Security Analysis & Portfolio Mangt(1)

8/15/2019 Security Analysis & Portfolio Mangt(1)

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1.INTRODUCTION

INVESTMENT:Investment is a financial activity that involves risk. It is the commitment of funds for

a return expected to be realized in the future. Investment can be made in financial assets or

physical assets. In either case there is possibility that the actual return may vary from the

expected return that possibility is risk involved in it. Investment is generally distinguished

from speculation in terms of 3 factors namely risk, capital gain and time period. Gambling is

the extreme form of speculation. Investors may be individual or institutions there is large no.

of investment avenues for savers in India. Corporate securities, deposits in the banks and

on!"anking companies, mutual funds schemes, provident fund schemes, life insurance

policies, government securities are some of the important avenues.

INVESTMENT AVENUES:

#here are a large number of investment avenues for savers in India. $ome of them are

marketable and li%uid, &hile others are non!marketable. $ome of them are highly risky &hile

some others are almost risk less.Investment avenues can be broadly categorized under the follo&ing head.

1. Corporate securities

'. (%uity shares.

3. )reference shares.

*. +ebentures"onds.

-. +erivatives.

. /theres.

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CORPORATE SECURITIES

0oint stock companies in the private sector issue corporate securities. #hese include

e%uity shares, preference shares, and debentures. (%uity shares have variable dividend and

hence belong to the high risk!high return category preference shares and debentures have

fixed returns &ith lo&er risk. #he classification of corporate securities that can be chosen as

investment avenues can be depicted as sho&n belo&2

Characteristics of investment are eturn, isk, $afety and li%uidity. isk and return of

an investment related. ormally, the higher the risk, the higher is the return. 4ence an

investor generally prefers li%uidity for his investment, safety of his funds, good return &ith

minimum risk and maximum return.

RETURN:

#he term eturn from an investment refers to the benefits from that investment. In the

field of finance in general and security analysis in particular, the term return is almost

invariably associated &ith a percentage 5say, return on investment of 1'67 and not mere a

amount 5like, profit of s. 1-8.7. In security analysis &e are primarily concerned &ith return

forms a particular investment say, a share or a debenture or other financial instrument.

• Single period Retrns2It refers to a situation &here an investor is concerned &ith return from a single period

5$ay, one day, one &eek, one month or one year7.

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Mlti period Retrns:It refers to situation &here more than single period returns are under consideration.

Investor is concern &ith computing the return per period, over a longer period.

• E!-Post Retrns2

#he measurement of return from the historical data can be referred to (x! )ost

returns. #his includes the both current income and capital gains 5or losses7 brought

about by gains price of the security. #he income and capital gains are then expressed

as a percentage of the initial investment.

• E!-Ante Retrns2

#he ma9ority of investors tend to emphasize the return they expect from a security

&hile making investment decision and the expected return of a security. #his enables

the investors to look into future prospects from an investment and the measurement of

returns from expectation of benefits is kno&n as ex!ante returns.

RIS" AND E#PECTED RETURN2

#here is a positive relationship bet&een 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. /ne 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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(7 M(r*et Ris*:

/ne &ould notice that &hen the stock market surges up, most stocks post higher

price. /n the other hand, &hen the market falls sharply, most common stocks &ill

drop. It is not uncommon to find stock prices falling from time to time &hile a

company=s earnings are rising and vice!versa. #he price of stock may fluctuate &idely

&ithin a short time even though earnings remain unchanged or relatively stable.

+, Interest R(te Ris*:

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

interest rate paid on ne& securities currently being issued.

), Pr)(sing Poer Ris*:

#he typical investor seeks an investment &hich &ill give him current income and or

capital appreciation in addition to his original investment.

'. Un-s&ste'(ti) Ris* 2

:n!systematic risk is uni%ue and peculiar to a firm or an industry. #he nature and mode of

raising finance and paying back the loans, involve the risk element of .financial leverage ofthe companies that is debt!e%uity portion of the companies differs from each other. >ll these

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

return.

• vailability of ra& materials

•

Changes in the consumer preference

• ?abour problems

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

industry and company to company. #hey have to be analyzed separately for each industry and

firm. :n!systematic risk can be broadly classified into2

"usiness isk

;inancial isk

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I. /USINESS RIS":

"usiness risk is that portion of the unsystematic risk caused by the operating

environment of the business. "usiness risk arises from the inability of a firm to maintain its

competitive edge and gro&th or stability of the earnings. #he volatibility in stock prices due

to factors intrinsic to the company itself is kno&n as "usiness risk. "usiness risk is concerned

&ith difference the bet&een revenue and earnings before interest and tax. "usiness risk can be

divided into.

i. Intern(l /siness Ris*2

Internal business risk is associated &ith the operational efficiency of the firm.

#he operational efficiency differs from company to company. #he efficiency ofoperation is reflected on the company=s achievement of its pre!set goals and the

fullfilment of the promises to its investors.

ii. E!tern(l /siness Ris*:

(xternal business risk is the result of operating conditions imposed on the firm

by circumstances beyond its control. #he external environments in &hich it operates

exert some pressure on the firm. #he external factors are social and regulatory factors,

monetary and fiscal policies of the government, business cycle and the general

economic environment &ithin &hich a firm or an industry operates.

II. %INANCIA0 RIS":

It refers to the variability of the income to the e%uity capital due to the debt

capital. ;inancial risk in a company is associated &ith the capital structure of the

company. Capital structure of the company consists of e%uity funds and borro&ed

funds.

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O/ECTIVES O% THE STUD$:

• #o understand the process of security analysis and portfolio management.

• #o construct t&o security portfolios using


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RESEARCH METHODO0O2$

RESEARCH:

#he process used to collect information and data for the purpose

of making business decisions. #he methodology may

include publication research, intervie&s, surveys and other research techni%ues, and could

include both present and historical information.

SOURCES O% DATA CO00ECTION2

#he methodology adopted in this study &as nnual eports

• Information from Internet

• )ublications

• Information provided by Earvy $tock "roking ?td.

PERIOD O% STUD$2

;or different companies, financial data has been collected from the year '818!'81*.

SAMP0E DESI2N2

;ive stocks from ifty as on 311''81* has been selected for security analysis, #he

stocks are2

o (?I>C(o CI)?>

o ICICI ">E

o #>#> $#((?

o :#I

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SATISTICA0 TOO0S AND TECHNI3UES:

#he $tatistical tools like2

>F(>G(

>F(>G( (#:

$#>+>+ +(FI>#I/

C/(?>#I/

C/F>I>C(

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CHAPTER 4 5

REVIE6 O%

0ITERATURE

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RESEARCH (e.g.SecurityAnalysi)

PORTFOLIOMANAGERS

OPERATIONS (e.g. buying and selling of Securities)

CLIENTS

5.REVIE6 O% 0ITERATURE

PORT%O0IO MANA2EMENT 7 ITS PHASES

PORT%O0IO MANA2EMENT:

INTRODUCTION

ll such assets of financial

nature such as gold, silver, real!estate, building, insurance policies, post office certificate.

$C or $$ &ould constitute his portfolio the &ise investor not only plans his portfolio as

per risk return profile or preferences but manages his portfolio efficiently so as to secure the

highest return for the lo&est risk possible at that level of investment. #his is in short the

portfolio management. #he basic principle is that the higher the risk, the higher is the return

investor should have clear perception of elements of risk return &hen he makes

investments. isk return analysis is essential for the investment portfolio management. >n

investor considering investment is securities is faced &ith the problem of choosing from

among a large no. of securities. 4is choice depends upon the risk return characteristics of individual securities.

4e &ould attempt to choose the most desirable securities like to allocate his funds over

group of securities. >s the economic and financial environment keep changing the risk return

characteristics of individual securities as &ell as portfolios also change. >n investor invests

his funds in a portfolio expecting to get a good return consistent &ith the risk that

he has to bear. )ortfolio management comprises all the processes involved in the creation

maintenance of an investment portfolio. It deals specifically &ith $ecurity >nalysis, )ortfolio

>nalysis, impotent research begun to be practiced by mutual funds, investment consultants

and big brokers.

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#here &as a time &hen portfolio management &as an exotic term#he scenario has

changed drastically. It is no& a familiar term and is &idely practiced in India. #he theories

and concepts relating to portfolio management no& find their &ay to the front pages of

financial ne&spapers and the cover pages of investment 9ournals in India. Indian capital

markets have become active. #he Indian stock markets are steadily moving to&ards higher

efficiency, &ith rapid computerization, increasing market transparency, better infrastructure,

better customer service etc. #he markets are dominated by large institutional investors &ith

their diversified portfolios. > large no of mutual funds has been set up the county since 1DA@.

Hith this development investment in securities has gained considerable momentum.

)rofessional portfolio management backed by co

#he $ecurities (xchange "oard of India 5$("I7 #he $tock G(


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1, SECURIT$ ANA0$SIS:It refers to the analysis of trading securities from the point of vie& of their prices,

eturn and risk. >ll investment is risky and the expected return is related to risk. #he

securities available to an investor for investment are numerous and of various types. #he

shares of over more than @888 are listed in stock exchanges of the country. $ecurities

classified into o&nership securities such as e%uity shares and preference shares and

debentures and bonds. ecently, a number of ne& securities such as convertible

debentures and deep discount bonds, zero coupon bonds, ;lexi bonds, ;loating rate bonds

G+s (uro currency bonds etc, are issued to raise funds for their pro9ects by companies

from &hich investor has to choose those securities the is &orth&hile to be included in his

investment portfolio. #his calls for detailed analysis of the available securities.

$ecurity analysis is the initial phase of the portfolio management process. It examines

the risk return characteristics of individual securities. > basic strategy in securities

investment is to buy under priced securities and sell over priced securities. "ut the

problem is ho& to identify such securities in other &ords miss priced securities. #his is

&hat security analysis is all about.

)rices of the securities in the stock market fluctuate daily on the account of

continuous buying and selling. $tock prices move in trends and cycles and are never

stable. >n investor in the stock market is interested in buying securities at lo& price and

selling them at high price so as to get a good return on his investment made. 4e therefore

tries to analysis the movement of share prices in the market.

To (ppro()es (re )o''onl& sed 8or tis prpose.

• %nd('ent(l (n(l&sis: Hherein the analyst tries to determine the intrinsic value of

the share based on the current and future earning capacity of the company.

• Te)ni)(l (n(l&sis: It is an alternative approach to the study of stock price behavior

5, PORT%O0IO SE0ECTION2

#hen according to the risk appetite and return pattern an optimum portfolio is

designed for the investor. #he basket of investment instrument selected in the previous

step are given due &eightage and appropriate amount of money is invested in each of the

investment avenue so as to get maximum return &ith minimum possible risk.

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9, PORT%O0IO REVISION2

#he fund manager=s main ob9ective is revision of portfolio on monthly basis, #he

actual meaning is one person is taking care of investor=s capital, addition of stock,

deletion of stocks happen based on market conditions.

, PORT%O0IO EVA0UATION2

#he next step &ould be evaluating the needs. /ther investment instruments and

options should be analyzed. #he risk!return profile of investment products is evaluated in

this step every investment product varies according to its return potential and riskiness.

Investment products giving a high rate of return are generally risky and volatile. #he

products giving a lo&er rate of return usually are less risky.

;, PORT%O0IO ANA0$SIS:

MAR"O6IT< MODE0:


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ll investors have the same expected single period investment horizon .

• >ll investors before making any investments have a common goal. #his is the

avoidance of risk because Investors are risk!averse.

• Investors base their investment decisions on the expected return and standard

deviation of returns from a possible investment.

• #he investor assumes that greater or larger the return that he achieves on his

investments, the higher the risk factor surrounds him. /n the contrary &hen risks are

lo& the return can also be expected to be lo&.

• #he investor can reduce his risk if he adds investments to his portfolio. >n investor

should be able to get higher return for each level of risk by determining the efficient

set of securities.

• >n individual seller or buyer cannot affect the price of a stock. #his assumption is the

basic assumption of the perfectly competitive market.

THE E%%ECT O% COM/ININ2 T6O SECURITIES:

It is believed that holding t&o securities is less risky than by having only one

investment in a person=s portfolio. Hhen t&o stocks are taken on a portfolio and if they have

negative correlation then risk can be completely reduced because the gain on one can offset

the loss on the other. #his can be sho&n &ith the help of follo&ing example

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INTER- ACTIVE RIS" THROU2H COVARIANCE:

Covariance of the securities &ill help in finding out the inter!active risk. Hhen the

covariance &ill be positive then the rates of return of securities move together either up&ards

or do&n&ards. >lternatively it can also be said that the inter!active risk is positive. $econdly,

covariance &ill be zero on t&o investments if the rates of return are independent. 4olding t&o

securities may reduce the portfolio risk too. #he portfolio risk can be calculated &ith the help

of the follo&ing formula

CAPITA0 ASSET PRICIN2 MODE0 =CAPM,:

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THE SHARPE>S INDE# MODE0:

#he investor al&ays like to purchase a combination of stock that provides the highest

return and has lo&est risk. 4e &ants to maintain a satisfactory re&ard to risk ratiotraditionally analysis paid more attention to the return aspects of the stocks. o& a dayBs risk

has received increased attention and analysts are providing estimates of risk as &ell as return.

$harp has developed a simplified model to analyze the portfolio. 4e assumed that the return

of a security is linearly related to a single index like to market index. $trictly speaking the

market index should consist of all the securities trading on the exchange. In the absence of it,

a popular index can be treated as a surrogate for the market index. $harpe has provided a

model for the selection of appropriate securities in a portfolio. #he selection of any stock is

directly related to its excess return M beta ratio

i Mfai

Hhere , i J the expected return on stock i

f J the return on a risk less asset

>i J the expected change in the rate of return on stock I associated

Hith one unit change in the market return

SIN20E INDE# MODE0:

Causal observation of the stock prices over a period of time reveals that most of the

stock process move &ith the market index. Hhen sensex increases, stock prices also tend to

increase and vice versa. #his indicates that some underlying factor affect the market index as

&ell as the stock prices. $tock prices are related to the market index and this relationship

could be used to estimate the return on stock. #o&ards the purpose, the follo&ing e%uation

can be used2

i J aLa imLei

Hhere, Jexpected return on security i

aJ intercept of the straight line or alpha co!efficient

aiJ slope of straight line or beta co!efficient

m J the rate of return on market index

eiJ error term &ith a mean of zero a std.dev. Hhich is a constantN

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AR/ITRA2E PRICIN2 THEOR$

>ccording to this theory the returns of the securities are influenced by a number of

macroeconomic factors such as gro&th rate of industrial production rate of inflation, spread

bet&een lo&!grade and high grade bonds.

Te 0( o8 One Pri)e:

#he foundation for >pt is the la& of one price. #he la& of one price states that t&o

identical goods should sell at the same price. If they sold at different prices anyone could

engage in arbitrage by simultaneously buying at lo& prices and selling at the high prices and

make a risk less profit.

>rbitrage also applies to financial assets. If t&o financial assets have the same risk, they

should have the same expected return. If they do not have the same expected return, a riskless

profit could be earned by simultaneously issuing 5or selling short7 at the lo& return and

buying the high!return asset. >rbitrage causes prices to be revised $uggested by the la& of

one price.

#he arbitrage pricing line for one risk factor can be &ritten as2

OJ P8L PIQi

Hhere,

O J (xpected return on the security iR

P8 J eturn on the zero beta portfolio

PI J #he factor risk premium

Qi J #he sensitivity of the i th asset to the risk factor

To 8()tor Ar+itr(ge pri)ing:

#he #&o!factor model describes the return of it security as follo&s

OJ P8L PIQ1i L P'Qi'

Hhere,

P' J #he risk premium associated &ith risk factor'

Qi' J #he factor beta coefficient for factor

' and the factor 1 ' are uncorrelated

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CHAPTER 4 9

COMPAN$ PRO%I0E

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9.COMPAN$ PRO%I0E

/AC"2ROUND:

In 1DA', a group of 4yderabad!based practicing Chartered >ccountants started

Earvy Consultants ?imited &ith a capital of s.1,-8,888 offering auditing and taxation

services initially. ?ater, it forayed into the egistrar and $hare #ransfer activities and

subse%uently into financial services. >ll along, EarvySs strong &ork ethic and professional

background leveraged &ith Information #echnology enabled it to deliver %uality to theindividual.

> decade of commitment, professional integrity and vision helped Earvy achieve a leadership

position in its field &hen it handled the largest number of issues ever handled in the history of

the Indian stock market in a year. #hereafter, Earvy made inroads into a host of capital

!market services, ! corporate and retail &hich proved to be a sound business synergy.

#oday, Earvy has access to millions of Indian shareholders, besides companies, banks,

financial institutions and regulatory agencies. /ver the past one and half decades, Earvy has

evolved as a veritable link bet&een industry, finance and people. In 0anuary 1DDA, Earvy

became the first +epository )articipant in >ndhra )radesh.

"E$ PEOP0E =/OARD O% DIRECTORS,:

1. M. R('(*risn(

5. C. P(rt(s(r(t&

9. Me*( $g(nd(r

. Sdir V(ri&(r

;. i''& M(t(ni

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O?er?ie:

"ARV$ , is a premier integrated financial services provider, and ranked among the

top five in the country in all its business segments, services over 1 million individual

investors in various capacities, and provides investor services to over 388 corporate@comprising the &ho is &ho of Corporate India. E>F covers the entire spectrum of

financial services such as $tock broking, +epository )articipants, +istribution of financial

products ! mutual funds, bonds, fixed deposit, e%uities, Insurance "roking, Commodities

"roking, )ersonal ;inance >dvisory $ervices, ccountants &ho founded the flagship

company T Earvy Consultants ?imited. #hey started &ith accounting automation, and

carved inroads into the field of registry and share accounting by 1DA-.

$ince then, they have utilized our experience and superlative expertise to go from

strength to strengthTto better our services, to provide ne& ones, to innovate, diversify and

in the process, evolved Earvy as one of IndiaBs premier integrated financial service

enterprise.#hus over the last '8 years Earvy has traveled the success route, to&ards building

a reputation as an integrated financial services provider, offering a &ide spectrum of

services .>nd they have made this 9ourney by taking the route of %uality service, path!

breaking innovations in service, versatility in service a finally totally in service.

#heir values and vision of attaining total competence in their servicing has served as

the building block for creating a great financial enterprise, &hich stands solid on their

fortresses of financial strength ! their various companies. Hith the experience of years of

holistic financial servicing behind them and years of complete expertise in the industry to

look for&ard to, they have no& emerged as a premier integrated financial services provider.

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"(r?& )redo

Teir Clients@ Teir %o)s :

Clients are the reason for our being .

)ersonalized service, professional care pro!activeness are the values that help them nurture

enduring relationships &ith their clients.

Respe)t 8or te indi?id(l :

(ach and every individual is an essential building block of their

/rganization .

#hey are the kiln that hones individuals to perfection. "e they their employees, shareholdersor investors. #hey do so by upholding their dignity pride, inculcating trust and achieving a

sensitive balance of their professional and personal lives.

Te('or* :

one of us is more important than all of us .

(ach team member is the face of Earvy. #ogether they offer diverse services &ith speed,

accuracy and %uality to deliver only one product2 excellence.

Responsi+le Citiensip :

> social balance sheet is as re&arding as a business one .

>s a responsible corporate citizen, their duty is to foster a better environment in the society

&here they live and &ork. >biding by its norms, and behaving responsibly to&ards the

environment, is some of their gro&ing initiatives to&ards realizing it .

Integrit&:

(verything else is secondary.

)rofessional and personal ethics are their bedrock. #hey take pride in an environment that

encourages honesty and the opportunity to learn from failures than camouflage them. #hey

insist on consistency bet&een &orks and actions.

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MI0ESTONES

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2ROUP COMPANIES

o "ARV$ CONSU0TANTS 0IMITED:

+eals in egistrar and Investment $ervices.

o "ARV$ SECURITIES 0IMITED:

+eals in distribution of various Investment products, viz., (%uities,


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+epository )articipant &ith $+? 5ational $ecurities +epository ?imited7, the first

+epository in the country and then &ith C+$? 5Central +epository $ervices ?imited7.

#oday, &e service over lakhs customer accounts in this business spread across over '-8

citiesto&ns in India and are ranked amongst the largest +epository )articipants in the

country. Hith a gro&ing secondary market presence, &e have transferred this business to

Earvy $tock "roking ?imited 5E$"?7, our associate and a member of $(, "$( and 4$(.

IT en(+led ser?i)es:

/ur #echnology $ervices division forms the ideal platform to unleash our technology

initiatives and make our presence felt on the Internet. /ur past achievements include many

%uality &ebsites designed, developed and deployed by us. He also possess our o&n &eb

hosting facilities &ith dedicated band&idth and a state!of!the!art server farm 5data center7

&ith services functioning on a variety of operating platforms such as Hindo&s, $ola:nix.

#he corporate &ebsite of the company, &&&.karvy.comR, gives access to in!depth

Information on financial matters including


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It is an undisputed fact that the stock market is unpredictable and yet en9oys a high success

rate as a &ealth management and &ealth accumulation option. #he difference bet&een

unpredictability and a safety anchor in the market is provided by in!depth kno&ledge of

market functioning and changing trends, planning &ith foresight and choosing one risk

options &ith care. #his is &hat &e provide in our $tock "roking services. He offer services

that are beyond 9ust a medium for buying and selling stocks and shares. Instead &e provide

services &hich are multi dimensional and multi!focused in their scope.

#here are several advantages in utilizing our $tock "roking services, &hich are the reasons

&hy it is one of the best in the country. He offer trading on a vast platform ational $tock

(xchange, "ombay $tock (xchange and 4yderabad $tock (xchange.


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"ut true to our spirit, this success is not our final destination, but 9ust a platform to launch

further enhanced %uality services to customer!friendly stock management. /ver the years &e

have ensured that the trust of our customers is our biggest returns. ;actors such as our success

in the (lectronic custody business has helped build on our tradition of trust even more.

Conse%uentially our retail client base expanded very fast.

#o empo&er the investor further &e have made serious efforts to ensure that our research

calls are disseminated systematically to all our stock broking clients through various delivery

channels like email, chat, $


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%uick and our delivery impeccable. > &ide national net&ork makes our efficiencies

accessible to all.

Distri+tion o8 %in(n)i(l Prod)ts

Te p(r(dig' si8t 8ro' pre selling to *noledge +(sed selling dri?es te +siness

tod(&.

Hith our &ide portfolio offerings, &e occupy all segments in the retail financial services

industry. > 188 team of highly %ualified and dedicated professionals dra&n from the best of

academic and professional backgrounds are committed to maintaining high levels of client

service delivery. #his has propelled us to a position among the top distributors for e%uity and

debt issues &ith an estimated market share of 1-6 in terms of applications mobilized, besides

being established as the leading procurer in all public issues.

#o further tap the immense gro&th potential in the capital markets &e enhanced the scope of

our retail brand, "(r?& 4 te %in(polis , thereby providing planning and advisory services to

the mass affluent. 4ere &e understand the customer needs and lifestyle in the context of

present earnings and provide ade%uate advisory services that &ill necessarily help in creating

&ealth. 0udicious planning that is customized to meet the future needs of the customer deliver

a service that is exemplary. #he market!savvy and the ignorant investors, both find this

service very satisfactory. #he edge that &e have over competition is our portfolio of offeringsand our professional expertise. #he investment planning for each customer is done &ith an

unbiased attitude so that the service is truly customized.

/ur monthly magazine, ;inapolis, provides up!dated market information on market trends,

investment options, opinions etc. #hus empo&ering the investor to base every financial move

on rational thought and prudent analysis and embark on the path to &ealth creation.

Ad?isor& Ser?i)es

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:nder our retail brand =Earvy M the ;in polisS, &e deliver advisory services to a cross!section

of customers. #he service is backed by a team of dedicated and expert professionals &ith

varied experience and background in handling investment portfolios. #hey are continuallyengaged in designing the right investment portfolio for each customer according to individual

needs and budget considerations &ith a comprehensive support system that focuses on trading

customersS portfolios and providing valuable inputs, monitoring and managing the portfolio

through varied technological initiatives. #his is made possible by the expertise &e have

gained in the business over the years. >nother venture to&ards being investor!friendly is the

circulation of a monthly magazine called =Earvy ! the ;in polisS. Covering the latest of

market ne&s, trends, investment schemes and research!based opinions from experts in

various financial fields.

Pri?(te Client 2rop:

#his specialized division &as set up to cater to the high net &orth individuals and institutional

clients keeping in mind that they re%uire a different kind of financial planning and

management that &ill augment not 9ust existing finances but their life!style as &ell. 4ere &e

follo& a hard!nosed business approach &ith the soft touch of dedicated customer care and

personalized attention.

;or this purpose &e offer a comprehensive and personalized service that encompasses

planning and protection of finances, planning of business needs and retirement needs and a

host of other services, all provided on a one!to!one basis.

/ur research reports have been &idely appreciated by this segment. #he delivery and support

modules have been fine tuned by giving our clients access to online portfolio information,

constant updates on their portfolios as &ell as value!added advise on portfolio churning,

sector s&itches etc. #he investment recommendations given by our research team in the cash

market have en9oyed a high success rate.

31


32/61

"(r?& 2rop o8 Co'p(nies

3'


33/61

"(r?&>s Alli(n)es:

Earvy Computer share )rivate ?imited is a -82 -8 9oint venture of Earvy Consultants

?imited and Computer share ?imited, >ustralia. Computer share ?imited is &orldSs largest

and only global M hare registry, and a leading financial market services provider to the globalsecurities industry. #he 9oint venture &ith Computer share, reckoned as the largest registrar in

the &orld, servicing over 8 million shareholder accounts for over @,888 corporations across

eleven countries spread across five continents. Computer share manages more than @8 million

shareholder accounts for over 13,888 corporations around the &orld. Earvy Computer share

)rivate ?imited, today, is IndiaSs largest egistrar and $hare #ransfer >gent servicing over

388 corporate and mutual funds and 1 million investors.

A)ie?e'ents:

• >mong the top - stock brokers in India 5*6 of $( volumes7

• IndiaSs o. 1 egistrar $ecurities #ransfer >gents.

• >mong the t&o top 3 +epository )articipants

• ?argest et&ork of "ranches "usiness >ssociates I$/ D88' certified operations by

+F.

• >mong top 18 Investment bankers ?argest +istributor of ;inancial )roducts.

• >d9udged as one of the top -8 I# uses in India by sia.

• ;ully ;ledged I# driven operations.

3(lit& poli)&:

#o achieve and retain leadership, Earvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior %uality financial

services. In the process, Earvy &ill strive to exceed CustomerSs expectations.

3(lit& O+Be)ti?es :

>s per the Uuality )olicy, Earvy &ill2 "uild in!house processes that &ill ensure transparent

and harmonious relationships &ith its clients and investors to provide high %uality of services.

17 (stablish a partner relationship &ith its investor service agents and vendors that &ill

help in keeping up its commitments to the customers.

'7 )rovide high %uality of &ork life for all its employees and

33


34/61

37 (%uip them &ith ade%uate kno&ledge skills so as to respond to customerSs needs.

*7 Continue to uphold the values of honesty integrity and strive to establish

unparalleled standards in business ethics.

-7 :se state!of!the art information technology in developing ne& and innovative

financial products and services to meet the changing needs of investors and clients.

7 $trive to be a reliable source of value!added financial products and services and

constantly guide the individuals and institutions in making a 9udicious choice of same.

@7 $trive to keep all stake!holders 5shareholders, clients, investors, employees, suppliers

and regulatory authorities.

>t Earvy Commodities, they are focused on taking commodities trading to ne&

dimensions of reliability and profitability. #hey have made commodities trading, an

essentially age!old practice, into a sophisticated and scientific investment option. 4ere

they enable trade in all goods and products of agricultural and mineral origin that include

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

through a &ell!systematized trading platform.

#heir technological and infrastructural strengths and especially our street!smart skills

make them an ideal broker. #heir service matrix is holistic &ith a gamut of advantages, the

first and foremost being their legacy of human resources, technology and infrastructure that

comes from being part of the Earvy Group.

#heir &ide national net&ork, spanning the length and breadth of India, further supports

these advantages. egular trading &orkshops and seminars are conducted to hone trading

strategies to perfection. (very move made is a calculated one, based on reliable research that

is converted into valuable information through daily, &eekly and monthly ne&sletters, calls

and intraday alerts. ;urther, personalized service is provided here by a dedicated team

committed to giving hassle!free service &hile the brokerage rates offered are extremely

competitive.

#heir commitment to excel in this sector stems from the immense importance that

commodity broking has to a cross!section of investors M farmers, exporters, importers,

manufacturers and the Government of India itself.

#he reason for choosing the karvyR as the base to do the pro9ect is that karvy has a variety of

services that are provided by them in the financial markets and as a ;inance student I feel that

taking this company as the

3*


35/61

CHAPTER 4

DATA ANA0$SIS

7

INTERPRETATION

3-


36/61

DATA ANA0$SIS

Retrn =P1-P,PF1

Tot(l retrn V =P1-P,PF1

A?er(ge retrn Tot(l retrn

N

3


37/61

RETURNS O% RE0IANCE

$EAR MPE MP/ RETURNS=G,

'818 18-A.@ [email protected] !1.-D3D'811 D'.D- 18--.- !3*.3*A

'81' A3D.-- @8.-- 1A.A'3A

'813 AD-.' A*8.@ .*A'D3

'81* AD1.1- AAA.A 8.'**81

Tot(l Retrns -1.9

A?er(ge Retrns -5.J5

1.56

34.3418.82

6.48 0.26

YEARLY RETURNS OF RELIANCE

2010 2011 2012 2013 2014

INTERPRETATION:

>bove pie chart indicates returns generated during the ;y'818to'81*.;or

the ;'818,!1.-D3Dand ; '811,!3*.3*A egative returns and remaining are

)ositive returns. >nd during ; '81',1A.A'3A higher returns are generated.

3@


38/61

RETURNS O% CIP0A

$EAR MPE MP/ RETURNS =G,

'818 3D.A [email protected] D.--*1*'811 31D.D 3@'.- !1*.1'8A

'81' *1*.'- 3'8.@- 'D.1-8*3

'813 *88.A *1@.*- !3.DAA-

'81* '.* *81.@- --.D1@A

Tot(l Retrns .;1919

A?er(ge

Retrns

5.KJ9J;

9.55

14.15

29.15

3.98

55.91

YEARLY RETURNS OF CIPLA

2010 2011 2012 2013 2014

INTERPRETATION:

>bove pie chart indicates returns generated during the ; '818to'81*.;or the ; '811,!

1*.1'8A and ; '813,!3.DAA- egative returns and remaining are positive returns. >nd

during ; '81*,--.D1@A higher returns are generated.

3A


39/61

RETURNS O% ICICI /AN"


'818 11*-.1 A@D.@ 38.1D3A'811 A*.- 11**.A- !*8.1D@*

'81' 113A.'- D.-- 3.*1'-3

'813 18DA.@- 11-A.*- !-.1-3**

'81* 3-3.1 18D@.@

@.A33

Tot(l Retrns -1J.1J9

A?er(ge

Retrns

-9.J59K

30.16

40.19

63.41

5.15

6.83

YEARLY RETURNS OF ICICI BANK

2010 2011 2012 2013 2014

INTERPRETATION:

>bove pie chart indicates returns generated during the ; '818 to '81*. ;or the ; '811,

!*8.1D@* and ; '813,!-.1-3** and ; '81*,[email protected] returns and remaining are

positive returns. >nd during ; '81',3.*1'-3 higher returns are generated.

3D


40/61

RETURNS O% TATA STEE0

.36

52.36

25.62

3.19 6.22

YEARLY RETURNS OF TATA STEEL

2010 2011 2012 2013 2014

INTERPRETATION:

>bove pie chart indicates returns generated during the ; '818to'81*.;or the ; '811,!

-'.3A* and ; '813,!3.1D*AD and ; '81*,!.'''1' egative returns and remaining are

positive returns. >nd +uring ; '81', '-.''DA higher returns are generated.

*8


'818 A8.* 33.@- @.38D*@'811 33-.3- @8*.8- !-'.3A*

'81' *'A.- 3*1.1 '-.''DA

'813 *'*.' *3A.' !3.1D*AD

'81* 3DD.* *'-.D !.'''1'

Tot(l Retrns -5K.K1K

A?er(ge

Retrns

-;.9


41/61

RETURNS O% MARUTI


'818 1*'1. 1--1.*- !A.3D-D

'811 D1A.3 1*'.8- !3-.8-3

'81' 1*D8.8- D3A.D -A.@81@

'813 [email protected] 1-1*.* 1.*@-1@

'81* 33'D.A 1@* AA.@*1@

Tot(l Retrns 11J.J15

A?er(ge Retrns 59.JJ955

8.36

35.6

58.

16.4

88.6

YEARLY RETURNS OF MARUTI

2010 2011 2012 2013 2014

INTERPRETATION:

>bove pie chart indicates returns generated during the;'818 to '81*.;or the ; '818,!

A.3D-D and ; '811,!3-.8-3egative returns and remaining are positive returns.>nd during ; '81*,AA.@*1@ higher returns are generated.

*1


42/61

AVERA2E RETURNS

2.06

15.3

3.925.6

23.99

AVERAGE RETURNS

!"#$A%&" &$'#A $&$&$ A% *A*A S*""# +A!,*$

INTERPRETATION:

>ccording to above the pie chart it is prove that2 In longer time e%uity markets as high

fluctuated products in the market on yearly basis vacancy up and do&n in the market but in

market but in longer time &eek ended positive returns on e%uity investment.

*'

Sto)* A?er(ge Retrns

(?I>C( !'.8D*'

CI)?> 1-.38''ICICI ">E !3.D'83D

#>#> $#((? !-.@83

:#I '3.DD3''


43/61

CA0C0ATION O% STANDARD DEVITION

19.34

2.89

52.628.8

50.13

AVERAGE RISK

!"#$A%&" &$'#A $&$&$ A% *A*A S*""# +A!,*$

INTERPRETATION:

It is proving higher risk and high returns.

*3

STOC" St(nd(rd De?i(tion

(?I>C( 1D.3*ACI)?> '@.AD3D-

ICICI ">E -'.@3A

#>#> $#((? 'A.A@DAA

:#I -8.13D3*


44/61

AVERA2E RETURN 7 STANDARD DEVIATION

!"#$A%&" &$'#A $&$&$ A% *A*A S*""# +A!,*$-10

0

10

20

30

40

50

60

S*."/ &olun1

**

STOC" STD.DEV A?er(ge RETURNS

(?I>C( 1D.@31* !'.8D*'

CI)?> '@.AD3D- 1-.38''ICICI ">E -'.@ !3.D'83D

#>#> $#((? 'A.A@DA !-.@83

:#I -8.13D3* '3.DD3''


45/61

CA0CU0ATION O% CORRE0ATION

1, RE0IANCE 6ITH OTHERS:

RE0IANCE AND CIP0A

RE0IANCE AND ICICI

*-

$EAR RETURN=A, RETURN=/,

'818 !1.-' D.--

'811 !3*.3- !1*.1''81' 1A.A' 'D.1-

'813 .*A !3.DD

'81* 8.3 --.D'

Correl(tions=A/, .;95

$EAR RETURN=A, RETURN=C,

'818 !1.-' 38.1@

'811 !3*.3- !*8.1D@

'81' 1A.A' 3.*1

'813 .*A !-.1-

'81* 8.3 [email protected]

CORE0ATIONS=AC,

.;K;515


46/61

RE0IANCE AND TATA STEE0

RE0IANCE AND MARUTI

5, CIP0A 6ITH OTHERS:

CIP0A AND ICICI /AN"

CIP0A AND TATA STEE0

*

$EAR RETURN RETURN

'818 !1.-' @.3'811 !3*.3- !-'.3@

'81' 1A.A' '-.'

'813 .*A !3.1D

'81* 8.3 !.''

CORE0ATIONS=AD, .J;J;5

$EAR RETURN RETURN

'818 !1.-' !A.3@

'811 !3*.3- !3-.8-'81' 1A.A' -A.@

'813 .*A 1.*@-

'81* 8.3 AA.@

CORE0ATIONS=AE, .K

$EAR RETURN RETURN

'818 D.-- 38.1@

'811 !1*.1' !*8.1D@

'81' 'D.1- 3.*1

'813 !3.DD !-.1-'81* --.D' [email protected]

CORE0ATIONS=/C, -.19

$EARS RETURN RETURN

'818 D.-- @.3

'811 !1*.1' !-'.3@

'81' 'D.1- '-.'

'813 !3.DD !3.1D

'81* --.D' !.''

Correl(tion=/D, .;1;K55


47/61

CIP0A AND MARUTI

1

9, ICICI /AN" 6ITH OTHERS:

ICICI /AN" AND TATA STEE0

ICICI /AN" AND MARUTI

, TATA

STEE0 6ITH OTHERS:

TATA STEE0 AND MARUTI

*@

$EARS RETURN=5, RETURN=R;,

'818 D.-- !A.3@

'811 !1*.1' !3-8-

'81' 'D.1- -A.@

'813 !3.DD 1.*@-

'81* --.D' AA.@

CORE0ATION=/E, .;J19

$EARS RETURN=9, RETURN=,'818 38.1@ @.3

'811 !*8.1D@ !-'.3@

'81' 3.*1 '-.'

'813 !-.1- !3.1D

'81* [email protected] !.''

CORE0ATION=CD, .5JK

$EARS RETURN RETURN

'818 38.1@ !A.3@

'811 !*8.1D@ !3-.8-

'81' 3.*1 -A.@

'813 !-.1- 1.*@-

'81* [email protected] AA.@

CORE0ATION=CE, -.J;5

$EARS RETURN RETURN

'818 @.3 !A.3@

'811 !-'.3@ !3-.8-

'81' '-.' -A.@

'813 !3.1D 1.*@-

'81* !.'' AA.@

CORE0ATION=DE, .;K;K


48/61

*A


49/61

PORT %O0IO 1 6EI2HTS

NOTE: Te Port8olio>s 8or i) te eigt =eiter 6A OR 6/, L1 or e!e)ted 8or

8(rter (n(l&sis.

0IST O% PORT%O0IOS HAVIN2 POSITIVE 6EI2HT:

PORT%O0IO 6EI2HT=6A, 6EI2HT=6/,

H>" 8.A*A831* 8.1-1DD

H"C 8.-3@' 8.3*'@

H"+ 8.-3-**1D 8.**-A

HC+ 8.181* 1.181*

HC( 8.*A@D 8.-1'38D

56eigts (s +een done +& it te elp o8 MS-E#CE0 ?ersion 6INDO6S-,

*D

PORT %O0IO 6EI2HT=6A, 6EI2HT=6/,

H>" 8.A*A831* 8.1-1DD

H>C 1.113-''*' !8.113-'

H>+ '.1D'-@ !1.1D'-@H>( 1.1AA*DAA !8.1AA*@

H"C 8.-3@' 8.3*'@

H"+ 8.-3-**1D 8.**--A

H"( 1.8'DA*-3 !8.8'DA-

HC+ 8.181* 1.181*

HC( 8.*A@D 8.-1'38D

H+( 1.88A'*1 !8.88A'*


50/61

CA0CU0ATION O% PORT%O0IO RIS":

PORT%O0IO St(nd(rd De?i(tion o8

Port8olio

>" 1A.DDA-

>C 1A.A-3

>+ 13.*@8'

>( 13.-**A

"C '*.8*'

"+ '*.D8-

"( '@.AAA

C+ 38.@@

C( 3-.8*8DA

+( 'A.A@@'

18.99

18.68

13.4

13.54

24.04

24.692.86

30.6

35.04

28.8

STANDARD DEVIATION OF PORTFOLIO

A A& A A" & " & &" "

=Port8olio ris* (s +een done +& it te elp o8 MS-E#CE0 ?ersion 6INDO6s,

INTERTATION

It is proving higher risk and higher returns

-8


51/61

CA0CU0ATION O% PORT%O0IO RETURNS:

)ortfolio return J W5>XH>7 L 5"XH"7Y

CA0CU0ATION PORT%O0IO RETURNS

2.889.25

294.38

34.86

43.23

2.58

5.2136.55

51.9

30.02

PORT FOLIO RETURN

A A& A A" & " & &" "

INTERPRETATION: It is proving higher risk and higher returns.

-1

Port8olio Retrn on Port8olio

>" '.AA'

>C !D.'-@3

>+ 'D*.3A11

>( !3*.A-

"C *3.'38A

"+ '@.-AA*

"( @-.'11

C+ !3.--3*

C( -1.D88-

+( !38.8'@


52/61

CA0CU0ATION O% PORT %O0IO RIS" 7 RETURN

Hhere, p J eturn on )ortfolio

$+p J $tandard +eviation on )ortfolio

PORT %O0IO RIS" RETURN2

1 2 3 4 5 6 8 9 10

-100

-50

0

50

100

150

200

250

300

350

!' S'

5)ortfolio risk has been calculated &ith the help of


53/61

TRA/0E SHO6IN2 PORT%O0IO RIS" 7 RETURN

()J(fficient )ortfolio, I()JIn (fficient )ortfolio, " '.AA'81 1A.DDA- I()

>C !D.'-@3A 1A.A-31 18 ()

>+ 'D*.3A11 13.*@8'' 1 ( !3*.A- 13.-**A' A ()

"C *3.'38A- '*.8*3 * I()

"+ '@.-AA* '*.D8-@ - I()

"( @-.'11 '@.AAA3 ' I()

C+ !3.--3* 38.@@3 @ ()

C( -1.D88- 3-.8*8DD 3 I()

+( !38.8'@1 'A.A@@'1 D ()


54/61

INTERPRETATION:

>n (fficient )ortfolio is a )ortfolio that provides providing returnZ#he eturn

on

)ortfolio providing eturnZC(.

RE0IANCE 6ITH ICICI/AN":

#he )ortfolio &eights of (?I>C( and ICICI ">E are 1.11 !8.11 the standard

deviation are 1D.3* -'.@ the returns of reliance and ICICI ">E !18.31 and

!1D.8.Investors &ho are &illing to face high risk can invest in ICICI ">E, because its

returns are more than eliance.

RE0IANCE 6ITH TATA STEE0:

#he )ortfolio &eights of (?I>C( and #>#> $#((? are '.1D !1.1D #he standard

deviation are 1D.3* 'A.A@ #he returns of (?I>C( and #>#> $teel !18.31 and!

'A.A8.Investors &ho are &illing to face high risk can invest in (?I>C(, "ecause its

returns are more than #>#> $teel.

-*


55/61

RE0IANCE 6ITH MARUTI:

#he )ortfolio &eights of (?I>C( and :#I are 1.1AA !8.1A #he standard

deviation are 1D.3* -8.13 #he returns of (?I>C( and :#I !18.31 and

11D.D.Investors &ho are &illing to face high risk can invest in :#I because its

returns are more than (?I>C(.

5. CIP0A 6ITH OTHER COMPANIES:

CIP0A 6ITH ICICI /AN":

#he )ortfolio &eights of CI)?> and ICICI ">E are 8.- 8.3* #he standard

deviation are '@.AD -'.@ #he returns of CI)?> and ICICI ">E @.-1 and !1D.8

Investors &ho are &illing to face high risk can invest in CI)?>, because its returns are

more than ICICI ">E.

CIP0A 6ITH TATA STEE0:

#he )ortfolio &eights of CI)?> and ICICI ">E are 8.-3 8.* #he standard

deviation are '@.AD 'A.A@ #he returns of CI)?> and #>#> $#((? @.-1 and !'A.A8

Investors &ho are &illing to face high risk can invest in CI)?>, because its returns aremore than #>#> $#((?.

CIP0A 6ITH MARUTI:

#he )ortfolio &eights of CI)?> and ICICI ">E are 1.8' !8.8'D #he standard

deviation are '@.AD -8.13 #he returns of CI)?> and :#I @.-1 and 11D.D

Investors &ho are &illing to face high risk can invest in :#I, because its returns are

more than CI)?>.

9. ICICI /AN" 6ITH OTHERS:

ICICI /AN" 6ITH TATA STEE0:

#he )ortfolio &eights of ICICI ">E and #>#> $#((? are 8.1 1.1 #he standard

deviation are -'.@ 'A.A@ #he returns of ICICI ">E and #>#> $#((? !1D.8 and

!'A.A Investors &ho are &illing to face high risk can invest in #>#> $#((?, because itsreturns are more than ICICI ">E.

--


56/61

ICICI /AN" 6ITH MARUTI:

#he )ortfolio &eights of ICICI ">E and :#I are 8.*A 8.-1 #he standard

deviation are -'.@ -8.13 #he returns of ICICI ">E and :#I !1D.8 and

11D.D Investors &ho are &illing to face high risk can invest in :#I, because its

returns are more than ICICI ">E.

. TATA STSEE0 6ITH MARUTI:#he )ortfolio &eights of #>#> $#((? and :#I are 1.88A !8.88A #he standard

deviation are 'A.A@ -8.13 #he returns of #>#> $#((? and :#I !'A.A8 and

11D.D Investors &ho are &illing to face high risk can invest in :#I, because its

returns are more than #>#> $#((?.

2REATER PORT%O0IO RETURNS 6ITH 0ESS RIS"S IS A006A$S AN

ATTRACTIVE COM/INATION %OR THE INVESTORS.

T6O SECURITIES PORT%O0IO

SI.N

O

SECURITIES RP SDP

1 (?I>C( CI)?> '.AA'81 1A.DDA-

' (?I>C( ICICI ">E !D.'-@3A 1A.A-3

3 (?I>C( #>#> $#((? 'D*.3A11 13.*@8''

* (?I>C( :#I !3*.A- 13.-**A'

- CI)?> ICICI ">E *3.'38A '*.8*'D

CI)?> #>#>$#((? '@.-AA* '*.D8-@

@ CI)?> :#I @-.'11 '@.AAA

A ICICI ">E #>#>

$#((?

!3.--3* 38.@-@3

D ICICI ">E :#I -1.D88- 3-.8*8DA

18 #>#> $((? :#I !38.8'@1 'A.A@@'1

INTERPRETATION: #he above table sho&s that as per as correlation concerned

(?I>C( >+ #>#> $#((? are the good combination because they are high risk

and high returns.

-


57/61

CHAPTER-;

%INDIN2S@

SU22ESTIONS

7

CONC0USION

-@


58/61

%INDIN2S@ SU22ESTIONS 7 CONC0USION

%INDIN2S :

4e also observe that the efficient )ortfolioBs are those portfolioBs for &hich the

correlation of the t&o securities is the least because for getting maximum benefit

of diversification.

# he correlation bi&een the securities should be negitive or if it is positive it must

not be near to 1.

?o&er the correlation better the combination.

SU22ESTIONS:

>s per >verage eturn of securities (?I>C( :#I are high &hen

compared to other Companies so investors can invest in these Companies but they

have considered the risk.

>s the risk securities (?I>C( and #>#> $#((? are very high investor has to

careful &hile investing in these.

#he investor &ho re%uires minimum return can ac%uire the securities of

(?I>C( and CI)?>.

It is recommended that the investors &ho re%uire high risk &ith high return should

invest in :#I.

#he investors are benefited by investing in selected scripts of Industries

"efore investing in shares you should look at the type of shares, you &ant to buy and the &ay

they &ant to deal on stock market.

-A


59/61

CONC0USION:

CI)?> and :#I co are good enough to invest because there returns are good &hen

compared to (?I>C( and #>#> $#((?.

• >s per as $tandard +eviations ICICI has 4ighest risk security and ext highest risk

securities are :#I,#>#> $#(??,CI)?> and (?I>C( are having medium

risks.

• >s per as Correlation concerned the securities of (?I>C( >+ #>#> $#((? are

the good combinations because they are having normal returns &ith normal risk

-D


60/61

/I/0IO2RAPH$

8


61/61

/I/0IO2RAPH$

/oo*s:

SECURIT$ANA0$SIS AND PORT%O0IO MANA2EMENT

-----Don(ld.E.%iser@ Ron(ld..ord(n

INVESTMENT

-----6illi(' .%. S(rpe@ 2ordon@ Ale!(nder (nd e88er&.V./(il&

PORT%O0IO MANA2EMENT

----Strong R.A.

REPORTS:- ISE Reports

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http://www.nseindia.org/http://www.bseindia.org/http://www.iseindia.com/http://www.nsccl.com/http://www.nseindia.org/http://www.bseindia.org/http://www.iseindia.com/http://www.nsccl.com/

Security Analysis & Portfolio Mangt(1)

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