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The rapid growth of capital markets in India has opened up new investment avenues for
investors.
The stock markets have become attractive investment options for the common man.
But the need is to be able to effectively and efficiently manage investments in order to
keep maximum returns with minimum risk.
Hence this study on “PORTFOLIO MANAGEMENT” to examine the role process and
merits of effective investment management and decision.
Portfolio management is the management of various financial assets which comprise the
portfolio. Portfolio management is a decision – support system that is designed with a view
to meet the multi-faced needs of investors According to Securities and Exchange Board of
India Portfolio Management is defined as
Planning plays a pivotal role in Financial Investment. Don’t just invest just for the sake of
investing. Understand why you really need to invest money? Investing just because your friend
has said you to do so is foolish. Careful analysis and focused approach are mandatory before
investing.
Explore all the investment plans available in the market. Go through the pros and cons of
each plan in detail. Analyze the risk factors carefully before finalizing the plan. Invest in
something which will give you the maximum return.
Appoint a good financial planning manager who takes care of all your investment needs.
He must understand your requirement, family income, stability etc to decide the best plan for
you.
One needs to be a little careful and sensible while investing. An individual must read the
documents carefully before investing.
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.
To maintain stability in the market demand and supply.
The scope of the study likes within the purview of risk return portfolio. Analysis of four
companies i.e. Aditya Birla groups, Bajaj Alliance, ACC cements Ltd. And Hero Corporation
ltd.
RESEARCH METHODOLOGY
Data was also gathered from Primary and Secondary sources like the books and internet sites of
the various companies. The data from the internet sites was collected in the month of May 2015
so there might be some modification of the data presently.
PRIMARY DATA:
Information was collected through this source comprises of discussions with the
personnel securities of the management.
Company analysis by Graphical representations of data through statistical tools and
interpreting them.
Comparing data of two companies and analyzing them.
SECONDARY DATA:
The secondary data includes information obtained from various sources that includes
newspaper articles, business magazines and websites.
Secondary data collected from different books.
It is collected from Organizations official sites.
LIMITATIONS OF THE STUDY
The data collection is basically confined to secondary sources, with very little amount of
primary data associated with the project.
The stock prices of only NSE (Nifty) and BSE (Bombay stock exchange) are examined.
Capital markets in India have considerable depth. There are 22 stock exchanges in India.
Ahmadabad, Delhi, Calcutta, Madras and Bangalore are major ones amongst the other stock
exchanges. These stock exchanges are served by 3,000 brokers and 20,000 sub-brokers. A
number of providers for merchant banking services exist.
The market capitalization of the Bombay Stock Exchange (BSE) alone was around Rs.5
trillion in December 1994.This makes it one of the largest emerging stock markets in the world.
A number of other cities also have stock markets.
The regulatory agency which oversees the functioning of stock markets is the Securities
and Exchange Board of India (SEBI), which is also located in Bombay.
India has one of the most active primary markets in the world, with roughly 130 public
issues taking place each month.
The National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and OTCEI have
already introduced screen-based trading. All other exchanges (except Guwahati, Magadha and
Bhubaneswar) are to introduce full computerization and screen-based trading by 30 June 1996.
This will bring about greater transparency for investors, reduce spreads, allow for more effective
monitoring of prices and volumes and speed up settlement.
NATIONAL STOCK EXCHANGE OF INDIA (NSE)
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access to
investors from all across the country on an equal footing. Based on the recommendations, NSE
was promoted by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock exchanges.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,
1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment
in June 1994. The Capital Market (Equities) segment commenced operations in November 1994
and operations in Derivatives segment commenced in June 2000
Currently, 200 large companies are traded on the NSE; that list is expected to gradually
expand as the exchange stabilizes. The NSE is a computerized market for debt and equity
instruments.
The NSE, located in Bombay, was set up in 1993 to encourage stock exchange reform
through system modernization and competition. NSE's reach has been extended to 21 cities, of
which 6 cities do not have their own stock exchanges. NSE plans to cover 40 cities by end-1996.
The NSE has a very modern implementation of trading using contemporary technology in
computers and communication. It is an electronic screen based system where members have
equal opportunity and access for trading irrespective of their location, since they are connected
by a satellite network.
The number of members trading on the exchange has increased from the 227 at
commencement to 600 members as of November 1995. NSE, thus, helps to integrate the national
market and provides a modern system with a complete audit trail of all transactions. In a further
effort to improve the settlement system and minimize the risks associated therein, NSE has set up
a subsidiary - National Securities Clearing Corporation (NSCC). On par with clearing
corporations the world over, NSCC will shortly guarantee settlement of trades executed and
settled through it. The instruments traded are treasury bills, government security, and bonds
issued by public sector companies.
The government of India issues around Rs.70 billion of debt instruments per year. The
market is still nascent; but, trading volumes are steadily rising. Average daily turnover in stocks
have increased from Rs.70 million in November 1994 to Rs.990 million during July 1995.
OBJECTIVES:
1. To establish a nationwide trading facility for equities, debt instruments and hybrids.
a. To ensure equal access to investors all over the country through appropriate
communication network.
b. To provide a fair, efficient and transparent securities market to investors using an
electronic communication network.
c. To enable shorter settlement cycle and book entry settlement system.
d. To meet current international standards of securities market.
PROMOTERS
The national Stock Exchange on April 22, 1996 launched a new Equity Index. The NSE-
50. The new Index which replaces the existing NSE-100 Index is expected to serve as an
appropriate Index for the new segment of futures and options. “Nifty” means National Index for
Fifty Stocks.
The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an
aggregate market capitalization of around Rs.170000crores. All companies included in the index
have a market capitalization in excess of Rs.500crores each and should have traded for 85% of
trading days at an impact cost of less than 1.5%.
The base period for the index is the close of prices on Nov 3, 1995 which makes one year
of completion of operation of NSE’s capital market segment. The base value of the Index has
been set at 1000.
The Stock Exchange, Mumbai, Popularly as “Bombay Stock Exchange” (BSE) was
established in 1875 as The Native Share and Stock Brokers Association”, as a voluntary non-
profit making association. It has evolved over the year into its present status as the premier Stock
Exchange in the country. It may be noted that the Bombay Stock Exchange is the oldest one in
Asia, even older than the Tokyo Stock Exchange, which was founded in 1878.
The Bombay Stock Exchange, while providing an efficient and transparent market for the
trading in securities, upholds the interests of the investors and ensures redresses of their
grievances, whether against the companies or its own member-brokers. It also strives to educate
and enlighten the investors by making available necessary informative inputs and conducting
investor education programs.
A Government Board comprising of 9 elected Directors (one third of them retire every
year by rotation), Two SEBI Nominees, Seven Public representatives and an Executive Director
is the Apex Body, which decides the policies and regulates the affairs of the Bombay Stock
Exchange. The executive Director as the Chief Executive Officer is responsible for the day-to-
day administration of the Bombay Stock exchange.
SECURITIES TRADED:
The securities traded in the BSE are classified in to three group’s namely specified
shares of ‘A’ group and non-specified securities. The latter is sub-divided into ‘B1’ and ‘B’
groups. ‘A’ group contains the companies with large outstanding shares, good track record and
large volumes of business in the secondary market. Settlements of all the shares are carried out
through the Clearing House.
In order to enable the market participants, analysts etc., to track the various ups and
downs in the Indian Stock Market, the Exchange has introduced in 1986 an equity stock index
called BSE-SENSEX that subsequently became the barometer of the moments of the share prices
in the Indian Stock Market. It is a “Market Capitalization-Weighted” index of 30 components.
The base year of SENSEX is 1978-79. The SENSEX is widely reported in both domestic and
international markets through print as well as electronic media.
In practice, the daily calculation of SENSEX is done by dividing the aggregate market of
the 30 Companies in the Index by a number called the Index Divisor. The Divisor is the only link
to the original based period value of the SENSEX. The divisor keeps the index comparable over
a period of time and if the reference point for the entire Index maintenance adjustments.
SENSEX is widely used to describe the mood in the Indian Stock Markets.
New Base Year Average =Old Base Year Average * (New Market Value/Old Market
Value)
Many steps have been taken in recent years to reform the Stock Market such as:
Regulation of Intermediaries.
Changes in the Management Structure.
Insistence on Quality Securities.
Prohibition of Insider Trading.
Transparency of Accounting Processes.
Strict supervision of Stock Market Operations.
Prevention of Price Rigging.
Encouragement of Market Making.
Discouragement of Price Manipulations.
Introduction of Electronic Trading.
Introducing of Depository System.
Derivates Trading.
International Listing.
STOCK EXCHANGES IN INDIA
S.NO NAME OF THE STOCK EXCHANGE YEAR
1 Bombay Stock Exchange. 1875
2 Hyderabad Stock Exchange. 1943
3 Ahmadabad Share & Stock Brokers Association. 1957
4 Calcutta Stock Exchange Association Limited 1957
5 Delhi Stock Exchange Association Limited 1957
6 Madras Stock Exchange Association Limited 1957
7 Indoor Stock Brokers Association. 1958
8 Ban galore Stock Exchange. 1963
9 Cochin Stock Exchange. 1978
10 Pune Stock Exchange Limited 1982
11 U.P Stock Exchange Association Limited 1982
12 Ludhiana Stock Exchange Association Limited 1983
13 Jaipur Stock Exchange Limited 1984
14 Gauhati Stock Exchange Limited 1984
15 Mangalore Stock Exchange Limited. 1985
16 Maghad Stock Exchange Limited, Patna. 1986
17 Bhubaneswar Stock Exchange Limited 1989
18 Over the Counter Exchange of India, Bombay 1989
19 Saurasthra Kutch Stock Exchange Limited 1990
20 Vadodara Stock Exchange Limited 1991
21 Coimbatore Stock Exchange Limited 1991
22 Meerut Stock Exchange Limited 1991
23 National Stock Exchange Limited 1992
24 Integrated Stock Exchange 1999
STOCK EXCHANGES IN WORLD
S.NO COUNTRY INDEX
1. Russia Moscow Times
2. Argentina Mer Val
3. Thailand SET
4. Pakistan Karachi 100
5. Indonesia Jak Comp
6. US NASDAQ
7. Czech Republic PX50
8. Mexico IPC
9. Brazil Bovespa
10. Japan Nikkei 225
11. Malaysia KISE Comp
12. China Shanghai Comp
13. Singapore Straits Times
14. South Korea Seoul Comp
15. Spain Madrid General
16. US S & P 500
17. India SENSEX
18. US Dow Jones
19. Germany Dax
20. Hong Kong Hang Sang
21. Canada S & P TSX Composite
22. India NIFTY
23. UK FTSE 100
24. Australia All Ordinaries
25. France CAC 40
COMPANY PROFILE
UNICON has been founded with the aim of providing world class investing experience to
hitherto underserved investor community. The technology today has made it possible to reach
out to the last person in the financial market and gave him the same level of service which was
available to only the few.
We give personalized premium service with reasonable commissions on the NSF, BSE &
Derivative market through our Equity broking arm Unicon Securities Pvt. Ltd. and Commodities
on NCDEX and MCX through our Commodity broking arm Unicon Commodities Pvt. Ltd. with
our sophisticated technology you can trade through your computer and if you want human touch
you can also deal through our Relationship Managers out of our more than 100 branches spread
across the nation.
We also give personalized services on insurance (Life &General) & Investments (Mutual
Funds &IPO’s) needs, through our Insurance & Investment distribution arm Unicon
Insurance Advisors Pvt. Ltd. Our tailor- made customized solutions are perfect match to
different financial objectives. Our distribution network is backed by in-house back office support
to serve our customers promptly.
MISSION
To create long term value by empowering individual investors through superior financial
services supported by culture based on highest level of teamwork, efficiency and integrity.
VISION
To provide the most useful and ethical Investment Solutions-guided by values driven
approach to growth, client service and employee development.
UNICON INVESTMENT SOLUTIONS
Find it tedious to keep track of markets? Grow your wealth with Unicon PMS The capital
markets today have not only become far more complex in terms of compliances, methodologies,
effects and analysis but also need a constant tracking mechanism. As is the case globally, the
Indian investor has also realized the advantages of seeking professional advice in order to not
only manage but also augment his portfolio.
Choose from our range of PMS products that are designed to perform in any market
based on your investment objectives.
The Schemes, duly approved by SEBI, are managed by a highly competent team
comprising of portfolio managers and equity strategists, backed by a team of fundamental,
technical and derivatives analysts
Periodic review and rebalancing with timely performance reporting Unicon customers
have the advantage of trading in all the market segments together in the same window, as we
understand the need of transactions to be executed with high speed and reduced time. At the
same time, they have the advantage of having all Advisory Services for Life Insurance, General
Insurance, Mutual Funds and IPO’s also.
Unicon is a customer focused financial services organization providing a range of
investment solutions to our customers. We work with clients to meet their overall investment
objectives and achieve their financial goals. Our clients have the opportunity to get personalized
services depending on their investment profiles. Our personalized approach enables clients to
achieve their Total Investment Objectives.
MANAGEMENT TEAM:
Equity
Commodity
Depository
Distribution
NRI Services
Back Office
Fixed Income
Investment Banking
Currency Derivatives
Portfolio Management
Facilities Offered by Unicon
De-materialization:
You can submit your physical shares at the Unicon branch for dematerialization into
electronic form.
Re-materialization:
You can also request for Re-materialization which enables you to convert the
dematerialized shares into physical form.
* Transfer: Inter and intra depository services are available through which you can transfer
shares.
* IPO: You can apply for IPO using your demat account details and on allotment the securities
are transferred directly to your demat account.
General Insurance
Unicon offers all products of General Insurance under one umbrella. Unicon comprises of
a team of distinguished professionals from insurance, finance and other management disciplines
who have vast business & managerial experience.
Unicon team evaluates the client's business environment and studies the risk profile.
based on the results of these evaluations, Unicon team then suggests the most cost effective ,
integrated insurance package that is perfectly suited to the client's risk profile.
Unicon has a nationwide network of branches all over India, equipped with top quality
infrastructure facilities, to provide you prompt & efficient service.
Life Insurance
Unicon offers you a Peace of Mind by offering various life insurance plans for your
unique & specific needs. Our philosophy is that for every financial problem, there is a solution
also. And we are here to give you complete financial solutions. At the same time we offer you
very Prompt & Reliable Policy related service for enduring relationship.
We offer a very wide range of products to fulfill your particular requirements. You can
always have an access to our 83 Branch Offices situated at prime locations of the city, or you can
call our Relationship Manager to guide on your Investments.
Following is the glimpse of Life Insurance Plans:
Protection Plans
Investment Plans
Child Plans
Retirement/Pension Plans
Saving Plans
NRI Plans
Health Plans
Unicon is a specialized property broking company. Our highly experienced and professional
teams present retail, office, industrial and residential property opportunities to a broad base of
clients. Whether it is a residential or commercial development, Unicon offers a total solution to
our clients inclusive of market research, marketing strategy, interaction with the professional
teams and sales or leasing of the property.
Unicon’s professional team of consultants will assist you to identify suitable premises
that satisfy your requirements. We will help you negotiate favorable leases and assist with the
preparation of all documentation.
“Whether you are looking for a home or a place to conduct business Unicon shall find you
one”
We provide customer focused transparent investment planning and solutions. We offer
products which benefit your special status. PCG has a specialized advisory team which nurtures
all your investment. We ensure that your investments work for you rather than you for them.
Products offered:
Live Market Watch for commodity market (NCDEX, MCX) in one screen.
PORTFOLIO:
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 an extreme policy instead, investors should diversify,
meaning that their portfolio should include more than one security.
Investor :
The relationship between an investor and portfolio manager is of a highly interactive nature
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 himself in a tricky situation , to keep track of market movement ,update
his knowledge, yet stay in the capital market and make money , therefore in looked forward to
resuming help from portfolio manager to do the job for him .
RISK:
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.
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.
RISK ON PORTFOLIO:
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,
however, a risk less return on capital of about 12% which is the bank, rate charged by the R.B.I
or long term, yielded on government securities at around 13% to 14%. 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 risk 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
diversification.
Though, equity carries a risk and howsoever much one may desire, the risk can’t be
eliminated. However the risk can certainly be managed (or controlled) with professional
expertise. This professional expertise developed over the long years of operations in financial
markets is being offered by the company. PMS is a dedicated service aimed at managing the
portfolios of the investors who feel the need of professional approach to optimize the returns
from their investments.
Besides its long experience of operating in financial markets. Company offers many other
advantages to its investors. Continuing with its tradition of innovations. Management has
introduced some new features in its PMS as well .These include giving the advantage of its being
a Depository participant to the investor by not charging him for any custodial charges.
Technique’s of portfolio management:
1. Equity portfolio: It is influenced by internal and external factors the internal factors affect
the inner working of the company’s growth plans 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
One can estimate trend of earning by EPS, which reflects trends of earning quality of
company, dividend policy, and quality of management.
Price earnings ratio indicate a confidence of market about the company future, a high
rating is preferable.
The following points must be considered by portfolio managers while analyzing the securities.
1. Nature of the industry and its product: long term trends of industries, competition within,
and outside the industry, Technical changes, lab our relations, sensitivity, to Trade cycle.
2. Industrial analysis of prospective earnings, cash flows, working capital, dividends, etc.
3. Ratio analysis: Ratio such as debt equity ratio’s current ratio’s net worth, profit earnings
ratio, returns on investment, is worked out to decide the portfolio.
Prices are based upon demand and supply of the market.
Capital Assets pricing approach (CAPM) it pays more weight age, to risk or portfolio
diversification of portfolio.
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.
Returns From the angle of securities can be fixed income securities such as:
(a) Debentures –partly convertibles and non-convertibles debentures debt with tradable
Warrants.
(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
Investors’ philosophy at management is driven by following fundamental Principles.
Optimal returns
Willing to perform under Rising market, but aiming to outperform in falling market.
Stock specific selection procedure based on fundamental research for Making sound
investment decisions.
Analysis of 4 Companies:
Table: 4.1
Table: 4.2
Table: 4.3
Table: 4.4
Table: 4.5
Formula: _
AVERAGE RETURN (R) = Σ(R)/N
N = No. of years
INTERPRETATION
ADITHYA BIRLA
Table: 4.6
Table: 4.7
Table: 4.8
Avg.
Returns Return( R) (R-R) (R-R)2
Year
2011-12 31.36 84.99 -53.63 2876.39
Table: 4.9
Table: 4.10
Graph: 4.1
AVERAGE RETURN
100
80
60
40
20
0
Adithya Birla GROUPS BAJAJ ALLIANCES LTD. ACC CEMENT LTD. HERO CORPORATIONS
INTERPRETATIONS
Based on the above calculations Standard Deviation of ACC CEMENT LTD is high as
82.28, ADITHYA BIRLA GROUPS is a low with 46.75& other company having medium
standard deviations i.e. BAJAJ ALLIANCES LTD. 54.48 AND HERO CORPORATIONS AS
60.33
Standard deviation is the indication at risk associated with a security. it shows
uncertainty of return from a security from above analysis ACC CEMENT LTD have high
Standard deviation as82.28 and it has practical to get good return ADITHYA BIRLA GROUPS
has 46.75 is low risky.
CALCULATION OF CORRELATION:
σa = 46.75; σb = 54.48
σa = 46.75; σb = 82.28
Table: 4.13
σa = 46.75; σb = 60.33
σa = 54.48; σb = 82.28
σa = 54.48; σb = 60.33
Table: 4.16
σa = 82.28; σb = 60.33
Formula:
Wa = σb [σb - (nab*σa)]
Wb = 1 – Wa
σa = 46.75,
σb = 54.48 ,
nab = 0.978
Wa = 54.48 [54.48-(0.978*46.75)]
Wa = 476.70
171.82
Wa = 2.77
Wb = 1-Wa
Wb = 1-2.77 = -1.7
b) ADITHYA BIRLA (a) & ACC CEMENT (b):
σa = 46.75,
σb = 82.28 ,
nab = 0.786
Wa = 3746.20
2908.72
Wa = 1.28
Wb = 1-WA
Wb = 1-1.28 = -0.28
σa = 46.75,
σb = 60.33 ,
nab = 0.878
Wa = 60.33 [60.33 – (0.878*46.75)]
(46.75)2 + (60.33) 2 – 2(0.878)*(46.75)*(60.33)
Wa = 1163.16
872.59
Wa = 1.33
Wb = 1-WA
Wb = 1-1.33 = -0.3
II. BAJAJ & OTHER COMPANIES:
a) BAJAJ (a) & ACC CEMENT (b):
σa = 54.48,
σb = 82.28 ,
nab = 0.743
Wa = 3439.30
3276.90
Wa = 1.04
Wb = 1-WA
Wb = 1-1.04 = -0.04
σa = 54.48,
σb = 60.33 ,
nab = 0.90
Wa = 60.33 [60.33 – (0.90*54.48)]
(54.48)2 + (60.33) 2 – 2(0.90)*(54.48)*(60.33)
Wa = 681.60
691.57
Wa = 0.98
Wb = 1-WA
Wb = 1-0.98 = 0.02
III. CALCULATION OF WEIGHTS OF ACC CEMENT (a) & HERO CO.(b):
σa = 82.28,
σb = 60.33 ,
nab = 0.811
Wa = 60.33 [60.33 – (0.811*82.28)]
(82.28)2 + (60.33) 2 – 2(0.811)*(82.28)*(60.33)
Wa = -385.50
2358.16
Wa = -0.16
Wb = 1-WA
Wb = 1-(-1.16) = 1.16
3 CORRELATION COEFFICIENT BETWEEN THE SECURITIES
Formula:
Where
R = Return
_
R = Average Return
Table: 4.17
SECURITY ADITHYA BIRLA BAJAJ ACC HERO
ADITHYA BIRLA 1 0.978 0.786 0.879
BAJAJ 1 0.743 0.9
ACC 1 0.811
HERO CO. 1
PORTFOLIO WEIGHTS:
Formula:
Wa = σb [σb - (nab*σa)]
Wb = 1 – Wa
Table: 4.18
INTERPRETATIONS
σa = 82.28,
σb = 60.33 ,
Wa = 2.77
Wb = -1.77
nab = 0.978
= 1627.96 = 40.34
ii. ADITHYA BIRLA (a) ACC CEMENT (b);
σa = 46.75,
σb = 82.28 ,
WA = 1.28
Wb = -0.28
Nab = 0.786
= 1923.33 = 43.85
σa = 46.75,
σb = 60.33,
Wa = 1.33
Wb = -0.33
nab = 0.878
= 2036.83 = 45.13
II. BAJAJ & OTHER COMPANIES:
σa = 54.48,
σb = 82.28,
Wa = 1.04
Wb = -0.04
nab = 0.743
= 2939.24 = 54.21
σa = 54.48,
σb = 60.33,
Wa = 0.98
Wb = -0.02
nab = 0.90
= 2966.74 = 54.46
III. ACC CEMENT (a) & HERO CO. (b):
σa = 82.28,
σb = 60.33,
Wa = -0.16
Wb = 1.16
nab = 0.811
= 3552.07 = 59.59
5. PORTFOLIO RISK:
Table: 4.19
Where,
Wa = Weight of Security a
Wb = Weight of Security b
PORTFOLIO RISK
70
59.59
60 54.21 54.46
50 43.85 45.13
40.34
40
30
20
10
0
ADITHYA & ADITHYA & ADITHYA & BAJAJ & ACC BAJAJ & ACC & HERO
BAJAJ ACC HERO CO HERO CO. CO
INTERPRETATIONS:
It is proved fact that portfolio is lower than individual risks at assets of portfolio we
absurd from the calculations in that risk of portfolio.
NAME PORTFILIORETURN
ADITHYA & ACC 43.85
ADITHYA & BAJAJ 40.43
ADITHYA & HERO CO. 45.13
BAJAJ & ACC 54.21
BAJAJ & HERO CO. 54.46
ACC & HERO CO. 59.59
So it is advised to go for portfolio investment return their individual security investment.
6 CALCULATION OF PORTFOLIO RETURNS:
PR = (Ra*Wa) + (Rb*Wb)
Where,
Wa = weight of Security a
Wb = weight of Security b
PR = Portfolio Return
Table: 4.20
PR = (Ra*Wa) + (Rb*Wb)
Where,
Wa = weight of Security a
Wb = weight of Security b
PR = Portfolio Return
Table: 4.21
PORTFOLIO RETURN
80
60
40
20
0
-20 1 2 3 4 5 6
Portfolio Return
INTERPRETATIONS
It is proved fact that portfolio is lower than individual risks at assets of portfolio we
absurd from the calculations in that risk of portfolio.
NAME PORTFILIORETURN
ADITHYA &ACC -10.78
ADITHYA & BAJAJ 6. 55
ADITHYA & HERO CO. -9.44
BAJAJ &ACC 9.31
BAJAJ& HERO CO. 13.37
ACC & HERO CO. 67.14
Table: 4.22
Graph: 4.4
PORTFOLIO RISK-RETURN
80
60
40
20
0
1 2 3 4 5 6
-20
RISK RETURN
INTERPRETATIONS
As we absorbed portfolio 6 ACC CEMENT & HERO CO. has the risk level of 59.59 .
Return from that security is 67.14. So by analysis correlation between the assets we
should put our money into securities.
FINDINGS & CONCLUSIONS
As far as the average returns of the selected companies are concerned, ACC CEMENT
LTD. is performing well in isolation where as ADITHYA BIRLA GROUPS is
performing very poor.
As far as the standard Deviation of the selected companies are concerned, ACC
CEMENT LTD. is very high, where as ADITHYA BIRLA GROUPS is giving less risk
than other companies. This means that the higher the risk the higher the return.
As far as the correlation co-efficient is concerned the study selects only negatively
correlated scripts as suggested by Markowitz. The combination of securities with ITC is
negatively correlated.
As far as Portfolio Risk & Return are concerned the combination of securities of ACC
CEMENT & HERO CORPORATIONS is giving more return and meanwhile the risk
involved in that security is also more.
Before investing in shares you should look at the type of shares you want to buy and the way in
which you want to deal on the stock market. The main routes for investing in shares are;
REFERENCES
MAGAZINES
BUSINESS TODAY
BUSINESS WORLD
BUSINESS INDIA
ARTICLES:
WEBSITES:
1. www.nseindia.com
2. www.bseindia.com
3. www.google.com
4. www.wikipedia.com
5. www.investropedia.com
All the above sites were referred in the month of January and February 2015