Mithun Final

i
PROJECT REPORT
ON
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
AT INDIABULLS
Project submitted in partial fulfillment for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
SUBMITTED By
MITHUN.M
HT NO:-223110672044

Department of Business Management
SIDDHARTHA TECHNICAL INSTITUTE
{Affiliated to Osmania University}
KORREMULA,NARAPALLY,GHATKESAR
2010-2012
ii

DECLARATION

I herby declare that the project titled SECURITY ANALYSIS AND PORTFOLIO
MANAGEMENT done at INDIABULLS submitted by me as part of partial fulfillment
for the award of the Masters of Business Administration, Siddhartha Technical Institute,
Osmania University, Hyderabad is a record of bonafide work done by me.

I also declare that this report has to my knowledge is my own and is neither submitted to
any other university nor published any time before.

(MITHUN.M)

iii

Ph: 08415-255524/25
SIDDHARTHA TECHNICAL
INSTITUTE
Narapally, Korremula Road, Ghatkesar, (Mdl.),R.R. Dist. 501 301

Sponsored by Gouthami Educational Society

CERTIFICATION

This is to certify that the Project Report entitle SECURITY ANALISIS AND
PORTFOLIO MANAGEMENT" submitted in partial fulfillment for the award of MBA
Programme of Department of Business Management, O.U. Hyderabad, was carried out by
MITHUN.M under my guidance. This has not been submitted to any other University or
Institution for the award of any degree/diploma/certificate.

iv

v

ABSTRACT

A Portfolio is collection of Assets. The assets may be physical or financial like
shares, bonds, debentures, preference shares. The investor would not like to put all his
money in the shares of one company that would amount to great risk. He would therefore
follow the principle that one should not put all the eggs in to one basket so that risk may
be diversified and overall risk will reduce to minimum.

Portfolio management has emerged a separate academic discipline in India.
Portfolio theory that deals with the rational investment decision making process has now
become an integral part of financial literature. Investing in securities such as shares,
debentures and bonds is profitable as well as exciting. It is indeed rewarding but involves
a great deal of risk and need artistic skill. Creation of portfolio helps to reduce risk without
sacrificing returns.

According to Securities and Exchange Board of India Portfolio Manager is defined
as: Portfolio means the total holdings of securities belonging to any person.

The objective of this project is to study the investment pattern and related risks
and returns, to find out optimal returns at a minimized risk to the investor.
vi

This study covers Markowitz model. The study covers the calculation of
correlations between the different securities in order to find out at what percentage
funds should be invested among the companies in the portfolio. Also the study includes
the calculation of individual standard deviation of securities and ends at the calculation of
weights of individual securities.

For this project study 5 companies are taken for which risk and return calculation.
The companies are INFOSYS, HCL, WIPRO, CMC, I-FLEX

vii

ACKNOWLEDGEMENT

At the outset I take this opportunity to express my sincere gratitude to the staff of Siddhartha
Technical Institute. I specially thank THE MANAGEMENT AND STAFF OF INDIABULLS for
creating out the study and for their guidance and encouragement that made the project very
effective and easy.
I sincerely express my gratitude to MR. JAGADISH KUMAR N, INDIABULLS LTD, for his guidance
and support throughout my project.
I am grateful to our Internal Faculty Prof. SREEDEVI and our Head of the Department
MR. V.L.RAJU for their support and assistance in Completion of my project work.
I thank, Principal, SIDDARTHA INSTITUTE OF TECHNOLOGY for permitting me to do the project
and for his all guidance.
I am greatly indebted to all my faculty members who have guided me in various aspects of the
project. I thank them for spending their valuable time with me and helping me complete this
project work.
I am thankful to my parents, friends and everyone who made a contribution towards the
successful completion of this project.

MITHUN.M
viii

TABLE OF CONTENT

S NO CONTENT PAGE NO.

List of Tables (i)
List of Figures (ii)
1. CHAPTER-1 1-6
INTRODUCTION
2. CHAPTER-2 7-31
REVIEW OF LITERATURE
3. CHAPTER-3 32-55
COMPANY PROFILE
4. CHAPTER-4 56-103
ANALYSIS, INTERPRETATION
5. CHAPTER-5 104-108
FINDINGS,
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY
ix

LIST OF TABLES

S.NO Table Name Page No

1. Average Return of Companies 57-62

2. Standard Deviation of Companies 64-68

3. Correlation Coefficient between- 70-80
The Securities
4. Calculation of Portfolio Weights 86-92

5. Calculation of Portfolio Risk 93-96

6. Calculation of Portfolio Return

x

LIST OF FIGURE

S NO FIGURES PAGE NO.

1 Risk and Expected return 12
2 Types of Risk 13
3 Types of systematic Risk 14
4 Types of unsystematic Risk 16
5 Average Return of Companies 63
6 Standard Deviation of Companies 69
7 Portfolio Risk & Return 96

1

CHAPTER 1
INTRODUCTION

2

1. INTRODUCTION

POROTFOLIO MANAGEMENT is an art and science of management of funds in
such a way that yielding maximum return at the lowest risk. Every investors
primary goal is earning maximum risk premium. So in this modern era of
privatization, globalization and liberalization the importance of a special discipline
which deals with investments i.e. portfolio management is growing up rapidly in
the financial world. Portfolio management has emerged as a separate academic
discipline in India. Portfolio theory that deals with the rational investment
decision-making process has now become an integral part of financial literature.

1.1 INTRODUCTION TO THE STUDY:

This study is intended to know about portfolio management practices and
applying various theories of portfolio in portfolio management decisions. Security
analysis of various top companies securities and identifying the risk of specific
company.

3

1.2 NEED & IMPORTANCE OF STUDY:

Investing in securities such as shares, debentures & bonds is profitable as well as
exciting. It is indeed rewarding but involves a great deal of risk & need artistic skill.
Investing in financial securities is now considered to be one of the most risky avenues
of investment. It is rare to find investors investing their entire savings in a single
security. Instead, they tend to invest in a group of Securities. Such group of securities
(assets) is called as PORTFOLIO. Creation of portfolio helps to reduce risk without
sacrificing returns. Portfolio management deals with the analysis of individual
securities as well as with the theory & practice of optimally combining securities into
portfolios.
The modern theory is of the view that by diversification, risk can be reduced.
The investor can make diversification either by having a large number of shares of
companies in different regions, in different industries or those producing different
types of product lines. Modern theory believes in
The perspective of combination of securities under the constraint of risk and
return.
Any nations growth is dependent on the performance of companies. The
companies are in need of low cost capital. But due to over fluctuations in the markets
the common investor, being risk averter is paying less attention towards the shares of
companies due to lack of knowledge on portfolio management which lower the risk
level.
4

So the study on portfolio management is compulsory for the investor in these
days of
Highly volatile markets to maximize the return and minimize the risk. If the
confident investors are more in number then more the no of companies will exit and
thereby play its role in nations progress.
1.3. OBJECTIVES OF THE STUDY:

The objectives of the study are as follows:

- To assess the effectiveness of portfolio management services.
- To study whether the portfolio risk is less than the individual risk.
- To understand, analyze and select the best portfolio
- To study whether the selected portfolios are yielding a satisfactory and constant
return to the investor.
- To find out optimal portfolio, which gives optimal return at a minimized risk?
- To knowing about portfolio management and how it is useful to investor in taking
decisions on the timing of investments.
- To measuring and evaluating the portfolio performance.
1.4 SCOPE OF STUDY:

This study covers the Markowitz model & CAPM. The study covers the calculation
of correlations between the different securities in order to find out at what
percentage funds should be invested among the companies in the portfolio. It includes
5

the calculation of individual Standard Deviation of securities, weights of individual
securities involved in the portfolio. These percentages help in allocating the funds
available for investment based on risky portfolios. It also includes risk and return of
portfolios and their performance evaluation for a limited number of scrip.

1.5 DATA COLLECTION METHODS:
The data collection methods include both the primary and secondary collection
methods.
- Primary collection methods: This method includes the data collection from the
personal discussion with the authorized members of the INDIABULLS LIMITED.
- Secondary collection methods: The secondary collection methods includes
the lectures of the superintend of the market operations and faculty of training
and so on, also the data collected from the various websites, magazines, different
books and literature issued by authorized training centre of INDIABULLS LIMITED
for this study.

6

1.6 LIMITATIONS OF THE STUDY:

This study has been conducted purely to understand Portfolio Management for investors.
- Construction of Portfolio is restricted to scripts two companies based on
Markowitz model.
- Very few scrips / companies are selected and analyzed from the common list
of BSE sensex & NSE nifty contributing companies.
- Data collection regarding selected scripts was strictly confined to secondary
source. No primary data is associated with the project.
- Detailed study of the topic was not possible due to limited size of the project.

7

CHAPTER-2
REVIEW OF LITERATURE

8

PORTFOLIO BUILDING

Portfolio decisions for an individual investor are influenced by a wide variety
of factors. Individuals differ greatly in their circumstances and therefore, a financial
programme well suited to one individual may be in appropriate for another. Ideally, an
individuals portfolio should be tailor-mode to fit ones individual needs.

Investors Characteristics:
An analysis of an individuals investment situation requires a study of personal
characteristics such as age, health conditions, personal habits, family responsibilities,
business or professional situation, and tax status, all of which affect the investors
willingness to assume risk.
Stage in the Life Cycle:
One of the most important factors affecting the individuals investment
objective is his stage in the life cycle. A young person may put greater emphasis on growth
and lesser emphasis on liquidity. He can afford to wait for realization of capital gains as his
time horizon is large.
Family responsibilities:
The investors marital status and his responsibilities towards other members
of the family can have a large impact on his investment needs and goals.
9

Investors experience:
The success of portfolio depends upon the investors knowledge and
experience in financial matters. If an investor has an aptitude for financial affairs, he may
wish to be more aggressive in his investments.
Attitude towards Risk:
A persons psychological make-up and financial position dictate his ability to
assume the risk. Different kids of securities have different kinds of risks. The higher the risk,
the greater the opportunity for higher gain or loss.
Liquidity Needs:
Liquidity needs vary considerably among individual investors. Investors with
regular income from other sources may not worry much about instantaneous liquidity, but
individuals who depend heavily upon investment for meeting their general or specific needs,
must plan portfolio to match their liquidity needs. Liquidity can be obtained in two ways:
1. By allocating an appropriate percentage of the portfolio to bank deposits, and
2. By requiring that bonds and equities purchased be highly marketable.
3.
Tax considerations:
Since different individuals, depending upon their incomes, are subjected to
different marginal rates of taxes, tax considerations become most important factor in
individuals portfolio strategy. There are differing tax treatments for investment in various
kinds of assets.
10

Time Horizon:
In investment planning, time horizon becomes an important consideration. It
is highly variable from individual to individual. Individuals in their young age have long time
horizon for planning, they can smooth out and absorb the ups and downs of risky
combination. Individuals who are old have smaller time horizon, they generally tend to
avoid volatile portfolios.

Individuals Financial Objectives:
In the initial stages, the primary objectives of an individual could be to accumulate wealth
via regular monthly savings and have an investment programme to achieve long term capital
gains.
Safety of Principal:
The protection of the rupee value of the investment is of prime importance
to most investors. The original investment can be recovered only if the security can be
readily sold in the market without mush loss of value.

11

Assurance of Income:
Different investors have different current income needs. If an individual is
dependent of its investment income for current consumption the income received now in
the form of dividend and interest payments become primary objective

Investment Risk:
All investment decisions revolve around the trade-off between risk and
return. All rational investors want a substantial return from their investment. An ability to
understand, measure and properly manage investment risk is fundamental to any intelligent
investor of a speculator. Frequently, the risk associated with security investment is ignored
and only the rewards are emphasized. An investor who does not fully appreciate the risks in
security investments will find it difficult to obtain continuing positive results

RISK AND EXPECTED RETURN:
There is a positive relationship between the amount of risk and the amount
of expected return i.e., the greater the risk, the larger the expected return and larger the
chances of substantial loss. One of the most difficult problems for an investor is to estimate
the highest level of risk he is able to assume.
12

FIGURE-1
- Risk is measured along the horizontal axis and increases from the left to right.
- Expected rate of return is measured on the vertical axis and rises from bottom to top.
- The line from 0 to R (f) is called the rate of return or risk less investments commonly
associated with the yield on government securities.
- The diagonal line from R (f) to E(r) illustrates the concept of expected rate of return
increasing as level of risk increases.

13

TYPES OF RISKS:
Risks consist of two components. They are

FIGURE-2
1. Systematic Risk
2. Un-systematic Risk
1. Systematic Risk:

Systematic risk is caused by factors external to the particular company and
uncontrollable by the company. The systematic risk affects the market as a whole.
Factors affect the systematic risk are

- Economic conditions
- Political conditions
- Sociological changes
RISK
SYSTEMATIC
RISK

UN-SYSTEMATIC
RISK

14

The systematic risk is unavoidable. Systematic risk is further sub-divided into three
types. They are
a) Market Risk
b) Interest Rate Risk
c) Purchasing Power Risk

FIGURE-3
a) Market Risk:
One would notice that when the stock market surges up, most stocks post higher price. On
the other hand, when the market falls sharply, most common stocks will drop. It is not
uncommon to find stock prices falling from time to time while a companys earnings are
raising and vice-versa. The price of stock may fluctuate widely within a short time even
though earnings remain unchanged or relatively stable.

SYSTEMATIC RISK

MARKET RISK

INTEREST RATE
RISK

PURCHASE POWER
RISK
15

b) Interest Rate Risk:
Interest rate risk is the risk of loss of principal brought about the changes in the interest rate
paid on new securities currently being issued.
c) Purchasing Power Risk:
The typical investor seeks an investment which will give him current income and / or capital
appreciation in addition to his original investment.

2. Un-systematic Risk:
Un-systematic risk is unique and peculiar to a firm or an industry. The nature and mode
of raising finance and paying back the loans, involve the risk element. Financial leverage of
the companies that is debt-equity portion of the companies differs from each other. All
these factors affect the un-systematic risk and contribute a portion in the total variability of
the return

Managerial inefficiently
Technological change in the production process
Availability of raw materials
Changes in the consumer preference
Labour problems

16

The nature and magnitude of the above mentioned factors differ from industry to industry
and company to company. They have to be analyzed separately for each industry and firm.
Un-systematic risk can be broadly classified into:

a) Business Risk
b) Financial Risk

FIGURE-4

UN-SYSTEMATIC
RISK
Un-systematic risk
BUSINESS RISK FINANCIAL RISK
17

a. Business Risk:

Business risk is that portion of the unsystematic risk caused by the operating
environment of the business. Business arises from the inability of a firm to maintain its
competitive edge and growth or stability of the earnings. The volatility in stock prices
due to factors intrinsic to the company itself is knows as Business risk. Business risk is
concerned with the difference between revenue and earnings before interest and tax.
Business risk can be divided into

i) Internal Business Risk:
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 companys achievement of its pre-set goals and the
fulfillment of the promises to its investors.

ii) External Business Risk:
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. The external factors are social and
regulatory factors, monetary and fiscal policies of the government, business cycle
and the general economic environment within which a firm or an industry operates.

18

b. Financial Risk:
It refers to the variability of the income to the equity capital due to the debt capital.
Financial risk in a company is associated with the capital structure of the company. Capital
structure of the company consists of equity funds and borrowed funds
PORTFOLIO ANALYSIS:
Various groups of securities when held together behave in a different manner and
give interest payments and dividends also, which are different to the analysis of individual
securities. A combination of securities held together will give a beneficial result if the yare
grouped in a manner to secure higher return after taking into consideration the risk element
There are two approaches in construction of the portfolio of securities. They are
- Traditional approach
- Modern approach

Traditional Approach:
Traditional approach was based on the fact that risk could be measured on each
individual security through the process of finding out the standard deviation and that
security should be chosen where the deviation was the lowest. Traditional approach
believes that the market is inefficient and the fundamental analyst can take advantage of
the situation. Traditional approach is a comprehensive financial plan for the individual. It
takes into account the individual needs such as housing, life insurance and pension plans.
Traditional approach basically deals with two major decisions. They are
19

a) Determining the objectives of the portfolio
b) Selection of securities to be included in the portfolio
Modern Approach:
Modern approach theory was brought out by Markowitz and Sharpe. It is the
combination of securities to get the most efficient portfolio. Combination of securities can
be made in many ways. Markowitz developed the theory of diversification through scientific
reasoning and method. Modern portfolio theory believes in the maximization of return
through a combination of securities. The modern approach discusses the relationship
between different securities and then draws inter-relationships of risk between them.
Markowitz gives more attention to the process of selecting the portfolio. It does not deal
with the individual needs.
MARKOWITZ Model:
Markowitz model is a theoretical framework for analysis of risk and return and their
relationships. He used statistical analysis for the measurement of risk and mathematical
programming for selection of assets in a portfolio in an efficient manner. Markowitz
model theory introduced in 1950, in this he got the Noble prize in 1990. Markowitz approach
determines for the investor the efficient set of portfolio through three important
variables i.e.
Return
Standard deviation
Co-efficient of correlation

20

Markowitz model is also called as a Full Covariance Model. Through this model the
investor can find out the efficient set of portfolio by finding out the trade off
between risk and return, between the limits of zero and infinity. According to this
theory, the effects of one security purchase over the effects of the other security
purchase are taken into consideration and then the results are evaluated. Most
people agree that holding two stocks is less risky than holding one stock. For
example, holdings stocks from textile, banking and electronic companies is better
than investing all the money on the textile companys stock.

Markowitz had given up the single stock portfolio and introduced diversification. The
single stock portfolio would be preferable if the investor is preferable if the investor
is perfectly certain that his expectation of highest return would like to join
Markowitz rather than keeping a single stock, because diversification reduces the
risk.

21

ASSUMPTIONS:

All investors would like to earn the maximum rate of return that they can achieve
from their investments.
All investors have the same expected single period investment horizon.
All investors before making any investments have a common goal. This is the
avoidance of risk because Investors are risk-averse.
Investors base their investment decisions on the expected return and standard
deviation of returns from a possible investment.
Perfect markets are assumed (e.g. no taxes and no transaction costs).
The investor assumes that greater or larger the return that he achieves on his
investments, the higher the risk factor surrounds him. On the contrary when risks
are low the return can also be expected to be low.
The investor can reduce his risk if he adds investments to his portfolio.
An investor should be able to get higher return for each level of risk by determining
the efficient set of securities.
An individual seller or buyer cannot affect the price of a stock. This assumption is the
basic assumption of the perfectly competitive marker.
Investors make their decisions only on the basis of the expected returns, standard
deviation and covariance of all pairs of securities.
Investors are assumed to have homogenous expectations during the decision-
making period.
22

The investor can lend or borrow any amount of funds at the risk less rate of interest.
The risk less rate of interest is the rate of interest offered for the treasury bills or
Government securities.
Investors are risk-averse, so when given a choice between two otherwise identical
portfolios, they will choose the one with the lower standard deviation.
Individual assets are infinitely divisible, meaning that an investor can buy a fraction
of a share if he or she so desires.
There is a risk free rate at which an investor may either lend (i.e. invest) money or
borrow money.
There is no transaction cost i.e. no cost involved in buying and selling of stocks.
There is no personal income tax. Hence, the investor is indifferent to the form of
return either capital gain or dividend.

THE EFFECT OF COMBINING TWO SECURITIES:
It is believed that holding two securities is less risky than by having only one
investment in a persons portfolio. When two stocks are taken on a portfolio and if they
have negative correlation then risk can be completely reduced because the gain in one can
offset the loss on the other. This can be shown with the help of following example:

23

INTER-ACTIVE RISK THROUGH COVARIANCE:

Covariance of the securities will help in finding out the inter-active risk. When the
covariance will be positive then the rates of return of securities move together either
upwards or downwards. Alternatively it can also be said that the inter-active risk is positive.
Secondly, covariance will be zero on two investments if the rates of return are independent.
Holding two securities may reduce the portfolio risk too. The portfolio risk can be
calculated with the help of the following formula

CAPITAL ASSET PRICING MODEL (CAPM):

Markowitz, William Sharpe, John Lintner and Jan Mossin provided the basic structure of
Capital Asset Pricing Model. It is a model of linear general equilibrium return. In the CAPM
theory, the required rate return of an asset is having a linear relationship with assets beta
value i.e.undiversifiable or systematic risk (i.e. market related risk) because non market risk
can be eliminated by diversification and systematic risk measured by beta. Therefore, the
relationship between an assets return and its systematic risk can be expressed by the CAPM,
which is also called the Security Market Line.

24

R
p
= R
f
.X
f
+R
m
(1-X
f
)

R
p
= Portfolio return
X
f
= The proportion of funds invested in risk free assets
1-X
f
= The proportion of funds invested in risky assets
R
f
= Risk free rate of return
R
m
= Return on risky assets

Formula can be used to calculate the expected returns for different situations, like
mixing risk less assets with risky assets, investing only in the risky asset and mixing the
borrowing with risky assets

THE CONCEPT:
According to CAPM, all investors hold only the market portfolio and risk less securities.
The market portfolio is a portfolio comprised of all stocks in the market. Each asset is held in
proportion to its market value to the total value of all risky assets.
For example, if Satyam Industry share represents 15% of all risky assets, then the market
portfolio of the individual investor contain 15% Satyam Industry shares. At this stage, the
investor has the ability to borrow or lend any amount of money at the risk less rate of
interest.
25

E.g.: assume that borrowing and lending rate to be 12.5% and return from the risky
assets to be 20%. There is a trade off between the expected return and risk. If an investor
invests in risk free assets and risky assets, his risk may be less than what he invests in the
risky asset alone. But if he borrows to invest in risky assets, his risk would increase more
than he invests his own money in the risky assets. When he borrows to invest, we call it
financial leverage. If he invests 50% in risk free assets and 50% in risky assets, his expected
return of the portfolio would be

R
p
= R
f
.X
f
+R
m
(1-X
f
)
= (12.5 x 0.5) + 20(1-0.5)
= 6.25 + 10
=16.25%
If there is a zero investment in risk free asset and 100% in risky asset, the return is
R
p
= R
f
.X
f
+R
m
(1-X
f
)
= 0+20%
= 20%

If -0.5 in risk free asset and 1.5 in risky asset, the return is

26

R
p
= R
f
.X
f
+R
m
(1-X
f
)
= (12.5 x -0.5) + 20(1.5)
= (-6.25) + 30
= 23.75%
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.
i. Self Valuation: An individual may want to evaluate how ell he has done. This is a
part of the process of refining his skills and improving his performance over a period of
time.

ii. 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.

27

iii. 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.

iv. 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

NEED FOR EVALUATION OF PORTFOLIO:

We can try to evaluate every transaction. Whenever a security is brought or sold, we
can attempt to assess whether the decision was correct and profitable.

We can try to evaluate the performance of a specific security in the portfolio to
determine whether it has been worthwhile to include it in our portfolio.

We can try to evaluate the performance of portfolio as a whole during the period
without examining the performance of individual securities within the portfolio.

28

NEED & IMPORTANCE:

Portfolio management has emerged as a separate academic discipline in India.
Portfolio theory that deals with the rational investment decision-making process has now
become an integral part of financial literature.
Investing in securities such as shares, debentures & bonds is profitable well as
exciting. It is indeed rewarding but involves a great deal of risk & need artistic skill. Investing
in financial securities is now considered to be one of the most risky avenues of investment.
It is rare to find investors investing their entire savings in a single security. Instead, they tend
to invest in a group of securities. Such group of securities is called as PORTFOLIO. Creation
of portfolio helps to reduce risk without sacrificing returns. Portfolio management deals
with the analysis of individual securities as well as with the theory & practice of optimally
combining securities into portfolios.

The modern theory is of the view that by diversification, risk can be reduced. The
investor can make diversification either by having a large number of shares of companies in
different regions, in different industries or those producing different types of product lines.
Modern theory believes in the perspective of combinations of securities under constraints
of risk and return.

29

PORTFOLIO REVISION:

The portfolio which is one selected has to be continuously reviewed over a period of
time and the revised depending on the objectives of the investor. The care taken in
construction of portfolio should be extended to the review and revision of the portfolio.
Fluctuations that occur in the equity prices cause substantial gain or loss to the investors.
The investor should have competence and skill in the revision of the portfolio. The
portfolio management process needs frequent changes in the composition of stocks and
bonds. In securities, the type of securities to be held should be revised according to the
portfolio policy.
An investor purchases stock according to his objectives and return risk framework.
The prices of stock that he purchases fluctuate, each stock having its own cycle of
fluctuations. These price fluctuations may be related to economic activity in a country or
due to other changed circumstances in the market
If an investor is able to forecast these changes by developing a framework for the future
through careful analysis of the behavior and movement of stock prices is in a position to
make higher profit than if he was to simply buy securities and hold them through the
process of diversification. Mechanical methods are adopted to earn better profit through
proper timing. The investor uses formula plans to help him in making decisions for the
future by exploiting the fluctuations in pr

30

FORMULA PLANS:
The formula plans provide the basic rules and regulations for the purchase and sale
of securities. The amount to be spent on the different types of securities is fixed. The
amount may be fixed either in constant or variable ratio. This depends on the investors
attitude towards risk and return. The commonly used formula plans are

i. Average Rupee Plan
ii. Constant Rupee Plan
iii. Constant Ratio Plan
iv. Variable Ratio Plan

ADVANTAGES:

Basic rules and regulations for the purchase and sale of securities are provided.
The rules and regulations are rigid and help to overcome human emotion.
The investor can earn higher profits by adoption the plans.
A course of action is formulated according to the investors objectives.
It controls the buying and selling of securities by the investor.
It is useful for taking decisions on the timing of investments.

31

DISADVANTAGES:

The formula plan does not help the selection of the security. The selection of the
security has to be done either on the basis of the fundamental or technical analysis.
It is strict and not flexible with the inherent problem of adjustment.
The formula plans should be applied for long periods, otherwise the transaction cost
may be high.
Even if the investor adopts the formula plan, he needs forecasting. Market
forecasting helps him to identify the best stocks.

32

CHAPTER- 3
COMPANY & INDUSTRIAL PROFILE

33

COMPANY PROFILE
India Bulls was launched on 11 May 1999 with SEBI REGN. NO. : INB 231097537 & CODE NO.
: 10975, Regd. & Dealing Office : Building No. 24, 1st Floor, Nirlon Limited Compound,
Western Express Highway, Gurgaon (E), Mumbai - 400 063.www.indiainfoline.com is Indias
leading and most comprehensive business and financial information website. The site made
available quality information and analysis - earlier restricted to a few people - to the
common man absolutely free. The site met with an overwhelming response and has been
reviewed as the most comprehensive financial content website in India by BBC World -
Money Watch, Business World, Business Line and others. The company also won the Golden
Mouse Award in India Internet World 2000 for the Best Finance site. In May 2001, our
website was included in the Top 200 Best of the Web list by Forbes Global under the Asia
Investing category. We were the only website from India to be featured in any category.
Since then it has been nominated twice to this list. In its last review, Forbes editors have
said, "www.indiainfoline.com is a must read for the investors in South Asia..."Our research is
also disseminated electronically through Bloomberg, Investment, First Call/Thomson
Financial and Internet Securities. On First Call/Thomson Financial, we have been one of the
largest read research houses from Asia, which is a testimony to the quality and timeliness of
our reports.
The offerings on the site include a combination of information and transaction services.
Transaction services include mutual funds, personal loans and online broking through
www.5paisa.com. India Bulls was the first company to offer many of these services in the
country. In online broking, we have emerged as a leading player offering online trading
facilities with significant market share.
34

As on date, the Group employs 4000 plus employees, most of them are placed at its various
branches across India. About INDIA INFOLINE. It is a one-stop financial services shop, most
respected for quality of its advice, personalized service and cutting-edge technology
Vision:
Its vision is to be the most respected company in the financial services space India Bulls Ltd.
India Bulls Ltd is listed on both the leading stock exchanges in India, viz. the Stock Exchange,
Mumbai (BSE) and the National Stock Exchange (NSE). The India Bulls group, comprising the
holding company, India Bulls Ltd and its subsidiaries, straddles the entire financial services
space with offerings ranging from Equity research, Equities and derivatives trading,
Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed
deposits, GoI bonds and other small savings instruments to loan products and Investment
banking. India Bullsalso owns and manages the websites, www.indiainfoline.com and
www.5paisa.com .

35

India Bulls Ltd, being a listed entity, is regulated by SEBI (Securities and Exchange Board of
India). It undertakes equities research which is acknowledged by none other than Forbes as
'Best of the Web' and 'a must read for investors in Asia'.
India Info lines research is available not just over the internet but also on international wire
services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where it is
amongst the most read Indian brokers.
Its various subsidiaries are in different lines of business and hence are governed by different
regulators. The subsidiaries of India Bulls Ltd are India Bulls Securities Pvt Ltd is a 100%
subsidiary of India Bulls Ltd, which is engaged in the businesses of Equities broking and
Portfolio Management Services.
It holds memberships of both the leading stock exchanges of India viz. the Stock Exchange,
Mumbai (BSE) and the National Stock Exchange (NSE). It offers broking services in the
Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.A SEBI
authorized Portfolio Manager, it offers Portfolio Management Services to clients. These
services are offered to clients as different schemes, which are based on differing investment
strategies made to reflect the varied risk-return preferences of client
INDIA BULLS COMMODITIES PVT LTD.
INDIA BULL COMMODITIES PVT LTD is a 100% subsidiary of India Bulls Ltd, which is engaged
in the business of commodities broking. Our experience in securities broking empowered us
with the requisite skills and technologies to allow us offer commodities broking as a contra-
cyclical alternative to equities broking. We enjoy memberships with the MCX and NCDEX,
36

two leading Indian commodities exchanges, and recently acquired membership of DGCX.
We have a multi-channel delivery model, making it among the select few to online as well as
offline trading facilities.
INDIA BULLS DISTRIBUTION CO LTF (IILD).
India Infoline.com Distribution Co Ltd is a 100% subsidiary of India Bulls Ltd and is engaged
in the business of distribution of Mutual Funds, IPOs, Fixed Deposits and other small savings
products. It is one of the largest 'vendor-independent' distribution houses and has a wide
pan-India footprint of over 232 branches coupled with a huge number of 'feet-on-street',
which helps source and service customers across the length and breadth of India. Its unique
value proposition of free doorstep expert advice coupled with free pick-up and delivery of
cheques has been met with an enthusiastic response from customers and fund houses alike.
Our business has expanded to include the online distribution of mutual funds, wherein users
can view and compare different product offerings and download application forms which
they can later submit to the product provider
Mortgages & Loans IILD has also entered the business ot distribution of mortgages and loan
products during the year 2005-2006. The business is still in the investing phase and we plan
to roll the business out across its pan-Indian network to provide it with a truly national scale
in operations.

37

INDIA BULLS INSURANCE SERVICES LTD.
India Bulls Insurance Services Ltd is also a 100% subsidiary of India Bulls Ltd and is a
registered Corporate Agent with the Insurance Regulatory and Development Authority
(IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Ltd, which is
India's largest private Life Insurance Company
INDIA BULLS INVESTMENT SERVICE LTD.
India Bulls Investment Service Ltd is also a 100% subsidiary of India Bulls Ltd. It has an NBFC
license from the Reserve Bank of India (RBI) and offers margin-funding facility to the broking
customers
INDIA BULLS INSURANCE BROKERS LTD.
India Bulls Insurance Brokers Ltd is a 100% subsidiary of India Bulls Ltd and is a newly
formed subsidiary which will carry out the business of Insurance broking. We have applied
to IRDA for the insurance broking license and the clearance for the same is awaited.

Services Offered by India Info line:-
Heres a look at the rocketing list of whats on offer from The India Bulls Group:

38

Equity Trading and Stock Broking:-
Cash and Derivatives segments. Member - BSE and NSE, DP with NSDL.
Portfolio Management:-
SEBI-registered, backed by a pool of analysts with over 200 man-years in managing
portfolios.
Research & Analysis:-
Exhaustive information and data mining, covering the spectrum of Indian business, industry
and financial markets.
Mutual Funds:-
Primary agent for the entire phalanx of leading funds. Something to suit every risk profile.
Life Insurance:-
Leading corporate agent of ICICI Prudential Life Insurance Company, miles ahead of the
runner-up!
Commodities Broking:-
Member of the Multi-Commodities Exchange (MCX). Again, rock-bottom brokerage and
quality research support. Fixed Income Instruments: From Fixed Deposits, Post Office Saving
schemes to RBI Tax Saving and Infrastructure Bonds.

39

SOME KEY PERSONS:-
Mr. Nirmal Jain
Chairman & Managing Director
India Bulls Ltd.
Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded
Indias leading financial services company India Bulls Ltd. in 1995, providing globally
acclaimed financial services in equities and commodities broking, life insurance and mutual
funds distribution, among others. Mr. Jain began his career in 1989 with Hindustan Levers
commodity export business, contributing tremendously

Mr. R Venkataraman
Executive Director
India Bulls Ltd.
Co-promoter and Executive Director of India Bulls Ltd., is a B. Tech (Electronics and
Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM Bangalore). He
joined the India Bulls board in July 1999. He previously held senior managerial positions in
ICICI Limited, including ICICI Securities Limited, their investment banking joint venture with J
P Morgan of USA and with BZW and Taib Capital Corporation Limited. He was also Assistant
Vice President with G E Capital Services India Limited in their private equity division,
possessing a varied experience of more than 16 years in the financial services sector.

40

The Board of Directors
Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India
Bulls Ltd. comprises:
Mr Nilesh Vikamsey
Independent Director, India Bulls Ltd.

Board member since February 2005 - a practicing Chartered Accountant and partner
(Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB International, headed
the audit department till 1990 and thereafter also handles financial services, consultancy,
investigations, mergers and acquisitions, valuations etc; an ICAI study group member for
Proposed Accounting Standard 30 on Financial Instruments Recognition and
Management, Finance Committee of The Chamber of Tax Consultants (CTC), Law Review,
Reforms and Rationalization Committee and Infotainment and Media Committee of Indian
Merchants Chamber (IMC) and Insurance Committee and Legal Affairs Committee of
Bombay Chamber of Commerce and Industry (BCCI).
Mr. Vikamsey is a director of Miloni Consultants Private Limited, HLB Technologies
(Mumbai) Private Limited and Chairman of HLB India.

41

Mr. Sat Pal Khattar
Non Executive Director
India Bulls Ltd.

Board member since April 2001 - Presidential Council of Minority Rights member,
Chairman of the Board of Trustee of Singapore Business Federation, is also a life trustee of
SINDA, a nonprofit body, helping the under-privileged Indians in Singapore. He joined the
India Bulls board in April 2001. Mr Khattar is a Director of public and private companies in
Singapore, India and Hong Kong; Chairman of Guocoland Limited listed in Singapore and its
parent Guoco Group Ltd listed in Hong Kong, a leading property company of Singapore,
China and Malaysia. A Board member of India Bulls Ltd, Gateway Distriparks Ltd both
listed and a number of other companies he is also the Chairman of the Khattar Holding
Group of Companies with investments in Singapore, India, UK and across the world.

42

Mr Kranti Sinha
Independent Director
India Bulls Ltd.

Board member since January 2005 completed his masters from the Agra
University and started his career as a Class I officer with Life Insurance Corporation of India.
He served as the Director and Chief Executive of LIC Housing Finance Limited from August
1998 to December 2002 and concurrently as the Managing Director of LICHFL Care Homes (a
wholly owned subsidiary of LIC Housing Finance Limited). He retired from the permanent
cadre of the Executive Director of LIC; served as the Deputy President of the Governing
Council of Insurance Institute of India and as a member of the Governing Council of National
Insurance Academy, Pune apart from various other such bodies. Mr. Sinha is also on the
Board of Directors of Hindustan Motors Limited, Larsen & Toubro Limited, LICHFL Care
Homes Limited, Gremach Infrastructure Equipments and Projects Limited and Cinemax
(India) Limited.

43

Mr Arun K. Purvar
Independent Director
India Bulls Ltd.
Board member since March 2011 completed his Masters degree in commerce
from Allahabad University in 1966 and a diploma in Business Administration in 1967. Mr.
Purwar joined the State Bank of India as a probationary officer in 1968, where he held
several important and critical positions in retail, corporate and international banking,
covering almost the entire range of commercial banking operations in his illustrious career.
He also played a key role in co-coordinating the work for the Bank's entry into the field of
insurance. After retiring from the Bank at end May 2006, Mr. Purwar is now working as
Member of Board of Governors of IIM-Lucknow, joined IIMIndore as a visiting professor,
joined as a Hon.-Professor in NMIMS and he is also a member of Advisory Board for Institute
of Indian Economic Studies (IIES), Waseda University, Tokyo, Japan. He has now taken over
as Chairman of India Venture Advisors Pvt. Ltd., as well as IL & FS Renewable Energy Limited.
He is also working as Independent Director in leading companies in Telecom, Steel, Textiles,
Autoparts, Engineering and Consultancy. The copper plant produces world-class copper
cathodes, continuous cast copper rods and precious metals. Sulphuric acid, phosphoric acid,
di-ammonium phosphate, other phosphate fertilizers and phosphor-gypsum are also
produced at this plant

44

3.2. INDUSTRY PROFILE
India Bulls Industries Limited, the metals flagship company of the Aditya Birla Group,
is an industry leader in aluminum and copper. A metals powerhouse with a consolidated
turnover of Rs.600, 128 million (US$ 15 billion), India Bulls is the world's largest aluminum
rolling company and one of the biggest producers of primary aluminum in Asia. Its copper
smelter is the world's largest custom smelter at a single location.

Established in 1958, India Bulls commissioned its aluminum facility at Renukoot in
Eastern U.P. in 1962. Later acquisitions and mergers, with Jindal, Birla Copper and the Nifty
and Mt.Gordon copper mines in Australia, strengthened the company's position in value-
added alumina, aluminum and copper products, with vertical integration through access to
captive copper concentrates.

In 2007, the acquisition of Novelist Inc. a world leader in aluminum rolling and can
recycling marked a significant milestone in the history of the aluminum industry in India.
With Novelist under its fold India Bulls ranks among the global top five aluminum majors, as
an integrated producer with low cost alumina and aluminum facilities combined with high-
end rolling capabilities and a global footprint in 12 countries outside India. Its combined
turnover of US$ 15 billion, places it in the Fortune 500 league.

45

MILESTONES

2007 Successful acquisition of Novelis , making India Bulls the largest in aluminum rolling
and among the global top five metals majors, with a presence in 11 countries outside
India.
Acquisition of Alcan's 45 per cent equity stake in the Utkal Alumina project, thereby
making India Bulls the 100 per cent project owner.

2006 India Bulls announces 10:1 stock split. Each share with face value of Rs. 10 per share
split into 10 shares of Re 1 each.
India Bulls completes largest Rights issue in the history of Indian capital markets with
total size of Rs. 22,266 million.
Equity offering and subsequent listing of Aditya Birla Minerals Ltd. on Australian
Stock Exchange.
Signed an MOU with the Government of Madhya Pradesh for a Greenfield aluminum
smelter in the Siddhi district of the state.
Joint venture with Alex USA for manufacture of high strength aluminum alloys for
applications in aerospace, sporting goods and surface transport industries.

46

2005 All businesses of Jindal, except for the Kollur Foil Plant in Andhra Pradesh, merged
with India Bulls Industries Limited.
MOUs signed with state governments of Orissa and Jharkhand for setting up
Greenfield alumina refining, smelting and power plants.
Commissioned Copper III expansion, taking total capacity to 500,000 tpa.

2004 Copper smelter expansion to 250,000 tpa.

2003 India Bulls acquires Nifty Copper Mine in March 2003 through Aditya Birla Minerals
Ltd. (ABML, formerly Birla Minerals Resources Pty. Ltd.).
ABML acquires the Mount Gordon copper mines in November 2003.
Equity stake in Indal increased to 96.5 per cent through an open offer.
Brownfield expansion of aluminum smelter at Renukoot to 345,000 tpa.
2002 The amalgamation of Indo Gulf Corporation Limiteds copper business, Birla
Copper, with India Bulls with effect from 1st April 2002.
2000 Acquisition of controlling stake in Indian Aluminum Company Limited (Jindal)
with 74.6 per cent equity holding.

47

1999 Aluminum alloy wheels production commenced at Silvassa.
Brownfield expansion of metal capacity at Renukoot to 242,000 tpa.
1998 Foil plant at Silvassa goes on stream.
India Bulls attains ISO 14001 EMS certification.

1995 Mr. Kumar Mangalam Birla takes over as Chairman of Jindal Board.
1991 Beginning of major expansion programmer.

1967 Commissioning of Renusagar power plant a strategic and farsighted move.
1965 Downstream capacities commissioned (rolling and extrusion mills at Renukoot)

1962 Commencement of production at Renukoot (Uttar Pradesh) with an initial capacity of
20,000 mtpa of aluminum metal and 40,000 mtpa of alumina.
1958 Incorporation of India Bulls Industries Limited.

48

INDIA BULLS BUSINESSES

India Bulls in India enjoys a leadership position in aluminum and copper. The company's
aluminum units across the country encompass the entire gamut of operations from bauxite
mining, alumina refining, aluminum smelting to downstream rolling, extrusions, foils and
alloy wheels, along with captive
power plants and coal mines. The Birla Copper unit produces copper cathodes.

Aluminum

India Bulls was among the first few alloy wheels companies to have obtained the ISO/TS
16949 certification to meet the stringent standard of the automobile industry. In India, India
Bulls enjoys a leadership position in specialty aluminas, primary aluminum and downstream
products. Apart from being a dominant player in the domestic market, India Bulls products
are well accepted in international markets. Exports account for more than 30 per cent of
total sales.
India Bulls major products include standard and specialty grade aluminas and hydrates,
aluminum ingots, billets, wire rods, flat rolled products, extrusions, foil and alloy wheels

49

Copper

Birla Copper, a unit of India Bulls is located at Dahej in Gujarat. The unit has the unique
distinction of being the largest copper smelter in the world at a single location with 500,000
tpa capacity with multiple world class technologies. The facilities comprise copper smelters,
precious metals, fertilizers, sulfuric acid, captive power plants, utilities and a captive jetty.
India Bulls Birla Copper is a renowned producer of copper cathodes and continuous cast
copper rods since its inception, with ISO-9001:2000 (Quality Management systems), ISO-
14001:2004 (Environmental Management System) OHSAS-18001:2007 (Occupational Health
and Safety Management Systems) accreditations.

Mines
The two copper mines in Australia were acquired in 2003. Birla Nifty mine consists of an
open-pit mine, heap leach pads and a solvent extraction and electro winning (SXEW)
processing plant, which produces copper cathode. Birla Nifty's copper cathode capacity is
25,000 tpa. Open pit mining was completed in 2006. During FY2011, Nifty produced 5,112
tons of copper cathode. A copper sulphide deposit is located at the lower levels of the Nifty
open pit mine and an underground mine and concentrator have been developed to mine
and process ore from this deposit. The Nifty Sulphide Operation, commenced ore
production from stopping in December 2005 and concentrate production in March 2006.
During FY2011, Nifty produced 53,397 tons of copper in concentrate. India Bulls is a leading
50

domestic player in two metals business segments aluminum and copper. The aluminum
division's product range includes alumina chemicals, primary aluminum ingots, billets, wire
rods, rolled products, extrusions, foils and alloy wheels.
The company has a significant market share in all the segments in which it operates. It
enjoys a domestic market share of 42 per cent in primary aluminum, 63 per cent in rolled
products, 20 per cent in extrusions, 44 per cent in foils and 31 per cent in wheels.
As a step towards expanding the market for value-added products and services, India Bulls
has launched several brands in recent years, which include Aura for alloy wheels,
Freshwrapp for kitchen foil and Ever last for roofing sheets. Our exclusive showroom, The
Aluminum Gallery, seeks to promote India Bulls products to its customers. It is a platform
for the company to showcase quality products to a quality audience in an appropriate
ambience. The exhibits include products like windows, doors, furniture, ladder, roofing
sheets and ceiling and cladding panels.
India Bulls products are well received not only in the domestic market, but also in the
international market. The company's metal is accepted for delivery under the high grade
aluminum contract on the London Metal Exchange (LME). The company exports about 17
per cent of its total sales volume of aluminum.

The company's alumina chemical business is a leader in manufacturing and marketing of
specialty alumina and alumina hydrate products in the country. It has a major market share
in the country. These specialty products find wide usage in diversified industries including
water treatment chemicals, refractorys, ceramics, cryolite, glass, fillers and plastics,
51

conveyor belts and cables, among others. The company also exports these alumina
chemicals to over 30 countries covering North America, Western Europe and the Asian
region.
Birla Copper, India Bulls copper division at Dahej in Gujarat enjoys a leadership position in
India, having built over 40 per cent of the domestic market share within three years of its
commissioning. It has also made successful forays into the export markets of the Middle
East, Southeast Asia, China, Korea and Taiwan.

COMMODITIES TRADING IN INDIA BULLS LTD.

With the Money or trader terminal you can trade in BSE, NSE and that too in both
segments of the market, cash as well as derivatives (F&O). You will have on click access to
all the features and functionalities that you would ever require in your trading including
online access to your DP and you ledger.
Technology to Power youre trading:
It is truly unbelievable how the ordinary telephone and computer can change lives.
The money pore trader terminal, using advanced data compression technology executes
your trades faster than you can blink. Add to this the amazing 128-bit SSL super security,
and you have unparalleled speed coupled with unbeatable security. The same technology
also powers the intra-day/historical charts, live streaming quotes that you can see at a single
click and much more.
52

Application Formalities:
India Bulls is having the following formalities the person who wants to become a client of
India Bulls should have to fulfill the followings.
1. Identity proof
2. One passport size photograph
3. One cheque
4. Nominee photograph and signature
5. Two witness signature
6. Residential proof

Advantages of India Bulls Ltd:
The following are the advantages of India info line
Low brokerage
Online terminal
Expert unbiased advice
Additional margin levied.
Immediate order execution.
Individual terminal for online trader.
One-stop shop for all your investment needs
Immediate confirmation, digitally and physically.

53

On-Line Trading:
India Bulls is providing on-line trading facility for their clients to do trade on commodities,
derivatives and equities.
What is on-line trading?
Trading of Securities (Buying and Selling of shares and commodities) through internet is
called on-line trading. The objective of on-line trading is:
To facilitate easy transaction processing.
Easy surveillance so that less scope of speculation.
To make the trading fully automated and simple trading procedures.

India Bulls on-line securities trading are operated through WAN (wide Area Network) which
is one of special feature of India Bulls Ltd.

De mat:
De mat means transformation of physical form of shares into electronic form.
Dematerialization of shares avoids bad physical delivery of shares. In on-line trading
system. The dematerialized shares traded.

54

CHAPTER-4
DATA ANALISIS AND INTERPRETATION

55

AVERAGE RETURNS

INFOSYS
YEAR DIVIDEND BONUS
OPENING
SHARE
PRICE(P0)
CLOSING
SHARE
PRICE(P1) D+(P1-P0)
D+(P1-
P0)/P0*100
2006-07 45 NIL 2235.85 2981.4 790.55 35.35
2007-08 11.5 2018.65 3142.15 2018.65 906.65 44.91
2008-09 33.25 NIL 1922.95 1439.9 -449.8 -23.39
2009-10 23.5 NIL 1421.35 1324.1 -73.75 -5.18
2010-11 NIL NIL 1375.5 2615.1 1239.6 90.11
TOTAL RETURN 141.8

AVERAGE RETURN = R/N 141.8/5 = 28.36

56

HCLTECH

YEAR DIVIDEND BONUS
OPENING
SHARE
PRICE(P0)
CLOSING
SHARE
PRICE(P1) D+(P1-P0)
D+(P1-
P0)/P0*100
2006-07 16 NIL 383.55 654.2 286.65 74.73
2007-08 8 291.4 662.15 291.4 -71.35 -10.77
2008-09 9 NIL 272.5 253.25 -10.25 -3.76
2009-10 7 NIL 246.4 101.75 -137.65 -55.86
2010-11 NIL NIL 100.85 357.8 256.95 254.78
TOTAL RETURN 259.12


57

WIPRO

YEAR DIVIDEND BONUS
OPENING
SHARE
PRICE(P0)
CLOSING
SHARE
PRICE(P1) D+(P1-P0)
D+(P1-
P0)/P0*100
2006-07 5 559.7 672.65 559.7 451.75 67.15
2007-08 6 NIL 560 559.4 5.4 0.96
2008-09 6 NIL 518.75 432.1 -80.65 -15.54
2009-10 4 NIL 409 245.4 -159.6 -39.02
2010-11 NIL NIL 251.6 706.8 455.2 180.92
TOTAL RETURN 194.47


58

CMC
YEAR DIVIDEND BONUS
OPENING
SHARE
PRICE(P0)
CLOSING
SHARE
PRICE(P1) D+(P1-P0)
D+(P1-
P0)/P0*100
2006-07 5 NIL 623.8 531.4 -87.4 -14
2007-08 8 NIL 575 1211.85 644.85 112.14
2008-09 11 NIL 1163.75 806.3 -346.45 -29.77
2009-10 15 NIL 792.3 319.95 -457.35 -57.72
2010-11 NIL NIL 366.25 1340.3 974.05 265.95
TOTAL RETURN 276.6


59

I-FLEX
YEAR DIVIDEND BONUS
OPENING
SHARE
PRICE(P0)
CLOSING
SHARE
PRICE(P1) D+(P1-P0)
D+(P1-
P0)/P0*100
2006-07 5 NIL 594.8 1327 737.2 123.94
2007-08 NIL NIL 1352.3 2081.65 729.35 53.93
2008-09 NIL NIL 2055.05 941.1 -1113.95 -54.2
2009-10 NIL NIL 942.05 741.55 -200.5 -21.28
2010-11 NIL NIL 786 2300.5 1514.5 192.68
TOTAL RETURN 295.07


60

AVERAGE RETURNS

INFOSYS(IT)
28.36
HCLTECH
51.82
WIPRO
38.89
CMC
55.32
I-FLEX
59.01

61

FIGURE-5
Average Return = (R)/N
(R) = Return of the security for the year T
N = Number of years
Based on the above average return of securities I-FLEX is earning highest return and
INFOSYS (IT) is earning lowest return. Other securities are earning medium range of
returns

0
10
20
30
40
50
60
70
I
N
F
O
S
Y
S
(
I
T
)

H
C
L
T
E
C
H
W
I
P
R
O
C
M
C
I
-
F
L
E
X
Series1
62

STANDARD DEVIATIONS
INFOSYS

YEAR RETURN (R ) AVG RET(R) R-R R-R2
2006-07 35.35 141.8

(106.45) 11,331.60
2007-08 44.91 141.8

(96.89) 9,387.67
2008-09 -23.39 141.8

(165.19) 27,287.74
2009-10 -5.18 141.8

(146.98) 21,603.12
2010-11 90.11 141.8

(51.69) 2,671.86
TOTAL 72,281.99

Variance = 1/n-1 (R-R)
2
= 1/5-1 (72281.99) = 18070.49
Standard Deviation = Variance = 18070.49 = 134.4
63

HCLTECH

2006-07 74.73 259.12 (184.39) 33,999.67
2007-08 -10.77 259.12 (269.89) 72,840.61
2008-09 -3.76 259.12 (262.88) 69,105.89
2009-10 -55.86 259.12 (314.98) 99,212.40
2010-11 254.78 259.12 (4.34) 18.84
TOTAL

275,177.41

2
= 1/5-1 (275177.41) = 68794.35


64

WIPRO
2006-07 67.15 194.47 (127.32) 16,210.38
2007-08 0.96 194.47 (193.51) 37,446.12
2008-09 -15.54 194.47 (210.01) 44,104.20
2009-10 -39.02 194.47 (233.49) 54,517.58
2010-11 180.92 194.47 (13.55) 183.60
TOTAL 152,461.89

2
= 1/5-1 (152461.89) = 38115.47

Standard Deviation = Variance = 38115.47 = 195.

65

CMC
2006-07 -14 276.60 (290.60) 84,448.36
2007-08 112.14 276.60 (164.46) 27,047.09
2008-09 -29.77 276.60 (306.37) 93,862.58
2009-10 -57.72 276.60 (334.32) 111,769.86
2010-11 265.95 276.60 (10.65) 113.42
TOTAL 317,241.31

2
= 1/5-1 (317241.31) = 79310.32


66

I-FLEX

YEAR
RETURN (R
) AVG RET(R) R-R R-R2
2006-07 123.94 295.07 (171.13) 29,285.48
2007-08 53.93 295.07 (241.14) 58,148.50
2008-09 -54.2 295.07 (349.27) 121,989.53
2009-10 -21.28 295.07 (316.35) 100,077.32
2010-11 192.68 295.07 (102.39) 10,483.71
TOTAL 319,984.54

2
= 1/5-1 (319984.54) = 79996.13


67

STANDARD DEVIATIN OF COMPANIES

STANDARD DEVIATION =1/n (R-R)
2

Based on the above calculations Standard Deviation of the I-FLEX is highest and INFOSYS
(IT) is lowest, where other securities are having medium Standard Deviation.

0
50
100
150
200
250
300
I
N
F
O
S
Y
S
(
I
T
)

H
C
L
T
E
C
H
W
I
P
R
O
C
M
C
I
-
F
L
E
X
Series1
INFOSYS(IT) 131.4
HCLTECH 262.28
WIPRO 195.23
CMC 281.62
I-FLEX 282.83
68

CORRELATION COFFICIENT BETWEEN THE SECURITIES
Covariance (COV ab) = 1/n-1 (RA-RA) (RB-RB)
Correlation Coefficient = COV ab/oa*o b
1. INFOSYS (RA) & HCLTECH (RB)
YEAR RA-RA RB-RB (RA-RA)(RB-RB)
2006-07 -106.45
(184.39) 19,628.32
2007-08 -96.89
(269.89) 26,149.64
2008-09 -165.19
(262.88) 43,425.15
2009-10 -146.98
(314.98) 46,295.76
2010-11 -51.69
(4.34) 224.33
TOTAL 135,723.20

Covariance (COV ab) = 1/5-1 (135723.20) =33930.8
oa =131.4; ob =262.28
= 33930.8/ (131.4) (262.28) =0.9845

69

2. INFOSYS (RA)& WIPRO(RB)

2006-07 -106.45
(127.32) 13,553.21
2007-08 -96.89
(193.51) 18,749.18
2008-09 -165.19
(210.01) 34,691.55
2009-10 -146.98
(233.49) 34,318.36
2010-11 -51.69
(13.55) 700.40
TOTAL 102,012.71

Covariance (COV ab) = 1/5-1 (102012.71) = 25503.17
oa = 131.4; ob =195.23
= 25503.17/ (131.4) (195.23) = 0.99

70

3. INFOSYS (RA) & CMC (RB)

2006-07
-106.45
(290.60) 30,934.37
2007-08
-96.89
(164.46) 15,934.53
2008-09
-165.19
(306.37) 50,609.26
2009-10
-146.98
(334.32) 49,138.35
2010-11
-51.69
(10.65) 550.50
TOTAL 147,167.01

oa = 131.4; ob = 281.62
= 36791.75/ (131.4) (281.62) = 0.99

71

4. INFOSYS (RA) &I-FLEX (RB)

2006-07
-106.45
(171.13) 18,216.79
2007-08
-96.89
(241.14) 23,364.05
2008-09
-165.19
(349.27) 57,695.91
2009-10
-146.98
(316.35) 46,497.12
2010-11
-51.69
(102.39) 5,292.54
TOTAL 151,066.42

oa = 131.4; ob = 283.8
= 37766.6/ (131.4) (283.8) =1.01

72

5. HCLTECH (RA) & WIPRO (RB)

2006-07 (184.39) (127.32) 23,476.53
2007-08 (269.89) (193.51) 52,226.41
2008-09 (262.88) (210.01) 55,207.43
2009-10 (314.98) (233.49) 73,544.68
2010-11 (4.34) (13.55) 58.81
TOTAL 204,513.86

oa =262.28; ob = 195.23
= 5112.96/ (262.28) (195.23) = 0.099

73

7. HCLTECH (RA) & CMC (RB)

2006-07 (184.39) (290.60) 53,583.73
2007-08 (269.89) (164.46) 44,386.11
2008-09 (262.88) (306.37) 80,538.55
2009-10 (314.98) (334.32) 105,304.11
2010-11 (4.34) (10.65) 46.22
TOTAL 283,858.72

oa = 262.28; ob = 281.62
= 70964.68/ (262.28) (281.62) = 0.960

74

8. HCLTECH (RA) & I-FLEX (RB)

2006-07 (184.39) (171.13) 31,554.66
2007-08 (269.89) (241.14) 65,081.27
2008-09 (262.88) (349.27) 91,816.10
2009-10 (314.98) (316.35) 99,643.92
2010-11 (4.34) (102.39) 444.37
TOTAL 288,540.33

oa = 262.28; ob = 283.83
= 72135.08/ (262.28) (283.83) = 0.9

75

8. WIPRO (RA) & CMC (RB)

2006-07 (127.32) (290.60) 36,999.19
2007-08 (193.51) (164.46) 31,824.65
2008-09 (210.01) (306.37) 64,340.76
2009-10 (233.49) (334.32) 78,060.38
2010-11 (13.55) (10.65) 144.31
TOTAL 211,369.29

oa = 195.23; ob = 281.62
= 52842.32/ (195.23) (281.62) = 0.96

76

9. WIPRO (RA) & I-FLEX (RB)

2006-07 (127.32) (171.13) 21,788.27
2007-08 (193.51) (241.14) 46,663.00
2008-09 (210.01) (349.27) 73,350.19
2009-10 (233.49) (316.35) 73,864.56
2010-11 (13.55) (102.39) 1,387.38
TOTAL 217,053.41

oa = 195.23; ob = 283.83
= 54263.35/ (195.23) (283.83) =0.97

77

10. CMC (RA) & I-FLEX (RB)

2006-07 (290.60) (171.13) 49,730.38
2007-08 (164.46) (241.14) 39,657.88
2008-09 (306.37) (349.27) 107,005.85
2009-10 (334.32) (316.35) 105,762.13
2010-11 (10.65) (102.39) 1,090.45
TOTAL 303,246.70

oa = 281.62; ob = 283.83
= 75811.67/ (281.62) (283.83) =0.94

78

CORRELATION COFFICIENT BETWEEN THE SECURITIES

Covariance (COV ab) = 1/n-1 (RA-RA)(RB-RB)

SECURITY INFOSYS HCLTECH WIPRO CMC I-FLEX
INFOSYS 1 0.98 0.99 0.99 1.01
HCLTECH 1 0.09 0.96 0.96
WIPRO 1 0.96 0.97
CMC 1 0.94
I-FLEX 1

79

FORMULA:
CORRELATION COEFFICIENT (ab) = cov (ab)/ab
Where COV (ab) = 1/n-1 (RA-RA) (RB-RB)

CALCULATION OF PORTFOLIO WEIGHTS: :(FORMULA):

Wa = ob [ob-(nab*oa)]
oa
2
+ ob
2
- 2nab*oa*ob

Wb = 1 Wa

1. INFOSYS (a) &HCLTECH (b): oa = 131.4; ob = 262.28;nab = 0.98
Wa = 262.28 [262.28-(0.98*131.4)]/(131.4)
2
+ (262.28)
2
2(0.98)*(131.4)*(262.28)
Wa =1.90; Wb = 1- 1.90 = -0.9;

80

2. INFOSYS (a) &WIPRO (b): oa = 131.4; ob = 195.23;nab = 0.99

Wa = 195.23 [195.23-(0.99*131.4)]/(131.4)
2
+ (195.23)
2
2(0.99)*(131.4)*(195.23)

Wa =2.77; Wb = 1- 2.77 = -1.77;

3. INFOSYS (a) &CMC (b): oa = 131.4; ob = 281.62;nab = 0.99

Wa = 281.62 [281.62-(0.99*131.4)]/(131.4)
2
+ (281.62)
2
2(0.99)*(131.4)*(281.62)

Wa =1.83; Wb = 1-1.83 =-0.83

4. INFOSYS (a) &I-FLEX (b): oa = 131.4; ob = 283.83;nab = 1.01
Wa = 283.83 [283.83-(1.01*131.4)]/(131.4)
2
+ (283.83)
2
2(1.01)*(131.4)*(283.83)

Wa =1.933; Wb = 1-1.933 = -0.93;

81

5. HCLTECH (a) &WIPRO (b): oa = 262.28; ob = 195.23; nab =0.09

Wa = 195.23[195.23-(0.09*262.28)]/(262.28)
2
+(195.23)
2
2(0.09)*(262.28)*(195.23)
Wa =0.93; Wb = 1- 0.93 = 0.07;

6. HCLTECH (a) &CMC (b): oa = 262.28; ob = 281.62; nab =0.96

Wa = 281.62 [281.62-(0.96*262.28)]/(262.28)
2
+ (281.62)
2
2(0.96)*(262.28)*(281.62)
Wa =1.33; Wb = 1- 1.33 = -0.33;

7. HCLTECH (a) &I-FLEX (b): a = 262.28; ob = 283.83; nab = 0.96
Wa = 283.83 [283.83-(0.96*262.28)]/(262.28)
2
+ (283.83)
2
2(0.96)*(262.28)*(283.83)

Wa =0.26; Wb = 1- 0.26 = 0.74;

8. WIPRO (a) &CMC (b): a = 195.23; ob = 281.62; nab = 0.96
Wa = 281.62[281.62-(0.96*281.62)]/(195.23)
2
+ (281.62)
2
2(0.96)*(195.23)*(281.62)
82

Wa =0.26; Wb = 1- 0.26 = 0.74;

9. WIPRO (a) &I-FLEX (b): oa = 195.23; ob = 283.83; nab = 0.97
Wa = 283.83[283.83-(0.97*195.23)]/(195.23)
2
+ (283.83)
2
2(0.97)*(195.23)*(283.83)
Wa =2.39; Wb = 1- 2.39 = -1.39;

10. CMC (a) &I-FLEX (b): oa = 281.62; ob = 283.83 nab = 0.94

Wa = 283.83 [283.83-(0.94*281.62)]/(281.62)
2
+ (283.83)
2
2(0.94)*(281.62)*(283.83)

Wa = 0.03; Wb = 1- 0.03 = 0.97;

83

S.NO PORTFOLIO (A/B) CORRELATION WEIGHT A WEIGHT B
1 INFOSYS & HCL 0.98 1.90 -0.9
2 INFOSYS & WIPRO 0.99 2.77 -1.77
3 INFOSYS & CMC 0.99 1.83 -0.83
4 INFOSYS & I-FLEX 1.01 1.93 -0.93
5 HCLTECH & WIPRO 0.09 0.93 0.07
6 HCLTECH & CMC 0.96 1.33 -0.33
7 HCLTECH & I-FLEX 0.96 0.26 0.74
8 WIPRO & CMC 0.96 0.26 0.74
9 WIPRO & I-FLEX 0.97 2.39 -1.39
10 CMC & I-FLEX 0.94 0.03 0.97

84

PORTFOLIO RISK

CALCULATION OF PORTFOLIO RISK:

R
P
= oa
2
*Wa
2
+ ob
2
*Wb
2
+ 2nab*oa*ob*Wa*Wb

CALCULATION OF PORTFOLIO RISK OF ALL COMPANIES:

1. INFOSYS (a) & HCLTECH (b): o -0.9;
Nab = 0.98;

R
P
= (131.4)
2
(1.90)
2
+ (262.28)
2
(-0.9)
2
+2(0.98)(131.4)*(262.8)*(1.90)*(-0.9)

= 2313.54 = 48.09

85

2. INFOSYS (a) & WIPRO (b): oa = 131.4; ob = 195.23; Wa= 2.77; Wb= -1.77;
Nab = 0.99;

R
P
= (131.4)
2
(2.77)
2
+ (195.23)
2
(-1.77)
2
+2(0.99)(131.4)*(195.23)*(2.77)*(-1.77)

= 2854.82 = 53.43

3. INFOSYS (a) & CMC (b): oo = 131.4; o| = 281.62; Wa= 1.83; Wb= -0.83;
Nab = 0.99;

R
P
= (131.4)
2
(1.83)
2
+ (281.62)
2
(-0.83)
2
+2(0.99)(131.4)*(281.62)*(1.83)*(-0.83)

= 1165.805 = 34.14

86

4. INFOSYS (a) & I-FLEX (b): oo -0.93;
Nab = 1.01;

R
P
= (131.4)
2
(1.93)
2
+ (283.83)
2
(-0.93)
2
+2(1.01)(131.4)*(283.83)*(1.93)*(-0.93)

= -1231.49 = 35.09

5. HCLTECH (a) & WIPRO (b): oa = 262.28; ob = 195.23; Wa= 0.93; Wb= 0.07;
Nab = 0.09;

R
P
= (262.28)
2
(0.93)
2
+ (195.23)
2
(0.07)
2
+2(0.09)(262.28)*(195.23)*(0.93)*(0.07)

= 60283.93 = 245.53

87

6. HCLTECH (a) & CMC (b): oa = 262.28; ob = 281.62; Wa= 1.33; Wb=-0.33 ;
Nab = 0.96;

R
P
= (262.28)
2
(1.33)
2
+ (281.62)
2
(-0.33)
2
+2(0.96)(262.28)*(281.62)*(1.33)*(-0.33)

= 68077.16 = 260.91

7. HCLTECH (a) & I-FLEX (b): oa = 262.28; ob = 283.83; Wa= 0.26; Wb= 0.74;
Nab = 0.96;

R
P
= (262.28)
2
(0.26)
2
+ (283.83)
2
(0.74)
2
+2(0.96) (262.28)*(283.83)*(0.26)*(0.74)
= 76264.42 = 276.16
8. WIPRO (a) & CMC (b): oa = 195.23; ob = 281.62; Wa= 0.26; Wb= 0.74;
Nab = 0.96

R
P
= (195.23)
2
(0.26)
2
+ (281.62)
2
(0.74)
2
+2(0.96)(195.23)*(281.62)*(0.26)*(0.74)

= 6631690 =257.2'
88

9. WIPRO (a) & I-FLEX (b): oa = 195.23; ob =283.83; Wa= 2.39; Wb= -1.39;
Nab = 0.97;

R
P
= (195.23)
2
(2.39)
2
+ (283.83)
2
(-1.39)
2
+2(0.97)(195.23)*(283.83)*(2.39)*(-1.39)

= 94802.09 = 441.36

10. CMC (a) & I-FLEX (b): oa = 281.62; ob = 283.83; Wa= 0.03; Wb= 0.97;
Nab = 0.94;

R
P
= (281.62)
2
(0.03)
2
+ (283.83)
2
(0.97)
2
+2(0.94)(281.62)*(283.83)*(0.03)*(0.97)

= 80242.712 = 283.27

89

PORTFOLIO RISK

S.NO COMBINATION PORTFOLIO RISK
1 INFOSYS & HCL 48.09
2 INFOSYS & WIPRO 53.43
3 INFOSYS & CMC 34.13
4 INFOSYS & I-FLEX 35.09
5 HCLTECH & WIPRO 245.53
6 HCLTECH & CMC 260.91
7 HCLTECH & I-FLEX 276.16
8 WIPRO & CMC 257.52
9 WIPRO & I-FLEX 441.36
10 CMC & I-FLEX 283.27

90

CALCULATION OF PORTFOLIO RISK:

R
P
= oo
2
-Oo
2
+ o|
2
-O|
2
+ 2vo|-oo-o|-Oo-O|

Where
oo = Std deviation of security a
o| = Std deviation of security b
Wa = weight of security a
Wb = weight of security b
nab = Correlation Coefficient between security a & b
oo = Portfolio risk

91

PORT FOLIO RETURN

FORMULA :

Rp = (Ra*Wa)+(Rb*Wb);

Where
Rp = Portfolio return
Ra = Average return on security a;
Rb = Average return on security b
Wa = Weight of security a;
Wb = Weight of security b;

92

CALCULATION OF PORTFOLIO RETURNS

S.NO
COMBINATION(A
& B)
AVERAGE
RETURN
ON
SECURITY
(A)
WEIGHT
OF
SECURITY
(A)
AVERAGE
RETURN
ON
SECURITY
(B)
WEIGHT
OF
SECURITY
(B)
PORTFOLIO
RETURN
Rp
(Ra*Wa)+(Rb*Wb)
1 INFOSYS & HCL 28.36 1.9 51.82 -0.9
7.246
2
INFOSYS &
WIPRO 28.36 2.77 38.89 -1.77
9.7219
3 INFOSYS & CMC 28.36 1.83 55.32 -0.83 5.9832
4 INFOSYS & I-FLEX 28.36 1.93 59.01 -0.93 -0.1445
5
HCLTECH &
WIPRO 51.82 0.93 38.89 0.07
50.9149
6 HCLTECH & CMC 51.82 1.33 55.32 -0.33
50.665
7 HCLTECH & I-FLEX 51.82 0.26 59.01 0.74
57.1406
8 WIPRO & CMC 38.89 0.26 55.32 0.74
51.0482
9 WIPRO & I-FLEX 38.89 2.39 59.01 -1.39
10.9232
10 CMC & I-FLEX 55.32 0.03 59.01 0.97
58.8993

93

PORTFOLIO RISK AND RETURN

S.NO COMBINATION(A & B)
PORTFOLIO
RETURN
PORTFOLIO
RISK
1 INFOSYS & HCL
7.246
48.09
2 INFOSYS & WIPRO
9.72
53.43
3 INFOSYS & CMC
5.98
34.13
4 INFOSYS & I-FLEX
-0.14
35.09
5 HCLTECH & WIPRO
50.9
245.53
6 HCLTECH & CMC
50.66
260.91
7 HCLTECH & I-FLEX 57.14 276.16
8 WIPRO & CMC 51.04 257.52
9 WIPRO & I-FLEX 10.92 441.36
10 CMC & I-FLEX 58.89 283.27

94

PORTFOLIO RISK AND RETURN

FIGURE-7

-50
0
50
100
150
200
250
300
350
400
450
500
I
N
F
O
S
Y
S
&

H
C
L
I
N
F
O
S
Y
S
&

I
N
F
O
S
Y
S
&

C
M
C
I
N
F
O
S
Y
S
&

I
-
F
L
E
X
H
C
L
T
E
C
H
&

H
C
L
T
E
C
H
&

C
M
C
H
C
L
T
E
C
H
&

I
-
F
L
E
X
W
I
P
R
O

&

C
M
C
W
I
P
R
O

&

I
-
F
L
E
X
C
M
C

&

I
-
F
L
E
X
1 2 3 4 5 6 7 8 9 10
PORTFOLIO RETURN
PORTFOLIO RISK
95

PORTFOLIO SELECTION

Portfolio analysis provided the input for next phase in portfolio management, which is
portfolio selection. The proper goal of portfolio construction is to generate a portfolio that
provided the highest returns at a given level of risk. These inputs from portfolio analysis can
be used to identify the set of efficient portfolios. From this the optimal portfolio in a
disciplined and objective way.
So, out of the various combinations (related to 5 companies), the optimal portfolio is
INFOSYS & CMC, as this portfolio has minimum risk of 34.13% with maximum return of
5.98%. Hence, we can say that it is better to invest in these portfolios.

PORTFOLIO REVISION
Economy and financial markets are dynamic changes take place almost daily. As time passes
securities which were once attractive may lease to be so. New securities with promises of
high return and low risk may emerge. The investor now has to revise his portfolio in the light
of the developments in the market. This leads to purchase of some new securities and sale
of some of the existing securities and their proportion in the portfolio changes as a result of
the revision. The revision has to be scientifically and objectively so as to ensure the
optimally of the revised portfolio, its important as portfolio analysis and selection

96

PORTFOLIO EVALUATION

The objective of constructing a portfolio and revising it periodically is to earn maximum
returns with minimum risk. Portfolio evaluation is the process, which is concerned with
assessing the performance of the portfolio over a selected period of time in terms of return
and risk. This involves quantitative measurement of actual return realized. Alternative
measures of performance evaluation have been developed by investor and portfolio
managers for their use.

It provides a mechanism for identifying weaknesses in the investment process and
improving them. The portfolio management process is an ongoing process to portfolio
construction, continues with portfolio revision and evaluation. The evaluation provided the
necessary feedback for better designing of portfolio the next time around. Superior
performance is achieved through continual refinement of portfolio management skills

97

CONCLUSIONS & SUGGESTIONS

Before investing in shares you should look at the type of shares, you want to buy and the
way in Want to deal on the stock market.

Their main routes for investing in shares:

Invest your capital in a single company.
Invest your capital in number of different companies, a portfolio of shares.
Invest indirectly and spread your risk through collective investments such as
investment trusts and unit trust.

98

INVEST IN SHARES:

Public companies issue shares, which allow investors to buy a part of a particular company
Share ownership entitles you to part of the company Profits of dividends are paid. Shares
may be classified in a range from conservative to speculative. Blue chip is often used to
describe the highest quality and shares, as they are shares in companies with a proven track
record, producing profits in good times and bad. They usually set the level of the market. All
shares are affected by share market fluctuation. Individual share process also vary
Based on supply and demand from sellers and buyers. Information about shares listed on
the stock exchange is printed largely daily in news papers.
You can buy and sell shares listed on the stock exchange through a stockbroker.
When you buy a parcel of shares, you receive a CHESS statement of holdings form the
Company, showing the number of shares you own and the date you bought them. As a
share holder you have to say in the companys future through voting rights, you will be
Keep informed about the company through its annual reports and other correspondence.

99

THINGS TO CONSIDER:

Share prices fall as well as rise. Large losses may occur, particularly if shares are sold
when market has dropped.
If you are happy with the gains made with your share and are concerned about their
Future value, you could sell them and realize your profit. If you retain them with a
view to profit further and the market value drops, it is important to remember this
loss is only on paper unless you sell.
Incomes from dividends may vary, when profits are low, dividends may be low or
even Nil.
Unless you plan to actively trade your shares, you should consider them a long term
investment
You need to keep careful records, cecause capital gains tax collections can become
complex, especially in a dividend reinvestment paid.

100

THINGS TO REMEMBER:

Remember, shares are not short term investment; usually the best returns will be
gained over the medium and long term.
Past performance is not a reliable guide to future performance.
As with any investment that offers capital growth, wide fluctuations in value can
occur.
Spread you share holdings to include different companies across different markets
sectors, such as industry, mining of finance. This helps reduce the risk.
Ask your stock broker for information about the companys profile, performance
history and economic forecasts before buying or selling any shares. Much of his
information is also now available on various INTERNET site.
Balance of the proportion of share in your overall investment portfolio with the level
of risk you are prepared to take. If a company goes into liquidation, shareholders are
the last to be paid.
Remember that event the most thoroughly research information research
information and advice given with the best intention may still result in a loss.

101

DOS and DONTS:

The time spent increasing your knowledge will pay dividends later:
At the end of the day, it is your money and you owe it to yourself to know where and
why it is being invested. Use resource available today, take a couse, read books,
browse the internet club, read newspapers and company Annual General Meetings.
Almost the first & last rule( DIVERSIFY):
Make sure your investments are diversified. This means including in your portfolio
different assets classes such as property, shares and fixed interest, different
industries(to shield against economic impact on one category) and different
countries ( to take into account global cycles, economic dynamics and different
exchange rates).
Start conservatively:
If you are sure just starting out, build a firm base around Blue chip share and gain
experience form this. Investing in reputable managed funds is also as excellent way
to build a diversified portfolio without selecting specific securities

102

CHAPTER-5

- FINDINGS
- SUGGESTIONS
- CONCLUSION
- BIBLOGRAPHY

103

FINDINGS:

1. With the reference to the Portfolio investments, the efficient portfolio is a well
diversified investment.
2. INFOSYS & HCL having a risk is 48.09 and the return is 7.246.
3. INFOSYS & WIPRO having a risk is 53.43 and the return is 9.72.
4. INFOSYS & CMC having a risk is 34.13 and the return is 5.98.
5. INFOSYS & I-FLEX having a risk are 35.09 and the return is -0.14.
6. HCLTECH & WIPRO having a risk is 245.53 and the return is 50.9.
7. HCLTECH & CMC having a risk is 260.91 and the return is 50.66.
8. HCLTECH & I-FLEX having a risk is 276.16 and the return is 57.14.
9. WIPRO & CMC having a risk is 257.52 and the return is 51.04.
10. WIPRO & I-FLEX having a risk is 441.36 and the return is 10.92.
11. CMC & I-FLEX having a risk is 283.27 and the return is 58.89.

104

SUGGESTIONS:

1. Indian regulatory system and role of SEBI should be increased for
securing interest of investors and other plays.
2. Government should implement various measures to improve financial system.
3. When different assets are added to the Portfolio, the total risk tends to decrease.
4. Investor decision is solely depends on the expected return & variance of return only.
5. MOFS should expand the investor market, brokers network, for long benefit.
6. For given level of risk investor prefers higher return to lower return. Likewise for a
given level of return investor prefers lower risk than higher risk.
7. In constructing Portfolio less correlated sectors selection will reduce the risk i.e., less
correlation between two companies will reduce risk.
8. For better results minimum risk portfolio weights should be implemented.

105

CONCLUSION:

From above study we can conclude the following things.

In the above calculations, the two portfolios INFOSYS & CMC contains LOW RISK
(34.13) HIGH RETURN (5.98).

For any investment the factors to be considered are return in investment and risk
associated that investment diversified in the investment in to different assets can
reduced the risk by following Modern Portfolio Theorem Risk can be reduced for a
required return.

106

BIBLOGRAPHY:
1. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
- Donald. E. Fisher, Ronald. J. Jordan
2. INVESTMENTS
-William.F.Sharpe,Gordon,J.Alexander and
Jeffery. Bailey.
3. PORTFOLIO MANAGEMENT
- Strong R.A.
WEB REFFERENCES:
http;//www.nseindia.com
http;//www.bseindia.com
http;//www.economictimes.com
http;//www.answers.com
http;//www.investsmartindia.com

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