NIILM-Centre for Management Studies Course Title: Security Analysis and Portfolio Management Credits: Four

Course Outline
(PGDM 2012-14, Sem - III) Faculty : Dr.Puneet Dublish Course Objective: From the peak of 2007 to sudden crash in the following year to revival in the year 2010 and finally consolidation and volatility in the current year, equity investment has proved to be a risky as well as profitable investment venture. Right stock picking has proved to be an elusive thing even for the experts of the field. However by applying sound theoretical financial tools to analyze and select right stocks and timing the entry and exit, the probability of incurring losses is minimized and making gains maximized. Keeping the above as background, this course aims at how to analyze and select equity and then construct an optimum portfolio to maximize return and minimize loss. The course also aims to familiarize the students with portfolio revision and performance measurement techniques. Learning Outcomes: Analyzing and selecting individual stocks on the basis of fundamental analysis Timing of entry and exit of stocks in the secondary market on the basis of technical analysis Tools of constructing a diversified equity portfolio Revising a portfolio and measuring its performance

Course Topics:

1. Overview of investments and investment alternatives 2. Risk and return in the context of single asset and portfolio analysis 3. Capital Asset Pricing Model, Arbitrage Pricing Theory and Beta estimation 4. Efficient market hypothesis 5. Equity fundamental analysis: Economic & Industry analysis 6. Equity fundamental analysis: Company analysis & valuation 7. Equity technical analysis 8. Portfolio selection, formulation, revision, and performance evaluation

Course Material Essential Reading (Text Book)

Investment Analysis & Portfolio Management, 3e --- by Prasanna Chandra (Tata McGraw-Hill Publishing Company Limited)

Reference Readings: 1. Security Analysis and Portfolio Management, 6e --- by Fischer D E & Jordan R J (Prentice Hall) 2. Investment Analysis and Portfolio Management,8e --- Frank K. Reilly and Keith C. Brown (Cengage Learning Private Limited) 3. Investments, 6e -- Bodie, Zvi, Kane, Alex, Marcus, Alan J, Mohanty, Pitabas (Tata McGraw Hill Publishing Co. Ltd.) 4. Modern Investment Theory, 5e --- Haugen, Robert A (Pearson Education) 5. Investments: Analysis and Management, 9e --- Jones, Charles P (John Wiley & Sons) 6. Investment Analysis & Portfolio Management, ----- M. Ranganatham, R.Madhumati (Pearson Education) 7. Value Investing: From Graham to Buffet and Beyond --- Greenwald, Bruce C N; Kahn, Judd; Sonkin, Paul D; Biema, Michael Van (John Wiley & Sons) 8. The Intelligent Investor, 4e --- Graham, Benjamin (Harper & Row Publishers, 1973) 9. Investments, ----- Sharpe, Alexender, Bailey ( Eastern Economy Edition)
10. Investment Valuation by Aswath Damodaran ( John Wiley)

Magazines/News Papers: 1. 2. 3. 4. Chartered Finance Analyst Portfolio Organizer (CFA) The Economic Times/Business Standard/Financial Express Economist

Online Resources: www.sebi.gov.in www.capitalmarket.com www.bseindia..com www.amfiindia.com www.nsdl.co.in www.nse-india.com www.sharekhan.com www.icicidirect.com
www.moneycontrol.com

Evaluation S.No 1 2 3 Parameter Mid-term Test Individual and Group Project Presentation Weightage 25% 10% 5%

4 5

Case Analysis/Assignment End-Term Exam

10% 50%

Pre- Requisite: The students should have a reasonable understanding of corporate finance and fundamentals of quantitative techniques.

SESSION PLAN: Sessi on No. 1-2 Topic Learning Objectives Description/Readings Prasanna Chandra Pg. 3 to 46, Students will go through the stock market page in the The Economic Times, and understand various terms and its interpretation Case/Assignment/ Project

Overview

of 1.Describe and compare

various investment investments and alternatives 2.Identify different types investment of financial markets alternatives 3.Understand portfolio management process and approaches to investment decision making

3-4

Risk and return in the context of single asset

Prasanna Chandra Pg.95 to 112, 1.Calculate the total Activity Solved Problems Pg.113 return, return relative, and cumulative wealth index 2.Compute the arithmetic mean and geometric mean of a return series 3.Rexplain the rationale for using standard deviation as the principal measure of risk 4.Measure the expected (ex ante) return and risk of a security I M Pandey Pg.90 to 99 Discussion on Assignment 1

Assignment 1 Prasanna Chandra, pg.114, Prob. 1 to 3

5-6

Risk and return in the context of portfolio analysis

7-8

Risk and return in the context of portfolio analysis Risk and return in the context of portfolio analysis

I M Pandey Pg.100 to 102 Fisher & Jordan Pg.574 to 585 I M Pandey Pg.102 to 105 Prasanna Chandra Activity Solved Problems Pg.239 to 243 Assignment 2 Prasanna Chandra, pg.244, Prob. 1 to 8

10

11-12

Risk and return in the context of portfolio analysis Capital Asset Pricing Model, Arbitrage Pricing Theory & Beta Estimation

Discussion on Assignment 2

I M Pandey Pg.106 to 111 1.Explain the capital market relationship and I M Pandey Pg.117 to 125 the security market line relationship 2.Develop the inputs required for applying the capital asset pricing model 3.Calculate the beta of a security 4.Discuss the application of arbitrage pricing theory Prasanna Chandra Activity - Solved Problems Pg.269 to 270, Unsolved Problems 1, 3, & 4 Pg.271. Discussion on Case of Radiant Securities

Individual Project Detail information given after session plan

13-14

15

Capital Asset Pricing Model, Arbitrage Pricing Theory & Beta Estimation Efficient market hypothesis

Case of Radiant Securities Prasanna Chandra, pg.273

16

Equity fundamental analysis: Economic & Industry analysis

1.Discuss types of efficient market hypothesis and its implication for an investment analysis 2.Cite evidence that supports and refutes the efficient market hypothesis in various versions. 1.Appreciate the major global economic influences 2.Understand broadly the key governmental policies 3.Explain how macroeconomic variables affect the stock market 4.Analyse industry prospects

Fisher & Jordan Pg.538 to 554

Prasanna Chandra Pg.405 to 426

17 18 19

Group Presentation 1
Mid-Term Examination

Detail information given after session plan 1.Analyse the financials of a company 2.Identify the qualitative factors that
Syllabus Topics covered till session 16 Prasanna Chandra Pg.427 to 450, Case of GSM Discussion on Case of GSM Limited, Limited Prasanna Chandra, pg.451 Pg.451

Equity fundamental analysis: Company analysis

affect a companys prospects 3.Explain the procedure to estimate the intrinsic value of a share 4. Understand various equity valuation models 20-22 Equity fundamental analysis: Company analysis & Valuation Equity fundamental analysis: Valuation Stock Market Simulation Game Equity technical analysis
Fisher & Jordan Pg.217 to 232 Prasanna Chandra Pg. 371 to 399 Mini Case Prasanna Chandra, pg.403

23

Prasanna Chandra Activity Discussion on Solved Problems Pg.400 to 402, Discussion on Mini Case Pg.403 Detail information given after session plan

24

25-26

1.Use line and bar charts to identify buy and sell opportunities 2.Use technical indicators to assess the direction of market and stock

Prasanna Chandra Pg.463 to 480 Mid-Term Test Feedback

25 26-28

29-30

31 32

Group Presentation-2 Portfolio selection, formulation, revision, and performance evaluation Portfolio selection, formulation, revision, and performance evaluation Group Presentation-3 Feed-back on GP

Detail information given after session plan Prasanna Chandra Pg.601 to 606 and 613 to 622 Fischer & Jordan Pg.593 to 606

Prasanna Chandra Activity Discussion on Solved problems Pg.624 to 625 and Mini Case Pg.626 to 638

Asset Allocation Case Prasanna Chandra, pg.626

Detail information given after session plan

Pedagogy The teaching methodology is a judicious blend of lectures, real life situation analysis, case discussion and project work using Excel. Individual Project (5 marks) Collect monthly closing price data for last 37 months for Sensex and any three companies from the same industry. Calculate the share return (ignore dividends) for each company and Sensex. Compare and explain average returns and standard deviations. Now calculate beta for three of these companies. Why do you think betas of these three companies differ? The project has to be submitted within three working days. Group Project (5 marks) Each group consisting of four students will do a live project by simulating real portfolio construction using excel for financial analysis and using free financial software available on brokerage houses websites to have a feel of real investment scenario. Group project must be submitted by 29th session of the term. Failure to submit without good cause (illness supported by a medical certificate or similar) will result in a zero mark. A feed-back will be provided on the group project in the last session. Group Presentation (5 marks) Each student in a group of four will make three presentations. Each group will be given five minutes for their presentations. The topics of presentations are given below: Presentation 1 = Economic and industry survey report published by various research agencies, Government department, Banks/FIs, etc. Presentation 2 = Technical chart/indicator report prepared by financial research agencies.

Presentation 3 = Portfolio strategy of any mutual fund scheme.

Assignment/Case (10 marks) A student should submit all assignments and case analysis report within the time given by the course instructor. Failing which without valid reason would result in zero marks. The weight age for all assignments and cases is 10% in internal assessment. Simulation Game A stock market game will be simulated and played in group. The objective is to enable student to have a feel of stock market investment and constructing an equity portfolio.

Academic Honesty Students are expected to uphold the NIILM standard of conduct for students relating to academic dishonesty, which is defined as an intentional act of deception in which a student seeks to claim credit for the work or effort of another person or uses unauthorized materials or fabricated information in any academic work. Students assume full responsibility for the content and integrity of the academic work they submit. The guiding principle of academic integrity is that a students submitted work, examinations, reports, and projects must be that students own work for individual assignments, and the groups own work for group assignments/ projects. Students are guilty of academic dishonesty if they: Use or obtain unauthorized materials or assistance in any academic work; i.e. cheating. Falsify or invent any information regarded as cheating by the instructor; i.e. fabrication. Give unauthorized assistance to other students, i.e. assisting in dishonesty. Represent the work of others as their own; i.e. plagiarism. Modify, without instructor approval, an examination paper, record or report for the purpose of obtaining additional credit; i.e. tampering.

The penalty for academic dishonesty is severe. Any student guilty of academic dishonesty may be subject to receive a failing grade for the examination, assignment, quiz, or class participation exercise as deemed appropriate by the instructor.