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For the Indian investors, the year belonged to stock markets, which have been shining bright
when it comes to generating wealth, while the glitter of gold and silver faded for the second
straight year in 2014.
Measured by BSE Sensex, stock market has generated a positive return of about 9 per cent
for investors in 2014, while gold prices fell by about three per cent and its poorer cousin
silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for two
consecutive years now vis-a-vis equities, shows an analysis of their price movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid anticipated
tapering over last several months combined with FII investment in Indian stocks.
"This movement has been equally true for global markets as 2014 saw gold losing its shine
and markets coming back with a bang," said Jayant Manglik, President Retail Distribution,
Religare Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.
Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.
In 2013, the Sensex had gained over 25 per cent, which was nearly double the gain of about
13.95 per cent in gold. The appreciation in silver was at about 13.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2014 when RBI took some strong
measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets, including
stocks in Indian markets. However, assurance by the Fed about planned and staggered
tapering in stimulus once again proved to be a catalyst for the markets."

"External factors affecting Indian stocks seem to be negative for the first half of 2015 due to
continued strength of the US dollar and benign in the second half. By that time, elections too
would have taken place. A combination of domestic and international factors point to a
bumper closing of Indian markets in 2015 with double-digit percentage growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and 17
per cent, respectively, in 2014.
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly USD
20 billion) till December 19. In 2013, they had pumped in Rs 1.28 lakh crore (USD 24.37


Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used
to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by s and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased
to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous
slump began (for example, of Bombay Share which had touched Rs 2850 could only be sold
at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in Bombay,
the "Native Share and Stock Brokers' Association" (which is alternatively known as " The
Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it
was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers
formed "The Ahmadabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta.
After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which
was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between
1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange

In the beginning of the twentieth century, the industrial revolution was on the way in India
with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company
Limited in 1907, an important stage in industrial advancement under Indian enterprise was

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally
enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100
members. However, when boom faded, the number of members stood reduced from 100 to 3,
by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated. In
1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the
Punjab Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stock market as the only outlet for their activities. They were
anxious to join the trade and their number was swelled by numerous others. Many new
associations were constituted for the purpose and Stock Exchanges in all parts of the country
were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)
and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the
Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.

Post-independence Scenario

Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange
was closed during partition of the country and later migrated to Delhi and merged with Delhi
Stock Exchange.

Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established
exchanges, were recognized under the Act. Some of the members of the other Associations
were required to be admitted by the recognized stock exchanges on a concessional basis, but
acting on the principle of unitary control, all these pseudo stock exchanges were refused
recognition by the Government of India and they thereupon ceased to function.

Thus, during early sixties there were eight recognized stock exchanges in India (mentioned
above). The number virtually remained unchanged, for nearly two decades. During eighties,
however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar
Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange
Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock
Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh
Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989),
Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange
Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently
established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one
recognized stock exchanges in India excluding the Over The Counter Exchange of India
Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital of
listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and
this was due to the favouring government policies towards security market industry.

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited companies.
They are broadly divided into two categories, namely, specified securities (forward list) and
non-specified securities (cash list). Equity shares of dividend paying, growth-oriented
companies with a paid-up capital of atleast Rs.50 million and a market capitalization of
atleast Rs.100 million and having more than 20,000 shareholders are, normally, put in the
specified group and the balance in non-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery
transactions "for delivery and payment within the time or on the date stipulated when entering
into the contract which shall not be more than 15 days following the date of the contract" :
and (b) forward transactions "delivery and payment can be extended by further period of 15
days each so that the overall period does not exceed 90 days from the date of the contract".
The latter is permitted only in the case of specified shares. The brokers who carry over the
outstandings pay carry over charges (cantango or backwardation) which are usually
determined by the rates of interest prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell securities for
his clients on a commission basis and also can act as a trader or dealer as a principal, buy and
sell securities on his own account and risk, in contrast with the practice prevailing on New
York and London Stock Exchanges, where a member can act as a jobber or a broker only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many
functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long
settlement periods and benami transactions, which affected the small investors to a great
extent. To provide improved services to investors, the country's first ringless, scripless,
electronic stock exchange - OTCEI - was created in 1992 by country's premier financial
institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India,
Industrial Development of India, SBI Capital Markets, Industrial Finance Corporation of
India, General Insurance Corporation and its subsidiaries and Can Financial Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded on the
OTCEI are classified into:

 Listed Securities - The shares and debentures of the companies listed on the OTC can
be bought or sold at any OTC counter all over the country and they should not be
listed anywhere else

 Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded

 Initiated debentures - Any equity holding atleast one lakh debentures of a particular
scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The original
certificate will be safely with the custodian. But, a counter receipt is generated out at the
counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange. The
difference is that the delivery and payment procedure will be completed within 15 days.

Compared to the traditional Exchanges, OTC Exchange network has the following

 OTCEI has widely dispersed trading mechanism across the country which provides
greater liquidity and lesser risk of intermediary charges.

 Greater transparency and accuracy of prices is obtained due to the screen-based

scripless trading.

 Since the exact price of the transaction is shown on the computer screen, the investor
gets to know the exact price at which s/he is trading.

 Faster settlement and transfer process compared to other exchanges.

 In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes a
longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors
are gradually becoming aware of the manifold advantages of the OTCEI.

National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock
market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development of India, Industrial Credit and Investment
Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations,
selected commercial s and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper, certificate
of deposit, etc.

There are two kinds of players in NSE:

(a) trading members and

(b) participants.

Recognized members of NSE are called trading members who trade on behalf of themselves
and their clients. Participants include trading members and large players like s who take
direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism which
adopts the principle of an order-driven market. Trading members can stay at their offices and
execute the trading, since they are linked through a communication network. The prices at
which the buyer and seller are willing to transact will appear on the screen. When the prices
match the transaction will be completed and a confirmation slip will be printed at the office
of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:

 NSE brings an integrated stock market trading network across the nation.

 Investors can trade at the same price from anywhere in the country since inter-market
operations are streamlined coupled with the countrywide access to the securities.

 Delays in communication, late payments and the malpractice’s prevailing in the

traditional trading mechanism can be done away with greater operational efficiency
and informational transparency in the stock market operations, with the support of
total computerized network.
Unless stock markets provide professionalized service, small investors and foreign investors
will not be interested in capital market operations. And capital market being one of the major
source of long-term finance for industrial projects, India cannot afford to damage the capital
market path. In this regard NSE gains vital importance in the Indian capital market system.


Often, in the economic literature we find the terms ‘development’ and ‘growth’ are used
interchangeably. However, there is a difference. Economic growth refers to the sustained
increase in per capita or total income, while the term economic development implies
sustained structural change, including all the complex effects of economic growth. In other
words, growth is associated with free enterprise, where as development requires some sort of
control and regulation of the forces affecting development. Thus, economic development is a
process and growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like India to
take the country in the path of economic development to attain economic growth.

Why Economic Planning for India?

One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels of
income, saving and investment. However, increasing the rate of capital formation in India is
beset with a number of difficulties. People are poverty ridden. Their capacity to save is
extremely low due to low levels of income and high propensity to consume. Therefor, the rate
of investment is low which leads to capital deficiency and low productivity. Low productivity
means low income and the vicious circle continues. Thus, to break this vicious economic
circle, planning is inevitable for India.

The market mechanism works imperfectly in developing nations due to the ignorance and
unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is
very vital. In India, a large portion of the economy is non-monitised; the product, factors of
production, money and capital markets is not organized properly. Thus the prevailing price
mechanism fails to bring about adjustments between aggregate demand and supply of goods
and services. Thus, to improve the economy, market imperfections has to be removed;
available resources has to be mobilized and utilized efficiently; and structural rigidities has to
be overcome. These can be attained only through planning.

In India, capital is scarce; and unemployment and disguised unemployment is prevalent.

Thus, where capital was being scarce and labour being abundant, providing useful
employment opportunities to an increasing labour force is a difficult exercise. Only a
centralized planning model can solve this macro problem of India.

Further, in a country like India where agricultural dependence is very high, one cannot ignore
this segment in the process of economic development. Therefore, an economic development
model has to consider a balanced approach to link both agriculture and industry and lead for a
paralleled growth. Not to mention, both agriculture and industry cannot develop without
adequate infrastructural facilities which only the state can provide and this is possible only
through a well carved out planning strategy. The government’s role in providing
infrastructure is unavoidable due to the fact that the role of private sector in infrastructural
development of India is very minimal since these infrastructure projects are considered as
unprofitable by the private sector.

Further, India is a clear case of income disparity. Thus, it is the duty of the state to reduce the
prevailing income inequalities. This is possible only through planning.

Planning History of India

The development of planning in India began prior to the first Five Year Plan of independent
India, long before independence even. The idea of central directions of resources to overcome
persistent poverty gradually, because one of the main policies advocated by nationalists early
in the century. The Congress Party worked out a program for economic advancement during
the 1920’s, and 1930’s and by the 1938 they formed a National Planning Committee under
the chairmanship of future Prime Minister Nehru. The Committee had little time to do
anything but prepare programs and reports before the Second World War which put an end to
it. But it was already more than an academic exercise remote from administration.
Provisional government had been elected in 1938, and the Congress Party leaders held
positions of responsibility. After the war, the Interim government of the pre-independence
years appointed an Advisory Planning Board. The Board produced a number of somewhat
disconnected Plans itself. But, more important in the long run, it recommended the
appointment of a Planning Commission.

The Planning Commission did not start work properly until 1950. During the first three years
of independent India, the state and economy scarcely had a stable structure at all, while
millions of refugees crossed the newly established borders of India and Pakistan, and while
ex-princely states (over 500 of them) were being merged into India or Pakistan. The Planning
Commission as it now exists, was not set up until the new India had adopted its Constitution
in January 1950.

Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :

 To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nation’s requirement.

 To formulate a plan for the most effective and balanced use of the country’s

 Having determined the priorities, to define the stages in which the plan should be
carried out, and propose the allocation of resources for the completion of each stage.

 To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political situation,
should be established for the successful execution of the Plan.

 To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

 To appraise from time to time the progress achieved in the execution of each stage of
the Plan and recommend the adjustments of policy and measures that such appraisals
may show to be necessary.

 To make such interim or auxiliary recommendations as appear to it to be appropriate

either for facilitating the discharge of the duties assigned to it or on a consideration of
the prevailing economic conditions, current policies, measures and development
programs; or on an examination of such specific problems as may be referred to it for
advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

 Increasing National Income

 Reducing inequalities in the distribution of income and wealth

 Elimination of poverty

 Providing additional employment; and

 Alleviating bottlenecks in the areas of : agricultural production, manufacturing

capacity for producer’s goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year Plans.
Approximately, economic growth has been targeted at a rate of five per cent per annum. High
priority to economic growth in Indian Plans looks very much justified in view of long period
of stagnation during the British rule

Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely
towards attaining diverse goals of the customer through varied services. Creating a plethora
of opportunities for the customer by opening up investment vistas backed by research-based
advisory services. Here, growth knows no limits and success recognizes no boundaries.
Helping the customer create waves in his portfolio and empowering the investor completely
It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success
rate as a wealth management and wealth accumulation option. The difference between
unpredictability and a safety anchor in the market is provided by in-depth knowledge of
market functioning and changing trends, planning with foresight and choosing one's options
with care. This is what we provide in our Stock Broking services.

We offer services that are beyond just a medium for buying and selling stocks and shares.
Instead we provide services which are multi dimensional and multi-focused in their scope.
There are several advantages in utilizing our Stock Broking services, which are the reasons
why it is one of the best in the country.

We offer trading on a vast platform National Stock Exchange and Bombay Stock Exchange.
More importantly, we make trading safe to the maximum possible extent, by accounting for
several risk factors and planning accordingly. We are assisted in this task by our in-depth
research, constant feedback and sound advisory facilities. Our highly skilled research team,
comprising of technical analysts as well as fundamental specialists, secure result-oriented
information on market trends, market analysis and market predictions. This crucial
information is given as a constant feedback to our customers, through daily reports delivered
thrice daily ; The Pre-session Report, where market scenario for the day is predicted, The
Mid-session Report, timed to arrive during lunch break , where the market forecast for the
rest of the day is given and The Post-session Report, the final report for the day, where the
market and the report itself is reviewed. To add to this repository of information, we publish a
monthly magazine "Karvy The Finapolis", which analyzes the latest stock market trends and
takes a close look at the various investment options, and products available in the market,
while a weekly report, called "Karvy Bazaar Baatein", keeps you more informed on the
immediate trends in the stock market. In addition, our specific industry reports give
comprehensive information on various industries. Besides this, we also offer special portfolio
analysis packages that provide daily technical advice on scrips for successful portfolio
management and provide customized advisory services to help you make the right financial
moves that are specifically suited to your portfolio.

Our Stock Broking services are widely networked across India, with the number of our
trading terminals providing retail stock broking facilities. Our services have increasingly
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networth or otherwise, with equal dedication and competence.

But true to our spirit, this success is not our final destination, but just a platform to launch
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stock management.

Over the years we have ensured that the trust of our customers is our biggest returns. Factors
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To empower the investor further we have made serious efforts to ensure that our research
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Our foray into commodities broking has been path breaking and we are in the process of
converting existing traders in commodities into the more organized mainstream of trading in
commodity futures, both as a trading and risk hedging mechanism.

In the future, our focus will be on the emerging businesses and to meet this objective, we
have enhanced our manpower and revitalized our knowledge base with enhances focus on
Futures and Options as well as the commodities business.


The onset of the technology revolution in financial services Industry saw the emergence of
Karvy as an electronic custodian registered with National Securities Depository (NSDL)
and Central Securities Depository (CSDL) in 1998. Karvy set standards enabling further
comfort to the investor by promoting paperless trading across the country and emerged as the
top 3 Depository Participants in the country in terms of customer serviced.

Offering a wide trading platform with a dual membership at both NSDL and CDSL, we are a
powerful medium for trading and settlement of dematerialized shares. We have established
live DPMs, Internet access to accounts and an easier transaction process in order to offer
more convenience to individual and corporate investors. A team of professional and the latest
technological expertise allocated exclusively to our demat division including technological
enhancements like SPEED-e, make our response time quick and our delivery impeccable. A
wide national network makes our efficiencies accessible to all.

Karvy Consultants Limited was started in the year 1981, with the vision and enterprise of a
small group of practicing Chartered Accountants. Initially it was started with consulting and
financial accounting automation, and carved inroads into the field of registry and share
accounting by 1985. Since then, it has utilized its experience and superlative expertise to go
from strength to strength…to better its services, to provide new ones, to innovate, diversify
and in the process, evolved as one of India’s premier integrated financial service enterprise.
Today, Karvy has access to millions of Indian shareholders, besides companies, s,
financial institutions and regulatory agencies. Over the past one and half decades, Karvy has
evolved as a veritable link between industry, finance and people. In January 1998, Karvy
became the first Depository Participant in Andhra Pradesh. An ISO 9002 company, Karvy's
commitment to quality and retail reach has made it an integrated financial services company.

KARVY, is a premier integrated financial services provider, and ranked among the top five in
the country in all its business segments, services over 17 million individual investors in
various capacities, and provides investor services to over 300 corporates, comprising the who
is who of Corporate India. KARVY covers the entire spectrum of financial services such as
Stock broking, Depository Participants, Distribution of financial products - mutual funds,
bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal Finance
Advisory Services, Merchant ing & Corporate Finance, placement of equity, IPOs, among
others. Karvy has a professional management team and ranks among the best in technology,
operations and research of various industrial segments.
Today, Karvy service over 6.5 lakhs customer accounts spread across over 250 cities/towns
in India and serves more than 85 million shareholders across 7500 corporate clients and
makes its presence felt in over 16 countries across 5 continents. All of Karvy services are also
backed by strong quality aspects, which have helped Karvy to be certified as an ISO 9002
company by DNV.


 Among the top 5 stock brokers in India (4% of NSE volumes)

 India's No. 1 Registrar & Securities Transfer Agents
 Among the top 3 Depository Participants
 Largest Network of Branches & Business Associates
 ISO 9001:2000 certified operations by DNV
 Among top 10 Investment ers
 Largest Distributor of Financial Products
 Adjudged as one of the top 50 IT uses in India by MIS Asia
 Full Fledged IT driven operations
 First ISO-9002 Certified Registrars in India
 Ranked as “The Most Admired Registrar” by MARG
 Largest mobilize of funds as per PRIME DATABASE
 First depository participant from Andhra Pradesh.
 Handled over 500 public issues as Registrars.
 Handling the Reliance account, which accounts for nearly 10 million account holders?

Range of services:

 Stock broking services

 Distribution of Financial Products (investments & loan products)
 Depository Participant services
 IT enabled services
 Personal finance Advisory Services
 Private Client Group
 Debt market services
 Insurance & merchant ing
 Mutual Fund Services
 Corporate Shareholder Services
 Other global services

Besides these, they also offer special portfolio analysis packages that provide daily technical
advice on scrips for successful portfolio management and provide customized advisory
services to help customers make the right financial moves that are specifically suited to their
portfolio. They are continually engaged in designing the right investment portfolio for each
customer according to individual needs and budget considerations.

Karvy Consultants limited deals in Registrar and Investment Services. Karvy is one of the
early entrants registered as Depository Participant with NSDL (National Securities
Depository Limited), the first Depository in the country and then with CDSL (Central
Depository Services Limited).

Karvy stock broking is a member of National Stock Exchange (NSE), The Bombay Stock
Exchange (BSE), and The Hyderabad Stock Exchange (HSE). The services provided are
multi dimensional and multi-focused in their scope: to analyze the latest stock market trends
and to take a close looks at the various investment options and products available in the
market. Besides this, they also offer special portfolio analysis packages.

The paradigm shift from pure selling to knowledge based selling drives the business
today. The monthly magazine, Finapolis, provides up-dated market information on market
trends, investment options, opinions etc. Thus empowering the investor to base every
financial move on rational thought and prudent analysis and embark on the path to wealth

Karvy is recognized as a leading merchant er in the country, Karvy is registered with SEBI as
a Category I merchant er. This reputation was built by capitalizing on opportunities in
corporate consolidations, mergers and acquisitions and corporate restructuring.

Karvy has a tie up with the world’s largest transfer agent, the leading Australian
company, Computer share Limited. It has attained a position of immense strength as a
provider of across-the-board transfer agency services to AMCs, Distributors and Investors.
Besides providing the entire back office processing, it also provides the link between various
Mutual Funds and the investor.

Karvy global services limited covers ing, Financial and Insurance Services (BFIS), Retail
and Merchandising, Leisure and Entertainment, Energy and Utility and Healthcare sectors.

Karvy comtrade limited trades in all goods and products of agricultural and mineral origin
that include lucrative commodities like gold and silver and popular items like oil, pulses and
cotton through a well-systematized trading platform.

Karvy Insurance Broking Pvt. . provides both life and non-life insurance products to retail
individuals, high net-worth clients and corporates. With Indian markets seeing a sea change,
both in terms of investment pattern and attitude of investors, insurance is no more seen as
only a tax saving product but also as an investment product.

Karvy Inc. is located in New York to provide various financial products and information
on Indian equities to potential foreign institutional investors (FIIs) in the region. This entity
would extensively facilitate various businesses of Karvy viz., stock broking (Indian equities),
research and investment by QIBs in Indian markets for both secondary and primary offerings.

.Quality Policy:
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial
services. In the process, Karvy will strive to exceed Customer's expectations.
Quality Objectives

As per the Quality Policy, Karvy will:

 Build in-house processes that will ensure transparent and harmonious relationships
with its clients and investors to provide high quality of services.
 Establish a partner relationship with its investor service agents and vendors that will
help in keeping up its commitments to the customers.
 Provide high quality of work life for all its employees and equip them with adequate
knowledge & skills so as to respond to customer's needs.
 Continue to uphold the values of honesty & integrity and strive to establish
unparalleled standards in business ethics.
 Use state-of-the art information technology in developing new and innovative
financial products and services to meet the changing needs of investors and clients.
 Strive to be a reliable source of value-added financial products and services and
constantly guide the individuals and institutions in making a judicious choice of same.

Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and
regulatory authorities) proud and satisfied

A security is a fungible, negotiable instrument representing financial value. Securities are
broadly categorized into debt securities (such as banknotes, bonds and debentures) and equity
securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options
and swaps. The company or other entity issuing the security is called the issuer. A country's
regulatory structure determines what qualifies as a security. For example, private investment
pools may have some features of securities, but they may not be registered or regulated as
such if they meet various restrictions.

Securities may be represented by a certificate or, more typically, "non-certificated", that is in

electronic or "book entry" only form. Certificates may be bearer, meaning they entitle the
holder to rights under the security merely by holding the security, or registered, meaning they
entitle the holder to rights only if he or she appears on a security register maintained by the
issuer or an intermediary. They include shares of corporate stock or mutual funds, bonds
issued by corporations or governmental agencies, stock options or other options, limited
partnership units, and various other formal investment instruments that are negotiable and
fungible. Corporations or governmental agencies, stock options or other options, limited
partnership units, and various other formal investment instruments those are negotiable and


A portfolio is a collection of securities since it is really desirable to invest

the entire funds of an individual or an institution or a single security, it is essential that
every security be viewed in a portfolio context. Thus it seems logical that the expected return
of the portfolio. Portfolio analysis considers the determine of future risk and return in holding
various blends of individual securities

Portfolio expected return is a weighted average of the expected return of the

individual securities but portfolio variance, in short contrast, can be something reduced
portfolio risk is because risk depends greatly on the co-variance among returns of individual
securities. Portfolios, which are combination of securities, may or may not take on the
aggregate characteristics of their individual parts.
Since portfolios expected return is a weighted average of the expected return of its
securities, the contribution of each security the portfolio’s expected returns depends on its
expected returns and its proportionate share of the initial portfolio’s market value. It follows
that an investor who simply wants the greatest possible expected return should hold one
security; the one which is considered to have a greatest expected return. Very few investors
do this, and very few investment advisors would counsel such and extreme policy instead,
investors should diversify, meaning that their portfolio should include more than one security.


The main objective of investment portfolio management is to maximize the

returns from the investment and to minimize the risk involved in investment. Moreover, risk
in price or inflation erodes the value of money and hence investment must provide a
protection against inflation.

Secondary objectives:
The following are the other ancillary objectives:

 Regular return.
 Stable income.
 Appreciation of capital.
 More liquidity.
 Safety of investment.
 Tax benefits.
Portfolio management services helps investors to make a wise choice between
alternative investments with pit any post trading hassle’s this service renders optimum returns
to the investors by proper selection of continuous change of one plan to another plane with in
the same scheme, any portfolio management must specify the objectives like maximum
return’s, and risk capital appreciation, safety etc in their offer.

Return From the angle of securities can be fixed income securities such as:
(a) Debentures –partly convertibles and non-convertibles debentures debt with tradable
(b) Preference shares
(c) Government securities and bonds
(d) Other debt instruments

(2) Variable income securities

(a) Equity shares
(b) Money market securities like treasury bills commercial papers etc.

Portfolio managers has to decide up on the mix of securities on the

basis of contract with the client and objectives of portfolio


Portfolio management is a process encompassing many activities of investment in assets

and securities. It is a dynamic and flexible concept and involves regular and systematic
analysis, judgment and action. The objective of this service is to help the unknown and
investors with the expertise of professionals in investment portfolio management. It involves
construction of a portfolio based upon the investor’s objectives, constraints, preferences for
risk and returns and tax liability. The portfolio is reviewed and adjusted from time to time in
tune with the market conditions. The evaluation of portfolio is to be done in terms of targets
set for risk and returns. The changes in the portfolio are to be effected to meet the changing

Portfolio construction refers to the allocation of surplus funds in hand among a variety of
financial assets open for investment. Portfolio theory concerns itself with the principles
governing such allocation. The modern view of investment is oriented more go towards the
assembly of proper combination of individual securities to form investment portfolio. A
combination of securities held together will give a beneficial result if they grouped in a
manner to secure higher returns after taking into consideration the risk elements.

The modern theory is the view that by diversification risk can be reduced.
Diversification can be made by the investor 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
constraints of risk and returns


Investment management is a complex activity which may be broken down into the
following steps:

1) Specification of investment objectives and constraints:

The typical objectives sought by investors are current income, capital

appreciation, and safety of principle. The relative importance of these objectives should be
specified further the constraints arising from liquidity, time horizon, tax and special
circumstances must be identified.

2) choice of the asset mix :

The most important decision in portfolio management is the asset mix decision very
broadly; this is concerned with the proportions of ‘stocks’ (equity shares and units/shares of
equity-oriented mutual funds) and ‘bonds’ in the portfolio.

The appropriate ‘stock-bond’ mix depends mainly on the risk tolerance and investment
horizon of the investor.


Portfolio management is on-going process involving the following basic tasks:

 Identification of the investor’s objectives, constraints and preferences.

 Strategies are to be developed and implemented in tune with investment policy
 Review and monitoring of the performance of the portfolio.
 Finally the evaluation of the portfolio
Risk is uncertainty of the income /capital appreciation or loss or both. All investments
are risky. The higher the risk taken, the higher is the return. But proper management of risk
involves the right choice of investments whose risks are compensating. The total risks of two
companies may be different and even lower than the risk of a group of two companies if their
companies are offset by each other.


Business risk:
As a holder of corporate securities (equity shares or debentures), you are exposed
to the risk of poor business performance. This may be caused by a variety of factors like
heightened competition, emergence of new technologies, development of substitute products,
shifts in consumer preferences, inadequate supply of essential inputs, changes in
governmental policies, and so on.

Interest rate risk:

The changes in interest rate have a bearing on the welfare on investors. As the
interest rate goes up, the market price of existing firmed income securities falls, and vice
versa. This happens because the buyer of a fixed income security would not buy it at its par
value of face value o its fixed interest rate is lower than the prevailing interest rate on a
similar security. For example, a debenture that has a face value of RS. 100 and a fixed rate of
13% will sell a discount if the interest rate moves up from, say 13% to 15%.while the chances
in interest rate have a direct bearing on the prices of fixed income securities, they affect
equity prices too, albeit some what indirectly.

The two major types of risks are:

 Systematic or market related risk.

 Unsystematic or company related risks.

Systematic risks affected from the entire market are (the problems, raw material
availability, tax policy or government policy, inflation risk, interest risk and financial risk). It
is managed by the use of Beta of different company shares.
The unsystematic risks are mismanagement, increasing inventory, wrong financial policy,
defective marketing etc. this is diversifiable or avoidable because it is possible to eliminate or
diversify away this component of risk to a considerable extent by investing in a large
portfolio of securities. The unsystematic risk stems from inefficiency magnitude of those
factors different form one company to another.


Each security in a portfolio contributes return in the proportion of its investments

in security. Thus the portfolio expected return is the weighted average of the expected return,
from each of the securities, with weights representing the proportions share of the security in
the total investment. Why does an investor have so many securities in his portfolio? If the
security ABC gives the maximum return why not he invests in that security all his funds and
thus maximize return? The answer to this questions lie in the investor’s perception of risk
attached to investments, his objectives of income, safety, appreciation, liquidity and hedge
against loss of value of money etc. this pattern of investment in different asset categories,
types of investment, etc., would all be described under the caption of diversification, which
aims at the reduction or even elimination of non-systematic risks and achieve the specific
objectives of investors


The expected returns from individual securities carry some degree of risk. Risk on
the portfolio is different from the risk on individual securities. The risk is reflected in the
variability of the returns from zero to infinity. Risk of the individual assets or a portfolio is
measured by the variance of its return. The expected return depends on the probability of the
returns and their weighted contribution to the risk of the portfolio. These are two measures of
risk in this context one is the absolute deviation and other standard deviation.

Most investors invest in a portfolio of assets, because as to spread risk by not

putting all eggs in one basket. Hence, what really matters to them is not the risk and return of
stocks in isolation, but the risk and return of the portfolio as a whole. Risk is mainly reduced
by Diversification.

All investment has some risk. Investment in shares of companies has its own risk or
uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or
depreciation of share prices, losses of liquidity etc

The risk over time can be represented by the variance of the returns. While the return over
time is capital appreciation plus payout, divided by the purchase price of the share.

Normally, the higher the risk that the investor takes, the higher is the return.
There is, how ever, a risk less return on capital of about 13% which is the bank, rate charged
by the R.B.I or long term, yielded on government securities at around 14% to 15%. This risk
less return refers to lack of variability of return and no uncertainty in the repayment or
capital. But other risks such as loss of liquidity due to parting with money etc., may however
remain, but are rewarded by the total return on the capital. Risk-return is subject to variation
and the objectives of the portfolio manager are to reduce that variability and thus reduce the
risky by choosing an appropriate portfolio.

Traditional approach advocates that one security holds the better, it is according to
the modern approach diversification should not be quantity that should be related to the
quality of scripts which leads to quality of portfolio.
Experience has shown that beyond the certain securities by adding more securities expensive.

Simple diversification reduces:

An asset’s total risk can be divided into systematic plus unsystematic risk, as shown below:

Systematic risk (undiversifiable risk) + unsystematic risk (diversified risk) =Total risk
=Var (r).

Unsystematic risk is that portion of the risk that is unique to the firm (for example, risk due to
strikes and management errors.) Unsystematic risk can be reduced to zero by simple

Simple diversification is the random selection of securities that are to be added to a

portfolio. As the number of randomly selected securities added to a portfolio is increased, the
level of unsystematic risk approaches zero. However market related systematic risk cannot be
reduced by simple diversification. This risk is common to all securities.

Persons involved in portfolio management:

Are the people who are interested in investing their funds?

Portfolio managers:

Is a person who is in the wake of a contract agreement with a client, advices or directs
or undertakes on behalf of the clients, the management or distribution or management of the
funds of the client as the case may be.

Discretionary portfolio manager:

Means a manager who exercise under a contract relating to a portfolio
management exercise any degree of discretion as to the investment or management of
portfolio or securities or funds of clients as the case may be
The relation ship between an investor and portfolio manager is of a highly interactive

The portfolio manager carries out all the transactions pertaining to the investor
under the power of attorney during the last two decades, and increasing complexity was
witnessed in the capital market and its trading procedures in this context a key
(uninformed) investor formed ) investor found him self in a tricky situation , to keep track of
market movement ,update his knowledge, yet stay in the capital market and make money ,
there fore in looked forward to resuming help from portfolio manager to do the job for him
.The portfolio management seeks to strike a balance between risk’s and return.
The generally rule in that greater risk more of the profits but S.E.B.I. in its
guidelines prohibits portfolio managers to promise any return to investor.
Portfolio management is not a substitute to the inherent risk’s associated with equity

Who can be a portfolio manager?

Only those who are registered and pay the required license fee are eligible to operate
as portfolio managers. An applicant for this purpose should have necessary infrastructure
with professionally qualified persons and with a minimum of two persons with experience in
this business and a minimum net worth of Rs. 50lakh’s. The certificate once granted is valid
for three years. Fees payable for registration are Rs 2.5lakh’s every for two years and
Rs.1lakh’s for the third year. From the fourth year onwards, renewal fees per annum are Rs
75000. These are subjected to change by the S.E.B.I.

The S.E.B.I. has imposed a number of obligations and a code of conduct on them.
The portfolio manager should have a high standard of integrity, honesty and should not have
been convicted of any economic offence or moral turpitude. He should not resort to rigging
up of prices, insider trading or creating false markets, etc. their books of accounts are subject
to inspection to inspection and audit by S.E.B.I... The observance of the code of conduct and
guidelines given by the S.E.B.I. are subject to inspection and penalties for violation are
imposed. The manager has to submit periodical returns and documents as may be required by
the SEBI from time-to- time.

.Functions of portfolio managers:

Advisory role: advice new investments, review the existing ones, identification of
objectives, recommending high yield securities etc.

Conducting market and economic service: this is essential for recommending good
yielding securities they have to study the current fiscal policy, budget proposal;
individual policies etc further portfolio manager should take in to account the credit
policy, industrial growth, foreign exchange possible change in corporate law’s etc.

Financial analysis: he should evaluate the financial statement of company in order

to understand, their net worth future earnings, prospectus and strength.

Study of stock market : he should observe the trends at various stock exchange
and analysis scripts so that he is able to identify the right securities for investment

Study of industry: he should study the industry to know its future prospects,
technical changes etc, required for investment proposal he should also see the
problem’s of the industry.

Decide the type of port folio: keeping in mind the objectives of portfolio a portfolio
manager has to decide weather the portfolio should comprise equity preference
shares, debentures, convertibles, non-convertibles or partly convertibles, money
market, securities etc or a mix of more than one type of proper mix ensures higher
safety, yield and liquidity coupled with balanced risk techniques of portfolio
A portfolio manager in the Indian context has been Brokers (Big brokers)
who on the basis of their experience, market trends, Insider trader, helps the limited
knowledge persons.

Registered merchant bankers can act’s as portfolio manager’s

Investor’s must look forward, for qualification and performance and ability and research base
of the portfolio manager’s.

Technique’s of portfolio management:

As of now the under noted technique of portfolio management: are in vogue in our
1. equity portfolio: is influenced by internal and external factors the internal factors
effect the inner working of the company’s growth plan’s are analyzed with referenced
to Balance sheet, profit & loss a/c (account) of the company.
Among the external factor are changes in the government policies, Trade cycle’s,
Political stability etc.
2. equity stock analysis: under this method the probable future value of a share of a
company is determined it can be done by ratio’s of earning per share of the company
and price earnings ratio




E.P.S (earnings per share)

One can estimate trend of earning by EPS, which reflects trends of earning quality of
company, dividend policy, and quality of management.
Price earning ratio indicate a confidence of market about the company future, a high rating is
The following points must be considered by portfolio managers while analyzing the

1. Nature of the industry and its product: long term trends of industries, competition
within, and outside the industry, Technical changes, labour relations, sensitivity, to Trade
2. Industrial analysis of prospective earnings, cash flows, working capital, dividends,

3. Ratio analysis: Ratio such as debt equity ratio’s current ratio’s net worth, profit
earning ratio, return on investment, are worked out to decide the portfolio.

The wise principle of portfolio management suggests that “Buy when the market is low
or BEARISH, and sell when the market is rising or BULLISH”.

Stock market operation can be analyzed by:

a) Fundamental approach :- based on intrinsic value of share’s
b) Technical approach:-based on Dowjone’s theory, Random walk theory, etc.

Prices are based upon demand and supply of the market.

i. Traditional approach assumes that

ii. Objectives are maximization of wealth and minimization of risk.
iii. Diversification reduces risk and volatility.
iv. Variable returns, high illiquidity; etc.

Capital Assets pricing approach (CAPM) it pay’s more weight age, to risk or portfolio
diversification of portfolio.

Diversification of portfolio reduces risk but it should be based on certain assessment

such as:

Trend analysis of past share prices.

Valuation of intrinsic value of company (trend-marker moves are known for their
Uncertainties they are compared to be high, and low prompts of wave market trends are
constituted by these waves it is a pattern of movement based on past).

The following rules must be studied while cautious portfolio manager before decide to invest
their funds in portfolio’s.

1. Compile the financials of the companies in the immediate past 3 years such as turn
over, gross profit, net profit before tax, compare the profit earning of company with that
of the industry average nature of product manufacture service render and it future demand
,know about the promoters and their back ground, dividend track record, bonus shares in
the past 3 to 5 years ,reflects company’s commitment to share holders the relevant
information can be accessed from the RDC(registrant of companies)published financial
results financed quarters, journals and ledgers.

2. Watch out the high’s and lows of the scripts for the past 2 to 3 years and their timing
cyclical scripts have a tendency to repeat their performance ,this hypothesis can be true of
all other financial ,

3. The higher the trading volume higher is liquidity and still higher the chance of
speculation, it is futile to invest in such shares who’s daily movements cannot be kept
track, if you want to reap rich returns keep investment over along horizon and it will
offset the wild intra day trading fluctuation’s, the minor movement of scripts may be
ignored, we must remember that share market moves in phases and the span of each phase
is 6 months to 5 years.

a. Long term of the market should be the guiding factor to enable you to invest and
quit. The market is now bullish and the trend is likely to continue for some more

b. UN tradable shares must find a last place in portfolio apart from return; even capital
invested is eroded with no way of exit with no way of exit with inside.

How at all one should avoid such scripts in future?

(1) Never invest on the basis of an insider trader tip in a company which is not sound (insider
trader is person who gives tip for trading in securities based on prices sensitive up price
sensitive un published information relating to such security).

(2) Never invest in the so called promoter quota of lesser known company

(3) Never invest in a company about which you do not have appropriate knowledge.

(4) Never at all invest in a company which doesn’t have a stringent financial record your
portfolio should not a stagnate

(4) Shuffle the portfolio and replace the slow moving sector with active ones , investors were
shatter when the technology , media, software , stops have taken a down slight.

(5) Never fall to the magic of the scripts don’t confine to the blue chip company‘s, look out
for other portfolio that ensure regular dividends.

(6) In the same way never react to sudden raise or fall in stock market index such fluctuation
is movement minor correction’s in stock market held in consolidation of market their by
reading out a weak player often taste on wait for the dust and dim to settle to make your
move” .


Combinations of securities that have high risk and return features make up a portfolio.

Portfolio’s may or may not take on the aggregate characteristics of individual part,
portfolio analysis takes various components of risk and return for each industry and consider
the effort of combined security.

Portfolio selection involves choosing the best portfolio to suit the risk return
preferences of portfolio investor management of portfolio is a dynamic activity of evaluating
and revising the portfolio in terms of portfolios objectives
It may include in cash also, even if one goes bad the other will provide protection from the
loss even cash is subject to inflation the diversification can be either vertical or horizontal the
vertical diversification portfolio can have script of different company’s with in the same
In horizontal diversification one can have different scripts chosen from different industries. It
should be an adequate diversification looking in to the size of portfolio.
Traditional approach advocates the more security one holds in a portfolio , the better it is according
to modern approach diversification should not be quantified but should be related to the quality of
scripts which leads to the quality and portfolio subsequently experience can show that beyond a
certain number of securities adding more securities become expensive.

Investment in a fixed return securities in the current market scenario which is passing
through a an uncertain phase investors are facing the problem of lack of liquidity combined with
minimum returns the important point to both is that the equity market and debt market moves in
opposite direction .where the stock market is booming, equities perform better where as in
depressed market the assured returns related securities market out perform equities.

It is cyclic and is evident in more global market keeping this in mind an investor can shift
from fixed income securities to equities and vise versa along with the changing market scenario ,
if the investment are wisely planned they , fetch good returns even when the market is depressed
most , important the investor must adopt the time bound strategy in differing state of market to
achieve the optimum result when the aim is short term returns it would be wise for the investor to
invest in equities when the market is in boom & it could be reviewed if the same is done.Maximum
of returns can be achieved by following a composite pattern of investment by having, suitable
investment allocation strategy among the available resources.

 Never invest in a single securities your investment can be allocated in the following

1. Equities:-primary and secondary market.

2. Mutual Funds
3. Bank deposits
4. Fixed deposits & bonds and the tax saving schemes
 The different areas of fixed income are as:-
Fixed deposits in company
Mutual funds schemes

with an investment strategy to invest in debt investment in fixed deposit can be made for the
simple reason that assured fixed income of a high of 15-18% per annum can be expected which is
much safer then investing a highly volatile stock market, even in comparison to banks deposit
which gives a maximum return of 13% per annum, fixed deposit s in high profile esteemed will
performing companies definitely gives a higher returns.

The concept of Beta as a measure of systematic risk is useful in portfolio management. The
beta measures the movement of one script in relation to the market trend*. Thus BETA can be
positive or negative depending on whether the individual scrip moves in the same direction as
the market or in the opposite direction and the extent of variance of one scrip vis-à-vis the
market is being measured by BETA. The BETA is negative if the share price moves contrary to
the general trend and positive if it moves in the same direction. The scrip’s with higher BETA
of more than one are called aggressive, and those with a low BETA of less than one are called
It is therefore it is necessary, to calculate Betas for all scrip’s and choose those with high
Beta for a portfolio of high returns.


Definition of investment:
According to F. AMLING “Investment may be defined as the purchase by an
individual or an Institutional investor of a financial or real asset that produces a return
proportional to the risk assumed over some future investment period”. According to D.E. Fisher
and R.J. Jordon, Investment is a commitment of funds made in the expectation of some positive
rate of return. If the investment is properly undertaken, the return will be commensurate with the
risk of the investor assumes”.
Concept of Investment:
Investment will generally be used in its financial sense and as such investment is the
allocation of monetary resources to assets that are expected to yield some gain or positive return
over a given period of time. Investment is a commitment of a person’s funds to derive future
income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of
the value of his principal capital.
Many types of investment media or channels for making investments are available.
Securities ranging from risk free instruments to highly speculative shares and debentures are
available for alternative investments.

All investments are risky, as the investor parts with his money. An efficient investor
with proper training can reduce the risk and maximize returns. He can avoid pitfalls and protect
his interest.
There are different methods of classifying the investment avenues. A major
classification is physical Investments and Financial Investments. They are physical, if savings are
used to acquire physical assets, useful for consumption or production. Some physical
assets like ploughs, tractors or harvesters are useful in agricultural production. A few useful
physical assets like cars, jeeps etc., are useful in business.

Many items of physical assets are not useful for further production or goods or create
income as in the case of consumer durables, gold, silver etc. among different types of investment,
some are marketable and transferable and others are not. Examples of marketable assets are
shares and debentures of public limited companies, particularly the listed companies on Stock
Exchange, Bonds of P.S.U., Government securities etc. non-marketable securities or investments
in bank deposits, provident fund and pension funds, insurance certificates, post office deposits,
national savings certificate, company deposits, private limited companies shares etc.
The investment process may be described in the following stages:
Investment policy:
The first stage determines and involves personal financial affairs and objectives
before making investment. It may also be called the preparation of investment policy stage. The
investor has to see that he should be able to create an emergency fund, an element of liquidity
and quick convertibility of securities into cash. This stage may, therefore be called the proper
time of identifying investment assets and considering the various features of investments.
investment analysis:

After arranging a logical order of types of investment preferred, the next step is to
analyze the securities available for investment. The investor must take a comparative analysis of
type of industry, kind of securities etc. the primary concerns at this stage would be to form
beliefs regarding future behavior of prices and stocks, the expected return and associated risks
Investment valuation:

Investment value, in general is taken to be the present worth to the owners of future
benefits from investments. The investor has to bear in mind the value of these investments. An
appropriate set of weights have to be applied with the use of forecasted benefits to estimate the
value of the investment assets such as stocks, debentures, and bonds and other assets.
Comparison of the value with the current market price of the assets allows a determination of the
relative attractiveness of the asset allows a determination of the relative attractiveness of the
asset. Each asset must be value on its individual merit.

Portfolio construction and feed-back:

Portfolio construction requires knowledge of different aspects of securities

in relation to safety and growth of principal, liquidity of assets etc. In this stage, we study,
determination of diversification level, consideration of investment timing selection of
investment assets, allocation of invest able wealth to different investments, evaluation of
portfolio for feed-back.


Equity shares are characterized by price fluctuations, which can produce substantial
gains or inflict severe losses. Given the volatility and dynamism of the stock market, investor
requires greater competence and skill-along with a touch of good luck too-to invest in equity
shares. Here are some general guidelines to play to equity game, irrespective of weather you
aggressive or conservative.

 Adopt a suitable formula plan.

 Establish value anchors.
 Assets market psychology.
 Combination of fundamental and technical analyze.
 Diversify sensibly.
 Periodically review and revise your portfolio.

Requirement of portfolio:

1. Maintain adequate diversification when relative values of various securities in the portfolio

2. Incorporate new information relevant for return investment.

3. Expand or contrast the size of portfolio to absorb funds or with draw funds.

4.Reflect changes in investor risk disposition.

Qualitiles For successful Investing:

Contrary thinking


An investor tends to choose that portfolio, which yields him maximum return by
applying utility theory. Utility Theory is the foundation for the choice under uncertainty.
Cardinal and ordinal theories are the two alternatives, which is used by economist to
determine how people and societies choose to allocate scare resources and to distribute
wealth among one another.
The former theory implies that a consumer is capable of assigning to every commodity
or combination of commodities a number representing the amount of degree of utility
associated with it. Were as the latter theory, implies that a consumer needs not be liable to
assign numbers that represents the degree or amount of utility associated with commodity or
combination of commodity. The consumer can only rank and order the amount or degree of
utility associated with commodity.

In an uncertain environment it becomes necessary to ascertain how different individual

will react to risky situation. The risk is defined as a probability of success or failure or risk
could be described as variability of out comes, payoffs or returns. This implies that there is a
distribution of outcomes associated with each investment decision. Therefore we can say that
there is a relationship between the expected utility and risk. Expected utility with a particular
portfolio return. This numerical value is calculated by taking a weighted average of the
utilities of the various possible returns. The weights are the probabilities of occurrence
associated with each of the possible returns.


Dr. Harry M.Markowitz is credited with developing the first modern portfolio
analysis in order to arrange for the optimum allocation of assets with in portfolio. To reach
this objective, Markowitz generated portfolios within a reward risk context. 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 for 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. At this process is repeated for expected returns, set of efficient portfolio is generated.

1. Investors consider each investment alternative as being represented by a probability
distribution of expected returns over some holding period.
2. Investors maximize one period-expected utility and posse’s utility curve, which
demonstrates diminishing marginal utility of wealth.
3. Individuals estimate risk on the risk on the basis of the variability of expected returns.
4. Investors base decisions solely on expected return and variance or returns only.
5. For a given risk level, investors prefer high returns to lower return similarly for a
given level of expected return, Investors prefer risk to more risk.

Under these assumptions, a single asset or portfolio of assets is considered

to be “efficient” if no other asset or portfolio of assets offers higher expected return with the
same risk or lower risk with the same expected return.


In developing his model, Morkowitz first disposed of the investment behavior

rule that the investor should maximize expected return. This rule implies that the non-
diversified single security portfolio with the highest return is the most desirable portfolio.
Only by buying that single security can expected return be maximized. The single-security
portfolio would obviously be preferable if the investor were perfectly certain that this highest
expected return would turn out be the actual return. However, under real world conditions of
uncertainty, most risk adverse investors join with Markowitz in discarding the role of calling
for maximizing expected returns. As an alternative, Markowitz offers the “expected
returns/variance of returns” rule.

Markowitz has shown the effect of diversification by reading the risk of securities.
According to him, the security with covariance which is either negative or low amongst them
is the best manner to reduce risk. Markowitz has been able to show that securities which have
less than positive correlation will reduce risk without, in any way bringing the return down.
According to his research study a low correlation level between securities in the portfolio will
show less risk. According to him, investing in a large number of securities is not the right
method of investment. It is the right kind of security which brings the maximum result.


Purpose of the study:

The purpose of the study is to find out at what percentage of investment should be
invested between two companies, on the basis of risk and return of each security in
comparison. These percentages helps in allocating the funds available for investment based
on risky portfolios.
Implementation of study:
For implementing the study,8 security’s or scripts constituting the Sensex market are
selected of one month closing share movement price data from Economic Times and
financial express from Jan 3rd to 31st Jan 2017.

In order to know how the risk of the stock or script, we use the formula, which is given

Standard deviation = √ variance

n _
Variance = (1/n-1) ∑(R-R) ^2
t =1
Where (R-R) ^2=square of difference between sample and mean.
n=number of sample observed.
After that, we need to compare the stocks or scripts of two companies with each other by
using the formula or correlation co-efficient as given below.

n _ _

Co-variance (COVAB) = 1/n∑ (RA-RA) (RB-RB)

t =1
Correlation-Coefficient (P AB) = ---------------------
(Std. A) (Std. B)
Where (RA-RA) (RB-RB) = Combined deviations of A&B
(Std. A) (Std B) =standard deviation of A&B
COVAB= covariance between A&B
n =number of observation
The next step would be the construction of the optimal portfolio on the basis of what
percentage of investment should be invested when two securities and stocks are combined i.e.
calculation of two assets portfolio weight by using minimum variance equation which is
given below.
FORMULA (Std. b) ^2 – pab (Std. a) (Std. b)

Xa =------------------- ----------------------------------

(Std. a) ^2 + (std. b) ^2 –2pab (Std. a) (Std. b)

Std. b= standard deviation of b
Std. a = standard deviation of a
Pab= correlation co-efficient between A&B
The next step is final step to calculate the portfolio risk (combined risk) ,that shows how
much is the risk is reduced by combining two stocks or scripts by using this formula:

σp= √ X1^2σ1^2+X2^2σ2^2+2(X1)(X2)(X13)σ1σ

X1=proportion of investment in security 1.
X2=proportion of investment in security 2.
σ 1= standard deviation of security 1.
σ 2= standard deviation of security 2.
X13=correlation co-efficient between security 1&2.
σ p=portfolio risk