Research and Analysis on

Alternate Investment options

for PSUs: Is the orthodox govt.
ready to trade-off risk for
profitability amidst strict
guidelines? - An inside study


2014
IBS Business School, Hyderabad
National Aluminium Company Limited
4/9/2014
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AN INTERIM REPORT
ON
Research and Analysis on Alternate Investment
options for PSUs: Is the orthodox govt. ready to trade-
off risk for profitability amidst strict guidelines?
- An inside study
At
NATIONAL ALUMINIUM COMPANY Ltd.
BY
ANUJ SHARMA
13BSPHH010088
Interim report is submitted in partial fulfillment of the requirements of MBA
Program of IBS, Hyderabad.

SUBMITTED TO:
FACULTY GUIDE COMPANY GUIDE
Dr. Suresh Chandra Bihari Mr. Jiban Mahapatra
(Professor in Banking & Finance, IBS Hyd.) (A.G.M, Co-ordination, NALCO)

DATE OF SUBMISSION
11/04/2014





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TABLE OF CONTENTS






HEADING
NO.
TOPIC PAGE NO.
ACKNOWLEDGEMENTS 6
ABSTRACT OF WORK DONE 7
1. INTRODUCTION 9
1.1 Company Profile 9
1.2 Investment Scenario 10
1.3 Risk Management & Aversion 17
2. Main Text 18
2.1 Objectives of the project 18
2.2 Methodology 18
2.3 Excel Calculations (Zoha) 27
3. LEARNING OUTCOME 28
4. PLAN FOR COMPLETION 29
5. SUMMARY

30
APPENDIX A 31
APPENDIX - B 32
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List of Figures

Fig No. Heading Page no.
1 Study of Instrument Tenure 10
2 Types of Instrument 12

3 Types of Mutual Funds 16

4 & 5 Market Speculation Study 17

6 CBLO Returns 21

7 Commercial Papers
(Regularized)
22

8 CD Returns 23

9 Gilt Funds Return 24

10 Cash management Bills
Returns
25
11 G-Secs Returns 26

12 Excel Calculations 27

13 & 14 Actual Calculations 27

15 Key Financials 30

16 Margin Profile 30

17 Return Ratios 30

18 Valuation Bonds 30

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List of tables

Table No. Heading Page no.
1 Instrument Validation 19
2 P/E Ratio & AVM 19

3 Expense Ratio 20

4 Net Asset Valuation 20













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ACKNOWLEDGEMENT


A person can never reach his destination without the lighthouse. A person can carry
out any task he wants, but an able guidance, support and feedback is always called for
so as to achieve the task in the most efficient manner.

I am extremely grateful to IBS Hyderabad for having prescribed this internship and project
work to me as a part of the academic requirement in the MBA course. The completion of
this project work has enabled me to gain invaluable knowledge.
I would like to thank Mr. Jiban Mahapatra Assistant General Manager-Co-ordination
National Aluminium Company, who gave me a wonderful opportunity to work, learn and
grow in their esteemed organization. His invaluable support and guidance has helped me to
gain knowledge of various aspects of Finance and has given me an opportunity to sharpen
my skill-sets and become an efficient manager.
With great pride and extreme gratitude, I wish to thank my illustrious and inspiring faculty
guide Prof. Dr. Suresh Chandra Bihari IBS, Hyderabad, who left no stones unturned in
helping me out in the successful completion of my project work. I am fortunate to get such
an encouraging guide who continuously counseled me and helped me accomplish my goals.
At this juncture, I wish to appreciate the management and staff of National Aluminium
Company Limited for providing the entire state of the art infrastructure and resources, to
enable me to complete and enrich my project.

-ANUJ SHARMA

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ABSTRACT OF WORK DONE

India is a developing country and the growth of the economy is only possible through large scale
investment into manufacturing and production sector which will ensure not only self-dependency
but will also reduce the amounts of our imports and Current and Capital Account Deficits. Large
investment into these sectors would mean large number of people investing money in setting up
plants and industry and development of stock markets and listings of the shares of the companies
on the stock exchanges. But the scenario completely changes when Corporates are involved into
the scenario coz they have deeper pockets to invest and can sustain losses even in the short run to
play big in the long run. Corporate Investments are much more concerned about the liquidity of
their funds rather than returns because of their cash requirements and necessities within a very
short span of time. Unlike the early 80s where there werent many options to invest surplus
funds, now there exists a plethora of options where corporate investment can be done as per their
requirements.

But despite all these lucrative options available in the market providing attractive liquidity and
return options, Public Sector Companies which are highly profit making dont tend to utilize all
of the options because of the stereotype guidelines set by the government regarding their
investment of surplus cash. Year after year, they simply keep on investing in options in a
traditional manner without any review for years which though gives them risk-free returns and
maintains liquidity but at the same time restricts them from utilizing the full potential of their
funds which they could have done if they would have invested the money in a combination of
alternatives rather than sticking to a stereotype option as they are doing presently. But theres a
different catch to the story that these investments cannot deviate even an inch from the
guidelines set forward by the Department of Public Sector Enterprises (DPSE) which is a strict
regulator of all the public sector undertakings directly monitored by the Ministry of Heavy
Industries and Resources. So, keeping well within the purview of these guidelines, now the
question arises how the investments can be optimized so as to provide a greater return without
compromising on liquidity. Their first preference always involves instruments backed by the
government as they are considered to be risk-free but it largely restricts their return because the
government hardly pays an upper hand, it reels under the surety.

So, by the means of this project, the basic task is to find alternatives for the investment of surplus
funds keeping well within the government guidelines and providing greater returns and liquidity
at the same time. First of all, a comprehensive study was undertaken to understand the
requirements of Nalco keeping in mind the work that is to be done. All the various Money
Market Instruments (MMI) and government securities were analyzed which could be brought
into use as per the government directives but well within the government guidelines. The task of
segregation came into picture where the instruments were filtered according to the requirements.
Then the corresponding calculations pertaining to each of the filtered instruments was done to
facilitate the exact amount of return they can provide for comparison with the existing trends and
instruments. Then, a comprehensive comparison was done with the existing trend and the
proposed trend. For this, the present data sheet of the company was thoroughly analyzed and a
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report was generated from it on a Software Package Zohra. Also, this was then related to the
stock prices of the company to identify a trend which would enable to give rise to speculations
about the money market. This would also provide a base to all the people who want to averse
their risk by investing in PSU stocks and bonds but at the same time, be sure of the return. It will
give a fair idea of how the Govt. market trends fluctuate and how is it going to affect the market
when govt. itself invests in these securities.

The summary of work done till date and progress can be summarized as follows:

Study of Company Profile and investment patterns.
Thorough research and analysis of the current government guidelines by DPSE regarding
investment and how they can be exploited to the advantage.
Analysis of individual instruments with the inclusion of stamp duties and transaction
costs.
On-hand speculative analysis of intra-day trades of the government securities in both
primary as well as secondary markets.
Preparation of FIMMDA guidelines as and when speculations increase.
Keeping a track of the Stock-options available and relating it to the market risks and
speculations.
Stabilization Criteria requirements for temporary overhauling of liquidity.


The above tasks have been undertaken and completed till date and the information collected from
the above calculations and sources are further being refined for use in the upcoming calculations
where an overall comparison will be made with the existing options and how lucrative the
suggested options can be.









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1. INTRODUCTION

1.1 Company Profile
National Aluminium Company Limited, abbreviated as NALCO, (incorporated 1981) has units
in Odisha at places like Angul and Damanjodi. It was incorporated as a public sector enterprise
of the Ministry of Mines, Government of India in 1981. It is Asia's largest, and the sixth largest,
integrated aluminium complex, encompassing bauxite mining, alumina refining,
aluminium smelting and casting, power generation, rail and port operations . Commissioned
during 1985-87, NALCO produced and exported alumina and aluminium. The main units of
NALCO are at Damanjodi (Mines & Refinery complex) and Nalconagar, Angul (Smelter &
Power Plant Complex). The Bauxite mines called "Panchpatmalli Mines" is situated atop a set of
five mountains called Panchpatmalli. These mines are open cast mines. The refinery complex for
producing bauxite is located in Damanjodi. The smelter unit of NALCO is located in
Nalconagar, Angul. The company's headquarters are located in Bhubaneswar, which is the
capital of the Indian state of Odisha. It is expanding by currently employing new projects. The
ongoing second phase of expansion is set to make it the sixth largest producer of the metal in the
world. The recent disinvestment issues, for the alumina giant, finally settled down after the
central government decided not to disinvest profit making PSUs which meant that NALCO
would not be privatized and continue to be a complete Govt. of India Enterprise PSU. Nalco
received ISO 9001:2000 awards and OHSAS 140001 for its excellence in production technology
& occupational health & safety systems respectively.















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1.2 Investment Scenario & Money Market Instruments

By convention, the term "Money Market" refers to the market for short-term requirement and
deployment of funds. Money market instruments are those instruments, which have a maturity
period of less than one year. The most active part of the money market is the market for
overnight call and term money between banks and institutions and repo transactions. Call
Money/Repo are very short-term Money Market products. Comparative study of tenure is as
follows:


Money Market Instruments can be classified into various categories and based on various
parameters.

The broad classifications are:

On the basis of structure:

Open Ended Instruments

Open Ended Instruments have been in the market from long time back. Such
instruments do not have any particular maturity date and investment date. Usually
investors can enter and exit from these instruments at any particular time which is one
of the most beneficial feature of such instruments.


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Close Ended Instruments
Close-ended Instruments have a fixed or stipulated maturity period wherein the
investor can invest directly in the instrument which is at the time of the initial issue
and thereafter units of the instrument can be traded (bought/ sold) on the stock
exchanges where it is listed. The market prices at the stock exchange could vary from
the instruments NAV on account of demand and supply in the market, expectations
from unit holders and also other market factors. Usually a characteristic feature of
close-ended instruments is that they are generally traded at a discount to NAV (Net
Asset Value); but closer to maturity date, the discount narrows.
Interval Instruments
Interval Instruments are those instruments that combine the features of both open-
ended and close-ended instruments. The units of such instrument may be traded on
the stock exchange or they may be open for sale or even for redemption during pre-
determined intervals at NAV (Net Asset Value) related prices.
On the basis of Investment Objective:
Income Instruments
Growth Instruments
Money Market Instruments
Tax Saving Instruments
Offshore Funds
Special Instruments like Index Instruments

Some popular objectives of MMI are:


Fund Objective:

Fund Investment in:
Equity (Growth) Only in stocks
Debt (Income) Only in fixed-income securities
Money Market (including
Gilt)
In short-term money market instruments (including government securities)
Balanced
Partly in stocks and partly in fixed-income securities, in order to maintain a 'balance'
in returns and risk




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On the basis of nature of funds:
Equity based Funds
Debt based Funds
Hybrid/Balanced Funds














Types of Instruments:
Equity Instruments
Equity instruments invest the amounts that they collect from investors into stocks of various
companies listed on the stock exchanges as well as those that are unlisted. These instruments are
also called Growth Instruments because the idea behind such investments is to earn a high
return through the rise in the value of the investment.
Sectoral Instruments
These are a variant of equity oriented instruments where the risk for the investor is higher than
the diversified equity instruments. The funds of such investments are invested into the shares of a
particular sector only or it could be in companies that comply with a particular theme only. The
TYPES OF
INSTRUMENTS
By Investment
Objective
By Structure Other
Instruments
Open Ended
Instruments
Close Ended
Instruments
Interval
Instruments
Balanced
Instruments
Income
Instruments
Money Market
Instruments
Tax Saving
Instruments
Special
Instruments
Index
Inst.
Sector Specific
Instruments
Growth
Instruments
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amounts collected by the Fund houses are deposited into one particular sector on which the fund
is based. Thus, there lies a significant risk of the investor if that particular sector does not
perform well. But as is a saying Profit is the reward for risk taking, therefore there is also
greater chance that the particular sector might do exceptionally well and the returns are more
than expected.
Equity linked savings instrument (ELSS)
Equity linked savings instruments are also known as tax savings instruments. These are like
diversified equity instruments in terms of their portfolio composition but they give investors a
tax benefit that other instruments do not. Investors looking at earning a higher return on their
investments and save on the tax at the same time opt for such instruments. Unlike normal equity
instruments, ELSS carry a three year lock in period. If any withdrawal is made before the lock-in
period, then exit loads are charged to the amount of funds.
Index Funds
Index funds are known as passive instruments because here the fund manager does not have to
take active investment decisions regarding selection of companies for investment. The corpus of
these instruments is invested in such a manner that it mimics an index that is being tracked by the
fund. The movement of the fund is almost as similar to the movement of the index. For example,
if the index goes up, then the NAV of the instrument goes up and vice versa
Income Instruments
Income instruments invest their assets into debt instruments that are either of medium to long
term in duration. They main distinguishing factor of these instruments is that they are different in
terms of their investment objective. They only seek to generate some income rather than building
up capital. For e.g. bonds, debentures, government securities and other debt instruments.
Liquid Instruments
Liquid instruments are meant for very short term investors where the investor horizon ranges
from a couple of days to around a week or slightly more. The liquid instruments invest the
money into overnight call money market and extremely short term options. Such instruments are
majorly used by corporate when they have huge sums of money lying idle for a shorter period of
time.
Gilt Instruments
Gilt instruments invest their assets only in government securities. There can be short term or long
term instruments. These instruments have no credit risk which means that there is no possibility
of the investments of the instrument turning out to be worthless because the issuing authority is
the government itself. They are most recommended for people in the higher age groups as they
are mostly interested in getting some fixed returns rather than taking risk by investing a major
chunk in equity instruments.
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Balanced Instruments
Balanced instruments are a mixture of equity and income instruments whereby they hold
both equities and debt in their portfolio. Balanced instruments need to hold an average 65% of
assets as equity. These instruments are meant for those who want to earn some returns on their
investment but would like a small element of stability built into the instrument. The major
advantage is that a portion of the savings will yield almost fixed and guaranteed returns, thus the
investor prefers such type of instruments.
Fixed Maturity Plans (FMP)
FMPs are plans that are in operation for a short period of time but they act like a quasi-fixed
deposit for the investors. This is because the fund manager selects the securities in the portfolio
in such a manner that it matures on the same date as that of the instrument. This results in the
situation where the investor will get a return near the yield of the investments when they were
purchased because of reduced risk in the investment.
Fund of Funds
This instrument invests its funds into another mutual fund instrument and is hence known as
fund of funds. Several funds invest their corpus into instruments of their own fund house while
another variety of fund of fund instruments invest the amount into instruments from other fund
houses too. Fund of Funds is basically a feeder fund for the main funds.
Offshore Funds
Offshore funds are specializing in investing in foreign companies or corporations. These funds
basically have non-residential investors and are regulated and guided by the provisions of the
foreign countries in which they are registered. These funds are regulated by RBI directives and
certain changes are introduced from time to time as and when necessary.
Tax-Saving Instruments
Tax-saving instruments offer attractive tax rebates to the investors under tax laws prescribed
from time to time to promote investments into such instruments. Under Sec.88 of the Income
Tax Act, any contributions made to any Equity Linked Savings Instrument (ELSS) is eligible for
rebate @ 20% for a maximum investment on Rs10,000 per financial year which lures the
investors to invest in such instruments.




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Money Market Instruments
Money Market Instruments aim to provide easy liquidity, preservation of capital invested and
moderate income. These instruments generally invest in safer, short-term instruments, such as
treasury bills, certificates of deposit, commercial paper and inter-bank call money. They are
invested for shorter durations.
With the govt. realizing the importance of Mutual Funds in Investment, govt. has finally allowed
the public sector companies to invest their cash surplus in mutual funds subject to a cap of 30%
only. Lets have a look at what the Mutual fund Industry has on offer.
Mutual Fund Industry
The Mutual Fund Industry has a worldwide penetration of about 70% of GDP in US, 60% of
GDP in France and over 35% in Brazil and less than even 5% of the GDP of India. Mutual funds
as an investment tool has gained great popularity in the current times, this is clearly reflected in
the robust growth levels of Assets under Management (AUM). Despite this growth, the level of
penetration of Mutual Funds in India is very low as compared to other global economies.
The mutual fund industry started in India in the year of 1963 with the establishment of Unit Trust
of India (UTI), which was a combined initiative of the Indian Government and Reserve Bank of
India.
A new trend or new era started in the Indian industry with the entry of private sector funds in
Mutual Funds in 1993, allowing the Indian investors a wider choice of fund instruments. The
first private sector mutual fund company was registered in July 1993, the erstwhile Kothari
Pioneer (now merged with Franklin Templeton). The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.
In the last few years, households income levels have grown significantly, leading to
commensurate increase in households savings. Household financial savings (at current prices)
registered growth rate of around 17.4% on an average during the period FY04-FY08 as against
11.8% on an average during the period FY99-FY03. The considerable rise in households
financial savings, point towards the huge market potential of the Mutual fund industry in India.
Besides, SEBI has introduced various regulatory measures in order to protect the interest of
small investors that augurs well for the long term growth of the industry. The tax benefits
allowed on mutual fund instruments (for example investment made in Equity Linked Saving
Instrument (ELSS) is qualified for tax deductions under section 80C of the Income Tax Act) also
have helped mutual funds to evolve as the preferred form of investment among the salaried
income earners.
Besides, the Indian Mutual fund industry that started with traditional products like equity fund,
debt fund and balanced fund has significantly expanded its product portfolio. Today, the industry
has introduced an array of products such as liquid/money market funds, sector-specific funds,
index funds, gilt funds, capital protection oriented instruments, special category funds, insurance
16 | P a g e

linked funds, exchange traded funds, etc. It also has introduced Gold ETF fund in 2007 with an
aim to allow mutual funds to invest in gold or gold related instruments. Further, the industry has
launched special instruments to invest in foreign securities. The wide variety of instruments
offered by the Indian Mutual fund industry provides multiple options of investment to common
man.
The Mutual Fund Industry has another regulator in India, namely Association of Mutual Funds in
India (AMFI) which is the body under which the distributors of Mutual Funds have to get
themselves registered to carry out distribution of Mutual Fund Instruments.

The Mutual Fund Industry is currently going through a transformation stage. On side we see
rigid and stringent norms of the governing bodies and on the other side we see the economy as
whole still jostling out to recover from the world wide economic and financial crisis of 2008-
2009.

The Indian Economy has a 7.4% growth rate of Gross Domestic Product (GDP) and has great
potential to reach into double digits backed by a strong support.



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1.3 Risk Management and aversion measures taken up by the PSUs
On dissemination of surplus funds in non-government sectors:


Risk assessment involves the integration of threat, vulnerability, and consequence information.
Risk management involves deciding which protective measures to take based on an agreed upon
risk reduction strategy. Many models/methodologies have been developed by which threats,
vulnerabilities, and risks are integrated and then used to inform the allocation of resources to
reduce those risks. For the most part, these methodologies consist of the following elements,
performed, more or less, in the following order:

Identify assets and identify which are most critical
Identify, characterize, and assess threats
Assess the vulnerability of critical assets to specific threats
Determine the risk (i.e. the expected consequences of specific types of attacks on specific
assets)
Identify ways to reduce those risk.
Prioritize risk reduction measures based on a strategy

In this regard, it is necessary to assess the debt conditions of government and suggest profitable
ways of investment in short term liquid funds so as to provide fixed income in the money market
instrument. The following graph illustrates the risk and debt positions respectively:










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2. MAIN TEXT

2.1 Objective of the Project:

The project aims at comparing the returns and risks of the various money market
instruments and maintain the minimum liquidity at all times.
The project also aims at comparing the returns of both the present as well the proposed
investment options and suggest lucrative options.
The project also aims at benchmarking the various funds to their respective indices.
Value Addition to the company: The Company gets a clear picture of its current market
positioning according to the industry in which it operates.
Reduce the risk factor at any cost and be a tenantial risk averse during the course of the
entire analysis and study.
Maintain minimum liquidity ratio of 2.5:1 at any instance of time so as to be able to meet
the organizational requirements at any time irrespective of the instrument in which the
cash is being invested.
Strictly adhere to Government guidelines and to check compliance at each and every step
of the study/research/analysis undertaken.

2.2 Methodology:

The projects covers Money Market Instruments of large and midcap sector and a comparison
and analysis will be done using financial and statistical tools which include:
Sharpe Ratio: To measure the risk-return comparison of the fund.
Standard Deviation and Beta: To show the volatility and systematic risk of a Portfolio/
Fund to the market as a whole.
Treynor Ratio: Risk adjusted measure of return based on systematic risk. Treynor ratio is
similar to Sharpe ratio, only that it uses Beta as the measurement of volatility
Returns: The annualized year on year returns of the respective instruments.

Since the project also covers details of the investment opportunities in Gold as an Asset
Class, hence the various returns or fluctuations in price of Gold over the years on a
comparative analysis will be undertaken based on the price of the underlying asset, which in
this is Gold.

As per the government apprehensions and CRISIL ratings, the corresponding instruments
validated by the government can be classified as:

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Instrument
Launch
Date
Category Rating
Risk
Grade
Return
Grade
1 Year
Return
Expense
Ratio
CBLO (Regularized) Aug-2002 Large & Mid
Cap

Avg. Above Avg. 21.45 1.86
Commercial Papers
(FFL)
Feb-1997 Large Cap

Below Avg. Above Avg. 9.77 1.84
Commercial Deposits Nov-1993 Large Cap

Low High 13.21 1.81
Gilt Funds Sep-2004 Large Cap

Avg. High 12.59 1.78
Cash Management Bills Apr-2005 Large & Mid
Cap

Below Avg. Above Avg. 9.89 1.85
G-Secs Oct-1986 Large Cap

Below Avg. Above Avg. 14.57 1.88

The category as mentioned in the table represents the investments made by these instruments fall
under which category. Also since they are majorly large cap funds, so they have a high rating of
4 or 5 stars which means that they have been consistently being performing well.

Expense ratio is the amount of expenses per Rs. 100 invested in the instrument. These
instruments have a similar kind of expense ratio around 1.75 to 1.90 since they fall under same
category.


The following table gives the details about the Price Earnings Ratio (P/E ratio) and Assets under
Management (AUM) of the Instruments.

Fund Name
Fund
Style
P/E
Ratio
P/B
Ratio
Market
Cap
(Rs Cr)
Turnover
(%)
Assets
(Rs
Cr)
Avg. Cred.
Qual.
Average
Maturity (Yrs)
CBLO
(Regularized)

20.11 3.81 43,407.02 72.00 3,043.64 -- --
Commercial
Papers (FFL)

20.18 3.01 33,126.97 291.00 3,529.71 -- --
Commercial
Deposits

18.48 3.69 51,379.18 24.94 5,150.18 -- --
Gilt Funds

17.14 3.43 37,975.64 21.63 12,016.86 -- --
Cash Management
Bills

20.09 4.03 60,281.08 0.00 2,398.60 -- --
G-Secs

23.47 4.55 64,836.16 13.48 2,321.94 GOI/Cash --







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The following table shows the expense ratio of each of the Instruments and also the load
structure.

Fund Name
Expense
Ratio %
Front-End
Load %
Back-End
Load %
CDSC
Mim Initial
Inv. (Rs. in crores)
Tenure (Yrs.)
CBLO (Regularized) 1.86 0.00 0.00 Yes 500 11, 8, 10, 9, 9, 8, 8
Commercial Papers (FFL) 1.84 0.00 0.00 Yes 500 8, 10, 8, 7
Commercial Deposits 1.81 0.00 0.00 Yes 200 20, 6, 2
Gilt Funds 1.78 0.00 0.00 Yes 400 11, 17, 3
Cash Management Bills 1.85 0.00 0.00 Yes 250 8, 1, 4, 1
G-Secs 1.88 0.00 0.00 Yes 300 11, 9, 7, 8


The following table tells about the NAV (Net Asset Value) of the Instruments under
consideration and the current NAVs as well as the highs and lows during the past one year.


Fund Name NAV As on
Chg. from
previous
52 Weeks
High
As on
52 Weeks
Low
As On
CBLO (Regularized) 100.39 Mar 2,
2013
0.86 102.33 Jan 15,
2013
76.74 May 23,
2012
Commercial Papers
(FFL)
108.68 Mar 2,
2013
1.21 113.88 Jan 3, 2013 91.34 Jun 1, 2012
Commercial Deposits 235.38 Mar 2,
2013
1.30 244.20 Jan 21,
2013
193.25 May 23,
2012
Gilt Funds 223.47 Mar 2,
2013
2.32 234.76 Jan 21,
2013
182.02 May 16,
2012
Cash Management Bills 37.00 Mar 2,
2013
0.39 38.58 Jan 21,
2013
31.31 Jun 4, 2012
G-Secs 58.25 Mar 2,
2013
0.64 58.77 Jan 21,
2013
47.69 May 23,
2012











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The detailed description about the Instruments are as follows:
CBLO (Regularized)

Current Stats & Profile

Latest NAV 100.39 (02/05/13)

52-Week High 102.33 (15/01/13)

52-Week Low 76.74 (23/05/12)

Fund Category Large & Mid Cap

Type Open End

Launch Date August 2002

Risk Grade Average

Return Grade Above Average

Net Assets (Cr) *
3,043.64 (31/03/13)

Benchmark S&P BSE 200



The instrument aims to generate long-term capital growth, income generation and distribution of
dividend. It would target the same sectoral weights as BSE 200, subject to flexibility of selecting
stocks within a particular sector.
Stated Asset Allocation
Min Max
Equity 75 100
Debt 0 25
Cash & Cash Eq. 0 25
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COMMERCIAL PAPER (FFL)


Current Stats & Profile

Latest NAV 108.676 (02/05/13)

52-Week High 113.878 (03/01/13)

52-Week Low 91.339 (01/06/12)

Fund Category Large Cap

Type Open End

Launch Date February 2003

Risk Grade Below Average

Return Grade Above Average

Net Assets (Cr) *
3,529.71 (31/03/13)

Benchmark S&P BSE 100




The instrument seeks to generate capital appreciation from a portfolio that largely consists of
equity and equity related securities of the 100 largest corporates, by market capitalization, listed
on either BSE or NSE.
Stated Asset Allocation
Min Max
Equity 90 100
Debt 0 10
Cash & Cash Eq. 0 10
COMMERCIAL DEPOSITS


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Current Stats & Profile

Latest NAV 235.3809 (02/05/13)

52-Week High 244.2003 (21/01/13)

52-Week Low 193.2501 (23/05/12)

Fund Category Large Cap

Type Open End

Launch Date November 1993

Risk Grade Low

Return Grade High

Net Assets (Cr) *
5,150.18 (31/03/13)

Benchmark S&P BSE Sensex




The instrument seeks aggressive growth and aims to provide medium to long term capital appreciation
through investment in shares of quality companies and by focusing on well established large sized
companies.

Stated Asset Allocation
Min Max
Equity 85 100
Debt 0 10
Cash & Cash Eq. 0 15
Gilt Funds

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Current Stats & Profile

Latest NAV 223.472 (02/05/13)

52-Week High 234.759 (21/01/13)

52-Week Low 182.017 (16/05/12)

Fund Category Large Cap

Type Open End

Launch Date September 1996

Risk Grade Average

Return Grade High

Net Assets (Cr) *
12,016.86 (31/03/13)

Benchmark S&P BSE 200



The instrument seeks capital appreciation and would invest up to 90 per cent in equity and the
remaining in debt instruments. Also, the stocks would be drawn from the companies in the BSE
200 Index as well as 200 largest capitalized companies in India.
Cash Management Bills

Stated Asset Allocation
Min Max
Equity 0 100
Debt 0 0
Cash & Cash Eq. 0 5
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Current Stats & Profile

Latest NAV 37.003 (02/05/13)

52-Week High 38.584 (21/01/13)

52-Week Low 31.312 (04/06/12)

Fund Category Large & Mid Cap

Type Open End

Launch Date April 2005

Risk Grade Below Average

Return Grade Above Average

Net Assets (Cr) *
2,398.60 (31/03/13)

Benchmark S&P BSE 200


The instrument aims to follow bottom up stock picking, without any bias for sectors or market
capitalizations. The instrument will attempt to be fully invested in equities at all times; however,
up to 20 per cent of its assets can be invested in cash and cash equivalents.
Stated Asset Allocation
Min Max
Equity 80 100
Debt 0 0
Cash & Cash Eq. 0 20
G-Secs

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Current Stats & Profile

Latest NAV 58.2495 (02/05/13)

52-Week High 58.77 (21/01/13)

52-Week Low 47.69 (23/05/12)

Fund Category Large Cap

Type Open End

Launch Date October 1986

Risk Grade Below Average

Return Grade Above Average

Net Assets (Cr) *
2,321.94 (31/03/13)

Benchmark S&P BSE 100


An open-end instrument aiming to provide benefit of capital appreciation and income
distribution through investment in equity.

Stated Asset Allocation
Min Max
Equity 70 100
Debt 0 30
Cash & Cash Eq. 0 30



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2.3 EXCEL CALCULATIONS (Data from Zoha Inc.)
















CALCULATIONS (Actual)














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3. LEARNING SUMMARY:

Thorough learning regarding the government guidelines and its implications
on various parameters such as tax and liquidity.

Learning of the relationship between speculation and market risks.

Calculation procedure for the returns on CBLO, G-Secs and various other
instruments as mentioned.

Alternate purviews to the required investment options and their relation with
the current trends in investment.

Understanding of the government lending and borrowing machinery and
intra-day margin maintenance.

CBLOs are equivalent to non-assimilated asset uptil the return exceeding
7.5% in growth after it, it is simply NPA.

The risk factor for analysis is being held constant at 2.75% owing to no
consistent change in the calculation methods and current stability in the
government intervention













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4. PLAN FOR COMPLETION:

The following schedule is being followed:

Project Component Time
Schedule
Status Date
Understanding about the
company & its investment
pattern
1 week Complete 25
th
Feb 2014 to
03
rd
March 2014
Understanding about the Money
Market Instruments
2 weeks Complete 04
th
March 2014 to
15
th
March 2014
Understanding about the
guidelines pertaining to MMI
0.5 week Complete 16
th
March 2014 to
20
th
March 2014
Data Collection and Calculation
of returns of tier-1 MMIs
1 week Complete 21
st
March 2014 to
28
th
March 2014
Data Collection and Investment
options in conventional
Government Securities
1 week Complete 30
th
March 2014 to
5
th
April 2014
Data Collection of speculations
in the stock prices relating to the
investment options exercised
1 week Ongoing 5
th
April 2014 to
11
th
April 2014
Comparison between the current
trends in investment and
alternate suggested trends
1 week Pending 13
th
April 2014 to
21
st
April 2014
Conclusive Research on the
findings obtained and increment
in speculations corresponding to
these trends.
1 week Pending 23
rd
April 2014 to
30
th
April 2014
Discussions &
Recommendations
1 week Pending 01
st
May 2014 to
07
th
May 2014
Formatting & Project
Completion
1 week Pending 09
th
May 2014 to
15
th
May 2014



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5. SUMMARY:
On analysis and exercising of all the options explained above, the basic aim of
project remains to provide maximum liquidity and returns to the public sector
enterprises and the government with its stringent guidelines to averse risk but at the
same time, with the advent of mutual funds, govt. too has understood the
importance of risk in the market and for this, a comprehensive analysis was
undertaken on its stock position to know the behavior of the traders. These are the
relations that I found:










Major work of the project is to develop the comparative study to reach a conclusion of the risk
aversion by the government and how these funds are being invested on the pretext of govt.
regulations and how significant research is being done in this particular field. If the ratio is found
out to be more than 2.81 which is the average government figure, then its definitely worth
taking the risk to enhance the returns and liquidity on the part of the government.

31 | P a g e

APPENDIX - A

Balance Sheet of NALCO:














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APPENDIX B

Key Ratios:














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REFERENCES

Indian Institute of Banking and Finance. (2010). Treasury Management.
Mumbai: Macmillan Publishers India Limited.
E.Gordon, Dr.K.Natarajan. (2013). Financial Markets and Services.
Mumbai: Himalaya Publishing House
Investopedia : Content specific tags
Retrieved February 27
th
, 28
th
2014 from http://investopedia.com
National Aluminium Company. (2014). Department of Finance
Retrieved from http://nalcoindia.co.in/fin/cred.aspx
Clearing Corporation of India Ltd. (2012). Money Market Instruments.
Retrieved from https://www.ccilindia.com/FAQ/Pages/CBLO.aspx
during 3
rd
March to 7
th
March, 2014
Business Standard. (2014). Economic Policy.
Retrieved from http://www.business-standard.com/article/economy-policy/govt-allows-tax-
free-bonds-for-13-psus-113081300433_1.html on 12th March, 2014
SBI DHFI Limited. (2013). Products and Services.
Retrieved from https://www.sbidfhi.com/products-services.aspx?id=5 on 14th March, 2014
FIMMDA. (2014). Investor Information
Retrieved from http://www.fimmda.org/modules/content/?p=1064
CRISIL (2013). The Insight Journal.
Retrieved from http://www.crisil.com/downloads/insights-opinions-more.jsp
during 25
th
March to 7
th
April, 2014




Faculty Guide : Prof. Dr. Suresh Chandra Bihari
Company Guide: Mr. Jiban Mahapatra
Date: 11
th
April, 2014 Anuj Sharma
(Signature of Student)