and implemented in tune with invest policy formulated. This will

help the selection of asset classes and securities in each class depending upon their risk-return

attributes.

Review and monitoring of the performance of the portfolio by continuous overview of the

market conditions, company’s performance and investor’s circumstances.

Finally, the evaluation of portfolio for the results to compare with the targets and needed

adjustments have to be made in the portfolio to the emerging conditions and to make up for any

shortfalls in achievements (targets).

QUALITIES OF PORTFOLIO MANAGER

1. SOUND GENERAL KNOWLEDGE: Portfolio management is an exciting and challenging job.

He has to work in an extremely uncertain and confliction environment. In the stock market every

new piece of information affects the value of the securities of different industries in a different way.

He must be able to judge and predict the effects of the information he gets. He must have sharp

memory, alertness, fast intuition and self-confidence to arrive at quick decisions.

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2. ANALYTICAL ABILITY: He must have his own theory to arrive at the intrinsic value of the

security. An analysis of the security’s values, company, etc. is a continuous job of the portfolio

manager. A good analyst makes a good financial consultant. The analyst can know the strengths,

weaknesses, opportunities of the economy, industry and the company.

3. MARKETING SKILLS: He must be good salesman. He has to convince3 the clients about the

particular security. He has to compete with the stock brokers in the stock market. In this context, the

marketing skills help him a lot.

4. EXPERIENCE: In the cyclical behavior of the stock market history is often repeated, therefore the

experience of the different phases helps to make rational decisions. The experience of the different

types of securities, clients, market trends, etc., makes a perfect professional manager.

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Schematic diagram of stages in portfolio management

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Specification and quantification of investor objectives, constraints, and preferences

Portfolio policies and strategies

Capital market expectations

Relevant economic, social, political sector and security considerations

Monitoring investor related input factors

Portfolio construction and revision asset allocation, portfolio optimization, security selection, implementation and execution

Monitoring economic and market input factors

Attainment of investor objectives

Performance measurement

Fig. 2


PROCESS OF PORTFOLIO MANAGEMENT:

The Portfolio Program and Asset Management Program both follow a disciplined process to establish and

monitor an optimal investment mix. This six-stage process helps ensure that the investments match

investor’s unique needs, both now and in the future.

(Fig – 3)

1. IDENTIFY GOALS AND OBJECTIVES

When will you need the money from your investments? What are you saving your money for? With the

assistance of financial advisor, the Investment Profile will guide through a series of questions to help

identify the goals and objectives for the investments.

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2. DETERMINE OPTIMAL INVESTMENT MIX

Once the Investment Profile is completed, investor’s optimal investment mix or asset allocation will be

determined. An asset allocation represents the mix of investments (cash, fixed income and equities) that

match individual risk and return needs.

3. CREATE A CUSTOMIZED INVESTMENT POLICY STATEMENT

When the optimal investment mix is determined, the next step is to formalize our goals and objectives in

order to utilize them as a benchmark to monitor progress and future updates.

4. SELECT INVESTMENTS

The customized portfolio is created using an allocation of select QFM Funds. Each QFM Fund is

designed to satisfy the requirements of a specific asset class, and is selected in the necessary proportion

to match the optimal investment mix.

5 MONITOR PROGRESS

Building an optimal investment mix is only part of the process. It is equally important to maintain the

optimal mix when varying market conditions cause investment mix to drift away from its target. To

ensure that mix of asset classes stays in line with investor’s unique needs, the portfolio will be

monitored and rebalanced back to the optimal investment mix

6. REASSESS NEEDS AND GOALS

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Just as markets shift, so do the goals and objectives of investors. With the flexibility of the Portfolio

Program and Asset Management Program, when the investor’s needs or other life circumstances

change, the portfolio has the flexibility to accommodate such changes.

RISK:

Risk refers to the probability that the return and therefore the value of an asset or security may have

alternative outcomes. Risk is the uncertainty (today) surrounding the eventual outcome of an event which

will occur in the future. Risk is uncertainty of the income/capital appreciation or loss of both. All

investments are risky. The higher the risk taken, the higher is the return. But proper management of risk

involves the right choice of investments whose risks are compensation.

RETURN:

Return-yield or return differs from the nature of instruments, maturity period and the creditor or debtor

nature of the instrument and a host of other factors. The most important factor influencing return is risk

return is measured by taking the price income plus the price change.

PORTFOLIO RISK:

Risk on portfolio is different from the risk on individual securities. This risk is reflected by in the variability

of the returns from zero to infinity. The expected return depends on probability of the returns and their

weighted contribution to the risk of the portfolio.

RETURN ON PORTFOLIO:

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Fig 4


Each security in a portfolio contributes returns in the proportion of its investment in security. Thus the

portfolio of expected returns, from each of the securities with weights representing the proportionate share

of security in the total investments.

RISK – RETURN RELATIONSHIP:

The risk/return relationship is a fundamental concept in not only financial analysis, but in every

aspect of life. If decisions are to lead to benefit maximization, it is necessary that individuals/institutions

consider the combined influence on expected (future) return or benefit as well as on risk/cost. The

requirement that expected return/benefit be commensurate with risk/cost is known as the "risk/return trade-

off" in finance. All investments have some risks. An investment in shares of companies has its own risks or

uncertainty. These risks arise out of variability of returns or yields and uncertainty of appreciation or

depreciation of share prices, loss of liquidity etc. and the overtime can be represented by the variance of the

returns. Normally, higher the risk that the investors take, the higher is the return.

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TYPES OF RISKS: Risk consists of two components. They are

1. Systematic Risk

2. Un-systematic Risk

1. SYSTEMATIC RISK:

Systematic risk refers to that portion of total variability in return caused by factors affecting the prices of all

securities. Economic, Political and sociological changes are sources of systematic risk. Their effect is to

cause prices of nearly all individual common stocks and/or all individual bonds to move together in the

same manner.

i. Market Risk: Variability in return on most common stocks that are due to basic sweeping changes

in investor expectations is referred to as market risk. Market risk is caused by investor reaction to

tangible as well as intangible events.

ii. Interest rate-Risk:

Interest –rate risk refers to the uncertainty of future market values and of the size of future income, caused

by fluctuations in the general level of interest rates.

iii. Purchasing-Power Risk:

Purchasing power risk is the uncertainty of the purchasing power of the amounts to be received. In more

events everyday terms, purchasing power risk refers to the impact of or deflation on an investment.

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2. UNSYSTEMATIC RISK:

Unsystematic risk is the portion of total risk that is unique to a firm or industry. Factors such as

management capability, consumer preferences, and labor strikes Cause systematic variability of return in a

firm. Unsystematic factors are largely independent of factors affecting securities markets in general.

Because these factors affect one firm, they must be examined for each firm. Unsystematic risk that portion

of risk that is unique or peculiar to a firm or an industry, above and beyond that affecting securities markets

in general. Factors such as management capability, consumer preferences, and labor strikes can cause

unsystematic variability of return for a company’s stock.

i. Business Risk:

Business risk is a function of the operating conditions faced by a firm and the variability these conditions

inject into operating income and expected dividends.

Business risk can be divided into two broad categories

a. Internal Business Risk

b. External Business Risk

a. Internal business risk is associated with the operational efficiency of the firm. The operational

efficiency differs from company to company. The efficiency of operation is reflected on the company‘s

achievement of its pre-set goals and the fulfillment of the promises to its investors.

b. External business risk is the result of operating conditions imposed on the firm by circumstances

beyond its control. The external environments in which it operates exert some pressure on the firm.

Financial Risk:

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Financial risk is associated with the way in which a company finances its activities. Financial risk is avoided

risk to the extent that management has the freedom to decide to borrow or not to borrow funds. A firm with

no debit financing has no financial risk.

EVALUATION OF PORTFOLIO

Portfolio manager evaluates his portfolio performance and identifies the sources of strengths and weakness.

The evaluation of the portfolio provides a feed back about the performance to evolve better management

strategy. Even though evaluation of portfolio performance is considered to be the last stage of investment

process, it is a continuous process. There are number of situations in which an evaluation becomes

necessary and important.

Self Valuation: An individual may want to evaluate how well he has done. This is a part of the

process of refining his skills and improving his performance over a period of time.

Evaluation of Managers: A mutual fund or similar organization might want to evaluate its

managers. A mutual fund may have several managers each running a separate fund or sub-fund. It is

often necessary to compare the performance of these managers.

Evaluation of Mutual Funds: An investor may want to evaluate the various mutual funds operating

in the country to decide which, if any, of these should be chosen for investment. A similar need

arises in the case of individuals or organizations who engage external agencies for portfolio advisory

services.

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Evaluation of Groups: Academics or researchers may want to evaluate the performance of a whole

group of investors and compare it with another group of investors who use different techniques or

who have different skills or access to different information.

THE MARKOWITZ MODEL – THE MODERN PORTFOLIO THEORY

Harry Markowitz is generally acknowledged as the father of modern portfolio theory after

publishing his seminal paper in 1952, for which he (jointly) received a Nobel Prize in 1990. Markowitz

(1952) and Tobin (1958) showed that it was possible to identify the composition of an optimal portfolio of

risky securities, given forecasts of future returns and an appropriate covariance matrix of share returns. This

research endeavours to apply the theory of Markowitz to the Johannesburg Securities Exchange (JSE) to

establish whether an optimal portfolio can be identified and used as an effective trading rule. Weekly data

over 11 years on the top 40 JSE listed companies was analysed to construct the study found that the trading

strategy significantly outperformed the market in the period under review 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 companies stock. But building up the optimal portfolio is very difficult. Markowitz provides an

answer. It is also known as modern portfolio theory. Modern portfolio theory (MPT) is a theory of

investment which tries to maximize portfolio expected return for a given amount of portfolio risk, or

equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of

various assets. Although MPT is widely used in practice in the financial industry and several of its creators

won a Nobel Prize for the theory, in recent years the basic assumptions of MPT have been widely

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challenged by fields such as behavioral economics. MPT is a mathematical formulation of the concept of

diversification in investing, with the aim of selecting a collection of investment assets that has collectively

lower risk than any individual asset. That this is possible can be seen intuitively because different types of

assets often change in value in opposite ways.

For example, when prices in the stock market fall, prices in the bond market often increase, and vice versa].

A collection of both types of assets can therefore have lower overall risk than either individually. But

diversification lowers risk even if assets' returns are not negatively correlated—indeed, even if they are

positively correlated. More technically, MPT models an asset's return as a normally distributed (or more

generally as an elliptically distributed random variable), defines risk as the standard deviation of return, and

models a portfolio as a weighted combination of assets so that the return of a portfolio is the weighted

combination of the assets' returns. By combining different assets whose returns are not perfectly positively

correlated, MPT seeks to reduce the total variance of the portfolio return. MPT also assumes that investors

are rational and markets are efficient.

Assumptions underlying Markowitz Theory:

Portfolio theory in the shape of Markowitz Theory makes the following assumptions concerning the

investment market and investors behavior within those markets.

We summaries these assumptions below:

Investors seek to maximize the expected return of total wealth.

All investors have the same expected single period investment horizon.

All investors are risk-adverse, that is they will only accept greater risk if they are compensated with

a higher expected return.

Investors base their investment decisions on the expected return and risk

(I.e. the standard deviation of assets historical returns).

- 34 -


All markets are perfectly efficient (e.g. no taxes and no transaction cost).

Literature Review of Case Studies in Portfolio Management

1. Keynes Meets Markowitz: The Tradeoff Between Familiarity and

Diversification

Model also has empirically testable implications for trading behavior: in response to a change in

idiosyncratic risk the Keynesian portfolio always exhibits more trading than the Markowitz portfolio, while

the opposite is true for a change in systematic volatility. In the equilibrium version of the model with

heterogeneous agents who are familiar with different assets, we find that the risk premium of stocks depends

on both systematic and idiosyncratic volatility, and that the equity risk premium is significantly higher than

in the standard model out ambiguity.

2. Portfolio Optimization Using Markowitz Model: An Application of

the Bucharest Stock Exchange

The Bucharest Stock Exchange, with all its economical, social and political problems and sudden ups and

downs, is a good reflection of the transition period that emerging economy is currently undergoing. This

study focuses on the use of an appropriate methodology for constructing efficient stock portfolios in an

extremely unstable market that makes the trade-off between risk and return even more difficult to achieve.

The objective is set in order to assess the market behavior: employing the Markowitz model, to construct a

set of optimum portfolios under a number of varying constraints and to compare them with the market

portfolio

- 35 -


3. Portfolio analysis based on Markowitz model

This paper focused on Portfolio Analysis that set-up among 15 selected stocks traded in Kuala Lumpur

Stock Exchange (KLSE). Markowitz model (1959) is the main idea which used to build up the optimal

portfolio in order to achieve the objective of maximizes the return and minimizes the risk. There are few

scenarios are considered in constructing the optimal portfolio, such as risk-free, taxes, transaction cost and

benchmark portfolio.

4. On the Markowitz mean-variance analysis of self-financing Portfolios

This paper extends the work of Markowitz (1952), Korkie and Turtle (2002) and others by first proving that

the traditional estimate for the optimal return of self-financing portfolios always overestimates from its

theoretic value. We further demonstrate the superiority of our proposed estimate over the traditional

estimate by simulation.

5. The Perfect Portfolio

Abstract: Nowadays investors have a large number of choices of how they can invest their money. One of

their biggest challenges is how to allocate their portfolio between equities, bonds and properties. It can only

be shown afterwards, which was the best allocation. That is why it is so popular to look at historical mean-

variance to predict the future.

Last but not the least, the practical experiences of reliance money has given the best ever exposure

on the actually market works in financial products and services.

- 36 -


Our Work at RELIANCE MONEY…

My task was divided in 4 phases:

1. Product knowledge: This included the theoretical knowledge about the field and products which need to

know as a part of the project.

2. Pitching in retail sector: This included the implementation of the knowledge imparted to us and the test

of our marketing skills. i was given target of making 3 demat accounts for the company . This also enhanced

our interpersonal skills and confidence level.

3. Implementation in retail sector and pitching in corporate: I need to explain the product - demat to

prospective investors and convince them to open a demat account with Reliance Money by explaining about

the company benefits to the investors. This also included of the ways we should pitch the corporate.

4. Implementation at corporate levels: This included the implementation of the all the knowledge and

ways learnt for the pitching and extracting business out of the prospective investors.

With the end of 6 weeks, every phase was completed and it gave me the real experience of retail as

well as corporate world.

- 37 -


CHAPTER – III

THE COMPANY PROFILE

- 38 -


INDUSTRY PROFILE

The only stock exchanges operating in the 19th century were those of Bombay set up in 1875 and

Ahmedabad set up in 1894. These were organized as voluntary non profit making organization of brokers to

regulate and protect their interests. Before the controls on securities trading become a central subject under

the constitution in 1950, it was a state subject and the Bombay securities contract (control) Act of 1952 used

to regulate trading in securities. Under this Act, the Bombay stock exchange in 1972 and the Ahmedabad in

1973.

During the war boom, a number of stock exchanges were organized in Bombay, Ahmedabad and

other centers, but they were not organized. Soon after it become a central subject, central legislation

proposed on a committee headed by A.D. Gorwala went into the bill securities regulation. On the basis of

committee’s recommendations and the public discussion the securities contract (regulation) Act become law

in 1956.

DEFINITION OF THE STOCK EXCHANGE

“Stock exchange means any body or individuals whether incorporated or not, constituted for the

purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities”.

It is an association of member brokers for the purpose of self regulation and protecting the interest of

its members. It can operate only if the government recognizes it. Under the securities contract (regulation)

act 1956, the recognition is granted under section 3 of the act by central finance ministry.

- 39 -


BY-LAWS

Beside the above act, the securities contract (regulations) rules were also made in 1975 to regulate

certain matters of trading of stock exchanges, which are concerned with following subjects.

Opening/closing of stock exchanges, timing of trading, regulation of bank transfer, regulation of

carryover business, control of settlement, and other actives of stock exchanges, fixation of margins, fixation

of market prices or making prices, regulation of taravani business (jobbing), regulation of broker trading,

brokerage charges, trading rules on exchanges, arbitration and settlement of disputes, settlement and

clearing of the trading.

REGULATIONS OF STOCK EXCHANGES:

The securities contract (regulation) is the basis for operations of the stock exchange of India. Stock

exchanges are given monopoly in certain areas under section 19 of the above act is to ensure that the control

and regulation are facilitated. Recognition can be granted to a stock exchange provided certain conditions

are satisfied and the necessary information is supplied to the government. Recognition can be withdrawn, if

necessary. Where there is no stock exchange, the government can license some to the brokers to perform the

function of a stock exchange in its absence.

SECURITIES EXCHANGE BOARD OF INDIA (SEBI)

SEBI was set up as an autonomous regulatory authority by the government of India in 1988 “to

perform the interest of investors in securities and to promote the development of and to regulate the

- 40 -


securities the securities markets and for matters connected therewith or incidental thereto”. It is empowered

by, to acts namely the SEBI Act, 1982 and the securities contract (regulation) Act, 1956 to perform the

function of protecting investor’s rights and regulating the capital market.

NATIONAL STOCK EXCHANGE (NSE):

The NSE was incorporated in NOVEMBER 1994 with an equity capital of Rs.25 Crores. The

International Securities Consultancy (ISC) of Hong Kong has helped in setting up NSE. ISC has prepared

the detailed business plans and installation of hardware and software systems. The promoters for NSE were

financial institutions, insurance companies, banks and SEBI capital market ltd, Infrastructure leasing and

financial services ltd., and Stock Holding Corporation Ltd.

BOMBAY STOCK EXCHANGE (BSE):

This stock exchange, in Mumbai popularly known as “BSE” was established in 1875 as “The native

share and stock brokers association”, as a voluntary non-profit making association .It has evolved over the

years into its present status as the premier stock exchange in the country. It may be noted that Bombay

Stock Exchange is the oldest one in Asia, even older than the Tokyo Stock Exchange, this was founded in

1878.

A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an

executive director is the apex body, which decides the policies and regulates the affairs of the exchange.

- 41 -


COMPANY PROFILE

Reliance Securities Limited is a Reliance Capital company and part of the Reliance Anil Dhirubhai

Ambani Group. Reliance Securities is a permitted user of the brand "Reliance Money" for promoting its

various products and services.

Reliance Securities endeavors to change the way investors transact in equities markets and avails

services. It provides customers with access to Equity, Derivatives, Portfolio Management Services,

Investment Banking, Mutual Funds & IPO’s. It also offers secured online share trading platform and

investment activities in secure, cost effective and convenient manner. To enable wider participation, it also

provides the convenience of trading offline through variety of means, including Call & Trade, Branch

dealing Desk and its network of affiliates. Reliance Money through its pan India presence with 6,233 outlets

has more than 3.5 million customers.

Reliance Capital is one of India's leading and fastest growing private sector financial services

companies, and ranks among the top 3 private sector financial services and banking groups, in terms of net

worth.

Awards and Achievements

India's largest e-broking house and Best Equity House 2009 - Awarded by Dun and Bradstreet 2009

Reliance Money is rated no. 1 by Starcom Worldwide for online security and cost effectiveness

- 42 -


Reliance Money has been awarded Debutant Franchisor of the Year 2007 by Franchise India

Holdings Ltd.

A short brief on Reliance Capital Limited

Reliance Capital Limited (RCL) was incorporated in year 1986 at Ahmedabad in Gujarat as Reliance

Capital & Finance Trust Limited. The name RCL came into effect from January 5, 1995. In 2002, RCL

shifted its registered office to Jamnagar in Gujarat before it finally moved to Mumbai in Maharashtra, in

2006.

In 2006, Reliance Capital Ventures Limited merged with RCL and with this merger the shareholder

base of RCL rose from 0.15 million shareholders to 1.3 million.

RCL entered the Capital Market with a maiden public issue in 1990 and in subsequent years further

tapped the capital market through rights issue and public issues. The equity shares were initially listed on

the Ahmedabad Stock Exchange and The Stock Exchange Mumbai. Presently the shares are listed on The

Stock Exchange Mumbai and the National Stock Exchange of India.

RCL in the initial years engaged itself in steady annuity yielding businesses such as leasing, bill

discounting, and inter-corporate deposits. Later, in 1993 diversified its business in the areas of portfolio

investment, lending against securities, custodial services, money market operations, project finance advisory

services, and investment banking.

RCL was accredited a Category 1 Merchant banker by the Securities Exchange Board of India

(SEBI). It had lead managed/co-managed 15 issues of an aggregate value of Rs. 400 crore and had

underwritten 33 issues for an aggregate value of Rs. 550 crore. All these companies were listed on various

exchanges. RCL obtained its registration as a Non-banking Finance Company (NBFC) in December 1998.

In view of the regulatory requirements RCL surrendered its Merchant Banking License.

- 43 -


RCL has since diversified its activities in the areas of asset management and mutual fund; life and

general insurance; consumer finance and industrial finance; stock broking; depository services; private

equity and proprietary investments; exchanges, asset reconstruction; distribution of financial products and

other activities in financial services.

Reliance Capital's vision is that: By 2012, it will be a company that is known as:

"The largest, most profitable, innovative, and most trusted financial services company in India and in the

emerging markets".

In doing so, the company expects to reach the following targets by 2012:

1. 50 million customers.

2. 75,000 employees

3. A profit after tax of Rs. 5,000 crore for that financial year.

4. A valuation of Rs. 100,000 crore for the company and its subsidiary businesses.

In achieving this vision, the company will be both customer-centric and innovation-driven.

Reliance money Now…

Reliance Capital, a constituent of S&P CNX Nifty and MSCI India, is a part of the Reliance Anil

Dhirubhai Ambani Group. It is one of India's leading and amongst most valuable financial services

companies in the private sector.

Reliance Capital has interests in asset management and mutual funds; life and general insurance;

commercial finance; stock broking; investment banking; wealth management services; distribution of

financial products; exchanges; private equity; asset reconstruction; proprietary investments and other

activities in financial services.

- 44 -


Reliance Mutual Fund is India's largest Mutual Fund with over seven million investor folios.

Reliance Life Insurance is amongst the leading private sector life insurers. Reliance General Insurance is

amongst the leading private sector general insurers. Reliance Securities is one of India’s leading broking

houses. Reliance Capital is one of India’s leading distributors of financial products and services.

Reliance Capital has a net worth of Rs. 8,126 crore (US$ 2 billion) and total assets of Rs. 30,393

crore (US$ 7 billion) as on December 31, 2010.

Business mix of Reliance Capital

Asset Management Mutual Fund, Offshore Fund, Pension fund, Portfolio Management

Insurance Life Insurance, General Insurance

Commercial Finance Mortgages, Loans against Property , SME Loans, Loans for Commercial Vehicles, Loans for Construction Equipment, Auto Loans, Business Loans, Loans against Securities

Broking and Distribution Equities, Commodities and Derivatives, Wealth Management Services, Portfolio Management Services, Investment Banking, Foreign Exchange and Offshore Investment, Third Party Products

Other Businesses Exchanges, Private Equity, Institutional Broking, Asset Reconstruction, Venture Capital

(Table – 1)

Reliance Capital is anchored by a team of experienced and committed visionaries who are dedicated

towards scaling the company to greater heights through innovation and excellence; thereby creating value

for all our stakeholders.

Executive names in Reliance Capital

Amit Bapna (Chief Financial Officer, Reliance Capital)

Arun Hariharan (President, Quality and Knowledge Management, Reliance Capital)

- 45 -


K. Achuthan (Chief People Officer, Reliance Capital)

K. V. Srinivasan (Chief Executive Officer, Reliance Commercial Finance)

Lav Chaturvedi (Chief Risk Officer, Reliance Capital)

Madhusudan Kela (Chief Investment Strategist, Reliance Capital)

Malay Ghosh (Executive Director & President, Reliance Life Insurance Company)

Rajnikant Patel (President and Chief Executive Officer, Reliance Spot Exchange)

Sam Ghosh (Chief Executive Officer, Reliance Capital)

Sandeep Phanasgaonkar (Chief Technology Officer, Reliance Capital)

Sanjay Jain (Chief Marketing Officer, Reliance Capital)

Sundeep Sikka (Chief Executive Officer, Reliance Capital Asset Management)

Vijay Pawar (Executive Director & Chief Executive Officer, Reliance General Insurance)

Vikrant Gugnani (Chief Executive Officer, International Business- Reliance Capital) (Executive

Director, Reliance Securities Ltd)

V. R. Mohan (Company Secretary, Reliance Capital)

Reliance Money Services

Reliance Money is promoted by Reliance Capital; one of India's leading and fastest growing

private sector financial services companies, ranking among the top 3 private sector financial services and

banking companies, in terms of net worth. Reliance Capital is a part of the Reliance Anil Dhirubhai Ambani

Group.

- 46 -


Thus, Reliance Money provides a comprehensive platform, offering an investment avenue for a wide

range of asset classes. Its endeavor is to change the way India transacts in financial market and avails

financial services. Reliance Money offers a single window facility, enabling you to access amongst others,

Equities, Equity and Commodity derivatives, Offshore Investments, IPO’s, Mutual Funds, Life Insurance

and General Insurance products.

Advantages offered by Reliance money over other companies :

Cost Effective

Convenience

Security

Single Window for Multiple Products

3 in 1 Integrated Access

Demat Account with Reliance Capital

Other Services like research, live news from Reuter and Dow Jones, etc.

PRODUCT OFFERING

1. Trading Portal (with almost negligible brokerage )

Equity Broking

Commodity Broking

Derivatives ( Futures & Options )

Offshore Investments (Contract For Differences)

Demat Account.

- 47 -


2. Financial Products

Mutual Funds

Life Insurance

o ULIP plan

o Term Plan

o Money Back Plan

General Insurance

oVehicle/Motor Insurance

oHealth Insurance

oHouse insurance

IPO’s

NFOs

3. Value-Added Services

Retirement Planning

Financial Planning

Tax Saving

Children Future Planning

4. Credit Cards

5. Gold coins retailing

What is Portfolio Management Services (PMS)?

- 48 -


The Management of investments in equities requires time, knowledge, experience and constant

monitoring of stock market. It is the services provided by the market professionals to those who need an

expert to help to manage their investments.

The business of portfolio management has never been an easy one. Juggling the limited choices at

hand with the twin requirements of adequate safety and sizeable returns is a task fraught with complexities.

Given the unpredictable nature of the share market it requires solid experience and strong research to make

the right decision. In the end it boils down to make the right move in the right direction at the right time.

That's where the expert comes in.

Reliance Portfolio Management Services (PMS) is a premium financial service, offering innovative

& exclusive products through discretionary & advisory services. Our expertise has earned the trust of

thousands of high net-worth individual/ institutional investors and created a family that is constantly

growing. Reliance Portfolio Management Services can conduct your investments with true finesse coupled

with passion and innovation.

Reliance Portfolio Management Services is a part of Reliance Capital Asset Management Ltd., a

wholly owned subsidiary of Reliance Capital Ltd. Reliance Capital Ltd. is one of India's leading and fastest

growing private sector financial services companies, and ranks among the top 3 private sector financial

services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset

management, life and general insurance, private equity and proprietary investments, stock broking and other

financial services.

Our vision

"To be a globally respected wealth creator with an emphasis on customer care and a culture of good

corporate governance"

Our Mission

- 49 -

http://www.kotaksecurities.com/

http://www.kotaksecurities.com/home/index.html


"To be a multi-asset class player with a significant presence in domestic market & expand horizons

in International markets through Advisory services."

CHAPTER - IV

DATA ANALYSIS AND

INTERPRETATION

- 50 -


Portfolio A

Securities Returns

R %

Beta

Values

()

Un

Syste

metic

Risk

2e (%)

Excess

Return

Over ()

Ri – Rf_____________

(Ri-Rf) _____________

2e

Cumulative(Ri-Rf) _____________

2e

2

__________

2e

Cumulative

2

__________

2e

C= nm2t=1 (Ri-Rf) ____________________

2e

n1+ m2t=1 2

________

2e

Bharti

Airtel

14.2 0.88 29 10.5 0.2822 0.2822 0.0286 0.0288 2.19

ITC 10.1 0.99 18.65 5.2 0.2654 0.5476 0.1133 0.1420 2.26

Guj

Amb.com

10.5 1.03 35 4.5 0.1618 0.7094 0.0303 0.1723 2.606

ICICI

Bank

8.8 0.91 12.33 4.3 0.2878 0.9972 0.0801 0.2524 2.830

BHEL 9.4 1.06 30.5 4.24 0.1564 1.1536 0.0368 0.2892 2.964

HDFC 9.1 0.96 14.83 4.2 0.2590 1.4126 0.1908 0.4799 2.45

Bajaj

Auto

8.4 1.03 14 3.39 0.2575 1.6701 0.1326 0.6124 2.34

- 51 -


Acc 8.6 1.06 28 3.30 0.1325 1.8026 0.0401 0.6526 2.39

Hindalco 8.3 1.29 12 2.7 0.3762 2.1788 0.1664 0.8190 2.37

HDFC

Bank

6.6 0.82 32 2.39 0.0461 2.2249 0.0210 0.84 2.36 c*

HLL 7.1 1.03 26 1.9 0.0792 2.3041 0.0408 0.8808 2.34

Dr.

Reddys

6.1 0.69 20 1.5 0.0345 2.3386 0.0238 0.9046 2.32

Note: -C* is the cut-off point to include the securities in to portfolio.

INTERPRETATION:

Construction of optimal portfolio starts with determines which securities are

included in the portfolio, for this the following steps necessary.

Calculation of’ excess return to beta ratio’ for each securities under review and

rank from highest to lowest.

The above table shows that the construction of optimal portfolio from BSE

SENSEX scripts.

In the above table all the securities whose ‘excess return to beta ‘ratio are

above the cut-off rate are selected and all those whose ratios are below are

rejected.

For the portfolio-A selected scripts are 10 out of twelve whose “excess return to

beta” ratio are above the cutoff rate (2.36 C*) are included in the portfolio

- 52 -


basket. HLL (1.9 < 2.34) Dr.Reddy’s (1.5 < 2.32) securities excess return to

beta ratios are less than the cut-off so those are excluded from the portfolio.

Securities Returns

R %

Beta

Values

()

Un

Syste

metic

Risk

2e (%)

Excess

Return

Over ()

Ri – Rf_____________

(Ri-Rf) _____________

2e


2e

2

__________

2e

Cumulative

2

__________

2e

C= nm2t=1 (Ri-Rf) ____________________

2e

n1+ m2t=1 2

________

2e

Bharti

Airtel

14.2 0.88 29 10.5 0.2822 0.2822 0.0286 0.0286 2.19

ITC 10.1 0.99 18.65 5.2 0.2654 0.5476 0.1133 0.1419 2.26

Guj

Amb.com

10.5 1.03 35 4.5 0.1618 0.7094 0.0303 0.1722 2.606

ICICI

Bank

8.8 0.91 12.33 4.3 0.2878 0.9972 0.0801 0.2523 2.830

BHEL 9.4 1.06 30.5 4.24 0.1564 1.1536 0.0368 0.2891 2.964

HDFC 9.1 0.96 14.83 4.2 0.2590 1.4126 0.1908 0.479 2.45

Bajaj

Auto

8.4 1.03 14 3.39 0.2575 1.6701 0.1326 0.6125 2.34

Acc 8.6 1.06 28 3.30 0.1325 1.8026 0.0401 0.6525 2.39

Hilbalco 8.3 1.29 12 2.7 0.3762 2.1788 0.1664 0.8190 2.37

- 53 -


HDFC

Bank

6.6 0.82 32 2.39 0.0461 2.2249 0.0210 0.84 2.36 c*

HLL 7.1 1.03 26 1.9 0.0792 2.3041 0.0408 0.8808 2.34

Dr.

Reddys

6.1 0.69 20 1.5 0.0345 2.3386 0.0238 0.9046 2.32

PORTFOLIO B

Note: -C* is the cut-off point to include the securities in to portfolio.

INTERPRETATION:

The desirability of any securities to include in the portfolio is directly related to

excess return to beta ratio and cut-off rate.

The above information shows that for securities of Satyam computers to NTPC

Ri – Rf / is less than C*. While securities 11&12 are less than C*. So from

Satyam computers to NTPC all the ten securities are included in the portfolio

and ONGC & TATA consultancy services are not added in the optimal portfolio.

Here optimal portfolio consists of securities of 10 companies

- 54 -


PORTFOLIO C:

Securities

Returns

R %

Beta

Values

()

Un

Syste

metic

Risk

2e (%)

Excess

Return

Over ()

Ri – Rf_____________

(Ri-Rf) _____________

2e


2e

2

__________

2e

Cumulative

2

__________

2e

C= nm2t=1 (Ri-Rf) ____________________

2e

n1+ m2t=1 2

________

2e

Satyam

Com

18 1.09 45 11 0.2906 0.2906 0.0264 0.0264 2.29

Bharthi

Airtel

14.3 0.88 29 10.5 0.2654 0.556 0.0286 0.055 3.587

Reliance

comm

10.3 0.95 19 8.4 0.2650 0.821 0.0525 0.1074 3.956

SBI 10.62 1.12 20.5 7 0.3070 1.128 0.0711 0.1786 4.048

Reliance

Ene

8 0.66 22 5.6 0.0900 1.218 0.0200 0.2086 3.94

L&T 5.5 0.80 12 5.2 0.2333 1.4513 0.0544 0.263 3.9

Hero

Honda

4.8 1.00 15 4.54 0.2533 1.7046 0.6777 1.9407 1.637

Guj

Amboja

8.5 1.42 12.76 4.5 0.3894 2.094 0.1580 1.0987 1.905

Ranbaxy 6.8 0.82 32 4.4 0.0461 2.1401 0.1664 1.2651 1.567

- 55 -


ICICI 6 0.74 4.5 4.3 0.1644 2.3045 0.1217 1.3868 1.549

BHEL 6 0.69 20 4.24 0.0345 2.3390 0.0238 1.4106 1.5488

Infosys 6 0.89 5 4.2 0.178 2.517 0.15842 1.5690 1.508

INTERPRETATION

For the portfolio-C selected scripts are 12companies and portfolio basket

consists of all the selected scripts whose excess return to beta ratios are always

greater than cutoff rates.

So the optimal portfolio consists of selected all 12 securities.

CALCULATION OF AVERAGE RETURNS, RISK, CORRELATION COEFICIENTBHARTI AIRTEL

Symbol DatePrev Close

Close Price Returns Average Difference D2

BHARTIARTL 1-Feb-13 319 317.1 -0.5956 4.1602 -4.7558 22.61774BHARTIARTL 2-Feb-13 317.1 322.8 1.7975 4.1602 -2.3627 5.582161BHARTIARTL 3-Feb-13 322.8 339.8 5.2664 4.1602 1.1062 1.22372BHARTIARTL 4-Feb-13 339.8 332.5 -2.1483 4.1602 -6.3085 39.79746BHARTIARTL 7-Feb-13 332.5 333.85 0.406 4.1602 -3.7542 14.0939BHARTIARTL 8-Feb-13 333.85 333.3 -0.1647 4.1602 -4.3249 18.70515BHARTIARTL 9-Feb-13 333.3 332.15 -0.345 4.1602 -4.5052 20.29714BHARTIARTL 10-Feb-13 332.15 322.6 -2.8752 4.1602 -7.0354 49.49695BHARTIARTL 11-Feb-13 322.6 318.9 -1.1469 4.1602 -5.3071 28.16564BHARTIARTL 14-Feb-13 318.9 327.35 2.6497 4.1602 -1.5105 2.281509BHARTIARTL 15-Feb-13 327.35 329.15 0.5499 4.1602 -3.6103 13.03448BHARTIARTL 16-Feb-13 329.15 328.4 -0.2279 4.1602 -4.3881 19.25507BHARTIARTL 17-Feb-13 328.4 339.85 3.4866 4.1602 -0.6736 0.453735BHARTIARTL 18-Feb-13 339.85 331.35 -2.5011 4.1602 -6.6613 44.37296BHARTIARTL 21-Feb-13 331.35 330.7 -0.1962 4.1602 -4.3564 18.97794BHARTIARTL 22-Feb-13 330.7 330.5 -0.0605 4.1602 -4.2207 17.81412BHARTIARTL 23-Feb-13 330.5 328.2 -0.6959 4.1602 -4.8561 23.58186BHARTIARTL 24-Feb-13 328.2 324.4 -1.1578 4.1602 -5.318 28.28145BHARTIARTL 25-Feb-13 324.4 329.75 1.6492 4.1602 -2.511 6.305128BHARTIARTL 28-Feb-13 329.75 331.3 0.4701 4.1602 -3.6901 13.61718 4.1602 387.9553

(Table -2)Returns= (close price - prev. close)*100/prev. close

- 56 -


(Fig – 19)Risk = √∑D2/n-1 = 4.5187

RELIANCE COMMUNICATION


Close Price Returns Average

Difference D2

RCOM 1-Feb-13 122.65 118.50 -3.3836 -33.7802 30.3966 923.9526RCOM 2-Feb-13 118.50 116.95 -1.3080 -33.7802 32.4722 1054.4427RCOM 3-Feb-13 116.95 118.10 0.9833 -33.7802 34.7635 1208.5028RCOM 4-Feb-13 118.10 114.75 -2.8366 -33.7802 30.9436 957.5077RCOM 7-Feb-13 114.75 115.60 0.7407 -33.7802 34.5209 1191.6953RCOM 8-Feb-13 115.60 110.45 -4.4550 -33.7802 29.3252 859.9663RCOM 9-Feb-13 110.45 94.65 -14.3051 -33.7802 19.4751 379.2789RCOM 10-Feb-13 94.65 96.60 2.0602 -33.7802 35.8404 1284.5358RCOM 11-Feb-13 96.60 97.15 0.5694 -33.7802 34.3496 1179.8921RCOM 14-Feb-13 97.15 97.30 0.1544 -33.7802 33.9346 1151.5571RCOM 15-Feb-13 97.30 101.55 4.3679 -33.7802 38.1481 1455.2801RCOM 16-Feb-13 101.55 99.60 -1.9202 -33.7802 31.8600 1015.0573RCOM 17-Feb-13 99.60 99.95 0.3514 -33.7802 34.1316 1164.9665RCOM 18-Feb-13 99.95 93.15 -6.8034 -33.7802 26.9768 727.7476RCOM 21-Feb-13 93.15 93.60 0.4831 -33.7802 34.2633 1173.9732RCOM 22-Feb-13 93.60 95.05 1.5491 -33.7802 35.3293 1248.1626RCOM 23-Feb-13 95.05 96.45 1.4729 -33.7802 35.2531 1242.7817RCOM 24-Feb-13 96.45 92.35 -4.2509 -33.7802 29.5293 871.9791RCOM 25-Feb-13 92.35 87.45 -5.3059 -33.7802 28.4743 810.7857RCOM 28-Feb-13 87.45 85.75 -1.9440 -33.7802 31.8362 1013.5457 -33.7802 20915.6109

(Table – 3)

Returns= (close price - prev. close)*100/prev. close

- 57 -


(Fig – 20)

Risk = √∑D2/n-1= 33.1786

NTPC



NTPC 1-Feb-13 189.05 185.25 -2.0101 -10.4050 8.3949 70.4752NTPC 2-Feb-13 185.25 180.25 -2.6991 -10.4050 7.7059 59.3816NTPC 3-Feb-13 180.25 182.3 1.1373 -10.4050 11.5423 133.2249NTPC 4-Feb-13 182.3 176.95 -2.9347 -10.4050 7.4703 55.8050NTPC 7-Feb-13 176.95 179.6 1.4976 -10.4050 11.9026 141.6718NTPC 8-Feb-13 179.6 174.15 -3.0345 -10.4050 7.3705 54.3240NTPC 9-Feb-13 174.15 171.35 -1.6078 -10.4050 8.7972 77.3906NTPC 10-Feb-13 171.35 170.4 -0.5544 -10.4050 9.8506 97.0339NTPC 11-Feb-13 170.4 176.85 3.7852 -10.4050 14.1902 201.3621NTPC 14-Feb-13 176.85 178.1 0.7068 -10.4050 11.1118 123.4724NTPC 15-Feb-13 178.1 180.9 1.5722 -10.4050 11.9772 143.4521NTPC 16-Feb-13 180.9 181.6 0.3870 -10.4050 10.7920 116.4663NTPC 17-Feb-13 181.6 180.85 -0.4130 -10.4050 9.9920 99.8402NTPC 18-Feb-13 180.85 179.05 -0.9953 -10.4050 9.4097 88.5425NTPC 21-Feb-13 179.05 176.65 -1.3404 -10.4050 9.0646 82.1668NTPC 22-Feb-13 176.65 175.85 -0.4529 -10.4050 9.9521 99.0448NTPC 23-Feb-13 175.85 172.9 -1.6776 -10.4050 8.7274 76.1681NTPC 24-Feb-13 172.9 170.95 -1.1278 -10.4050 9.2772 86.0661NTPC 25-Feb-13 170.95 169.85 -0.6435 -10.4050 9.7615 95.2876NTPC 28-Feb-13 169.85 169.85 0.0000 -10.4050 10.4050 108.2640 -10.4050 2009.4400

(Table – 4)


- 58 -


(Fig – 21)Risk = √∑D2/n-1= 10.2840

POWERGRID



POWERGRID 1-Feb-13 96.55 95.65 -0.9322 2.6046 -3.5368 12.5087

POWERGRID 2-Feb-13 95.65 95.55 -0.1045 2.6046 -2.7091 7.3395

POWERGRID 3-Feb-13 95.55 98.65 3.2444 2.6046 0.6398 0.4093

POWERGRID 4-Feb-13 98.65 97.3 -1.3685 2.6046 -3.9731 15.7853

POWERGRID 7-Feb-13 97.3 97.8 0.5139 2.6046 -2.0907 4.3711

POWERGRID 8-Feb-13 97.8 95.7 -2.1472 2.6046 -4.7518 22.5800

POWERGRID 9-Feb-13 95.7 95.9 0.2090 2.6046 -2.3956 5.7390

POWERGRID 10-Feb-13 95.9 95.4 -0.5214 2.6046 -3.1260 9.7717

POWERGRID 11-Feb-13 95.4 96.4 1.0482 2.6046 -1.5564 2.4223

POWERGRID 14-Feb-13 96.4 98.55 2.2303 2.6046 -0.3743 0.1401

POWERGRID 15-Feb-13 98.55 98.75 0.2029 2.6046 -2.4017 5.7680

POWERGRID 16-Feb-13 98.75 98.6 -0.1519 2.6046 -2.7565 7.5983

POWERGRID 17-Feb-13 98.6 98.6 0.0000 2.6046 -2.6046 6.7839

POWERGRID 18-Feb-13 98.6 98.1 -0.5071 2.6046 -3.1117 9.6827

POWERGRID 21-Feb-13 98.1 98.95 0.8665 2.6046 -1.7381 3.0211

POWERGRID 22-Feb-13 98.95 98.45 -0.5053 2.6046 -3.1099 9.6715

POWERGRID 23-Feb-13 98.45 99.6 1.1681 2.6046 -1.4365 2.0635

POWERGRID 24-Feb-13 99.6 98.25 -1.3554 2.6046 -3.9600 15.6818

- 59 -


POWERGRID 25-Feb-13 98.25 99.2 0.9669 2.6046 -1.6377 2.6820

POWERGRID 28-Feb-13 99.2 98.95 -0.2520 2.6046 -2.8566 8.1603

2.6046 152.1800

(Table – 5)Returns= (close price - prev. close)*100/prev. close

(Fig – 22)Risk = √∑D2/n-1 = 2.830102

RANBAXY



RANBAXY 1-Feb-13 544.85 535.3 -1.7528 -21.9584 20.2056 408.2672RANBAXY 2-Feb-13 535.3 539.25 0.7379 -21.9584 22.6963 515.1222RANBAXY 3-Feb-13 539.25 537.4 -0.3431 -21.9584 21.6153 467.2225RANBAXY 4-Feb-13 537.4 524.65 -2.3725 -21.9584 19.5859 383.6061RANBAXY 7-Feb-13 524.65 510.85 -2.6303 -21.9584 19.3281 373.5745RANBAXY 8-Feb-13 510.85 498.2 -2.4763 -21.9584 19.4821 379.5536RANBAXY 9-Feb-13 498.2 488.35 -1.9771 -21.9584 19.9813 399.2516RANBAXY 10-Feb-13 488.35 499.1 2.2013 -21.9584 24.1597 583.6906RANBAXY 11-Feb-13 499.1 502.8 0.7413 -21.9584 22.6997 515.2779RANBAXY 14-Feb-13 502.8 517 2.8242 -21.9584 24.7826 614.1765RANBAXY 15-Feb-13 517 516.15 -0.1644 -21.9584 21.7940 474.9780RANBAXY 16-Feb-13 516.15 510.65 -1.0656 -21.9584 20.8928 436.5099RANBAXY 17-Feb-13 510.65 512.2 0.3035 -21.9584 22.2619 495.5937RANBAXY 18-Feb-13 512.2 505.15 -1.3764 -21.9584 20.5820 423.6181RANBAXY 21-Feb-13 505.15 509.15 0.7918 -21.9584 22.7502 517.5736RANBAXY 22-Feb-13 509.15 492.25 -3.3193 -21.9584 18.6391 347.4176RANBAXY 23-Feb-13 492.25 461.8 -6.1859 -21.9584 15.7725 248.7724RANBAXY 24-Feb-13 461.8 441.75 -4.3417 -21.9584 17.6167 310.3479RANBAXY 25-Feb-13 441.75 449.15 1.6752 -21.9584 23.6336 558.5450RANBAXY 28-Feb-13 449.15 434.65 -3.2283 -21.9584 18.7301 350.8159 -21.9584 8803.9149

(Table – 6)


- 60 -


(Fig – 23)

Risk = √∑D2/n-1 = 21.52589

DR REDDY LABS



DRREDDY 1-Feb-13 1624.25 1609.35 -0.9173 -4.6404 3.7231 13.8611DRREDDY 2-Feb-13 1609.35 1613.4 0.2517 -4.6404 4.8921 23.9322DRREDDY 3-Feb-13 1613.4 1600.35 -0.8089 -4.6404 3.8315 14.6808DRREDDY 4-Feb-13 1600.35 1580.9 -1.2154 -4.6404 3.4250 11.7309DRREDDY 7-Feb-13 1580.9 1565.15 -0.9963 -4.6404 3.6441 13.2797DRREDDY 8-Feb-13 1565.15 1534.6 -1.9519 -4.6404 2.6885 7.2281DRREDDY 9-Feb-13 1534.6 1518.45 -1.0524 -4.6404 3.5880 12.8738DRREDDY 10-Feb-13 1518.45 1491.25 -1.7913 -4.6404 2.8491 8.1174DRREDDY 11-Feb-13 1491.25 1497.25 0.4023 -4.6404 5.0427 25.4293DRREDDY 14-Feb-13 1497.25 1541.15 2.9320 -4.6404 7.5724 57.3419DRREDDY 15-Feb-13 1541.15 1538.6 -0.1655 -4.6404 4.4749 20.0251DRREDDY 16-Feb-13 1538.6 1511.2 -1.7808 -4.6404 2.8596 8.1771DRREDDY 17-Feb-13 1511.2 1525.85 0.9694 -4.6404 5.6098 31.4702DRREDDY 18-Feb-13 1525.85 1537.35 0.7537 -4.6404 5.3941 29.0961DRREDDY 21-Feb-13 1537.35 1537.25 -0.0065 -4.6404 4.6339 21.4730DRREDDY 22-Feb-13 1537.25 1550.75 0.8782 -4.6404 5.5186 30.4549DRREDDY 23-Feb-13 1550.75 1578.05 1.7604 -4.6404 6.4008 40.9707DRREDDY 24-Feb-13 1578.05 1500.1 -4.9396 -4.6404 -0.2992 0.0895DRREDDY 25-Feb-13 1500.1 1527.4 1.8199 -4.6404 6.4603 41.7352DRREDDY 28-Feb-13 1527.4 1546 1.2178 -4.6404 5.8582 34.3180 -4.6404 446.2849


- 61 -


(Fig – 24)Risk = √∑D2/n-1 = 4.8465118

GMR INFRA



GMRINFRA 1-Feb-13 39.4 38.6 -2.0305 6.9894 -9.0199 81.3578GMRINFRA 2-Feb-13 38.6 38.25 -0.9067 6.9894 -7.8961 62.3490GMRINFRA 3-Feb-13 38.25 39.6 3.5294 6.9894 -3.4600 11.9715GMRINFRA 4-Feb-13 39.6 38.5 -2.7778 6.9894 -9.7672 95.3978GMRINFRA 7-Feb-13 38.5 39.05 1.4286 6.9894 -5.5608 30.9228GMRINFRA 8-Feb-13 39.05 35.95 -7.9385 6.9894 -14.9279 222.8434GMRINFRA 9-Feb-13 35.95 31.75 -11.6829 6.9894 -18.6723 348.6545GMRINFRA 10-Feb-13 31.75 36.1 13.7008 6.9894 6.7114 45.0427GMRINFRA 11-Feb-13 36.1 37.7 4.4321 6.9894 -2.5573 6.5396GMRINFRA 14-Feb-13 37.7 40.45 7.2944 6.9894 0.3050 0.0930GMRINFRA 15-Feb-13 40.45 42.25 4.4499 6.9894 -2.5395 6.4489GMRINFRA 16-Feb-13 42.25 41.9 -0.8284 6.9894 -7.8178 61.1180GMRINFRA 17-Feb-13 41.9 41.3 -1.4320 6.9894 -8.4214 70.9197GMRINFRA 18-Feb-13 41.3 40.2 -2.6634 6.9894 -9.6528 93.1773GMRINFRA 21-Feb-13 40.2 41.5 3.2338 6.9894 -3.7556 14.1043GMRINFRA 22-Feb-13 41.5 41.05 -1.0843 6.9894 -8.0737 65.1852GMRINFRA 23-Feb-13 41.05 40.5 -1.3398 6.9894 -8.3292 69.3761GMRINFRA 24-Feb-13 40.5 38.4 -5.1852 6.9894 -12.1746 148.2205GMRINFRA 25-Feb-13 38.4 39.95 4.0365 6.9894 -2.9529 8.7199GMRINFRA 28-Feb-13 39.95 41.05 2.7534 6.9894 -4.2360 17.9433 6.9894 1460.3853


- 62 -


(Fig – 25)Risk = √∑D2/n-1 = 8.7671

L&T



L&T 1-Feb-13 1641.1 1578.5 -3.8145 -6.2520 2.4375 5.9413

L&T 2-Feb-13 1578.5 1573.5 -0.3168 -6.2520 5.9352 35.2271

L&T 3-Feb-13 1573.5 1630.6 3.6289 -6.2520 9.8809 97.6313

L&T 4-Feb-13 1630.6 1570.05 -3.7134 -6.2520 2.5386 6.4447

L&T 7-Feb-13 1570.05 1539.25 -1.9617 -6.2520 4.2903 18.4065

L&T 8-Feb-13 1539.25 1506.9 -2.1017 -6.2520 4.1503 17.2252

L&T 9-Feb-13 1506.9 1481.85 -1.6624 -6.2520 4.5896 21.0649

L&T 10-Feb-13 1481.85 1491.7 0.6647 -6.2520 6.9167 47.8409

L&T 11-Feb-13 1491.7 1556.1 4.3172 -6.2520 10.5692 111.7085

L&T 14-Feb-13 1556.1 1660.15 6.6866 -6.2520 12.9386 167.4071

L&T 15-Feb-13 1660.15 1624.75 -2.1323 -6.2520 4.1197 16.9716

L&T 16-Feb-13 1624.75 1654.5 1.8311 -6.2520 8.0831 65.3357

L&T 17-Feb-13 1654.5 1695.45 2.4751 -6.2520 8.7271 76.1617

L&T 18-Feb-13 1695.45 1639.15 -3.3207 -6.2520 2.9313 8.5928

L&T 21-Feb-13 1639.15 1652.35 0.8053 -6.2520 7.0573 49.8054

L&T 22-Feb-13 1652.35 1605.85 -2.8142 -6.2520 3.4378 11.8186

- 63 -


L&T 23-Feb-13 1605.85 1600.95 -0.3051 -6.2520 5.9469 35.3652

L&T 24-Feb-13 1600.95 1516.4 -5.2812 -6.2520 0.9708 0.9424

L&T 25-Feb-13 1516.4 1513.95 -0.1616 -6.2520 6.0904 37.0934

L&T 28-Feb-13 1513.95 1527.95 0.9247 -6.2520 7.1767 51.5055

-6.2520 882.4898


(Fig – 26)

Risk = √∑D2/n-1 = 6.8152

MAHINDRA & MAHINDRA



M&M 1-Feb-13 713.35 705.8 -1.0584 -13.9208 12.8624 165.4417M&M 2-Feb-13 705.8 700.55 -0.7438 -13.9208 13.1770 173.6324M&M 3-Feb-13 700.55 705.65 0.7280 -13.9208 14.6488 214.5873M&M 4-Feb-13 705.65 669.5 -5.1229 -13.9208 8.7979 77.4024M&M 7-Feb-13 669.5 669.2 -0.0448 -13.9208 13.8760 192.5431M&M 8-Feb-13 669.2 627.7 -6.2014 -13.9208 7.7194 59.5886M&M 9-Feb-13 627.7 655.2 4.3811 -13.9208 18.3019 334.9586M&M 10-Feb-13 655.2 652.6 -0.3968 -13.9208 13.5240 182.8979M&M 11-Feb-13 652.6 665.2 1.9307 -13.9208 15.8515 251.2713M&M 14-Feb-13 665.2 680.1 2.2399 -13.9208 16.1607 261.1691M&M 15-Feb-13 680.1 668.05 -1.7718 -13.9208 12.1490 147.5982M&M 16-Feb-13 668.05 655.8 -1.8337 -13.9208 12.0871 146.0981M&M 17-Feb-13 655.8 669.55 2.0967 -13.9208 16.0175 256.5595M&M 18-Feb-13 669.55 649.6 -2.9796 -13.9208 10.9412 119.7096M&M 21-Feb-13 649.6 651 0.2155 -13.9208 14.1363 199.8355M&M 22-Feb-13 651 639.75 -1.7281 -13.9208 12.1927 148.6617M&M 23-Feb-13 639.75 640.6 0.1329 -13.9208 14.0537 197.5055M&M 24-Feb-13 640.6 616 -3.8401 -13.9208 10.0807 101.6195M&M 25-Feb-13 616 595.2 -3.3766 -13.9208 10.5442 111.1797M&M 28-Feb-13 595.2 615.75 3.4526 -13.9208 17.3734 301.8358

- 64 -


-

13.9208 3644.0954(Table – 10)Returns= (close price - prev. close)*100/prev. close

(Fig – 27)Risk = √∑D2/n-1 = 13.8490

TATA MOTORS



TATAMOTORS 1-Feb-13 1147.05 1069.05 -6.8001 -4.1392 -2.6609 7.0801TATAMOTORS 2-Feb-13 1069.05 1114.25 4.2281 -4.1392 8.3673 70.0109TATAMOTORS 3-Feb-13 1114.25 1156.8 3.8187 -4.1392 7.9579 63.3284TATAMOTORS 4-Feb-13 1156.8 1150.85 -0.5143 -4.1392 3.6249 13.1395TATAMOTORS 7-Feb-13 1150.85 1146.35 -0.3910 -4.1392 3.7482 14.0489TATAMOTORS 8-Feb-13 1146.35 1112.25 -2.9747 -4.1392 1.1645 1.3562TATAMOTORS 9-Feb-13 1112.25 1073.6 -3.4749 -4.1392 0.6643 0.4412TATAMOTORS 10-Feb-13 1073.6 1102.5 2.6919 -4.1392 6.8311 46.6636TATAMOTORS 11-Feb-13 1102.5 1142.7 3.6463 -4.1392 7.7855 60.6134TATAMOTORS 14-Feb-13 1142.7 1209.25 5.8239 -4.1392 9.9631 99.2639TATAMOTORS 15-Feb-13 1209.25 1237.35 2.3238 -4.1392 6.4630 41.7698TATAMOTORS 16-Feb-13 1237.35 1238.45 0.0889 -4.1392 4.2281 17.8768TATAMOTORS 17-Feb-13 1238.45 1248.6 0.8196 -4.1392 4.9588 24.5894TATAMOTORS 18-Feb-13 1248.6 1205.55 -3.4479 -4.1392 0.6913 0.4779TATAMOTORS 21-Feb-13 1205.55 1161.75 -3.6332 -4.1392 0.5060 0.2560TATAMOTORS 22-Feb-13 1161.75 1136.85 -2.1433 -4.1392 1.9959 3.9835TATAMOTORS 23-Feb-13 1136.85 1143.9 0.6201 -4.1392 4.7593 22.6513TATAMOTORS 24-Feb-13 1143.9 1054.4 -7.8241 -4.1392 -3.6849 13.5786TATAMOTORS 25-Feb-13 1054.4 1110.7 5.3395 -4.1392 9.4787 89.8463TATAMOTORS 28-Feb-13 1110.7 1082.75 -2.5164 -4.1392 1.6228 2.6334 -4.3192 593.6092


- 65 -


(Fig – 28)Risk = √∑D2/n-1 = 5.5895

CORRELATION CO-EFFICIENTS

CORREALATION CO-EFFICIENT OF BHARTI AIRTEL AND RCOMM

- 66 -

Date Returns Average D1 Returns Average D2 D22 D1*D2

1-Feb-13 -0.5956 4.1602 -4.7558 -3.3836 -33.7802 30.3966 923.9526 -144.56042-Feb-13 1.7975 4.1602 -2.3627 -1.3080 -33.7802 32.4722 1054.443 -76.72073-Feb-13 5.2664 4.1602 1.1062 0.9833 -33.7802 34.7635 1208.503 38.45614-Feb-13 -2.1483 4.1602 -6.3085 -2.8366 -33.7802 30.9436 957.5077 -195.20857-Feb-13 0.4060 4.1602 -3.7542 0.7407 -33.7802 34.5209 1191.695 -129.59808-Feb-13 -0.1647 4.1602 -4.3249 -4.4550 -33.7802 29.3252 859.9663 -126.82989-Feb-13 -0.3450 4.1602 -4.5052 -14.3051 -33.7802 19.4751 379.2789 -87.7398

10-Feb-13 -2.8752 4.1602 -7.0354 2.0602 -33.7802 35.8404 1284.536 -252.152011-Feb-13 -1.1469 4.1602 -5.3071 0.5694 -33.7802 34.3496 1179.892 -182.297614-Feb-13 2.6497 4.1602 -1.5105 0.1544 -33.7802 33.9346 1151.557 -51.257115-Feb-13 0.5499 4.1602 -3.6103 4.3679 -33.7802 38.1481 1455.28 -137.727316-Feb-13 -0.2279 4.1602 -4.3881 -1.9202 -33.7802 31.8600 1015.057 -139.803417-Feb-13 3.4866 4.1602 -0.6736 0.3514 -33.7802 34.1316 1164.967 -22.991018-Feb-13 -2.5011 4.1602 -6.6613 -6.8034 -33.7802 26.9768 727.7476 -179.700621-Feb-13 -0.1962 4.1602 -4.3564 0.4831 -33.7802 34.2633 1173.973 -149.263522-Feb-13 -0.0605 4.1602 -4.2207 1.5491 -33.7802 35.3293 1248.163 -149.113823-Feb-13 -0.6959 4.1602 -4.8561 1.4729 -33.7802 35.2531 1242.782 -171.193224-Feb-13 -1.1578 4.1602 -5.3180 -4.2509 -33.7802 29.5293 871.9791 -157.037725-Feb-13 1.6492 4.1602 -2.5110 -5.3059 -33.7802 28.4743 810.7857 -71.499028-Feb-13 0.4701 4.1602 -3.6901 -1.9440 -33.7802 31.8362 1013.546 -117.4804

4.1602 -33.7802 20915.61-

2503.7178


(Table – 12)

CORRELATION CO-EFFICIENT

=∑D1*D2/ ∑D22 = - 0.120

CORREALATION CO-EFFICIENT OF NTPC AND POWERGRID

(Table – 13)

CORRELATION CO-EFFICIENT - 67 -


1-Feb-13 -2.0101 -10.4050 8.3949 -0.9322 -19.2291 18.2969 334.7780 153.60192-Feb-13 -2.6991 -10.4050 7.7059 -0.1045 -19.2291 19.1246 365.7485 147.3727

3-Feb-13 1.1373 -10.4050 11.5423 3.2444 -19.2291 22.4735 505.0571 259.39584-Feb-13 -2.9347 -10.4050 7.4703 -1.3685 -19.2291 17.8606 319.0019 133.42387-Feb-13 1.4976 -10.4050 11.9026 0.5139 -19.2291 19.7430 389.7850 234.99278-Feb-13 -3.0345 -10.4050 7.3705 -2.1472 -19.2291 17.0819 291.7900 125.90159-Feb-13 -1.6078 -10.4050 8.7972 0.2090 -19.2291 19.4381 377.8392 171.0006

10-Feb-13 -0.5544 -10.4050 9.8506 -0.5214 -19.2291 18.7077 349.9789 184.281911-Feb-13 3.7852 -10.4050 14.1902 1.0482 -19.2291 20.2773 411.1696 287.739414-Feb-13 0.7068 -10.4050 11.1118 2.2303 -19.2291 21.4594 460.5054 238.452715-Feb-13 1.5722 -10.4050 11.9772 0.2029 -19.2291 19.4320 377.6043 232.740516-Feb-13 0.3870 -10.4050 10.7920 -0.1519 -19.2291 19.0772 363.9396 205.880317-Feb-13 -0.4130 -10.4050 9.9920 0.0000 -19.2291 19.2291 369.7583 192.137318-Feb-13 -0.9953 -10.4050 9.4097 -0.5071 -19.2291 18.7220 350.5133 176.168421-Feb-13 -1.3404 -10.4050 9.0646 0.8665 -19.2291 20.0956 403.8316 182.158122-Feb-13 -0.4529 -10.4050 9.9521 -0.5053 -19.2291 18.7238 350.5805 186.341623-Feb-13 -1.6776 -10.4050 8.7274 1.1681 -19.2291 20.3972 416.0460 178.015324-Feb-13 -1.1278 -10.4050 9.2772 -1.3554 -19.2291 17.8737 319.4684 165.817325-Feb-13 -0.6435 -10.4050 9.7615 0.9669 -19.2291 20.1960 407.8793 197.144228-Feb-13 0.0000 -10.4050 10.4050 -0.2520 -19.2291 18.9771 360.1297 197.4566

-

10.4050 2.6046 7525.4047 3850.0226


=∑D1*D2/ ∑D22 = 0.5355

CORREALATION CO-EFFICIENT OF RANBAXY AND DR REDDY LABS

(Table – 14)


=∑D1*D2/ ∑D22 = 4.17036

- 68 -


1-Feb-13 -1.75278 -21.9584 20.2056 -0.9173 -4.6404 3.7231 13.8614 75.22742-Feb-13 0.737904 -21.9584 22.6963 0.2517 -4.6404 4.8921 23.9326 111.03253-Feb-13 -0.34307 -21.9584 21.6153 -0.8089 -4.6404 3.8316 14.6811 82.82114-Feb-13 -2.37253 -21.9584 19.5859 -1.2154 -4.6404 3.4251 11.7312 67.08327-Feb-13 -2.63032 -21.9584 19.3281 -0.9963 -4.6404 3.6442 13.2800 70.43488-Feb-13 -2.47627 -21.9584 19.4821 -1.9519 -4.6404 2.6886 7.2283 52.37879-Feb-13 -1.97712 -21.9584 19.9813 -1.0524 -4.6404 3.5880 12.8741 71.6938

10-Feb-13 2.20129 -21.9584 24.1597 -1.7913 -4.6404 2.8491 8.1176 68.834311-Feb-13 0.741334 -21.9584 22.6997 0.4023 -4.6404 5.0428 25.4297 114.469914-Feb-13 2.824185 -21.9584 24.7826 2.9320 -4.6404 7.5725 57.3425 187.665715-Feb-13 -0.16441 -21.9584 21.794 -0.1655 -4.6404 4.4750 20.0254 97.527716-Feb-13 -1.06558 -21.9584 20.8928 -1.7808 -4.6404 2.8596 8.1773 59.745117-Feb-13 0.303535 -21.9584 22.2619 0.9694 -4.6404 5.6099 31.4706 124.886518-Feb-13 -1.37642 -21.9584 20.582 0.7537 -4.6404 5.3941 29.0965 111.021721-Feb-13 0.791844 -21.9584 22.7502 -0.0065 -4.6404 4.6339 21.4734 105.423222-Feb-13 -3.31926 -21.9584 18.6391 0.8782 -4.6404 5.5186 30.4553 102.862623-Feb-13 -6.18588 -21.9584 15.7725 1.7604 -4.6404 6.4009 40.9712 100.958024-Feb-13 -4.34171 -21.9584 17.6167 -4.9396 -4.6404 -0.2992 0.0895 -5.270925-Feb-13 1.675156 -21.9584 23.6336 1.8199 -4.6404 6.4603 41.7357 152.680328-Feb-13 -3.22832 -21.9584 18.7301 1.2178 -4.6404 5.8582 34.3185 109.7245

-21.9584 -4.6404 446.2919 1861.1999


CORREALATION CO-EFFICIENT OF GMR INFRA AND L&T

(Table – 15)


=∑D1*D2/ ∑D22 = -0.5180

- 69 -


1-Feb-13 -2.0305 6.9894 -9.0199 -3.81451 -10.6579 6.8434 46.8319 -61.72642-Feb-13 -0.9067 6.9894 -7.8961 -0.31676 -10.6579 10.3411 106.9393 -81.65513-Feb-13 3.5294 6.9894 -3.4600 3.628853 -10.6579 14.2868 204.1113 -49.43204-Feb-13 -2.7778 6.9894 -9.7672 -3.71336 -10.6579 6.9445 48.2267 -67.82867-Feb-13 1.4286 6.9894 -5.5608 -1.96172 -10.6579 8.6962 75.6235 -48.35808-Feb-13 -7.9385 6.9894 -14.9279 -2.10167 -10.6579 8.5562 73.2090 -127.72689-Feb-13 -11.6829 6.9894 -18.6723 -1.66235 -10.6579 8.9955 80.9199 -167.9675

10-Feb-13 13.7008 6.9894 6.7114 0.66471 -10.6579 11.3226 128.2015 75.990411-Feb-13 4.4321 6.9894 -2.5573 4.317222 -10.6579 14.9751 224.2543 -38.295414-Feb-13 7.2944 6.9894 0.3050 6.686588 -10.6579 17.3445 300.8313 5.290615-Feb-13 4.4499 6.9894 -2.5395 -2.13234 -10.6579 8.5256 72.6852 -21.650316-Feb-13 -0.8284 6.9894 -7.8178 1.831051 -10.6579 12.4890 155.9739 -97.636217-Feb-13 -1.4320 6.9894 -8.4214 2.475068 -10.6579 13.1330 172.4748 -110.597718-Feb-13 -2.6634 6.9894 -9.6528 -3.32065 -10.6579 7.3372 53.8352 -70.825321-Feb-13 3.2338 6.9894 -3.7556 0.805295 -10.6579 11.4632 131.4048 -43.050822-Feb-13 -1.0843 6.9894 -8.0737 -2.81417 -10.6579 7.8437 61.5240 -63.328223-Feb-13 -1.3398 6.9894 -8.3292 -0.30513 -10.6579 10.3528 107.1798 -86.230624-Feb-13 -5.1852 6.9894 -12.1746 -5.28124 -10.6579 5.3767 28.9085 -65.458625-Feb-13 4.0365 6.9894 -2.9529 -0.16157 -10.6579 10.4963 110.1730 -30.995128-Feb-13 2.7534 6.9894 -4.2360 0.924733 -10.6579 11.5826 134.1574 -49.0636

6.9894 -6.25196 2317.4653-

1200.5450


CORREALATION CO-EFFICIENT OF MAHINDRA AND MAHINDRA AND TATA MOTORS


1-Feb-13 -1.0584 -13.9208 12.8624 -6.8001 -4.3192 -2.4809 6.1546 -31.90972-Feb-13 -0.7438 -13.9208 13.1770 4.2281 -4.3192 8.5473 73.0555 112.62683-Feb-13 0.7280 -13.9208 14.6488 3.8187 -4.3192 8.1379 66.2256 119.21064-Feb-13 -5.1229 -13.9208 8.7979 -0.5143 -4.3192 3.8049 14.4769 33.47467-Feb-13 -0.0448 -13.9208 13.8760 -0.3910 -4.3192 3.9282 15.4306 54.50758-Feb-13 -6.2014 -13.9208 7.7194 -2.9747 -4.3192 1.3445 1.8078 10.37909-Feb-13 4.3811 -13.9208 18.3019 -3.4749 -4.3192 0.8443 0.7128 15.4516

10-Feb-13 -0.3968 -13.9208 13.5240 2.6919 -4.3192 7.0111 49.1552 94.817611-Feb-13 1.9307 -13.9208 15.8515 3.6463 -4.3192 7.9655 63.4485 126.264814-Feb-13 2.2399 -13.9208 16.1607 5.8239 -4.3192 10.1431 102.8830 163.920315-Feb-13 -1.7718 -13.9208 12.1490 2.3238 -4.3192 6.6430 44.1288 80.705316-Feb-13 -1.8337 -13.9208 12.0871 0.0889 -4.3192 4.4081 19.4313 53.281217-Feb-13 2.0967 -13.9208 16.0175 0.8196 -4.3192 5.1388 26.4070 82.310218-Feb-13 -2.9796 -13.9208 10.9412 -3.4479 -4.3192 0.8713 0.7592 9.533521-Feb-13 0.2155 -13.9208 14.1363 -3.6332 -4.3192 0.6860 0.4706 9.697622-Feb-13 -1.7281 -13.9208 12.1927 -2.1433 -4.3192 2.1759 4.7345 26.529923-Feb-13 0.1329 -13.9208 14.0537 0.6201 -4.3192 4.9393 24.3970 69.415824-Feb-13 -3.8401 -13.9208 10.0807 -7.8241 -4.3192 -3.5049 12.2844 -35.331825-Feb-13 -3.3766 -13.9208 10.5442 5.3395 -4.3192 9.6587 93.2911 101.843428-Feb-13 3.4526 -13.9208 17.3734 -2.5164 -4.3192 1.8028 3.2500 31.3203 -13.9208 -4.3192 622.5045 1128.0481

(Table – 16)CORRELATION CO-EFFICIENT

=∑D1*D2/ ∑D22 = 1.81211

- 70 -


CONSTRUCTING A PORTFOLIO:

PORTFOLIO OF

BHARTI AIRTEL & RELIANCE COMMUNICATION

r1= 4.1602 r2= -33.7802

σ1= 4.5187 σ2= 33.1786

r1, 2= -0.120

Assume w1=50% w2=50

=0.5 =0.5

Return of portfolio: Rp1 = w1.r1+w2.r2

= (0.5*4.1602) + (0.5* -33.7802)

= 2.0801 – 16.8901

Rp1 = -14.81

Risk of Portfolio: σp1= √ (w12σ12+w22σ22+2w1w2σ1σ2r12

=√ (0.5)2*(4.5187)2+ (0.5)*(33.1786)2+2*0.5*0.5*1.922*1.7298 *0.0785)

= √ (0.25*20.42 + 0.25*1100.82 + 8.995)

= √ (5.105 + 275.205 – 8.995)

= √ (271.315)

σp1= 16.47

- 71 -


PORTFOLIO OF NTPC & POWERGRID

r1= -10.4050 r2= 2.6046

σ1= 10.2840 σ2= 2.8301

r1, 2= 0.5355

Assume w1=50% w2=50

=0.5 =0.5


= (0.5*-10.4050) + (0.5* 2.6046)

= -5.2025 + 1.3023

Rp1 = -3.90


=√ (0.5)2*(10.2840)2+ (0.5)*(2.8301)2+2*0.5*0.5*10.2840*2.8301 *0.5355)

= √ (0.25*105.76 + 0.25*8.009 + 7.79)

= √ (26.44 + 2.002 + 7.79)

= √ (36.232)

σp1= 6.02

- 72 -


PORTFOLIO OF RANBAXY & DR. REDDY LABS

r1= -21.9584 r2= -4.6404

σ1= 21.5259 σ2= 4.8465

r1, 2= 4.1704

Assume w1=50% w2=50

=0.5 =0.5


= (0.5*-21.9584) + (0.5* -4.6404)

= -10.9792 – 2.3202

Rp1 = -13.29


=√ (0.5)2*(-21.5259)2+ (0.5)*(4.8465)2+2*0.5*0.5*21.5259*4.8465*4.1704)

= √ (0.25*463.36 + 0.25*23.49 + 217.539)

= √ (115.84 + 5.87 – 217.539)

= √ (339.249)

σp1= 18.42

- 73 -


PORTFOLIO OF GMR INFRA & L&T

r1= 6.9894 r2= -6.2520

σ1= 8.7671 σ2= 6.8152

r1, 2= -0.5180

Assume w1=50% w2=50

=0.5 =0.5


= (0.5*6.9894) + (0.5* -6.2520)

= 3.49 – 3.126

Rp1 = 0.3687


=√ (0.5)2*(8.7671)2+ (0.5)*(6.8152)2+2*0.5*0.5*8.7671*6.8152*-0.5180)

= √ (0.25*76.86 + 0.25*46.45 – 15.47)

= √ (19.215 + 11.61 – 15.47)

= √ (15.355)

σp1= 3.92

- 74 -


PORTFOLIO OF MAHINDRA&MAHINDRA AND TATA MOTORS

r1= 13.9208 r2= -4.3192

σ1= 13.8490 σ2= 5.5895

r1, 2= 1.8121

Assume w1=50% w2=50

=0.5 =0.5


= (0.5*13.9208) + (0.5* -4.3192)

= 6.96 – 2.1596

Rp1 = 4.8


=√ (0.5)2*(13.8490)2+ (0.5)*(5.5895)2+2*0.5*0.5*13.8490*5.5895*4.1704)

= √ (0.25*193.79 + 0.25*18.65 – 70.128)

= √ (48.45 + 4.66 – 70.128)

= √ (123.238)

- 75 -


σp1= 11.10

STATEMENT OF EXPECTED RETURNS OF COMPANIES

COMPANIESEXPECTED RETURNS

BHARTI AIRTEL 4.16R COMM -33.78NTPC -10.4POWER GRID 2.6RANBAXY -21.96DR REDDY -4.64GMR INFRA 6.99L&T -6.25M&M -13.92TATA MOTORS -4.32

(Table – 17)

EXPECTED RETURS OF COMPANIES

- 76 -


(Fig – 29)

STATEMENT OF RISK OF COMPANIES

COMPANIES RISKBHARTI AIRTEL 4.52

R COMM 33.18

NTPC 10.28

POWER GRID 2.83

RANBAXY 21.53

DR REDDY 4.85

GMR INFRA 8.77

LT 6.82

M&M 13.85

TATA MOTORS 5.59(Table – 18)

- 77 -


GRAPH STATEMENT OF RISK OF COMPANIES

(Fig – 30)

STATEMENT SHOWING COMPARISON OF PORTFOLIO RETURNS AND RISK

(Table – 19)

- 78 -

COMPANIES EXPECTED RETURNS

RISK

BHARTI AIRTEL & RELIANCE COMMUNICATION

-14.81 16.47

NTPC & POWERGRID -3.90 6.02

RANBAXY & DR. REDDY LABS

-13.29 18.42

GMR INFRA & LT 0.37 3.92

MAHINDRA&MAHINDRA AND TATA MOTORS

4.8 11.10


EXPECTED RETURNS AND RISK OF COMPANIES

(Fig – 31)

- 79 -


CHAPTER - V

FINDINGS, SUGGESTIONS

&

CONCLUSIONS

- 80 -


FINDINGS

QUESTIONNAIRE FINDINGS

There is considerable rise in the working female population. 35% of the respondents are working

females earning good remuneration.

46% respondents prefer fixed deposits, 19% post office deposits, 4% chit funds. A considerable 23%

also prefer stock market.

29% are aware of stock market, 35% about mutual funds, 14% about IPO’s 7% bonds, 7% bullion,

4ULIP’s, and rest 4% prefer other options.

80% respondents feel stock market as a very risky option, 10% feel it as a gambling and another

only 10% feel it is a safe option.

Only 40% respondents are willing to invest in stock market.

Only 45% are aware of the online share trading.

A 75% are satisfied with their current investment portfolio.

A 75% respondent recognizes Reliance Money as one of the leading stock broking company.

FINDINGS FROM DATA ANALYSIS- 81 -


CALCULATED EXPECTED RETURNS AND RISKS

Company name Expected returns (%) Risks (%)

TELE COMMUNICATION

BHARTI AIRTEL

R COMM

4.16

-33.78

4.52

33.18

POWER

NTPC

POWERGRID

-10.40

2.60

10.28

2.83

PHARMACEUTICALS

RANBAXY

DR REDDY

-21.96

-4.64

21.53

4.85

CONSTRUCTION & ENGINEERING

GMR INFRA

LT

6.99

-6.25

8.77

6.82

AUTOMOBILES

M&M

TATA MOTORS

-13.92

-4.32

13.85

5.59

TELE COMMUNICATION

- 82 -


The expected return of Bharti Airtel is 4.16 and Reliance Communication is -33.78 respectively, and

the risk is 4.52 and 33.18 respectively.

POWER:

The expected returns of NTPC and POWERGRID are -10.40 and 2.60 respectively and their risk is

10.28 and 2.83 respectively.

PHARMACEUTICALS

The expected returns of RANBAXY and Dr REDDY LABS are -21.96 and -4.64, and their risk is

are 21.53 and 4.85 respectively.

CONSTRUCTION & ENGINEERING:

The expected returns of GMR INFRA and L&T are 6.99 and -6.25 respectively. And their risk is

8.77 and 6.82.

AUTOMOBILES

The expected returns of Mahindra & Mahindra and TATA Motors are -13.92 and -4.32 respectively.

And their risk is 13.85 and 5.59.

- 83 -


CORRELATION COEFFICIENT BETWEEN THE COMPANIES

Company name Correlation Coefficients (r)

TELE COMMUNICATION

BHARTI AIRTEL

R COMM-0.120

POWER

NTPC

POWERGRID0.535

PHARMACEUTICALS

RANBAXY

DR REDDY4.170

CONSTRUCTION & ENGINEERING

GMR INFRA

LT-0.518

AUTOMOBILES

M&M

TATA MOTORS1.812

- 84 -


TELE COMMUNICATION

The combination of Bharti Airtel and Reliance Communication are having a correlation of - 0.120.

POWER:

The combination of NTPC and POWERGRID are having a correlation of 0.535.

PHARMACEUTICALS

The combination of Ranbaxy and Dr Reddy Labs are having a correlation of 4.170.

CONSTRUCTION & ENGINEERING:

The combination of GMR Infra and L&T are having a correlation of -0.518

AUTOMOBILES

The combination of M&M and TATA Motors are having a correlation of 1.812.

- 85 -


SUGGESTIONS:

The respondents being working professionals should be aware of requirement of various financial

proofs and tools like personal bank account, credit card, PAN Card, Demat account. A very low

percentage of respondents posses all kinds of financial documents.

The respondents are not feeling stock market as a trustable place to invest their savings. There

should be financial education made as a special requirement in the academic curriculum to male the

young generation have more knowledge about the markets and can decide what they want and where

they should invest their savings.

The respondents need to be given full disclosure about the details about various investment options

available to them and so they can decide themselves what is required and suitable to them.

The stock broking companies should conduct various awareness campaigns to make the general

investors aware of the situation of the market and various investment avenues available to them.

The stock broking companies should make fair dealings with the investors, use corporate

governance, social responsibility activities to win the trust of investors and show concerned interest

towards the inquiries of the investors.

Don’t put your trust in only one investment. It is like “putting all the eggs in one basket “. This will

help reduce the risk in the long term.

Select your investments on economic grounds. Public knowledge is no advantage. Listen to rumors

and tips, check for yourself. The investor must select the right advisory body which is has sound

knowledge about the product which they are offering.

Professionalized advisory is the most important feature to the investors. Professionalized research,

analysis which will be helpful for reducing any kind of risk to overcome.

- 86 -


CONCLUSIONS

Conclusions for Portfolio Risk, Return & Investments

The conclusion on this study is formed on the basis of data analysis made from the 1 month (February)

CNX 100 Index from National Stock Exchange listed companies. The conclusions are based on Markowitz

Model of Portfolio Theory.

BHARTI AIRTEL & RELIANCE COMMUNICATION: Both the companies are one of the most top

Tele communication companies. BHARTI AIRTEL is giving positive returns of 4.16 with calculated risk at

4.52. The Reliance Communication shows negative returns of -33.78 and a high calculated risk of 33.18.

The combined correlation coefficient is -0.120.

NTPC & POWERGRID: Both the companies are one of the most top Power companies. NTPC is giving

negative returns of -10.40 with calculated risk at 10.28. The POWERGRID shows negative returns of 2.60

and a high calculated risk of 2.83. The combined correlation coefficient is 0.535.

RANBAXY & DR REDDY LABS: Both the companies are one of the most top Pharmaceuticals

companies. RANBAXY is giving negative returns of -21.96 with calculated risk at 21.53. The DR REDDY

LABS shows negative returns of -4.64 and a high calculated risk of 4.85. The combined correlation

coefficient is 4.170.

RANBAXY & DR REDDY LABS: both the companies are one of the most top Pharmaceuticals

companies. RANBAXY is giving negative returns of -21.96 with calculated risk at 21.53. The DR REDDY

LABS shows negative returns of -4.64 and a high calculated risk of 4.85. The combined correlation

coefficient is 4.170.

- 87 -


GMR INFRA & L&T: Both the companies are one of the most top Infrastructure & Engineering

companies. GMR Infra is giving positive returns of 6.99 with calculated risk at 8.77. The L&T shows

negative returns of -6.25 and a calculated risk of 6.82. The combined correlation coefficient is -0.518.

MAHINDRA AND MAHINDRA & TATA MOTORS: Both the companies are one of the most top

Automobile companies. M&M is giving negative returns of -13.92 with calculated risk at 13.85. The TATA

Motors shows negative returns of -4.32 and a calculated risk of 5.59. The combined correlation coefficient

is 1.812.

- 88 -


CHAPTER - VI

BIBLIOGRAPHY

- 89 -


Books referred:

Robert A. Strong, Portfolio Management Handbook, 2006, Fourth Edition, Jaico Publishing House,

page No: 85-88, 475-476.

Donald E. Fischer, Ronald J. Jordan, Portfolio Analysis, SAPM , 1999, Sixth Edition, , page no:

559-588, page no: 636-648

Punithavathy Pandian, Security Analysis & Portfolio Management, 2007, Portfolio Markowitz

Model, page no: 329-349.

Prasanna Chandra, Investment Analysis & Portfolio Management, 2006, Second edition, Efficient

Frontier, page no: 251-259

Websites:

www.reliancemoney.com

www.reliancecapital.com

www.moneycontrol.com

www.bseindia.com

www.nseindia.com

www.sebi.gov.in

www.amfiindia.com

www.investopedia.com

www.economictimes.com

Business Journals:

Business world-2008

Outlook Money-2008

Economic Times – Times of India.

- 90 -

http://www.amfi.com/

http://www.nseindia.com/

http://www.bseindia.com/

http://www.moneycontrol.com/

http://www.reliancemoney.com/


CHAPTER - VII

APPENDIX

- 91 -


QUESTIONNAIRE

(Note: This questionnaire is used as a part of data collection for academic project.)

Q1. Is it a safe option on investing in Stock Market? Yes No

Q2. Are you willing to invest in Stock Market? Yes No

Q3. Do you have any of your own company stocks in your portfolio? Yes No

Q4. Invest in the direct stocks and managed funds are useful? Agree Strongly agree neutral Disagree Strongly disagree Q5. Are you aware of online share trading? Yes No

Q6. You invest up to 25%, is it better savings? Agree Strongly agree neutral Disagree Strongly disagree Q7. Are you satisfied with your current investment portfolio? Yes No

Q8. Have you heard about Reliance Capital?Yes No

Q9. In an effort to grow your wealth, can you afford to lose any money over the next two years? Yes No

Q10. Portfolio is a combination of various assets and instruments of investments. Agree Strongly agree neutral Disagree Strongly disagree Q11. In the management of investments both risk and return are vital, to a great extent in creating value of the company

Agree Strongly agree neutral Disagree Strongly disagree Q12. Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs safety? Agree Strongly agree neutral Disagree Strongly disagree Q13. Banks and other financial institutions generally create a portfolio of fixed income securities to fund liabilities

- 92 -


Agree Strongly agree neutral Disagree Strongly disagree Q14. Portfolio management is the art of managing the expected return requirement for the corresponding risk tolerance

Agree Strongly agree neutral Disagree Strongly disagree

Q15 The relevant risk of an asset contributes more to a widely-held portfolio Yes No Q16. Investors have homogenous information about different assets?

Agree Strongly agree neutral Disagree Strongly disagree Q17. All investors are risk-adverse, that is they will only accept greater risk if they are compensated with a higher expected return


Q18. Markets are inefficient when prices of securities assimilate and reflect information about them


Q19. Do u agree that constructing the optimal portfolio, such as risk-free, taxes, transaction cost and benchmark portfolio maximizes the return and minimizes the risk?


Q20. Do u agree that Reliance capital provides Investors with better Portfolio Management Services?


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Dichotomous Table

YES-1 NO-2SL.NO NAME Q1 Q2 Q3 Q5 Q7 Q8 Q9 Q15

1 ANIL 1 2 1 1 1 1 1 12 RISHI 1 2 1 1 1 1 1 13 SANTHOSH 1 2 1 1 1 1 1 14 MAHESH 1 2 1 1 1 1 1 15 SUDHIR 1 2 1 1 1 1 2 16 PRABHA 1 2 1 1 1 1 1 17 RAKESH 1 2 1 1 1 1 1 18 BHASKAR 1 2 1 1 1 1 1 19 ARJUN 1 2 1 1 1 1 2 110 ASHOK 1 2 1 1 1 1 1 111 PRIYA 1 1 1 1 1 1 1 112 SHILPA 1 1 1 1 1 1 1 113 KISHORE 1 1 1 1 1 1 1 114 SAGAR 1 1 1 1 1 1 1 115 MURALI 1 1 1 1 1 1 1 116 SHANTHI 1 1 1 1 1 1 1 117 SWAPNA 1 1 1 1 1 1 1 118 GANESH 1 1 1 1 1 1 1 119 VISHNU 1 1 1 1 1 1 1 120 SUMAN 1 1 1 1 1 1 2 121 SINDHU 1 2 2 1 1 1 1 222 SAIRAM 1 2 2 1 1 1 1 223 SANTOSH 1 2 2 1 1 1 1 224 NARESH 1 2 2 1 1 1 1 225 SUJITH 1 2 2 1 1 1 1 226 AJAY 1 2 2 1 1 1 1 227 AKHIL 1 2 2 1 1 1 1 228 KRISHNA 1 2 2 1 1 1 2 229 MICHAEL 1 2 2 1 1 1 1 230 PRASANA 1 2 2 1 1 1 1 231 BALU 1 1 2 1 1 1 1 232 BALRAJ 1 1 2 1 1 1 1 233 VARUN 1 1 2 1 2 1 2 234 KIRAN 1 1 2 1 2 1 1 235 NIKHIL 1 1 2 1 2 1 2 236 GOPI 1 1 2 1 2 1 1 137 MOHAN 1 1 2 1 2 1 2 138 MADHUKAR 1 1 2 1 2 1 1 139 ANUSH 1 1 2 1 2 1 1 140 VIKRAM 1 1 2 1 2 1 1 141 SUDHAKAR 2 1 2 1 2 1 1 142 MAHESH 2 1 2 1 2 1 1 1

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43 HEMA 2 1 2 1 2 1 1 144 BHARATHI 2 1 2 1 2 1 1 145 VARSHA 2 1 2 1 2 1 1 146 RAKESH 2 1 2 1 2 1 1 147 VAMSHI 2 1 2 1 2 1 1 148 MADHAN 2 1 2 1 2 1 2 149 ROMESH 2 1 2 1 2 1 2 150 SUNIL 2 1 2 1 2 1 2 1

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ranjith complete project

Documents

right portfolio of securities

particular portfolio

overall portfolio return

different securities

securities segment

diversified securities

securities individual

business administration