CONTENTS Title Chapter number I Introduction to topic Page number

II III I! ! !II !III !III $NNE%&'E()

Objectives Methodology Need and scope of study imitations iterature survey Industry profile Company profile "ata collection "ata analysis #indings Suggestions Conclusion

INT'O"&CTION

Investment management Investment management is the professional management of various securities *shares+ bonds etc,- and assets *e,g,+ real estate-+ to meet specified investment goals for the benefit of the investors, Investors may be institutions *insurance companies+ pension funds+ corporations etc,- or private investors *both directly via investment contracts and more commonly via collective investment schemes e,g, mutual funds or E.change Traded #unds- , The term asset management is often used to refer to the investment management of collective investments,/hilst the more generic fund management may refer to all forms of institutional investment as /ell as investment management for private investors, Investment managers /ho speciali0e in advisory or discretionary management on behalf of *normally /ealthy- private investors may often refer to their services as wealth management or portfolio management often /ithin the conte.t of so)called 1private ban2ing1, The provision of 3investment management services3 includes elements of financial analysis+ asset selection+ stoc2 selection+ plan implementation and ongoing monitoring of investments, Investment management is a large and important global industry in its o/n right responsible for careta2ing of trillions of dollars+ euro+ pounds and yen, Coming under the remit of financial services many of the /orld3s largest companies are at least in part investment managers and employ millions of staff and create billions in revenue,

Fund manager *or investment adviser in the &,S,- refers to both a firm that provides investment management services and an individual /ho directs fund management decisions, Asset allocation

The different asset class definitions are /idely debated+ but four common divisions are stoc2s+ bonds+ real)estate and commodities, The e.ercise of allocating funds among these assets *and among individual securities /ithin each asset class- is /hat investment management firms are paid for, $sset classes e.hibit different mar2et dynamics+ and different interaction effects4 thus+ the allocation of monies among asset classes /ill have a significant effect on the performance of the fund, Some research suggests that allocation among asset classes has more predictive po/er than the choice of individual holdings in determining portfolio return, $rguably+ the s2ill of a successful investment manager resides in constructing the asset allocation+ and separately the individual holdings+ so as to outperform certain benchmar2s *e,g,+ the peer group of competing funds+ bond and stoc2 indices-,

ON5 TE'M 'ET&'NS( It is important to loo2 at the evidence on the long)term returns to different assets+ and to holding period returns *the returns that accrue on average over different lengths of investment-, #or e.ample+ over very long holding periods *eg, 678 years- in most countries+ e9uities have generated higher returns than bonds+ and bonds have generated higher returns than cash, $ccording to financial theory+ this is because e9uities are ris2ier *more volatile- than bonds /hich are themselves more ris2y than cash, Diversification $gainst the bac2ground of the asset allocation+ fund managers consider the degree of diversification that ma2es sense for a given client *given its ris2 preferences- and construct a list of planned holdings accordingly, The list /ill indicate /hat percentage of the fund should be invested in each particular stoc2 or bond, The theory of portfolio diversification /as originated by Mar2o/it0 and effective diversification re9uires management of the correlation bet/een the asset returns and the liability returns+ issues internal to the portfolio *individual holdings volatility-+ and cross)correlations bet/een the returns, Investment styles

There are a range of different styles of fund management that the institution can implement, #or e.ample+ gro/th+ value+ mar2et neutral+ small capitalisation+ inde.ed+ etc, Each of these approaches has its distinctive features+ adherents and+ in any particular financial environment+ distinctive ris2 characteristics, #or e.ample+ there is evidence that gro/th styles *buying rapidly gro/ing earnings- are especially effective /hen the companies able to generate such gro/th are scarce4 conversely+ /hen such gro/th is plentiful+ then there is evidence that value styles tend to outperform the indices particularly successfully, Performance measurement( #und performance is the acid test of fund management+ and in the institutional conte.t accurate measurement is a necessity, #or that purpose+ institutions measure the performance of each fund *and usually for internal purposes components of each fundunder their management+ and performance is also measured by e.ternal firms that speciali0e in performance measurement, The leading performance measurement firms *e,g, #ran2 'ussell in the &S$- compile aggregate industry data+ e,g,+ sho/ing ho/ funds in general performed against given indices and peer groups over various time periods, In a typical case *let us say an e9uity fund-+ then the calculation /ould be made *as far as the client is concerned- every 9uarter and /ould sho/ a percentage change compared /ith the prior 9uarter *e,g,+ 8:,;< total return in &S dollars-, This figure /ould be compared /ith other similar funds managed /ithin the institution *for purposes of monitoring internal controls-+ /ith performance data for peer group funds+ and /ith relevant indices */here available- or tailor)made performance benchmar2s /here appropriate, The specialist performance measurement firms calculate 9uartile and decile data and close attention /ould be paid to the *percentile- ran2ing of any fund, 5enerally spea2ing+ it is probably appropriate for an investment firm to persuade its clients to assess performance over longer periods *e,g,+ = to > years- to smooth out very short term fluctuations in performance and the influence of the business cycle, This can be difficult ho/ever and+ industry /ide+ there is a serious preoccupation /ith short)term numbers and the effect on the relationship /ith clients *and resultant business ris2s for the institutions-, $n enduring problem is /hether to measure before)ta. or after)ta. performance, $fter) ta. measurement represents the benefit to the investor+ but investors3 ta. positions may vary, ?efore)ta. measurement can be misleading+ especially in regimens that ta. realised capital gains *and not unrealised-, It is thus possible that successful active managers *measured before ta.- may produce miserable after)ta. results, One possible solution is to report the after)ta. position of some standard ta.payer, 'is2 adjusted performance measurement( Institutions often control huge shareholdings, In most cases they are acting as fiduciary agents rather than principals *direct o/ners-, The o/ners of shares theoretically have

great po/er to alter the companies they o/n via the voting rights the shares carry and the conse9uent ability to pressure managements+ and if necessary out)vote them at annual and other meetings, In practice+ the ultimate o/ners of shares often do not e.ercise the po/er they collectively hold *because the o/ners are many+ each /ith small holdings-4 financial institutions *as agents- sometimes do, There is a general belief that shareholders ) in this case+ the institutions acting as agents@could and should e.ercise more active influence over the companies in /hich they hold shares *e,g,+ to hold managers to account+ to ensure ?oards effective functioning-, Such action /ould add a pressure group to those *the regulators and the ?oard- overseeing management, Ao/ever there is the problem of ho/ the institution should e.ercise this po/er, One /ay is for the institution to decide+ the other is for the institution to poll its beneficiaries, $ssuming that the institution polls+ should it then( *i*ii*iii!ote the entire holding as directed by the majority of votes castB Split the vote */here this is allo/ed- according to the proportions of the vote 'espect abstainers and only vote the respondents3 holdingsB

The price signals generated by large active managers holding or not holding the stoc2 may contribute to management change, #or e.ample+ this is the case /hen a large active manager sells his position in a company+ leading to *possibly- a decline in the stoc2 price+ but more importantly a loss of confidence by the mar2ets in the management of the company+ thus precipitating changes in the management team, Some institutions have been more vocal and active in pursuing such matters4 for instance+ some firms believe that there are investment advantages to accumulating substantial minority shareholdings *i,e, 67< or more- and putting pressure on management to implement significant changes in the business, In some cases+ institutions /ith minority holdings /or2 together to force management change, Perhaps more fre9uent is the sustained pressure that large institutions bring to bear on management teams through persuasive discourse and P', On the other hand+ some of the largest investment managers @such as ?arclays 5lobal Investors and !anguard@advocate simply o/ning every company+ reducing the incentive to influence management teams, $ reason for this last strategy is that the investment manager prefers a closer+ more open and honest relationship /ith a company3s management team than /ould e.ist if they e.ercised control4 allo/ing them to ma2e a better investment decision, The national conte.t in /hich shareholder representation considerations are set is variable and important, The &S$ is a litigious society and shareholders use the la/ as a lever to pressure management teams, In Capan it is traditional for shareholders to be lo/ in the 3pec2ing order+3 /hich often allo/s management and labor to ignore the rights of the ultimate o/ners, Dhereas &S firms generally cater to shareholders+ Capanese businesses generally e.hibit a stakeholder mentality+ in /hich they see2 consensus

amongst all interested parties *against a bac2ground of strong unions and labour legislation-,

O?CECTI!ES

O?CECTI!ES( Primary objectives( To study ho/ an investment can be managed,

Secondary Objectives( To study security analysis, To 2no/ ho/ to construct a portfolio, To 2no/ ho/ to evaluate the performances of different portfolios, To 2no/ in /hich investment /e get more returns, Too 2no/ in /hich investment /e have less ris2,

METAO O5E

Methodology( "ata collection( ) in the present project /or2 the data has been collected from readily available sources i,e, secondary data, i2e /ebsites+ ne/s papers and maga0ines, The /ebsites visited are ///,nse India,com ///,bse india,com "ata analysis( ) the present project /or2 has been analysed using time series analysis /ith graphical presentations, The formulas applied in the calculations are follo/s( 'eturns Fclosing price)opening price Gopening priceH677 'is2()

#ormula( F*%)%-IGn

NEE" $N" SCOPE

NEED FOR THE T!D" Portfolio management is a process encompassing many activities of investment in assets and securities, It is a dynamic and fle.ible concept and involves regular and systematic analysis+ judgments and actions, The objective of this service is to help the un2no/n investors /ith the e.pertise of professionals in investment portfolio management, It involves construction of a of a portfolio bases upon the investors objectives+ constraints+ preferences for ris2 and return and ta. ability, The portfolio is revie/ed and adjusted from time to time in tune /ith the mar2et conditions, The evaluation of portfolio is to be done in terms of targets set for a ris2 and return, The changes in the portfolio are to be effected to meet the changing conditions, Portfolio construction refers to the allocation of surplus funds in hand among a variety of financial assets open for investments, Portfolio theory concerns itself /ith the principles governing such allocations, The modern vie/ of investments is oriented more to/ards the assembly of proper combinations of individual securities to form investment

portfolios, $ combination of individual securities to form investments portfolios, $ combination of securities held together /ill give a beneficial result if they are grouped in a manner to secure higher return after ta2ing into consideration the ris2 elements,

#O$E OF THE T!D" This study covers the Mar2o/it0 model, Aere in+ the study covers the calculation of correlations bet/een the different securities in order to find out at /hat percentage of funds should be invested among the companies in the portfolio, $lso the study includes the calculation of /eights of individual securities involved in the portfolio, These percentages help in allocation the funds available for investments based on the ris2y portfolios,

IMIT$TIONS

%imitations of the study

The study has certain constrains /hich has limited to its scope and objects of the study, The fulfillment of project to :> days, #rom ?SE and NSE listing J a very fe/ and randomly selected scripts are analy0ed, Construction of portfolio restricted to t/o) assets based in Mar2o/it0 model, imited industries are only covered in the study,

IN"&ST'E

P'O#I E

Evolution Indian Stoc2 Mar2ets are one of the oldest in $sia, Its history dates bac2 to nearly I77 years ago, The earliest records of security dealings in India are meagre and obscure, The East India Company /as the dominant institution in those days and business in its loan securities used to be transacted to/ards the close of the eighteenth century, ?y 6K=73s business on corporate stoc2s and shares in ?an2 and Cotton presses too2 place in ?ombay, Though the trading list /as broader in 6K=L+ there /ere only half a do0en bro2ers recogni0ed by ban2s and merchants during 6K:7 and 6K>7, The 6K>73s /itnessed a rapid development of commercial enterprise and bro2erage business attracted many men into the field and by 6K;7 the number of bro2ers increased into ;7, In 6K;7);6 the $merican Civil Dar bro2e out and cotton supply from &nited States of Europe /as stopped4 thus+ the 3Share Mania3 in India begun, The number of bro2ers increased to about I77 to I>7, Ao/ever+ at the end of the $merican Civil Dar+ in 6K;>+ a disastrous slump began *for e.ample+ ?an2 of ?ombay Share /hich had touched 's IK>7 could only be sold at 's, KM-, $t the end of the $merican Civil Dar+ the bro2ers /ho thrived out of Civil Dar in 6KM:+ found a place in a street *no/ appropriately called as "alal Street- /here they /ould conveniently assemble and transact business, In 6KKM+ they formally established in ?ombay+ the 1Native Share and Stoc2 ?ro2ers3 $ssociation1 */hich is alternatively 2no/n as 1 The Stoc2 E.change 1-, In 6KL>+ the Stoc2 E.change ac9uired a premise in

the same street and it /as inaugurated in 6KLL, Thus+ the Stoc2 E.change at ?ombay /as consolidated, $hmedabad gained importance ne.t to ?ombay /ith respect to cotton te.tile industry, $fter 6KK7+ many mills originated from $hmedabad and rapidly forged ahead, $s ne/ mills /ere floated+ the need for a Stoc2 E.change at $hmedabad /as realised and in 6KL: the bro2ers formed 1The $hmedabad Share and Stoc2 ?ro2ers3 $ssociation1, Dhat the cotton te.tile industry /as to ?ombay and $hmedabad+ the jute industry /as to Calcutta, $lso tea and coal industries /ere the other major industrial groups in Calcutta, $fter the Share Mania in 6K;6);>+ in the 6KM73s there /as a sharp boom in jute shares+ /hich /as follo/ed by a boom in tea shares in the 6KK73s and 6KL73s4 and a coal boom bet/een 6L7: and 6L7K, On Cune 6L7K+ some leading bro2ers formed 1The Calcutta Stoc2 E.change $ssociation1, In the beginning of the t/entieth century+ the industrial revolution /as on the /ay in India /ith the S/adeshi Movement4 and /ith the inauguration of the Tata Iron and Steel Company imited in 6L7M+ an important stage in industrial advancement under Indian enterprise /as reached, Indian cotton and jute te.tiles+ steel+ sugar+ paper and flour mills and all companies generally enjoyed phenomenal prosperity+ due to the #irst Dorld Dar, In 6LI7+ the then demure city of Madras had the maiden thrill of a stoc2 e.change functioning in its midst+ under the name and style of 1The Madras Stoc2 E.change1 /ith 677 members, Ao/ever+ /hen boom faded+ the number of members stood reduced from 677 to =+ by 6LI=+ and so it /ent out of e.istence, In 6L=>+ the stoc2 mar2et activity improved+ especially in South India /here there /as a rapid increase in the number of te.tile mills and many plantation companies /ere floated, In 6L=M+ a stoc2 e.change /as once again organi0ed in Madras ) Madras Stoc2 E.change $ssociation *Pvt- imited, *In 6L>M the name /as changed to Madras Stoc2 E.change imited-, ahore Stoc2 E.change /as formed in 6L=: and it had a brief life, It /as merged /ith the Punjab Stoc2 E.change imited+ /hich /as incorporated in

6L=;, &rowth $attern of the Indian toc' (ar'et

Sl,No, 6 I = : > ;

$s on =6st 6L:; 6L;6 6LM6 6LM> 6LK7 6LK> 6LL6 6LL> "ecember No, of M M K K L 6: I7 II Stoc2 E.changes No, of 66I> 6I7= 6>LL 6>>I II;> :=:: ;IIL K>L= isted Cos, No, of Stoc2 6>7; I666 IK=K =I=7 =;LM ;6M: KL;M 66MK: Issues of isted Cos, Capital of isted IM7 M>= 6K6I I;6: =LM= LMI= =I7:6 >L>K= Cos, *Cr, 's,Mar2et value of LM6 6ILI I;M> =IM= ;M>7 I>=7I 667IML :MK6I6 Capital of isted Cos, *Cr, 's,Capital per I: ;= 66= 6;K 6M> II: >6: ;L= isted Cos, *:GI* a2h 's,Mar2et !alue of K; 67M 6;M I66 ILK >KI 6MM7 >>;: Capital per isted Cos, * a2h 's,*>GI$ppreciated value =>K 6M7 6:K 6I; 6M7 I;7 =:: K7= of Capital per isted Cos, * a2 's,-

$ost)independence cenario Most of the e.changes suffered almost a total eclipse during depression, ahore E.change /as closed during partition of the country and later migrated to "elhi and merged /ith "elhi Stoc2 E.change, ?angalore Stoc2 E.change imited /as registered in 6L>M and recogni0ed in 6L;=, Most of the other e.changes languished till 6L>M /hen they applied to the Central 5overnment for recognition under the Securities Contracts *'egulation- $ct+ 6L>;, Only ?ombay+ Calcutta+ Madras+ $hmedabad+ "elhi+ Ayderabad and Indore+ the /ell established e.changes+ /ere recogni0ed under the $ct, Some of the members of the other $ssociations /ere re9uired to be admitted by the recogni0ed stoc2 e.changes on a concessional basis+ but acting on the principle of unitary control+ all these pseudo stoc2 e.changes /ere refused recognition by the 5overnment of India and they thereupon ceased to function, Thus+ during early si.ties there /ere eight recogni0ed stoc2 e.changes in India *mentioned above-, The number virtually remained unchanged+ for nearly t/o decades, "uring eighties+ ho/ever+ many stoc2 e.changes /ere established( Cochin Stoc2

E.change *6LK7-+ &ttar Pradesh Stoc2 E.change $ssociation imited *at Nanpur+ 6LKI-+ and Pune Stoc2 E.change imited *6LKI-+ udhiana Stoc2 E.change $ssociation imited *6LK=-+ 5auhati Stoc2 E.change imited *6LK:-+ Nanara Stoc2 E.change imited *at Mangalore+ 6LK>-+ Magadh Stoc2 E.change $ssociation *at Patna+ 6LK;-+ Caipur Stoc2 E.change imited *6LKL-+ ?hubanes/ar Stoc2 E.change $ssociation imited *6LKL-+ Saurashtra Nutch Stoc2 E.change imited *at 'aj2ot+ 6LKL-+ !adodara Stoc2 E.change imited *at ?aroda+ 6LL7- and recently established e.changes ) Coimbatore and Meerut, Thus+ at present+ there are totally t/enty one recogni0ed stoc2 e.changes in India e.cluding the Over The Counter E.change of India imited *OTCEIand the National Stoc2 E.change of India imited *NSEI -, The Table given belo/ portrays the overall gro/th pattern of Indian stoc2 mar2ets since independence, It is 9uite evident from the Table that Indian stoc2 mar2ets have not only gro/n just in number of e.changes+ but also in number of listed companies and in capital of listed companies, The remar2able gro/th after 6LK> can be clearly seen from the Table+ and this /as due to the favouring government policies to/ards security mar2et industry,

AISTO'E( The /or2ing of stoc2 e.changes in India started in 6KM>, ?SE is the oldest stoc2 mar2et in India, The history of Indian stoc2 trading starts /ith =6K persons ta2ing membership in Native Share and Stoc2 ?ro2ers $ssociation+ /hich /e no/ 2no/ by the name ?ombay Stoc2 E.change or ?SE in short, In 6L;>+ ?SE got permanent recognition from the 5overnment of India, National Stoc2 E.change comes second to ?SE in terms of popularity, ?SE and NSE represent themselves as synonyms of Indian stoc2 mar2et, The history of Indian stoc2 mar2et is almost the same as the history of ?SE, The =7 stoc2 sensitive inde. or Sense. /as first compiled in 6LK;, The Sense. is compiled based on the performance of the stoc2s of =7 financially sound benchmar2 companies, In 6LL7 the ?SE crossed the 6777 mar2 for the first time, It crossed I777+ =777 and :777 figures in 6LLI, The reason for such huge surge in the stoc2 mar2et /as

the liberal financial policies announced by the then financial minister "r, Man Mohan Singh, The up)beat mood of the mar2et /as suddenly lost /ith Aarshad Mehta scam, It came to public 2no/ledge that Mr, Mehta+ also 2no/n as the big)bull of Indian stoc2 mar2et diverted huge funds from ban2s through fraudulent means, Ae played /ith IM7 million shares of about L7 companies, Millions of small)scale investors became victims to the fraud as the Sense. fell flat shedding >M7 points, To prevent such frauds+ the 5overnment formed The Securities and E.change ?oard of India+ through an $ct in 6LLI, SE?I is the statutory body that controls and regulates the functioning of stoc2 e.changes+ bro2ers+ sub)bro2ers+ portfolio managers investment advisors etc, SE?I oblige several rigid measures to protect the interest of investors, No/ /ith the inception of online trading and daily settlements the chances for a fraud is nil+ says top officials of SE?I, Sense. crossed the >777 mar2 in 6LLL and the ;777 mar2 in I777, The M777 mar2 /as crossed in Cune and the K777 mar2 on September K in I77>, Many foreign institutional investors *#II- are investing in Indian stoc2 mar2ets on a very large scale, The liberal economic policies pursued by successive 5overnments attracted foreign institutional investors to a large scale, E.perts no/ believe the sense. can soar past 6:777 mar2 before I767, The unpredictable behavior of the mar2et gave it a tag J Oa volatile mar2et,P The factors that affected the mar2et in the past /ere good monsoon+ ?haratiya Canatha PartyPs rise to po/er etc, The result of a cric2et match bet/een India and Pa2istan also affected the movements in Indian stoc2 mar2et, The National "emocratic $lliance led by ?CP+ during I77: public elections unsuccessfully tried to ride on the mar2et sentiments to po/er, N"$ /as voted out of po/er and the sense. recorded the biggest fall in a day amidst fears that the Congress)Communist coalition /ould stall economic reforms, ater prime minister Man Mohan SinghPs assurance of Oreforms /ith a human faceP cast off the fears and mar2et reacted sharply to touch the highest ever mar2 of K>77, India+ after &nited States hosts the largest number of listed companies, 5lobal investors no/ ardently see2 India as their preferred location for investment, Once vie/ed /ith s2epticism+ stoc2 mar2et no/ appeals to middle class Indians also, Many Indians /or2ing in foreign countries no/ divert their savings to stoc2s, This recent phenomenon is the result of opening up of online trading and diminished interest rates from ban2s, The stoc2bro2ers based in India are opening offices in different countries mainly to cater the needs of Non 'esident Indians, The time factor also /or2s for the N'Is, They can buy or sell stoc2 online after returning from their /or2 places, The recent incidents that led to gro/ing interest among Indian middle class are the initial public offers announced by Tata Consultancy Services+ Maruti &dyog imited+ ON5C and big names li2e that, 5ood monsoons al/ays raise the mar2et sentiments, $ good

monsoon means improved agricultural produce and more spending capacity among rural fol2, The bullish run of the stoc2 mar2et can be associated /ith a steady gro/th of around ;< in 5"P+ the gro/th of Indian companies to MNCs+ large potential of gro/th in the fields of telecommunication+ mass media+ education+ tourism and IT sectors bac2ed by economic reforms ensure that Indian stoc2 mar2et continues its bull run,

6 6KM> 6KM> ) The Indian toc' (ar'et Driten by Dilliam ?erg The /or2ing of stoc' e.changes in India started in *+,-, ?SE is the oldest stoc' mar'et in India, The history of Indian stoc' trading starts /ith =6K persons ta2ing membership in Native Share and toc' ?ro2ers ... Sho/ more #rom Sphere Q Dhy India/s Economy Dill Neep 5ro/ing Q Ne/s/ee2 Enterprise ) 5lobal R ) 'elated /eb pages ///,sphere,comGsphereitGB9Fsphereit<=$/// ,,, I, 6LLK May 6=+ 6LLK ) The Indian stoc' mar'et in ?ombay has fallen four percent on /hat analysts say is nervous reaction to the threat of sanctions+ particularly those of Capan and the &nited States, "ealers are describing the situation as a bloodbath, Prices had already started falling /hen Capan announced ... #rom Nuclear tests hit India stoc' mar'et ) 'elated /eb pages ne/s,bbc,co,u2G6GhiG/orldGsG/SasiaGL=77>,stm

:, I777 Cun I777 ) Options and futures trading in India commenced from 0une1 2333 on National toc' E.change and ?ombay toc' E.change in stoc' inde. futures+ stoc' futures+ stoc' inde. option and stoc' option, It /as a /elcome step on the part of the government since it /as ... Sho/ more

#rom #inancial "erivatives

) 'elated /eb pages

boo2s,google,comGboo2sBidF.?CCNT0vf#$CUpgF'$6 ,,, ;, I776 "ec =6+ I776 ) ... ... on the age old carry for/ard trading and introduction of rolling settlement /as a landmar2 development in the history of India stoc' mar2ets, ... On Culy I+ inde. and stoc' options /ere introduced in the Indian e9uity mar2ets, $ccompanying them /ere a host of other mar'et reforms ... #rom Say Cheese to change ) 'elated /eb pages ///,business)standard,comGcommonGstorypage,php ,,,

K, I77= Nov 6I+ I77= ) ?esides helping the investors+ the proposal of the e.change to form Indone.t jointly /ith the #ederation of Indian toc' E.changes+ /ould also boost ... it /ould certainly mar2 a beginning of a ne/ chapter in the history of the Indian securities mar'et /hen the proposal is implemented, ... #rom Indone.t( $ boon for small cap stoc2s ) 'elated /eb pages sify,comGfinanceGe9uityGfullstory,phpBidF6==7;:MI

67, I77: May 6M+ I77: ) ?OM?$E+ India @ India3s stoc' mar'et too2 the biggest plunge in its 6IL)year history Monday as investors panic2ed over ho/ communist parties /ould influence the policy of the incoming coalition government of Sonia 5andhi, toc' mar'et regulators halted trading t/ice during the day and ... #rom India/s stoc' mar'et plunges ) 'elated /eb pages ///,usatoday,comGmoneyGmar2etsG/orldGI77:)7> ,,,

6I, I77> $pr 6K+ I77> ) Dhile bulls and bears may be the bu00/ords on the stoc' mar'et *or should /e say+ 0oo-+ these t/o are not the only species rampaging around, ... In the history of Indian stoc' mar2ets+ bulls have never had it so good, The Street3s least favorite animal is the bear, ... #rom Dant to investB Nno/ your 0oology firstV ) 'elated /eb pages ///,rediff,comGmoneyGI77>GaprG6Kguest,htm

6:, I77; May I=+ I77; ) $ longer dra/n)out fall /ould have appeared as a bear phase and softened investor interest in /hat remains a very e.citing gro/th mar'et, ast Thursday+ the Sense. shed KI;,=K points+ the previous biggest fall in the history of Indian stoc' mar2ets /hile it lost

KKM,=; points intraday, ... #rom ?iggest crash in stoc' mar'et ///,hindu,comGI77;G7>GI=Gstories ,,, 6;, I77K

) 'elated /eb pages

Cun =7+ I77K ) The /orst ; months in the history of Indian toc' (ar'et1 by $rum Prabhudesai /as published on 0une 43th1 233+ and is listed in India+ stoc' mar'et, #ollo/ comments via the 'SS #eed Q eave a comment Q Trac2bac2 &' Tags( + benchmar2+ ?SE+ #II+ foreign ... Sho/ more ,,,

In India there are mainly I stoc2 e.change /here the stoc2s are traded namely ?SE*?ombay Stoc2 E.change-and NSE*National Stoc2 E.change-$part from these I e.change there are I= other e.change+they are on regional levels,In NSE there are around >777 stoc2s are traded and in ?SE =777 stoc2s are traded,?ut the NI#TE inde. is >7 and SENSE% is =7 stoc2s are representing,in these inde. the top performing companies and sector stoc2s are present, Indian investors had seen the &p3s and "o/n3s of the mar2et, 67 biggest falls in the Indian stoc2 mar2et history( 0an 2*1 233+( The Sense. sa/ its highest ever loss of 6+:7K points at the end of the session on Monday, The Sense. recovered to close at 6M+;7>,:7 after it tumbled to the day3s lo/ of 6;+L;=,L;+ on high volatility as investors panic2ed follo/ing /ea2 global cues amid fears of the &S recession, 0an 221 233+( The Sense. sa/ its biggest intra)day fall on Tuesday /hen it hit a lo/ of 6>+==I+ do/n I+IM= points, Ao/ever+ it recovered losses and closed at a loss of KM> points at 6;+M=7, The Nifty closed at :+KLL at a loss of =67 points, Trading /as suspended for one hour at the ?ombay Stoc2 E.change after the benchmar2 Sense. crashed to a lo/ of 6>+>M;,=7 /ithin minutes of opening+ crossing the circuit limit of 67 per cent,

(ay *+1 2335( The Sense. registered a fall of KI; points *;,M; per cent- to close at 66+=L6+ follo/ing heavy selling by #IIs+ retail investors and a /ea2ness in global mar2ets, The Nifty crashed by :L;,>7 points *K,M7<- points to close at >+I7K,K7 points, Decem6er *,1 233,( $ heavy bout of selling in the late noon deals sa/ the inde. plunge to a lo/ of 6L+6MM ) do/n K>; points from the day3s open, The Sense. finally ended /ith a huge loss of M;L points *=,K<- at 6L+I;6, The NSE Nifty ended at >+MMM+ do/n IM6 points, Octo6er *+1 233,( Profit)ta2ing in noon trades sa/ the inde. pare gains and slip into negative 0one, The intensity of selling increased to/ards the closing bell+ and the inde. tumbled all the /ay to a lo/ of 6M+MM6 ) do/n 6+:IK points from the day3s high, The Sense. finally ended /ith a hefty loss of M6M points *=,K<- at 6M+LLK, The Nifty lost I7K points to close at >+=>6,

0anuary *+1 233+( &nabated selling in the last one hour of trade sa/ the inde. tumble to a lo/ of 6K+L=7 ) do/n MK; points from the day3s high, The Sense. finally ended /ith a hefty loss of ;KM points *=,><- at 6L+76:, The inde. thus shed K,M< *6+K6= points- during the /ee2, The NSE Nifty plunged =,>< *I7K points- to >+M7>, Novem6er 2*1 233,( Mirroring /ea2ness in other $sian mar2ets+ the Sense. sa/ relentless selling, The inde. tumbled to a lo/ of 6K+>6> ) do/n M;; points from the previous close, The Sense. finally ended /ith a loss of ;MK points at 6K+;7=, The Nifty lost II7 points to close at >+>;6, August *51 233,( The Sense.+ after languishing over >77 points lo/er for most of the trading sesion+ slipped again to/ards the close to a lo/ of 6:+=:>, The inde. finally ended /ith a hefty loss of ;:= points at 6:+=>K, April 321 233,( The Sense. opened /ith a huge negative gap of I;7 points at 6I+K6I follo/ing the 'eserve ?an2 of India decision to hi2e the cash reserve ratio and repo rate, &nabated selling+ mainly in auto and ban2ing stoc2s+ sa/ the inde. drift to lo/er levels as the day progressed, The inde. tumbled to a lo/ of 6I+:I; before finally settling /ith a hefty loss of ;6M points *:,M<- at 6I+:>>, August 3*1 233,7 The Sense. opened /ith a negative gap of I7M points at 6>+=:: amid /ea2 trends in the global mar2et and slipped deeper into the red, &nabated selling across) the)board sa/ the inde. tumble to a lo/ of 6:+L66, The Sense. finally ended /ith a hefty loss of ;6> points at 6:+L=;,

C&''ENT SCEN$'IO( Jun 09, 2008 8 The Indian E9uity (ar'ets remained su6dued throughout the wee' with indices losing 6y nearly -: over the wee' ;0une *st wee'<. The selling pressure from FIIs= NRIs ) non resident Indians was seen in heavyweight stoc's. At the same time some consolidation was also seen in some selective stoc's across the 6om6ay and national stoc' e>change inde>es li'e the nifty and sense>. The wee' started with the important support levels of *5333?@,-3 getting 6reached. As mentioned in our previous e9uity report1 the Indian mar'ets saw massive sell)off after this development. The indices reached near the ne>t target support level of @-33. Though mar'ets have fallen sharply there are no clear indication of 6ottoming out and further downside cannot 6e ruled out. Ae feel the ne>t important support level is seen at *@,33?@2+3. But 6efore that 6ig investors li'e person of india origin and overseas citiCen of india can start investing in small 9uantity in selective stoc's1 they have to really time the mar'et really well1 and they need to diversify their investments 6etween mutual funds and stoc's. The support for the wee' is seen near *-*33?@@,while the resistance for the wee' is seen near *5*33?@+33. In high volatility this 6and can stretch further to *@D33?@@33 and *5@33?@+-3. Ae advise our clients to invest in indian stoc' mar'ets with caution and with a long term view with a portfolio diversification view across various financial products li'e7 stoc's1 mutual funds1 commodities and futures. oints. This is the third 6iggest loss iThursday1 (arch 231 233+ #urrent Indian toc' (ar'et cenario vs ! Recession. Indian Stoc2 Mar2et including both NSE)National Stoc2 E.change and the ?SE)?ombay Stoc2 E.change have certainly ta2en a tremendous beating in the past fe/ /ee2s, De are sure most of us here 2ne/ that the correction in the trading curve /as round the corner /hich /ould be healthy+ and the mar2ets /ould bounce bac2 from 6K2 levels /ith the help of mutual fund investments U buying of Indian stoc2s again, Ao/ever the anticipation /ent /rong+ and the &S recession story along /ith global and Indian

commodity prices have added fuel to the global e9uity mar2et turmoil on a /hole, "o /e have to /orry our Indian investments in stoc2s U mutual fundsB Dhat /ould happen ne.t in the stoc2 mar2ets of IndiaB Dhether investors should ma2e more investments in IndiaB Aell /e have to reali0e a fact that /e all are NO astrologers here+ rather /e are investors ta2ing calculated ris2s+ and /e should ta2e into account the probability of us being /rong as /ell, Things have gone certainly /orse in the Indian trading conte.t+ but /e at NriInvestIndia,com hope that in the coming months the same /ouldn3t be the case, Ae at NriInvestIndia.com would li'e to 6ring a couple of things into picture7 6, #ederal 'eserve *&S head ban2ing institution+ li2e '?I in India- is loo2ing for/ard to ma2e more rate cuts *interest rate cuts- in the coming future to ease out the credit crunch that has evo2ed since this subprime crisis, Its effect /ould ta2e ;)K months to reflect in the global economies including mar2ets of India( "erivatives Trading Mar2et+ #utures Trading Mar2et+ and Commodities Trading Mar2et of India, This reflection in trading and investment sentiment could ta2e some time to happen+ but it /ould be definitely /itnessed /ith an increment in local business+ #II investment in India and N'I Investment Services in India, &ood news I, Indian SharesGStoc2s mar2et are not performing great in the gone /ee2s+ but institutions still have abundant money on the table to invest4 but /ith the coming rate cuts+ the debt mar2et /ould not loo2 any good to them either *in the &S-, o would they put money into commodities ;mainly7 gold1 oil1 silver<E Commodity prices have risen up real fast+ not giving many investors the room or time to s/itch from e9uities or debt mar2et into commodities mar2et, $ll this brings the investors+ institutions+ ban2s U hedge funds in the land of uncertainty, They have to rethin2 their strategy and that is where the emerging mar'ets loo' attractive to these investors *because these investors /ould still /ant to invest their money, &S recession doesn3t mean people /ould stop investing for their future+ or hedge fundsGban2s /ould stop investingGspeculating money-, Thus bringing such investors to loo2 for good valuations and a very positive side for the $sian stoc2 mar2ets, &ood news =, Nothing bad is happening in the $sian mar2ets, De loo2 pretty strong+ and all this major blood is on the street is a result of short)term panic /e are /itnessing, The momentum /ould soon pic2 up once the &S recession /orries ease a little /ith fed pumping in more money *bailout- into the subprime cycle, Thus /e /ould see lot more buy orders coming into demat accounts to buy the Indian stoc2s, &ood news :, India story has not changed at all, De still believe that our economy has lot of potential /ith great fuel to shoot up, Ao/ever /e still believe that this is not going to happen in short)term+ and /e might not see too much purchase orders coming into the Online "mat $ccounts of Indians as /ell as N'I+ PIO or OCIs *non resident Indians-, There is a lot of room for e.pansion in India+ and there is huge demand for credit consumption, De are just /aiting for the li9uidity to pour)in, That li9uidity is definitely on the table+ but all big

institutions are loo2ing for some good indicators+ and /hen this happens /e /ould be cra/ling bac2 on the curve, &ood news >, De all believe that the mar2ets are majorly falling due to the &S /orries that are coming in and not because of the performances e.hibited by the Indian corporates, Earning results of the company are e.pected to be out in $pril */hen companies declare their 9uarterlyGannual performances to the public-, Everyone out here e.pects these numbers to be good+ /hich could thus decide the turn of the mar2et sentiments, &ood News Important7 Our idea is not to put a very rosy picture in front of you+ but to ease out some tension by highlighting certain macro U micro economic points that are still in our favour, De 2no/ investors not only /ith us+ but also /ith other bro2ers are loosing their portfolio strength in terms of capital and valuations, Ao/ever+ 2eeping all the above notes in mind along /ith strongGstable Indian fundamentals that are still pretty attractive /e advise our clients to stay strong and very importantly increase their time frame from I years to a minimum of 4)@ years now, This is especially for clients /ho have invested heavily in mutual funds+ as mutual funds are supposed to be long term financial instruments and not short)term trading products, To conclude /e /ould advise clients to stay calm and hold onto the positions /ith a long term perspective *4)@ years now- and lets ta2e this opportunity to build our portfolios even stronger by adding good positions*especially in mining+ commodity+ energy U infrastructure sectors- at lo/ers prices as /ell,

I am impressed by your rational analysis of the current global scenario. ) 'am2umar+ a > Minute Drapup Subscriber, Sign &p No/,,, it3s #reeV

Today3s Mar2et Clic2 on a company name to vie/ its detailed stoc2 9uote B E)43F *41+D@ ;)*D< Top May I;+ I77L 66(7K(77 &ainers $M AIN"$ CO K7,:7 =,KK< STE' ITE IN", >>:,=7 =,76< A"#C I+6=K,7> I,:I< IN#OSES 6+>:I,77 I,I;< ?AE I+7=K,>7 6,L=<

$rchives Q Mar2et Monitor

Q 'SS

N E)-3F @12*+ ;)*D< Top May I;+ I77L 66(67(76 &ainers $M AIN"$ CO K7,>7 :,7M< STE' ITE IN", >>:,7> =,77< A"#C I+6=>,77 I,=:< IN#OSES 6+>:=,77 I,66< CIP $ IIK,I7 6,LL<

Top %osers ?A$'TI $I'TE '$N?$%E 'E I$NCE COMM NTPC T$T$ MOTO'S

MMK,;7 I>K,;7 =6>,K7 I7L,I7 =:6,:>

):,7:< )=,7:< )I,77< )6,;M< )6,=7<

Top %osers ?A$'TI $I'TE '$N?$%E PODE' 5'I" CO'P, 'E I$NCE COMM T$T$ COMM,

MMM,K> ):,76< I>K,:7 )=,II< 66=,>7 )I,;;< =6:,K7 )I,=6< >M=,=> )I,7I<

In the Indian mar2et scenario+ the large #MC5 companies reached the top line /ith a double)digit gro/th+ /ith their shares being attractive for investing in the Indian Stoc2 Mar2et, Such companies li2e the Tata Tea+ ?ritannia+ to name a fe/+ has been providing a bustling business for the Indian share mar2et, Other leading houses offering e9ually beneficial stoc2s for investing in Indian Stoc2 Mar2et+ of the SENSE% chart are the t/o) /heeler and three)/heeler ma2er ?ajaj $uto second largest soft/are e.porter Infosys Technologies+ top private sector telecoms service provider ?harti $irtel+ major pharmaceuticals 'anba.y aboratories+ housing finance company A"#C+ state)o/ned heavy electrical e9uipment ma2er ?AE + steel ma2er Tata Steel and second largest lender private sector ICICI ?an2, The Indian toc' (ar'et 8 #ontinued Boom or Impending BustE "ate( 7:,7:,I77K ) 6I(IK Category( Business1 Economy1 Finances1 Ban'ing = Insurance Press release from( Evalueserve "uring I77=J7M+ IndiaPs economy gre/ at an average annual rate of K,;< and reached &S W6+7=7 billion in the calendar yearI77M, Ao/ever+ during the last 6; years *6LL6J I77;-+ the annual inflation *as measured by the average /holesale price inde.XDPIY- has been appro.imately ;,;M<, 5iven the savings rate and li9uidity in the system+ EvalueservePs analysis sho/s that the annual inflation Indias li2ely to hover around >< during the ne.t 6: years, $ssuming a constant e.change rate+ /here one &S "ollar e9uals :7 Indian 'upees+ IndiaPs economy is li2ely to be W6+:L7 billion in I767 and around W>+7:7 billion in I7I7 *in nominal terms-, This implies that even after accounting for inflation+ there /ill be more than a five)fold increase in IndiaPs economy bet/een I77M and I7I7+ /hich /ill ma2e India the fourth largest economy in the /orld after the &nited States+ China+ and Capan, "uring the last :I months+ the Indian stoc2 mar2et+ and in particular the t/o indices@ Sense. *Sensitive Inde.- and ?SE)677+ have gro/n by appro.imately IL7<+ corresponding to a cumulative annual gro/th rate of =;<, This can be

attributed partly to the gro/th of the Indian economy and partly to the enormous inflo/ of foreign currency in the Indian stoc2 mar2et+ particularly by #oreign Institutional Investors *#IIs-, 5iven this bac2drop+ Evalueserve+ a global research U analytics firm+ recently conducted a study regarding the rise of the Indian stoc2 mar2et, This study /as 9uite challenging for us because the Indian mar2et is rather uni9ue /ith almost no parallels, Nevertheless+ /e compared it to other booms and busts in emerging mar2ets and also used bac2testing and related analysis, Our study resulted in the follo/ing three scenarios( Ma2ing stoc2 mar2et predictions is al/ays a very ris2y business, Ao/ever+ comparing and contrasting arguments by bulls and bears+ /e have arrived at three li2ely scenarios+ /hich are briefly discussed belo/( #irst Scenario J Stoc2 Mar2et Crash This scenario is li2ely to occur if+ because of a sudden crisis of confidence *e,g,+ because of a sudden collapse of the current coalition government in India-+ there /as a flight of #II money out of the country, $ccording to EvalueservePs models and analysis+ if &SW 6I billion of #II money /ere to leave /ithin a 9uarter+ the stoc2 mar2et /ould drop by appro.imately =7< and the Indian 'upee /ould depreciate by about ;<, This /ould imply a level of 6:+777 for Sense.+ /hich /as the level of Sense. around a year ago+ /hen it /as already causing an.iety among mar2et participants+ regulators+ and the Indian government, #ortunately+ an immediate ;< depreciation of the Indian currency /ould not be catastrophic for the economy+ although it /ould lead to a bout of inflation and have a short)term negative impact on the current account deficit, This could potentially lead to a vicious cycle /hereby more #II money leaves India+ /hich in turn /ould lead to further losses in Sense.+ the depreciation of the 'upee+ and even higher inflation, $lternatively+ a depreciated 'upee /ould ma2e Indian e.ports more competitive and /ould help close the current trade deficit in the long run, Second Scenario J Stoc2 Mar2et ?ubble This scenario is li2ely to occur if the '?I and the Indian government are unable to curb the massive inflo/ of #II money for another year or t/o, This /ould send the Sense. and the ?SE)677 even higher+ and more retail investors /ould jump in+ thereby pushing the PGE ratios of listed companies even higher, This situation /ould be some/hat a2in to the contemporary e.ample of the Chinese stoc2 mar2et+ /here companies are trading at PGE ratios of >7, So+ despite the current an.iety+ there is clearly room for the Indian stoc2 mar2et to double in the ne.t year or t/o, Of course+ in this scenario+ such an Zirrational e.uberance[ of the Indian stoc2 mar2et may continue for some time+ reminiscent of /hat happened in the &S from the time

/hen $lan 5reenspan made his comments in "ecember 6LL; to the time /hen the &S mar2et crashed in $pril I777, Third Scenario J $ 'easonable Mar2et 'ise The stoc2 mar2et continues to rise although at a ZsnailPs pace[ *of 7J67< per year-, Since the companies listed in the Sense. and the ?SE)677 are li2ely to gro/ in revenue at 6>J6M< annually *in nominal termsand probably more /ith respect to profit margins+ this system might self)adjust /ithin the ne.t IJ: years, Ao/ever+ during this period+ the stoc2 mar2et may remain stagnant or go Zside/ays[+ and could even have high levels of volatility, Indeed+ this scenario may be the least disruptive for the Indian economy+ and particularly+ for the Indian stoc2 mar2et, $ccording to "r, $lo2 $ggar/al+ co)founder and chairman of Evalueserve+ ZThe first scenario *i,e, the Sense. dropping to 6:+777 in the near future- has the highest probability of appro.imately >7<+ /hereas the other t/o scenarios have an e9ual probability of appro.imately I>< each, In other /ords+ the ris2 is s2e/ed on the do/nside,[ Seite 6 G I "isclaimer $lthough the information contained in this article has been obtained from sources believed to be reliable+ the author and Evalueserve disclaim all /arranties as to the accuracy+ completeness or ade9uacy of such information, Evalueserve shall have no liability for errors+ omissions or inade9uacies in the information contained herein or for interpretations thereof, Evalueserve Cyberpar2+ &nitech Dorld+ Sector)=L+ 5urgaon+ Aaryana+ India, Phone( 8L6 6I: :6I:777 prcc\evalueserve,com $bout Evalueserve Evalueserve provides custom research and analytics services to companies /orld/ide including ?usiness 'esearch+ Mar2et 'esearch+ "ata U #inancial $nalytics+ Investment 'esearch+ Intellectual Property and egal Process Services+ and access to a global net/or2 of domain e.perts through Evalueserve Circle of E.perts, The firm /as founded by I?M and McNinsey alumni+ and has completed over 6I+777 client engagements, The firm currently has over I+677 professionals located in research centers in Chile+ India+ China+ and Ne/ Eor2, EvalueservePs Zin)country[ Client E.ecutives are located in most major business and financial centers /orld/ide@from Silicon !alley to Sydney+ ,

#&T&'E O&T# OD Current Indian Stoc2 Mar2et Scenario for Nris in Nse U ?se Trading $uthor( $ditya Sharma The Indian E9uity Mar2ets remained subdued throughout the /ee2 /ith indices losing by nearly >< over the /ee2 *Cune 6st /ee2-, The selling pressure from #IIsU N'Is ) non resident Indians /as seen in heavy/eight stoc2s, $t the same time some consolidation /as also seen in some selective stoc2s across the ?ombay and national stoc2 e.change inde.es li2e the nifty and sense., The /ee2 started /ith the important support levels of 6;777G:M>7 getting breached, $s mentioned in our previous e9uity report+ the Indian mar2ets sa/ massive sell)off after this development, The indices reached near the ne.t target support level of :>77, Though mar2ets have fallen sharply there are no clear indication of bottoming out and further do/nside cannot be ruled out, De feel the ne.t important support level is seen at 6:M77G:IK7, ?ut before that big investors li2e person of India origin and overseas citi0en of India can start investing in small 9uantity in selective stoc2s+ they have to really time the mar2et really /ell+ and they need to diversify their investments bet/een mutual funds and stoc2s, The support for the /ee2 is seen near 6>677G::M> /hile the resistance for the /ee2 is seen near 6;677G:K77, In high volatility this band can stretch further to 6:L77G::77 and 6;:77G:K>7, De advise our clients to invest in Indian stoc2 mar2ets /ith caution and /ith a long term vie/ /ith a portfolio diversification vie/ across various financial products li2e( stoc2s+ mutual funds+ commodities and futures, Source( http(GG///,nriinvestindia,comG NriInvestIndia,com is an emerging N'I+ PIO and OCI focused Investment ?ro2er U Mutual fund "istributor Company from India+ offering N'I Services to do Investment in India, Our goal is to guide Non 'esident Indians to Trade in Indian Stoc2 Mar2et U Invest in top Mutual #unds of India, $rticle Source( http(GG///,articlesbase,comGinvesting)articlesGcurrent)indian)stoc2) mar2et)scenario)for)nris)in)nse)bse)trading)::=7I7,html $bout the $uthor( Myself $ditya Sharma *Sr,Investment $dvisor-+ and I /or2 for a N'I Investment

company * ///,NriInvestIndia,com - that helps N'Is+ PIOs and OCIs to invest in India3s top mutual funds, Aere at NriInvestIndia,com /e focus in delivering value service to our N'I clients /hen it comes to their investments in the Indian stoc2 mar2ets J NSE U ?SE, Our e9uity U mutual fund investment advising is structured to suit the investment objectives of the non resident Indian investor in a long run *including PIOs and OCIs-, De at NriInvestIndia,com advise our clients to invest across various financial products vi0( Mutual funds+ '?I bonds+ Portfolio Management Services for N'Is+ Stoc2s U Shares+ Trading $ccount+ "mat $ccount+ SIPs J systematic investment plans+ etc+ based on your ris2)return profile,

Present Scenario The current conditions of Indian mar2ets have drastically improved, There is absolute transparency and instant transactions, $ll Indian Stoc2 mar2ets are no/ computeri0ed and Internet Trading has become a common phenomenon, Indian stoc2 mar2ets have also developed a dynamic nature and can change from a bullish temperament to a bearish slide, $ny small bit of information or even a rumour from any part of the country can affect the mar2et and is a fairly accurate indicator of the prevalent atmosphere in the region or country, People from across the country and globe get in touch /ith minute /ise readings on the stoc2 mar2et and gain a lot of trading aptitude after daily seeing ?SE Stoc2 5ainers *http(GG///,paisa/aisa,comGstoc2sGtop)gainers,asp.- or ?SE top losers *http(GG///,paisa/aisa,comGstoc2sGtop)loosers,asp.- list /hich does a /orld of good to their investment portfolio, Dhat is Indian Stoc2 Mar2et B Indian Stoc2 Mar2et contains more then I7 Stoc2 E.changes+ some of /hich are popular nationally as /ell as regionally, The first stoc2 mar2et *http(GG///,paisa/aisa,comGstoc2sG- started in the country /as the ?ombay Stoc2 E.change *?SE-, Its the oldest stoc2 mar2et in $sia and /as established as Zthe Native Share and Stoc2 ?ro2er3s $ssociation[ in the year 6KM>,It has around >777 listings and a volume of more than &SW 6 Trillion, The other most popular Stoc2 E.change is the National Stoc2 E.change *NSE-, Its also the largest Stoc2 E.change in the country and third in the /orld, These t/o e.changes constitute a major part of the Indian Capital Mar2et,

The Indian Stoc2 Mar2et is a collection of various regional and national level stoc2 e.changes in India, It is platform for the masses of the country to invest their savings and also as a source of funds for various organi0ations and institutions that feature in business category, Indian stoc' mar'et In order to appreciate the emerging role of stoc2 e.changes in India it is apt to start /ith the historical perspective and a comparative picture /ith other stoc2 e.changes in the /orld, The stoc2 e.change is an association of member bro2ers for the purpose of facilitating and regulating trading in securities, It is thus+ a self regulating organi0ation+ be it a company or association, $s the securities trading developed in India since 6KM>+ it /as a private enterprise of an unregulated nature, The first attempt at regulation /as by Securities Contracts Control $ct of ?ombay 6LI>+ passed by the erst/hile ?ombay Presidency, There /as resistance from the stoc2 e.changes for government control even at that time, These e.changes had a mushroom gro/th during the /ar time of forties as private clubs, There /ere as many as I6 e.changes in 6L:>, $t that time securities trading /ere a state subject but /ith the adoption of Indian Constitution in 6L>6+ it became a Central subject, It too2 nearly si. years after that to pass the necessary central legislation in 6L>; in the form of Securities Contracts *'egulations- $ct, In the socialistic patter of society adopted by the government for planned development of the economy in 6L>6+ the role of stoc2 e.change received no significant attention and they /ere left /ith the minimum government regulation under the above $ct and the rules made there under, The traditional emphasis /as on self regulation by the stoc2 e.changes themselves /ith the result that the government had rarely used the full range of po/ers besto/ed on them e.cept for one or t/o occasions in /ar time, So the history of the gro/th of stoc' mar'et movement in India /as characteri0ed by three main features, 6, 'esistance to government control and regulation, I, 5ro/th of stoc2 e.changes as private associations /ith a modicum of government interference, =, Emphasis on self regulation and semi)autonomous nature of these private organi0ations, The government and bro2ing community /or2ed in close coordination and occasions resulting in friction fe/ and far bet/een, The volume of trade and funds raised from the capital mar2et /ere small and the investor interest /as at ebb, %atest $hase in toc' (ar'ets7 It /as only since 6LK> /ith the entry of ban2s and their subsidiaries into the stoc2 and capital mar2s+ facilitated by the passage of the ?an2ing a/s $mendment $ct 6LK= that the idea of better services in these mar2ets arose, The Seventh #ive Eear Plan 6LK>)L7 contained the first elements of a ne/ economic policy leading to the opening up of the economy+ industrial liberali0ation and a gro/ing role for

the private sector, These changes necessitated greater attention to the gro/th of capital mar2et and protection of investors as public interest in these mar2ets began to gro/, E>isting Regulation7 Indian stoc' mar'et activity is regulated by a variety of la/s as diverse as Companies $ct of 6L>;+ Indian Contracts $ct+ Stamp $ct+ Negotiable Instruments $ct and Securities Contract *'egulation- $ct etc, The first re9uirement of /ell 2nit reforms is to have a consolidated la/ incorporating all the provisions to regulate investment activity as financial Services $ct of 6LK; in &nited Ningdom, Management Perspectives( The government formed The Securities and E.change ?oard of India $ct in 6LLI, The SE?I is the statutory body that controls and regulates the functioning of stoc2 e.changes+ bro2ers+ intermediaries+ and portfolio managers investment advisors and obliges several rigid measures to protect the interest of investors, The era of management by lapses+ mismanagement has ostensibly ended and a ne/ concept of management by rules has started, !arious "epartments have been formed /hich perform the functions of listing+ regulation of trading+ provision of settlement and clearance etc basically 2eeping the services to be rendered to the members and the public in mind, The decisions are sometimes ta2en by the committees appointed by the governing board for specific purposes, The Operations "epartment observe that daily trading ta2es place+ collect 9uotation and ma2e them available to members and public by the evening of every day, The Computer "epartment collects and compiles the corporate data 9uotations of scripts and turnover of trade+ member)/ise and script)/ise for better investment decision ma2ing, The E"P /or2 of building up the information base on companies for members and investors to ma2e their investment decisions, Future Role of E>changes7 The future role of stoc2 e.changes /ill be radically difference from the present+ as their developmental role /ill be increasing much faster than their regulatory role, Not only the stoc2 e.changes but all the players in the mar2et namely companies+ bro2ers+ intermediaries and public /ould have to play a greater role in the functioning of stoc' mar'et, $long /ith increasing self regulation and a stricter enforcement of a code of conduct on the members+ the stoc2 e.changes /ill have to emerge as public service institutions catering to increasing demands of investors in the country, isted companies have also a role in this process to collaborate and e.tend all help for more efficient functioning of e.change, To improve the 9uality and efficiency of service+ trained and professional category of intermediaries and bro2ers is also necessary, Education+ training and research /ould be the hall mar2 of future stoc2 bro2ers and other intermediaries, #ommunication Technology7 Efficient mar2s re9uire the flo/ of 9uic2 and correct information+ an efficient communication system+ a system of fair and just practices and procedures accompanied by a strict enforcement of a code of conduct on all, $ national mar2et system+ if it is to be

developed+ /ould vitally depend on the efficient satellite telecommunication system in India and a proper lin2age of all stoc2 e.changes,

Information Technology7 Investment to increase the level of e.plicit coordination /ith outside agents have generally resulted in increased ris2 to the firm4 firms have traditionally avoided this increased ris2 by becoming vertically integrated or by under investing in coordination, Information Technology has the ability to lo/er coordination cost /ithout increasing the associated transactions ris2+ leading to more outsourcing and less vertically integrated firms, o/er association specificity of Information Technology investments and a better monitoring capability mean that firms can more safely spend in information technology for inter firm coordination than in customary investments for open coordination such as co)located facilities or speciali0ed human resources4 firms are therefore more li2ely to coordinate /ith suppliers /ithout re9uiring o/nership to reduce their ris2, This enables them to benefit from production economies of large speciali0ed suppliers, Moreover+ rapid reduction in the cost of information technology and reduction in the transactions ris2 of e.plicit coordination ma2es possible substantially more use of e.plicit coordination /ith suppliers, #onclusion7 $lthough the present stoc' mar'et scenario appears dismal+ it /as due to the transitional phase+ it /as going through, The policy reforms /ere adhoc and unplanned+ but the trend appears irreversible, The gro/ing strong investor base+ entry of middle class as investors and public a/areness of the stoc2 and capital mar2ets have made it imperative for the reforms to continue, The offshoot of the economic and financial reforms is the greater responsibility thrust on the companies to improve their competitive efficiency and productivity, The greater role given to the private sector and increasing dependence on the capital mar2et for both private and public sectors /ould force the companies to prove their ability through performance and stoc2 e.changes to be better /indo/s and transparent media of measuring the corporate and industrial performance, The regulatory frame/or2 of Securities and E.change ?oard of India is increasing and spreading its tentacles in 9uantitative terms instead of confining to 9ualitative aspects+ as in foreign mar2ets, The ultimate objective of all regulations is maintenance of standards and 9uality and if that is to be achieved+ deregulation can succeed and all the moves of the government and stoc2 e.changes should be in that direction, FOR IMMEDIA E RE!EA"E #R!og $#ress Release% J &ul '() *''+ J Ever since mar2ets slid precipitously in Canuary and continued on the do/n/ard turn+ one has been /ondering if the mar2et has fallen

enough to see a sustainable trend reversal, $midst around M+777 point fall in Sense. from Canuary pea2 till date+ there have been as many as four 6+777)point rallies+ including a I7 percent rise from mid)March lo/ to end)$pril high, Thus+ there have been a fe/ bottoms so to spea2+ and bottom hunting so far has been a rather unprofitable enterprise /ith many false starts, Continuing the ris2y pursuit even then+ there are multiple /ays to approach this 9uestion of bottom, #or most of us though+ given the odds of getting pea2s and troughs right+ the best /ay+ of course+ is to evolve an approach that does not effectively depend on searching for tops and bottoms, #rom a fundamental perspective+ trajectory in corporate earnings is the most significant variable that /ill decide the long)term direction of the mar2et, Corporate earnings in India have gro/n at almost t/ice the pace of 5"P in the last five years+ and the mar2et3s e.pectations are that earnings gro/th trend is intact4 only the e.tent of gro/th in the medium)term is made uncertain by recent macro)economic developments, The most important such development is the change in short)term inflation e.pectations in the recent past+ and /hich has resulted in a change in the direction of interest rate movement, To /hat levels inflation could rise and /hen it might start sho/ing declining trend is in some /ay lin2ed to trend in prices of global commodities+ chiefly oil, $s things stand today+ there are reasons to believe that inflation is li2ely to cool do/n to/ards the last 9uarter and may ta2e a little longer to come /ithin the policyma2ers3 tolerance band, De believe that for clarity to emerge on the impact of the macro)economic challenges on aggregate corporate earnings it /ill ta2e another =); months, Some clarity /ill emerge in the upcoming first 9uarter results+ but for more /e may have to /ait till second 9uarterBs earnings reports to come, Dhile the macroeconomic ne/s flo/ could remain mi.ed in the near future+ one need not /ait for the last of the bad ne/s to come out of the bag+ as in any case one can never be completely sure+ a priori+ to ma2e an investment, The most important lesson from history one can learn about e9uities is that one should not base onePs investment decisions based on prevailing sentiment+ feel good factor or lac2 of it, There is ample evidence in history to sho/ that mar2et bottoms out much before bad ne/s ends+ as mar2ets discount future ne/s into current prices or valuations, Of the many amongst us /ho /ish to time the bottom+ only a fe/ /ill succeed and even fe/er on a consistent basis+ /hile almost all of us need to save for future and on a regular basis, So instead of trying to time the bottom+ a better approach /ould be to systematically invest in a combination of assets that gives us the best chance of meeting our financial goals+ /hich must also include outperforming long)term inflation to protect real value of savings as one of the 2ey objectives, #or the reasons discussed above+ this is clearly an opportune time to be buying e9uities for the long)term, #R!og $#ress Release% J &ul '() *''+ J Ever since mar2ets slid precipitously in Canuary and continued on the do/n/ard turn+ one has been /ondering if the mar2et has fallen enough to see a sustainable trend reversal, $midst around M+777 point fall in Sense. from Canuary pea2 till date+ there have been as many as four 6+777)point rallies+ including a I7 percent rise from mid)March lo/ to end)$pril high,

Thus+ there have been a fe/ bottoms so to spea2+ and bottom hunting so far has been a rather unprofitable enterprise /ith many false starts, Continuing the ris2y pursuit even then+ there are multiple /ays to approach this 9uestion of bottom, #or most of us though+ given the odds of getting pea2s and troughs right+ the best /ay+ of course+ is to evolve an approach that does not effectively depend on searching for tops and bottoms, #rom a fundamental perspective+ trajectory in corporate earnings is the most significant variable that /ill decide the long)term direction of the mar2et, Corporate earnings in India have gro/n at almost t/ice the pace of 5"P in the last five years+ and the mar2et3s e.pectations are that earnings gro/th trend is intact4 only the e.tent of gro/th in the medium)term is made uncertain by recent macro)economic developments, The most important such development is the change in short)term inflation e.pectations in the recent past+ and /hich has resulted in a change in the direction of interest rate movement, To /hat levels inflation could rise and /hen it might start sho/ing declining trend is in some /ay lin2ed to trend in prices of global commodities+ chiefly oil, $s things stand today+ there are reasons to believe that inflation is li2ely to cool do/n to/ards the last 9uarter and may ta2e a little longer to come /ithin the policyma2ers3 tolerance band, De believe that for clarity to emerge on the impact of the macro)economic challenges on aggregate corporate earnings it /ill ta2e another =); months, Some clarity /ill emerge in the upcoming first 9uarter results+ but for more /e may have to /ait till second 9uarterBs earnings reports to come, Dhile the macroeconomic ne/s flo/ could remain mi.ed in the near future+ one need not /ait for the last of the bad ne/s to come out of the bag+ as in any case one can never be completely sure+ a priori+ to ma2e an investment, The most important lesson from history one can learn about e9uities is that one should not base onePs investment decisions based on prevailing sentiment+ feel good factor or lac2 of it, There is ample evidence in history to sho/ that mar2et bottoms out much before bad ne/s ends+ as mar2ets discount future ne/s into current prices or valuations, Of the many amongst us /ho /ish to time the bottom+ only a fe/ /ill succeed and even fe/er on a consistent basis+ /hile almost all of us need to save for future and on a regular basis, So instead of trying to time the bottom+ a better approach /ould be to systematically invest in a combination of assets that gives us the best chance of meeting our financial goals+ /hich must also include outperforming long)term inflation to protect real value of savings as one of the 2ey objectives, #or the reasons discussed above+ this is clearly an opportune time to be buying e9uities for the long)term,

COMP$NE P'O#I E

#O($AN" $ROFI%E Cholamandalam "?S is a pan)Indian+ composite financial services provider, It comprises the parent company+ Cholamandalam "?S #inance imited *C"# - and its subsidiaries, The shares of C"# are listed in the Madras *MSE-+ ?ombay *?SE- and National *NSEStoc2 E.changes, #HO%A(ANDA%A( DB FINAN#IA% ERGI#E &RO!$ Cholamandalam "?S is a pan)Indian+ composite financial services provider, It comprises the parent company+ Cholamandalam "?S #inance imited *C"# -+ and its subsidiaries and associates "?S Cholamandalam "istribution Cholamandalam Securities imited, The shares of C"# *MSE-+ Mumbai *?SE- and National *NSE- Stoc2 E.changes, #holamandalam DB Finance %imited ;#DF%< Cholamandalam Investment U #inance Company imited *CI#C - /as incorporated in 6LMK as the financial services arm of the Murugappa 5roup, In I77>+ post the joint venture partnership bet/een the Murugappa 5roup and "?S ?an2 imited+ Singapore+ the Company /as renamed as Cholamandalam "?S #inance imited *C"# -, The Company that commenced business as an e9uipment financing company has no/ emerged as a comprehensive financial services solution provider that offers vehicle finance+ business finance+ home e9uity loans+ mutual funds+ stoc2 bro2ing and distribution of financial products to its customers, The Company operates from over 6:7 branches across India /ith an asset under management of about 's,K>:; Crores, The imited+ "?S are listed in the Madras

subsidiaries of Cholamandalam "?S include "?S Cholamandalam Securities imited *"Csec- and "?S Cholamandalam "istribution imited *"C" -, DB #holamandalam Distri6ution %imited ;D#D%< Is in the business of providing /ealth management services /ith enhanced focus on larger product bas2et and unbiased investment advice, Products offered include mutual funds+ life and general insurance+ e9uities+ real estate+ private e9uity and fi.ed income products, The company has a rich base of loyal clients and ran2s among the top =7 distributors in the country /ith an asset si0e of 's,6=;K crores as on March =6+ I77K, DB #holamandalam ecurities %imited ;D# ec< Is a securities bro2ing company offering stoc2 bro2ing and e9uity advisory services to institutional investors+ including many of the largest mutual funds in India and individual clients across the country, "Csec is a member of ?ombay Stoc2 E.change imited and National Stoc2 E.change of India Services *India- imited *C"S (urugappa &roup Aead9uartered in Chennai+ the 's, 6>+L7M crores *&S" =,6: billion- Murugappa 5roup is one of India3s leading business conglomerates, Mar2et leaders in diverse areas of business including Engineering+ $brasives+ #inance+ 5eneral Insurance+ Cycles+ Sugar+ #arm Inputs+ #ertili0ers+ Plantations+ ?io)products and Nutraceuticals+ its IL companies have manufacturing facilities spread across 6= states in India, The organi0ation fosters an environment of professionalism and has a /or2force of over =I+777 employees, The 5roup has forged strong joint venture alliances /ith leading international companies li2e "?S ?an2+ Mitsui Sumitomo+ #os2or+ Cargill and 5roupe Chimi9ue Tunisien has consolidated its status as one of the fastest gro/ing diversified business houses in India, DB Ban' "?S ?an2 td,+ Singapore is a 677< subsidiary of "?S 5roup Aoldings td, *"?S-, imited, It is also a depository participant /ith National Securities "epository imited *NS" - and Central "epository

"?S is one of the largest financial services groups in $sia /ith operations in 6; mar2ets, Aead9uartered in Singapore+ "?S3 1$$)1 and 1$a61 credit ratings are among the highest in the $sia)Pacific region, $s a ban2 that specialises in $sia+ "?S leverages its deep understanding of the region+ local culture and insights to serve and build lasting relationships /ith its clients, "?S provides the full range of services in corporate+ SME+ consumer and /holesale ban2ing activities across $sia and the Middle East, The ban2 is committed to e.panding its pan) $sia franchise by leveraging its gro/ing presence in mainland China+ Aong Nong and Tai/an to intermediate the increasing trade and investment flo/s bet/een these mar2ets, i2e/ise+ "?S is focused on e.tending its end)to)end services to facilitate capital /ithin fast)gro/ing countries in Indonesia and India, "?S ac2no/ledges the passion+ commitment and can)do spirit in each of its 6>+777 staff+ representing over =7 nationalities, #or more information+ please visit ///,dbs,com,

A Aal' Down History O/ing to Murugappa 5roup3s pre)eminent position in the industry and the consumer e9uity that it had painsta2ingly built+ the hori0on offered opportunities in the financial sector, To harness this+ the group set up Cholamandalam "?S #inance imited *C"# incorporated as Cholamandalam Investment and #inance Company td *CI#C - in 6LMK /ith the primary objective of offering asset finance through leasing and hire purchase to corporates and then to retail customers, It has since evolved itself into a large+ composite financial services organi0ation, Today+ Cholamandalam "?S offers stoc2 bro2ing+ mutual fund and investment advisory services through its subsidiaries, Ever since its inception and all through its gro/th+ the company has 2ept a clear sight of its values, The basic tenet of these values is a strict adherence to ethics and a responsibility to all those /ho come /ithin its corporate ambit ) customers+ shareholders+ employees and society,

?oard Of "irectors Mr, M,$, $lagappan Chairman Is a graduate in Commerce and has undergone a course in Management at &niversity of $ston+ &,N, Aolds an honorary doctorate besto/ed upon by ?irmingham city &niversity+ &N, Is the Chairman of the Murugappa Corporate ?oard, Is a Committee member of #ICCI and SICCI and Aonorary Consul of Aungary in India *Southern 'egion-, Aas been associated /ith the Company since its inception in various capacities including as Managing "irector bet/een 6LL:)LL Mr, Indresh Narain Non)e.ecutive "irector ?an2er /ith /ide e.perience at regional and head office level in personal and corporate ban2ing+ /ealth management+ currency mar2ets+ asset recovery+ corporate finance and human resources, 'etired as Aead of Compliance U egal+ AS?C India, Das also member of the $ssets U iabilities committee *$ CO-+ the $pe. Management Committee and a member of the corporate governance and audit committees of AS?C+ India, Is also a director on the ?oards of "hanu2a $gritech imited + Mindtec2 *India- td and Inte. Technologies *India- td,

Mr, ' Nrishnamurthy Non)e.ecutive "irector Aolds a masters degree in Commerce from the university of the Madras besides being an associate of the Institute of ?an2ers, Aolds a diploma in Industrial #inance Management Education program at IIM+ $hmedabad and is a ord $ldington ?an2ing 'esearch #ello/ in &N, $ttended a course on ?an2ing Policy at Aarvard &niversity+ &S$, Aas over three decades of e.perience in ban2ing in various positions in State ban2 of India,

Is a visiting faculty at IIM $hmedabad and a fe/ other management institutions, ] Mr, ! P Mahendra Non)e.ecutive "irector Is a graduate in engineering from the &niversity College of Engineering+ ?angalore, Is the Managing "irector of !ST Tillers Tractors imited+ ?angalore and is also on the boards of several other companies, Aas participated in a number of management programmes in Capan, Is a 2een sportsman and is a member of several philanthropic institutions, Mr, ' ! Nanoria Non)e.ecutive "irector Is an M?$ *Aons- from IM"+ S/it0erland, Is the Chairman and Managing "irector of Nanoria Chemicals U Industries td, and is also on the boards of various other companies, #ormer !ice President of #ederation of Indian Chamber of Commerce *#ICCI-+ and has headed several joint)business councils, Is the managing committee member of PA" Chamber of Commerce U Industry,

Mr, N Srinivasan Non)e.ecutive "irector Is a member of the Institute of Chartered $ccountants of India and the Institute of Company Secretaries of India, Aas over I> years of e.perience in the areas of Corporate #inance+ egal+ Projects and 5eneral Management, Das the President and Chief operating officer of Thiru $rooran Sugars td, Das the Chief #inancial officer of Carborundum &niversal td, Ae is a director on the board of Tube Investments of India companies, td, and certain other Murugappa 5roup

ITE'$T&'E S&'!EE

INTROD!#TION TO $ORTFO%IO (ANA&E(ENT $ORTFO%IO $ portfolio is a collection of securities, Since it is rarely desirable to invest the entire funds of an individual or an institution in a single security+ it is essential that every security be vie/ed in the portfolio conte.t, Thus it seems logical that the e.pected return of each of the security contained in the portfolio, Portfolio analysis considers the determination of future ris2 and return in holding various blends of the individual securities, Portfolio e.pected return is a /eighted average of the e.pected return of individual securities but portfolio variances+ inshort contrast+ can be something less then a /eighted average of security variance, $s a result an investor can sometimes reduce portfolio ris2 by adding security /ith greater individual ris2 than any other security in the portfolio, This is because ris2 depends greatly on the co)variance among returns of individual security, Portfolio /hich is combination of securities may or may not ta2e an aggregate characteristic of their part, Since portfolios e.pected return is a /eighted average of the e.pected return of its securities+ the contribution of each security to the portfolioPs e.pected returns depends on its e.pected returns and its proportionate share of the initial portfolioPs mar2et value, It follo/s that an investor /ho simply /ants the greatest possible e.pected return should hold one security4 the oneP /hich is considered to have a greatest+ e.pected return, !ery fe/ investors do this+ and very fe/ investments advisors /ould counsel such an e.treme policy, Instead+ investors should diversify+ meaning that their portfolio should include more than one security,

OB0E#TIGE OF $ORTFO%IO (ANA&E(ENT

The objectives of investmentsGportfolio management can be classified as follo/s Basic o6Hectives The basic objectives of investmentGportfolio management are To Ma.imi0e Eield+ and To Minimi0e ris2 econdary o6Hectives The follo/ing are the other ancillary objectives are 'egular return Stable income $ppreciation of capital a- More li9uidity b- Safety of investments+ and c- Ta. benefits,

Need for portfolio management

Portfolio management is a process encompassing many activities of investment in assets and securities, It is a dynamic and fle.ible concept and involves regular and systematic analysis+ judgments and actions, The objective of this service is to help the un2no/n investors /ith the e.pertise of professionals in investment portfolio management, It involves construction of a of a portfolio bases upon the investors objectives+ constraints+ preferences for ris2 and return and ta. ability, The portfolio is revie/ed and adjusted from time to time in tune /ith the mar2et conditions, The evaluation of portfolio is to be done in terms of targets set for a ris2 and return, The changes in the portfolio are to be effected to meet the changing conditions, Portfolio construction refers to the allocation of surplus funds in hand among a variety of financial assets open for investments, Portfolio theory concerns itself /ith the principles governing such allocations, The modern vie/ of investments is oriented more to/ards the assembly of proper combinations of individual securities to form investment portfolios, $ combination of individual securities to form investments portfolios, $ combination of securities held together /ill give a beneficial result if they are grouped in a manner to secure higher return after ta2ing into consideration the ris2 elements, The modern theory is of the vie/ that by diversifications+ ris2 can be reduced, The investor can ma2e diversification either by having a large number of shares of companies in different region+ in different industries or those producing different types products lines, Modern theory believes in the perspective of combination of securities under constraints of ris2 and return,

Elements of portfolio management

Portfolio management is an on)going process involving the follo/ing the follo/ing basic tas2s( Identification of the investorPs objectives+ constraints and preferences, Strategies are to be developed and implemented in tune /ith investments policy formulated, 'evie/ and monitoring of the performance of the portfolio, #inally the evaluation of the portfolio

$ORTFO%IO ANA%" I

Portfolio analysis is needed for the selection of optimal portfolio by rational ris2 adverse investors, Portfolio analysis is essential for portfolio construction, The objective of the portfolio or ma.imi0e the ris2 subject to the desired level of return on the portfolio or ma.imi0e the return subject to the constraint of a tolerable level of ris2, It enables the investors to identify the potential securities+ /hich /ill ma.imi0e the follo/ing objectives such as security of the principle+ stability of income+ capital gro/th mar2etability+ li9uidity U diversification,

#oncept of Ris' Investment in shares has its o/n ris2 or uncertainty+ /hich arises out of variability of returns+ yields and uncertainty of appreciation or depreciation of shares prices+ loss of li9uidity etc, this ris2 over time+ is capital appreciation, This ris2 is measured statistically by the degree of variance or standard deviation of returns, Normally higher the ris2 that the investor ta2er higher is the return,

Diversification of Ris'7

The process of combining securities in a portfolio is 2no/n as diversification, The aim of diversification is to reduce total ris2 /ithout sacrificing portfolio, The ris2 in a portfolio can be reduced by a proper diversification into a number of strips, The efforts to spread and minimi0es portfolio ris2 ta2es the form of diversification, Most investors prefer to hold several assets rather than putting all their eggs into one bas2et /ith hope that if one goes bad+ the other /ill provide some protection from the e.treme loss, $ORTFO%IO E%E#TION The determination and selection of a portfolio is a complicated affair as there is a possibility of infinite number of combinations of various securities that can enter a portfolio, The securities available to an investor can be combined in any proportion hence any number of portfolios can be built, Each such portfolio can be described in terms of return and ris2, Portfolio construction refers to the allocation of funds among a variety of financial assets open for investment, The objectives of the theory is to elaborate the principle in /hich the ris2 can be minimi0ed+ subject to desired level of return on the portfolio or ma.imi0ed the return+ subject to constrain of tolerable level of ris2,

The most popular models used for portfolio selection are( Mar2o/it0 model Capital assets pricing model

(ar'owitC model $ccording to mar2o/it0+ the portfolio theory establishes a relationship bet/een portfolios e.pected return and its level of ris2 as the criteria for selecting the optimal portfolio, Thus t/o measures /ere suggested for evaluating the merits of portfolio, The e.pected return from the portfolio, The level of ris2 e.posure associated /ith the portfolio, This theory believes in asset correlation and combining assets so as to lo/er the ris2, #rom the efficient set of portfolios the best one /ould be selected on the basis of the ris2 and returns, These ris2 and returns are calculated using standard deviations and the coefficient of variations, It is also called as the Zfull co) variance model[, The e.pected return on the portfolio is calculated by using the follo/ing4 N 'p F ^ 'i%i IF6 Dhere+ 'p F e.pected return on portfolio 'i F e.pected return on security OiP %i F the proportion of portfolio investment in security OiP N F total number of securities in the portfolio,

The ris2 of a portfolio comprising of shares $ and ? van be e.pressed using variance as the measures of ris2, _ Covariance of $? F %I $_I $ 8%I ?_I ? 8 I%$%?r$? _$ _ ? Cov,$? F the variance bet/een the rates of return on shares $ and ?+ Dhere+ r$? F Coefficient of correlation bet/een $ and ? shares %I $ F Proportion invested in shares $
I % ?

F proportion invested in shares ?

_I $ F !ariance of the rate of return on share $,

_I ? F !ariance of the rate of return on share ?, The term covariance e.plains the relationship bet/een the movements in the rates of return from shares $ and ?4 it is derived from the follo/ing formula( Cov,$? F r$? _$ _ ?

#apital asset pricing model The Capital $sset Pricing Model *C$PM- attempts to measure the ris2 of a security in the portfolio, It considers the re9uired rate of return of a security on the basis of its contribution to total portfolio ris2, It provides that in a /ell)functioning efficient mar2et+ the ris2 premium varies indirect proportion to ris2, It also provides a measure of ris2 premium and method of estimating mar2et ris2 return line, The ris2 of /ell)diversified portfolio depends on the mar2et ris2 of the securities included in portfolio, The mar2et ris2 of the security is measured in terms of its sensitivity to the mar2et movements, The core idea of C$PM is that only non)diversifiable ris2 is relevant to the determination of the e.pected return on any asset,

#apital (ar'et %ine ;#($) The portfolio theory states that rational investors /ould chose a combination of Zefficient frontier[ but in capital mar2et line relationship of total ris2 and e.pected return is reflected, ecurity (ar'et %ine ;sml< #or all /ell diversified portfolios nonsystematic ris2 tend to go to 0ero+ and the only relevant ris2 measured by beta SM describes the e.pected return for all assets and portfolios of assets+ efficient or not, The higher the beta the higher must be the return, The relationship bet/een e.pected return and beta is linear,

$ortfolio revision Irrespective of ho/ /ell a portfolio is constructed+ it soon tends to change and hence needs to be monitored and revised periodically, Portfolio once constructed undergoes changes in the mar2et prices4 reassessment of companies+ the portfolio ris2 and the proportion in each asset class /ill change to bring bac2 the portfolio to the targeted level of beta or ris2 and duration, Overtime several things are li2ely to happen, This usually involves t/o things( 6- $ortfolio re6alancing, It involves revie/ing and revising the portfolio compositions, There are three basic policies /ith respect to portfolio rebalancing, ?y and hold policy+ Constant asset mi.+ and Portfolio insurance policy, I- $ortfolio upgrading, Dhile portfolio rebalancing involves shifting from stoc2s to bonds or vice versa+ it calls for reassessing the ris2 return characteristics of various securities+ selling investor may consider necessary to enhance the performance of portfolio, over priced securities and buying under priced securities, It may also involve the other changes the

$ortfolio evaluation The performance of the portfolio should be evaluated periodically, The 2ey dimensions of a portfolio performance evaluation are ris2 and return and the 2ey issue is /hether the portfolio return is commensurate /ith its ris2 e.posure, Such a revie/ may provide useful to improve the 9uality of portfolio management process on a continuing basis, #or evaluating the performance of a portfolio it is necessary to consider both ris2 and return, The follo/ing are the models for evaluating performance of a portfolio, Treynor Measure, Sharpe measure, Censen measure, Investment Decision Definition of investment $ccording to #, $mling ZInvestment may be defined as the purchase by an individual or institutional investor of a financial or real asset that produces a return proportional to the ris2 assumed over some future investment period[, $ccording to ",E, #isher and ',C, Cordan+ Zinvestment is a commitment of funds made in the e.pectation of some positive rate of return, If the investment is properly underta2en+ the return /ill be commensurate /ith the ris2 the investor assumes[, #oncept of investment Investment /ill be generally be used in its financial sense and as such investment is an allocation of monetary resources to assets that are e.pected to yield some gain or positive return over a given period of time, Investment is a commitment of personPs funds to drive

future income in the form of interest+ dividends rent+ premiums+ pension benefits or the appreciation of the value of his principle capital $ny Investors /ould li2e to 2no/ the media or range of investment so that he can use his discretion and save in those investments+ /hich /ill give him both security and stable return, The ultimate objective of the investor is to derive a variety of investments that meets his preference for ris2 and e.pected return, The investor /ill select the portfolio+ /hich /ill ma.imi0e his utility, $nother important consideration is the temperament and psychology of the investor, It is not only the construction of a portfolio that /ill promise the highest e.pected return+ but it is the satisfaction of the need of the investor, Many types of investment media or channels for ma2ing investment are available, Securities ranging from ris2 free instruments to highly speculative shares and debentures are available for alternative investments, $ll investments are ris2y+ as the investor parts /ith his money, $n efficient investor /ith proper training+ can reduce the ris2 and ma.imi0e returns+ he can avoid pitfalls and protect his interests, There are different methods of classifying the investment avenues, $ physical+ if savings are used to ac9uire physical assets+ useful for consumption or production, Some physical assets li2e ploughs+ tractors or harvesters are useful in agriculture production, $ fe/ useful physical assets li2e cars+ jeeps etc,+ are useful in business, $mong different types of investments some are mar2etable and transferable and other are not, E.ample of mar2etable assets are shares and debentures of public ltd companies particularly the listed companies on stoc2 e.change+ bonds of P,S,&, 5overnment securities etc, non mar2etable securities of investments are ban2 deposits+ provident and pension funds+ insurance certificates+ company deposits+ private td Company shares etc,+

Investment process The investment process may be described in the follo/ing stages, Investment $olicy7 The first state determines and involves personal financial affairs and objectives before ma2ing investment, It can also be called the preparation of the investment policy stage, The investor has to see that he should be able to create an emergency fund+ an element of li9uidity and 9uic2 convertibility of securities into cash, This stage may+ therefore+ be called the proper time for identifying investment assets and considering the various features of investment, Investment Analysis7 $fter arranging a logical order of type of investment preferred+ the ne.t step is to analy0e the securities available for 2ind of securities etc, the primary concerns at this stage /ould be to form beliefs regarding future behavior of prices and stoc2s+ the e.pected return and associated ris2s, Investment Galuation7 Investment value+ in general is ta2en to be the present /orth to the o/ners of future benefits from investments, The investor has to bear in mind the value of these investments, $n appropriate set of /eights have to be applied /ith the use of forecasted benefits to estimate the value of investment assets such as stoc2s+ debentures and bonds and other assets, Comparison of the value /ith the current mar2et price of the asset allo/s a determination of the relative attractiveness of the asset must be valued on its individual merit, $ortfolio #onstruction and Feed6ac'7 Portfolio construction re9uired a 2no/ledge of the different aspects of securities in relation to safety and gro/th of principal+ li9uidity of assets etc+ in this stage+ /e study determination of diversification level+ consideration of investment timing+ selection of investment assets+ allocation of ingestible /ealth to different investment+ evaluation of portfolio feedbac2,

Investment Decisions 8 guidelines for the e9uity investment E9uity shares are characteri0ed by price fluctuations+ /hich can produce substantial gains or inflict severe losses, 5iven the volatility and dynamism of the stoc2 mar2et+ investor re9uires greater competence and s2ill along /ith a touch of good luc2 to invest in e9uity shares, Aere are some general guidelines to play e9uity game+ irrespective /hether you are aggressive or conservative, $dopt a suitable formula plan Establish value anchors, $ssess mar2et psychology Combine fundamental and technical analysis, "iversify sensibly Periodically revie/ and revise your revise portfolio,

Re9uirement of portfolio Maintain ade9uate diversification /hen relative values various securities in the portfolio change, Incorporate ne/ information relevant for ris2 return assessment, E.pand or contract the si0e of portfolio to absorb funds or /ithdra/ funds and+ 'eflect changes in investor ris2 disposition,

Factors influencing investors decision and type of investors There are four types of investors in a mar2et, They are as follo/s, Types of Investors7 Type A Investors7 No mar'et timing and no stoc' pic'ing s'ills. If the investor does not believe that he has any special s2ills in pic2ing undervalued stoc2s or in predicting the movement of the mar2et+ then the portfolio design problem becomes relatively simple, The investor simply chooses a diversified portfolio and then adjusts its beta to the desired level, If he /eights the chosen security in proportion to the mar2et capitali0ation+ he can e.pect to get a portfolio beta close to one, To achieve a higher or lo/er beta+ he can shift the /eights to/ards high or lo/ beta stoc2s, Ae can achieve the same effects by increasing or decreasing the allocation to the e9uity portfolio in the overall portfolio, The type $ investor /ould hold a passive+ diversified portfolio /ith the constant beta e9ual to the target beta, Ae may also prefer to invest his money in a mutual fund and let it do the portfolio management for him, Type B Investor7 Only stoc')pic'ing s'ills $n investor /ho has and /ishes to e.ploit his stoc2 pic2ing s2ills should start /ith a base portfolio to that of type $ investor, Ae should then adjust the /eights of the stoc2s+ /hich are in his opinion mispriced, Specifically+ he should over/eight the stoc2s that are over valued and under/eighted those /hich are under value, #or e.ample+ the base portfolio may have I< in stoc2 % and 6,>< in stoc2 E, the investor /ho finds % under valued and E over valued may change the /eights to =< to %+ he may have a portfolio, This may not be legally or practically possible, The investor than has to raise the /eight

% to :<+ eliminate E from the portfolio and reduce the /eight of some other stoc2s by 7,><, The investor can deal /ith this problem in a slightly different manner, Ae can put+ say L7< of his e9uity investment in the diversified portfolio and reserve the remaining 67< for the mispriced stoc2s, Ao/ large a fraction he should devote to mispriced scripts depends on ho/ good analyst may choose a larger fraction, Dhat /e are doing in this decision is to balance to profit potential of investing is undervalued stoc2s against the benefits of diversification, &nless /e are confident about our analysis+ /e should give privacy to the need for diversification, Since the average beta of the undervalued and overvalued stoc2s is li2ely to be closed to one+ the overall beta is li2ely to remain close to the target value+ unless the target beta is substantially different from one and the percentage of the portfolio devoted to mispriced stoc2s is large, If+ for some reason+ this is not so+ the investor /ould have to ta2e future action to maintain to the beta at the largest value, The portfolio of the type ? investor is concentrated but has a constant beta,

Type # Investor7 Only mar'et 8 timing s'ills The type C investor holds a /ell)diversified portfolio but s/itches actively bet/een defensive and offensive portfolios to ta2e advantage of the mar2et timing, If the e.pects the mar2et to rise+ he should push his portfolio beta above his target level by any of the techni9ues described in the section on mar2et timing, The converse should be done if the investor is bearish about the mar2et, In either case+ the portfolio /ould remain diversified all through, The portfolio of this investor diversified+ but its beta is managed and not constant,

Type D Investor7 Both stoc' pic'ing and mar'et timing s'ills This type of investor /ould use the techni9ues used by both the type ? and type C investor, These investors /ould have the most active and aggressive portfolio management strategies, &sing their superior ability to predict boom and busts in the mar2ets as a /hole and their s2ills in identifying undervalued scrips+ they should hold highly concentrated portfolios and let the beta fluctuate 9uiet sharply around the long run target value, $ pitfall be a very strenuously avoided is that of assuming that one has a s2ill+ /hich one in reality does not have, #or e.ample+ an investor /ho does not have very good abilities in script selection may still thin2 that he does not have suc2 stills, Ae /ould then end up /ith an ill)diversified portfolio+ /hich earns mediocre returns( he /ould have been better off /ith a passive portfolio, Iualities for successful investing Contrary thin2ing Patience Composure #le.ibility and Openness

Discounted cash flow ;D#F< method of time adHusted techni9ue $n important techni9ue used by Narvy Stoc2 ?ro2ing imited for evaluating their shares for trading purpose, The discounted cash flo/ techni9ue is an improvement on the pay) bac2 period method, It ta2es into account both the interest factor as /ell as the return after pay)bac2 period, The method involves three stages( 6, Calculation of cash flo/+ i,e, both inflo/s and out flo/s *preferable after ta.- over the full life of the asset, I, "iscounting the cash flo/ so calculated by a discount factor, =, $ggregating of discounted cash inflo/s and out comparing the total /ith discounted cash out flo/ "iscounted cash flo/ thus recogni0es that 'e6 of day *the cash out flo/- is /orth more than 'e6 received at a future date *cash inflo/-, "iscounted cash flo/ method s for evaluating capital investment proposal is of three types as e.plained belo/( *a*c;a< NP! method, Internal rate of return, The net present value ;N$G< method7 *b- E.cess present value inde.

In this method cash inflo/ and cash outflo/s associated /ith each project are first /or2ed out, The present value pt these cash inflo/s and outflo/s are then calculated at the rate of return acceptable to the management, This rate of return is considered as the cut)off rate and is generally determined on the basis of cost of capital suitable adjusted to allo/ for the ris2 element involved in the project, Cost outflo/s represent the investment and commitments of cash in the project at various point of time, The /or2ing capital is ta2en as a cash outflo/ in the year the project starts, Commercial production profit after

ta. but before depreciation represents cash inflo/, Thee Net Present !alue *NP!- is the difference bet/een the total present value of future cash inflo/s and the total present value of future cash outflo/s, ;6< E>cess present value inde>7 This is refinement of the net present value inde. method, Instead of /or2ing out the net present value+ a present inde. is found out by comparing the total of present value of future cash inflo/s and the total of the present value of future cash outflo/s, ;c< Internal Rate of Return7 I'' is that at /hich the sum of discounted cash inflo/s e9uals the sun of discounted cash outflo/s, In other /ords+ it is the rate /hich discounts their dash flo/s to 0ero, It can be started in the form of a ratio as follo/s, Cash inflo/s Cash outflo/s F6

$s for the techni9ue follo/ed sho/s only for the present value or an limited time period /here as the techni9ue follo/ed in analysis for portfolio building ta2es into account all he long term capital gains,

"$T$

CO

ECTION

s,no 6 I = : > ; M K L 67 66 6I 6= 6: 6> 6; 6M 6K 6L I7

$verage Company name returns $arti drugs 7,=II6K= Cipla 7,7M67;K $uropharma )7,67;; "abur T" 7,7LI6;M ?ombay dyeing )7,IK7:I ?harath Electronics )7,7;L> `uari agro :,=LLK7M $sian piants )7,7::6L Dipro soft/are T" 7,7>7;I= Infosys technology 7,7L677> California soft/are 7,K>6K:= Satyam soft/are )7,;LKI6 Tata motors )7,;;L7M Maruthi su0u2i 7,I;=76: Aero honda 7,=MK;:= $pollo tyres )7,==;; Indian ban2 )7,=>KMK $.is ban2 )7,66MK6 I"?I )7,I>>6K $ndhra ban2 )7,I:776

Average returns 5 4 3 2 1 0 -1 1 3 5 7 9 11 13 15 17 19 21 Average returns

s,no

Company name 6 $arti drugs I Cipla = $uropharma : "abur T" > ?ombay dyeing ?harath ; Electronics M `uari agro K $sian piants L Dipro soft/are 67 Infosys technology 66 California soft/are 6I Satyam soft/are 6= Tata motors 6: Maruthi su0u2i 6> Aero honda 6; $pollo tyres 6M Indian ban2 6K $.is ban2 6L I"?I I7 $ndhra ban2

'is2 I6,=M>> > K,7;;=6 M IK,6==K K L,=M=>M :,LM6:M 66,:KL> : :K,6IL: K M,;III; K 6K,:6MM 6 L,I;I;: ==,:M;: ;K,I:K; ; :,7L=ML I 6:,K=77 I K,L::7I M =,MM=7L K I=,>7;> ; IK,>>I; > 6;,MIM7 : 6I,MM=: K

Risk 80 70 60 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Risk

Correlation co)efficient a( S,no Company name 6 $urobindho U "abur I Cipla U $atrti drugs ?ombay dyeing U ?harath = electronics : `uari industries U $sian piants > Dipro U Infosys technologies ; M K L California U Satyam soft/are Tata motors U Maruti su0u2i Aero honda U $pollo tyres Indian ban2 U $.is ban2 r 7,7I>7>> 7,7M=L7K 7,==:L;K 7,77MLLK > 7,>M6KL; = 7,7;=6M> > 7,=:;KII 7,7;K>M> 7,>>=LLK 7,776>LM :

67 I"?I U $ndhra ban2

CIP $ $N" $$'TI "'&5S T", Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F 7,7M67;K $vg 'eturns *rI- F 7,=II6K= #O'M& $( 'eturns F.6,r68.I,rI F 7,>H7,7M67;K87,>H7,=II6K= F7,6MI>=LL>, 'is2 *^6- F K,7;;=6M 'is2 *^I- F I6,=M>>> Co)relation coefficienta F7,7M=L7MM=L #ormula( 'is2 of portfolio Fb*.6-I,*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb7,I>H;>,7;>87,I>H:>;,L6I86,>LIL6767 Fb6;,I;;I>866:,IIK86,>LIL6767 Fb6=I,7KM6;76 F66,:LIL

$&'O?IN"AO $N" "$?&' T", Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F )7,67;; $vg 'eturns *rI- F 7,7LI6;M #O'M& $( 'eturns F.6,r68.I,rI F 7,>H)7,67;;87,>H7,7LI6;M F,7,=L=:87,7:;7> F7,:=L:> 'is2 *^6- F IK,6==KK 'is2 *^I- F L,=M=>M Co)relation coefficienta F7,7I>7>:K6L #ormula( 'is2 of portfolio Fb*.6-I,*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb *7,>-I,*IK,6==KK-I8*7,>-I,*L,=M=>M-I8IH7,>H7,>HIK,6=KKHL,=M=>MH7,7I>7>:K6L Fb7,I>HML6,:;>87,I>HKM,K;=K8=,=7=>>; Fb6LM,K;;8I6,L;>L>8=,=7=>>; FbII=,6=>>7; F6:,L=MMI7

?OM?$E "EEIN5 $N" ?A$'$T E ECT'ONICS T" Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F )7,IK7:I $vg 'eturns *rI- F )7,7;L> #O'M& $( 'eturns F.6,r68.I,rI F 7,>H*)7,IK7:I- 87,>H*)7,7;L>F,)7,6:7I68 *)7,7=:M>F)7,6M;K> 'is2 *^6- F :,LM6:M: 'is2 *^I- F 66,:KL>: Co)relation coefficienta F 7,==:L;K:=: #ormula( 'is2 of portfolio Fb*.6-I,*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb *7,>-I, *:,LM6:M:-I8*7,>-I*66,:KL>:-I8IH7,>H7,>H:,LM6:M:H66,:KL>:H7,==:L;K:=: Fb;,6MKKKK:8=I,LLLI8L,>;== Fb:K,M:6=K F;,LK6>7

`&$'I CEMENT $N" $SI$N P$INTS, Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F :,=LLK7M $vg 'eturns *rI- F )7,7::6L #O'M& $( 'eturns F.6,r68.I,rI F 7,>H :,=LLK7M87,>H*)7,7::6LFI,6LLL78 *)7,7II7L>FI,6MMK7> 'is2 *^6- F :K,6IL:K 'is2 *^I- F M,;III;K Co)relation coefficienta F 7,77MLLK:L; #ormula( 'is2 of portfolio Fb*.6-I, *^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb *7,>-I*:K,6IL:K-I8 *7,>-I*M,;III;K-I8IH7,>H7,>H:K,6IL:KH M,;III;KH 7,77ML Fb>ML,67786:,>I=M86,:;>> Fb>L>,7KLI F I:,=L::

DIP'O $N" IN#OSES SO#TD$'E T", Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F 7,7>7;I= $vg 'eturns *rI- F 7,7L677> #O'M& $( 'eturns F.6,r68.I,rI F 7,>H7,7>7;I=87,>H7,7L677> F,7,7I>=66>87,7:>>7I> F 7,7M7K6: 'is2 *^6- F 6K,:6MM6 'is2 *^I- F L,I;I;: Co)relation coefficienta F7,>M6KL;I;: #ormula( 'is2 of portfolio Fb*.6-I,*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb *7,>-I*6K,:6MM6-I8*7,>-I, * L,I;I;:-I8IH7,>H7,>H6K,:6MM6HL,I;I;:H7,>M6KL; FbK:,K7IL8I6,::L6I8I:,=M;:MI Fb6=7,;IK;I F66,:ILIK

C$ I#O'NI$ $N" S$TE$M SO#TD$'E T", Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F 7,K>6K:= $vg 'eturns *rI- F )7,;LKI6 #O'M& $( 'eturns F.6,r68.I,rI F 7,>H7,K>6K:=87,>H)7,;LKI6 F7,:I>LI6>8)7,6LKI6 F7,IIMM66>, 'is2 *^6- F ==,:M;: 'is2 *^I- F ;K,I:K;; Co)relation coefficienta F 7,7;=6M; #ormula( 'is2 of portfolio Fb*.6-I,*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb7,I>H66I7,I:87,I>H:;>;,;L86K,7= FbIK7,7;866;:,6M86K,7= Fb6:;I,I; F=K,I=

T$T$ MOTO'S $N" M$'&TI S&`&NI CO, T" Deight *.6- F7,> 'eturns *r6- F)7,;;L7M Deight *.I- F7,> 'eturns *rI- F7,I;=76: #ormula( 'eturns F.6,r68.I,rI F7,>H7,;;L7M87,>H7,I;=76: F7,I6L:L: 'is2 *^6- F:,7L=MLI 'is2 *^I- F6:,K=77I Co)relation coefficient a F #ormula( 'is2 of portfolio Fb*.6-I, *^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb7,I>H6;,M>L87,I>HI6L,LI867,>IMM Fb:,6KL8>:,LK867,>IMM FK,=:K:, 7,=:;KII:L;

AE'O AON"$ $N" $PO Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F 7,=MK;:= $vg 'eturns *rI- F )7,==;; #O'M& $( 'eturns F.6,r68.I,rI F 7,>H 7,=MK;:=87,>H )7,==;; F7,6KL=I8 *)7,6;K=F O,7I67I 'is2 *^6- F K,L::7IM 'is2 *^I- F =,MM=7LK Co)relation coefficienta F 7,7;K>M>:K= #ormula(

O TE'ES T"

'is2 of portfolio Fb*.6-I*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb *7,>-I*K,L::7IM-I8 *7,>-I*=,MM=7LK-I8IH7,>H7,>H K,L::7IMH=,MM=7LKH7,7;K> Fb6L,LLKM8=,>>KKK86,6>;LM FbI:,M6:>> F:,LM6=M=

IN"I$N ?$NN $N" $%IS ?$NN Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F )7,=>KMK $vg 'eturns *rI- F )7,66MK6 #O'M& $( 'eturns F.6,r68.I,rI F 7,>H )7,=>KMK87,>H )7,66MK6 F)7,6ML=L8*)7,7>KL7>F)7,I=KIL> 'is2 *^6- F I=,>7;>; 'is2 *^I- F IK,>>I;> Co)relation coefficienta F 7,>>=LLK #O'M& $ 'is2 of portfolio Fb*.6-I,*^6-I8*.I-I*^I-I8I.6.I^6^I r6I Fb *7,>-I,* I=,>7;>;-I8*7,>-I*IK,>>I;>-I8IH7,>H7,>HI=,>7;>;HIK,>>I;>H 7,>>=LLK Fb6=K,67:8I7=,K6=86K>,K6

Fb>IM,MIM FII,LMI=

I"?I ?$NN $N" $N"A'$ ?$NN Deight *.6- F7,> Deight *.I- F7,> $vg 'eturns *r6- F )7,I>>6K $vg 'eturns *rI- F )7,I:776 #O'M& $( 'eturns F.6,r68.I,rI F 7,>H*)7,I>>6K- 87,>H* )7,I:776F)7,6IM>L)7,6I777> F)7,I:M>L> 'is2 *^6- F 6;,MIM7: 'is2 *^I- F 6I,MM=:K Co)relation coefficienta F7,776>LM=;= #O'M& $( 'is2 of portfolio Fb*.6-I, *^6-I8*.I-I*^I-I8I.6.I^6^I r6I F b *7,>-I*6;,MIM7:-I8 *7,>-I*6I,MM=:K-I8IH7,>H7,>H 6;,MIM7:H6I,MM=:KH7,776>LM Fb;L,L:K68:7,MKLL87,6;LK; Fb667,L7MK; F67,>=6IK77 PO'T#O IO 'ET&'NS s,no set of companies 6 $urobindho U "abur Portfolio returns ran2 7,:=L:> I

I Cipla U $atrti drugs ?ombay dyeing U ?harath = electronics : `uari industries U $sian piants > Dipro U Infosys technologies ; California U Satyam soft/are M Tata motors U Maruti su0u2i K Aero honda U $pollo tyres L Indian ban2 U $.is ban2 67 I"?I U $ndhra ban2

7,6MI>=L )7,6M;K> I,6MMK7> 7,7M7K6: 7,IIMM66> 7,I6L:L: 7,7I67I 7,I=KIL> )7,I:M>L>

; L 6 M : > K = 67

Portfolio returns 2.5 2 1.5 1 0.5 0 -0.5 1 2 3 4 5 6 7 8 9 10 Portfolio returns

PO'T#O IO 'ISNS( s,no set of companies 6 $urobindho U "abur I Cipla U $atrti drugs = ?ombay dyeing U ?harath Portfolio ris2 6:,L=MMI 66,:LIL ;,LK6>

: > ; M K L 67

electronics `uari industries U $sian piants Dipro U Infosys technologies California U Satyam soft/are Tata motors U Maruti su0u2i Aero honda U $pollo tyres Indian ban2 U $.is ban2 I"?I U $ndhra ban2
Portfolio risk

I:,=L:: 66,:ILIK =K,I= K,=:K: :,LM6=M= II,LMI= 67,>=6IK

45 40 35 30 25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 11

Portfolio risk

#IN"IN5S #IN"IN5S( $&'O?IN"AO $N" "$?&' ( The returns of portfolio comprising t/o companies *$urobindho and "abur T"- are, 7,:=L:>, The individual returns of $urobindho are )7,67;;and "abur is 7,7LI6;M /here as ris2 of portfolio of t/o companies *$urobindho and "abur- is, 6:,L=MMI7 $nd the ris2 of individual companies is IK,6==KK and L,=M=>M CIP $ $N" $$'TI "'&5S(

The returns of portfolio comprising t/o companies *Cipla and $arti drugs T"- are, 7,6MI>=LL>, The individual returns of Cipla are 7,7M67;K and $arti is 7,=II6K= /here as ris2 of portfolio of t/o companies *Cipla and $arti drugs- is, 66,:LIL $nd the ris2 of individual companies is K,7;;=6M and I6,=M>>>, ?OM?$E "EEIN5 $N" ?A$'$TA E ECT'INICS( The returns of portfolio comprising t/o companies *?ombay dyeing W ?harath electronics- is )7,6M;K> The individual returns of ?ombay dyeing are )7,IK7:Iand ?harath electronics is )7,7;L> ris2 of /here as ris2 of portfolio of t/o companies *?ombay dyeing U ?harath electronics- is ;,LK6>7,and the ris2 of individual companies are :,LM6:M: $nd 66,:KL>:, `&$'I IN"&ST'IES $N" $SI$N PI$NTS( The returns of portfolio comprising t/o companies *`uari cement and $sian paints- are, I,6MMK7>, The individual returns of `uari are :,=LLK7Mand $sian paints is )7,7::6L /here as portfolio of t/o companies *`uari and $sian paints- is I:,=L:: and the ris2 of individual companies is, :K,6IL:K $nd M,;III;K, DIP'O $N" IN#OSES( The returns of portfolio comprising t/o companies *Dipro and Infosys- are, 7,7M7K6:, The individual returns of Dipro are 7,7>7;I= and Infosys is 7,7L677> /here as ris2 of portfolio of t/o companies *Dipro and Infosys- is 66,:ILIK $nd the ris2 of individual companies is 6K,:6MM6and L,I;I;:, C$ I#O'NI$ $N" S$TE$M SO#TD$'E( The returns of portfolio comprising t/o companies *California and Satyam soft/are T"- are, 7,IIMM66>, The individual returns of California are 7,K>6K:= and Satyam is )7,;LKI6 /here as ris2 of portfolio of t/o companies *California and sat yam- is =K,I=, $nd the ris2 of individual companies is ==,:M;: and ;K,I:K;;,

T$T$ MOTO'S $N" M$'&TI S&`&NI( The returns of portfolio comprising t/o companies *T$T$ Motors W Maruti Su0u2i co, T"- is 7,I6L:L:, The individual returns of T$T$ Motors are 7,;;L7M and Maruti Su0u2i is 7,I;=76: /here as ris2 of portfolio of t/o companies *T$T$ Motors U Maruti Su0u2i- is K,=:K:,and the ris2 of individual companies are :,7L=MLI $nd 6:,K=77I, AE'O AON"$ $N" $PO O TE'ES( The returns of portfolio comprising t/o companies *Aero Aonda and $pollo tyres- are, O,7I67I, The individual returns of Aero Aonda are 7,=MK;:=$nd $pollo tyres is )7,==;;

/here as ris2 of portfolio of t/o companies *Aero Aonda and $pollo tyres- is :,LM6=M= and the ris2 of individual companies is K,L::7IM and =,MM=7LK IN"I$N ?$NN $N" $%IS ?$NN( The returns of portfolio comprising t/o companies *Indian ban2 and $.is ban2- are )7,I=KIL>, The individual returns of Indian ban2 are )7,=>KMK and $pollo tyres is )7,66MK6 /here as ris2 of portfolio of t/o companies *Indian ban2 and $.is ban2- is II,LMI= and the ris2 of individual companies is I=,>7;>; and IK,>>I;> I"?I $N" $N"A'$ ?$NN The returns of portfolio comprising t/o companies *I"?I and $ndhra ban2- is )7,I:M>L>, The individual returns of I"?I are )7,I:M>L> and $ndhra ban2 is )7,I:776, Dhere as ris2 of portfolio of t/o companies *I"?I and $ndhra ban2- is 67,>=6IK77,and the ris2 of individual companies are 6;,MIM7: and 6I,MM=:K

S&55ESTIONS

S&55ESTIONS( The present project /or2 has been underta2en to identify a best portfolio using different sets of securities using their returns and ris2 along /ith correlation co)efficient on the basis of analysis and findings + the follo/ing suggestions can be made the investors, 6- The best portfolio consists of the t/o companies `uari industries and $sian paints /ith a portfolio return of I,6MMK7> and portfolio ris2 I:,=L::, I- The best portfolio consists of the t/o companies $urobindho pharmacy and "abur Dith a portfolio return of 7,:=L:> and portfolio ris2 6:,L=MMI =- The best portfolio consists of the t/o companiesP Indian ban2 and a.is ban2 /ith a portfolio return of 7,I=KIL> and portfolio ris2 II,LMI=

:- The best portfolio consists of the t/o companies California and Satyam soft/are /ith a portfolio return of 7,IIMM66> and portfolio ris2 =K,I= >- The best portfolio consists of the t/o companies Tata motors and Maruti su0u2i /ith a portfolio returns of 7,I6L:L and portfolio ris2 K,=:K:,

#ON#%! ION7 The present project /or2 has been underta2en to study the investment opportunities available to investors, These avenues are different for different profiles of investors, Ao/ ever it is very important for an investor to identify the ris2 associated /ith the returns of various securities, In order to manage the ris2 associated /ith the returns one has to construct the portfolio ,$ portfolio is a set of securities /hich by adding reduces

the ris2 in /hole, In this project /or2 it is seen ho/ the securities can be constructed as a portfolio, ?y using Mar2o/it0 theory a portfolio is constructed and the returns and ris2s are calculated ,the entire project /or2 is done to identify the best portfolio and it is found the results are satisfactory,