`

AN INTERIM REPORT
ON

PORTFOLIO MANAGEMENT, LIVE TRADING, EQUITY

RESEARCH, FUNDAMENTAL ANALYSIS

BY

Gargi Verma
18BSPHH01C0410

Aditya Birla Sun life Insurance Private Ltd

 AN INTERIM REPORT

ON

PORTFOLIO MANAGEMENT, LIVE TRADING, EQUITY

RESEARCH, FUNDAMENTAL ANALYSIS

By
Gargi Verma
18BSPHH01C0410

Aditya Birla Sun life Insurance Private Ltd

A report submitted in partial fulfillment of the

requirements of MBA Program of

IBS Hyderabad

SUBMITTED TO:
FACULTY GUIDE COMPANY GUIDE
Prof. Shubhagata Roy Mr. Nikesh Ruparel

13th April, 2019

 AUTHORISATION

This is to certify that this is a bonafide report submitted in partial fulfilment of the requirements of MBA
program (Class of 2018-20) of ICFAI Business School, Hyderabad.
This report document titled “A PROJECT REPORT ON PORTFOLIO MANAGEMENT, LIVE
TRADING AND EQUITY RESEARCH” is a submission of work done by Gargi Verma as part of the
completion of the Summer Internship Program at Aditya Birla Capital; Birla Sun life Insurance
Company under the guidance of Mr. Nikesh Ruparel, EAP (Executive Associate Partner) of Aditya Birla
Capital; Birla Sun life Insurance Company.

This report has been formally submitted to Prof Shubhagata Roy, IBS Hyderabad.

Gargi Verma
(18BSPHH01C0410)
Date: 13-04-2019
Place: New Delhi

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 ACKNOWLEDGEMENT

I would like to take this opportunity for extending my gratitude towards Aditya Birla Capital; Birla Sun
life Insurance Company for providing me the chance to undertake this internship study and allowing me
to explore the expertized area of Financial Analysis which was entirely new to me and which will surely
prove to be very beneficial to me in my future assignments, my studies and my career ahead.
No job is a single man’s work as there are different factors, situations and people combine together to
form the background for the accomplishment of any task.

I sincerely extend my gratitude to my company guide, Mr. Nikesh Ruparel (Executive Associate Partner,
Aditya Birla Capital; Birla Sun life Insurance Company who played a pivotal role in the learning and
experience during my Internship. His constant monitoring, guidance and expert knowledge in the
operation and finance domain helped me in enhancing my knowledge and outlook towards the corporate.

I would also like to mention the unconditional help put forth by the entire team member at Aditya Birla
Capital; Birla Sun life Insurance Company, New Delhi.

I am deeply grateful, to my faculty guide Prof. Shubhagata Roy for his invaluable suggestions,
comments, feedback and support throughout the internship.

My heartfelt thanks towards all those people who have helped me in the preparation of this project, which
has been a wonderful learning experience, without any of the above people, this project would not have
seen the light of the day.

Gargi Verma
(18BSPHH01C0410)

ii
 TABLE OF CONTENTS

1. Abstract……………………………………………………………………………4
2. Introduction……………………………………………………..…………………5
2.1 Overview…………………………………………………………………………6
2.1.1 About the Company………………………...………………………………….6
2.1.2 About Life Insurance…......................................................................................9
2.1.3 Products……………………………………………………………..…………11
3. Initial Public Offering…………………………………………………………….12
3.1 Steps in IPO Process ............................................................ ……………………13
4. Mutual Funds……………………………………………………………………..15
4.1 Types of Mutual Funds…………………………………………………………..16
4.2 Systematic Investment Plan (SIP)………………………………………………..17
4.2.1Types of SIP…………………………………………………………………….17
4.2.2 How does SIP works…………………………………………………………...18
5. Live Trading……………………………………………………………………….19
5.1 Index…….………………………………………………………………………..19
5.2 Steps to calculate index………………………………………………………..…20
5.3 Ways of making Profit……………………………………………………………21
6. Fundamental Analysis…………………………………………………………...…22
6.1 Steps for analysis… ................................................................... …………………22
7. Project….................................................................................................................24
7.1 Introduction ................................................................................... ………………24
7.2 Porter Five Forces Model… ........................................................... ………...……26
7.3Progress on Report…………...……………………………………………………28
8. Bibliography………………………………………………………………………31
 ABSTRACT

A mutual fund is an investment vehicle, which is made by pooling of money collected from different
investors for the purpose of investing in securities such as stocks, bonds, money market instruments and
other assets. Mutual funds are operated by professional fund managers, who allocate the funds and attempt
to produce capital gains and/or income for the investors who have provided with the fund. A mutual fund
portfolio is structured in a way to match the investment objectives stated in its prospectus.

The aim of the training is to learn the various analysis so that the fund can be allocated in the portfolio
that we have made for a particular sector or the combination of different sectors large cap stocks so that
the probability of getting the profit and increasing the NAV should increase. The technical and
fundamental analysis has been used to make a better portfolio. Fundamental analysis has been done to
make the portfolio of the stocks of a sector and calculating the NAV and Technical analysis is used for
the trading. The motive is to learn the skills as a financial analyst to improve the probability of getting
the profit from the portfolio.

Learning about the company i.e. Aditya Birla Sun life Insurance has been done and also the research on
its products is completed. Learned about the mutual funds and its types that the company offer. Also, the
main business of the company i.e. insurance is being learned during the training.

Project has been started, in which the allocation of the fund has to be done by making a portfolio using
fundamental analysis and calculating NAV on the daily basis. Till now the analysis has been going on
and the result will be shown at the end of the training.

4
Aditya Birla Sun life Insurance Pvt Ltd

5
 Overview:

About ABSIL

Formerly known as Birla Sun Life Insurance Company Ltd, Aditya Birla Sun Life Insurance Company
Limited (ABSLI) is a subsidiary of Aditya Birla Capital Ltd (ABCL). It is one of the leading private
sector life insurance companies with nation-wide presence. It offers large range of products which
includes children future plans, wealth protection plans, retirement and pension solutions, traditional term
plans and Unit Linked Insurance Plans (ULIPs). ABSLI has an active customer base of over 16 lacs policy
holders and has over 10,000 employees.

History

Aditya Birla Sun Life Insurance Company Limited was founded on August 4th, 2000 and started its
operations on January 17th, 2001. The company is based in Mumbai, India. It is a joint venture between
Indian Aditya Birla Group and Canadian Sun Life Financial Inc., an International Financial Services
Organizations from Canada. Sun Life Financial increased their stake in Birla Sun Life Insurance to 49%
in April, 2016.

The Aditya Birla Group is an Indian multinational conglomerate, named after Aditya Vikram Birla and
headquartered in the Aditya Birla Center in Worli, Mumbai, India. It works in 35 nations with in excess
of 120,000 employees around the world. The group was established by Seth Shiv Narayan Birla in 1857.
The group interests in diversified segment like viscose staple fiber, metals, cement (largest in India), thick
fiber yarn, branded clothing, carbon black, synthetic compounds, fertilizers, insulators, financial services,
telecom (third largest in India), BPO and IT administrations. The organization offers asset management,
life insurance, housing finance, lending, equity & commodity broking, wealth management and
distribution, online money management portal—Aditya Birla Money My Universe, general insurance
advisory and private equity and health insurance businesses, for retail and corporate consumers. The
group had a revenue of roughly US$44.3 billion in year 2018.

Sun Life Financial

Sun Life Financial, Inc. is a Canada-based financial services company known primarily essentially as a
life insurance organization. It is one of the biggest Life Insurance organizations in the world, and
furthermore one of the oldest, with the history traversing back to 1865. Sun Life Financial has a revenue
of CA$26.997 billion as of 2018. Sun Life has about CA$951.1 billion of Asset under Management as of
2018.

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 Growth

ABSLI is the first Indian Insurance Company to introduce "Free Look Period", by which consumer
can return the policy to an insurance agency within this period after receiving the policy. "Free Look
Period" was later made compulsory by Insurance Regulatory and Development Authority of India for
all other life insurance organizations in 2013. Moreover, ABSLI spearheaded the launch of Unit
Linked Plan. ABSLI has a strategy of revealing their portfolio on a monthly basis. On 5 February
2015, ABSLI signed an IT outsourcing deal with International Business Machines Corporation (IBM)
with the end goal of utilizing mobility and cloud solutions created by IBM Research and the IBM
India Software Lab.
Total AUM of ABSLI remained at Rs. 389,548 million, as of 31st Dec 2018. In Q3 FY 2018-19,
ABSLI recorded a gross premium income of Rs. 18,599 million and a y-o-y development of 68% in
Individual First Year Premium and currently positioned 7th in Individual Business (Individual FYP
adjusted for 10% single premium).

Awards and accolades

 Media Abby Awards at Goa Fest Advertising Agencies Association of India & Advertising Club
Bombay (2011)

 'Gold Trophy' for Financial Reporting by the Institute of Chartered Accountants of India (ICAI) in
2012.
 Grand Midas at the Midas Awards 2013 in Public Service Category for work titles as 'Death Track'.
 Gold Midas Awards 2013 in Direct Mail/Collateral competition for work titled as 'Karva Chauth'
 Awarded as Best Fund House Overall by Annual Morningstar India in 2018.

Key Peoples of Organization

Board of Directors:-

• Mr. Kumar Mangalam Birla- Chairman

• Mr. Sushil Agarwal- Non-Executive Director

• Mr. Santrupt Misra- Non-Executive Director

• Mr. Arun Adhikari- Independent Director

• Mr. P.H. Ravi Kumar- Independent Director

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• Mrs. Vijayalakshmi R Iyer- Independent Director

• Mr. S.C. Bhargava- Independent Director

Investment Committee:-
• Mr. B. N. Puranmalka

• Mr. Eugene Lundrigan

• Mr. Ajay Srinivasan

• Mr. Vikram Mehmi

• Mr. Mayank Bathwal

• Mr. Fabien Jeudy

• Mr. Vikram Kotak

• Ms. Keerti Gupta

Competitors:-
• Life Insurance Corporation

• ING Vysya Life Insurance

• Max network Life Insurance

• Met Life Insurance

• Aviva Life Insurance

• Bharathi Axa Life Insurance

• Bajaj Allianz Life Insurance

• Tata AIG Life Insurance

• ICICI Prudential Life Insurance

• Reliance Life Insurance

• Kotak Mahindra Life Insurance

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Vision:
To be a world class provider of financial security to individuals and corporates and to be amongst the
top three private sector life insurance companies in India.

Mission:

To be the first preference of our customers by providing innovative, need based life insurance and
retirement solutions to individuals as well as corporates.

About Life Insurance

Life Insurance

Life insurance is a contract between you and an insurance company in which the insured transfers a
risk to the insurer. The insured pays a premium and gets a policy in exchange. The risk assumed by
the insurer is the risk of death of the person who is being insured.

There are three parties in a life insurance transaction; the insurer, the insured, and the owner of the
policy known as proposer, although the proposer and the insured could be the same person. The
beneficiary or nominee is the person or persons who will receive the life insurance payout, called the
death benefit. In case of suicides or any misrepresentation on the application by the proposer or
insured, the policy would be nullified. These contracts have a contestability period, which is usually
a two-year period and if the insured dies within this period, the insurer has a legal right to contest the
claim and request additional information before deciding to pay or deny the claim. The amount paid
when the policy matures is known as face amount of the policy. The policy matures when the insured
dies or attains a specified age.

How a Life Insurance works-

Proposer agreed to pay for the policy on a regular basis, and the insurer agrees to pay a sum of money
to the beneficiaries if insured dies. Within those parameters are several types of life insurance. There
are few options for paying premiums, such as paying monthly, quarterly, semi-annually or annually.

Life insurance companies make money by investing the premiums, hoping to make more than they’ll
have to pay in claims. Companies also receive profit from those policyholders who stop paying for
their policies, causing the policies to lapse and leaving the insurer with the money that has already
been paid. Beneficiaries will be designated by the insured or proposer, who will receive the death
benefit. This can be used for funeral expenses, mortgage payments or anything else. It is important
that beneficiaries know that your life insurance exists. They don’t need the policy with them to make
a claim later, but they do need to know which company holds the policy. Once beneficiaries submit a
life insurance claim, they’ll generally get the cheque within a week or two.

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 Need of a Life Insurance Policy-

The most common reason to buy a life insurance policy is to protect the financial interests of the
owner of the policy in case of the insured's demise. So, one must buy life insurance and be a step
ahead so that the financial goals set for his/her family can be accomplished even when he/she isn’t
around. Other reasons are:
 Financial Cushion- It provides financial support to insured’s family which is much-needed, by
compensating for the loss of income.
 Debt-Proof Future- In case of sudden demise of the sole earner of the family, it provides financial
support. With the help of life insurance, any outstanding debt, such as a motor loan, personal loan, a
home loan, etc. can be paid.
 Accomplishment of Retirement Goals- While life plan is a perfect option to accomplish long-term
goals, it helps accomplish retirement goals as well. Life insurance plans offer both diverse investment
opportunities as well as performance-based dividends.
 Tax Benefits- A policyholder also gets tax-benefits regardless the type of life insurance he/she
purchases. As per section 80 C of the Income Tax Act, person is eligible for tax benefits up to Rs.1.5
lac.
 Savings Tool- In case a person chooses a traditional/unit-linked plan, he/she pays an enhanced
insurance premium. This extra amount of money is invested in the insured’s preferred fund, either
equity or debt fund and consequently acts as a savings tool.
 Children’s Future Expenses- A life plan takes care of all the future expenses of a policyholder’s
children, like education and wedding expenses.
 Business Security- There are some insurance plans available in the market that offer support to the
insured’s business. It also enables a business partner to buy the share of his/her deceased business
partner.

Contribution of life insurance in the development of economy-

➢ Flow of Insurance Industry in India

➢ Structure of insurance industry: Snap Shot Industry

➢ Aggregation of long-term savings

➢ Spread of financial services in rural Areas

➢ Provides Long-term funds used for development of Capital Markets or Economic Growth.

➢ Employment generation

➢ Growth Potential

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 Products-

Insurance planning helps you to smooth out the uncertainties and adversities that life might send your
way, so that you can secure the future of your loved ones in the best possible way. ABSLI offers a
complete range of insurance products. Some of the well-known products are:
1. Life Term Solutions

2. Savings with Protection

3. Child Plan

4. Wealth Plan

5. Retirement and Pension Solution Plans

6. ULIP Solution Plans

7. Rural Plans

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 Initial Public Offering

An IPO is stands for an Initial Public Offering. It is when a company offers its shares to the public for
the first time. It is also called "going public." An IPO is the first time when promoters of the company
give up part of their ownership to stockholders. IPOs are issued by smaller companies or start-ups
seeking capital to expand their business, as well as by large private companies looking to expand &
become publicly traded. In case of IPOs, when a company lists its securities on a public exchange, the
money paid by investors for the newly-issued shares goes directly to the company (unlike, trading of
shares later on the exchange where the money passes between investors). An IPO, therefore, permits a
company to tap a wide pool of investors to provide it with capital for future development, repayment
of debt or working capital. This ability to quickly raise large amount of capital from the market is a key
reason many companies seek to go public.

Benefits for being a public company are as follows:

1. Diversifying the equity base.

2. Enabling cheaper access to capital.
3. Exposure, prestige and public image of the company.
4. Attracting and holding better management and employee’s retention through liquid equity
Participation.
5. Encouraging acquisitions.
6. Making various financing opportunities: equity, convertible debt, cheaper bank loans, etc.

Procedure to apply for an IPO –

You can apply for an IPO through online as well as offline mode:
 Online Mode
To apply in IPO's online, an investor has to open a Demat account / trading account with financial
institution that provide this type of facility. Once a Demat & trading account is opened, one should
follow these steps to apply online:
1. First login in your trading a/c and select the IPO you wish to invest in.
2. Transfer funds from your bank account to your trading account.
3. Select the number of shares you want to apply for and the price you want to bid for (or use cut off
option) and then press submit button.
 Offline Mode
You can also apply through your bank account. You just need to fill the information such as your Name,
PAN number, Demat a/c number, bid quantity, bid price and other details and submit the ASBA
application form to the banking branch which has been designated to provide ASBA services. Once
you submit the application, the bank will upload the details of the application in the bidding platform.
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 ASBA (Application Supported by Blocked Amount)-

ASBA means “Application Supported by Blocked Amount”. ASBA is an application that has the
authority to block the money mentioned in the application in the bank account, for subscribing to an
issue. If an investor is applying through ASBA, his application money shall be debited from the bank
account only if shares are allotted to him/her, after the basis of allotment is finalized. It is a
supplementary process of applying in Initial Public Offers (IPO), right issues and Follow on Public
Offers (FPO) made through book-building process and exists together with the present procedure of
using cheque as a mode of payment and submitting applications.

Steps in IPO Process-

The whole process is regulated by the 'Securities and Exchange Board of India’ (SEBI), to prevent the
fraudulent activities and safeguard the interest of the investor.

Selection of an Investment Banker-

The first thing that company management must do to go public is to find an investment banker that will
act as underwriters on behalf of the company. Underwriter buys the shares of the company and resell
them to the general public. Some companies also sell their shares directly through the stock market,
but most prefer going through the underwriters.

1. Preparation of Registration Statement- To begin an IPO process, the first step is to submit a
registration statement to the SEBI by the company, which includes a detailed report of its fiscal health
and business plans. SEBI critically examine this report and also does its own background check of the
company. It must also see that registration statement must fulfil all the mandatory requirements and
satisfy all rules and regulations.

2. Preparation of Prospectus - While awaiting the approval, the company, with assistance from the
underwriters, must create a preliminary 'Red Herring' prospectus. It includes detailed information
about the financial records, future plans or projects and the specification of expected share price range.
This prospectus is meant for forthcoming investors who would be interested in buying the stock. It
likewise has a lawful cautioning about the IPO pending SEBI approval.

Red Herring Prospectus- A red herring prospectus may refer to the first prospectus filed with the
SEC as well as a variety of subsequent drafts created prior to obtaining approval for public release. A
red herring is a preliminary prospectus filed by a company with the Securities and Exchange
Commission (SEC), usually in connection with the company's (IPO) and most important it does not
include key details of the security issue, such as its price and the number of shares offered.

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3. SEBI Approval - Once SEBI is satisfied with the registration statement, it declares the statement to be
effective, giving a go ahead for the IPO to issue. Sometimes it asks for changes to be made before
giving its approval. The prospectus cannot be given to the public without the changes suggested by
SEBI. The company needs to choose a stock exchange where it wants to sell its shares and get listed.

4. Deciding the Price Band & No. of shares - After the SEBI approval, the company, with assistance
from the underwriters decide the number of shares to be sold and the final price band of the shares.

There are two ways to decide the Price: Fixed Price and Book Building

Fixed Price – In Fixed price issue, company decides the price of the shares issued and also the number
of shares being sold. Ex: XYZ Ltd issues 20 lakh shares of face value 100/- each at a premium of 10/-
each to the public thereby generating 22 crores.
Book Building – A Book building is a process which helps the company to decide the price of the issue.
The company decides a price band for the issuance of the shares.
Ex: XYZ Ltd issue of 10 lakh shares of face value 10/- each at a price band of 60 to 70 is available to
the public thereby generating up to 7 crores.

5. Available to public for purchase - On the dates mentioned in the prospectus, the shares are available
to public. Investors can fill out the IPO form and specify the price at which they wish to make the
purchase and submit the application.

6. Issue Price Determination& share allotment - Once the subscription period is over, members of the
underwriting banks, share issuing company etc. will meet and determine the price at which shares are to
be allotted to the prospective investors. The price would be directly determined by the demand and the
bid price quoted by investors. Once the price is finalized, shares are allotted to investors based on the
bid amounts and the shares available.
Note: In case of oversubscribed issues, shares are not allotted to all applicants.

7. Listing & unblocking Funds- The last step is the listing in the Stock Exchanges. Investors who have
applied through ASBA & to whom shares were allotted would get the shares credited to their DEMAT
accounts & their funds getting debited from their bank account or else for those investors to whom the
shares were not allotted, funds would get unblocked in their bank account.

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 MUTUAL FUNDS

A mutual fund is a venture vehicle comprised of a pool of money gathered from numerous investors to
invest in securities, such as stocks, bonds or shares. Both gains and rewards earned over the time of
investment and losses are shared equally in proportion of contribution to the corpus by all the investors.
Mutual funds are registered with SEBI.

Mutual fund units, or shares, can regularly be acquired or redeemed as needed at the fund's current net
asset value (NAV) per share, which is sometimes expressed as NAVPS. A fund's NAV is derived by
dividing total value of the securities in the portfolio by the total amount of outstanding shares.

Net Asset Value (NAV) - Net asset value tells the net value of an entity which is calculated by net
assets – net liabilities. It is most commonly used in the mutual funds and represents per share/unit price
of the funds registered with the US securities & exchange commission.
Formula for Mutual fund’s NAV calculation is-
Net assets- Net liabilities / Total number of shares.

How does Mutual Fund Companies Work?

Mutual fund are virtual organizations that purchase pools of stocks as well as securities as suggested by
a speculation advisor and fund manager. The fund manager is procured by a governing body and is
lawfully committed to work to the best interest of mutual fund shareholders. Most fund managers are
additionally owner of the fund however some are definitely not.

There are very few other employees in a mutual fund company. The speculation advisor or fund
manager may employ a few analysts to help pick investments or perform market surveying. A fund
accountant is kept on staff to calculate the fund's net asset value (NAV), or the daily value of the mutual
fund that determines if share prices go up or down.

Mutual funds need a consistence officer or two, and probably an attorney, to stay aware of government
guidelines.
Most mutual funds are part of a much larger investment company apparatus; the biggest have hundreds
of separate mutual funds. A portion of these fund companies are names well-known to the overall
population, for example, Fidelity Investments, the Vanguard Group, T. Rowe Price and Oppenheimer
Funds.

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Types of Mutual Funds

1. Equity Fund: These are the funds which are invested in the equity shares of the different companies.
They provide higher return, that’s why they are considered as high-risk funds.
Equity fund are of following types-

(i) Large Cap Fund: It is a type of equity mutual fund that invests a large portion of their
Corpus in companies with market capitalization of more than 20,000 crore.
Example- Aditya Birla SL Focused Equity Fund

(ii) Mid Cap Fund: Mid Cap Mutual Fund scheme invest in stocks of mid-size companies or
Stocks with market capitalization of 10,000-20,000 crore. Example- L&T mid Cap Fund

(iii) Small Cap Fund: They invest in stocks of small companies that have potential of growth. The
Market capitalization of these companies are less than 10,000 crore. Ex- SBI Small Cap Fund

(iv) Multi Cap Fund: Investment in stocks of all Large Cap, Mid Cap and Small Cap companies.
These are less risky fund and therefore, returns are also low.

(v) Sector Fund: It invests solely in business that operates in specific sectors of economy.
Portfolio is built from stocks of different sectors that can be IT, FMCG, Banking. The main
Aim is to benefit from sectors that are performing well based on the investment objective of
The scheme. Example- Financial Services Sector Fund

(vi) Contrarian Fund: It has contrary view to market view. In this, underperformed companies are
identified where investment is done with conviction to create Long-term capital appreciation.
They mostly give negative returns during bear market. Example- SBI Contra Fund

(vii) Index Fund: In this, movement of fund is in accordance to movement in market index in order to
monitor the returns. Charges of Index Funds are less. Ex- Purchasing shares from BSE Sensex.

(viii) Foreign Funds: Foreign Fund invests in firms in countries other than the one they reside. It is
also called overseas or international mutual funds. Investing in them means more exposure,
but also chances of higher returns.

(ix) Fund of Funds: It is a mutual fund scheme that invests in other mutual fund schemes. In this,
the fund manager holds portfolio of other mutual funds instead of directly investing in equity
Or debt fund. The fund may choose to invest in scheme of the same fund house or some other
Fund house.

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 1. Debt Mutual Fund: These funds are invested in debt instruments like government bonds,
company debentures and fixed income assets. As they provide fixed returns, they are known to be
a safe investment instrument with negligible or no-risk. On the basis of duration of maturity period,
they are of 3 types-
i. Short-term Debt Fund: It is a Mutual Fund scheme with a shorter holding or maturity period less
than three years.
ii. Mid-term Debt Fund- It has a holding or maturity period of 3-5 years.
iii. Long-term Debt Fund- It has a holding or maturity period of more than 5 years.

3. Balanced or Hybrid Fund: Balanced funds invest in both equity and debt mutual fund i.e. in stocks
and bonds with the aim of reducing risk of exposure to one asset class or another. Another name for this
type is "asset allocation fund." An investor may expect to find the allocation of these funds among asset
classes relatively unchanging, though it will differ among funds. Though their goal is asset appreciation
with lower risk, these funds carry same risk and are subject to fluctuation as per classifications of funds.

Systematic Investment Plan

Systematic Investment Plan, commonly referred to as SIP, allows you to invest regularly a fixed sum
in any of the mutual fund scheme/s. SIP allows you to invest in small amounts at fixed intervals (weekly,
monthly or quarterly) instead of doing a one-time investment.
In SIP, a fixed amount is deducted from your savings account every month and directed towards the
mutual fund you choose to invest in and no. of units are assigned on the basis of NAV. In SIP, money
is invested on the basis of average NAV so that it can cover both falling and rising price.

Types of SIP-
1. Top-Up SIP- This type of SIP allows you to increase your investment amount periodically. You can
increase your investment amount as your income increases.
2. Flexible SIP- This SIP allows you to increase as well as decrease your investment amount as per
Cash flow you have. This way you can skip one or more payments when you face cash – crunch and
accordingly large investment can be made when you receive bonuses.
3. Perpetual SIP- SIP investments are generally for a fixed period of 1 yr. 3 yr. & 5 yrs. SIP is referred
to as perpetual SIP if you do not mention the end date. This SIP allows you to redeem your funds
whenever required.
4. Trigger SIP- This SIP is ideal for investors with limited knowledge of financial market. You are
allowed to set NAV, index level etc.

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 How does SIP work
Investment in SIP is very simple. Steps are as follows:
 You apply for one or more SIP plans.
 Amount is automatically debited from your bank account.
 Based on NAV, you are allocated certain no. of units
 Every time you invest, you choose to invest in best SIP plans.
 Now additional units are added to your account based on current market rate.
 So, when prices are high, investor buy more units and vice-versa.

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 LIVE TRADING

Live trading is basically the act of buying or selling of financial products through an online trading
platform. These platforms are normally provided by internet-based brokers and are available to every
single person who wants to make money from the market. It is also known as e-trading or self-directed
investing.

INDEX
Stock market indexes measure the value of a segment of a country’s stock market by the method of
weighted average of selected stocks. These indexes help investors and analysts describe the market and
compare different investments. Stocks in numerical terms. As the stocks within an index change value,
the index value also changes accordingly.
The stocks could be selected on the basis of the type of industry, market capitalisation or the size of the
company. The value of the stock market index is calculated using values of the underlying stocks. Any
change taking place in the prices of underlying stock impact the overall value of the index. If the prices
of most of the underlying stocks rise, then the index will rise and vice-versa.
In this way, a stock index reflects overall market sentiment and direction of price movements of products
in the financial, commodities or any other markets.

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Steps to calculate Stock Market Index (RETAIL SECTOR):
1. Closing price of the stocks and percentage change in price of stocks of a particular company is noted
down on a daily basis.
2. Market capitalization is to be calculated by multiplying total no. of outstanding shares
floated by company with share price of stock.
3. The stocks are assigned weightage based on their market capitalization as compared to the total market
capitalization of the index.
4. Change in weightage is calculated by multiplying change in price with M Cap weightage.
5. Final value is calculated by taking 1000 as base value and multiplying it with change in weightage.

Some of the indices in India are as follows:

a. Benchmark indices like NSE Nifty and BSE Sensex.

b. Broad-based indices like Nifty 50 and BSE 100.
c. Indices based on market capitalization like the BSE Small-cap and BSE Midcap.
d. Sectorial indices like Nifty FMCG Index and CNX IT.

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 Some of the World indices are as follows-

The trading in the internship is mostly in Nifty 50. And for sectorial fund analysis, sector wise indexes
have been taken. The trading is being done on TRADE TIGER by SHAREKHAN.

WAYS OF MAKING PROFIT IN STOCK MARKET-

1. First way is a basic BUY-SELL situation in which we buy the stock at a lower pricing predicting that
its price will increase in future and sell it at a higher price to make profit.

2. In second case we do SHORT SELLING. Short selling is the sale of a security which is not owned by
the seller or that the seller has borrowed from the broker. Short selling is motivated by the belief that a
security's price will decrease in future, enabling it to be bought back at a lower price to make a profit. In
simple words, we sell the share at a higher price predicting that it will decline in the future and buy it at
a lower price to make profit.

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 FUNDAMENTAL ANALYSIS

Fundamental analysis is a technique for evaluating a security to quantify its intrinsic value, by examining
related economic, financial and other qualitative and quantitative variables. Fundamental analyst studies
every element that can influence the security's value, including macroeconomic factors, for example, the
general economy and industry conditions, and microeconomic factors, for example, financial conditions
and company management. The true objective of fundamental analysis is to create a quantitative value
that an investor can compare with security's current price, thus indicating whether the security is
undervalued or overvalued. Fundamental analysis uses real, public data in the assessment of a security's
value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be
used for any type of security.

For stocks and equity instruments, this technique utilizes revenues, profits, future development, return
on equity, profit margins and other information to decide an organization's underlying data and potential
for future development. As far as stocks, fundamental analysis centers on the financial statements of the
company being evaluated.

STEPS FOR DOING SECTORIAL FUNDAMENTAL ANALYSIS:-

1. Select any sector for doing the analysis (for e.g. Pharma, Retail and Telecom etc.).
2. As the investment in mutual funds is for long term, therefore take large cap stocks from that sector
and some mid cap stocks also if there’s less no. of large cap stocks.
3. Check the last closing share price of every stock in the list and note it down.
4. Get the P/E value of every stock. It can be calculated or can be seen in the company details.
[P/E = Price / EPS (Earnings per share)]
5. Calculate Industrial P/E by taking the average of the P/E’s of the stocks in the list.
6. Calculate EPS by multiplying P/E by Price of the stock.
7. By comparing the P/E value of the stock by the Industrial P/E, we can see if the stock is
Overvalued or undervalued. If the value is above Industrial P/E then it is overvalued and if below
then Undervalued.
8. Overvalued stock shows that there are chances that its value will decrease in future and undervalued
shows that its price can increase in future. So, it is considered to buy the U.V. stock and sell
O.V.stock.
9. We can also calculate the future price i.e. LTPT (long term price target) by multiplying the industrial
P/E with the EPS of that particular stock.

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 Finding the value pick stocks:

1. Next step is to take all the undervalued stocks and analyze their topline (revenue) and
bottom-line factors (profit).
2. The motive is to see whether both of them are increasing or decreasing.
3. If both revenue and profit is increasing or either of them is increasing then we will definitely
take that stock. If both have decreased then it will be rejected
4. We will reject some stocks after this analysis and the left one will be value pick stocks,
which are hidden gems as they have the potential of increasing in the future.

Finding the growth pick stocks:

1. We will take all the Overvalued stocks and calculate their PEG value.
[PEG = P/E / EPS growth]
2. The EPS growth is the percentage growth in the EPS of the company compared to last
financial year.
3. The value that we will put in the EPS growth should be the percentage value. For e.g. If the
EPS has increased by 20% then we will right the value 20, not 0.2.
4. If the EPS has decreased then the stock is removed. If PEG value is 1 or below, that stock
would be considered and all the other stocks with PEG value more than 1 would be rejected.
5. We will be having the list of growth pick stocks after this analysis.

RANKING AND ALLOCATION OF FUND

The ranking is done by comparing the important financial ratios of the sector in which the
companies are lying. Ranking is given to all the value pick stocks and the growth pick stocks.
The lowest ranked stock will get the highest investment i.e. the lower, the better. As a mutual
fund manager, we will allocate the fund according to the ranking of the stocks.
After the allocation of the funds, the daily NAV (net asset value) is calculated of the portfolio
according to the change in the price of the stocks.

NAV= AUM (Asset under Management) / No. of units

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 PROJECT

The project that I have started working on is the Portfolio management of the different stocks by
doing Fundamental analysis of a particular sector in which the company’s shares lies. I have
chosen RETAIL SECTOR for my analysis. The project was given 3 weeks ago by company
mentor and progress on report till date is as follows:

Objective of the study:

To observe the rate of stock fluctuation of selected companies.
To make your own Mutual funds and beat the benchmark.
To do the Fundamental and Technical Analysis of the stocks of the chosen sector.

Methodology:
Primary Research: Primary research is new research which is carried out to answer specific
questions. This type of research is mainly done through questionnaires, surveys or interviews
with individuals or small groups. There was no primary research conducted for doing equity
research.

Secondary Research: Secondary research (also known as desk research) involves the study or
analysis of existing research rather than primary research and data is collected from research
papers or experiments. To understand the stock behavior which includes data from various
sources such as News channels, Business Magazines, Government websites, and Company’s
official websites, we collected secondary data from websites such as
https://www.moneycontrol.com/, https://in.finance.yahoo.com/ and then analyzing the market
from that given data and performed all the calculations.

INTRODUCTION
The Indian retail industry has developed as a standout amongst the most powerful and quick
growing businesses because of the entrance of few new players. Total consumption expenditure
is expected to reach almost US$ 3,600 billion by 2020 from US$ 1,824 billion in 2017. It
represents more than 10 percent of the nation's Gross Domestic Product (GDP) and around 8
percent of the work. India is the world's fifth-biggest worldwide destination in the retail space.

Market Size
India's retail market is expected to increase by 60% to reach US$ 1.1 trillion by 2020, on account
of components like rising income & lifestyle changes in middle class and expanded digitalization.
Online retail deals are required to develop at the rate of 31% y-o-y to reach US$ 32.70 billion till
2018.

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 India is relied upon to turn into the world's quickest developing online business showcase, driven
by robust investment in the sector and fast increment in the number of internet users.

Luxury market of India is expected to grow to US$ 30 billion before the finish of 2018 because
of the developing introduction of worldwide brands among Indian youth and higher buying
intensity of the upper white-collar class in tier 2 and tier 3 urban cities.

Investment Scenario

The Indian retail trading has gotten Foreign Direct Investment (FDI) inflows of around
US$ 1.42 billion amid April 2000– June 2018, as indicated by the Department of Industrial
Policies and Promotion (DIPP).
With the expanding requirement for consumer products in various parts including consumer
electronics and home appliances, numerous organizations have put resources into the Indian retail
space to increase immense benefits.
• Beccos, a South Korean planner brand is set to enter the Indian market with a speculation of
about Rs 1.00 billion (US$ 14.25 million) and open 50 stores by June 2019.
• Walmart Investments Cooperative U.A has contributed Rs 2.75 billion (US$ 37.68 million) in
Wal-Mart India Pvt Ltd.

SECTORIAL ANALYSIS-
 Retailing in India represents over 10% of the nation's Gross Domestic Product (GDP) and around
8% of the employment.
 The retail segment in India is ruled by the unorganized retail trade, where unorganized trade
forms to 93% of the overall trade. This is in contrast with the developed nations where the
organized retail industry represents around 80% of the complete retail exchange. This features a
great deal of extension for further penetration of organized retail in India.
 The sector can be extensively partitioned into two segments: Value retailing, which is ordinarily
a low margin-high volume business (primarily food and groceries) and Lifestyle retailing, a high
margin-low volume business (clothing, footwear, and so on). The sector is additionally
partitioned into different categories, depending on the types of items offered.
 Transition from traditional retail to organized retail is taking place because of changing buyer
expectations, growing middle class, higher disposable income, inclination for luxury goods, and
change in the demographic mix, and so on. This is additionally escalated with the accommodation
of shopping with online stores (online shopping), variety of decision under one rooftop (Shop-
in-Shop), and the expansion of shopping center or mall culture, and so on. These variables are
expected to drive organized retail development in India over the long run.
 The overall retail market in India is expected to grow at 12% growth rate per annum, driven by
developing urbanization, rising income, more young generation and rising desires of the middle
class. Modern trade will extend as twice as fast at 20% per annum and traditional trade is expected
to grow at 10%.
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 PORTER Five Force Model for research on Retail Sector-

 Demand & Supply: The retail industry is currently utilizing the digital retail channels (e-
commerce), which enables them to spend less on real estate while connecting with more clients
in Tier 2 and Tier 3 cities. Supply is likewise impacted by some worldwide players entering
domestic markets. Growing urbanization, expanding disposable income, changing consumer
tastes and preferences are some of the factors that are driving interest in retail market in India.
 Barriers to entry: Lack of quality, financial background, regulatory issues are some of the
components acting as an obstacle to the spread of organized retail in India. Since it is capital-
intensive industry, access to capital has a critical influence for expansion.
 Bargaining power of suppliers: The bargaining power of suppliers differs depending on the target
segment, the format followed, and items on offer. The unorganized sector has a dominant position
in the total retail market in India. There are not many players who appreciate an edge over others
by virtue of being built up players and enjoying brand distinction. In general, the bargaining
power of suppliers is low as retailers have low switching costs.
 Bargaining power of customers: High because of wide accessibility of choice and less expensive
options available over different channels. Likewise, low switching costs, price sensitiveness, and
effectively open information of a product and its price gives customers high bargaining power.
 Competition: With India being an appealing retail market, there is a high level of competition.
Competition is described by numerous factors, including variety, items, price, quality,
administration, location, reputation, credit, comfort offered, etc.

FINANCIAL YEAR 2018

 Financial year 2017-18 stood as one more year of mixed trends. The retail sector in India saw
some improvement in buyer notions and business confidence.
 Collective efforts of financial houses and banks with retailers are empowering customers to go
for durable products with easy credit.
 The introduction of Goods and Services Tax (GST) and the demonetization move bolstered the
development of organized retail industry.
 With the rising requirement for consumer products in various segments including customer
electronics and home appliances, many organizations invested in the Indian retail space in FY18.
 Department of Industrial Policy & Promotion (DIPP) approved three foreign direct investments
(FDI), Mountain Trail Food, Kohler India Corporation, and Merlin Entertainments India in the
single brand retail sector and two FDI proposition of over Rs 4 billion (US$ 62.45 million) inside
the retail sector.
 2018 was a fruitful year for herbal- ayurvedic brands. With the growing requirement for natural
items, numerous new Indian organizations were seen entering this segment.
 The year saw development of online market places over an entire scope of categories with
aggressive discounting strategies funded by overseas investors.
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 PROSPECTS
 Retail industry has been on a growth trajectory in the course of recent years. Indian retail market
industry is expected to be worth US$ 1.1 trillion by 2020.
 Another pattern rising in retail sector is the increase in sales during discount seasons. It has been
seen generally that sales numbers in discount seasons are significantly higher than at different
times. This is prompting retailers to start discounts earlier and have longer than usual sale season.
Likewise, concepts, such as, online retailing and direct selling are becoming increasingly popular
in India, in this way boosting development of retail division.
 E-commerce business is most likely said to make a revolution in the retail industry in the years
to come. With the rapid expansion of online business, there can be seen a pattern of consistently
increasing choice of items at lowest rates.
 One of the major areas supporting the retail growth in India is the E-commerce industry.
According to India Brand Equity Foundation, India is expected to turn into the world's fastest
growing e-commerce market, driven by robust investments in the sector and fast increment in the
number of internet users. E-commerce deals in India are expected to reach US$ 120 billion by
2020 from US$ 30 billion in FY16. Further, India's online business showcase is expected to reach
US$ 220 billion as far as gross merchandise value (GMV) with 530 million customers by the
year 2025. This will come on the back of faster speeds on dependable telecom systems, faster
adoption of online services, variety of decision, comfort, etc.
 There is likewise an upward trend found in present day retailing. Driven by western culture and
urbanization, it has become an important part of everyday life. There are in excess of 500
operational shopping malls in India having a large number of brands across food, design and
lifestyle which are putting forth best of national and international brands to better educated
customers.
 The new trendy expression in retail is Omni-channel. Omni-channel offers a seamless experience
to the customers across various channels, whether brick & mortar, online stores, etc. The strategic
objective here is to merge different channels (departmental stores, online stores) and link them
to a multichannel retailer. This system makes a brand constantly accessible to the client and gives
an impetus to sales by increasing visibility, customer base across different geographies. It
likewise optimizes inventory holding costs, working expenses and real estate cost. With present
day retail making progress in India, there remains a great deal of extension for omni-channel to
extend.
 With rising income, favorable demographics, entry of foreign players and expanding
urbanization, the long-term outlook for the retail business in India is positive.
 Goods and Services Tax (GST) is required to simplify the distribution structure and diminish the
operational complexities of overall supply chain in the retail business. The entry of GST will
likewise turn out as a positive advancement for the retail Industry in India.

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 Progress on project till date:

1. Started the fundamental analysis in Retail Sector. As I have to manage and allocate the fund, I
have given 10cr. (not real) for the investment.
2. Firstly, I chose the large cap and mid cap stocks in the sector. One can find it from number of
sources, I used money control for this.
3. Then P/E Analysis has been done to find the Overvalued and Undervalued stocks.
4. The U.V. stocks were further analyzed by seeing Top-line (Revenue) and Bottom-line (Sales)
and value picks stocks were selected.
5. The O.V. stocks were further analyzed by finding the PEG value and growth pick stocks were
selected.
6. The ranking was done according the values of the important financial ratios of the sector of the
stocks.
7. The fund allocation was done according to the ranking of the stocks.
8. Daily NAV was calculated of the portfolio according to the price change of the stocks.

Some of the calculations done so far are shown in the tables below:

Calculation of P/E Ratio& Long term price target

Industry P/E Ratio – 71.56 (Average of company P/E Ratio)

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 Overvalued / Undervalued Stocks

• Avenue Supermar, Aditya Birla F and Trent are overvalued stocks as their P/E is greater
than Industry P/E Ratio.
• Future Life, V-Mart Retail, Shoppers Stop and V2 Retail are undervalued stocks as their
P/E Ratio is less than Industry P/E Ratio.

OVERVALUED STOCKS:

PEG Ratio= P/E Ratio/ EPS Growth

In case of overvalued stocks, if PEG Ratio is greater than 1 then reject it and if less than 1
then accept it.
GROWTH PICKS- ADITYA BIRLA F

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 UNDERVALUED STOCKS:
VALUE PICKS

Key Financial Ratios for Retail Sector

FUND ALLOCATION
Total Value = 10 Cr

Total Cash in hand = Rs. 2100.15

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 BIBLIOGRAPHY

 https://www.equitymaster.com/research-it/sector-info/Retail/index-jul09.html
 https://www.ibef.org/industry/indian-retail-industry-analysis-presentation
 https://www.investopedia.com/articles/stocks/07/retail_stocks.asp
 https://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/retail.html?classic=true
 https://www.policybazaar.com/life-insurance/
 https://www.chittorgarh.com/ipo/ipo_list.asp
 https://economictimes.indiatimes.com/mutual-funds

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