Professional Documents
Culture Documents
The only stock exchanges operating in the 19th century were those of
this Act, the Bombay Stock Exchange was recognized in 1927 and
Ahmedabad in 1937.
During the war boom, a number of stock exchanges were organized even in
Bombay, Ahmedabad and other centers, but they were not recognized. Soon
capital by private individuals also grow. Along with it, the opportunity for
scale. These are services, which the Stock Exchange alone can render
efficiently.
The Stock Exchanges in India have an important role to play in the building
subjecting not only its members to a high degree of discipline, but also
those who use its facilities-Joint Stock Companies and other bodies in
potential are provided, through the daily Stock Exchange quotations. The
job of the Stock Exchange and its members is to satisfy the need of market
for investments to bring the buyers and sellers of investments together, and
possible.
As the business and industry expanded and economy became more complex
for long term needs, whereas investors demand liquidity. The solution to this
problem gave way for the origin of 'stock exchange', which is a ready market
dealing in securities".
BY-LAWS
Besides the above act, the securities contracts (regulation) rules were also
There are also by-laws of exchanges, which are concerned with the following
subjects.
Opening / closing of the stock exchanges, timing of trading, regulation of
The Securities Contracts (regulation) Act, 1956 is the basis for operations of
the stock exchanges in India. No exchange can operate legally without the
in certain areas under section 19 of the above Act to ensure that the control
matters connected therewith. This is the principal Act, which governs the
2. Derivative.
4. Government securities.
to be securities.
helped in setting up NSE. ISC prepared the detailed business plans and
installation of hardware and software systems. The promotions for NSE were
Market Ltd., Infrastructure Leasing and Financial Services Ltd. and Stock
investors.
NSE is not an exchange in the traditional sense where brokers own and
NSE-NIFTY:
The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The
new Index which replaces the existing NSE-100 Index is expected to serve as
Rs.500 crs each and should have traded for 85% of trading days at an
The base period for the index is the close of prices on Nov3, 1995 which
The NSE midcap Index or the Junior Nifty comprises 50 stocks that
of the midcap segment of the Indian capital Market. All stocks in the Index
should have market capitalization of greater than Rs.200 crs and should
have traded 85% of the trading days at an impact cost of less 2.5%.
The base period for the index is Nov 4, 1996 which signifies two years for
Average daily turnover of the present scenario 2,58,212 (Lacs) and number
EXCHANGE (BSE)" was established in 1875 as ''The Native Share and Stock
evolved over the years into its present status as the premiere Stock
Exchange in the country. It may be noted that the Stock Exchange is the
oldest one in Asia, even older than the Tokyo Stock Exchange, which was
founded in 1878.
education programmes.
The Executive director as the chief executive officer is responsible for the day
BSE INDICES:
In order to enable the market participants, analysts etc., to track the various
ups and downs in the Indian stock market, the Exchange introduced in
as electronic media.
this methodology, the level of the index reflects the total market value of all
the price of its stock by the number of shares outstanding. Statisticians call
an index of a set of combined variables (such as price and number of shares)
this calculation in order to make the value easier to work with and track
over a time. It is much easier to graph a chart based on Indexed values than
one based on actual values world over majority of the well known Indices are
the Index Divisor. The Divisor is the only link to the original base period
value of the SENSEX. The Divisor keeps the Index comparable over a period
of time and it is the reference point for the entire Index maintenance
New base year average = old base year average *(new market value/old
market value)
COMPANY PROFILE
company has 8500+ sub-brokers and franchisee outlets in more than 850
cities across India.
insurance are also delivered by this company. In 2006, the company started
its Portfolio Management Services (PMS), IPOs business and Mutual Funds
Type Private
Industry Stock Broker and Financial services
Headquarter Mumbai, India
s
Key people DineshThakkar
(Chairman & Managing Director)
Services Equity Trading Life insurance
Commodities IPO
Angel Broking offers products such as Angel Eye, Angel SpeedPro, Angel
Trade and Angel Swift for online trading. Angel Eye is a browser trading
History
Five Lakhs Indian Rupees and lost half of the money within eight months. In
December, 1997. In November 1998, Angel Capital and Debt Market Ltd.
gained membership of National Stock Exchange as a legal entity. The
2007, Birla Sun Life Insurance joined hands with Angel Broking for
Awards
Awards
2012 - BSE IPF-D&B Equity Broking Award for Best Retail Broking
House
Trading) FY 2012-13
2013 - BSE-IPF D&B Equity Broking Award for Broking House with
2013 - BSE-IPF D&B Equity Broking Award for 'Best Retail Equity
Broking House
the BSE
Concept of Portfolio:
Portfolio is the collection of securities may be financial or real assets such as equity shares,
debentures, bonds, treasury bills and property etc. portfolio is a combination of assets or it
consists of collection of securities. These holdings are the result of individual preferences,
decisions of the holders regarding risk, return and a host of other considerations.
Portfolio management:
An investor considering investment in securities is faced with the problem of choosing from
among a large number of securities. His choice depends upon the risk return characteristics of
individual securities. He would attempt to choose the most desirable securities and like to
allocate his funds over his group of securities. Again he is faced with the problem of deciding
which securities to hold and how much to invest in each.
The investor faces an infinite number of possible portfolio or group of securities. The risk and
return characteristics of portfolios differ from those of individual securities combining to
form a portfolio. The investor tries to choose the optimal portfolio taking into consideration
the risk-return characteristics of all possible portfolios.
As the economic and financial environment keeps the changing the risk return characteristics
of individual securities as well as portfolio also change. An investor invests his funds in a
portfolio expecting to get a good return with less risk to bear. Portfolio management concerns
the construction and maintenance of a collection of investment. It is investment of funds in
different securities in which the total risk of the Portfolio is minimized while expecting
maximum return from it. It primarily involves reducing risk rather that increasing return.
Return is obviously important though, and the ultimate objective of portfolio manager is to
achieve a chosen level of return by incurring the least possible risk.
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Characteristics of Investment:
- Return,
- Risk,
- Safety,
- Liquidity etc.
Risk: Risk is inherent in any investment. Risk may relate to loss of capital, delay in
repayment of capital, non-payment of return or variability of returns. The risk of an
investment is determined by the investments, maturity period, repayment capacity,
nature of return commitment and so on. Risk and expected return of an investment are
related. Theoretically, the higher the risk, higher is the expected returned. The higher
return is a compensation expected by investors for their willingness to bear the higher
risk.
Safety: The safety of investment is identified with the certainty of return of capital
without loss of time or money. Safety is another feature that an investor desires from
investments. Every investor expects to get back the initial capital on maturity without
loss and without delay.
Liquidity: An investment that is easily saleable without loss of money or time is said
to be liquid. A well developed secondary market for security increases the liquidity of
the investment. An investor tends to prefer maximization of expected return,
minimization of risk, safety of funds and liquidity of investment.
72
Investment categories:
- Real assets
- Financial assets
Real assets: Real assets are tangible material things like building, automobiles, land, gold
etc.
Financial assets: Financial assets are piece of paper representing an indirect claim to real
assets held by someone else. These pieces of paper represent debt or equity commitment in
the form of IOUs or stock certificates. Investments in financial assets consist of
- Non-securities investment
The term securities used in the broadest sense, consists of those papers which are
quoted and are transferable. Under section 2 (h) of the Securities Contract
(Regulation) Act, 1956 (SCRA) securities include: -
iii) Such other instruments as may be declared by the central Government as securities, and;
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Investment avenues can be broadly categorized under the following heads:
1. Corporate securities:
. Warrants, Derivatives
8. Real assets.
74
3) APPRECIATION IN THE VALUE OF CAPITAL: A good portfolio should
appreciate in value in order to protect the investor from erosion in purchasing power
due to inflation. In other words, a balance portfolio must consist if certain investment,
which tends to appreciate in real value after adjusting for inflation.
4) MARKETABILITY: A good portfolio consists of investment, which can be marketed
without difficulty. If there are too many unlisted or inactive share in your portfolio,
you will face problems in enchasing them, and switching from one investment to
another. It is desirable to invest in companies listed on major stock exchanges, which
are actively traded.
5) LIQUIDITY: The portfolio should ensure that there are enough funds available at the
short notice to take of the investor's liquidity requirements.
6) TAX PLANNING: Since taxation is an important variable in total planning, a good
portfolio should let its owner enjoy favourable tax shelter. The portfolio should be
developed considering income tax, but capital gains, gift tax too. What a good
portfolio aims at is tax planning, not tax evasion or tax avoidance.
PORTFOLIO MANAGEMENT PROCESS:
Portfolio management IS a complex activity, which may be broken down into the following
steps:
1. SPECIFICATION OF INVESTMENT OBJECTIVES AND CONSTRAINTS:
The first step in the portfolio management process is to specify one's investment objectives
and constraints. The commonly stated investment goals are:
a) Income
b) Growth
c) Stability
The constraints arising from liquidity, time horizon, tax and special circumstances must be
identified.
2. CHOICE OF ASSET MIXES:
The most important decision in portfolio management is the asset mix decision. Very broadly,
this is concerned with the proportions of 'stocks' and 'bonds' in the portfolio.
3. FORMULATION OF PORTFOLIO STRATEGY:
Once a certain asset mix is chosen, an appropriate portfolio strategy has to be hammered out.
Two broad choices are available an active portfolio strategy or a passive portfolio strategy.
An active portfolio strategy strives to earn superior risk adjusted returns by resorting to
market timing, or sector rotation, or security selection, or some combination of these. A
passive portfolio strategy, on the other hand, involves holding a broadly diversified portfolio
and maintaining a pre-determined level of risk exposure.
76
4. SELECTION OF SECURITIES:
Generally, investors pursue an active stance with respect to security selection. For stock
selection, investors commonly go by fundamental analysis and or technical analysis. The
factors that are considered in selecting bonds are yield to maturity, credit rating, term to
maturity, tax shelter and liquidity.
5. PORTFOLIO EXECUTION:
This is the phase of portfolio management which is concerned with implementing the
portfolio plan by buying and or selling specified securities in given amounts.
6. PORTFOLIO REVISION:
The value of a portfolio as well as its composition - the relative proportions of stock and bond
components - may change as stocks and bonds fluctuate. In response to such changes,
periodic rebalancing of the portfolio is required. This primarily involves a shift from stocks to
bonds or vice-versa. In addition, it may call for sector rotation as well as security switches.
7. PERFORMANCE EVALUATION:
The performance of a portfolio should be evaluated periodically. The key dimensions of
portfolio performance evaluation are risk and return and the key issue is whether the portfolio
return is commensurate with its risk exposure.
MARKOWITZ MODEL
Harry M. Markowitz is credited with introducing new concept of risk measurement and their
application to the selection of portfolios. He started with the idea of risk aversion of investors
and their desire to maximize expected return with the least risk. Markowitz used
mathematical programming and statistical analysis in order to arrange for .the optimum
allocation of assets within portfolio. To reach this objective, Markowitz generated portfolios
within a reward-risk context. In other words, he considered the variance in the expected
returns from investments and their relationship to each other in constructing portfolios. In
essence, Markowitz's model is a theoretical framework for the analysis of risk return choices.
Decisions are based on the concept of efficient portfolios.
A portfolio is efficient when it is expected to yield the highest return for the level of risk
accepted or, alternatively, the smallest portfolio risk or a specified level of expected return. To
build an efficient portfolio an expected return level is chosen, and assets are substituted until
the portfolio combination with the smallest variance at the return level is found. As this
process is repeated for other expected returns, set of efficient portfolios is generated.
Assumptions:
ii) Investors maximize one period-expected utility and possess utility curve,
which demonstrates diminishing marginal utility of wealth.
iii) Individuals estimate risk on the basis of the variability of expected returns.
iv) Investors base decisions solely on expected return and variance (or standard
deviation) of returns only.
v) For a given risk level, investors prefer high returns to lower returns. Similarly,
for a given level of expected return, investor prefer less risk to more risk.
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MARKOWITZ DIVERSIFICATION
Markowitz postulated that diversification should not only aim at reducing the risk of a security by
reducing its variability or standard deviation but by reducing the covariance or interactive risk of
two or more securities in a portfolio. As by combination of different securities, it is theoretically
possible to have a range of risk varying from zero to infinity. Markowitz theory of portfolio
diversification attached importance to standard deviation to reduce it to zero, if possible.
Expected Return of a Portfolio:
It is the weighted average of the expected returns of the individual securities held in the portfolio.
These weights are the proportions of total investable funds in each security.
n
Rp xi R i
I1
Risk Measurement
Risk: Risk is inherent in any investment. Risk may relate to loss of capital, delay in repayment of
capital, non-payment of return or variability of returns. The risk of an investment is determined by
the investments, maturity period, repayment capacity, nature of return commitment and so on. Risk
and expected return of an investment are related. Theoretically, the higher the risk, higher is the
expected returned. The higher return is a compensation expected by investors for their willingness
to bear the higher risk.
The statistical tool often used to measure and used as a proxy for risk is the standard deviation.
N
p (ri - E(r))2
i 1
Here Variance (2 )
Research is a careful investigation or inquiry specially through search for new fact
in any branch of knowledge. Once can also define research as a scientific and
and the term is usally considered to include research design data gathering and
data analysis.
Research Design:
structured, way to find out problem under such descriptive research. I have gone
through secondly data for technical analysis, calculative study of risk and return
equity shares.
Objective:
and return.
particular unit .
Sample size: I have selected 6 companies listed in NSE for risk &
returnanalysis.
BHEL
JINDAL STEEL
RELIANCE INDUSTRY
WIPRO
ACC
SUNPHARMA
Data collection:
This study is majorly based on seanclary data and data are collected from NSE|
Measuament Technique:
o rate of return
o risk
o variance
DATA ANALYSIS & INTERPRETATION
CALCULATION OF RETUN AND RISK:
Ri
EXPECTED RETURN E (Ri)
N
PORTFOLIO-A
BHARAT HEAVY ELECTRICALS LIMITED (BHEL):
RISK = 3550.55/14
= 15.93
JINDAL STEEL
RISK = 4030.31/14
= 16.97
66226.31
RISK = 66226.31/14
= 68.78
WIPRO
RISK = 223463/14
= 39.95
SUN PHARMA
3
Feb 16 855.5 95.68 9154.66
Mar 16 819.45 60.08 3609.61
Apr 16 811.30 51.93 2696.72
May 16 762.70 3.33 11.09
Jun 16 763.60 24.23 1789.29
July 16 829.75 70.38 4953.34
Aug 16 774.85 15.48 239.63
Sep 16 742.70 -16.67 277.89
Oct 16 748.25 -11.12 123.65
Nov 16 710.30 -49.07 2407.86
Dec 16 629.75 -129.82 16801.34
Jan 17 631.55 -127.82 16337.38
Jan 17 678.9 -80.42 6467.38
77782.19
RISK = 77782.19/14
= 14.54
ACC
RISK = 494741/14
= 187.99
PORTFOLIO-A
IN PORTFOLIO A IS:
IN PORTFOLIO B IS:
PORTFOLIO-C
THE RISK AND RETURN OF EACH COMPANY
IN PORTFOLIO C IS:
Before buying a security, its better to find out everything one can about the company, its
management and competitors, its earnings and possibilities for growth.
Don't try to buy at the bottom and sell at the top. This can't be done-except by liars.
Learn how to take your losses and cleanly. Don't expect to be right all the time. If you
have made a mistake, cut your losses as quickly as possible
Don't buy too many different securities. Better have only a few investments that can be
watched.
Make a periodic reappraisal of all your investments to see whether changing
developments have altered prospects.
Always keep a good part of your capital in a cash reserve. Never invest all your funds.
Purchasing stocks you do not understand if you can't explain it to a ten year old, just don't
invest in it.
Not recognizing difference between value and price: This goes along with the failure to
compute the intrinsic value of a stock, which are simply the discounted future earnings of
the business enterprise.
Failure to understand Mr. Market: Just because the market has put a price on a business
does not mean it is worth it. Only an individual can determine the value of an investment
and then determine if the market price is rational.
Too much focus on the market whether or not an individual investment has merit and
value has nothing to do with that the overall market is doing.
6. BIBLIOGRAPHY
BOOKS:
INTERNET:
1. www.moneycontrol.com
2. www.wikipedia.com
7. APPENDIX