INTRODUCTION

POROTFOLIO MANAGEMENT is an art and science of management of

funds in such a way that yielding maximum return at the lowest risk. Every investors
primary goal is earning maximum risk premium. So in this modern era of
privatization, globalization and liberalization the importance of a special discipline
which deals with investments i.e. portfolio management is growing up rapidly in the
financial world. Portfolio management has emerged as a separate academic discipline
in India. Portfolio theory that deals with the rational investment decision-making
process has now become an integral part of financial literature.
INTRODUCTION TO THE STUDY:
This study is intended to know about portfolio management practices and
applying various theories of portfolio in portfolio management decisions.
PORTFOLIO MANAGEMENT is a process encompassing many activities aimed at
optimizing investment of funds each phase is an integral part of the whole process and the
success of portfolio management depends upon the efficiency in carrying out each phase.
Five phases can be indentified:1) Security analysis
2) Portfolio analysis
3) Portfolio selection
4) Portfolio revision
5) Portfolio evaluation

SECURITY ANALYSIS:It refers to the analysis of trading securities from the point of view of their prices, return,
risk. All investment are risky and the expected return is related to risk.
The securities available to an investment are numerous ad of various types. The shares of
over more than 7000 are listed in stock exchanges of the country. Securities classified into
ownership securities such as equity shares and preference shares and debentures and bonds.
1

Recently, a number of new securities such as convertible debentures and deep discount
bonds, zero coupon bonds, flexi bonds, floating rate bonds GDRs Euro currency bonds etc.,
are innsued to raise funds for their projects by companies from which investor has to
choose those securities the is worthwhile to be included in his investment portfolio. The
calls for detailed analysis of the available securities.
Security analysis is the initial phase of the portfolio management process. It examines the
risk return characteristics of individual securities. A basic strategy in securities investment
is to buy under priced securities and sell over priced securities. But the problem is how to
identify such securities in other words mispriced securities. This is what security analysis is
all about.
Prices of the securities in the stock market fluctuate daily on the account of continuous
buying and selling. Stock prices move in trends and cycles and are never stable. An
investor in the stock market is interested in buying securities ar low price and selling them
at high price so as to get a good return on his investment made. He, therefore tries to
analyze the movement of share prices in the market.

NEED & IMPORTANCE OF STUDY:

Investing in securities such as shares, debentures & bonds is profitable as well as
exciting. It is indeed rewarding but involves a great deal of risk & need artistic skill.
Investing in financial securities is now considered to be one of the most risky
avenues of investment. It is rare to find investors investing their entire savings in a
single security. Instead, they tend to invest in a group of Securities. Such group of
securities (assets) is called as PORTFOLIO. Creation of portfolio helps to reduce
risk without sacrificing returns. Portfolio management deals with the analysis of
individual securities as well as with the theory & practice of optimally combining
securities into portfolios.

SCOPE OF STUDY:
This study covers the Markowitz model & CAPM.

The study covers the

calculation of correlations between the different securities in order to find out at what
percentage funds should be invested among the companies in the portfolio. It
includes the calculation of individual Standard Deviation of securities, weights of
individual securities involved in the portfolio. These percentages help in allocating
the funds available for investment based on risky portfolios. It also includes risk and
return of portfolios and their performance evaluation for a limited number of scrips

OBJECTIVES OF THE STUDY:

The objectives of the study are as follows:

To examine the process of portfolio management at Religare Securities

To assess the effectiveness of portfolio management services.

To study whether the portfolio risk is less than the individual risk.

To understand, analyse and select the best portfolio

To study whether the selected portfolios are yielding a satisfactory and constant

return to the investor.

To find out optimal portfolio, which gives optimal return at a minimized risk

To knowing about portfolio management and how it is useful to investor in

taking decisions on the timing of investments.

To measuring and evaluating the portfolio performance

METHODOLOGY OF THE STUDY

DATA COLLECTION METHODS:
The data collection methods include both the primary and secondary
collection methods.

Primary collection methods: This method includes the data collection from the

personal discussion with the authorized members of the Religare securities

Secondary collection methods: The secondary collection methods includes the

lectures of the superintend of the market operations and faculty of training and so on,
also the data collected from the various websites, magazines, different books and
literature issued by authorized training centre of Religare securities. for this study.
APPLIED STATISTICAL METHODS IN DATA ANALYSIS:
This study involves in applying the statistical tools like average, variance,
standard deviation, covariance, correlation, regressionetc to analyse the
collected data from various sources to help in portfolio construction, selection, and in
evaluation. Graphical presentation methods are used to understand easily and
comprehensively to interprete the data and analysed results.

LIMITATIONS OF THE STUDY:

This study has been conducted purely to understand Portfolio Management

for investors.

Construction of Portfolio is restricted to scripts two companies based on

Markowitz model.

Very few scrips / companies are selected and analysed from the common list of

BSE sensex & NSE nifty contributing companies.

Data collection regarding selected scripts was strictly confined to secondary

source. No primary data is associated with the project.

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

There was a constraint with regard to time allocation for the research study i.e.
for a period of two months.

CHAPTER II
INDUSTRY PROFILE
COMPANY PROFILE

INDUSTRY PROFILE
STOCK EXCHANGE
HISTORY:
The only stock exchange operating in the 19th century was Bombay Stock Exchange
set up in 1875 and Ahmadabad set up in 1894. There were organized as voluntary nonprofit making association of brokers to regulate and protect their interests. Before the
control on securities trading became a central subject under the constitution in 1950, it was
a state subject and the Bombay securities contracts (control) Act if 1925 used to regulate
trading in securities. Under this Act, the Bombay Stock Exchange was recognized in 1927
and Ahmadabad in 1937.
During the war boom, a number of stock exchanges were organized even in Bombay,
Ahmadabad and other centers, but they were not recognized. Soon after it became a central
subject, central legislation was proposed and a committee headed by A.D. Gorwala went
into the bill for securities regulation. On the basis of the committees recommendations and
public discussion, the securities contracts (regulation) Act became law in 1956.
DEFINITION OF STOCK EXCHANGE:
Stock Exchange means anybody or individuals whether incorporated or not, constituted
for the purpose of assisting, regulating or controlling the business of buying, selling or
dealing in securities.
It is an association of member brokers for the purpose of self-regulation and protecting the
interests of its members.
It can operate only if it is recognized by the government under the securities contacts
(regulation) Act, 1956. The recognition is granted under section 3 of the Act by the central
government, Ministry of Finance.

BY LAWS:
Besides the above act, the securities contracts (regulation) rules were also made in 1957 to
regulate certain matters of trading on the stock exchanges. There are also by laws of the
exchanges, which are concerned with the following subjects.
Opening/Closing of Stock Exchanges, timing of trading, regulation of blank transfers,
regulation of badla or carryover business, control of the settlement and other activities of
the Stock Exchange, fixation of margins, fixation of market prices or making up prices.
Regulation of taravani business (jobbing), etc; regulation of brokers trading, brokerage
charges, trading rules on the exchange, arbitration and settlement of disputes, settlement
and clearing of the trading etc.
REGULATION OF STOCK EXCHANGE:
The Securities contracts (regulation) act is the basis for operations of the Stock Exchanges
in India. No exchange can operate legally without the Government permission or
recognition. Stock Exchanges are given monopoly in certain areas under section 19 of the
above Act to ensure that the control and regulation are facilitated. Recognition can also be
withdrawn, if necessary where there are no Stock Exchanges in its absence.
SECURITIES AND EXCHANGE BOARD OF INDIA [SEBI]:
SEBI was setup as an autonomous regulatory authority by the Government of India in 1988
to protect the interests of investors in securities and to promote the development and to
regulate the securities market and for matters connected there with or incidental there to. It
is empowered by two acts namely SEBI Act, 1992 and Securities Contract (regulation) Act,
1956 to perform the function of protecting investors rights and regulating the capital
markets. SEBI was given statutory status by an Act of Parliament on April 4, 1992. SEBI
was authorized.
1) To regulate all merchant banks on issue activity
2) To lay guidelines, and supervise and regulate the working of mutual funds, and
9

NATIONAL STOCK EXCHANGE

The Organization:
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchange, which recommended
promotion of The National Stock Exchange by financial institutions to provide access to
investors from all across the country on an equal footing. Based on the recommendations,
NSE was promoted by leading Financial Institutions at the best of the Government of India
and was incorporated in November 1992 as a tax paying company unlike other stock
exchanges in the country.
On its recognition as a stock exchange under The Securities Contracts (Regulation) Act,
1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The capital market (Equity) segment commenced operations in
November 1994 and operations in Derivatives segment commenced June 2000.
The National Stock Exchange (NSE) is Indias leading stock exchange covering various
cities and town across the country. NSE was set up by leading institutions to provide a
modern, fully automated screen based trading system with national reach. The exchange
has brought about unparalleled transparency, speed and efficiency, safety and market
integrity. It has set up facilities that serve as a model for the securities industry in terms of
system practices, and procedures.
NSE has played a catalytic role in reforming the Indian securities market in terms of micro
structure, market practices and trading volumes. The market today uses slate of art
information technology to provide an efficient and transparent trading, clearing and
settlement mechanism, and has witnessed several innovations in products and services viz.,
dematerialization of stock exchange governance, screen based trading, compression of
settlement cycles, dematerialization and electronic transfer of securities, securities lending
and borrowing, professionalization of trading members, fine-turned risk management
systems, emergence of clearing corporations to assume counter party risks, market of debt
and derivative instruments and intensive use of information technology.
10

Technology:
Across the globe, developments in information, communication and network Technologies
have created paradigm shifts in the securities market operations. Technology has enabled
organizations to build new sources of competitive advantage, bring about innovations in
products and services, and to provide for new business opportunities. Stock Exchanges all
over the world have realized the potential of IT and have moved over to electronic trading
systems, which are cheaper, have wider reach and provide a better mechanism for trade and
post trade execution.
NSE believes that technology will continue to provide the necessary impetus for the
organization to retain its competitive edge and ensure timeliness and satisfaction in
customer service. In recognition of the fact that technology will continue to redefine the
shape of the securities industry, NSE stresses on innovation and sustained investment in
technology to remain ahead of competition.
Form around 400 cities spread all over the country. In the recent past, capacity
enhancement measures were taken up in regard to the trading systems so as to effectively
meet the requirements of increased users and associated trading loads. With up gradation of
trading hardware, NSE can handle up to 1 million trades per day. NSE has also put in place
NIBIS (NSEs Internet Based Information System) for on-line real time dissemination of
trading information over the Internet. In order to capitalize on in house expertise in
technology, NSE set up a separate company, NSE.IT, in October 1999. This IT expertise to
provide a platform for taking up new IT assignments both within and outside India and
attaining global exposure.
The telecommunications network uses x.25 protocol and is the backbone of the automated
trading system. Each trading member trades on the NSE with other members through a PC
located in the trading members office, anywhere in India. The Trading members on the
wholesale Debt Market segment are linked to the central computer at the NSE through
dedicated 64kbps leased lines and VSAT terminals. These leased lines are multiplexed

11

using dedicated 2 mbps, optical-fiber links. The WDM participants connect to the trading
system through dial-up links.
The exchange uses powerful RISC based UNIX services, procured from Digital and HP for
the back office processing. The latest software platforms like ORACLES 7, RDBMS, and
GUPTA- SQL/ORACLE FORMS 4.5 Front- Ends, etc.; have been for the exchange
applications. The Exchange currently manages its data center operations, system and
database administration, design and development of in-house systems and design and
implementation of telecommunication solutions.
NSE is one of the largest interactive VSAT based Stock Exchanges in the world. Today it
supports more than 3000 VSATs and is expected to grow to more than 4000VSATs in the
next year. The NSE network is the largest private wide area network in the country and
the first extended C-B and VSAT network in the world. Currently more than 9000 users are
trading on the real time online NSE application. There are over 15 large computer
systems, which include non-stop fault-tolerant computers and high-end UNIX servers,
operational less than one roof to support the NSE applications. This coupled with the
nationwide VSAT network makes NSE the countrys largest Information Technology user.
NSE-NIFTY
The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new Index
which replaces the existing NSE-100 Index is expected to serve as an appropriate Index for
the new segment of futures and options. NIFTY means Nations Index for Fifty Stocks.
The NSE-50 comprises 50 companies that represent 20 broad industry groups with an
aggregate market capitalization of around Rs. 1,70000 crs. All companies included in the
Index have a market capitalization excess of Rs. 500crs each and should have traded for
85% of trading days at an impact cost of less than 1.5%.
NSE- MIDCAP INDEX
The NSE midcap Index or the Nifty comprises 50 stocks that represent 21 boards industry
groups and will provide proper representation of the midcap segment of the Indian Capital
12

Market. All stocks in the Index should have market capitalization of greater than Rs. 200crs
and should have traded 85% of the trading days at an impact cost of less 2.5%. The base
period for the index is Nov 4, 1996 which signifies two years for completion of operations
of the capital market segment of the operations. The base value of the Index has been set at
1000.
MISSION:
NSEs, mission is setting the agenda for change in the securities markets in India. The NSE
was set-up with the main objectives of:

Establishing a nationwide trading facility for equities, debt instruments and hybrids.

Ensuring equal access to investors all over the country through an appropriate
communication network.

Providing a fair, efficient and transparent securities market to investors using

electronic trading systems.

Enabling shorter settlement cycles and book entry settlements systems and

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has become industry
benchmarks and is being emulated by other market participants. NSE is more than a mere
market facilitator. Its that force which is guiding the industry towards new horizons and
greater opportunities.
PROMOTERS:
NSE has been promoted by leading financial institutions, Banks, Insurance companies and
other financial intermediaries:
Industrial Development Bank of India Limited
Industrial Finance Corporation of India Limited
Life Insurance Corporation of India
State Bank of India
13

 ICICI Bank Limited

IL & FS Trust Company Limited
Stock Holding Corporation of India Limited
SBI Capital Markets Limited
The Administrator of the Specified Undertaking of Unit Trust of India
Bank of Baroda
Canara Bank
General Insurance Corporation of India
National Insurance Company India
The New India Assurance Company Limited
The Oriental Insurance Company Limited
Punjab National Bank
Oriental Bank of Commerce
Corporation Bank
Indian Bank
Union Bank of India
At present, there are 24 Stock Exchanges recognized under the Securities Contract
(Regulation) Act, 1956. They are:

NAME OF THE STOCK EXCHANGE

Bombay Stock Exchange
Ahmadabad Share and Stock Brokers Association Ltd.
Calcutta Stock Exchange Association Ltd.
Delhi Stock Exchange Association Ltd.
Madras Stock Exchange Association Ltd.
Indore Stock Exchange Association Ltd.
Bangalore Stok Exchange
Hyderabad Stock Exchange
Cochin Stock Exchange
14

YEAR
1875
1957
1957
1957
1958
1968
1943
1978
1982

Pune Stock Exchange

U.P. Stock Exchange Association Ltd.
Ludhiana Stock Exchange Association
Jaipur Stock Exchange Ltd.
Gauhathi Stock Exchange Ltd.
Mangalore Stock Exchange Ltd.
Maghad Stock Exchange Association Ltd.
Bhubaneshwar Stock Exchange Association Ltd.
Over the Counter Exchange of India, Bombay
Saurashtra Kutch Stock Exchange Ltd.
C Stock Exchange Ltd.
Coimbatore Stock Exchange Ltd.
The Meerut Stock Exchange Ltd.
National Stock Exchange Ltd.
Integrated Stock Exchange Ltd.

COMPANY PROFILE

INDIA INFOLINE LIMITED

15

1982
1983
1983
1984
1985
1986
1989
1989
1990
1991
1991
1991
1991
1991
1999

India Info line was founded in 1995 by a group of professionals with impeccable
educational qualifications and professional credentials. Its institutional investors include
Intel Capital (worlds leading technology company), CDC (promoted by UK government),
ICICI, TDA and ReeshanarIndia Info line group offers the in tire gamut of investment
products including Stock broking, Commodities broking, Mutual Funds, Fixed Deposits,
GOI Relief bonds, Post office savings and life Insurance. India Info line is the leading
corporate agent of ICICI Prudential Life Insurance Company, which is Indias No .1 private
sector life insurance company.www.indiainfoline.com has been the only Indian Website to
have been listed

by none other than Forbes in its Best of the Web survey of global

website, not just once but three times in a row and counting. a must read for investors in
south Asia is how they choose to describe India Info line. It has been rated as No.1 in the
category of Business News in Asia by Alexia rating.
Stock and Commodities broking is offered under the trade name 5paisa. India Infoline
Commodities Pvt. Ltd., a wholly owned subsidiary of India Infoline Ltd., holds
membership of MCX.
Products: The India infoline pvt. Ltd, offers the following products.
a. E-broking:
1. Equities
2. Derivatives
3. Commodities
The above three are traded as 5paisa.
b. Distribution:
1. Mutual funds.
2. Govt. of India bonds.
3. Fixed deposits.
C. Insurance:
1. Life insurance policies.
2. Corporate sector of ICICI
3. Prudential life insurance.

16

It was originally incorporated on October 18, 1995 as Probity Research and Services
Private Limited at Mumbai under the Companies Act, 1956 with Registration No:11 93797.
We commenced our operations as an independent provider of information analysis and
research covering Indian businesses, financial markets and economy, to institutional
customers. We became a public limited company on April 28, 2000 and the name of the
Company was changed to Probity Research and Services Limited.

The name of the

company was changed to India Infoline.com on May 23, 2000 and later to India Info line
Limited on March 23, 2001.
In 1999, the company identified the potential of the Internet to cater to a mass retail
segment and transformed our business model form providing information services to
institutional customers to retail customers. Hence the company launched Internet portal,
www.Indiainfoline.com and started providing news and market information, independent
research, interviews with business leaders and other specialized features.
In May 2000, the name of our company changed to India Infoline.com Limited. In
the year 2000, we leveraged our position as a provider of financial information and analysis
by diversifying into transactional services, primarily for online trading in shares and
securities and online as well as offline distribution of personal financial products, like
Mutual funds and RBI Bonds.
Our broking service as launched under the brand name of 5Paisa through our
subsidiary, India Infoline Securities Private Limited and www.5Paisa.com, the e-broking
portal, was launched for online trading in July 2000. Besides we also offer Real time stock
quotes, market news and price charts with multiple tools for technical analysis In
December 2000, our subsidiary, India Infoline Insurance Services Limited became a
corporate agent for ICICI Prudential Life Insurance Company Limited. And emerged as
one of the leading corporate agents for ICICI Prudential Life Insurance Company Limited.
In the year 2004, company launched commodities broking through our subsidiary
India Info line commodities Private LTD.
At present company has a network of 73 branches across 36 cities in India. We plan
to set up 77 additional branches in 50 cities across India for our different business
including broking, insurance, commodities and distribution of mutual funds and other
investment products.
17

Key promoters of the company

Key promoters of our company are Mr. Nirmal Jain and Mr. Venkataraman, professionals
with a good academic and work experience.
Mr. Nirmal Jain has been the chairman and Managing Director of the Company since its
incorporation i.e., October 18, 1995.Mr. Jain holds a MBA degree form IIM Ahmadabad
and is a member Institute of Chartered Accountants of India and the Institute of Cost
Accountants of India. He started his career in 1989 with Hindustan Lever Limited, a
subsidiary of Unilever Plc, in their commodities trading and exports division Mr.Jain has a
total experience of more than 15 years.
Mr. R. Venkataraman joined the Board with effect from July 5 th, 1999. He holds a B-Tech
degree in Electronics and Electrical Communications Engineering form IIT Kharagpur and
an MBA degree form IIM Bangalore. He has held senior managerial positions in various
divisions of ICICI limited, including ICICI securities limited, their investment banking
joint venture with J P Morgan of USA. He also worked as an equity analyst with BZW and
Taib Capital Corporation Limited.

HE has also held the position of Assistant Vice

President with G E Capital Services India Limited in their private equity division. He has
varied experience of more than 14 years in the financial services sector
Business
Indi Infoline Limited
Content related services- Equity research & Online Media
Property
India Infoline Securities PVt. Ltd.

Equities & Derivative Broking.

Depository Services.

Portfolio Management Services.

India Infoline.com Distibution Company Ltd.

Mutual funds

RBI Bonds

Fixed Deposits etc.

18

India Infoline Insurance Services Ltd.

Corporate agents for ICICI Prudential
Life Insurance Company Ltd.

India Infoline Commodities Pvt. Ltd.

Commodities Broking.

India Infoline Investment Services Pvt. Ltd.

Margin funding & financing

BROKERAGE SERVICES
1. Online Brokerage: we offer subscribers real-time trading on The NSE and BSE.
Apart from this we also offer commodities trading on the MCX and NCDEX.
Customers can directly Place Orders to buy and sell securities through our
automated order Processing system.
2. Offline Brokerage: we began offering offline brokerage services as a back up to
our online brokerage offering through our branches. This was mainly to address the
internet access problems faced by some of our retail customers.
Competition
1. Broking: we face competition from small local brokers
a. (Traditional) and pan India Brokers like Kotak Securities Ltd.
b. S.S Kantilla Ishwarlal securities Ltd, India bulls Securities Ltd,
c. ICICI Web Trade Limited, Geojit Financial Services Ltd etc.
2. Distribution : We face competition from small retail distributors (typically single
outlet unorganized units), brokers who have a distribution setup, old and established
distribution companies like Blue chip Corporate Investment Centre Limited, Bajaj

19

Capital Ltd, Karvy Securities Ltd, and banks

including their PMS

and Wealth Management desks.

3. Our Strength:

Our strengths are our content and research online technology

platform and customer services.

Financial Performance:
Consolidated Financial Performance of India Infoline Ltd, (Excluding intergroup
revenue)
Revenue (in Rs. Million)

Year ended 31st

2012

March

Year ended 31st March

2013

Income
Revenue from operations
Equities Brokerage & Related
income
Agency Commission & Fees

30.79

191.47

40.07

81.17

Commodities Brokerage

Policy Commission

7.03

17.92

Media & Content Income

7.63

16.82

Other income

21.03

52.56

Total Income
106.54
359.94
Our consolidated total income has grown from Rs. 106.54 million in FY 2011 to Rs.
359.94 million in FY 2012. That same year, we made a turnaround and reported a
consolidated cash profit of 103.84 million and a net profit of Rs. 74.8 million on the first
nine months of FY 2012; we have reported a consolidated total income of Rs. 475.03
million.
we had 28,215 customers for our broking services and we have sold mutual fund unit,
company deposits government bonds or small savings schemes to over 0.15 million

20

customers. India Infoline Ltd has 85 branches across 36 locations in India, controlled by 10
Regional Offices in India. It has a branch in Dubai also.
Expenditure:
The following table sets out expenses as a percentage of its total income for
the fiscal years ended March 31, 2008, 2009, and the nine months ended December 31,
2009.
Rs. Million
Particulars

Year ended
31st
March, 2012

Year ended
31st
March, 2013

Direct Costs

32.58%

30.12%

Employee Cost

29.41%

16.64%

Administration & Other Expense

48.43%

21.51%

Interest

1.46%

2.95%

Depreciation & Amortization

32.31%

8.07%

Total Expenditure

144.18%

79.30%

Expenditure

Our Expenses as a percentage of its total Expenditure is come down from

1.44.18% o f 2008 to 79.30% in FY 2009. That same year we reduced the total expenditure
percentage of its Total income INS 13.98% in the first three Months of FY 2012, we have
reported total expenditure % of its total income is 65.32%.

21

CHAPTER III
REVIEW OF
LITERATURE

REVIEW OF LITERATURE
PORTFOLIO MANAGEMENT is a process encompassing many activities aimed at
optimizing investment of funds each phase is an integral part of the whole process and the
22

success of portfolio management depends upon the efficiency in carrying out each phase.
Five phases can be indentified:1. Security analysis
2. Portfolio analysis
3. Portfolio selection
4. Portfolio revision
5. Portfolio evaluation
SECURITY ANALYSIS:It refers to the analysis of trading securities from the point of view of their prices, return,
risk. All investment are risky and the expected return is related to risk.
`The securities available to an investment are numerous ad of various types. The
shares of over more than 7000 are listed in stock exchanges of the country. Securities
classified into ownership securities such as equity shares and preference shares and
debentures and bonds. Recently, a number of new securities such as convertible debentures
and deep discount bonds, zero coupon bonds, flexi bonds, floating rate bonds GDRs Euro
currency bonds etc., are innsued to raise funds for their projects by companies from which
investor has to choose those securities the is worthwhile to be included in his investment
portfolio. The calls for detailed analysis of the available securities.

Security analysis is the initial phase of the portfolio management process. It examines the
risk return characteristics of individual securities. A basic strategy in securities investment
is to buy under priced securities and sell over priced securities. But the problem is how to
identify such securities in other words mispriced securities. This is what security analysis is
all about.
Prices of the securities in the stock market fluctuate daily on the account of continuous
buying and selling. Stock prices move in trends and cycles and are never stable. An
investor in the stock market is interested in buying securities ar low price and selling them
at high price so as to get a good return on his investment made. He, therefore tries to
analyze the movement of share prices in the market.
23

An investor invests his funds in a portfolio expecting to get a good return consistent with
the risk that he has to bear. Portfolio management comprises all the processes involved in
the creation and maintenance of an investment portfolio. It deals specifically with Security
analysis, Portfolio Analysis, Selection, Vision and Evaluation. Portfolio management is a
complex process which tries to make investment activity more rewarding and less risky.
There was a time when portfolio management was an exotic term. The scenario has
changed drastically. It is now a familiar term and is widely practiced in India. The theories
and concepts relating to portfolio management now find their way to the front pages of
financial newspapers and the cover pages of investment journals in India. Indian capital
markets have become active. The Indian stock markets are steadily moving towards higher
efficiency,

with

rapid

computerization,

increasing

market

transparency,

better

infrastructure, better customer service etc., the markets are dominated by large institutional
investors with their diversified portfolios. A large no of mutual funds has been set up the
country since 1987.

with this development investment in securities has gained

considerable momentum.
Professional portfolio management backed by competent research began to be practiced by
mutual funds, investment consultants and big brokers. The Securities Exchange Board of
India (SEBI). The Stock Market Regulatory body in India is supervising the whole process.
With the advent of computers the whole process of portfolio management has
become quite easy. The computer can absorb large volumes of data perform computations
accurately and quickly give out results in desired form.
The trend towards liberalization and globalization of the economy has promoted fee
flow of capital across international border. Portfolio now include not only domestic
securities but also foreign securities but also foreign securities such as Options and Futures
in the field of investment management and trading in derivative securities. Their valuation
etc., have broadened its scope.

EVALUATION OF PORTFOLIO:

24

Portfolio manager evaluates his portfolio performance and identifies the sources of
strengths and weakness. The evaluation of the portfolio provides a feed back about the
performance to evolve better management strategy. Even though evaluation of portfolio
performance is considered to be the last stage of investment process, it is a continuous
process. There are number of situations in which an evaluation becomes necessary and
important.
i.

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

ii.

Evaluation of Managers: A mutual fund or similar organization might want to

evaluate its managers. A mutual fund may have several managers each running a
separate fund or sub-fund. It is often necessary to compare the performance of these
managers.

iii.

Evaluation of Mutual Funds: An investor may want to evaluate the various mutual
funds operating in the country to decide which, if any, of these should be chosen for
investment. A similar need arises in the case of individuals or organizations who
engage external agencies for portfolio advisory services.

iv.

Evaluation of Groups: Academics or researchers may want to evaluate the

performance of a whole group of investors and compare it with another group of
investors who use different techniques or who have different skills or access to
different information.

NEED FOR EVALUATION OF PORTFOLIO:

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

25

 We can try to evaluate the performance of a specific security in the portfolio to

determine whether it has been worthwhile to include it in our portfolio.
We can try to evaluate the performance of portfolio as a whole during the period
without examining the performance of individual securities within the portfolio.
NEED & IMPORTANCE:
Portfolio management has emerged as a separate academic discipline in India.
Portfolio theory that deals with the rational investment decision-making process has now
become an integral part of financial literature.
Investing in securities such as shares, debentures & bonds is profitable well as
exciting. It is indeed rewarding but involves a great deal of risk & need artistic skill.
Investing in financial securities is now considered to be one of the most risky avenues of
investment. It is rare to find investors investing their entire savings in a single security.
Instead, they tend to invest in a group of securities. Such group of securities is called as
PORTFOLIO. Creation of portfolio helps to reduce risk without sacrificing returns.
Portfolio management deals with the analysis of individual securities as well as with the
theory & practice of optimally combining securities into portfolios.
The modern theory is of the view that by diversification, risk can be reduced. The
investor can make diversification either by having a large number of shares of companies
in different regions, in different industries or those producing different types of product
lines. Modern theory believes in the perspective of combinations of securities under
constraints of risk and return.
PORTFOLIO REVISION:
The portfolio which is one selected has to be continuously reviewed over a period
of time and the revised depending on the objectives of the investor. The care taken in
construction of portfolio should be extended to the review and revision of the portfolio.
Fluctuations that occur in the equity prices cause substantial gain or loss to the investors.
The investor should have competence and skill in the revision of the portfolio. The
portfolio management process needs frequent changes in the composition of stocks and
26

bonds. In securities, the type of securities to be held should be revised according to the
portfolio policy.
An investor purchases stock according to his objectives and return risk framework.
The prices of stock that he purchases fluctuate, each stock having its own cycle of
fluctuations. These price fluctuations may be related to economic activity in a country or
due to other changed circumstances in the market.
If an investor is able to forecast these changes by developing a framework for the
future through careful analysis of the behavior and movement of stock prices is in a
position to make higher profit than if he was to simply buy securities and hold them
through the process of diversification. Mechanical methods are adopted to earn better profit
through proper timing. The investor uses formula plans to help him in making decisions for
the future by exploiting the fluctuations in prices.
FORMULA PLANS:
The formula plans provide the basic rules and regulations for the purchase and sale
of securities. The amount to be spent on the different types of securities is fixed. The
amount may be fixed either in constant or variable ratio. This depends on the investors
attitude towards risk and return. The commonly used formula plans are
i.

Average Rupee Plan

ii.

Constant Rupee Plan

iii.

Constant Ratio Plan

iv.

Variable Ratio Plan

ADVANTAGES:
Basic rules and regulations for the purchase and sale of securities are provided.
The rules and regulations are rigid and help to overcome human emotion.
The investor can earn higher profits by adoption the plans.
A course of action is formulated according to the investors objectives.
It controls the buying and selling of securities by the investor.
27

 It is useful for taking decisions on the timing of investments.

DISADVANTAGES:
The formula plan does not help the selection of the security. The selection of the
security has to be done either on the basis of the fundamental or technical analysis.
It is strict and not flexible with the inherent problem of adjustment.
The formula plans should be applied for long periods, other wise the transaction
cost may be high.
Even if the investor adopts the formula plan, he needs forecasting. Market
forecasting helps him to identify the best stocks.
PORTFOLIO BUILDING
Portfolio decisions for an individual investor are influenced by a wide
variety of factors. Individuals differ greatly in their circumstances and therefore, a financial
programme well suited to one individual may be in appropriate for another. Ideally, an
individuals portfolio should be tailor-mode to fit ones individual needs.
Investors Characteristics:
An analysis of an individuals investment situation requires a study of
personal characteristics such as age, health conditions, personal habits, family
responsibilities, business or professional situation, and tax status, all of which affect the
investors willingness to assume risk.
Stage in the Life Cycle:
One of the most important factors affecting the individuals investment
objective is his stage in the life cycle. A young person may put greater emphasis on growth
and lesser emphasis on liquidity. He can afford to wait for realization of capital gains as his
time horizon is large.
Family responsibilities:
28

The investors marital status and his responsibilities towards other members
of the family can have a large impact on his investment needs and goals.
Investors experience:
The success of portfolio depends upon the investors knowledge and
experience in financial matters. If an investor has an aptitude for financial affairs, he may
wish to be more aggressive in his investments.
Attitude towards Risk:
A persons psychological make-up and financial position dictate his ability
to assume the risk. Different kids of securities have different kinds of risks. The higher the
risk, the greater the opportunity for higher gain or loss.
Liquidity Needs:
Liquidity needs vary considerably among individual investors. Investors
with regular income from other sources may not worry much about instantaneous liquidity,
but individuals who depend heavily upon investment for meeting their general or specific
needs, must plan portfolio to match their liquidity needs. Liquidity can be obtained in two
ways:
1. By allocating an appropriate percentage of the portfolio to bank deposits, and
2. By requiring that bonds and equities purchased be highly marketable.
Tax considerations:
Since different individuals, depending upon their incomes, are subjected to
different marginal rates of taxes, tax considerations become most important factor in
individuals portfolio strategy. There are differing tax treatments for investment in various
kinds of assets.
Time Horizon:
In investment planning, time horizon becomes an important consideration. It
is highly variable from individual to individual. Individuals in their young age have long
29

time horizon for planning, they can smooth out and absorb the ups and downs of risky
combination. Individuals who are old have smaller time horizon, they generally tend to
avoid volatile portfolios.
Individuals Financial Objectives:
In the initial stages, the primary objectives of an individual could be to
accumulate wealth via regular monthly savings and have an investment programme to
achieve long term capital gains.
Safety of Principal:
The protection of the rupee value of the investment is of prime importance
to most investors. The original investment can be recovered only if the security can be
readily sold in the market without mush loss of value.
Assurance of Income:
Different investors have different current income needs. If an individual is
dependent of its investment income for current consumption the income received now in
the form of dividend and interest payments become primary objective.
Investment Risk:
All investment decisions revolve around the trade-off between risk and
return. All rational investors want a substantial return from their investment. An ability to
understand, measure and properly manage investment risk is fundamental to any intelligent
investor of a speculator. Frequently, the risk associated with security investment is ignored
and only the rewards are emphasized. An investor who does not fully appreciate the risks in
security investments will find it difficult to obtain continuing positive results.
RISK AND EXPECTED RETURN:
There is a positive relationship between the amount of risk and the amount
of expected return i.e., the greater the risk, the larger the expected return and larger the
chances of substantial loss. One of the most difficult problems for an investor is to estimate
the highest level of risk he is able to assume.
30

Risk is measured along the horizontal axis and increases from the left to right.

Expected rate of return is measured on the vertical axis and rises from bottom to top.

The line from 0 to R (f) is called the rate of return or risk less investments commonly
associated with the yield on government securities.

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

TYPES OF RISKS:
Risks consist of two components. They are

31

RISKS

SYSTEMATIC
RISK

UN-SYSTEMATIC
RISK

1. Systematic Risk
2. Un-systematic Risk
1.Systematic Risk:
Systematic risk is caused by factors external to the particular company and
uncontrollable by the company. The systematic risk affects the market as a whole.
Factors affect the systematic risk are

Economic conditions

Political conditions

Sociological changes

The systematic risk is unavoidable. Systematic risk is further sub-divided into three
types. They are
a) Market Risk
b) Interest Rate Risk
c) Purchasing Power Risk

32

SYSTEMATIC
RISK

MARKET
RISK

INTEREST
RATE RISK

PURCHASE
POWER RISK

a) Market Risk:
One would notice that when the stock market surges up, most stocks post higher
price. On the other hand, when the market falls sharply, most common stocks will drop.
It is not uncommon to find stock prices falling from time to time while a companys
earnings are raising and vice-versa. The price of stock may fluctuate widely within a
short time even though earnings remain unchanged or relatively stable.

b) Interest Rate Risk:

Interest rate risk is the risk of loss of principal brought about the changes in the
interest rate paid on new securities currently being issued.
c) Purchasing Power Risk:
The typical investor seeks an investment which will give him current income and /
or capital appreciation in addition to his original investment.
2. Un-systematic Risk:
Un-systematic risk is unique and peculiar to a firm or an industry. The nature and mode
of raising finance and paying back the loans, involve the risk element. Financial leverage of
the companies that is debt-equity portion of the companies differs from each other. All
33

these factors affect the un-systematic risk and contribute a portion in the total variability of
the return.
Managerial inefficiently
Technological change in the production process
Availability of raw materials
Changes in the consumer preference
Labour problems
The nature and magnitude of the above mentioned factors differ from industry to industry
and company to company. They have to be analyzed separately for each industry and firm.
Un-systematic risk can be broadly classified into:
b) Business Risk
c) Financial Risk

UN-SYSTEMATIC
RISK

FINANCIAL RISK

BUSINESS RISK

a. Business Risk:
34

Business risk is that portion of the unsystematic risk caused by the operating
environment of the business. Business arises from the inability of a firm to maintain its
competitive edge and growth or stability of the earnings. The volatility in stock prices
due to factors intrinsic to the company itself is knows as Business risk. Business risk is
concerned with the difference between revenue and earnings before interest and tax.
Business risk can be divided into
i) Internal Business Risk:
Internal business risk is associated with the operational efficiency of the
firm. The operational efficiency differs from company to company. The efficiency
of operation is reflected on the companys achievement of its pre-set goals and the
fulfillment of the promises to its investors.
ii) External Business Risk:
External business risk is the result of operating conditions imposed on the
firm by circumstances beyond its control. The external environments in which it
operates exert some pressure on the firm. The external factors are social and
regulatory factors, monetary and fiscal policies of the government, business cycle
and the general economic environment within which a firm or an industry operates.
b. Financial Risk:
It refers to the variability of the income to the equity capital due to the debt capital.
Financial risk in a company is associated with the capital structure of the company.
Capital structure of the company consists of equity funds and borrowed funds.
PORTFOLIO ANALYSIS:
Various groups of securities when held together behave in a different manner and
give interest payments and dividends also, which are different to the analysis of individual
securities. A combination of securities held together will give a beneficial result if the yare
grouped in a manner to secure higher return after taking into consideration the risk element.
There are two approaches in construction of the portfolio of securities. They are
35

Traditional approach

Modern approach

Traditional Approach:
Traditional approach was based on the fact that risk could be measured on each
individual security through the process of finding out the standard deviation and that
security should be chosen where the deviation was the lowest. Traditional approach
believes that the market is inefficient and the fundamental analyst can take advantage of the
situation. Traditional approach is a comprehensive financial plan for the individual. It takes
into account the individual needs such as housing, life insurance and pension plans.
Traditional approach basically deals with two major decisions. They are
a) Determining the objectives of the portfolio
b) Selection of securities to be included in the portfolio
Modern Approach:
Modern approach theory was brought out by Markowitz and Sharpe. It is the
combination of securities to get the most efficient portfolio. Combination of securities can
be made in many ways. Markowitz developed the theory of diversification through
scientific reasoning and method. Modern portfolio theory believes in the maximization of
return through a combination of securities. The modern approach discusses the relationship
between different securities and then draws inter-relationships of risk between them.
Markowitz gives more attention to the process of selecting the portfolio. It does not deal
with the individual needs.
MARKOWITZ Model:
Markowitz model is a theoretical framework for analysis of risk and return and their
relationships. He used statistical analysis for the measurement of risk and mathematical
programming for selection of assets in a portfolio in an efficient manner. Markowitz
model theory introduced in 1950, in this he got the Noble prize in 1990. Markowitz
approach determines for the investor the efficient set of portfolio through three
important variables i.e.
Return
Standard deviation
36

 Co-efficient of correlation
Markowitz model is also called as a Full Covariance Model. Through this model
the investor can find out the efficient set of portfolio by finding out the trade off
between risk and return, between the limits of zero and infinity. According to this
theory, the effects of one security purchase over the effects of the other security
purchase are taken into consideration and then the results are evaluated. Most
people agree that holding two stocks is less risky than holding one stock. For
example, holdings stocks from textile, banking and electronic companies is better
than investing all the money on the textile companys stock.
Markowitz had given up the single stock portfolio and
introduced diversification. The single stock portfolio would be preferable if the
investor is preferable if the investor is perfectly certain that his expectation of
highest return would like to join Markowitz rather than keeping a single stock,
because diversification reduces the risk.
ASSUMPTIONS:
All investors would like to earn the maximum rate of return that they can achieve
from their investments.
All investors have the same expected single period investment horizon.
All investors before making any investments have a common goal. This is the
avoidance of risk because Investors are risk-averse.
Investors base their investment decisions on the expected return and standard
deviation of returns from a possible investment.
Perfect markets are assumed (e.g. no taxes and no transaction costs).
The investor assumes that greater or larger the return that he achieves on his
investments, the higher the risk factor surrounds him. On the contrary when risks
are low the return can also be expected to be low.
The investor can reduce his risk if he adds investments to his portfolio.
An investor should be able to get higher return for each level of risk by
determining the efficient set of securities.
37

 An individual seller or buyer cannot affect the price of a stock. This assumption is
the basic assumption of the perfectly competitive marker.
Investors make their decisions only on the basis of the expected returns, standard
deviation and covariance of all pairs of securities.
Investors are assumed to have homogenous expectations during the decisionmaking period.
The investor can lend or borrow any amount of funds at the risk less rate of interest.
The risk less rate of interest is the rate of interest offered for the treasury bills or
Government securities.
Investors are risk-averse, so when given a choice between two otherwise identical
portfolios, they will choose the one with the lower standard deviation.
Individual assets are infinitely divisible, meaning that an investor can buy a fraction
of a share if he or she so desires.
There is a risk free rate at which an investor may either lend (i.e. invest) money or
borrow money.
There is no transaction cost i.e. no cost involved in buying and selling of stocks.
There is no personal income tax. Hence, the investor is indifferent to the form of
return either capital gain or dividend.
THE EFFECT OF COMBINING TWO SECURITIES:
It is believed that holding two securities is less risky than by having only one
investment in a persons portfolio. When two stocks are taken on a portfolio and if they
have negative correlation then risk can be completely reduced because the gain in one can
offset the loss on the other. This can be shown with the help of following example:
INTER-ACTIVE RISK THROUGH COVARIANCE:
Covariance of the securities will help in finding out the inter-active risk. When the
covariance will be positive then the rates of return of securities move together either
upwards or downwards.

Holding two securities may reduce the portfolio risk too. The

portfolio risk can be calculated with the help of the following formula:

38

CAPITAL ASSET PRICING MODEL (CAPM):

Markowitz, William Sharpe, John Lintner and Jan Mossin provided the basic
structure of Capital Asset Pricing Model. It is a model of linear general equilibrium return.
In the CAPM theory, the required rate return of an asset is having a linear relationship with
assets beta value i.e. undiversifiable or systematic risk (i.e. market related risk) because
non market risk can be eliminated by diversification and systematic risk measured by beta.
Therefore, the relationship between an assets return and its systematic risk can be
expressed by the CAPM, which is also called the Security Market Line.
Rp = Rf.Xf+Rm (1-Xf)
Rp

= Portfolio return

Xf

The proportion of funds invested in risk free assets

1-Xf

The proportion of funds invested in risky assets

Rf

Risk free rate of return

Rm

Return on risky assets

Formula can be used to calculate the expected returns for different situations, like
mixing risk less assets with risky assets, investing only in the risky asset and mixing the
borrowing with risky assets.

39

CHAPTER IV
DATA ANALYSIS
&
INTERPRETATION

DATA ANALYSIS
AVERAGE RETURNS
ITC
40

YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

OPENING CLOSING
SHARE
SHARE
DIVIDEND BONUS PRICE(P0) PRICE(P1)
14
536
780.65
NIL
8
786.35
1183.90
NIL
16
1185
1168.8
NIL
13
1170
1575.75
NIL
20
1565
2133.15
NIL
TOTAL RETURN

D+(P1-P0)
0.4751
-0.2933
0.2710
0.3839
0.1613

D+(P1P0)/P0*100
47.51
-29.33
27.10
38.39
16.13
99.8

AVERAGE RETURN = R/N 99.8/5 = 19.96

CIPLA

YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

OPENING CLOSING
SHARE
SHARE
D+(P1- D+(P1DIVIDEND BONUS PRICE(P0) PRICE(P1) P0)/P0
P0)/P0*100
218.5
338.35
0.5576
2
NIL
55.76
339
321.65
0.06002
2
NIL
6.002
322.9
305.1
-0.0489
2
NIL
-4.89
305
379.75
0.2516
2
NIL
25.16
383.75
382.80
0.0027
2
NIL
0.27
TOTAL RETURN
243.587

AVERAGE RETURN = R/N 243.587/5 = 48.7174

WIPRO

41

YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

OPENING CLOSING
SHARE
SHARE
D+(P1DIVIDEND BONUS PRICE(P0) PRICE(P1) P0)/P0
246
706.95
6
NIL
1.8481
711
480.2
4
NIL
-0.3189
477
440.1
4
NIL
0.0689
437.6
437.15
5
NIL
0.0103
437.3
543.2
5
NIL
0.2536
TOTAL RETURN

D+(P1P0)/P0*100
184.81
-31.89
-6.89
1.03
25.36
172.42

AVERAGE RETURN = R/N 172.42/5 = 34.48

BAJAJ AUTO

YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

DIVIDEND
40
40
45
45
50

OPENING CLOSING
SHARE
SHARE
D+(P1- D+(P1BONUS PRICE(P0) PRICE(P1) P0)/P0
P0)/P0*100
624.35
2014.8
NIL
2.2923
229.23
2005
1463.25
NIL
-0.2502
-25.02
1478
1678.8
NIL
0.1663
16.63
1687
1799.55
NIL
0.0933
9.33
1798
2083.6
NIL
0.1866
18.66
TOTAL RETURN
248.83

AVERAGE RETURN = R/N 248.83/5 = 49.77

42

ICICI

YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

OPENING CLOSING
SHARE
SHARE
D+(P1D+(P1DIVIDEND BONUS PRICE(P0) PRICE(P1) P0)/P0
P0)/P0*100
12
349.7
952.5
NIL
1.758
175.8
14
957
1116.2
NIL
0.1809
18.09
16.5
1114.8
890.2
NIL
-0.1866
-18.66
20
887.8
1045.2
NIL
0.1998
19.98
23
1057
1245.05
NIL
0.1996
19.96
TOTAL RETURN
215.17

AVERAGE RETURN = R/N 215.17/5 = 43.03

AVERAGE RETURNS

43

Average Return

ITC

19.96

CIPLA

16.46

WIPRO

34.48

BAJAJ

49.77

ICICI

43.03

= (R)/N

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

N = Number of years
Based on the above average return of securities I-FLEX is earning highest return
and CMC is earning lowest return. Other securities are earning medium range of
returns

CALCULATIONS OF STANDARD DEVIATIONS

ITC
44

YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

AVG
RET(R)
19.96
19.96
19.96
19.96
19.96

RETURN (R )
47.51
-29.33
27.1
38.39
16.13
99.8

R-R
27.55
-49.29
7.14
18.43
-3.83
Total

Variance = 1/n-1 (R-R) 2 = 1/5-1 (3593.82) = 898.455

Standard Deviation =

Variance

898.455

= 29.97

CIPLA
YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

RETURN (R )
55.76
6.002
-4.89
25.16
0.27

AVG
RET(R)
16.46
16.46
16.46
16.46
16.46

82.302

R-R
39.3
-10.458
-21.35
8.7
-16.19
Total

(R-R)2
1544.49
109.37
455.823
75.69
262.116
2447.49

Variance = 1/n-1 (R-R) 2 = 1/5-1 (2447.49) = 611.87

Standard Deviation =

Variance

611.87 =

24.73

WIPRO
YEAR

RETURN (R )

AVG
45

R-R

(R-R)2

(R-R)2
759.003
2429.5
50.9796
339.665
14.6689
3593.82

2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

RET(R)
34.48
34.48
34.48
34.48
34.48

184.81
-31.89
-6.89
1.03
25.36

150.33
-66.37
-41.37
-33.45
-9.12
Total

172.42

22599.1
4404.98
1711.48
1118.9
83.1744
29917.6

Variance = 1/n-1 (R-R) 2 = 1/5-1 (29917.6) = 7479.4

Standard Deviation =

Variance

7479.4

= 86.48

BAJAJ
YEAR
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

RETURN (R )
229.23
-25.02
16.63
9.33
18.66

AVG
RET(R)
49.77
49.77
49.77
49.77
49.77

R-R
179.46
-74.79
-33.14
-40.44
-31.11
Total

248.83

(R-R)2
32205.9
5593.54
1098.26
1635.39
967.832
41500.9

Variance = 1/n-1 (R-R) 2 = 1/5-1 (41500.9) = 10375.225

Standard Deviation =

Variance

10375.225

101.85

ICICI

YEAR

RETURN (R )

AVG
RET(R)
46

R-R

(R-R)2

2009 2010
2010 2011
2011 2012
2012 2013
2013 2014

175.8
18.09
-18.66
19.98
19.96

43.03
43.03
43.03
43.03
43.03

215.17

132.77
-24.94
-61.69
-23.05
-23.07
Total

17627.9
622.004
3805.66
531.303
532.225
23119.1

Variance = 1/n-1 (R-R) 2 = 1/5-1 (23119.1) = 5779.775

Standard Deviation =

Variance

5779.775

76.02

STANDARD DEVIATION OF COMPANIES

ITC

29.97
47

CIPLA

24.73

WIPRO

86.48

BAJAJ

101.85

ICICI

76.02

STANDARD DEVIATION =1/n (R-R) 2

Based on the above calculations Standard Deviation of the Bajaj is highest and Cipla is
lowest. Where other securities are having medium Standard Deviation.

Calculations Of Correlation Cofficient Between The Securities

Covariance (COV ab) = 1/n-1 (RA-RA) (RB-RB)
Correlation Coefficient = COV ab/a*b
48

1. ITC (RA) & CIPLA (RB)

YEAR
2008-09
2009-10
2010-11
2011-12
2012-13

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

27.55
39.3
1,082.72
-49.29
-10.458
515.47
7.14
-21.35
-152.44
18.43
8.7
160.34
-3.83
-16.19
62.01
TOTAL
1,668.10
Covariance (COV ab) = 1/5-1 (1668.10) =417.0249
Correlation Coefficient = COV ab/ a* b
a =29.97; b =24.73
= 417.0249/ (29.97) (24.73)
= 417.0249 / 741.1581

0.5626

2. ITC (RA) & WIPRO(RB)

YEAR
2008-09
2009-10
2010-11
2011-12
2012-13

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

27.55
150.33
4,141.59
-49.29
-66.37
3,271.38
7.14
-41.37
-295.38
18.43
-33.45
-616.48
-3.83
-9.12
34.93
TOTAL
6,536.03
Covariance (COV ab) = 1/5-1 (6536.03) = 1634.008
Correlation Coefficient = COV ab/ a* b
a = 29.97; b = 86.48
= 1634.008 / (29.97) (86.48) =
3.

1634.008/2591.06=

ITC (RA) & BAJAJ (RB)

YEAR
2008-09

RA-RA
27.55

RB-RB
179.46
49

(RA-RA) (RB-RB)
4,944.12

0.630

2009-10
2010-11
2011-12
2012-13

-49.29
7.14
18.43
-3.83
TOTAL

-74.79
-33.14
-40.44
-31.11

3,686.40
-236.62
-745.31
119.15
7,767.74

Covariance (COV ab) = 1/5-1 (7767.74) = 1941.936

Correlation Coefficient = COV ab/ a* b
a = 29.97; b = 101.45
= 1941.936/ (29.97) (101.45) = 1941.936/3040.457 =

0.638

4. ITC (RA) & ICICI (RB)

YEAR
2008-09
2009-10
2010-11
2011-12
2012-13

RA-RA
27.55
-49.29
7.14
18.43
-3.83
TOTAL

RB-RB
132.77
-24.94
-61.69
-23.05
-23.07

(RA-RA) (RB-RB)
3,657.81
1,229.29
-440.47
-424.81
88.36
4,110.19

Covariance (COV ab) = 1/5-1 (4110.19) = 1027.547

Correlation Coefficient = COV ab/ a* b
a = 29.97; b = 76.02
= 1027.547 / (29.97) (76.02) =

1027.547 / 2278.319

5. CIPLA (RA) & WIPRO (RB)

YEAR
2008-09
2009-10
2010-11
2011-12

RA-RA
39.3
-10.458
-21.35
8.7

RB-RB
150.33
-66.37
-41.37
-33.45
50

(RA-RA) (RB-RB)
5,907.97
694.10
883.25
-291.02

0.451

2012-13

-16.19
TOTAL

-9.12

147.65
7,341.95

Covariance (COV ab) = 1/5-1 (7341.95) = 1835.488

Correlation Coefficient = COV ab/ a* b
a =24.73; b = 86.48
= 1835.488/ (24.73) (86.48) = 1835.488/2138.65 = 0.858

6. CIPLA (RA) & BAJAJ (RB)

YEAR
2008-09
2009-10
2010-11
2011-12
2012-13

RA-RA
39.3
-10.458
-21.35
8.7
-16.19
TOTAL

RB-RB
179.46
-74.79
-33.14
-40.44
-31.11

Covariance (COV ab) = 1/5-1 (48350.35) =

(RA-RA) (RB-RB)
7,052.78
782.15
707.54
-351.83
503.67
8,694.31
2173.578

Correlation Coefficient = COV ab/ a* b

a = 24.73; b = 101.45
= 2173.578/ (24.73) (101.45) = 2173.578/ 2508.859 = 0.866

7. CIPLA (RA) & ICICI (RB)

YEAR
2008-09
2009-10
2010-11

RA-RA
39.3
-10.458
-21.35

RB-RB
132.77
-24.94
-61.69
51

(RA-RA) (RB-RB)
5,217.86
260.82
1,317.08

2011-12
2012-13

8.7
-16.19
TOTAL

-23.05
-23.07

-200.54
373.50
6,968.73

Covariance (COV ab) = 1/5-1 (6968.73) = 1742.182

Correlation Coefficient = COV ab/ a* b
a = 24.73; b = 76.02
= 1742.182/ (24.73) (76.02) = 1742.182/ 1879.975 =

0.926

8. WIPRO (RA) & BAJAJ(RB)

YEAR
2008-09
2009-10
2010-11
2011-12
2012-13

RA-RA
150.33
-66.37
-41.37
-33.45
-9.12
TOTAL

RB-RB
179.46
-74.79
-33.14
-40.44
-31.11

(RA-RA) (RB-RB)
26,978.22
4,963.81
1,371.00
1,352.72
283.72
34,949.48

Covariance (COV ab) = 1/5-1 (34949.48) = 8737.369

Correlation Coefficient = COV ab/ a* b
a = 86.48; b = 101.45
= 8737.369/ (86.48) (101.45) = 8737.369/8773.396 = 0.99

9. WIPRO (RA) & ICICI (RB)

YEAR
2008-09
2009-10
2010-11

RA-RA
150.33
-66.37
-41.37

RB-RB
132.77
-24.94
-61.69
52

(RA-RA) (RB-RB)
19,959.31
1,655.27
2,552.12

2011-12
2012-13

-33.45
-9.12
TOTAL

-23.05
-23.07

771.02
210.40
25,148.12

Covariance (COV ab) = 1/5-1 (25148.12) = 6287.03

Correlation Coefficient = COV ab/ a* b
a = 86.48; b = 76.02
= 6287.03/ (86.48) (76.02) =

6287.03/6574.21

= 0.956

10. BAJAJ (RA) & ICICI (RB)

YEAR
2008-09
2009-10
2010-11
2011-12
2012-13

RA-RA
179.46
-74.79
-33.14
-40.44
-31.11
TOTAL

RB-RB
132.77
-24.94
-61.69
-23.05
-23.07

(RA-RA) (RB-RB)
23,826.90
1,865.26
2,044.41
932.14
717.71
29,386.42

Covariance (COV ab) = 1/5-1 (29386.42) = 7346.606

Correlation Coefficient = COV ab/ a* b
a = 101.45 ; b = 76.02
= 7346.606 / (101.45) (76.02) = 7346.606 / 7712.229 = 0.952

CORRELATION COFFICIENT BETWEEN THE SECURITIES

Covariance (COV ab) = 1/n-1 (RA-RA)(RB-RB)
Correlation Coefficient = COV ab/ a* b

SECURITY

ITC

CIPLA
53

WIPRO BAJAJ

ICICI

ITC

0.562

0.630

0.638

0.451

0.858

0.866

0.926

0.99

0.956

0.952

CIPLA
WIPRO
BAJAJ
ICICI

FORMULA:
CORRELATION COEFFICIENT (ab) = cov (ab)/ab
Where COV (ab) = 1/n-1 (RA-RA) (RB-RB)

CALCULATION OF PORTFOLIO WEIGHTS: :(FORMULA):

Wa =

b [ b-(nab* a)]
a2 + b2 - 2nab* a* b

Wb = 1 Wa
54

1. ITC (a) & CIPLA (b): a = 29.97; b = 24.73; nab = 0.56

Wa = 24.73 [24.73 - (0.56 x 29.97)]/ (29.97)2 + (24.73)2 - (0.56) x (29.97) x (24.73)
Wa = 196.5244/ 679.9797
Wa =0.28 ; Wb = 1- 0.28 = 0.72;
2. ITC (a) &WIPRO (b): a = 29.97; b = 86.48; nab = 0.63
Wa = 86.48[86.48 - (0.63 x 29.97)] / (29.97)2 + (86.48)2 - (0.63) x (29.97) x (86.48)
Wa = 5845.953 /5111.316

1.14

Wa = 1.14; Wb = 1- 1.14 = -0.14;

3. ITC (a) &BAJAJ(b): a = 29.97; b = 101.45; nab = 0.638
Wa = 101.45 [101.45 - (0.63x29.97)] / (29.97)2 + (101.45)2 - (0.638) x (29.97) x (101.45)
Wa = 8376.615 / 7359.328

= 1.13

Wa =1.13; Wb = 1 1.13 =- - 0.13

4. ITC (a) & ICICI (b): a = 29.97; b = 76.02 ; nab = 0.451
Wa = 76.02 [76.02 - (0.451x 29.97)] / (29.97)2 + (76.02)2 - (0.451) x (29.97) x (76.02)
Wa = 4753.797 / 4626.754 =

1.02

Wa = 1.02; Wb = 1 1.02 = - 0.02;

5. CIPLA(a) &WIPRO (b): a = 24.73; b = 86.48; nab =0.858
Wa = 86.48 [86.48 - (0.858 x 24.73)] / (24.73)2 + (86.48)2 - (0.858) x (24.73) x (86.48)
Wa = 5660.938 / 4454.658

1.27

Wa =1.27; Wb = 1- 1.27 = -0.27;

6. CIPLA(a) & BAJAJ (b): a = 24.73; b = 101.45; nab =0.866
Wa = 101.45[101.45 - (0.866x24.73)] / (24.73)2+(101.45)2 - (0.866) x (24.73)x(101.45)
Wa = 8134.484 / 6588.439 =

1.23

Wa =1.23; Wb = 1- 1.23 = - 0.23;

7. CIPLA (a) &ICICI (b): a = 24.73; b = 76.02; nab = 0.926
55

Wa = 76.02[76.02 - (0.926 x24.7)] / (24.73)2 + (76.02)2 - (0.926)x(24.73)x (76.02)2

Wa = 4049.464 / 2931.46

1.38

Wa = 1.38; Wb = 1- 1.38 = - 0.38;

8. WIPRO (a) &BAJAJ (b): a = 86.48; b = 101.45; nab = 0.99
Wa = 101.45 [101.45 - (0.99 x 86.48)] / (86.48)2 + (101.45)2 - (0.99) x (86.48) x (101.45)
Wa = 1606.44 / 399.568

4.02

Wa =4.02; Wb = 1- 4.02 = -3.02;

9. WIPRO (a) &ICICI (b): a = 86.48; b = 76.02; nab = 0.956

Wa = 76.02 [76.02 - (0.956 x 86.48)] / (86.48)2 + (76.02)2 - (0.956) x (86.48) x (76.02)
Wa = -466.459 / 766.832

-0.60

Wa = -0.60; Wb = 1- (- 0.60) = 1.60;

10. BAJAJ (a) &ICICI(b): a = 101.45; b = 76.02 nab = 0.952

Wa = 76.02 [76.02 - (0.952x101.45)] / (101.45)2 + (76.02)2 - (0.952)x(101.45) x (76.02)
Wa = -1547.58 / 1417.90

-1.09

Wa = -1.09; Wb = 1- (-1.09) = 2.09;

Correlations & Weights of Individual security

S.NO PORTFOLIO (A/B) CORRELATION WEIGHT A WEIGHT B
ITC & CIPLA
1
0.56
0.28
0.72
2
ITC & WIPRO
0.63
1.14
-0.14
3
ITC & BAJAJ
0.63
1.13
-0.13
4
ITC & ICICI
0.45
1.02
-0.02
5
CIPLA & WIPRO
0.85
1.27
-0.27
56

6
7
8
9
10

CIPLA & BAJAJ

CIPLA & ICICI
WIPRO & BAJAJ
WIPRO & ICICI
BAJAJ & ICICI

0.86
0.92
0.99
0.95
0.95

1.23
1.38
4.02
-0.60
-1.09

PORTFOLIO RISK
CALCULATION OF PORTFOLIO RISK:
RP

a2*Wa2 + b2*Wb2 + 2nab*a*b*Wa*Wb

CALCULATION OF PORTFOLIO RISK OF ALL COMPANIES:

57

-0.23
-0.38
-3.02
1.60
2.09

1. ITC (a) & CIPLA (b): a = 29.97; b = 24.73; Wa= 0.28; Wb= 0.72;
Nab = 0.56;
RP =

(29.97)2(0.28)2+ (24.73)2 (0.72)2+2(0.56)x29.97x24.73x(0.28)x(0.72)

554.80 =

23.55

2. ITC (a) & WIPRO (b): a = 29.97; b = 86.48; Wa= 1.14; Wb= -0.14;
Nab = 0.63;
RP =

(29.97)2(1.14)2+ (86.48)2 (-0.14)2+2(0.63)x29.97x86.48x(1.14)x(-0.14)

792.68

28.15

3. ITC (a) & BAJAJ (b): a = 29.97; b = 101.45; Wa=1.13; Wb= -0.13;Nab = 0.0.63;
RP =

(29.97)2(1.13)2+ (101.45)2 (-0.13)2+2(0.63)x29.97x101.45x(1.13)x(-0.13)

758.07

27.53

4. ITC (a) & ICICI(b): a = 29.97; b = 76.02; Wa= 1.02; Wb= -0.2;Nab = 0.45;
RP =

(29.97)2(1.02)2+ (76.02)2 (-0.2)2+2(0.45)x29.97x76.02x(1.02)x(-0.2)

894.96

29.91

5. CIPLA (a) & WIPRO (b): a = 24.73; b = 86.48; Wa= 1.27; Wb= -0.27; Nab = 0.85;
58

RP =

(24.73)2(1.27)2+ (86.48)2 (-0.27)2+2(0.85)x24.73x86.48x(1.27)x(-0.27)

284.82

16.87

6. CIPLA (a) & BAJAJ(b): a = 24.73; b = 101.45; Wa= 1.23; Wb= -0.23; Nab = 0.86;
RP =

(24.73)2(1.23)2+ (101.45)2 (-0.23)2+2(0.86)x24.73x101.45x(1.23)x(-0.23)

240.40

15.50

7. CIPLA(a) & ICICI(b): a = 24.73; b = 76.02; Wa= 1.38; Wb = -0.38; Nab = 0.92;
RP =

(24.73)2(1.38)2+ (76.02)2 (-0.38)2+2(0.92)x24.73x76.02x(1.38)x(-0.38)

173.36

13.16

8. WIPRO (a) & BAJAJ (b): a = 86.48; b = 101.45; Wa= 4.02; Wb= -3.02; Nab = 0.99
RP =

(86.48)2(4.02)2+ (101.45)2 (-3.02)2+2(0.99)x86.48x101.45x(4.02)x(-3.02)

3833.513

= 61.91

9. WIPRO (a) & ICICI (b): a = 86.48; b =76.02; Wa= -0.60; Wb= 1.60; Nab = 0.95;
RP =

(86.48)2(-0.60)2+ (76.02)2 (1.60)2+2(0.95)x86.48x76.02x(-0.60)x(1.60)

5495.35

74.13

59

10. BAJAJ (a) & ICICI (b): a = 101.45; b = 76.02; Wa= -1.09; Wb= 2.09; Nab = 0.95;
RP =

(101.45)2(-1.09)2+ (76.02)2 (2.09)2+2(0.95)x101.45x76.02x(-1.09)x(2.09)

4089393

63.95

PORTFOLIO RISK
S.NO COMBINATION
ITC & CIPLA
1
2
ITC & WIPRO
3
ITC & BAJAJ
4
ITC & ICICI
5
CIPLA & WIPRO
6
CIPLA & BAJAJ
7
CIPLA & ICICI
8
WIPRO & BAJAJ
60

PORTFOLIO RISK
23.55
28.15
27.53
29.91
16.87
15.5
13.16
61.91

9
10

WIPRO & ICICI

BAJAJ & ICICI

74.13
63.95

CALCULATION OF PORTFOLIO RISK:

RP

a2*Wa2 + b2*Wb2 + 2nab*a*b*Wa*Wb

Where a = Std deviation of security a
b = Std deviation of security b
Wa = weight of security a
Wb = weight of security b
Nab = Correlation Coefficient between security a & b
a = Portfolio risk

PORT FOLIO RETURN

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

Where Rp = Portfolio return

Ra = Average return on security a;

Wa = Weight of security a;

Rb = Average return on security b

Wb = Weight of security b;

CALCULATION OF PORTFOLIO RETURNS

61

WEIGHT

WEIGHT

PORTFOLIO

AVERAGE

OF

AVERAGE

OF

RETURN

COMBINATION

RETURN ON

SECURITY

RETURN ON

SECURITY

Rp (Ra*Wa)+

S.NO

(A & B)

SECURITY (A)

(A)

SECURITY (B)

(B)

(Rb*Wb)

1
2
3
4

ITC & CIPLA

ITC & WIPRO
ITC & BAJAJ
ITC & ICICI
CIPLA &

19.96
19.96
19.96
19.96

0.28
1.14
1.13
1.02

16.46
34.48
49.77
43.03

0.72
-0.14
-0.13
-0.02

17.44
17.93
16.08
19.50

WIPRO
CIPLA &

16.46

1.27

34.48

-0.27

11.59

6
7

BAJAJ
CIPLA & ICICI
WIPRO &

16.46
16.46

1.23
1.38

49.77
43.03

-0.23
-0.38

8.80
6.36

8
9
10

BAJAJ
WIPRO & ICICI
BAJAJ & ICICI

34.48
34.48
49.77

4.02
-0.6
-1.09

49.77
43.03
43.03

-3.02
1.6
2.09

-11.70
48.16
35.68

PORTFOLIO RISK AND RETURN

S.NO
1
2
3
4
5
6
7
8
9
10

COMBINATION(A PORTFOLIO PORTFOLIO

& B)
RETURN
RISK
ITC & CIPLA
17.44
23.55
ITC & WIPRO
17.93
28.15
ITC & BAJAJ
16.08
27.53
ITC & ICICI
19.5
29.91
CIPLA & WIPRO
11.59
16.87
CIPLA & BAJAJ
8.8
15.5
CIPLA & ICICI
6.36
13.16
WIPRO & BAJAJ
-11.7
61.91
WIPRO & ICICI
48.16
74.13
BAJAJ & ICICI
35.68
63.95

PORTFOLIO RISK AND RETURN

62

PORTFOLIO SELECTION
Portfolio analysis provided the input for next phase in portfolio management, which is
portfolio selection. The proper goal of portfolio construction is to generate a portfolio that
provided the highest returns at a given level of risk. These inputs from portfolio analysis
can be used to identify the set of efficient portfolios. From this the optimal portfolio in a
disciplined and objective way.
So, out of the various combinations (related to 5 companies), the optimal portfolio is
WIPRO & ICICI, as this portfolio has minimum risk of 74.13% with maximum return of
48.16%. Hence, we can say that it is better to invest in these portfolios.
PORTFOLIO REVISION
Economy and financial markets are dynamic changes take place almost daily. As time
passes securities which were once attractive may lease to be so. New securities with
63

promises of high return and low risk may emerge. The investor now has to revise his
portfolio in the light of the developments in the market. This leads to purchase of some new
securities and sale of some of the existing securities and their proportion in the portfolio
changes as a result of the revision.
The revision has to be scientifically and objectively so as to ensure
the optimally of the revised portfolio, its important as portfolio analysis and selection.

PORTFOLIO EVALUATION
The objective of constructing a portfolio and revising it periodically is to earn maximum
returns with minimum risk. Portfolio evaluation is the process, which is concerned with
assessing the performance of the portfolio over a selected period of time in terms of return
and risk. This involves quantitative measurement of actual return realized. Alternative
measures of performance evaluation have been developed by investor and portfolio
managers for their use.
It provides a mechanism for identifying weaknesses in the investment process and
improving them. The portfolio management process is an ongoing process to portfolio
construction, continues with portfolio revision and evaluation. The evaluation provided the
necessary feedback for better designing of portfolio the next time around. Superior
performance is achieved through continual refinement of portfolio management skills
CONCLUSIONS
Before investing in shares you should look at the type of shares, you want to buy and the
way in
Want to deal on the stock market.
Their main routes for investing in shares:
Invest your capital in a single company.
Invest your capital in number of different companies, a portfolio of shares.

64

 Invest indirectly and spread your risk through collective investments such as
investment trusts and unit trust.

INVEST IN SHARES:
Public companies issue shares, which allow investors to buy a part of a particular
company share ownership entitles you to part of the company Profits of dividends are paid.
Shares may be classified in a range from conservative to speculative. Blue chip is
often used to describe the highest quality and shares, as they are shares in companies with a
proven track record, producing profits in good times and bad. They usually set the level of
the market. All shares are affected by share market fluctuation. Individual share process
also varies based on supply and demand from sellers and buyers.
Information about shares listed on the stock exchange is printed largely daily in
news papers.
You can buy and sell shares listed on the stock exchange through a stockbroker.
When you buy a parcel of shares, you receive a CHESS statement of holdings form
the company, showing the number of shares you own and the date you bought them.
As a share holder you have to say in the companys future through voting rights,
you will be kept informed about the company, through its annual reports and other
correspondence.

THINGS TO CONSIDER:
Share prices fall as well as rise. Large losses may occur, particularly if shares are
sold when market has dropped.
If you are happy with the gains made with your share and are concerned about their
Future value, you could sell them and realize your profit. If you retain them with a view
to profit further and the market value drops, it is important to remember this loss is only
on paper unless you sell.

65

 Incomes from dividends may vary, when profits are low, dividends may be low or even
Nil.
Unless you plan to actively trade your shares, you should consider them a long term
investment
You need to keep careful records, cecause capital gains tax collections can become
complex, especially in a dividend reinvestment paid.
THINGS TO REMEMBER:
Remember, shares are not short term investment; usually the best returns will be
gained over the medium and long term.
Past performance is not a reliable guide to future performance.
As with any investment that offers capital growth, wide fluctuations in value can
occur.
Spread you share holdings to include different companies across different markets
sectors, such as industry, mining of finance. This helps reduce the risk.
Ask your stock broker for information about the companys profile, performance
history and economic forecasts before buying or selling any shares. Much of his
information is also now available on various INTERNET site.
Balance of the proportion of share in your overall investment portfolio with the
level of risk you are prepared to take. If a company goes into liquidation,
shareholders are the lost to be paid.
Remember that event the most thoroughly research information research
information and advice given with the best intention may still result in a loss.

DOS and DONTS:

66

 The time spent increasing your knowledge will pay dividends later:
At the end of the day, it is your money and you owe it to yourself to know where
and why it is being invested. Use resource available today, take a couse, read books,
browse the internet club, read newspapers and company Annual General Meetings.
Almost the first & last rule( DIVERSIFY):
Make sure your investments are diversified. This means including in your portfolio
different assets classes such as property, shares and fixed interest, different
industries (to shield against economic impact on one category) and different
countries (to take into account global cycles, economic dynamics and different
exchange rates).
Start conservatively:
If you are sure just starting out, build a firm base around Blue chip share and gain
experience form this. Investing in reputable managed funds is also as excellent way
to build a diversified portfolio without selecting specific securities.

CHAPTER V
67

FINDINGS
&
SUGGESTIONS

FINDINGS:
1. With the reference to the Portfolio investments, the efficient portfolio is a well
diversified investment.
2.

ITC & CIPLA having a risk is 23.55 and the return is 17.44.

3.

ITC & WIPRO having a risk is 28.15 and the return is 17.93.

4.

ITC & BAJAJ having a risk is 27.53 and the return is 16.08.

5.

ITC & ICICI having a risk is 29.91 and the return is 19.50.

6.

CIPLA & WIPRO having a risk is 16.87 and the return is 11.59.

7.

CIPLA & BAJAJ having a risk is 15.50 and the return is 8.80.
68

8.

CIPLA & ICICI having a risk is 13.16 and the return is 6.36.

9. WIPRO & BAJAJ having a risk is 16.91 and the return is -11.7.
10. WIPRO & ICICI having a risk is 74.13 and the return is 48.16.
11. BAJAJ & ICICI having a risk is 63.95 and the return is 35.68.

SUGGESTIONS:
1. Indian regulatory system and role of SEBI should be increased for securing interest
of investors and other plays.
2. Government should implement various measures to improve financial system.
3. When different assets are added to the Portfolio, the total risk tends to decrease.
4. Investor decision is solely depends on the expected return & variance of return only.
5. ISE should expand the investor market, brokers network, for long benefit.
6. For given level of risk investor prefers higher return to lower return. Likewise for a
given level of return investor prefers lower risk than higher risk.
7. In constructing Portfolio less correlated sectors selection will reduce the risk i.e., less
correlation between two companies will reduce risk.
8. For better results minimum risk portfolio weights should be implemented.
69

BIBLIOGRAPHY

70

BIBLOGRAPHY:

1.

SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

- Donald. E. Fisher, Ronald. J. Jordan

2.

INVESTMENTS
- William. F. Sharpe, Gordon, J. Alexander and Jeffery, V. Baily.

3.

PORTFOLIO MANAGEMENT
- Strong R.A.

WEB REFFERENCES
http;//www.nseindia.com
http;//www.bseindia.com
http;//www.economictimes.com
http;//www.answers.com
http;//www.investsmartindia.com

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