1. Security Analysis andPortfolio ManagementPRESENTED BY:Aditi GoelAnand JhaAndrew JohnArushi BansalSachin ChopraShashank Kapoor

2. IntroductionPortfolio management refers to the professional management ofsecurities and other assets. 3. IndustriesEngineering FMCGPharmaceutical Banking/ FinanceConstruction CementTyre CoalTours & Travel Fitness-HealthLamination Non Banking financeSeed MiningFootwear Textile 4. Portfolio ManagementDay 1: Instructions:i) Investment should not exceed Rs. 1 crore.ii) Investment should only be in stocks.iii) Min securities in the portfolio should be 20 & Max should be 30.iv) We cant invest more than 10% investment in single stock.v) Stocks should be taken from BSE Sensex only.Criteria followed to select the stocks: Industry analysis Sector analysis Market share Reputation of the company. Past performance of the stock. 5. Snapshots 6. Snapshots Contd 7. Snapshots Contd 8. Day 2: Instructions Investment of Rs. 20 Lac as cash. Investment of Rs. 40 Lac in Fixed income securities (Min of 5securities with not more than 25% in a particular security). Invest Rs. 10 Lac in Gold & Rs. 5 Lac in Silver. Remove the five least performers from your portfolio and add anotherfive stocks from the list of stocks emailed by the Professor. 9. Ahluwalia Contracts Ltd. Arvind Remedies Ltd. Birla Corporation Ltd. Century textiles Ltd. Coal India Ltd.Stocksremoved Bronze Infratech Ltd. Gail India Ltd. HDFC Bank Ltd. IDFC NMDCStocksadded 10. Snapshots 11. Snapshots Contd 12. Snapshots Contd 13. Fixed Income Snapshot 14. Gold, Silver & Cash InvestmentSnapshot 15. Day 3: InstructionsReduce the stocks to 15 on the basis of the returns (i.e. average returns).Stock Average Return Standard Deviation VarianceMahindra & Mahindra Financial Services Ltd. 0.10% 1.444% 0.021%HDFC Bank Ltd. -0.09% 1.698% 0.028%Gail (India) Ltd. 0.13% 1.798% 0.032%UltraTech Cement Ltd. -0.15% 1.839% 0.034%Kotak Mahindra Bank Ltd. 0.16% 1.907% 0.036%NMDC Ltd. -0.19% 1.951% 0.038%Oil And Natural Gas Corporation Ltd. 0.17% 2.238% 0.050%Aurobindo Pharma Ltd. 0.57% 2.564% 0.066%Apollo Tyres Ltd. 0.41% 2.605% 0.068%Talwalkars Better Value Fitness Ltd. -0.15% 2.667% 0.070%Sesa Sterlite Ltd. -0.25% 2.802% 0.079%Voltas Ltd. -0.34% 2.910% 0.085%Suven Life Sciences Ltd. -0.46% 3.163% 0.100%Power Finance Corporation Ltd. 0.39% 3.192% 0.100%Orchid Chemicals & Pharma Ltd. -0.11% 3.296% 0.109%Bank Of India 0.23% 3.478% 0.121%Liberty Shoes Ltd. -0.49% 3.498% 0.122%Nath Bio-Genes (India) Ltd. 0.90% 3.713% 0.138%Max Alert Systems Ltd. -0.19% 4.157% 0.172%Bronze Infra Tech Ltd. 0.71% 4.313% 0.186% 16. Justification1. Sesa Sterlite Ltd. -0.25% 2.802% 0.079%We sold this stock, since the average return is negative and its higher than others.2. Voltas Ltd. -0.34% 2.910% 0.085%This stock is also sold, as the average return is negative and also not performing well3. Suven Life Sciences Ltd. -0.46% 3.163% 0.100%According to 1 year data, this stock showed highly negative average return as comparedto others .4. Orchid Chemicals & Pharma Ltd. -0.11% 3.296% 0.109%Since there are other stocks which have higher negative average return, but according to3 days performance this stock is continuously in loss.5. Liberty Shoes Ltd. -0.49% 3.498% 0.122%This stock had the highest negative average return.6. Max Alert Systems Ltd. -0.19% 4.157% 0.172%This stock sold due to higher negative average return. 17. Snapshots 18. Snapshots Contd 19. Snapshots Contd 20. Day 4: Return AnalysisHigher the SD, higher the ReturnStock Average Return StandardDeviationMahindra & Mahindra Financial Services Ltd. 0.10% 1.444%HDFC Bank Ltd. -0.09% 1.698%Gail India Ltd. 0.13% 1.798%Ultra Tech Cement Ltd. -0.15% 1.839%Kotak Mahindra Bank Ltd. 0.16% 1.907%NMDC Ltd. -0.19% 1.951%Oil and natural gas Corporation Ltd. 0.17% 2.238%Aurobindo Pharma Ltd. 0.57% 2.564%Apollo tyres Ltd. 0.41% 2.605%Talwalkars Better value Fitness Ltd. -0.15% 2.667%Power Finance Corporation Ltd. 0.39% 3.192%Bank of India 0.23% 3.478%Nath Bio Genes Ltd. 0.90% 3.713%Bronze Infra tech Ltd. 0.71% 4.313% 21. Fundamental Analysis Fundamental analysis is about using real data to evaluate a security's value. Fundamental analysts attempt to study everything that can affect thesecurity's value, including macroeconomic factors (like the overall economyand industry conditions) and company-specific factors (like financialcondition and management). The end goal of performing fundamental analysis is to produce a value thatan investor can compare with the security's current price, with the aim offiguring out what sort of position to take with that security (under-priced =buy, overpriced = sell or short). 22. Fundamental Analysis Includes Economic analysis Industry analysis Company analysis 23. Macroeconomic Analysis FIIsAurobindo Pharma: 24. FDIIn cement industry (Ultra tech cement)Industry attracted foreign direct investment (FDI) worth Rs.3,370.32 crore (US$ 2.24 billion) between April 2000 andFebruary 2014. 25. Falling International prices of related products:APOLLO TYRES Fall in prices of rubber in the market has lead to the benefit of the tyremanufacturing companies. The performance of the tyre industry is directly linked with theperformance of automobile industry and with the pick up in the autodemand they will have advantage of both lower raw material priceand higher sales volume growth. Stock prices of tyre companies have added huge value to theirrespective shareholders. 26. Industry AnalysisCement Industry The production has increased at CAGR of 9.7% to reach 272 million tonnes(MT) during FY 0613. The production capacity is expected to grow to 550MT by FY 20. The demand is set to increase at a CAGR of more than 8% during 201314to 201516, according to the latest RNCOS report titled, Indian CementIndustry Outlook 2016.UltraTech Cement, an Aditya Birla Group Company, has acquired the 4.8 million tonnesper annum (MTPA) Gujarat unit of Jaypee Cement Corp for Rs 3,800 crore (US$ 634.81million). 27. Pharmaceutical industry Pharma markets has grown at an estimated (CAGR) of 13% during the period FY20092013. The Indian pharmaceutical market is poised to grow to US$ 55 billionby 2020. Pharmaceutical sales in India are expected to grow by 14.4% to US$ 27 billion in2016 from US$ 22.6 billion in 2012. With the support of Pharmexcil and the government in the form of Brand IndiaPharma project iPHEX, the sector would continue to grow and meet the healthcarerequirements of the developing world. 28. Financial services industry The size of banking assets in India reached US$ 1.8 trillion in FY 13 and isprojected to touch US$ 28.5 trillion by FY 25. During FY 14, foreign institutional investors (FIIs) invested a net amount of aboutRs 80,000 crore (US$ 13.31 billion) in India's equity market. The country is expected to become the fifth largest banking sector in the world by2020.BankingFinance 29. Oil & Natural GasDuring FY 201314, the total consumption of petroleum products in India was 158.2million tonnes (MT). The consumption stood at 14.2 MT in March 2014, according todata released by the Petroleum Planning and Analysis Cell, Ministry of Petroleum andNatural Gas. GAIL (India) Ltd has entered into an agreement with Japan-based Chubu ElectricPower Co to seek collaboration in the area of joint LNG procurement. The twocompanies will look to work together on shipping optimization as well. Vietnam has offered two exploration blocks to ONGC Videsh (OVL), in addition tothe five it has already offered the company. Oil and Natural Gas Corporation(ONGC) has selected one of the five blocks that were proposed in November, 2013and will evaluate the two new blocks 30. Company AnalysisFactors considered Debt equity ratio Earning per share Dividend per share Liquidity ratios (current ratio and quick ratio) P/E ratio 31. CompanyAnalysis 32. Market CapitalMarket capitalization is the value of the stock that you arrive at by multiplyingthe stock price by the company's outstanding number of equity shares.Market Capitalisation = Current Stock Price x Number of Shares outstandingLarge cap stocksMarket capitalisation for stocks in the BSE-100 Index, for large cap, rangesfrom Rs 200 bn to Rs 3,500 bn.Mid cap stocksMid caps lie between large cap stocks and small cap stocks. Mid cap stocks arethose that generally have a market capitalisation within the range of Rs 50 bnand Rs 200 bn.Small cap stocksLying at the lowest end of market capitalisation 33. Market Capital 34. Technical AnalysisTechnical analysis is the examination of past price movements to theforecast future price movements. Technical analysts are sometimesreferred to as chartists because they rely almost exclusively on charts fortheir analysis. 35. Assumptions The futures market discounts everything. Prices move in trends . History repeats itself. 36. Statistical Tools used Simple Moving Average Relative Strength Index Volume 37. Simple Moving Average The market indices do not rise or fall in straight line.The upward and downward are interrupted by countermoves. The underlying trend can be studied bysmoothening of the data. To smooth the data movingaverage technique is used. 38. Stock price and stock prices movingaverage Buy and sell signals are provided by the moving averages.Moving averages are used along with the price of the scrip.The stock price may intersect the moving average at aparticular point. Downward penetration of the rising averageindicates the possibility of a further fall. Upward penetrationof a falling average would indicate the possibility of thefurther rise and gives the buy signal. 39. Relative Strength Index RSI is an oscillator used to identify the inherent technicalstrength and weakness of a particular scrip or market. 40. Apollo Tyres 41. Aurobindo pharmacy 42. Bank of India 43. Bronze Infra Tech 44. GAIL 45. HDFC 46. IDFC 47. Kotak Mahindra 48. Mahindra & Mahindra FinancialServices 49. Oil & Natural Gas 50. Talwalkars Better Value Fitness 51. Ultratech Cements 52. Return on portfolio 53. Stock Weight ReturnApollo tyres Ltd. 3.33% 0.000177Aurobindo Pharma Ltd 9.95% 0.001627Bank of India 10% 0.000677Bronze Infra-tech Ltd. 1.62% 0.003812Gail India Ltd 12% 0.001384HDFC Bank Ltd 9.2% 0.001247IDFC Ltd 1% 0.000986Kotak Mahindra Bank Ltd 4.7% 0.004798Mahindra & Mahindra3% 0.000768Financial Services Ltd.Oil & Natural GasCorporation Ltd. 7.9% 0.000402Talwalkars Better value6.3% 0.000356Fitness Ltd.Ultra Tech Cement Ltd. 7.3% 0.0006790.0094 54. Correlation Matrix 55. Markowitz Portfolio TheoryThis model includes not only expected return, but also includes the levelof risk for a particular return. Markowitz assumed the following about anindividual's investment behavior: Given the same level of expected return, an investor will choose theinvestment with the lowest amount of risk. Investors estimate risk on basis of variability of expected returns. For each investment, the investor can quantify the investment'sexpected return and the probability of those returns over a specifiedtime horizon. Investors seek to maximize their utility. Investors prefer higher returns to lower risk and lower risk for thesame level of return. 56. ConclusionAccording to the above table, all the companies have positive averagecorrelation i.e. efficient frontier except Bank of India which is negativelycorrelated i.e. inefficient, so according to Markowitz Portfolio Theory aninvestor mostly choose the investment with the lowest amount of riskand risk associated with Bank of India is high w.r.t. other stock in ourportfolio, so investor may show low interest in investing in BOI stocks ascompared to the other Stocks. 57. Last day Performance of thePortfolio Amount Invested on Stock Rs. 99.97 Lac, Profit on Lastdate Rs. 6,964 and Notional gain till last date Rs. 23.30 Lac. Amount Invested on Fixed Income Rs. 40 Lac, Interestearned till Last date Rs. 19,433. Amount Invested on Gold & Silver Rs.15 Lac, NotionalLoss on it Rs. 30.26. 58. Snapshots 59. Snapshots Contd 60. Sensitivity (beta) Sensitivity analysis is used to determine how much the valuation of anindividual trade, and ultimately your portfolio, changes by varying anindependent input. The sensitivity analysis could be used to evaluate the impact that eachindividual (or group of) asset has on the portfolio variance. We have to construct our portfolio with minimum variance. 61. Sensitivity Matrix 62. Recommendations for managingPortfolio 63. Recommendations for managingPortfolio Contd 64. Recommendations for managingPortfolio Contd