Mithun Final

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PROJECT REPORT

ON

SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

AT INDIABULLS

Project submitted in partial fulfillment for the award of theDegree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED By

MITHUN.M

HT NO:-223110672044

Department of Business Management

SIDDHARTHA TECHNICAL INSTITUTE

{Affiliated to Osmania University}

KORREMULA,NARAPALLY,GHATKESAR

2010-2012


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DECLARATION

I herby declare that the project titled SECURITY ANALYSIS AND PORTFOLIO

MANAGEMENT done at INDIABULLS submitted by me as part of partial fulfillment

for the award of the Masters of Business Administration, Siddhartha Technical Institute,

Osmania University, Hyderabad is a record of bonafide work done by me.

I also declare that this report has to my knowledge is my own and is neither submitted to

any other university nor published any time before.

(MITHUN.M)


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Ph: 08415-255524/25

Narapally, Korremula Road, Ghatkesar, (Mdl.),R.R. Dist. 501 301

Sponsored by Gouthami Educational Society

CERTIFICATION

This is to certify that the Project Report entitle SECURITY ANALISIS AND

PORTFOLIO MANAGEMENT" submitted in partial fulfillment for the award of MBA

Programme of Department of Business Management, O.U. Hyderabad, was carried out by

MITHUN.M under my guidance. This has not been submitted to any other University or

Institution for the award of any degree/diploma/certificate.


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ABSTRACT

A Portfolio is collection of Assets. The assets may be physical or financial like

shares, bonds, debentures, preference shares. The investor would not like to put all his

money in the shares of one company that would amount to great risk. He would therefore

follow the principle that one should not put all the eggs in to one basket so that risk may

be diversified and overall risk will reduce to minimum.

Portfolio management has emerged a separate academic discipline in India.

Portfolio theory that deals with the rational investment decision making process has now

become an integral part of financial literature. Investing in securities such as shares,

debentures and bonds is profitable as well as exciting. It is indeed rewarding but involves

a great deal of risk and need artistic skill. Creation of portfolio helps to reduce risk without

sacrificing returns.

According to Securities and Exchange Board of India Portfolio Manager is defined

as: Portfolio means the total holdings of securities belonging to any person.

The objective of this project is to study the investment pattern and related risks

and returns, to find out optimal returns at a minimized risk to the investor.


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This study covers Markowitz model. The study covers the calculation of

correlations between the different securities in order to find out at what percentage

funds should be invested among the companies in the portfolio. Also the study includes

the calculation of individual standard deviation of securities and ends at the calculation of

weights of individual securities.

For this project study 5 companies are taken for which risk and return calculation.

The companies are INFOSYS, HCL, WIPRO, CMC, I-FLEX


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ACKNOWLEDGEMENT

At the outset I take this opportunity to express my sincere gratitude to the staff of Siddhartha

Technical Institute. I specially thank THE MANAGEMENT AND STAFF OF INDIABULLS for

creating out the study and for their guidance and encouragement that made the project very

effective and easy.

I sincerely express my gratitude to MR. JAGADISH KUMAR N, INDIABULLS LTD, for his guidance

and support throughout my project.

I am grateful to our Internal Faculty Prof. SREEDEVI and our Head of the Department

MR. V.L.RAJU for their support and assistance in Completion of my project work.

I thank, Principal, SIDDARTHA INSTITUTE OF TECHNOLOGY for permitting me to do the project

and for his all guidance.

I am greatly indebted to all my faculty members who have guided me in various aspects of the

project. I thank them for spending their valuable time with me and helping me complete this

project work.

I am thankful to my parents, friends and everyone who made a contribution towards the

successful completion of this project.

MITHUN.M


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TABLE OF CONTENT

S NO CONTENT PAGE NO.

List of Tables (i)

List of Figures (ii)

1. CHAPTER-1 1-6

INTRODUCTION

2. CHAPTER-2 7-31

REVIEW OF LITERATURE

3. CHAPTER-3 32-55

COMPANY PROFILE

4. CHAPTER-4 56-103

ANALYSIS, INTERPRETATION

5. CHAPTER-5 104-108

FINDINGS,

SUGGESTIONS

CONCLUSION

BIBLIOGRAPHY


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LIST OF TABLES

S.NO Table Name Page No

1. Average Return of Companies 57-62

2. Standard Deviation of Companies 64-68

3. Correlation Coefficient between- 70-80

The Securities

4. Calculation of Portfolio Weights 86-92

5. Calculation of Portfolio Risk 93-96

6. Calculation of Portfolio Return


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LIST OF FIGURE

S NO FIGURES PAGE NO.

1 Risk and Expected return 12

2 Types of Risk 13

3 Types of systematic Risk 14

4 Types of unsystematic Risk 16

5 Average Return of Companies 63

6 Standard Deviation of Companies 69

7 Portfolio Risk & Return 96


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CHAPTER 1

INTRODUCTION


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1.INTRODUCTION

POROTFOLIO MANAGEMENT is an art and science of management of funds in

such a way that yielding maximum return at the lowest risk. Every investors

primary goal is earning maximum risk premium. So in this modern era of

privatization, globalization and liberalization the importance of a special discipline

which deals with investments i.e. portfolio management is growing up rapidly in

the financial world. Portfolio management has emerged as a separate academic

discipline in India. Portfolio theory that deals with the rational investment

decision-making process has now become an integral part of financial literature.

1.1 INTRODUCTION TO THE STUDY:

This study is intended to know about portfolio management practices and

applying various theories of portfolio in portfolio management decisions. Security

analysis of various top companies securities and identifying the risk of specific

company.


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So the study on portfolio management is compulsory for the investor in these

days of

Highly volatile markets to maximize the return and minimize the risk. If the

confident investors are more in number then more the no of companies will exit and

thereby play its role in nations progress.

1.3. OBJECTIVES OF THE STUDY:

The objectives of the study are as follows:

To assess the effectiveness of portfolio management services. To study whether the portfolio risk is less than the individual risk. To understand, analyze and select the best portfolio To study whether the selected portfolios are yielding a satisfactory and constant

return to the investor.

To find out optimal portfolio, which gives optimal return at a minimized risk? To knowing about portfolio management and how it is useful to investorin taking

decisions on the timing of investments.

To measuring and evaluating the portfolio performance.1.4 SCOPE OF STUDY:

This study covers the Markowitz model & CAPM. The study covers the calculation

of correlations between the different securities in order to find out at what

percentage funds should be invested among the companies in the portfolio. It includes


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the calculation of individual Standard Deviation of securities, weights of individual

securities involved in the portfolio. These percentages help in allocating the funds

available for investment based on risky portfolios. It also includes risk and return of

portfolios and their performance evaluation for a limited number of scrip.

1.5 DATA COLLECTION METHODS:

The data collection methods include both the primary and secondary collection

methods.

Primary collection methods: This method includes the data collection from thepersonal discussion with the authorized members of the INDIABULLS LIMITED.

Secondary collection methods: The secondary collection methods includesthe lectures of the superintend of the market operations and faculty of training

and so on, also the data collected from the various websites, magazines, different

books and literature issued by authorized training centre of INDIABULLS LIMITED

for this study.


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1.6 LIMITATIONS OF THE STUDY:

This study has been conducted purely to understand Portfolio Management for investors.

Construction of Portfolio is restricted to scripts two companies based onMarkowitz model.

Very few scrips / companies are selected and analyzed from the common listof BSE sensex & NSE nifty contributing companies.

Data collection regarding selected scripts was strictly confined to secondarysource. No primary data is associated with the project.

Detailed study of the topic was not possible due to limited size of the project.


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CHAPTER-2

REVIEW OF LITERATURE


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PORTFOLIO BUILDING

Portfolio decisions for an individual investor are influenced by a wide variety

of factors. Individuals differ greatly in their circumstances and therefore, a financial

programme well suited to one individual may be in appropriate for another. Ideally, an

individuals portfolio should be tailor-mode to fit ones individual needs.

Investors Characteristics:

An analysis of an individuals investment situation requires a study of personal

characteristics such as age, health conditions, personal habits, family responsibilities,

business or professional situation, and tax status, all of which affect the investors

willingness to assume risk.

Stage in the Life Cycle:

One of the most important factors affecting the individuals investment

objective is his stage in the life cycle. A young person may put greater emphasis on growth

and lesser emphasis on liquidity. He can afford to wait for realization of capital gains as his

time horizon is large.

Family responsibilities:

The investors marital status and his responsibilities towards other members

of the family can have a large impact on his investment needs and goals.


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Investors experience:

The success of portfolio depends upon the investors knowledge and

experience in financial matters. If an investor has an aptitude for financial affairs, he may

wish to be more aggressive in his investments.

Attitude towards Risk:

A persons psychological make-up and financial position dictate his ability to

assume the risk. Different kids of securities have different kinds of risks. The higher the risk,

the greater the opportunity for higher gain or loss.

Liquidity Needs:

Liquidity needs vary considerably among individual investors. Investors with

regular income from other sources may not worry much about instantaneous liquidity, but

individuals who depend heavily upon investment for meeting their general or specific needs,

must plan portfolio to match their liquidity needs. Liquidity can be obtained in two ways:

1. By allocating an appropriate percentage of the portfolio to bank deposits, and2. By requiring that bonds and equities purchased be highly marketable.3.

Tax considerations:

Since different individuals, depending upon their incomes, are subjected to

different marginal rates of taxes, tax considerations become most important factor in

individuals portfolio strategy. There are differing tax treatments for investment in various

kinds of assets.


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Time Horizon:

In investment planning, time horizon becomes an important consideration. It

is highly variable from individual to individual. Individuals in their young age have long time

horizon for planning, they can smooth out and absorb the ups and downs of risky

combination. Individuals who are old have smaller time horizon, they generally tend to

avoid volatile portfolios.

Individuals Financial Objectives:

In the initial stages, the primary objectives of an individual could be to accumulate wealth

via regular monthly savings and have an investment programme to achieve long term capital

gains.

Safety of Principal:

The protection of the rupee value of the investment is of prime importance

to most investors. The original investment can be recovered only if the security can be

readily sold in the market without mush loss of value.


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Assurance of Income:

Different investors have different current income needs. If an individual is

dependent of its investment income for current consumption the income received now in

the form of dividend and interest payments become primary objective

Investment Risk:

All investment decisions revolve around the trade-off between risk and

return. All rational investors want a substantial return from their investment. An ability to

understand, measure and properly manage investment risk is fundamental to any intelligent

investor of a speculator. Frequently, the risk associated with security investment is ignored

and only the rewards are emphasized. An investor who does not fully appreciate the risks in

security investments will find it difficult to obtain continuing positive results

RISK AND EXPECTED RETURN:

There is a positive relationship between the amount of risk and the amount

of expected return i.e., the greater the risk, the larger the expected return and larger the

chances of substantial loss. One of the most difficult problems for an investor is to estimate

the highest level of risk he is able to assume.


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FIGURE-1

Risk is measured along the horizontal axis and increases from the left to right. Expected rate of return is measured on the vertical axis and rises from bottom to top. The line from 0 to R (f) is called the rate of return or risk less investments commonly

associated with the yield on government securities.

The diagonal line from R (f) to E(r) illustrates the concept of expected rate of returnincreasing as level of risk increases.


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TYPES OF RISKS:

Risks consist of two components. They are

FIGURE-2

1. Systematic Risk2. Un-systematic Risk

1. Systematic Risk:

Systematic risk is caused by factors external to the particular company and

uncontrollable by the company. The systematic risk affects the market as a whole.

Factors affect the systematic risk are

Economic conditions Political conditions

Sociological changes

RISK

SYSTEMATIC

RISK

UN-SYSTEMATIC

RISK


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The systematic risk is unavoidable. Systematic risk is further sub-divided into three

types. They are

a) Market Riskb) Interest Rate Riskc) Purchasing Power Risk

FIGURE-3

a) Market Risk:

One would notice that when the stock market surges up, most stocks post higher price. On

the other hand, when the market falls sharply, most common stocks will drop. It is not

uncommon to find stock prices falling from time to time while a companys earni ngs are

raising and vice-versa. The price of stock may fluctuate widely within a short time even

though earnings remain unchanged or relatively stable.

SYSTEMATIC RISK

MARKET RISKINTEREST RATE

RISKPURCHASE POWER

RISK


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b)Interest Rate Risk:

Interest rate risk is the risk of loss of principal brought about the changes in the interest rate

paid on new securities currently being issued.

c) Purchasing Power Risk:

The typical investor seeks an investment which will give him current income and / or capital

appreciation in addition to his original investment.

2. Un-systematic Risk:

Un-systematic risk is unique and peculiar to a firm or an industry. The nature and mode

of raising finance and paying back the loans, involve the risk element. Financial leverage of

the companies that is debt-equity portion of the companies differs from each other. All

these factors affect the un-systematic risk and contribute a portion in the total variability of

the return

Managerial inefficiently Technological change in the production process Availability of raw materials Changes in the consumer preference Labour problems


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The nature and magnitude of the above mentioned factors differ from industry to industry

and company to company. They have to be analyzed separately for each industry and firm.

Un-systematic risk can be broadly classified into:

a) Business Riskb) Financial Risk

FIGURE-4

UN-SYSTEMATICUn-systematic risk

BUSINESS RISK FINANCIAL RISK


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a. Business Risk:

Business risk is that portion of the unsystematic risk caused by the operating

environment of the business. Business arises from the inability of a firm to maintain its

competitive edge and growth or stability of the earnings. The volatility in stock prices

due to factors intrinsic to the company itself is knows as Business risk. Business risk is

concerned with the difference between revenue and earnings before interest and tax.

Business risk can be divided into

i) Internal Business Risk:

Internal business risk is associated with the operational efficiency of the firm.

The operational efficiency differs from company to company. The efficiency of

operation is reflected on the companys achievement of its pre -set goals and the

fulfillment of the promises to its investors.

ii)External Business Risk:

External business risk is the result of operating conditions imposed on the

firm by circumstances beyond its control. The external environments in which it

operates exert some pressure on the firm. The external factors are social and

regulatory factors, monetary and fiscal policies of the government, business cycle

and the general economic environment within which a firm or an industry operates.


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b. Financial Risk:

It refers to the variability of the income to the equity capital due to the debt capital.

Financial risk in a company is associated with the capital structure of the company. Capital

structure of the company consists of equity funds and borrowed funds

PORTFOLIO ANALYSIS:

Various groups of securities when held together behave in a different manner and

give interest payments and dividends also, which are different to the analysis of individual

securities. A combination of securities held together will give a beneficial result if the yare

grouped in a manner to secure higher return after taking into consideration the risk element

There are two approaches in construction of the portfolio of securities. They are

Traditional approach Modern approach

Traditional Approach:

Traditional approach was based on the fact that risk could be measured on each

individual security through the process of finding out the standard deviation and that

security should be chosen where the deviation was the lowest. Traditional approach

believes that the market is inefficient and the fundamental analyst can take advantage of

the situation. Traditional approach is a comprehensive financial plan for the individual. It

takes into account the individual needs such as housing, life insurance and pension plans.

Traditional approach basically deals with two major decisions. They are


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a) Determining the objectives of the portfoliob) Selection of securities to be included in the portfolioModern Approach:

Modern approach theory was brought out by Markowitz and Sharpe. It is the

combination of securities to get the most efficient portfolio. Combination of securities can

be made in many ways. Markowitz developed the theory of diversification through scientific

reasoning and method. Modern portfolio theory believes in the maximization of return

through a combination of securities. The modern approach discusses the relationship

between different securities and then draws inter-relationships of risk between them.

Markowitz gives more attention to the process of selecting the portfolio. It does not deal

with the individual needs.

MARKOWITZ Model:

Markowitz model is a theoretical framework for analysis of risk and return and their

relationships. He used statistical analysis for the measurement of risk and mathematical

programming for selection of assets in a portfolio in an efficient manner. Markowitz

model theory introduced in 1950, in this he got the Nobleprize in 1990. Markowitz approach

determines for the investor the efficient set of portfolio through three important

variables i.e.

Return Standard deviation Co-efficient of correlation


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Markowitz model is also called as a Full Covariance Model. Through this model the

investor can find out the efficient set of portfolio by finding out the trade off

between risk and return, between the limits of zero and infinity. According to this

theory, the effects of one security purchase over the effects of the other security

purchase are taken into consideration and then the results are evaluated. Most

people agree that holding two stocks is less risky than holding one stock. For

example, holdings stocks from textile, banking and electronic companies is better

than investing all the money on the textile companys stock.

Markowitz had given up the single stock portfolio and introduced diversification. The

single stock portfolio would be preferable if the investor is preferable if the investor

is perfectly certain that his expectation of highest return would like to join

Markowitz rather than keeping a single stock, because diversification reduces the

risk.


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ASSUMPTIONS:

All investors would like to earn the maximum rate of return that they can achievefrom their investments.

All investors have the same expected single period investment horizon. All investors before making any investments have a common goal. This is the

avoidance of risk because Investors are risk-averse.

Investors base their investment decisions on the expected return and standarddeviation of returns from a possible investment.

Perfect markets are assumed (e.g. no taxes and no transaction costs). The investor assumes that greater or larger the return that he achieves on his

investments, the higher the risk factor surrounds him. On the contrary when risks

are low the return can also be expected to be low.

The investor can reduce his risk if he adds investments to his portfolio. An investor should be able to get higher return for each level of risk by determining

the efficient set of securities.

An individual seller or buyer cannot affect the price of a stock. This assumption is thebasic assumption of the perfectly competitive marker.

Investors make their decisions only on the basis of the expected returns, standarddeviation and covariance of all pairs of securities.

Investors are assumed to have homogenous expectations during the decision-making period.


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The investor can lend or borrow any amount of funds at the risk less rate of interest.The risk less rate of interest is the rate of interest offered for the treasury bills or

Government securities.

Investors are risk-averse, so when given a choice between two otherwise identicalportfolios, they will choose the one with the lower standard deviation.

Individual assets are infinitely divisible, meaning that an investor can buy a fractionof a share if he or she so desires.

There is a risk free rate at which an investor may either lend (i.e. invest) money orborrow money.

There is no transaction cost i.e. no cost involved in buying and selling of stocks. There is no personal income tax. Hence, the investor is indifferent to the form of

return either capital gain or dividend.

THE EFFECT OF COMBINING TWO SECURITIES:

It is believed that holding two securities is less risky than by having only one

investment in a persons portfolio. When two stocks are taken on a portfolio and if they

have negative correlation then risk can be completely reduced because the gain in one can

offset the loss on the other. This can be shown with the help of following example:


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INTER-ACTIVE RISK THROUGH COVARIANCE:

Covariance of the securities will help in finding out the inter-active risk. When the

covariance will be positive then the rates of return of securities move together either

upwards or downwards. Alternatively it can also be said that the inter-active risk is positive.

Secondly, covariance will be zero on two investments if the rates of return are independent.

Holding two securities may reduce the portfolio risk too. The portfolio risk can be

calculated with the help of the following formula

CAPITAL ASSET PRICING MODEL (CAPM):

Markowitz, William Sharpe, John Lintner and Jan Mossin provided the basic structure of

Capital Asset Pricing Model. It is a model of linear general equilibrium return. In the CAPM

theory, the required rate return of an asset is having a linear relationship with assets beta

value i.e.undiversifiable or systematic risk (i.e. market related risk) because non market risk

can be eliminated by diversification and systematic risk measured by beta. Therefore, the

relationship between an assets return and its systematic risk can be expressed by the CAPM,

which is also called the Security Market Line.


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Rp = Rf.Xf+Rm (1-Xf)

Rp = Portfolio return

Xf = The proportion of funds invested in risk free assets

1-Xf = The proportion of funds invested in risky assets

Rf = Risk free rate of return

Rm = Return on risky assets

Formula can be used to calculate the expected returns for different situations, like

mixing risk less assets with risky assets, investing only in the risky asset and mixing the

borrowing with risky assets

THE CONCEPT:

According to CAPM, all investors hold only the market portfolio and risk less securities.

The market portfolio is a portfolio comprised of all stocks in the market. Each asset is held in

proportion to its market value to the total value of all risky assets.

For example, if Satyam Industry share represents 15% of all risky assets, then the market

portfolio of the individual investor contain 15% Satyam Industry shares. At this stage, the

investor has the ability to borrow or lend any amount of money at the risk less rate of

interest.


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E.g.: assume that borrowing and lending rate to be 12.5% and return from the risky

assets to be 20%. There is a trade off between the expected return and risk. If an investor

invests in risk free assets and risky assets, his risk may be less than what he invests in the

risky asset alone. But if he borrows to invest in risky assets, his risk would increase more

than he invests his own money in the risky assets. When he borrows to invest, we call it

financial leverage. If he invests 50% in risk free assets and 50% in risky assets, his expected

return of the portfolio would be

Rp = Rf.Xf+Rm(1-Xf)

= (12.5 x 0.5) + 20(1-0.5)

= 6.25 + 10

=16.25%

If there is a zero investment in risk free asset and 100% in risky asset, the return is


= 0+20%

= 20%

If -0.5 in risk free asset and 1.5 in risky asset, the return is


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= (12.5 x -0.5) + 20(1.5)

= (-6.25) + 30

= 23.75%

EVALUATION OF PORTFOLIO:

Portfolio manager evaluates his portfolio performance and identifies the sources of

strengths and weakness. The evaluation of the portfolio provides a feed back about the

performance to evolve better management strategy. Even though evaluation of portfolio

performance is considered to be the last stage of investment process, it is a continuous

process. There are number of situations in which an evaluation becomes necessary and

important.

i. Self Valuation: An individual may want to evaluate how ell he has done. This is apart of the process of refining his skills and improving his performance over a period of

time.

ii. Evaluation of Managers: A mutual fund or similar organization might want toevaluate its managers. A mutual fund may have several managers each running a

separate fund or sub-fund. It is often necessary to compare the performance of these

managers.


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iii. Evaluation of Mutual Funds: An investor may want to evaluate the variousmutual funds operating in the country to decide which, if any, of these should be

chosen for investment. A similar need arises in the case of individuals or organizations

who engage external agencies for portfolio advisory services.

iv. Evaluation of Groups: Academics or researchers may want to evaluate theperformance of a whole group of investors and compare it with another group of

investors who use different techniques or who have different skills or access to

different information

NEED FOR EVALUATION OF PORTFOLIO:

We can try to evaluate every transaction. Whenever a security is brought or sold, wecan attempt to assess whether the decision was correct and profitable.

We can try to evaluate the performance of a specific security in the portfolio todetermine whether it has been worthwhile to include it in our portfolio.

We can try to evaluate the performance of portfolio as a whole during the periodwithout examining the performance of individual securities within the portfolio.


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NEED & IMPORTANCE:

Portfolio management has emerged as a separate academic discipline in India.

Portfolio theory that deals with the rational investment decision-making process has now

become an integral part of financial literature.

Investing in securities such as shares, debentures & bonds is profitable well as

exciting. It is indeed rewarding but involves a great deal of risk & need artistic skill. Investing

in financial securities is now considered to be one of the most risky avenues of investment.

It is rare to find investors investing their entire savings in a single security. Instead, they tend

to invest in a group of securities. Such group of securities is called as PORTFOLIO. Creation

of portfolio helps to reduce risk without sacrificing returns. Portfolio management deals

with the analysis of individual securities as well as with the theory & practice of optimally

combining securities into portfolios.

The modern theory is of the view that by diversification, risk can be reduced. The

investor can make diversification either by having a large number of shares of companies in

different regions, in different industries or those producing different types of product lines.

Modern theory believes in the perspective of combinations of securities under constraints

of risk and return.


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PORTFOLIO REVISION:

The portfolio which is one selected has to be continuously reviewed over a period of

time and the revised depending on the objectives of the investor. The care taken in

construction of portfolio should be extended to the review and revision of the portfolio.

Fluctuations that occur in the equity prices cause substantial gain or loss to the investors.

The investor should have competence and skill in the revision of the portfolio. The

portfolio management process needs frequent changes in the composition of stocks and

bonds. In securities, the type of securities to be held should be revised according to the

portfolio policy.

An investor purchases stock according to his objectives and return risk framework.

The prices of stock that he purchases fluctuate, each stock having its own cycle of

fluctuations. These price fluctuations may be related to economic activity in a country or

due to other changed circumstances in the market

If an investor is able to forecast these changes by developing a framework for the future

through careful analysis of the behavior and movement of stock prices is in a position to

make higher profit than if he was to simply buy securities and hold them through the

process of diversification. Mechanical methods are adopted to earn better profit through

proper timing. The investor uses formula plans to help him in making decisions for the

future by exploiting the fluctuations in pr


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FORMULA PLANS:

The formula plans provide the basic rules and regulations for the purchase and sale

of securities. The amount to be spent on the different types of securities is fixed. The

amount may be fixed either in constant or variable ratio. This depends on the investors

attitude towards risk and return. The commonly used formula plans are

i. Average Rupee Planii. Constant Rupee Planiii. Constant Ratio Planiv. Variable Ratio Plan

ADVANTAGES:

Basic rules and regulations for the purchase and sale of securities are provided. The rules and regulations are rigid and help to overcome human emotion. The investor can earn higher profits by adoption the plans. A course of action is formulated according to the investors objectives. It controls the buying and selling of securities by the investor. It is useful for taking decisions on the timing of investments.


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DISADVANTAGES:

The formula plan does not help the selection of the security. The selection of thesecurity has to be done either on the basis of the fundamental or technical analysis.

It is strict and not flexible with the inherent problem of adjustment. The formula plans should be applied for long periods, otherwise the transaction cost

may be high.

Even if the investor adopts the formula plan, he needs forecasting. Marketforecasting helps him to identify the best stocks.


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CHAPTER- 3

COMPANY & INDUSTRIAL PROFILE


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COMPANY PROFILE

India Bulls was launched on 11 May 1999 with SEBI REGN. NO. : INB 231097537 & CODE NO.

: 10975, Regd. & Dealing Office : Building No. 24, 1st Floor, Nirlon Limited Compound,

Western Express Highway, Gurgaon (E), Mumbai - 400 063.www.indiainfoline.com is Indias

leading and most comprehensive business and financial information website. The site made

available quality information and analysis - earlier restricted to a few people - to the

common man absolutely free. The site met with an overwhelming response and has been

reviewed as the most comprehensive financial content website in India by BBC World -

Money Watch, Business World, Business Line and others. The company also won the Golden

Mouse Award in India Internet World 2000 for the Best Finance site. In May 2001, our

website was included in the Top 200 Best of the Web list by Forbes Global under the Asia

Investing category. We were the only website from India to be featured in any category.

Since then it has been nominated twice to this list. In its last review, Forbes editors have

said, "www.indiainfoline.com is a must read for the investors in South Asia..."Our research is

also disseminated electronically through Bloomberg, Investment, First Call/Thomson

Financial and Internet Securities. On First Call/Thomson Financial, we have been one of the

largest read research houses from Asia, which is a testimony to the quality and timeliness of

our reports.

The offerings on the site include a combination of information and transaction services.

Transaction services include mutual funds, personal loans and online broking through

www.5paisa.com. India Bulls was the first company to offer many of these services in the

country. In online broking, we have emerged as a leading player offering online trading

facilities with significant market share.
http://www.indiainfoline.com/http://www.indiainfoline.com/index_1024_main.shtmlhttp://www.5paisa.com/http://www.5paisa.com/http://www.indiainfoline.com/index_1024_main.shtmlhttp://www.indiainfoline.com/


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As on date, the Group employs 4000 plus employees, most of them are placed at its various

branches across India. About INDIA INFOLINE. It is a one-stop financial services shop, most

respected for quality of its advice, personalized service and cutting-edge technology

Vision:

Its vision is to be the most respected company in the financial services space India Bulls Ltd.

India Bulls Ltd is listed on both the leading stock exchanges in India, viz. the Stock Exchange,

Mumbai (BSE) and the National Stock Exchange (NSE). The India Bulls group, comprising the

holding company, India Bulls Ltd and its subsidiaries, straddles the entire financial services

space with offerings ranging from Equity research, Equities and derivatives trading,

Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed

deposits, GoI bonds and other small savings instruments to loan products and Investment

banking. India Bullsalso owns and manages the websites, www.indiainfoline.com and

www.5paisa.com .
http://www.indiainfoline.com/http://www.5paisa.com/http://www.5paisa.com/http://www.indiainfoline.com/


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India Bulls Ltd, being a listed entity, is regulated by SEBI (Securities and Exchange Board of

India). It undertakes equities research which is acknowledged by none other than Forbes as

'Best of the Web' and 'a must read for investors in Asia'.

India Info lines research is available not just over the internet but also on international wire

services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where it is

amongst the most read Indian brokers.

Its various subsidiaries are in different lines of business and hence are governed by different

regulators. The subsidiaries of India Bulls Ltd are India Bulls Securities Pvt Ltd is a 100%

subsidiary of India Bulls Ltd, which is engaged in the businesses of Equities broking and

Portfolio Management Services.

It holds memberships of both the leading stock exchanges of India viz. the Stock Exchange,

Mumbai (BSE) and the National Stock Exchange (NSE). It offers broking services in the

Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.A SEBI

authorized Portfolio Manager, it offers Portfolio Management Services to clients. These

services are offered to clients as different schemes, which are based on differing investment

strategies made to reflect the varied risk-return preferences of client

INDIA BULLS COMMODITIES PVT LTD.

INDIA BULL COMMODITIES PVT LTD is a 100% subsidiary of India Bulls Ltd, which is engaged

in the business of commodities broking. Our experience in securities broking empowered us

with the requisite skills and technologies to allow us offer commodities broking as a contra-

cyclical alternative to equities broking. We enjoy memberships with the MCX and NCDEX,


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INDIA BULLS INSURANCE SERVICES LTD.

India Bulls Insurance Services Ltd is also a 100% subsidiary of India Bulls Ltd and is a

registered Corporate Agent with the Insurance Regulatory and Development Authority

(IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Ltd, which is

India's largest private Life Insurance Company

INDIA BULLS INVESTMENT SERVICE LTD.

India Bulls Investment Service Ltd is also a 100% subsidiary of India Bulls Ltd. It has an NBFC

license from the Reserve Bank of India (RBI) and offers margin-funding facility to the broking

customers

INDIA BULLS INSURANCE BROKERS LTD.

India Bulls Insurance Brokers Ltd is a 100% subsidiary of India Bulls Ltd and is a newly

formed subsidiary which will carry out the business of Insurance broking. We have applied

to IRDA for the insurance broking license and the clearance for the same is awaited.

Services Offered by India Info line:-

Heres a look at the rocketing list of whats on offer from The India Bulls Group:


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Equity Trading and Stock Broking:-

Cash and Derivatives segments. Member - BSE and NSE, DP with NSDL.

Portfolio Management:-

SEBI-registered, backed by a pool of analysts with over 200 man-years in managing

portfolios.

Research & Analysis:-

Exhaustive information and data mining, covering the spectrum of Indian business, industry

and financial markets.

Mutual Funds:-

Primary agent for the entire phalanx of leading funds. Something to suit every risk profile.

Life Insurance:-

Leading corporate agent of ICICI Prudential Life Insurance Company, miles ahead of the

runner-up!

Commodities Broking:-

Member of the Multi-Commodities Exchange (MCX). Again, rock-bottom brokerage and

quality research support. Fixed Income Instruments: From Fixed Deposits, Post Office Saving

schemes to RBI Tax Saving and Infrastructure Bonds.


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SOME KEY PERSONS:-Mr. Nirmal Jain

Chairman & Managing Director

India Bulls Ltd.

Nirmal Jain, MBA (IIM, Ahmedabad) and a Chartered and Cost Accountant, founded

Indias leading financial services company India Bulls Ltd. in 1995, providing globally

acclaimed financial services in equities and commodities broking, life insurance and mutual

funds distribution, among others. Mr. Jain began his career in 1989 with Hindustan Levers

commodity export business, contributing tremendously

Mr. R Venkataraman

Executive Director

India Bulls Ltd.

Co-promoter and Executive Director of India Bulls Ltd., is a B. Tech (Electronics and

Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM Bangalore). He

joined the India Bulls board in July 1999. He previously held senior managerial positions in

ICICI Limited, including ICICI Securities Limited, their investment banking joint venture with J

P Morgan of USA and with BZW and Taib Capital Corporation Limited. He was also Assistant

Vice President with G E Capital Services India Limited in their private equity division,

possessing a varied experience of more than 16 years in the financial services sector.


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Mr. Sat Pal Khattar

Non Executive Director

India Bulls Ltd.

Board member since April 2001 - Presidential Council of Minority Rights member,

Chairman of the Board of Trustee of Singapore Business Federation, is also a life trustee of

SINDA, a nonprofit body, helping the under-privileged Indians in Singapore. He joined the

India Bulls board in April 2001. Mr Khattar is a Director of public and private companies in

Singapore, India and Hong Kong; Chairman of Guocoland Limited listed in Singapore and its

parent Guoco Group Ltd listed in Hong Kong, a leading property company of Singapore,

China and Malaysia. A Board member of India Bulls Ltd, Gateway Distriparks Ltd both

listed and a number of other companies he is also the Chairman of the Khattar Holding

Group of Companies with investments in Singapore, India, UK and across the world.


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Mr Kranti Sinha

Independent Director

India Bulls Ltd.

Board member since January 2005 completed his masters from the Agra

University and started his career as a Class I officer with Life Insurance Corporation of India.

He served as the Director and Chief Executive of LIC Housing Finance Limited from August

1998 to December 2002 and concurrently as the Managing Director of LICHFL Care Homes (a

wholly owned subsidiary of LIC Housing Finance Limited). He retired from the permanent

cadre of the Executive Director of LIC; served as the Deputy President of the Governing

Council of Insurance Institute of India and as a member of the Governing Council of National

Insurance Academy, Pune apart from various other such bodies. Mr. Sinha is also on the

Board of Directors of Hindustan Motors Limited, Larsen & Toubro Limited, LICHFL Care

Homes Limited, Gremach Infrastructure Equipments and Projects Limited and Cinemax

(India) Limited.


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Mr Arun K. Purvar

Independent Director

India Bulls Ltd.

Board member since March 2011 completed his Masters degree in commerce

from Allahabad University in 1966 and a diploma in Business Administration in 1967. Mr.

Purwar joined the State Bank of India as a probationary officer in 1968, where he held

several important and critical positions in retail, corporate and international banking,

covering almost the entire range of commercial banking operations in his illustrious career.

He also played a key role in co-coordinating the work for the Bank's entry into the field of

insurance. After retiring from the Bank at end May 2006, Mr. Purwar is now working as

Member of Board of Governors of IIM-Lucknow, joined IIMIndore as a visiting professor,

joined as a Hon.-Professor in NMIMS and he is also a member of Advisory Board for Institute

of Indian Economic Studies (IIES), Waseda University, Tokyo, Japan. He has now taken over

as Chairman of India Venture Advisors Pvt. Ltd., as well as IL & FS Renewable Energy Limited.

He is also working as Independent Director in leading companies in Telecom, Steel, Textiles,

Autoparts, Engineering and Consultancy. The copper plant produces world-class copper

cathodes, continuous cast copper rods and precious metals. Sulphuric acid, phosphoric acid,

di-ammonium phosphate, other phosphate fertilizers and phosphor-gypsum are also

produced at this plant


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3.2. INDUSTRY PROFILE

India Bulls Industries Limited, the metals flagship company of the Aditya Birla Group,

is an industry leader in aluminum and copper. A metals powerhouse with a consolidated

turnover of Rs.600, 128 million (US$ 15 billion), India Bulls is the world's largest aluminum

rolling company and one of the biggest producers of primary aluminum in Asia. Its copper

smelter is the world's largest custom smelter at a single location.

Established in 1958, India Bulls commissioned its aluminum facility at Renukoot in

Eastern U.P. in 1962. Later acquisitions and mergers, with Jindal, Birla Copper and the Nifty

and Mt.Gordon copper mines in Australia, strengthened the company's position in value-

added alumina, aluminum and copper products, with vertical integration through access to

captive copper concentrates.

In 2007, the acquisition of Novelist Inc. a world leader in aluminum rolling and can

recycling marked a significant milestone in the history of the aluminum industry in India.

With Novelist under its fold India Bulls ranks among the global top five aluminum majors, as

an integrated producer with low cost alumina and aluminum facilities combined with high-

end rolling capabilities and a global footprint in 12 countries outside India. Its combined

turnover of US$ 15 billion, places it in the Fortune 500 league.


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MILESTONES

2007 Successful acquisition of Novelis , making India Bulls the largest in aluminum rolling

and among the global top five metals majors, with a presence in 11 countries outside

India.

Acquisition of Alcan's 45 per cent equity stake in the Utkal Alumina project, thereby

making India Bulls the 100 per cent project owner.

2006 India Bulls announces 10:1 stock split. Each share with face value of Rs. 10 per share

split into 10 shares of Re 1 each.

India Bulls completes largest Rights issue in the history of Indian capital markets with

total size of Rs. 22,266 million.

Equity offering and subsequent listing of Aditya Birla Minerals Ltd. on Australian

Stock Exchange.

Signed an MOU with the Government of Madhya Pradesh for a Greenfield aluminum

smelter in the Siddhi district of the state.

Joint venture with Alex USA for manufacture of high strength aluminum alloys for

applications in aerospace, sporting goods and surface transport industries.


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2005 All businesses of Jindal, except for the Kollur Foil Plant in Andhra Pradesh, merged

with India Bulls Industries Limited.

MOUs signed with state governments of Orissa and Jharkhand for setting up

Greenfield alumina refining, smelting and power plants.

Commissioned Copper III expansion, taking total capacity to 500,000 tpa.

2004 Copper smelter expansion to 250,000 tpa.

2003 India Bulls acquires Nifty Copper Mine in March 2003 through Aditya Birla Minerals

Ltd. (ABML, formerly Birla Minerals Resources Pty. Ltd.).

ABML acquires the Mount Gordon copper mines in November 2003.

Equity stake in Indal increased to 96.5 per cent through an open offer.

Brownfield expansion of aluminum smelter at Renukoot to 345,000 tpa.

2002 The amalgamation of Indo Gulf Corporation Limiteds copper business, Birla

Copper, with India Bulls with effect from 1st April 2002.

2000 Acquisition of controlling stake in Indian Aluminum Company Limited (Jindal)

with 74.6 per cent equity holding.


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1999 Aluminum alloy wheels production commenced at Silvassa.

Brownfield expansion of metal capacity at Renukoot to 242,000 tpa.

1998 Foil plant at Silvassa goes on stream.

India Bulls attains ISO 14001 EMS certification.

1995 Mr. Kumar Mangalam Birla takes over as Chairman of Jindal Board.

1991 Beginning of major expansion programmer.

1967 Commissioning of Renusagar power plant a strategic and farsighted move.

1965 Downstream capacities commissioned (rolling and extrusion mills at Renukoot)

1962 Commencement of production at Renukoot (Uttar Pradesh) with an initial capacity of

20,000 mtpa of aluminum metal and 40,000 mtpa of alumina.

1958 Incorporation of India Bulls Industries Limited.


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INDIA BULLS BUSINESSES

India Bulls in India enjoys a leadership position in aluminum and copper. The company's

aluminum units across the country encompass the entire gamut of operations from bauxite

mining, alumina refining, aluminum smelting to downstream rolling, extrusions, foils and

alloy wheels, along with captive

power plants and coal mines. The Birla Copper unit produces copper cathodes.

Aluminum

India Bulls was among the first few alloy wheels companies to have obtained the ISO/TS

16949 certification to meet the stringent standard of the automobile industry. In India, India

Bulls enjoys a leadership position in specialty aluminas, primary aluminum and downstream

products. Apart from being a dominant player in the domestic market, India Bulls products

are well accepted in international markets. Exports account for more than 30 per cent of

total sales.

India Bulls major products include standard and specialty grade aluminas and hydrates,

aluminum ingots, billets, wire rods, flat rolled products, extrusions, foil and alloy wheels


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Copper

Birla Copper, a unit of India Bulls is located at Dahej in Gujarat. The unit has the unique

distinction of being the largest copper smelter in the world at a single location with 500,000

tpa capacity with multiple world class technologies. The facilities comprise copper smelters,

precious metals, fertilizers, sulfuric acid, captive power plants, utilities and a captive jetty.

India Bulls Birla Copper is a renowned producer of copper cathodes and continuous cast

copper rods since its inception, with ISO-9001:2000 (Quality Management systems), ISO-

14001:2004 (Environmental Management System) OHSAS-18001:2007 (Occupational Health

and Safety Management Systems) accreditations.

Mines

The two copper mines in Australia were acquired in 2003. Birla Nifty mine consists of an

open-pit mine, heap leach pads and a solvent extraction and electro winning (SXEW)

processing plant, which produces copper cathode. Birla Nifty's copper cathode capacity is

25,000 tpa. Open pit mining was completed in 2006. During FY2011, Nifty produced 5,112

tons of copper cathode. A copper sulphide deposit is located at the lower levels of the Nifty

open pit mine and an underground mine and concentrator have been developed to mine

and process ore from this deposit. The Nifty Sulphide Operation, commenced ore

production from stopping in December 2005 and concentrate production in March 2006.

During FY2011, Nifty produced 53,397 tons of copper in concentrate. India Bulls is a leading


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domestic player in two metals business segments aluminum and copper. The aluminum

division's product range includes alumina chemicals, primary aluminum ingots, billets, wire

rods, rolled products, extrusions, foils and alloy wheels.

The company has a significant market share in all the segments in which it operates. It

enjoys a domestic market share of 42 per cent in primary aluminum, 63 per cent in rolled

products, 20 per cent in extrusions, 44 per cent in foils and 31 per cent in wheels.

As a step towards expanding the market for value-added products and services, India Bulls

has launched several brands in recent years, which include Aura for alloy wheels,

Freshwrapp for kitchen foil and Ever last for roofing sheets. Our exclusive showroom, The

Aluminum Gallery, seeks to promote India Bulls products to its customers. It is a platform

for the company to showcase quality products to a quality audience in an appropriate

ambience. The exhibits include products like windows, doors, furniture, ladder, roofing

sheets and ceiling and cladding panels.

India Bulls products are well received not only in the domestic market, but also in the

international market. The company's metal is accepted for delivery under the high grade

aluminum contract on the London Metal Exchange (LME). The company exports about 17

per cent of its total sales volume of aluminum.

The company's alumina chemical business is a leader in manufacturing and marketing of

specialty alumina and alumina hydrate products in the country. It has a major market share

in the country. These specialty products find wide usage in diversified industries including

water treatment chemicals, refractorys, ceramics, cryolite, glass, fillers and plastics,
http://www.hindalco.com/products/aluminium.htmhttp://www.hindalco.com/products/copper.htmhttp://www.hindalco.com/products/primaryaluminium.htm#1http://www.hindalco.com/products/primaryaluminium.htm#2http://www.hindalco.com/products/primaryaluminium.htm#3http://www.hindalco.com/products/primaryaluminium.htm#3http://www.hindalco.com/products/rolled_products.htmhttp://www.hindalco.com/products/extrusions.htmhttp://www.hindalco.com/products/foil_packaging.htmhttp://www.hindalco.com/products/alloywheels.htmhttp://www.hindalco.com/products/primaryaluminium.htmhttp://www.hindalco.com/media/features/hindalco_aluminium_gallery.htmhttp://www.hindalco.com/media/features/hindalco_aluminium_gallery.htmhttp://www.hindalco.com/media/features/hindalco_aluminium_gallery.htmhttp://www.hindalco.com/media/features/hindalco_aluminium_gallery.htmhttp://www.hindalco.com/products/primaryaluminium.htmhttp://www.hindalco.com/products/alloywheels.htmhttp://www.hindalco.com/products/foil_packaging.htmhttp://www.hindalco.com/products/extrusions.htmhttp://www.hindalco.com/products/rolled_products.htmhttp://www.hindalco.com/products/primaryaluminium.htm#3http://www.hindalco.com/products/primaryaluminium.htm#3http://www.hindalco.com/products/primaryaluminium.htm#2http://www.hindalco.com/products/primaryaluminium.htm#1http://www.hindalco.com/products/copper.htmhttp://www.hindalco.com/products/aluminium.htm


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conveyor belts and cables, among others. The company also exports these alumina

chemicals to over 30 countries covering North America, Western Europe and the Asian

region.

Birla Copper, India Bulls copper division at Dahej in Gujarat enjoys a leadership position in

India, having built over 40 per cent of the domestic market share within three years of its

commissioning. It has also made successful forays into the export markets of the Middle

East, Southeast Asia, China, Korea and Taiwan.

COMMODITIES TRADING IN INDIA BULLS LTD.

With the Money or trader terminal you can trade in BSE, NSE and that too in both

segments of the market, cash as well as derivatives (F&O). You will have on click access to

all the features and functionalities that you would ever require in your trading including

online access to your DP and you ledger.

Technology to Power youre trading:

It is truly unbelievable how the ordinary telephone and computer can change lives.

The money pore trader terminal, using advanced data compression technology executes

your trades faster than you can blink. Add to this the amazing 128-bit SSL super security,

and you have unparalleled speed coupled with unbeatable security. The same technology

also powers the intra-day/historical charts, live streaming quotes that you can see at a single

click and much more.


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Application Formalities:

India Bulls is having the following formalities the person who wants to become a client of

India Bulls should have to fulfill the followings.

1. Identity proof2. One passport size photograph3. One cheque4. Nominee photograph and signature5. Two witness signature6. Residential proof

Advantages of India Bulls Ltd:

The following are the advantages of India info line

Low brokerage Online terminal Expert unbiased advice Additional margin levied. Immediate order execution. Individual terminal for online trader. One-stop shop for all your investment needs Immediate confirmation, digitally and physically.


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On-Line Trading:

India Bulls is providing on-line trading facility for their clients to do trade on commodities,

derivatives and equities.

What is on-line trading?

Trading of Securities (Buying and Selling of shares and commodities) through internet is

called on-line trading. The objective of on-line trading is:

To facilitate easy transaction processing. Easy surveillance so that less scope of speculation. To make the trading fully automated and simple trading procedures.

India Bulls on-line securities trading are operated through WAN (wide Area Network) which

is one of special feature of India Bulls Ltd.

De mat:

De mat means transformation of physical form of shares into electronic form.

Dematerialization of shares avoids bad physical delivery of shares. In on-line trading

system. The dematerialized shares traded.


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CHAPTER-4

DATA ANALISIS AND INTERPRETATION


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AVERAGE RETURNS

INFOSYS

YEAR DIVIDEND BONUS

OPENING

SHARE

PRICE(P0)

CLOSING

SHARE

PRICE(P1) D+(P1-P0)

D+(P1-

P0)/P0*100

2006-07 45 NIL 2235.85 2981.4 790.55 35.35

2007-08 11.5 2018.65 3142.15 2018.65 906.65 44.91

2008-09 33.25 NIL 1922.95 1439.9 -449.8 -23.39

2009-10 23.5 NIL 1421.35 1324.1 -73.75 -5.18

2010-11 NIL NIL 1375.5 2615.1 1239.6 90.11

TOTAL RETURN 141.8

AVERAGE RETURN = R/N 141.8/5 = 28.36


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HCLTECH

YEAR DIVIDEND BONUS

OPENING

SHARE

PRICE(P0)

CLOSING

SHARE

PRICE(P1) D+(P1-P0)

D+(P1-

P0)/P0*100

2006-07 16 NIL 383.55 654.2 286.65 74.73

2007-08 8 291.4 662.15 291.4 -71.35 -10.77

2008-09 9 NIL 272.5 253.25 -10.25 -3.76

2009-10 7 NIL 246.4 101.75 -137.65 -55.86

2010-11 NIL NIL 100.85 357.8 256.95 254.78

TOTAL RETURN 259.12



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WIPRO

YEAR DIVIDEND BONUS

OPENING

SHARE

PRICE(P0)

CLOSING

SHARE

PRICE(P1) D+(P1-P0)

D+(P1-

P0)/P0*100

2006-07 5 559.7 672.65 559.7 451.75 67.15

2007-08 6 NIL 560 559.4 5.4 0.96

2008-09 6 NIL 518.75 432.1 -80.65 -15.54

2009-10 4 NIL 409 245.4 -159.6 -39.02

2010-11 NIL NIL 251.6 706.8 455.2 180.92

TOTAL RETURN 194.47



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CMC

YEAR DIVIDEND BONUS

OPENING

SHARE

PRICE(P0)

CLOSING

SHARE

PRICE(P1) D+(P1-P0)

D+(P1-

P0)/P0*100

2006-07 5 NIL 623.8 531.4 -87.4 -14

2007-08 8 NIL 575 1211.85 644.85 112.14

2008-09 11 NIL 1163.75 806.3 -346.45 -29.77

2009-10 15 NIL 792.3 319.95 -457.35 -57.72

2010-11 NIL NIL 366.25 1340.3 974.05 265.95

TOTAL RETURN 276.6



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I-FLEX

YEAR DIVIDEND BONUS

OPENING

SHARE

PRICE(P0)

CLOSING

SHARE

PRICE(P1) D+(P1-P0)

D+(P1-

P0)/P0*100

2006-07 5 NIL 594.8 1327 737.2 123.94

2007-08 NIL NIL 1352.3 2081.65 729.35 53.93

2008-09 NIL NIL 2055.05 941.1 -1113.95 -54.2

2009-10 NIL NIL 942.05 741.55 -200.5 -21.28

2010-11 NIL NIL 786 2300.5 1514.5 192.68

TOTAL RETURN 295.07



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AVERAGE RETURNS

INFOSYS(IT) 28.36

HCLTECH 51.82

WIPRO 38.89

CMC 55.32

I-FLEX 59.01


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FIGURE-5

Average Return = (R)/N

(R) = Return of the security for the year T

N = Number of years

Based on the above average return of securities I-FLEX is earning highest return and

INFOSYS (IT) is earning lowest return. Other securities are earning medium range of

returns

0

10

20

30

40

50

60

70

INFO

SYS(IT)

HCLTECH

WIPRO CMC I-F

LEX

Series1


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STANDARD DEVIATIONS

INFOSYS

YEAR RETURN (R ) AVG RET(R) R-R R-R2

2006-07 35.35 141.8 (106.45) 11,331.60

2007-08 44.91 141.8 (96.89) 9,387.67

2008-09 -23.39 141.8 (165.19) 27,287.74

2009-10 -5.18 141.8 (146.98) 21,603.12

2010-11 90.11 141.8 (51.69) 2,671.86

TOTAL 72,281.99

Variance = 1/n-1 (R-R)2

= 1/5-1 (72281.99) = 18070.49

Standard Deviation = Variance = 18070.49 = 134.4


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HCLTECH


2006-07 74.73 259.12 (184.39) 33,999.67

2007-08 -10.77 259.12 (269.89) 72,840.61

2008-09 -3.76 259.12 (262.88) 69,105.89

2009-10 -55.86 259.12 (314.98) 99,212.40

2010-11 254.78 259.12 (4.34) 18.84

TOTAL 275,177.41


= 1/5-1 (275177.41) = 68794.35



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WIPRO


2006-07 67.15 194.47 (127.32) 16,210.38

2007-08 0.96 194.47 (193.51) 37,446.12

2008-09 -15.54 194.47 (210.01) 44,104.20

2009-10 -39.02 194.47 (233.49) 54,517.58

2010-11 180.92 194.47 (13.55) 183.60

TOTAL 152,461.89


= 1/5-1 (152461.89) = 38115.47

Standard Deviation = Variance = 38115.47 = 195.


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CMC


2006-07 -14 276.60 (290.60) 84,448.36

2007-08 112.14 276.60 (164.46) 27,047.09

2008-09 -29.77 276.60 (306.37) 93,862.58

2009-10 -57.72 276.60 (334.32) 111,769.86

2010-11 265.95 276.60 (10.65) 113.42

TOTAL 317,241.31


= 1/5-1 (317241.31) = 79310.32



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I-FLEX

YEAR

RETURN (R

) AVG RET(R) R-R R-R2

2006-07 123.94 295.07 (171.13) 29,285.48

2007-08 53.93 295.07 (241.14) 58,148.50

2008-09 -54.2 295.07 (349.27) 121,989.53

2009-10 -21.28 295.07 (316.35) 100,077.32

2010-11 192.68 295.07 (102.39) 10,483.71

TOTAL 319,984.54


= 1/5-1 (319984.54) = 79996.13



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STANDARD DEVIATIN OF COMPANIES

STANDARD DEVIATION =1/n (R-R)

2

Based on the above calculations Standard Deviation of the I-FLEX is highest and INFOSYS

(IT) is lowest, where other securities are having medium Standard Deviation.

0

50

100

150

200

250

300

INFO

SYS(IT)

HCLTEC

H

WIPRO CM

CI-F

LEX

Series1

INFOSYS(IT) 131.4

HCLTECH 262.28

WIPRO 195.23

CMC 281.62

I-FLEX 282.83


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CORRELATION COFFICIENT BETWEEN THE SECURITIES

Covariance (COV ab) = 1/n-1 (RA-RA) (RB-RB)

Correlation Coefficient = COV ab/a*b

1. INFOSYS (RA) & HCLTECH (RB)

YEAR RA-RA RB-RB (RA-RA)(RB-RB)

2006-07 -106.45 (184.39) 19,628.32

2007-08 -96.89 (269.89) 26,149.64

2008-09 -165.19 (262.88) 43,425.15

2009-10 -146.98 (314.98) 46,295.76

2010-11 -51.69 (4.34) 224.33

TOTAL 135,723.20

Covariance (COV ab) = 1/5-1 (135723.20) =33930.8


a =131.4; b =262.28

= 33930.8/ (131.4) (262.28) =0.9845


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2. INFOSYS (RA)& WIPRO(RB)


2006-07 -106.45 (127.32) 13,553.21

2007-08 -96.89 (193.51) 18,749.18

2008-09 -165.19 (210.01) 34,691.55

2009-10 -146.98 (233.49) 34,318.36

2010-11 -51.69 (13.55) 700.40

TOTAL 102,012.71

Covariance (COV ab) = 1/5-1 (102012.71) = 25503.17


a = 131.4; b =195.23

= 25503.17/ (131.4) (195.23) = 0.99


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3. INFOSYS (RA) & CMC (RB)


2006-07 -106.45 (290.60) 30,934.37

2007-08 -96.89 (164.46) 15,934.53

2008-09 -165.19 (306.37) 50,609.26

2009-10 -146.98 (334.32) 49,138.35

2010-11 -51.69 (10.65) 550.50

TOTAL 147,167.01



a = 131.4; b = 281.62

= 36791.75/ (131.4) (281.62) = 0.99


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4. INFOSYS (RA) &I-FLEX (RB)


2006-07 -106.45 (171.13) 18,216.79

2007-08 -96.89 (241.14) 23,364.05

2008-09 -165.19 (349.27) 57,695.91

2009-10 -146.98 (316.35) 46,497.12

2010-11 -51.69 (102.39) 5,292.54

TOTAL 151,066.42



a = 131.4; b = 283.8

= 37766.6/ (131.4) (283.8) =1.01


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5. HCLTECH (RA) & WIPRO (RB)


2006-07 (184.39) (127.32) 23,476.53

2007-08 (269.89) (193.51) 52,226.41

2008-09 (262.88) (210.01) 55,207.43

2009-10 (314.98) (233.49) 73,544.68

2010-11 (4.34) (13.55) 58.81

TOTAL 204,513.86



a =262.28; b = 195.23

= 5112.96/ (262.28) (195.23) = 0.099


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7. HCLTECH (RA) & CMC (RB)


2006-07 (184.39) (290.60) 53,583.73

2007-08 (269.89) (164.46) 44,386.11

2008-09 (262.88) (306.37) 80,538.55

2009-10 (314.98) (334.32) 105,304.11

2010-11 (4.34) (10.65) 46.22

TOTAL 283,858.72



a = 262.28; b = 281.62

= 70964.68/ (262.28) (281.62) = 0.960


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8. HCLTECH (RA) & I-FLEX (RB)


2006-07 (184.39) (171.13) 31,554.66

2007-08 (269.89) (241.14) 65,081.27

2008-09 (262.88) (349.27) 91,816.10

2009-10 (314.98) (316.35) 99,643.92

2010-11 (4.34) (102.39) 444.37

TOTAL 288,540.33



a = 262.28; b = 283.83

= 72135.08/ (262.28) (283.83) = 0.9


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8. WIPRO (RA) & CMC (RB)


2006-07 (127.32) (290.60) 36,999.19

2007-08 (193.51) (164.46) 31,824.65

2008-09 (210.01) (306.37) 64,340.76

2009-10 (233.49) (334.32) 78,060.38

2010-11 (13.55) (10.65) 144.31

TOTAL 211,369.29



a = 195.23; b = 281.62

= 52842.32/ (195.23) (281.62) = 0.96


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9. WIPRO (RA) & I-FLEX (RB)


2006-07 (127.32) (171.13) 21,788.27

2007-08 (193.51) (241.14) 46,663.00

2008-09 (210.01) (349.27) 73,350.19

2009-10 (233.49) (316.35) 73,864.56

2010-11 (13.55) (102.39) 1,387.38

TOTAL 217,053.41



a = 195.23; b = 283.83

= 54263.35/ (195.23) (283.83) =0.97


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10.CMC (RA) & I-FLEX (RB)


2006-07 (290.60) (171.13) 49,730.38

2007-08 (164.46) (241.14) 39,657.88

2008-09 (306.37) (349.27) 107,005.85

2009-10 (334.32) (316.35) 105,762.13

2010-11 (10.65) (102.39) 1,090.45

TOTAL 303,246.70



a = 281.62; b = 283.83

= 75811.67/ (281.62) (283.83) =0.94


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CORRELATION COFFICIENT BETWEEN THE SECURITIES

Covariance (COV ab) = 1/n-1 (RA-RA)(RB-RB)


SECURITY INFOSYS HCLTECH WIPRO CMC I-FLEX

INFOSYS 1 0.98 0.99 0.99 1.01

HCLTECH 1 0.09 0.96 0.96

WIPRO 1 0.96 0.97

CMC 1 0.94

I-FLEX 1


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FORMULA:

CORRELATION COEFFICIENT (ab) = cov (ab)/ab

WhereCOV (ab) = 1/n-1(RA-RA) (RB-RB)

CALCULATION OF PORTFOLIO WEIGHTS: :(FORMULA):

Wa = b [b-(nab*a)]

a2

+ b2

- 2nab*a*b

Wb = 1 Wa

1. INFOSYS (a) &HCLTECH (b):a = 131.4;b = 262.28;nab = 0.98

Wa = 262.28 [262.28-(0.98*131.4)]/2 + 2 2(0.98)**

Wa =1.90; Wb = 1- 1.90 = -0.9;


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5. HCLTECH (a) &WIPRO (b):a = 262.28;b = 195.23; nab =0.09

Wa = 195.23[195.23-(0.09*262.28)]/2+

22(0.09)**

Wa =0.93; Wb = 1- 0.93 = 0.07;

6.HCLTECH (a) &CMC (b):a = 262.28;b = 281.62; nab =0.96

Wa = 281.62 [281.62-(0.96*262.28)]/2 + 22(0.96)**

Wa =1.33; Wb = 1- 1.33 = -0.33;

7. HCLTECH (a) &I-FLEX (b): a = 262.28;b = 283.83; nab = 0.96

Wa = 283.83 [283.83-(0.96*262.28)]/2 + 2 2(0.96)**

Wa =0.26; Wb = 1- 0.26 = 0.74;

8.WIPRO (a) &CMC (b): a = 195.23;b = 281.62; nab = 0.96

Wa = 281.62[281.62-(0.96*281.62)]/2

+ 2 2(0.96)**


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Wa =0.26; Wb = 1- 0.26 = 0.74;

9.WIPRO (a) &I-FLEX (b):a = 195.23;b = 283.83; nab = 0.97

Wa = 283.83[283.83-(0.97*195.23)]/2

+ 2 2(0.97)**

Wa =2.39; Wb = 1- 2.39 = -1.39;

10. CMC (a) &I-FLEX (b):a = 281.62;b = 283.83 nab = 0.94

Wa = 283.83 [283.83-(0.94*281.62)]/2 + 2 2(0.94)**

Wa = 0.03; Wb = 1- 0.03 = 0.97;


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S.NO PORTFOLIO (A/B) CORRELATION WEIGHT A WEIGHT B

1 INFOSYS & HCL 0.98 1.90 -0.9

2 INFOSYS & WIPRO 0.99 2.77 -1.77

3 INFOSYS & CMC 0.99 1.83 -0.83

4 INFOSYS & I-FLEX 1.01 1.93 -0.93

5 HCLTECH & WIPRO 0.09 0.93 0.07

6 HCLTECH & CMC 0.96 1.33 -0.33

7 HCLTECH & I-FLEX 0.96 0.26 0.74

8 WIPRO & CMC 0.96 0.26 0.74

9 WIPRO & I-FLEX 0.97 2.39 -1.39

10 CMC & I-FLEX 0.94 0.03 0.97


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PORTFOLIO RISK

CALCULATION OF PORTFOLIO RISK:

RP = a2*Wa

2+ b

2*Wb

2+ 2nab*a*b*Wa*Wb

CALCULATION OF PORTFOLIO RISK OF ALL COMPANIES:

1. INFOSYS (a) & HCLTECH (b): -0.9;

Nab = 0.98;

RP = (131.4)2(1.90)

2+ (262.28

2(-0.9)

2+2(0.98)**(1.90)*(-0.9)

2313.54 = 48.09


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2. INFOSYS (a) & WIPRO (b):a = 131.4; b = 195.23; Wa= 2.77; Wb= -1.77;

Nab = 0.99;

RP = (131.4)2(2.77)

2+ (195.23

2(-1.77)

2+2(0.99)**(2.77)*(-1.77)

2854.82 = 53.43

3. INFOSYS (a) & CMC (b):131.4; = 281.62; Wa= 1.83; Wb= -0.83;

Nab = 0.99;

RP = (131.4)2(1.83)2+ (281.622 (-0.83)2+2(0.99)**(1.83)*(-0.83)

1165.805 = 34.14


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4. INFOSYS (a) & I-FLEX (b): -0.93;

Nab = 1.01;

RP = (131.4)2(1.93)

2+ (283.83

2(-0.93)

2+2(1.01)**(1.93)*(-0.93)

-1231.49 = 35.09

5. HCLTECH (a) & WIPRO (b): a = 262.28; b = 195.23; Wa= 0.93; Wb= 0.07;

Nab = 0.09;

RP = (262.28)2(0.93)2+ (195.232 (0.07)2+2(0.09)**(0.93)*(0.07)

60283.93 = 245.53


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6.HCLTECH (a) & CMC (b):a = 262.28; b = 281.62; Wa= 1.33; Wb=-0.33 ;

Nab = 0.96;

RP = (262.28)2(1.33)

2+ (281.62

2(-0.33)

2+2(0.96)**(1.33)*(-0.33)

68077.16 = 260.91

7.HCLTECH (a) & I-FLEX (b):a = 262.28; b = 283.83; Wa= 0.26; Wb= 0.74;

Nab = 0.96;

RP = (262.28)2(0.26)2+ (283.832 (0.74)2+2(0.96) **(0.26)*(0.74)

= 76264.42 = 276.16

8.WIPRO (a) & CMC (b):a = 195.23; b = 281.62; Wa= 0.26; Wb= 0.74;

Nab = 0.96

RP = (195.23)2(0.26)2+ (281.622 (0.74)2+2(0.96)**(0.26)*(0.74)

= 6631690 =257.2'


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9. WIPRO (a) & I-FLEX (b):a = 195.23; b =283.83; Wa= 2.39; Wb= -1.39;

Nab = 0.97;

RP = (195.23)2(2.39)2+ (283.832 (-1.39)2+2(0.97)**(2.39)*(-1.39)

94802.09 = 441.36

10.CMC (a) & I-FLEX (b): a = 281.62; b = 283.83; Wa= 0.03; Wb= 0.97;

Nab = 0.94;

RP = (281.62)2(0.03)2+ (283.832 (0.97)2+2(0.94)**(0.03)*(0.97)

80242.712 = 283.27


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PORTFOLIO RISK

S.NO COMBINATION PORTFOLIO RISK

1 INFOSYS & HCL 48.09

2 INFOSYS & WIPRO 53.43

3 INFOSYS & CMC 34.13

4 INFOSYS & I-FLEX 35.09

5 HCLTECH & WIPRO 245.53

6 HCLTECH & CMC 260.91

7 HCLTECH & I-FLEX 276.16

8 WIPRO & CMC 257.52

9 WIPRO & I-FLEX 441.36

10 CMC & I-FLEX 283.27


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CALCULATION OF PORTFOLIO RISK:

RP =

Where

= Std deviation of security a

= Std deviation of security b

Wa = weight of security a

Wb = weight of security b

nab = Correlation Coefficient between security a & b

= Portfolio risk


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PORT FOLIO RETURN

FORMULA :

Rp = (Ra*Wa)+(Rb*Wb);

Where

Rp = Portfolio return

Ra = Average return on security a;

Rb = Average return on security b

Wa = Weight of security a;

Wb = Weight of security b;


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CALCULATION OF PORTFOLIO RETURNS

S.NO

COMBINATION(A

& B)

AVERAGE

RETURN

ON

SECURITY

(A)

WEIGHT

OF

SECURITY

(A)

AVERAGE

RETURN

ON

SECURITY

(B)

WEIGHT

OF

SECURITY

(B)

PORTFOLIO

RETURN

Rp

(Ra*Wa)+(Rb*Wb)

1 INFOSYS & HCL 28.36 1.9 51.82 -0.9 7.246

2

INFOSYS &

WIPRO 28.36 2.77 38.89 -1.77 9.7219

3 INFOSYS & CMC 28.36 1.83 55.32 -0.83 5.9832

4 INFOSYS & I-FLEX 28.36 1.93 59.01 -0.93 -0.1445

5

HCLTECH &

WIPRO 51.82 0.93 38.89 0.07 50.9149

6 HCLTECH & CMC 51.82 1.33 55.32 -0.33 50.665

7 HCLTECH & I-FLEX 51.82 0.26 59.01 0.74 57.1406

8 WIPRO & CMC 38.89 0.26 55.32 0.74 51.0482

9 WIPRO & I-FLEX 38.89 2.39 59.01 -1.39 10.9232

10 CMC & I-FLEX 55.32 0.03 59.01 0.97 58.8993


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PORTFOLIO RISK AND RETURN

S.NO COMBINATION(A & B)

PORTFOLIO

RETURN

PORTFOLIO

RISK

1 INFOSYS & HCL 7.246 48.09

2 INFOSYS & WIPRO 9.72 53.43

3 INFOSYS & CMC 5.98 34.13

4 INFOSYS & I-FLEX -0.14 35.09

5 HCLTECH & WIPRO 50.9 245.53

6 HCLTECH & CMC 50.66 260.91

7 HCLTECH & I-FLEX 57.14 276.16

8 WIPRO & CMC 51.04 257.52

9 WIPRO & I-FLEX 10.92 441.36

10 CMC & I-FLEX 58.89 283.27


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PORTFOLIO RISK AND RETURN

FIGURE-7

-50

0

50

100

150

200

250

300

350

400

450

500

INFOSYS

&

HCL

INFOSYS

&

INFOSYS

&

CMC

INFOSYS

&

I-FLEX

HCLTECH

&

HCLTECH

&

CMC

HCLTECH

&

I-FLEX

WIPRO

&

CMC

WIPRO

&

I-FLEX

CMC

&

I-FLEX

1 2 3 4 5 6 7 8 9 10

PORTFOLIO RETURN

PORTFOLIO RISK


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PORTFOLIO SELECTION

Portfolio analysis provided the input for next phase in portfolio management, which is

portfolio selection. The proper goal of portfolio construction is to generate a portfolio that

provided the highest returns at a given level of risk. These inputs from portfolio analysis can

be used to identify the set of efficient portfolios. From this the optimal portfolio in a

disciplined and objective way.

So, out of the various combinations (related to 5 companies), the optimal portfolio is

INFOSYS & CMC, as this portfolio has minimum risk of 34.13% with maximum return of

5.98%. Hence, we can say that it is better to invest in these portfolios.

PORTFOLIO REVISION

Economy and financial markets are dynamic changes take place almost daily. As time passes

securities which were once attractive may lease to be so. New securities with promises of

high return and low risk may emerge. The investor now has to revise his portfolio in the light

of the developments in the market. This leads to purchase of some new securities and sale

of some of the existing securities and their proportion in the portfolio changes as a result of

the revision. The revision has to be scientifically and objectively so as to ensure the

optimally of the revised portfolio, its important as portfolio analysis and selection


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PORTFOLIO EVALUATION

The objective of constructing a portfolio and revising it periodically is to earn maximum

returns with minimum risk. Portfolio evaluation is the process, which is concerned with

assessing the performance of the portfolio over a selected period of time in terms of return

and risk. This involves quantitative measurement of actual return realized. Alternative

measures of performance evaluation have been developed by investor and portfolio

managers for their use.

It provides a mechanism for identifying weaknesses in the investment process and

improving them. The portfolio management process is an ongoing process to portfolio

construction, continues with portfolio revision and evaluation. The evaluation provided the

necessary feedback for better designing of portfolio the next time around. Superior

performance is achieved through continual refinement of portfolio management skills


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CONCLUSIONS & SUGGESTIONS

Before investing in shares you should look at the type of shares, you want to buy and the

way in Want to deal on the stock market.

Their main routes for investing in shares:

Invest your capital in a single company. Invest your capital in number of different companies, a portfolio of shares. Invest indirectly and spread your risk through collective investments such as

investment trusts and unit trust.


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INVEST IN SHARES:

Public companies issue shares, which allow investors to buy a part of a particular company

Share ownership entitles you to part of the company Profits of dividends are paid. Shares

may be classified in a range from conservative to speculative. Blue chip is often used to

describe the highest quality and shares, as they are shares in companies with a proven track

record, producing profits in good times and bad. They usually set the level of the market. All

shares are affected by share market fluctuation. Individual share process also vary

Based on supply and demand from sellers and buyers. Information about shares listed on

the stock exchange is printed largely daily in news papers.

You can buy and sell shares listed on the stock exchange through a stockbroker.

When you buy a parcel of shares, you receive a CHESS statement of holdings form the

Company, showing the number of shares you own and the date you bought them. As a

share holder you have to say in the companys future through voting rights, you will be

Keep informed about the company through its annual reports and other correspondence.


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THINGS TO CONSIDER:

Share prices fall as well as rise. Large losses may occur, particularly if shares are soldwhen market has dropped.

If you are happy with the gains made with your share and are concerned about theirFuture value, you could sell them and realize your profit. If you retain them with a

view to profit further and the market value drops, it is important to remember this

loss is only on paper unless you sell.

Incomes from dividends may vary, when profits are low, dividends may be low or

even Nil.

Unless you plan to actively trade your shares, you should consider them a long terminvestment

You need to keep careful records, cecause capital gains tax collections can becomecomplex, especially in a dividend reinvestment paid.


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THINGS TO REMEMBER:

Remember, shares are not short term investment; u

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