Kunthinath c m Portfolio Project Final

KARVY STOCK BROKING LTD BIJAPUR

I. EXECUTIVE SUMMERY

The Karvy group was formed in 1983 at Hyderabad, India. Karvy ranks

among the top player in almost all the fields it operates. Karvy Computershare Limited is

India’s largest Registrar and Transfer Agent with a client base of nearly 500 blue chip

corporate, managing over 2 crore accounts. Karvy Stock Brokers Limited, member of

National Stock Exchange of India and the Bombay Stock Exchange, ranks among the top

5 stock brokers in India. With over 6, 00,000 active accounts, it ranks among the top 5

Depositary Participant in India, registered with NSDL and CDSL.

I have undertaken the project at Karvy Stock Broking Ltd. at Bijapur city.

This project mainly deals with providing advisory services to investors. In this report I

have taken 5 clients portfolio out of 8 provided by the company. The selection is based on

total amount invested in entire portfolio and their location, and finally the manager of the

Bijapur branch agreed to carry my research work on this client’s portfolio. And as per the

instruction of the manager clients details are not disclosed in this project because of safety

of clients.

All together 5 clients are invested total Rs. 6,71,90,040.79 in 66 companies

in to different sector. Here I have analyzed all 66 companies first as part of my research

work. Firstly, I have calculated monthly returns, beta, alpha, variance, standard deviation,

co-efficient correlation, co-efficient determination and total risk for each scrip’s. Then I

moved to market return, market S.D and market variance. After that I applied the various

portfolio theories like Sharpe Index, Treynor Index, Jensen performance index and

CAPM model to decide which client has the best portfolio.

So among 5 clients, client no 3 and 4 very good because of they have well

diversified portfolios along with volatility(risk) factor of 14.23 and 8.09 respectively but

portfolio rate of return is higher as compared to other clients & market return. And client

no 5 is worst performing for given level of risk criteria standard deviation of 12.97, he has

negative rate of return -2.22% & he has invested in only few company, so it is not good

because that is more risky one. So clients are advised that they need to diversify their

portfolio to reduce risk level.

While investing investors should consider the market scenario also their

earnings depends on the market favorable conditions. If market expected to move up in

A.S.PATIL COLLEGE OF COMMERCE, MBA PROGRAMME BIJAPUR


future, that time investor should aggressive. They can choose scrip’s which has higher

beta, high standard deviation and high co-efficient determination; otherwise they can go

for defensive scrip’s.

TITLE OF PROJECT

“A Study on Performance Evaluation of Portfolio Investors With

Reference To Karvy Stock Broking Ltd In Bijapur City.”

OBJECTIVE OF STUDY:

This study is undertaken at the KARVY Stock Broking Ltd, at Bijapur

city. And it has following objectives.

Main objectives:

To study the advisory services and help to provide suggestions regarding

construction of optimal portfolio to the investors.

Construction and evaluation of optimal portfolio using NSE Nifty Index

Constituent scrip’s.

To know how best investors are getting returns by investing in various securities.

Sub-objectives:

To characterize the equity share by calculating average return and standard

deviation (S.D) of the return for each of the shares.

To characterize the NSE Nifty Index by calculating average return and standard

deviation of the returns.

To establish correlation coefficient (r), co-efficient determination (r 2), beta (β),

alpha (α), variance (Var) for each of the shares.

To arrive at systematic risk, unsystematic risk and total risk associated with each

of the share.

To arrive at the best portfolio management theories are used.



Research Methodology:

Methodology :

Both the primary data and secondary data’s are used in the report.

Primary Data

Interaction with the Branch Manager and staff of KARVY STOCK BROKING,

BIJAPUR branch.

Direct interaction with clients of the KARVY.

Secondary Data

From the internet and magazines

SCOPE OF THE STUDY:

Eight clients’ five portfolios consisting of 66 companies of the NSE Nifty Index

constituent are considered for the study.

NSE Nifty Index value is considered as a market representative..

The study and analysis of portfolio is limited to specific 5 clients of karvy stock

broking in bijapur.

The study is restricted to only 2 years Monthly closing price of stocks & NSE

Nifty Index from 30/04/2007 to 31/03/2009.

LIMITATIONS OF THE STUDY:

Though the company provided 8 portfolios list of the different clients with

different places and different amount. Out of 8 portfolios only 5 are selected on

the basis of amount invested and number of share held in the portfolio.

Even though the company also provided the details of the clients like name and

address and other information but safety purpose these details are not disclosed.

Returns of the securities are calculated excluding dividends.

Stock splits are not considered.

No debentures, mutual fund and government bonds are included in the portfolio

analysis.



INTRODUCTION

Economic liberalization has accelerated the pace of development in the

India Securities Market, which has undergone a sea change during the last two decades.

The role of securities market in mobilizing and canalizing private capital for the

economic development of the country has increased over the years and the securities itself

has undergone structural transformation with the introduction of computerized onligne

interconnected market system.

Over the years as investments in securities gathered momentum and the

need for rational analysis arisen. Only recently security analysis and portfolio

management has emerged as a important tool for investors and it is evident that rational

investment activity involves creation of an investment portfolio.

A portfolio is a group of securities held together as an investment. By

constructing a portfolio investors attempt to spread risk by not putting all their eggs in to

one basket.

Each individual security has its own risk and return characteristics which

can be measured and expressed quantitatively. Each portfolio by combining the individual

securities has its own specific risk and return characteristics, which are not just the

aggregate of the individual security characteristic. The return and risk of each portfolio

has to be calculated mathematically and expressed quantitatively. This demands the

process of selecting of optimum portfolio.



II. DESIGN OF THE STUDY

OBJECTIVE OF STUDY:

This study is undertaken at the KARVY Stock Broking Ltd, at Bijapur

city. And it has following objectives.

Main objectives:

To study the advisory services and help to provide suggestions regarding

construction of optimal portfolio to the investors.

Construction and evaluation of optimal portfolio using NSE Nifty Index

Constituent scrip’s.

To know how best investors are getting returns by investing in various securities.

Sub-objectives:

To characterize the equity share by calculating average return and standard

deviation (S.D) of the return for each of the shares.

To characterize the NSE Nifty Index by calculating average return and standard

deviation of the returns.

To establish correlation coefficient (r), co-efficient determination (r 2), beta (β),

alpha (α), variance (Var) for each of the shares.

To arrive at systematic risk, unsystematic risk and total risk associated with each

of the share.

To arrive at the best portfolio management theories are used.



TITLE OF PROJECT

“A Study on Performance Evaluation of Portfolio Investors With

Reference To Karvy Stock Broking Ltd In Bijapur City”.


Methodology :


Primary Data


BIJAPUR branch.


Secondary Data


METHODOLOGY:

Each individual security is characterized by calculating monthly returns and

finally calculating average monthly return and standard deviation of the security

return.

NSE Nifty Index is characterized by calculating monthly returns and finally

calculating average monthly return and standard deviation of the NSE Nifty

return.

Correlation co-efficient, co-efficient determination, variance and beta are

calculated by comparing each individual security return with NSE Nifty Index

return.



Systematic risk, unsystematic risk and total risk are associated with each share are

in the portfolio of the client.

To rank the portfolio various portfolio management theories are used i.e. Sharpe

Index Model, Treynors Index Model, CAPM Model and Jensen’s Performance

Model are used.

All the information regarding all the companies is not available.

Companies listed with stock exchanges with in the last 6 months are not

considered.

ANALYTICAL TECHNIQUE:

Statistical technique used for calculation of Return, Risk, and Variance of

the Investor by S.D, Alpha, Beta, Corr-Coefficient, and Co-eff Determination.

SCOPE OF THE STUDY:

Eight clients’ five portfolios consisting of 66 companies of the NSE Nifty Index

constituent are considered for the study.

NSE Nifty Index value is considered as a market representative.

Monthly closing shares price and Monthly closing NSE Nifty Index value is

considered for the 24 months (2 years) from 31st JAN 2005 to 31st JAN 2007 as a

time period.

The study and analysis of portfolio is limited to specific 5 clients of karvy stock

broking in bijapur.

The study is restricted to only 2 years Monthly closing price of stocks & NSE

Nifty Index from 30/04/2007 to 31/03/2009.



LIMITATIONS OF THE STUDY:

Though the company provided 8 portfolios list of the different clients with

different places and different amount. Out of 8 portfolios only 5 are selected on

the basis of amount invested and number of share held in the portfolio.

Even though the company also provided the details of the clients like name and

address and other information but safety purpose these details are not disclosed.

Returns of the securities are calculated excluding dividends.

Stock splits are not considered.

No debentures, mutual fund and government bonds are included in the portfolio

analysis.

All the calculation is made restricted to 2 years monthly closing price of the shares

and NSE Nifty Index.

Some assumptions of portfolio theories or portfolio models do not hold well in

practice.

CUT OF DATE:

Cut of date is 31st/April/2007 for all the company share price and market index prices.



III. INDUSTRY PROFILE

SECURITIES MARKET IN INDIA

Introduction:

Capital market is the backbone of any country’s economy. It facilitates

conversion of savings to investments. Capital market can be classified as primary and

secondary market. The fresh issue of securities takes place in primary market and trading

among investors takes place in secondary market. Primary market is also known as new

issues market. Equity investors first enter capital market though investment in primary

market. In India, common investors participating in the equity primary market is massive.

The number of companies offering equity through primary markets increased

continuously in the post independence period till the year 1995. After 1995, there is a

continuous slump experienced by the primary market offering equity. The main reason

for slump is lack of investor confidence in the primary market. So it is important to

understand the causes and measures of revival of investor confidence leading to capital

mobilization and investment in right avenues creating, economic growth in the country.

Globally, there are increased evidences to suggest that investor confidence

has assumed an important role in the economic development of a country. The Economist

(1998) indicated that a lot of issues need to be addressed to make capital markets safer.

Transparency, strengthening financial system and managing crises are the issues, which

cannot be quickly fixed. But they add up to a stronger system.

“The securities market is the market for equity, debt and derivatives”. The

securities market has essentially three categories i.e. the issuer of securities, the investors

in the securities and intermediaries. The issuers are the borrowers or deficit savers, who

issue securities to raise funds. The investors, who are surplus savers, deploy their saving

by subscribing to these securities. The intermediaries ware the agents who match the

needs of users and suppliers of funds for a commission. These intermediaries pack and

unpack securities to help both issuers and investors to achieve their respective goals.


Equity Market

Securities Market

Debt Market Derivatives Market

Government Securities

Market

Corporate Debt Market

Money Market

Options Market

Futures Market


There are a large variety and number of intermediaries providing various services in the

Indian securities market. This process of mobilization of resources is carries out under the

supervision and overview of regulators. The regulators develop fair market practices and

regulate the conduct of issuers of securities and the intermediaries. They are also in

charge of protecting the interest of the investors. The regulator ensures a high service

standard from the intermediaries and supply of quality securities and non manipulated

demand for them in the market.

STRUCTURE OF THE SECURITIES MARKET



MARKET PARTICIPANTS IN SECURITIES MARKET



EQUITY CULTURE IN THE INDIAN

FINANCIAL SYSTEM

The capital market services as a reliable guide to the performance and financial

position of companies, and there by promoters efficiency. It values firms

accurately and ties up manager compensation to stock value and thereby provides

incentives to managers to maximize firm value. It thus helps to align the interests

of the managers and thereby spurs efficient resources allocation and growth.

A near continuous valuation of companies as reflected in share prices, and the

implied possibility of mergers and takeovers are conducive to financial discipline,

and more efficient allocation of capital.

Stock market promoters’ growth through the creation of liquidity. Many profitable

investments require long term capital, but investors are often reluctant to

relinquish control over their savings for long periods. Equity market makes

investment less risky, more profitable, and more attractive by making it more

liquid. By facilitating long term and more profitable investment, liquid stock

market improves the allocation of capital and enhances growth. Through these

effects, stock market liquidity can lead to more saving and investment also.

Historically, many investors had been made much before they became

innovations. Inventions became innovations and ignited industrial revolution

when liquid financial market made it possible to develop projects that require

large capital injections for long periods. The industrial revolution had wait the

financial revolution took place.

Since high return projects tends to be comparatively risky, stock markets that

facilitates risk diversification through international integration can encourage a

shift to higher return projects and thereby help to promote growth.

Large active and liquid stock markets induce investors to research and monitor

firm, and the resulting improved information improves resource allocation and

accelerates growth.



STOCK EXCHANGE IN INDIA

The market for long term securities like bonds, equity stocks, and

preferred stocks are divided in to primary market and secondary market. The primary

market deals with the new issues of securities. Outstanding securities are traded in the

secondary market, which is commonly known as stock market or stock exchange. In the

secondary market, the investors can sell and buy securities. Stock markets predominantly

deal in the equity shares. Debt instruments like bonds and debentures are also traded in

the stock market. Well regulated and active stock market promotes capital formation.

Growth of the primary market depends on the secondary market. The health of the

economy reflected by the growth of the stock market.

The origin of the stock exchange in India can be traced back to the later

half of the 19th century. After the American civil war (1860-61) due to the share mania of

the public, the number of brokers dealing in shares increased. The brokers organized an

informal association in Mumbai named “The native stock and share brokers association”

in 1975. At presently in India there 23 stock exchanges are there and situated in various

part of the country. All the stock exchanges in India are controlled by SEBI.

FUNCTIONS OF STOCK MARKET

Provides quotations of shares/stock for facilitating trading and marketability

Extends liquidity to such stock as they are easily marketable and traded

Provides an orderly regulated market

Promotes savings and investment in the economy by attracting funds for

investment in corporate shares and securities

Ensures safe and fair dealing.

Maintains active trading



NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE) is India's leading stock exchange

covering various cities and towns across the country. NSE was set up by leading

institutions to provide a modern, fully automated screen-based trading system with

national reach. The Exchange has brought about unparalleled transparency, speed &

efficiency, safety and market integrity. It has set up facilities that serve as a model for the

securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market

in terms of microstructure, market practices and trading volumes. The market today uses

state-of-art information technology to provide an efficient and transparent trading,

clearing and settlement mechanism, and has witnessed several innovations in products &

services viz. demutualization of stock exchange governance, screen based trading,

compression of settlement cycles, dematerialization and electronic transfer of securities,

securities lending and borrowing, professionalization of trading members, fine-tuned risk

management systems, emergence of clearing corporations to assume counterparty risks,

market of debt and derivative instruments and intensive use of information technology.

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 in the country.

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.

NSE Logo



The logo of the NSE symbolises a single nationwide securities trading

facility ensuring equal and fair access to investors, trading members and issuers all over

the country. The initials of the Exchange viz., N, S and E have been etched on the logo

and are distinctly visible. The logo symbolises use of state of the art information

technology and satellite connectivity to bring about the change within the securities

industry. The logo symbolises vibrancy and unleashing of creative energy to constantly

bring about change through innovation.

Promoters

NSE has been promoted by leading financial institutions, banks, insurance

companies and other financial intermediaries:

Industrial Development Bank of India Limited

Industrial Finance Corporation of India Limited

Life Insurance Corporation of India

State Bank of India

ICICI Bank Limited

IL & FS Trust Company Limited

Stock Holding Corporation of India Limited

SBI Capital Markets Limited

Bank of Baroda

Canara Bank

General Insurance Corporation of India

National Insurance Company Limited

The New India Assurance Company Limited

The Oriental Insurance Company Limited



United India Insurance Company Limited

Punjab National Bank

Oriental Bank of Commerce

Indian Bank

Union Bank of India

Infrastructure Development Finance Company Ltd.

National Stock Exchange of India became operational in the Capital

Market segment on 3rd, November 1994 in Mumbai. The genesis of the NSE lies in the

recommendations of the Pherwani Committee (1991). Apart from NSE, it had

recommended for the establishment of National Stock Market System also. Committee

pointed out five major defects in the Indian stock market The defects specified.

Lack of liquidity in most of the markets in terms of depth and breadth.

Lack of ability to develop markets for debt.

Lack of infrastructure facilities and outdated trading system.

Lack of transparency in the operations that effect investors confidence.

Outdated settlement systems that are inadequate to cater to the growing volume,

leading to delay.

The main objectives of NSE are as follows:-

To establish a nationwide trading facility for equities, debt instruments and

hybrids.

To ensure equal access to investors all over the country through appropriate

communication network

To provide a fair, efficient and transparent securities market to investors using an

electronic communication network

To enable shorter settlement cycle and book entry settlement system

To meet current international standards of securities market.

Advantages of NSE:



Wider accessibility:

The NSE ensure wider accessibility through satellite linked trading

facility. Computer terminals and links with VSAT help the the traders to contact

their counterparts in other parts of the country quickly. The quick trading system

ensures better pricing.

Screen based trading:

Originally, the basic advantage of NSE is computer based trading.

The back office loads have been reduced as everything is stored in the computer.

At present, BSE and many other stock exchanges have introduced the computer

based trading. The ring based trading is vanishing in the recent days.

Non disclosure of the trading members identity.

While placing the orders there is no need to disclose the identity of

the member on the screen. It depends upon the wish of the trading members. So

without any fear of influencing the prices, any member can place large size orders.

Effective settlement of corporate benefit:

All monetary benefits lodged, dividend interest and redemption

amount, claims on company objections, are debited/credited directly in the

clearing account of the clearing members. This reduces the problems faced by the

members in settlement of corporate benefits.



Recent Trends in NSE:

Expansion:

After establishing its operation in Mumbai, the NSE had expanded

its operation to other cities. NSE has installed 2580 VSATS in 317 cities across

the country. A break up of VSATs across 317 cities is given below.

Quality:

Apart from the consolidation of the market at national level, the

transaction cost along with the bad deliveries has declined. Dematerialization of

shares has helped in the reduction of the bad deliveries. The effective functioning

of National Securities Clearing Corporation Limited is another reason for it.

More liquidity:

With its on line systems and quick trading facilities, the NSE has

introduced some liquidity into the capital market. In the last quarter of 1997, the

NSE was more liquid for the 835 scrips that accounted for 97 per cent of the total

trading volume. In number of trades, an indicator of the presence of the retail

investor, the NSE was ahead of the BSE.

Less brokerage:

Transparency in NSE allows the breaking up of the costs into

brokerage fees, market impact costs and clearing and settlement. The brokerage

fee at the BSE terminals outside Mumbai is 0.5 percent of the value transacted. On

the NSE, it is around 0.1 percent of the value transacted.

Quick clearing and settlement:

NSE has introduced a full range of clearing house facilities; a pan

of the securities is processed at the regional clearing centers (Delhi, Chennai and

Calcutta). The inter region clearing facility provided at present, reduced that risk

of the members because of not getting timely delivery of shares or loss of shares

in transit. The facility is also expected to boost delivery based trading.



IV. COMPANY PROFILE

About KARVY

The Karvy group was formed in 1983 at Hyderabad, India. Karvy ranks

among the top player in almost all the fields it operates. Karvy Computer share Limited is

India’s largest Registrar and Transfer Agent with a client base of nearly 500 blue chips

corporate, managing over 2 core accounts. Karvy Stock Brokers Limited, member of

National Stock Exchange of India and the Bombay Stock Exchange, ranks among the top

5 stock brokers in India. With over 6, 00,000 active accounts, it ranks among the top 5

Depositary Participant in India, registered with NSDL and CDSL. Karvy COM trade,

Member of NCDEX and MCX ranks among the top 3 commodity brokers in the country.

Karvy Insurance Brokers is registered as a Broker with IRDA and ranks among the top 5

insurance agent in the country. Registered with AMFI as a corporate Agent, Karvy is also

among the top Mutual Fund mobilize with over Rs. 5,000 cores under management.

Karvy Realty Services, which started in 2006, has quickly established itself as a broker

who adds value, in the realty sector. Karvy Global offers niche off shoring services to

clients in the US.

Karvy has 575 offices over 375 locations across India and overseas at

Dubai and New York. Over 9,000 highly qualified people staff Karvy.

Karvy – Early Days

Karvy the name comes from the names of the directors:

K - Mr. V. Kutumba Rao

A - Mr. K Ajay Kumar

R - Mr. M S Ramakrishna

V - Mr. Vikram Singh

Y - Mr. M Yugandhar



The birth of Karvy was on a modest scale in 1979. It began with the vision and enterprise of a small group of practicing Chartered Accountants who founded the flagship company …Karvy Consultants Limited. Karvy started with consulting and financial accounting automation, and carved inroads into the field of registry and share accounting by 1985. Since then, Karvy have utilized its experience and superlative expertise to go from

Strength to strength…to better its services, to provide new ones, to

innovate, diversify and in the process, evolved Karvy as one of India’s premier integrated

financial service enterprise.

GROWTH AND DEVELOPMENT OF KARVY

Over the last 20 years Karvy has traveled the success route, towards

building a reputation as an integrated financial services provider, offering a wide

spectrum of services. And Karvy have made this journey by taking the route of quality

service, path breaking innovations in service, versatility in service and finally…totality in

service. Karvy’s highly qualified manpower, cutting-edge technology, comprehensive

infrastructure and total customer-focus has secured for Karvy the position of an emerging

financial services giant enjoying the confidence and support of an enviable clientele

across diverse fields in the financial world.

AT PRESENT STATUS OF KARVY

Presently Karvy is a member of National Stock Exchange (NSE), the

Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE). Market

analysis and market predictions are done by professional management team.

KARVY is covering the entire spectrum of financial services such as

Stock Broking Services, Advisory Services, Stock broking, Depository Participants,

Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance

Broking, Commodities Broking, Personal Finance Advisory Services, Merchant Banking

& Corporate Finance, placement of equity, IPOs, among others.



It is the largest mobilized of funds as per PRIME DATABASE. It is

among the top 5 stock brokers in India (4% of NSE volumes). India's No. 1 Registrar &

Securities Transfer Agents (Ranked as “The Most Admired Registrar" by MARG).

Among the top 3 Depository Participants. Largest Network of Branches & Business

Associates. First ISO - 9002 Certified Registrar in India. Among top 10 Investment

bankers. Largest Distributor of Financial Products are --

The Finapolis, monthly magazine & Karvy Bazaar Baatein, a weekly

report cover stock market analysis and other financial matters. Every 50th Indian is

serviced by KARVY Every 20th trade in stock market is done through KARVY. KARVY

India's No.1 Registrars and Transfer agent: KARVY Every 10th Demat Account is held at

KARVY.

Vision of Karvy:

To achieve & sustain market leadership, Karvy shall aim for complete

customer satisfaction, by combining its human and technological resources, to provide

world class quality services. In the process Karvy shall strive to meet and exceed

customer's satisfaction and set industry standards.

Mission statement of karvy

“ Our mission is to be a leading and preferred service provider to our

customers, and we aim to achieve this leadership position by building an innovative,

enterprising, and technology driven organization which will set the highest standards of

service and business ethics ”.



SERVICE PROFILE OF THEKARVY GROUP OF COMPANIES

Karvy Stock Broking Limited

Member - National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the

Hyderabad Stock Exchange (HSE). Karvy Stock Broking Limited, one of the

cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the

customer through varied services.

Why should investors choose for Karvy?

Excellence is next to nothing….and here at Karvy everybody tries their

best to offer excellent services to its clientele through its offerings maintaining the Karvy

culture which includes:

1. Controlled and low cost service culture: Karvy is there to serve its client at the

minimum possible cost. it controls cost by its various cost- cutting techniques and

minimization of avoidable costs.

2. Large volume processing capability: being the largest financial service provider

in the country, it has the unique distinction of operating its activities on a large

scale which benefits all the parties cordially.

3. Adherence to strict time schedule: Karvy knows that time is money and tries it

best to finish the task within the stipulated time schedule.

4. Expertise in coordinating multi-location responses: Karvy has got a wide

network and hence one can find its branches at most of the places in India. Thus it

enjoys its presence everywhere and coordinates among itself in solving the queries

and in responding to any situation.

5. Expertise in managing independent entities such as banks, post-office etc.:

the work culture of Karvy and the ethics followed inside Karvy makes its



workforce compatible with everybody, so the Karvy people establishes good

coordination with independent entities too.

6. Pooling of group resources: Karvy group consists of eight subsidiaries, so it can

easily pool up its resources for accomplishment of its goals, whenever needed.

The groups can help each other whenever there are peaks and lows, and even in

the case when they have huge targets just as we saw few years back, Tata group

pooling its resources to acquire Corus.

Stock Broking Services

It is an undisputed fact that the stock market is unpredictable and yet

enjoys a high success rate as a wealth management and wealth accumulation option. The

difference between unpredictability and a safety anchor in the market is provided by in-

depth knowledge of market functioning and changing trends, planning with foresight and

choosing one & other options with care. Karvy offer trading on a vast platform; National

Stock Exchange, Bombay Stock Exchange and Hyderabad Stock Exchange. Karvy’s

highly skilled research team, comprising of technical analysts as well as fundamental

specialists, secure result-oriented information on market trends, market analysis and

market predictions. This crucial information is given as a constant feedback to its

customers, through daily reports delivered thrice daily; The Pre-session Report, where

market scenario for the day is predicted, The Mid-session Report, timed to arrive during

lunch break, where the market forecast for the rest of the day is given and The Post-

session Report, the final report for the day, where the market and the report itself is

reviewed. To add to this repository of information, Karvy publish a monthly magazine.

The Finpolis, which analyzes the latest stock market trends and takes a

close look at the various investment options, and products available in the market, while a

weekly report, called Karvy Bazaar Baatein, gives more information on the immediate

trends in the stock market. To empower the investor further Karvy have made serious

efforts to ensure that its research calls are disseminated systematically to all our stock

broking clients through various delivery channels like email, chat, SMS, phone calls etc.



Depository Participants

The onset of the technology revolution in financial services Industry saw

the emergence of Karvy as an electronic custodian registered with National Securities

Depository Ltd (NSDL) and Central Securities Depository Ltd (CSDL) in 1998.

Karvy set standards enabling further comfort to the investor by promoting paperless

trading across the country and emerged as the top 3, Depository Participants in the

country in terms of customer serviced. Offering a wide trading platform with a dual

membership at both NSDL and CDSL, Karvy have established live DPMs, Internet access

to accounts and an easier transaction process in order to offer more convenience to

individual and corporate investors. A team of professional and the latest technological

expertise allocated exclusively to demat division including technological enhancements

like SPEED-e, make response time quick and delivery impeccable. A wide national

network makes its efficiencies accessible to all.

Distribution of Financial Products

The paradigm shift from pure selling to knowledge based selling drives the

business today. With wide portfolio offerings, company occupies all segments in the retail

financial services industry.

A 1600 team of highly qualified and dedicated professionals drawn from

the best of academic and professional backgrounds are committed to maintaining high

levels of client service delivery. This has propelled company to a position among the top

distributors for equity and debt issues with an estimated market share of 15% in terms of

applications mobilized, besides being established as the leading procurer in all public

issues.



Advisory Services

Under its retail brand ‘Karvy – the Finapolis', it delivers advisory

services to a cross-section of customers. The service is backed by a team of dedicated and

expert professionals with varied experience and background in handling investment

portfolios. They are continually engaged in designing the right investment portfolio for

each customer according to individual needs and budget considerations with a

comprehensive support system that focuses on trading customers' portfolios and

providing valuable inputs, monitoring and managing the portfolio through varied

technological initiatives. ‘Karvy - the Finapolis', covers the latest of market news, trends,

investment schemes and research-based opinions from experts in various financial fields.

Mutual Fund Services

Karvy has attained a position of immense strength as a provider of across-

the-board transfer agency services to AMCs, Distributors and Investors. Nearly 40% of

the top-notch AMCs including prestigious clients like Deutsche AMC and UTI swear by

the quality and range of services that Karvy offers. Besides providing the entire back

office processing, Karvy provides the link between various Mutual Funds and the

investor, including services to the distributor, the prime channel in this operation.

Carrying the ‘limitless' ideology forward, Karvy has explored new dimensions in every

aspect of Mutual Fund servicing right from volume management, cost effective pricing,

delivery in the least turnaround time, efficient back-office and front-office operations to

customized service. Karvy has been with the AMCs every step of the way, helping them

serve their investors better by offering them a diverse and customized range of services.

The ‘first to market' approach that is Karvy’s anthem has earned the reputation of an

innovative service provider with a visionary bent of mind. Karvy’s service enhancements

such as ‘Karvy Covers', a full-fledged call center, a top-line website

(www.karvymfs.com), the ‘m-investor' and many more, creating a galaxy of customer

advantages.



Karvy Consultants Limited

As the flagship company of the Karvy Group, Karvy Consultants Limited

has always remained at the helm of organizational affairs, pioneering business policies,

work ethic and channels of progress. Today, Karvy service over 6 lakhs customer

accounts in this business spread across over 250 cities/towns in India and are ranked

amongst the largest Depository Participants in the country. With a growing secondary

market presence, Karvy have transferred this business to Karvy Stock Broking Limited

(KSBL), Karvy’s associate and a member of NSE, BSE and HSE.

Karvy Investor Service

Merchant Banking

Recognized as a leading merchant banker in the country, Karvy registered

with SEBI as a Category I merchant banker. This reputation was built by capitalizing on

opportunities in corporate consolidations, mergers and acquisitions and corporate

restructuring. Karvy’s quality professional team and our work-oriented dedication have

propelled it to offer value-added corporate financial services and act as a professional

navigator for long term growth of its clients, who include leading corporate, State

Governments, foreign institutional investors, public and private sector companies and

banks, in Indian and global markets. Its financial advice and assistance in restructuring,

divestitures, acquisitions, de-mergers, spin-offs, joint ventures, privatization and takeover

defense mechanisms have elevated its relationship with the client to one based on

unshakable trust and confidence.



Karvy Global Services Limited

The specialist Business Process Outsourcing unit of the Karvy Group.

Here Karvy offer several delivery models on the understanding that business needs are

unique and therefore only a customized service could possibly fit the bill. Be it in re-

engineering and managing processes or delivering new efficiencies, Karvy’s service

meets up to the most stringent of international standards. Karvy’s outsourcing models are

designed for the global customer and are backed by sound corporate and operations

philosophies, and domain expertise. Providing productivity improvements, operational

cost control, cost savings, improved accountability and a whole gamut of other

advantages. Karvy’s wide market coverage includes Banking, Financial and Insurance

Services (BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and

Utility and Healthcare.

Karvy Insurance Broking Private Limited

At Karvy Insurance Broking Pvt. Ltd., it provide both life and non-life

insurance products to retail individuals, high net-worth clients and corporate. With the

opening up of the insurance sector and with a large number of private players in the

business, Karvy is in a position to provide tailor made policies for different segments of

customers. With Indian markets seeing a sea change, both in terms of investment pattern

and attitude of investors, insurance is no more seen as only a tax saving product but also

as an investment product. By setting up a separate entity, Karvy would be positioned to

provide the best of the products available in this business to its customers. Karvy’s wide

national network, spanning the length and breadth of India, further supports these

advantages. Further, personalized service is provided here by a dedicated team committed

in giving hassle-free service to the clients.



Karvy Commodities Broking Private Limited

At Karvy Commodities, Karvy is focused on taking commodities trading

to new dimensions of reliability and profitability. Karvy has made commodities trading,

an essentially age-old practice, into a sophisticated and scientific investment option.

Here Karvy enable trade in all goods and products of agricultural and mineral origin that

include lucrative commodities like gold and silver and popular items like oil, pulses and

cotton through a well-systematized trading platform. Regular trading workshops and

seminars are conducted to hone trading strategies to perfection. Karvy’s commitment to

excel in this sector stems from the immense importance that commodity broking has to a

cross-section of investors – farmers, exporters, importers, manufacturers and the

Government of India itself.

Karvy Computershare Pvt. Limited

Karvy have traversed wide spaces to tie up with the world’s largest

transfer agent, the leading Australian company, Computershare Limited. The company

that services more than 75 million shareholders across 7000 corporate clients and makes

its presence felt in over 12 countries across 5 continents has entered into a 50-50 joint

venture with Karvy. Excellence has to be the order of the day when two companies with

such similar ideologies of growth, vision and competence, get together.



Issue Registry

Karvy has emerged as the largest transaction-processing house for the

Indian Corporate sector. With an experience of handling over 700 issues, Karvy today,

has the ability to execute voluminous transactions and hard-core expertise in technology

applications have gained the No.1 slot in the business. Karvy is the first Registry

Company to receive ISO 9002 certification in India that stands testimony to its stature.

It is actively coordinating with both the main depositories to develop

special models to enable the customer to access depository (NSDL, CDSL) services

during an IPO.

Achievements

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

India's No. 1 Registrar & Securities Transfer Agents.

Among the to top 3 Depository Participants.

Largest Network of Branches & Business Associates.

ISO 9002 certified operations by DNV.

Among top 10 Investment bankers.

Largest Distributor of Financial Products.

Adjudged as one of the top 50 IT uses in India by MIS Asia .

Full Fledged IT driven operations.



Milestones



Registered Office

"KARVY HOUSE"

46, Avenue 4, Street No.1,

Banjara Hills,

Hyderabad - 500 034,

Andhra Pradesh, India.

Tel : +91-40-23312454

Fax : +91-40-23311968

Email: [email protected]

Middle East - Representative Office

Karvy Stock Broking Limited

503, 5th Floor

Al Musalla Towers

Khalid Bin Waleed Road (Bank Street)

Bur Dubai, UAE

Mobile: 0097150 5526174

Contact Person: Mr Siddhartha Razdan

Email : [email protected]


mailto:[email protected]


V. PORTFOLIO ANALYSIS AND MANAGEMENT

INTRODUCTION TO PORTFOLIO

An INVESTMENT PORTFOLIO refers to the group of asset that is owned

by an investor. A portfolio is nothing but a combination of assets or securities.

It is rare to find investors investing their entire savings in a single security. Because

investors are risk averse, instead they tend to invest in group of securities. Such a group

of securities is called portfolio.

It is hoped that if money is invested in several securities simultaneously

the loss in one will be completed by the gain in others. Thus holding more that one

security at a time is an attempt to spread and minimize risk by not putting all our eggs in

one basket. It is possible to construct a portfolio in such a way that the total risk of the

portfolio is less than the sum of the risk of the individual assets taken together.

The process of creating such a portfolio is called diversification. It is an

attempt to spread and minimize the risk in investment. This is sought to be achieved by

holding different types of securities across different industry groups and may contain

equity capital, bonds, real estate, savings accounts, billion collection and various other

assets.

In the light of the portfolio theory two principles of finance should be kept

in mind Time value of money and safety of money:

A rupee today is worth more than a rupee of tomorrow or a year hence and

as parting with money involves the loss of the present constructions it has to be rewarded

by return commensurate with time of waiting. Secondly, a safe rupee is preferred to an

unsafe at any point of time. Due to risk aversion of investors, they feel risk is

inconvenient and has to be rewarded by a return. The larger the risk taken, the higher

should be the return.



OBJECTIVES OF THE PORTFOLIO

The objectives of a portfolio theory are two folders:

A. To optimize risk for a given level of yield or

B. To optimize return for a given level of risk.

This objective of portfolio management is termed as a search for “efficient

portfolio”. It is useful to clarify what an efficient portfolio. Efficient portfolio is a

portfolio if any (and only if) there is no alternative with:

a. The same return and a lower risk or

b. The same risk and a higher return or

c. A higher return and a low

A portfolio theory is based on two assumptions, other thing remain the same.

1. Investors prefer higher rates of return to a lower rate of return.

2. Investors are averse i.e., not willing to take risk

The traditional portfolio managers diversified their funds over a large

number of securities to strike a balance between risk and return. However this was done

on invitation, without really understanding the magnitude of risk reduction.

The 1950s saw a bid of knowledge being developed which measures the

expected rate of return and risk allocated with combining assets. This study came to be

known as portfolio theory.

These are as follows:

1. Harry M.Markowitz – Mode Portfolio Theory

2. William Sharpe – Sharpe Index

3. Treynor –Treynor Index

4. Jensen – Performance Index

1). SECURITY ANALYSIS



Understanding Volatility Measurements

1. Returns

The gain or loss of an investment over a specified period, expressed as a

percentage increase over the initial investment cost. Gains on investments are considered

to be any income received from the security, plus realized capital gains. The returns can

be calculated for a day, fortnight, and month or for a year.

Security Return = Today Price - Yesterdays Price X 100

Yesterday’s price

Market Return = Today Index - Yesterdays Index X 100

Yesterdays Index

2. Beta

Beta is a measure of the systematic risk of a security that cannot be

avoided through diversification. Beta is a relative measure of risk-the risk of an individual

stock relative to the market portfolio of all stocks. If the security's returns move more

(less) than the market's returns as the latter changes, the security's returns have more

(less) volatility (fluctuations in price) than those of the market. It is important to note that

beta measures a security's volatility, or fluctuations in price, relative to a benchmark, the

market portfolio of all stocks.

A fund with a beta very close to 1 means the fund's performance closely

matches the index or benchmark. A beta greater than 1 indicates greater volatility than the

overall market, and a beta less than 1 indicates less volatility than the benchmark.

EXAMPLE: A security with a beta of 1.5 indicates that, on average, security

returns are 1.5 times as volatile as market returns, both up and down. This would be

considered an aggressive security because when the overall market return rises or falls 10

percent, this security, on average, would rise or fall 15 percent. Stocks having a beta of

less than 1.0 would be considered more conservative investments than the overall market.

Beta = n Σ xy - (Σx) (Σy)



n Σ x 2 – (Σx)2

Where,

n = Number of days or observations

x = Index Return

y = Security Return

Investors expecting the market to be bullish may choose funds exhibiting high

betas, which increase investors' chances of beating the market. If an investor expects the

market to be bearish in the near future, the funds that have betas less than 1 are a good

choice because they would be expected to decline less in value than the index.

3. Alpha

Up to this point, we have learned how to examine figures that measure risk

posed by volatility, but how do we measure the extra return rewarded to you for taking on

risk posed by factors other than market volatility? Enter alpha, which measures how much

if any of this extra risk helped the fund outperform its corresponding benchmark. Using

beta, alpha's computation compares the fund's performance to that of the benchmark's

risk-adjusted returns and establishes if the fund's returns outperformed the market's, given

the same amount of risk.

Alpha = y - β(x)

Where.

y = Mean of security return

x = Mean of Index return

For example, if a fund has an alpha of 1, it means that the fund outperformed the

benchmark by 1%. Negative alphas are bad in that they indicate that the fund

underperformed for the amount of extra, fund-specific risk that the fund's investors

undertook.


http://www.investopedia.com/terms/b/bearmarket.asp

http://www.investopedia.com/terms/b/bullmarket.asp


4. Variance

The most commonly used measures of the risk in finance are variances or

its square root of standard deviation. A measure of the dispersion of a set of data points

around their mean value. It is a mathematical expectation of the average squared

deviations from the mean.

VARIANCE = ( Return - E ( R )) 2

n

E ( R) = Average of Security Return


Variance measures the variability (volatility) from an average. Volatility is

a measure of risk, so this statistic can help determine the risk an investor might take on

when purchasing a specific security.

5. Standard Deviation.

As with many statistical measures, the calculation for standard deviation

can be intimidating, but, as the number is extremely useful for those who know how to

use it, there are many free mutual fund screening services that provide the standard

deviations of funds. The standard deviation essentially reports a fund's volatility, which

indicates the tendency of the returns to rise or fall drastically in a short period of time. A

security that is volatile is also considered higher risk because its performance may change

quickly in either direction at any moment. The standard deviation of a fund measures this

risk by measuring the degree to which the fund fluctuates in relation to its mean return,

the average return of a fund over a period of time.

A fund that has a consistent four-year return of 3%, for example, would

have a mean, or average, of 3%. The standard deviation for this fund would then be zero

because the fund's return in any given year does not differ from its four-year mean of 3%.

On the other hand, a fund that in each of the last four years returned -5%, 17%, 2% and

30% will have a mean return of 11%. The fund will also exhibit a high standard deviation


http://www.investopedia.com/terms/v/volatility.asp


because each year the return of the fund differs from the mean return. This fund is

therefore more risky because it fluctuates widely between negative and positive returns

within a short period.

A note to remember is that, because volatility is only one indicator of the

risk affecting a security, a stable past performance of a fund is not necessarily a guarantee

of future stability. Since unforeseen market factors can influence volatility, a fund that

this year has a standard deviation close or equal to zero may behave differently in the

following year.

To determine how well a fund is maximizing the return received for its

volatility, you can compare the fund to another with a similar investment strategy and

similar returns. The fund with the lower standard deviation would be more optimal

because it is maximizing the return received for the amount of risk acquired. Consider the

following graph:



EXAMPLE:

With the S&P 500 Fund B, the investor would be acquiring a larger amount of

volatility risk than necessary to achieve the same returns as Fund A. Fund A would

provide the investor with the optimal risk/return relationship. Remember that the larger

the standard deviation, the more uncertain the outcome.

Standard Deviation = Variance

6. Correlation Co-efficient ( r )

The correlation co-efficient measures the nature and the extent of

relationship between the stock market index and the stock return in a particular period.

This can vary only in the range –1 to +1. A value of +1 would indicate a perfect Positive

linear relationship between security return and stock market index, meaning the returns

for the two stocks move together in a completely linear manner. A value of –1 indicates a

perfect negative relationship between the two return series such that when one stock’s

rate of return is above its mean, the other stock’s rate of return will be below its mean by

the comparable amount.

Correlation Co-eff = n Σ xy - (Σx) (Σy)

n Σ x 2 – (Σx)2 n Σ y 2 – (Σy)2

Where,


x = Index Return

y = Security Return


http://www.investopedia.com/terms/s/sp500.asp


7. Coefficient Determination

The square of the correlation co-efficient is the co-efficient determination.

It gives the percentage of variation in the stocks return explained by the variation in the

markets return.

Co-eff of Determination = r 2

8. Systematic risk

An investor can construct a diversified portfolio and eliminate part of the

total risk, the diversifiable or non market part. What is left is the non diversifiable portion

or the market risk. Variability in a security's total returns that is directly associated with

overall movements in the general market or economy is called systematic (market) risk.

Systematic Risk = Variance of the security return X r 2

Or

= β2 X Variance of the market index

Where,

β = Beta

r 2 = Co-eff of Determination

Virtually all securities have some systematic risk, whether bonds or stocks,

because systematic risk directly encompasses interest rate, market, and inflation risks.

The investor cannot escape this part of the risk because no matter how well he or she

diversifies, the risk of the overall market cannot be avoided. If the stock market declines

sharply, most stocks will be adversely affected; if it rises strongly, as in the last 2 years,

most stocks will appreciate in value. These movements occur regardless of what any

single investor does. Clearly, market risk is critical to all investors.

9. Unsystematic Risk



The variability in a security's total returns not related to overall market

variability is called the nonsystematic (non market) risk. This risk is unique to a particular

security and is associated with such factors as business and financial risk as well as

liquidity risk. Although all securities tend to have some nonsystematic risk, it is generally

connected with common stocks.

Unsystematic Risk = Variance of the security X ( 1- r 2)

10. Total Risk:

Total risk of any investment is total variance or volatility of returns on that

investment. It is combination of both systematic risk and unsystematic risk.

Total risk = Systematic risk + Nonsystematic risk

Remember the difference: Systematic (Market) Risk is attributable to

broad macro factors affecting all securities. Nonsystematic (Non-Market) Risk is

attributable to factors unique to a security.




Methodology :


Primary Data


BIJAPUR branch.


Secondary Data


METHODOLOGY:

Each individual security is characterized by calculating monthly returns and

finally calculating average monthly return and standard deviation of the security

return.

NSE Nifty Index is characterized by calculating monthly returns and finally

calculating average monthly return and standard deviation of the NSE Nifty

return.

Correlation co-efficient, co-efficient determination, variance and beta are

calculated by comparing each individual security return with NSE Nifty Index

return.

Systematic risk, unsystematic risk and total risk are associated with each share are

in the portfolio of the client.

To rank the portfolio various portfolio management theories are used i.e. Sharpe



Index Model, Treynors Index Model, CAPM Model and Jensen’s Performance

Model are used.

All the information regarding all the companies is not available.

Companies listed with stock exchanges with in the last 6 months are not

considered.

ANALYTICAL TECHNIQUE:

Statistical technique used for calculation of Return, Risk, and Variance of

the Securities by S.D, Alpha, Beta, Corr-Coefficient, and Co-eff Determination.



SECUTIRY ANALYSIS PART

CLIENT NO: 01

S. NO

COMPANY QUANTITY AVG PRICE

AMOUNT INVESTED

PROPORTION

1 APOLLO HOSP 75 507.12 38034 0.00811708

2 BALRAMCHI 250 75.83 18957.5 0.00404584

3 CAMBRIDGE 75 142.16 10662 0.00227544

4 CIPLA LTD 85 196.23 16679.55 0.00355969

5 CORPBANK 15 362.57 5438.55 0.00116068

6 DENABANK 50 67.13 3356.5 0.00071633

7 ESSAROIL 65 294.93 19170.45 0.00409129

8 IDBI 370 105.73 39120.1 0.00834887

9 IFCI LTD 5475 46.23 253109.25 0.05401764

10 INDIABULL FINANCE SER. LTD

1746 753.52 1315645.92 0.28078029

11 INFOSYSTCH 5 2220.05 11100.25 0.00236897

12 IVRCLINFRA 345 395.4 136413 0.02911276

13 KARNATAKA BANK LIMITED

50 233.29 11664.5 0.00248939

14 LIT 60 213.78 12826.8 0.00273745

15 MRPL 750 105.17 78877.5 0.01683374

16 NAGARCON 445 191.67 85293.15 0.01820295

17 ONGC 115 1073.52 123454.8 0.02634727

18 PFC 175 188.05 32908.75 0.00702326

19 RANBAXY 20 392.09 7841.8 0.00167357

20 RELIANCE COMMUNICATION

190 471.9 89661 0.01913512

21 REL. NATURAL RESOURCES LTD

4225 90.19 381052.75 0.08132287

22 ROLTA 260 477.3 124098 0.02648454

23 RELIANCE PETROLEUM LTD

1185 180.06 213371.1 0.04553687

24 STATE BANK OF INDIA 60 1241.73 74503.8 0.01590033

25 SESAGOA 60 1647.81 98868.6 0.02110017

26 SIEMENS LTD 205 1194 244770 0.05223791

27 SUZLON 150 1246.44 186966 0.03990159

28 SYNDICATE BANK 150 83.62 12543 0.00267688

29 TATA STEEL LIMITED 15 764.71 11470.65 0.00244802

30 UCO BANK 300 47 14100 0.00300917

31 UNITECH LTD 1866 481.21 897937.86 0.19163458

32 VIJAYA BANK 450 54.27 24421.5 0.00521195

33 YES BANK 50 187.23 9361.5 0.0019979

34 ZEEL 250 327.99 81997.5 0.0174996

TOTAL 19587 4685677.63 1.0000000



MARKET RETURN (%) -0.1062299RETURN ON PORTFOLIO -1.191386PORTFOLIO BETA 1.6559225PORTFOLIO ALPHA -1.0154773PORTFOLIO VARIENCE 42.422623PORTFOLIO STANDARD DEVIATION 6.513RISK FREE RETURN ASSUMED 6% PA SO 0.5% PER MONTH



Continued….SecurityReturn

β Beta

Α Alpha

S.D σ Security Variance

Corr. Co-eff(r)

Co-eff Detr (r)2

Syst. Risk

UnSyst Risk

Total Risk

-0.90975 0.256 -0.883 6.559 43.022 0.414 0.171 7.366 35.656 36.48442

3.354011 1.689 3.5334

23.86 569.54 0.75 0.563 320.7 248.89 249.3248

-1.38653 -0.12 -1.399 14.78 218.5 -0.09 0.007 1.613 216.89 217.8783

0.985156 0.439 1.0318

9.372 87.826 0.496 0.246 21.65 66.179 66.93236

-0.71042 1.114 -0.592 13.07 170.77 0.904 0.816 139.4 31.338 31.52146

1.295139 1.151 1.4174

16.14 260.55 0.756 0.571 148.8 111.72 112.1458

14.80915 1.709 14.991

72.7 5285.6 0.249 0.062 328.3 4957.3 4958.25

0.492405 1.333 0.634 18.56 344.44 0.762 0.58 199.9 144.55 144.9699

0.954834 1.873 1.1538

25.08 629.24 0.792 0.627 394.6 234.61 234.9846

-3.39067 1.656 -3.215 22.31 497.56 0.787 0.62 308.4 189.16 189.5391

-0.69252 0.422 -0.648 11 121.08 0.407 0.166 20.06 101.01 101.8489

0.179152 1.567 0.3456

23.03 530.33 0.721 0.52 276 254.34 254.8221

-1.90901 0.865 -1.817 13.91 193.36 0.66 0.435 84.11 109.26 109.8214

5.696046 2.271 5.9373

29.44 866.97 0.818 0.669 579.9 287.09 287.4258

3.816534 1.791 4.0068

25.58 654.31 0.742 0.551 360.6 293.73 294.1786

-1.9762 1.541 -1.812 19.69 387.57 0.83 0.689 267.1 120.5 120.8083

0.655795 1.026 0.7648

13.16 173.24 0.826 0.683 118.3 54.919 55.23648

2.105185 1.137 2.226 15.92 253.51 0.758 0.574 145.5 108.04 108.4668

-1.4309 0.853 -1.34 17.93 321.44 0.504 0.254 81.78 239.66 240.4011

-1.87488 0.998 -1.769 16.68 278.38 0.893 0.797 221.8 56.572 56.77504

7.713633 1.008 7.8207

32.29 1042.9 0.788 0.621 648 394.85 395.226

-2.90963 1.479 -2.753 24.86 618.18 0.631 0.398 245.8 372.37 372.9692

3.482612 1.73 3.6664

21.54 464.09 0.851 0.725 336.4 127.64 127.9166

1.749718 1.099 1.8664

15.19 230.59 0.767 0.589 135.7 94.857 95.26863

-1.101 1.539 -0.938 27.56 759.63 0.592 0.35 266.2 493.43 494.0786

-6.65183 1.528 -6.49 23.63 558.14 0.687 0.473 263.8 294.34 294.8692

-4.09528 2.399 -3.84 30.36 921.76 0.838 0.702 647 274.77 275.0715

-0.02046 0.914 0.0766

14.15 200.16 0.685 0.469 93.92 106.23 106.7643

49.73008 3.306 50.081

206.9 42823 0.169 0.029 1229 41594 41595.02

2.096977 0.861 2.1884

17.69 312.98 0.516 0.266 83.3 229.68 230.4164

-3.48293 2.261 -3.243 32.16 1034 0.746 0.556 574.7 459.23 459.6728

-1.38189 0.921 -1.284 15.71 246.7 0.622 0.387 95.4 151.3 151.9149

-0.89358 1.395 -0.745 19.32 373.4 0.765 0.586 218.7 154.68 155.0962



-3.01939 0.641 -2.951 13.36 178.55 0.509 0.259 46.26 132.29 133.0335



ANALYSIS:

Client no-1, in his portfolio he has 19,587 quantity of share worth of Rs:

46,8500/- in to different sector, he has well diversified portfolio consisting of more than

30 companies. In his portfolio if you consider return factor as criteria 27% of shares has

good return status. Total market return is in negative (-0.106%) per month & 53% of

securities are giving negative, but in this portfolio 7 securities are giving more than 3 %

return and 2 are near to it. And beta also good for these company they move along with

market movements. Tata Steel Limited & LIT has highest beta and also they has good

alpha with R2. So in the future, if market gives better return these also gives more than the

market return because R2 is good for company. At the same time if you consider risk

factor, S.D, variance ,Total Risk is very much high in case of Tata Steel Limited, it has

highest S.D of 206.9, total risk 41595.02 and variance 42823 followed by SESAGOA &

UNITECH LTD, so these are considered as more risky share in the portfolio. And one

most important thing is in this fund distribution out of 34 company security 47%

companies are outperformed the market.



CLIENT NO: 02

S. NO


AMOUNT INVESTED

PROPORTION

1 BHART I AIRTEL LIMITED 301 647.81 194990.81 0.041518298

2 CAIRN INDIA LIMITED 75 240.77 18057.75 0.003844935

3 CHAMBAL FERTILIZERS LTD 3075 79.55 244616.25 0.052084764

4 ESSAR OIL LTD 75 267.93 20094.75 0.004278662

5 FCS SOFTWSRE SOLN. LTD 100 104.43 10443 0.002223569

6 GWALIOR CHEM IND LTD 3724 99.11 369085.64 0.078587332

7 IFCI LTD 602 49.34 29702.68 0.006324425

8 INDIABULLS REL ESTATE LTD

8905 283.55 2525012.75 0.537636782

9 INDIABULLS FIN. SER. LTD 2621 308.00 807268 0.171887041

10 LARSEN & TOUBRO LTD 274 919.11 251836.14 0.053622055

11 MERCATOR LINES LTD 425 106.49 45258.25 0.009636585

12 MRPL 503 64.42 32403.26 0.006899444

13 NAGARJUN CONS. CO. LTD 25 133.92 3348 0.000712871

14 NAGARJUN FERTILIZERS LTD 206 41.04 8454.24 0.001800114

15 NOIDA TOLL BRIDGE CO 251 32.41 8134.91 0.001732121

16 OCL INDIA LTD 150 107.97 16195.5 0.003448417

17 SHREE RENUKA SUGARS LTD 250 117.80 29450 0.006270623

18 SASKEN COMMU TECHNO LTD

225 198.59 44682.75 0.009514047

19 SESA GOA LTD 175 138.10 24167.5 0.005145850

20 SIEMENS LTD 30 443.36 13300.8 0.002832065

TOTAL 21992 4696502.98 1.000000000

MARKET RETURN (%) -0.1062299RETURN ON PORTFOLIO -1.2517904PORTFOLIO BETA 1.5443678

4PORTFOLIO ALPHA -1.0877322PORTFOLIO VARIENCE 171.39056

6PORTFOLIO STANDARD DEVIATION

13.0916

RISK FREE RETURN ASSUMED 6% PA SO 0.5% PER MONTH



Continued…

SecurityReturn

Beta β

α Alpha

S.D(σ)

Security Variance

Corr. Co-eff (r)

Co-eff Detr (r)2

Syst. Risk

UnSyst. Risk

TOTAL RISK

-0.69438 0.616 -0.629 8.079 65.263 0.809 0.654 42.706 22.557 65.263

2.473781 0.98 2.578 14.45 208.92 0.719 0.517 107.96 100.96 208.92

3.666718 1.089 3.782 22.4 501.9 0.516 0.266 133.38 368.51 501.9

0.492405 1.333 0.634 72.7 5285.6 0.249 0.062 328.26 4957.3 5285.6

-1.12063 1.614 -0.949 26.74 714.9 0.64 0.41 292.93 421.97 714.9

1.751678 1.149 1.874 23.47 550.87 0.519 0.269 148.37 402.5 550.87

0.954834 1.873 1.154 25.08 629.24 0.792 0.627 394.62 234.61 629.24

-1.7395 1.647 -1.564 22.79 519.32 0.767 0.588 305.16 214.16 519.32

-3.39067 1.656 -3.215 22.31 497.56 0.787 0.62 308.4 189.16 497.56

0.264109 1.805 0.456 21.73 472.28 0.881 0.776 366.33 105.95 472.28

2.328505 2.019 2.543 25.08 629.2 0.854 0.729 458.53 170.67 629.2

-1.9762 1.541 -1.812 25.58 654.31 0.742 0.551 360.58 293.73 654.31

-1.9762 1.541 -1.812 19.69 387.57 0.83 0.689 267.07 120.5 387.57

4.192913 1.721 4.376 28.49 811.93 0.64 0.41 333.03 478.9 811.93

3.134852 1.655 3.311 25.96 674.18 0.676 0.457 307.8 366.38 674.18

-0.59185 1.686 -0.413 24.19 585.03 0.739 0.547 319.72 265.31 585.03

1.542243 1.31 1.681 30.11 906.42 0.461 0.213 192.99 713.43 906.42

-4.73725 1.456 -4.583 25.4 644.94 0.608 0.369 238.22 406.72 644.94

-6.65183 1.528 -6.49 27.56 759.63 0.592 0.35 266.2 493.43 759.63

-4.09528 2.399 -3.84 23.63 558.14 0.687 0.473 263.8 294.34 558.14

ANALYSIS:In this portfolio he invested in above 21,992 equity share amount of Rs 47

lacks. Altogether he has invested in 20 companies with various sectors, so it has well

diversified portfolio. Out of 20 companies 10 companies are giving negative returns &

remaining are giving positive returns this is very good sign for the investor. And Beta for

the almost all companies are more than one remaining are near to market movements.

According me he is Risk taking client because whatever he has invested in these

companies has high S.D and Total Risk i.e. Essar Oil Ltd, SESA Goa Ltd, Shree Renuka

Sugars Ltd & Nagarjun Fertilizers Ltd. In this portfolio 5 securities are giving more than

2% return and they also have good beta along with alpha & R2, if market gives more

return these companies also give more return to him. And one more important thing is in

this fund distribution out of 20 company security 50% companies are outperformed the

market, but his portfolio return in negative and lower than market return.



CLIENT NO: 03

S. NO


AMOUNT INVESTED

PROPORTION

1 APOLLO TYRES LTD 35122 20.64 724918.08 0.015502542 ASHOK LEYLAND LTD 4000 29.28 117120.00 0.002504643 BHARAT FORGE CO LTD 14173 221.97 3145980.81 0.067277524 CIPLA LTD 100 181.64 18164.00 0.000388445 GODREJ IND LTD 1249 271.57 339190.93 0.007253686 IFCI LTD 500 56.67 28335.00 0.000605957 INDIABULLS FIN. SER. LTD 14000 238.55 3339700.00 0.071420258 INDIAN OIL CORP LTD 4125 396.24 1634490.00 0.034953949 INFOSYS

TECHONOLOGIES LTD100 1657.99 165799.00 0.00354565

10 ITC LTD 700 168.37 117859.00 0.0025204411 JINDAL PHOTO LTD 7021 97.14 682019.94 0.0145851512 KARNATAKA BANK

LIMITED2025 153.80 311445.00 0.00666032

13 LARSEN & TOUBRO LTD 2456 1756.02 4312785.12 0.092229914 MYSORE CEMENTS LTD 15100 37.20 561720.00 0.0120125115 PIDILITE INDUSTRIES LTD 13453 120.13 1616108.89 0.0345608616 PUNJAB NATIONAL BANK 490 379.42 185915.80 0.0039758517 RELIANCE CAPITAL LTD 100 995.45 99545.00 0.0021287918 RELIANCE

COMMUNICATION LTD1010 438.89 443278.90 0.00947962

19 RELIANCE INDUSTRIES LTD

600 2234.02 1340412.00 0.02866502

20 RELIANCE NATURAL RESOURCES LTD

4000 57.04 228160.00 0.00487925

21 RELIANCE PETROLEUM LIMITED

2200 128.96 283712.00 0.00606725

22 SATYAM COMPUTERS SERVICES

5229 133.94 700372.26 0.01497762

23 STATE BANK OF INDIA 5505 1373.21 7559521.05 0.161662124 SIEMENS LTD 2650 445.16 1179674.00 0.025227625 SYNDICATE BANK 4600 47.46 218316.00 0.0046687426 TATA CONSULTANCY

SERVICES3550 569.59 2022044.50 0.04324189

27 TATA TELESERVICES (MAHARASTRA)

9500 25.59 243105.00 0.00519886

28 TATA INVESTMENT CORP LTD

809 309.89 250701.01 0.0053613

29 TATA STEEL LIMITED 5973 416.92 2490263.16 0.0532548530 TVS MOTOR COMPANY

LTD6500 28.35 184275.00 0.00394076

31 ULTRATECH CEMCO LTD 200 799.87 159974.00 0.0034210832 UNITECH LTD 95000 123.78 11759100.00 0.2514710633 VIJAYA BANK 2200 28.14 61908.00 0.0013239234 WIPRO LTD 600 392.22 235332.00 0.00503263

TOTAL 274305 51561704.15 1.00000000



Continued….

MARKET RETURN (%) -0.1062299RETURN ON PORTFOLIO 1.5056298PORTFOLIO BETA 1.61179103PORTFOLIO ALPHA 1.67685036PORTFOLIO VARIENCE 202.495765PORTFOLIO STANDARD DEVIATION

14.2301




Continued….

Security Return

ΒBeta

α Alpha

S.D (σ)

Security Variance

Corr. Co-eff (r)

Co-eff Detr (r)2

Syst. Risk

UnSyst. Risk

TOTAL RISK

-4.28708 1.104 -4.17 24.433 596.984 0.479 0.23 137.063 459.921 596.984

-1.07475 1.055 -0.963 16.644 277.028 0.672 0.451 125.055 151.972 277.028

-2.36445 1.325 -2.224 16.896 285.472 0.831 0.691 197.279 88.1923 285.472

0.985156 0.439 1.0318 9.3715 87.8259 0.496 0.246 21.6471 66.1788 87.8259

0.370311 1.848 0.5666 26.511 702.848 0.739 0.546 383.86 318.988 702.848

0.954834 1.873 1.1538 25.085 629.236 0.792 0.627 394.624 234.612 629.236

-3.39067 1.656 -3.215 22.306 497.556 0.787 0.62 308.397 189.159 497.556

1.571394 0.969 1.6743 17.822 317.629 0.577 0.332 105.583 212.046 317.629

-0.68939 0.421 -0.645 11.033 121.73 0.404 0.163 19.8828 101.848 121.73

0.953235 0.38 0.9936 7.2614 52.7278 0.555 0.308 16.2325 36.4954 52.7278

3.325192 1.516 3.4862 21.92 480.493 0.733 0.538 258.267 222.226 480.493

-1.90901 0.865 -1.817 13.906 193.364 0.66 0.435 84.1073 109.256 193.364

0.264109 1.805 0.4559 21.732 472.28 0.881 0.776 366.332 105.947 472.28

0.269345 1.382 0.4162 19.525 381.218 0.751 0.563 214.793 166.425 381.218

-0.5301 0.914 -0.433 12.231 149.586 0.792 0.627 93.844 55.7421 149.586

0.877104 0.841 0.9665 14.713 216.475 0.606 0.368 79.5818 136.894 216.475

2.055697 2.142 2.2832 26.172 684.969 0.868 0.753 515.792 169.177 684.969

-1.87488 0.998 -1.769 16.685 278.375 0.893 0.797 221.804 56.5718 278.375

1.456698 1.129 1.5766 13.08 171.093 0.915 0.837 143.251 27.8419 171.093

7.713633 1.008 7.8207 32.293 1042.86 0.788 0.621 648.008 394.847 1042.86

3.482612 1.73 3.6664 21.543 464.09 0.851 0.725 336.448 127.642 464.09

-6.56287 0.569 -6.502 19.217 369.289 0.314 0.098 36.3606 332.928 369.289

1.749718 1.099 1.8664 15.185 230.592 0.767 0.589 135.734 94.8573 230.592

-2.57701 1.532 -2.414 23.625 558.144 0.687 0.473 263.802 294.342 558.144

-0.02046 0.914 0.0766 14.148 200.155 0.685 0.469 93.9217 106.234 200.155

-2.36848 0.62 -2.303 10.42 108.567 0.631 0.398 43.214 65.3526 108.567

1.51166 1.313 1.6511 21.077 444.228 0.66 0.436 193.782 250.445 444.228

-0.46009 1.004 -0.353 14.684 215.618 0.725 0.526 113.372 102.246 215.618

49.73008 3.306 50.081 206.94 42823.2 0.169 0.029 1229.12 41594.1 42823.2

-0.67695 1.109 -0.559 20.12 404.817 0.584 0.341 138.215 266.602 404.817

-0.36012 0.931 -0.261 15.509 240.53 0.637 0.405 97.5288 143.001 240.53

-3.48293 2.261 -3.243 32.155 1033.98 0.746 0.556 574.747 459.229 1033.98

-1.38189 0.921 -1.284 15.707 246.7 0.622 0.387 95.3986 151.302 246.7

-1.47071 0.891 -1.376 12.98 168.468 0.728 0.53 89.3415 79.1262 168.468

ANALYSIS:



Client no-3, in his portfolio he has 274305 quantity of share worth more

than Rs. 5 Crores in to different sector, he has well diversified portfolio consisting of

more than 30 companies. In his portfolio if you consider return factor as criteria most all

shares has good return status. Total market return is negative (-0.106%) per month, but in

this portfolio 4 securities are giving more than 3 % return and 4 are near to 2% return.

Tata Steel Limited & Reliance Natural Resources Ltd are giving higher return (49.73% &

7.71%) to him compare to others. Godrej India Ltd, IFCI Ltd, Larsen & Toubro Ltd &

Reliance Capital Ltd has high beta and also they has good alpha with R 2, so in the future,

if market gives better return these also gives more than the market return because R2 is

good for company. At the same time if you consider risk factor, S.D, variance, Total Risk

is very much high in case of Tata Steel Limited, Reliance Natural Resources, Ltd Godrej

India Ltd, IFCI Ltd & Reliance Capital Ltd, so these are considered as more risky share in

the portfolio. Tata Steel Limited has highest S.D of 206.94, total risk 42823.2 and

variance 42823.2. And one most important thing is in this portfolio Unitech Ltd has good

beta along with Alpha & R but return is very low. One more important thing is in out of

34 company security 50% companies are outperformed the market.



CLIENT NO: 04

S. NO

COMPANY QUAN TITY

AVG PRICE

INVESTED

PROPORTION

1 APOLLO HOSP 75 507.12 38034 0.024315814

2 BALRAMCHI 250 75.83 18957.5 0.012119868

3 CAMBRIDGE 75 142.16 10662 0.006816407

4 CIPLA LTD 85 196.23 16679.55 0.010663534

5 CORPBANK 15 362.57 5438.55 0.003476962

6 DENABANK 50 67.13 3356.5 0.00214587

7 ESSAROIL 65 294.93 19170.45 0.012256011

8 IFCI LTD 602 49.34 29702.68 0.018989453

9 INDIABULLS REL ESTATE LTD

905 283.55 256612.75 0.164057107

10 INDIABULLS FIN. SER. LTD 621 308 191268 0.122281043

11 REL. NATURAL RESOURCES LTD

4225 90.19 381052.75 0.243613817

12 TVS MOTOR COMPANY LTD 650 28.35 18427.5 0.011781029

13 ULTRATECH CEMCO LTD 200 799.87 159974 0.102274231

14 UNITECH LTD 950 123.78 117591 0.075178023

15 VIJAYA BANK 2200 28.14 61908 0.039578888

16 WIPRO LTD 600 392.22 235332 0.150451944

TOTAL 11568 1564167.23 1.000000000

MARKET RETURN (%) -0.1062299RETURN ON PORTFOLIO 0.81606883PORTFOLIO BETA 1.26054358PORTFOLIO ALPHA 0.94997637PORTFOLIO VARIENCE 65.3957381PORTFOLIO STANDARD DEVIATION

8.0867




Continued….

Security Return

β Beta

α Alpha S.D

(σ)

Security Variance

Corr. Co-eff

(r)

Co-eff Detr

(r)2

Syst. Risk

UnSyst. Risk

TOTAL RISK

-0.91 0.256 -0.883 6.56 43.022 0.4138 0.171 7.365958 35.66 43.022

3.354 1.689 3.533 23.9 569.54 0.7503 0.563 320.6501 248.9 569.54

-1.387 -0.12 -1.399 14.8 218.5 -0.0859

0.007 1.61329 216.9 218.5

0.9852 0.439 1.032 9.37 87.826 0.4965 0.246 21.64708 66.18 87.826

-0.71 1.114 -0.592 13.1 170.77 0.9036 0.816 139.4275 31.34 170.77

1.2951 1.151 1.417 16.1 260.55 0.7558 0.571 148.8331 111.7 260.55

14.809 1.709 14.99 72.7 5285.6 0.2492 0.062 328.2589 4957 5285.6

0.9548 1.873 1.154 25.1 629.24 0.7919 0.627 394.624 234.6 629.24

-1.74 1.647 -1.564 22.8 519.32 0.7666 0.588 305.1588 214.2 519.32

-3.391 1.656 -3.215 22.3 497.56 0.7873 0.62 308.3972 189.2 497.56

7.7136 1.008 7.821 32.3 1042.9 0.7883 0.621 648.0081 394.8 1042.9

-0.677 1.109 -0.559 20.1 404.82 0.5843 0.341 138.2153 266.6 404.82

-0.36 0.931 -0.261 15.5 240.53 0.6368 0.405 97.52883 143 240.53

-3.483 2.261 -3.243 32.2 1034 0.7456 0.556 574.7466 459.2 1034

-1.382 0.921 -1.284 15.7 246.7 0.6219 0.387 95.39856 151.3 246.7

-1.471 0.891 -1.376 13 168.47 0.7282 0.53 89.3415 79.13 168.47

ANALYSIS:

In this portfolio he has invested in 16 companies amounting Rs 15.64

lacks. In this some are giving extremely good returns i.e. Essaroil, Reliance Natural

Resources Ltd & Balramchi. And other 3 security are giving near 1% return, but

remaining are not giving returns as compared to market return and risk. Essaroil, Reliance

Natural Resources Ltd & Balramchi are having high beta, alpha along with R2, So in the

future, if market gives better return these also gives more than the market return because

R2 is good for company and they also have high risk. Some companies are under

performing i.e. Cambridge, India bulls, Reliance Estate Ltd, Unitech Ltd, Vijaya Bank &

Wipro Ltd. In this portfolio only 3 companies are driving entire portfolio namely Essaroil,

Reliance Natural Resources Ltd & Balramchi, if anything unfair happens to these, it will

lead the worst. So he need tovwell diversify his portfolio.



CLIENT NO: 05

S.NO COMPANY QUANTITY

AVG PRICE

INVESTED

PROPORTION

1 APOLLO TYRES LTD 3512 20.64 72487.68 0.015482241

2 ASHOK LEYLAND LTD 4000 29.28 117120 0.025015011

3 BHARAT FORGE CO LTD 14173 221.97 3145980.8 0.671932586

4 CIPLA LTD 100 181.64 18164 0.003879548

5 RELIANCE PETROLEUM LTD

1185 180.06 213371.1 0.045572749

6 STATE BANK OF INDIA 60 1241.73 74503.8 0.015912853

7 SYNDICATE BANK 150 83.62 12543 0.00267899

8 UCO BANK 300 47 14100 0.003011541

9 UNITECH LTD 1866 481.21 897937.86 0.191785565

10 VIJAYA BANK 450 54.27 24421.5 0.005216053

11 YES BANK 50 187.23 9361.5 0.001999471

12 ZEEL 250 327.99 81997.5 0.017513391

TOTAL 26096 4681988.8 1.000000000

MARKET RETURN (%) -0.1062299RETURN ON PORTFOLIO -2.215224PORTFOLIO BETA 1.4890102PORTFOLIO ALPHA -2.0570464PORTFOLIO VARIENCE 168.32717PORTFOLIO STANDARD DEVIATION 12.974RISK FREE RETURN ASSUMED 6% PA SO 0.5% PER MONTH



Continued….

Security Return

β Beta

α Alpha

S.D(σ)Security Variance

Corr. Co-eff (r)

Co-eff Detr

(r)2

Syst. Risk

UnSyst. Risk

Total Risk

-4.287 1.104 -4.17 24.433

596.984 0.479 0.23 137.063 459.921 596.984

-1.075 1.055 -0.963 16.644

277.028 0.672 0.451 125.055 151.972 277.028

-2.364 1.325 -2.224 16.896

285.472 0.831 0.691 197.279 88.1923 285.472

0.9852 0.439 1.0318 9.3715

87.8259 0.496 0.246 21.6471 66.1788 87.8259

3.4826 1.73 3.6664 21.543

464.09 0.851 0.725 336.448 127.642 127.917

1.7497 1.099 1.8664 15.185

230.592 0.767 0.589 135.734 94.8573 95.2686

-0.02 0.914 0.0766 14.148

200.155 0.685 0.469 93.9217 106.234 106.764

2.097 0.861 2.1884 17.691

312.984 0.516 0.266 83.3019 229.683 230.416

-3.483 2.261 -3.243 32.155

1033.98 0.746 0.556 574.747 459.229 459.673

-1.382 0.921 -1.284 15.707

246.7 0.622 0.387 95.3986 151.302 151.915

-0.894 1.395 -0.745 19.324

373.403 0.765 0.586 218.721 154.682 155.096

-3.019 0.641 -2.951 13.362

178.553 0.509 0.259 46.2601 132.293 133.034

ANALYSIS:

He is a new entrant to the world of share market. He has invested 30% of

his amount in Banking or Finance sector. The problem with this client he has not

diversified his portfolio investment in all sectors. So it is not a good practice for the

investor if they do so risk profile is very high. In this portfolio only 4 securities are giving

positive return with minimum risk i.e. Cipla Ltd, Reliance Petroleum Ltd, State Bank Of

India & UCO Bank & remaining all companies are giving negative return to him. And

risk profile is highest in Apollo Tyres Ltd and lowest in case of State Bank of India with

better return. In case of State Bank of India it has low risk with good return is 1.75 % and

it also has good relationship with market i.e. R2 =0.59. And Reliance Petroleum Ltd &

UCO Bank are having highest return of 3.50% & 2.10&% with total risk of 127.91 &

230.41 respectively. One most import thing is the overall return of portfolio (i.e. -2.22) is

less than market return (-0.11), so this client not diversified his amount in to all sectors.



2) MARKET ANALYSIS

S.No Date NiftyClosing Price

MarketReturn (X)

X2

1 30/04/2007 4087.9 0 02 31/05/2007 4295.8 5.0857408 25.864763 29/06/2007 4318.3 0.5237674 0.2743324 31/07/2007 4528.85 4.8757613 23.773055 31/08/2007 4464 -1.4319308 2.0504266 28/09/2007 5021.35 12.485439 155.88627 31/10/2007 5900.65 17.511227 306.64318 30/11/2007 5762.75 -2.3370307 5.4617129 31/12/2007 6138.6 6.5220598 42.53726

10 31/01/2008 5137.45 -16.309093 265.986511 29/02/2008 5223.5 1.6749555 2.80547612 31/03/2008 4734.5 -9.3615392 87.6384213 30/04/2008 5165.9 9.1118386 83.025614 30/05/2008 4870.1 -5.726011 32.787215 30/06/2008 4040.55 -17.033531 290.141216 31/07/2008 4332.95 7.2366386 52.3689417 29/08/2008 4360 0.624286 0.38973318 30/09/2008 3921.2 -10.06422 101.288519 31/10/2008 2885.6 -26.410283 697.50320 28/11/2008 2755.1 -4.5224563 20.4526121 31/12/2008 2959.15 7.4062647 54.8527622 30/01/2009 2874.8 -2.8504807 8.1252423 27/02/2009 2763.65 -3.8663559 14.9487124 31/03/2009 3020.95 9.3101514 86.6789225 29/04/2009 3473.95 14.995283 224.8585

-2.5495186 2586.342ΣX ΣX2


N 24

MEAN( X ) -0.1062

MARKET RETURN -0.1062


3) PORTFOLIO PERFORMANCE MEASUREMENT

Evaluation of portfolio performance, the bottom line of the investing

process, is an important aspect of interest to all investors and money managers. The

framework for evaluating portfolio performance consists of measuring both the realized

return and the differential risk of the portfolio to use to compare a portfolio’s

performance, and recognizing any constraints that the portfolio manager may face. A 12%

return, by itself, is a fairly meaningless figure. It must be viewed in comparison to the

performance, over the same timeframe, of alternative investments bearing a similar level

of risk.

Remember, one can only measure return in relation to the risk taken.

Investing is always a two-dimensional process based on return and risk. These two factors

are opposite sides of the same coin, and both must be evaluated if intelligent decisions are

to be made. Therefore, if we know nothing about the risk of and investment, there is little

we can say about its performance. Given the risk that all investors face, it is totally

inadequate to consider only the returns from various investment alternatives. Although all

investors prefer higher returns, they are also risk averse. To evaluate portfolio

performance properly, we must determine whether the returns are large enough given the

risk involved. If we are to assess performance carefully, we must evaluate performance

on a risk-adjusted basis.

We must make relative comparisons in performance measurement, and an

important related issue is the benchmark to be used in evaluating the performance of a

portfolio. The essence of performance evaluation in investments is to compare the returns

obtained on some portfolio with the returns that could have been obtained from a

comparable alternative.



SINGLE INDEX MODEL BY WILLIAM SHARPE

The basic ratio undergoing the single index model is that all stocks are

affected by movements in the stock markets. Casuals’ observation of the share price

reveals that when market moves up (as measured by any of the widely used stock marker

indices), prices of the most shares tend to increase. When the market goes down the

prices of most shares tend to decline. This suggests that one reason why security returns

might be correlated and there is co- movement between securities, is because of a

common response to market changes.

William Sharpe has tried to simplify the process of data inputs, data

tabulation and reaching a solution, has developed a simplified variant of the Markowitz

model that reduces substantially its data and computational requirements.

The single index model is based on the assumption that stocks vary

together because of the common movement in the stock market and there are no effects

beyond the market that accounts the stocks co movement. The expected return, standard

deviation and co-variance of the single index model represent the joint movement of the

securities.

1) SHARPE’S PERFORMANCE INDEX

Sharpe performance index gives a single value to be used for the

performance ranking of various funds or portfolios. Sharpe index measures the risk

premium of the portfolio relative to the total amount of risk in the portfolio. This risk

premium is the difference between the portfolio average rate of return and the risk less

rate of return. The standard deviation of the portfolio indicates the risk.

Sharpe Performance Index = R p – R f

σp

Where,

Rp = Portfolio Return

Rf = Risk Free Return

σp = Portfolio Standard Deviation



EVALUATION: Sharpe index is a measure of risk premium related to the total risk. The

index assigns the highest values to assets that have best risk adjusted average rate of

return. According to this model which gives highest value is the best performing portfolio

2 ) TREYNOR’S PERFORMANCE INDEX:

To understand the Treynor’s index, an investor should know the concept of

characteristic line.

CHARACTERISTIC LINE: The relationship between a given market

return and the funds return is given by characteristic line. The funds performance is

measured in relation to the market performance. The ideal funds return rises at a faster

rate than the general market performance when the market is moving upwards and its rate

of return declines slowly than the market return, in the decline.

Treynor’s risk premium of the portfolio is the difference between the

average returns and the risk less rate of return. The risk premium depends on the

systematic risk assumed in a portfolio.

Treynor Performance Index = R p - R f

βp

where,

Rp = Portfolio Return


βp = Portfolio Beta

EVALUATION:

Treynor’s index measures the funds performance in relation to the market

performance. Fund or portfolio which gives or earns more risk premium per unit of

systematic risk is selected and that is considered as best performing one.



3) JENSEN’S PERFORMANCE INDEX

Like the Treynor measure, the Jensen measure or Jensen’s alpha is based

on the capital asset pricing model. It reflects the difference between the returns actually

earned on portfolio and the return the portfolio was supposed to earn, given its beta as per

the capital assets pricing model

Jensen Performance Index = α + Rf + β (R m ˉ R f )

Where,

α = Alpha


β = Beta

Rm = Market Return


The return of the portfolio varies in the same proportion of beta difference

between the market return and risk less rate of interest. Beta is assumed to reflect the

systematic risk. The funds portfolio beta would be equal to one if it takes a portfolio of all

market securities. The beta would be greater than one if the funds portfolio consists of

securities that are riskier that a portfolio of all market securities.

EVALUATION:

Jensen index compares the actual return of the portfolio with the calculated

or predicted return. Better performance of the fund depends on the predictive ability of

the managerial personnel of the fund. Fund or portfolio which gives or earns more return

is selected and that is considered as best performing portfolio.



4) CAPITAL ASSET PRICING MODEL (CAPM)

The CAPM was developed in mid 1960s by three researchers William

Sharpe, John Linter and Jan Mossin independently. Consequently, the model is often

referred to as Sharpe-Linter-Mossin Capital Asset Pricing Model.

The Capital Asset Pricing Model is really as extension of the portfolio

theory of Markowitz. The portfolio theory is a description of how rational investors

should build efficient portfolio and select the optimal portfolio. The Capital Asset Pricing

Model derives the relationship between the expected return and risk of individual

securities and portfolios in the capital markets if every one behaved in the way portfolio

theory suggested.

CAPM decomposes a portfolio's risk into systematic and specific risk.

Systematic risk is the risk of holding the market portfolio. As the market moves, each

individual asset is more or less affected. To the extent that any asset participates in such

general market moves, that asset entails systematic risk. Specific risk is the risk which is

unique to an individual asset. It represents the component of an asset's return which is

uncorrelated with general market moves.

According to CAPM, the marketplace compensates investors for taking

systematic risk but not for taking specific risk. This is because specific risk can be

diversified away. When an investor holds the market portfolio, each individual asset in

that portfolio entails specific risk, but through diversification, the investor's net exposure

is just the systematic risk of the market portfolio.

Systematic risk can be measured using beta. According to CAPM, the

expected return of a stock equals the risk-free rate plus the portfolio's beta multiplied by

the expected excess return of the market portfolio.


http://www.riskglossary.com/articles/common_stock.htm

http://www.riskglossary.com/articles/beta.htm

http://www.riskglossary.com/articles/hedging_and_diversification.htm

http://www.riskglossary.com/articles/correlation.htm


CAPM = Rf + β (R m ˉ R f )

Where,


β = Beta

Rm = Market Return

It states that a stocks (or portfolio's) excess expected return depends on its

beta and not its volatility. Stated another way, excess return depends upon systematic risk

and not on total risk.

We call CAPM a "capital asset pricing model" because, given a beta and

an expected return for an asset, investors will bid its current price up or down, and

adjusting that expected return so that it satisfies formula. Accordingly, the CAPM

predicts the equilibrium price of an asset. This works because the model assumes that all

investors agree on the beta and expected return of any asset. In practice, this assumption

is unreasonable, so the CAPM is largely of theoretical value.

BASIC ASSUMPTIONS:

Individual are risk averse.

Individuals seek to maximize the expected utility of their portfolio over a single

period planning horizon.

Individuals have homogeneous expectations.

Individuals can borrow and lend freely at a risk less rate of interest.

The market is perfect

There are no taxes and no transactions costs.

Securities are completely divisible and market is competitive.

The quantity of risky securities in the market is given.


http://www.riskglossary.com/articles/volatility.htm


4) EVALUATION OF PORTFOLIOS

S.NO

NAME OFTHE CLIEN

T

NUMBERQUANTITY

INPORTFOLI

O

TOTALAMOUN IN PORTFOLI

O

PORTFOLIO

Return Beta Alpha

Variance S.D

1CLIENT NO - 01 19587 4685677.63 -1.191 1.656 -1.02 42.42 6.51

2CLIENT NO - 02 21992 4696502.98 -1.252 1.544 -1.09 171.39 13.09

3CLIENT NO - 03 274305 51561704.15 1.506 1.612 1.68 202.50 14.23

4CLIENT NO - 04 11568 1564167.23 0.816 1.261 0.95 65.40 8.08

5CLIENT NO – 05 26096 4681988.8 -2.215 1.489 -2.05 168.33 12.97

MARKET PERFORMANCE


BETAMARKET RETURN

VARIENCE OF MARKET S.D OF MARKET

1 -0.10623 112.4379 10.604


ANALYSIS:

This is the aggregate table for all 5 clients’ portfolio performance along

with their portfolio return, portfolio beta, portfolio alpha, portfolio variance and portfolio

standard deviation. So here am try to analyze all 5 clients performance comparing their

portfolio performance each other. And also these compared with overall market

performance.

From the above table we can conclude that CLIENT NO- 03 earning

highest return 1.506 % per month compared other and as well as market return -0.106%,

with moderate level of risk(S.D= 14.23). In case of risk and volatility CLIENT NO- 03

has highest level of risk and volatility because S.D and Variance is highest in this case

14.23 and 202.50 respectively, but in the same it gives better return than others, and it has

highest beta along with alpha, so if market gives good response it will definitely brings

handful return to this client. But here CLIENT NO-05 is worst performer because he has

high risk but return is less than other & compare to market.

If you take CLIENT 1, 2 and 5 they have similarity in amount invested,

standard deviation & Variance of Client No 1 is less than 2 & 5 client & also client 1 has

high earnings than client 2 & 5. But among these clients no one invested their amount in

to well diversify portfolio, because all return is very low compare to the market return.

If you take consideration of variance & SD client no-01 & 04 are good,

because of their SD & Variance is lower than the market.

And the same if you consider CLIENT NO-3 and 4. CLIENT 3 is taken to

consider, because his portfolio return is high with higher risk along with high beta &

alpha, if market return increases then return of the client also increase. If you take in to

account of all clients CLIENT NO – 3 and 4 has well performing portfolio than others.



5) PORTFOLIO THEORY APPLICATION

S. No

Name Performance Index and Ranking

Sharpe’s Treynor’s Jensen’s CAPM

Ratio Rank Ratio Rank Ratio Rank Ratio Rank

1 Client No.1

-1.268 4 -1.49 3 -1.52 3 -0.50 5

2 Client No.2

-1.290 3 -1.58 4 -1.52 4 -0.44 3

3 Client No.3

1.470 1 1.20 1 1.12 1 -0.48 4

4 Client NO.4

0.754 2 0.42 2 0.69 2 -0.26 1

5 Client No.5

-2.253 5 -2.55 5 -2.46 5 -0.40 2

ANALYSIS:

1) SHARPE INDEX :

CLIENT NO-03 ranks top among the total 5 clients because of the higher

return with high volatility in return. Client no-4 ranks second in the list, because of the

low volatility in portfolio. Client no-5 ranks to last because of very low return and high

risk compare to his return and Client 1 & 2 ranks 4 & 3 respectively.



2) TREYNORS INDEX :

According to TREYNORS INDEX theory again client no-03 ranks top

among all because of high return and high market related risk. And Client no-02 has

low risk profile but ranks second because of high risk premium. Here client - 01 rank

in 3rd place & client – 2 ranks 4th place, its low risk premium makes it to lie in 4 th

place.

3) JENSEN INDEX: SHARPE INDEX : TREYNORS INDEX

According to this theory alpha takes very important role in ranking the

portfolios, higher the alpha is first chance to rank top. In this also Client no-03 has

takes 1st place, and again client no-04 is had 2nd rank. And client 1, 2 & 5 ranks 3rd, 4th

& 5th because of negative alpha & return.

4) CAPM:

JENSEN model based on alpha factor where as CAPM is based on beta

factor, higher the beta lowers the chance to rank high. So client no 4 and 5 ranks 1 st

and 2nd respectively. And client no-01 & 05 ranked 5th & 4th place respectively.



VI. FINDINGS

About company:

Through my study, I have found that most of the clients are satisfied with

KARVY services & they prefer KARVY because of its prominent parameters like

safety, client relationship & goodwill.

KARVY’s DEMAT service is safest & finest system which allows investors to get

prompt services. It was also found that DEMAT process at KARVY is transparent

which does not leave any kind of errors to the investors.

About market and investor

Since last 1 year market is too volatile, so investor has a fear to invest their money

in share market.

In India Mutual Fund industry is performing very well, so investors are interested

more in mutual fund because of diversified risk & safety purpose.

Most of the investors are not rational; they like to get advisory services.

The present global crisis impacts on the equity market which will continue to

bearish or high volatile mood.

If we consider IPO then its current performance is not good, so investors do not

prefer current IPOs. Leaders in IPO’s of Portfolio companies (more than 15

portfolio companies have already achieved stock market listing).

About project:



In my analysis work client no 3 and 4 found good, because their return is higher

than the market return.

In my analysis client no-01 & 04 SD & variance is low compare to market SD & Variance (10.60 & 112.44), so their risk is low. And client 2, 3 & 5 their risk is very high comparing to market SD & Variance.

In my analysis Beta & Alpha are high for the all client, if market return increases their return also increase.

It reveals client 5, 1 & 2 have the very low return than market return (-0.11%).

Finding out beta, alpha, S.D and systematic risk for each security and portfolio is

a very complicated process.

Clients can’t believe theories like Sharpe Treynor and CAPM, because they do not

aware about the theories and all.

Client no-05 & 02 have invested their amount in a few sectors only, so their

portfolio diversification is not good & very risky for them.



VII. SUGGESTIONS

Most of investors are not rational investor, so they should invest their money by analyzing the market condition.

Since last 1 year market is too volatile, so investor has a fearing for invest their

money in share market, in this condition investors must go long term investment

by taking of positive way.

Client no-05 & 02 have invested their amount in a few sectors only & their portfolio diversification is not good & very risky for them. So they should modify their portfolio by considering more companies.

Client 2, 3 & 5 their risk is very high comparing to market SD & Variance, So they should reduce their risk with the help of investing some amount in mutual fund also.

Karvy should reduce the transaction charges like purchasing and selling

commissions, which can encourage the investors.

The company should advise the customers, How to reduce their risk with the help of portfolio investment.



VIII. CONCLUSION

Investing in various types of assets is an interesting activity that attracts

people from all walks of life irrespective of their occupation, economic status, education

and family background. When a person has more money than he requires for current

consumption, he would be coined as a potential investor. The investor who is having extra

cash could invest it in securities or any other assets like gold or real estate or could simply

deposit it in his bank account. While investing, investor should look towards Risk and

Return criteria. To know the risk and return profile investor should be rational, but all

investor are not rational. So the company should advise their genuine investors by

educating them about diversification of good portfolio investments which can reduce their

risk & maximize return.



IX. BIBLIOGRAPHY

BOOKS

1) Investment Analysis and Portfolio Management (3rd Edition)

- By Prasanna Chandra

2) Security Analysis and Portfolio Management

- By Punithavathy Pandian

WEBSITE

http://www.nse.com

http://www.moneypore.com

http://www.icicdirect.com

http://www.moneycontrol.com

http://www.bseindia.com

http://www.thefinapolis.com

http://www.Karvy.com


http://www.Karvy.com/

http://www.thefinapolis.com/

http://www.bseindia.com/

http://www.moneycontrol.com/

http://www.icicdirect.com/

http://www.moneypore.com/

http://www.nse.com/

Kunthinath c m Portfolio Project Final

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