Report 2 – Investment Analysis & Portfolio Selection

Equity investments

We aim to invest 50% of our portfolio in equities listed on the BSE and NSE. The broad equity
investments would be in the following sectors:

❖ Information Technology: After the revival of the American economy this sector seems
promising. In addition, the focus of the Indian government on Digital India is another
reason to bet on this sector. This will be beneficial, especially to the midcap firms as they
will find it easier to shift focus on this. The devaluation of INR is also beneficial to the
sector. (TCS, Infosys, Mindtree)
❖ Pharmaceuticals: The government of India has taken steps to support the pharma
sector recently (Pharma vision 2020). This sector also benefits from the devaluation of
INR. The number of Pending ANDA (Abbreviated New Drug Application) approvals are a
good indicator of the future prospects of any company in this sector. (Glenmark,
Aurobindo Pharma)
❖ Autos: Urban consumption and spending bound to increase soon after implementation
of schemes like OROP (One rank one pension) and the 7th pay commission. Reduction
in commodity prices of aluminium and steel would decrease the supply-side costs for the
industry, thus enhancing margins. (Maruti Suzuki (selecting 4-wheeler as better due to
the urban growth))
❖ FMCG (including consumer durables): Evergreen. Will try firms with products catering to
Urban demand. One of the defensive strategies with respect to long term returns. Their
products in use for over a century and should keep doing well in the foreseeable future
(Godrej consumer Products, Asian Paints, ITC)
❖ Banks & Housing Finance: India is amongst the fastest growing economies in the
world with a fast-growing demand for affordable housing. (HDFC etc)

Breakup of Equity

1. TCS: 5% (INR 500,000) - Safe Pick; Consistent growth with healthy margins.
2. Infosys : 5% (INR 500,000) - Safe Pick
3. MindTree : 6% (INR 600,000) - They have delivered good results in the last quarter.
Overall IT sector is dependent on currency fluctuation and given the stability of INR in
the near future the risks for the sector are low and is thus a defensive sector.
4. Glenmark Pharma : 6% (INR 600,000) - Safe Pick
5. Aurobindo Pharma : 6% (INR 600,000) - Currently has one of the highest pending
approvals for their drugs. Glenmark is stronger as compared to the other due to better
fundamentals, and makes sense for longer term horizons.
6. Maruti Suzuki India: 5% (INR 500,000) - Safest Auto stock in India. Might get included
in the MSCI India index. Also, should reap the benefits of Foreign Institutional
 investments limit increasing. We are not taking midcap stocks for the auto sector, as
economies of scale play a big role for the industry.
7. Asian Paints: 6% (INR 600,000) - Good past risk/return profile.
8. Godrej Consumer Products: 4% (INR 400,000) - Safe Pick
9. ITC: 3% (INR 300,000) - Safe pick with some government backing as well. Good
revenue growth with healthy margins
10. HDFC: 2% (INR 200,000) Consistent growth with low NPAs.
11. Indiabulls Housing Finance: 2% (INR 200,000)

Debt Securities & Money Market Instruments

We aim to invest in debt & money market instruments of firms of solid financial standing, with
AAA ratings, lower default risk. The portfolio would consist of 10% investments in money
market, 10% in instruments maturing in 1 to 2 years, a further 10% in securities with 2-5 years
maturities and the remaining 20% in instruments having more than 5-year maturities.

Debt securities with embedded call options are more riskier. In short term variability risk is not
much but default risk is higher, in the long-term variability risk is higher with less risk in default,
even in the recent past AAA grade bond has default. With the 10% money market investment,
we try to hedge for the variability risk, for the long-term investment we are looking for active
investment which will help us to increase our expected return with the company which is
performing well and macroeconomic factors which can affect the interest rate. We are not
investing in troubled sectors like real estate, power sector, NBFCs as the outlook for these
sectors are uncertain amid looming troubles ahead for them like bankruptcy etc.

We aim to invest in the following securities

Security Code Issuer Name Maturity date Coupo Yield

n
670IRFC21 Indian Railway Finance 24-11-2021 6.70 6.23
corporation Limited
INE110L07112 Reliance Jio Infotech Limited 15-06-2021 8.70 6.80
732NTPC17JUL29 NTPC 17-07-2029 7.32 7.48
678RIL20 Reliance Industries Limited 16-09-2020 6.78 6.46
844HBL28 HDFC Bank limited 28-12-2028 8.44 7.60
945SBIPERP State Bank of India 31-12-9999 9.45 8.47
9MMFSL26 Mahindra and Mahindra 06-06-2026 9.00 7.99
Financial services Limited

Apart from the listed above, we also aim to invest in 91-Day & 364-Day Treasury Bills and the
10 Year G Secs.