Srishti Report 178

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Overview of Indian Financial System

1.1 Introduction The Finance is the science of money management. We can say that finance is something related to management of money and other assets. Finance represents the resources by way funds needed for a particular activity. Finance is also referred to as "Funds" or "Capital", when referring to the financial needs of a corporate body. Now you can finance anything that you want for example you can have home loans, business loans, education economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.
There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities. The word "system", in the term "financial system", implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three terms are intimately related yet are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation. These are briefly discussed below; 1.2 Financial system overview A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial
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Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend.
Money Market- The money market ifs a wholesale debt market for low-risk, highly-liquid, short-term instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions.
Capital Market - The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year. Forex Market - The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe. Credit Market- Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals. Financial Intermediaries- Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor in order to garner the requisite amount. When the borrower of funds approaches the financial market to raise funds, mere issue of securities will not suffice. Adequate information of the issue, issuer and the security should be passed on to take place. There should be a proper channel within the financial system to ensure such transfer. To serve this purpose, financial
intermediaries came into existence. Financial intermediation in the organized sector is conducted by a wide range of institutions functioning under the overall surveillance of the Reserve Bank of India. In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower. This service was offered by banks, FIs, brokers, and dealers. However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened. Some of the important intermediaries operating in the financial markets include;
investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers financial consultants, primary dealers, satellite dealers, self regulatory organizations, etc. Though the markets are different, there may be a few intermediaries offering their services in more than one market e.g. underwriter. However, the services offered by them vary from one market to another. The Indian Capital Market
Indian Capital Market
Market
Instruments
Intermediaries Regulator
SEBI
Primary
Secondary
Brokers Investment Bankers Stock Exchanges Underwriters
Equity
Hybrid
Debt
Players
CRA
Corporate Intermediaries
Individual
Banks/FI
FDI /FII
Figure.1 In the broad financial market, people have different instruments available to them in which they can invest. Investment is referred to as the concept of deferred consumption, which might comprise of purchasing an asset, rendering a loan, keeping the saved funds in a bank account such that it might generate lucrative returns in the future. The options of investments are huge; all of them having different risk-reward trade off. This concludes that the investment industry is really broad and that is why understanding the core concepts of investments and accordingly analyzing them is essential. After thorough understanding
of the investment industry, can an investor create and manage his own investment portfolio such that the returns are maximized with the least risk exposure. 1.3 Types of investments: Cash investments: Cash investments comprise of savings bank accounts, certificates of deposit (CDs) and treasury bills (TBs). All these types of investments render a low interest rate and prove to be quite risky during times of inflation. Debt securities: This type of investment gives returns in the form of fixed periodic payments and the fixed capital appreciate at maturity. This is safe bait for the investors in the investment industry and has always proved to be the risk free investment tool. Though, it is generally low in risks, the returns are also lower than the other peer securities. Stocks: Investors can also buy stocks (equities) from the secondary markets and be a part of any business corporates that are listed in the bourses. By this way, one can become the part of the profits that the company generates. But one should remember that stocks are generally more volatile and carries more risk than bonds. Mutual funds: They are usually a collection of stocks and bonds that a fund manager selects for an investor such that the returns are maximum. The investor does not have to track the investment, be it a bond, stock- or index-based mutual funds. Derivatives: Derivatives are financial contracts, whose value is derived from the value of the underlying assets like equities, commodities and bonds. They can take the form of futures, options and swaps. Investors choose derivatives as they are used to minimize the risk of loss that result from variations in the underlying asset values. Commodities: The items that are traded on the commodities market are agricultural and industrial commodities and they need to be standardized. Commodities trading have always been giving high returns and thus they are the riskiest of all investment options. One, who trades in commodities, requires specialized knowledge and analytical capabilities. Real estate: Investing in real estate has to be a long term affair. Funds get hooked into the real estate sector for a considerable time period.
1.4 The Securities Research within Financial Services Industry Securities research is a discipline within the financial services industry. Securities research professionals are known most generally as "analysts," "research analysts," or "securities analysts;" all the foregoing terms are synonymous. Securities analysts are commonly divided between the two basic kinds of securities: equity analysts (researching stocks and their issuers) and fixed income analysts (researching bond issuers). However, there are some analysts who cover all of the securities of a particular issuer, stocks and bonds alike. Securities research falls into two broad categories: that provided by investment banks and that provided by independent equity research boutiques. The former group offer research as part of a broad set of financial services including broking and corporate finance. Independent equity research has largely sprung into existence as a result of scandals such as Enron, Lernout & Hauspie and WorldCom where investment banks wrote positive research despite deteriorating fundamentals or fraudulent management. Equity research companies have grown in the past years as several trends moved the financial services sector away from using internal resources. One of the main drivers that led to an outcrop of equity research providers was the separation of research and investment banking after conflicts of interest was found. Another main driver is that trading fees, which in many cases paid for equity research at brokerage firms, were pressured downward due to the growth of electronic trading. The security research firms are as old as the share market in India. It was provide its service to give a high return to their clients. During the initial time the research companies are only under the some of the brokerage firm or companies they only give a tips and suggestion to their clients to buy or sell of the security. That period of time they mostly use a fundamental analysis with some of the basic ratios which provide financial health of the company. The need of the financial research continues increase with increase in investors participates and the number of company listed in the exchange, which result to modern financial research born.
Today the security market spared so wide and number of companies listed on the various stock exchanges in India is increased daily, which require so much research to select the best company. The Technical analysis and Fundamental Analysis are used together to analysis the companys stock. The technical Analysis is mostly used to give instant tips for short term investment to the investor and fundamental analysis are used for the long term investment. The analyst used various charts and statistical methods and tools to analyze the stock of the various companies. Many security research firms also comes which are professionally provide the research on the various companies and the economy of the country. They provide various financial services for investments. 1.5 The emergence of E-Broking in India The Indian trader is being fancied by the democratized world of online trading or also known as e-broking. The regular and attractive advertisements in the print media and electronic media haveadded to this fancy world. But as we compare to the Western countries, in India online trading has not still grasped the market, but has done a very important amount of progress in the past years and the future of online trading is bright. That is why many new companies are coming into this form of business structure and the existing companies are changing to this new format besides offline and other traditional forms of business. With only a mere share of 10% online trading a combined gross turnover of around Rs. 9000-10,000 crores handled by the BSE and NSE together there is a much greater scope for online trading. Earlier the share market was not safe enough to invest but some of the changes in the past ten years in the Indian share market have created the interest of trading in the shares by the people. Broadly we can classify three important factors which have contributed to the development of online trading in IndiaFirstly the major step was taken by the National Stock Exchange (NSE) in the year 1994 which allowed the electronic trading and seeing to this various other stock exchanges in India followed soon. This helped in making the fast .accurate and transparent transactions
saving a lot of time then the traditional method of trading. The investors were also saved by the clutches of the fraud brokers at the times when the clients were not aware of the true prices of the shares. Secondly, in the year 1996 the dematerialization of the shares came (also known as DEMAT) which avoided the online presence of shares in an electronic form avoiding them from theft, pilferage or from other losses like counterfeiting and frauds regarding share transfer. The third reason was the rapid growth of computer education and learning of internet by the people. With the evolving of internet the online trading became a hit and the investors became confident in investing just with a click of a mouse. With the happening of such events the ratio of trading has improved a lot. As it takes less time people praise this technology for trading purposes. Some people who traded rarely now even trades 2-3 times every day as it provides edge of researching about companies on the internet. The number of small investors is increasing on the daily basis that trades on the internet. If a person invests or trades in equities, derivatives, commodities etc through the use Internet it is known as online trading enabling the investor to connect electronically to buy or sell stocks, derivatives etc with the other investors. This can be done with the help of online service providers like Sharekhan.com, ICICI Direct.com etc. A person can access a stockbroker's website through a PC connected to Internet and can place his orders. The benefits are: 1. A person can see the latest market movement through streaming quotes. 2. Reduces time lag due to self-execution and instant confirmation. 3. Empowers traders to have a complete control over their trading decisions. 4. A person can access his accounts and related information on the Website. 5. Provides greater convenience of trade as a person can trade from home or other convenient location. 6. It is cheap in terms of cost associated and offers reduction in overheads
7. A trader can view the historical charts on his computer. The Internet revolution has changed the way to communicate and the way to do business in todays society bringing us closer and closer to vital sources of information. It provides us with means to directly interact with service-oriented computer systems tailored to our specific needs; therefore, we can serve ourselves better by making our own decisions. This new access by the online trading customers to low-cost transactions and cutting-edge, real-time market information that formerly belonged only to brokers has opened up extraordinary new investment opportunities as well as a crucial need for state-of-the-art information. Today the investors use the Internet Client-Server technology to buy and sell the securities at an instant at any point of time. People investing online have reached the proportions. Online trading allows an investor to buy and sell shares on the exchange through Internet and helps in the direct control of his investments. 1.6 Brokerage Firms in India Brokerage firms are the business entities that deal with stock trading. India, with an increasing capital market and a growing number of investors, has a number of brokerage firms. In Indian retail brokerage industry, the brokerage firms primarily work as agents for buying and selling of securities like shares, stocks and other financial instruments and earn commission for each of the transactions. There are plenty of brokerage firms in India. Let's have a look at the top 10 brokerage firms in India. Before talking anything about top brokerage firms in India, let's have a glance at the Indian retail brokerage market, which is going through a wonderful phase with high growth rate. The total trading volume of the Indian brokerage companies stood at US$ 1239.1 billion in the year 2004, which increased to US$ 1492.1 billion in 2005. It is further expected to reach US$ 6535.7 billion by the year 2015. Major Players in the Industry: 1. Karvy 2. Indiainfoline
3. ICICI direct 4. HDFC security 5. Indiabulls 6. HSBC Investmart 7. ShareKhan 8. Motilal Oswal 9. Religare 10. Geojit 11. Kotak Securities 12. Angel Trade 13. Reliance Money 14. IDBI Paisa Builder Details about the some of the top brokers in India: 1. Karvy
KARVY is a premier integrated financial services provider, and ranked among the top five in the country in all its business segments, services over 16 million individual investors in various capacities, and provides investor services to over 300 corporate, comprising the who is who of Corporate India. Karvy has a professional management team and ranks among the best in technology, operations and research of various industrial segments. History of Karvy :- The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a small group of practicing Chartered Accountants who founded the flagship company, Karvy Consultants Limited. They started with consulting and financial accounting automation and carved inroads into the field of registry and share accounting by 1985. Since then, karvy utilized its experience and superlative expertise to go from strength to strength, to better their services, to
innovate, diversify and in the process, evolved as one of Indias premier integrated financial service enterprise. PRODUCT AND SERVICES OF KARVY GROUP i. ii. iii. iv. Karvy comtrade. Karvy consultant ltd. Karvy merchant banking. Karvy global services ltd.
2. ICICI DIRECT
ICICI Web Trade Limited (IWTL) maintains www.icicidirect.com (herein after referred to as the "Website") whereas IWTL is an affiliate of ICICI Bank Limited and the Website is owned by ICICI Bank Limited. IWTL has launched and established an online trading service on the Website. Type of Account ICICIDirect offers 3 different online trading platforms to its customers: 1. Share Trading Account Share Trading Account by ICICIDirect is primarily for buying and selling of stocks in BSE and NSE. This account allows Cash Trading, Margin Trading, MarginPLUS Trading, Spot Trading, Buy Today Sell Tomorrow and Call and Trade on phone. ICICIDirect.com website is the primary trading platform for this trading account. They also provide installable application terminal based application for high volume trader. 2. Wise Investment Account Along with stock trading and IPO investing in BSE and NSE, Wise Investment account also provide options to invest in Mutual Funds and Bonds online.
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Online Mutual funds investment allows investor to invest on-line in around 19 Mutual Fund companies. ICICI Direct offers various options while investing in Mutual Funds like Purchase Mutual Fund, Redemption and switch between different schemes, Systematic Investment plans, Systematic withdrawal plan and transferring existing Mutual Funds in to electronic mode. This account also provides facility to invest in Government of India Bonds and ICICI Bank Tax Saving Bonds .
ICICIDirect.com website is the primary tool to invest in Mutual Funds, IPOs, Bonds and stock trading. 3. Active Trader Account Active Trader account gives more personalized investment options to the investors. It allows investor to use online and offline stock trading. It also provides with independent market expertise and support through a dedicated Relationship Manager from ICICI. Active Trader also provides commodity trading. PRODUCTS AND SERVICES OF ICICI DIRECT i. ii. iii. iv. v. vi. vii. viii. ix. Investing in Mutual funds Personal Finance Customer Service Features IPOs Margin Trading Margin PLUS Trading Call Trade Trading on NSE/BSE Trade in derivatives
3. INDIAINFOLINE SECURITY PRIVATE LTD
India Infoline.com Securities Pvt. Ltd. is a wholly owned subsidiary of India Infoline.com Ltd and is the stock broking arm of India Infoline.com. The subsidiary
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was formed to comply with regulatory guidelines. www.5paisa.com is a focused website for online stock market trading. 5paisa.com is a trade name owned by the India Infoline.com group. IILSPL has applied for trading membership of the BSE under Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules 1992. IILSPL is in the business of providing broking services online via the Internet ("Ebroking Services") and has been permitted by the NSE by way of registration permission no: NSEIL/CMO/INET/1103/2000 dated 03/July/2000, and will be applying for permission to the BSE, to provide E-broking Services to its clients. IILSPL is a TRADING MEMBER of the National Stock Exchange of India. PRODUCT OFFERED BY IILSPL i. Stock market:-IILSPL deals in stock market by trading in equity and derivatives. ii. iii. Personal finance:- It Deals In Mutual Fund And Insurance. Online Trading :- It provides services in stock and commodity trading (through Internet). 4. HDFC SECURITY
HDFC Securities(HDFCsec) is Equity Trading Company of HDFC Bank. HDFC Securities provide both online trading and trading on phone. The HDFC Securities trading account has a unique 3-in-1 feature that integrates your HDFC Securities trading account with your existing HDFC bank savings account and existing Demat account. Funds / shares are seamlessly moved from the linked Demat/Bank account to execute the transactions. HDFCsec provides Cash-n-Carry on both NSE and BSE, Day trading on both NSE and BSE, Trade on Futures & Options on the NSE and Online IPO Investment.
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Features on HDFC Securities Online trading 1. Seamless Transactions - By integrating your accounts, we ensure minimal waste of time during movement of your funds and shares. 2. Speed - Orders are placed electronically, so proceeds are available instantly. 3. No manipulation - To prevent any mismanagement, we will send you an email confirmation, the minute your order is executed. 4. Safety and Security - HDFC Securities offer the highest level of security such as 128-bit encryption technology. 5. Dedicated and Separate contact numbers - for trading over the phone as well as for customer care. PRODUCT OFFERED BY HDFC SECURITY i. ii. iii. iv. v. vi. Online trading for Resident & Non Resident Indians. Cash-n-Carry on both NSE and BSE. Day trading on both NSE and BSE. Trade on Futures & Options on the NSE. Online IPO's. Telephone-based Broking (Equity & Derivatives)
5. INDIABULLS SECURITIES LIMITED
Indiabulls Securities Limited was incorporated as GPF Securities Private Limited on June 9, 1995. The name of the company was changed to Orbis Securities Private Limited on December 15, 1995 to change the profile of the company and subsequently due to the conversion of the company into a public limited company; the name was further changed to Orbis Securities Limited on January 5, 2004. The name of the company was again changed to Indiabulls Securities Limited on February 16, 2004 so
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as to capitalize on the brand image of the term Indiabulls in the company name. ISL is a corporate member of capital market & derivative segment of The National Stock Exchange of India Ltd. At present, ISL accounts for approximately 3% of the total daily turnover of the Exchange with 32,359 client relationships and 70 branches spread across the country as of April 30, 2004. INDIABULLS CREDIT SERVICES LIMITED:- Indiabulls Credit Services has been valued at Rs. 263 crore with the Rs. 87.6-crore infusion. Indiabulls Credit Services Ltd, the recently formed subsidiary of broking firm, Indiabulls Financial Services Ltd. Faralon Capital, a San Francisco-based private equity fund, and its affiliates have acquired 33.3 per cent stake for Rs 87.6 crore. INDIABULLS REAL ESTATE:- Indiabulls through its group companies has entered Indian Real Estate business in 2005. It is currently evaluating several large-scale projects worth several hundred million dollars. Indiabulls became the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital Management, a respected US based investment firm. PRODUCT OFFERED BY INDIA BULLS i. Equity & Debt Stock Broking ii. Insurance iii. Commodity trading iv. Depository Services v. Derivatives Broking Services vi. Equity Research Services vii. Mutual Fund Distribution viii. IPO Distribution 6. HSBC InvestDirect
HSBC InvestDirect (India) Limited (HIL) is one of the India's leading financial services organizations providing varied range of services through its subsidiaries to Individual and Corporate customers. HIL is listed on the Bombay Stock Exchange Limited (BSE) and National Stock Exchange Limited (NSE).
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HSBC InvestDirect offers various services that include equity broking, wealth management, IPO distribution and portfolio management services. HSBC InvestDirect has around 240 offices in 80 cities around the country. Trade In: BSE and NSE Online Stock Trading Platforms: HSBC InvestDirect offers 3 different online trading platforms to their customers: 1. SmartSTART SmartStart is a powerful browser based Trading platform for beginners. SmartStart trading platform allows their investor to flexibility of trading on both the NSE & BSE via a single screen. Features: 1. Trade on NSE & BSE 2. Simple order entry for Equity & Derivatives 3. Fully Customizable display 4. User friendly Get Quote screen 5. Seamless 3-in-1 proposition 6. Live order status 7. Track your orders real-time 8. Dynamic buying power 9. Works behind a Proxy 10. Back office access 2. SmartINVEST SmartInvest is a browser-based trading platform for customers who transact occasionally. It is ideal for investors who believe in the Buy and Hold approach towards investment in equities. It gives the benefit of real-time streaming data with the flexibility of trading on any Internet capable system. Features: 1. Instant access to account with no wait time 2. Works behind a Proxy
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3. Live Streaming quotes 4. Multiple Watch lists 5. NSE & BSE Access 6. Single order form for Cash and FnO 7. Point and Click order entry 8. Hot Key Functions 9. Back Office access 3. SmartTRADE SmartTrade is an EXE based desktop software designed for active traders who transact frequently to capture short-term price movements. This platform gives more personalized investment options to the investors. Following are few popular features of Smart Trade account. Features: 1. Fully Customizable display 2. Dynamic Charts with Indicators 3. EOD Charts 4. Real-Time market data 5. Advanced Alert capabilities 6. Live order status 7. Track your orders real-time 8. Real time position updates 9. Dynamic buying power 10. Message window docking 7. ShareKhan:
Sharekhan is online stock trading company of SSKI Group, provider of India-based investment banking and corporate finance service. ShareKhan is one of the largest stock broking houses in the country. S.S. Kantilal Ishwarlal Securities Limited (SSKI) has been among Indias leading broking houses for more than a century.
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Sharekhan's equity related services include trade execution on BSE, NSE, Derivatives, commodities, depository services, online trading and investment advice. Trading is available in BSE and NSE. Along with Sharekhan.com website, ShareKhan has around 510 offices (share shops) in 170 cities around the country. Share khan has one of the best state of art web portal providing fundamental and statistical information across equity, mutual funds and IPOs. You can surf across 5,500 companies for in-depth information, details about more than 1,500 mutual fund schemes and IPO data. You can also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more Type of Account 1. ShareKhan Classic account Allow investor to buy and sell stocks online along with the following features like multiple watch lists, Integrated Banking, demat and digital contracts, Real-time portfolio tracking with price alerts and Instant credit & transfer. a. Online trading account for investing in Equities and Derivatives b. Free trading through Phone (Dial-n-Trade) I. Two dedicated numbers for placing your orders with your cellphone or landline. II. Automtic funds tranfer with phone banking (for Citibank and HDFC bank customers) III. Simple and Secure Interactive Voice Response based system for authentication IV. V. c. d. e. f. get the trusted, professional advice of our telebrokers After hours order placement facility between 8.00 am and 9.30 am
Integration of: Online trading + Bank + Demat account Instant cash transfer facility against purchase & sale of shares IPO investments Instant order and trade confirmations by e-mail
g. Single screen interface for cash and derivatives
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2. ShareKhan SpeedTrade account This accounts for active traders who trade frequently during the day's trading session. Following are few popular features of SpeedTrade account. a. Single screen interface for cash and derivatives b. Real-time streaming quotes with Instant order Execution & Confirmation c. Hot keys similar to a traditional broker terminal d. Alerts and reminders e. Back-up facility to place trades on Direct Phone lines 8. Motilal Oswal Securities
Incorporated in 1987, Motilal Oswal Securities Ltd is a well diversified financial services firm offering a range of financial products and services such as Wealth Management, Broking & Distribution, Commodity Broking, Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking Services and Principal Strategies. Company has a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. They are headquartered in Mumbai and as of September 30th, 2009, had a network spread over 576 cities and towns comprising 1,257 Business Locations operated by them. As at September 30th, 2009, company had 5,80,667 registered customers. Type of Account - Most E-Broking Most E-Broking is complete online stock trading solution for Indian stock market. Following are the features of Most E-Broking account: 1. Easy single screen trader with instant trade confirmation similar to exchange based trading terminals. 2. Access to various online reports like margin report, Demat A/c details, trades executed, turnover report, net position report with mark to market profit/loss and realized profit. 3. Online transfer funds through HDFC Bank.
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9. Religare:
Religare Enterprises Limited is Ranbaxy Laboratories Limited promoted financial product and service provider company. Religare provide its service in three different segments including Retail, Wealth management and the Institutional spectrum. Company offers wide range of services including equities, commodities, insurance broking, wealth advisory, portfolio management services, personal finance services, Investment banking and institutional broking services. Religare retail network has more than 900 locations in 300 cities and towns in India. Religare provides the online gateway to their investors so investor can trade online in Equities, Commodities, apply for IPOs, invest in Mutual Funds, and buy Insurance. Religare Securities Limited (RSL) is a subsidiary company of Religare Enterprises Ltd and involve in equity related services include online trading at BSE and NSE, Derivatives, commodities, IPO, Mutual fund, Investment banking and institutional broking services. People who wonder where Religare word came from, it's a Latin word meaning 'to bind together'.
Type of Account Religare offers its wide range of financial services though a sophisticated and customized trading platform - R-ACE (Religare Advanced Client Engine). Below are 3 flavors of RACE accounts available to the investors. 1. R-ACE (Basic) R-ACE (Religare Advanced Client Engine) the basic online trading account provided by Religare. Investor can trade and access their account information online and over the phone as well. This account comes with a browser based online trading platform and no additional software installation needed. 2. R-ACE Lite (Advanced) R-ACE Lite is the advanced trading platform for the investor of Religare. This trading
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account provides the entire feature of R-ACE (Basic) account. In addition it also provides real-time streaming stock quotes and alerts. This trading platform is also browser based and no software installation is needed. 3. R-ACE Pro (Professional) As the name indicates this account is for high volume traders. Along with the features from above 2 accounts, this account also comes with Trading Terminal software which needs to install on your computer. This terminal directly connects the investor to stock market and having all industry standard Treading terminal features including technical charting (intra-day and EOD), multiple watch list, advanced hot-key functions for faster trading, derivative chains, futures & options calculator etc. As in basic and advance account, trading is available online through internet and offline though phone. 10. Geojit PNB Paribas
Incorporated in 1987, Geojit BNP Paribas (Geojit) is one of the major stock brokers based in India. Geojit is based in Kochi, Kerala and has the strong presence in Gulf. Geojit BNP Paribas is cash equity and derivatives broker with extensive experience in Portfolio Management Services and the distribution of financial products: mutual funds and life insurance. Geojit provides stock trading at NSE and BSE stock exchanges through a strong network of around 500 branches and its state of art online trading portal. Geojit BNP Paribas is a stock market listed company and its stock are traded at NSE (GEOJIT) and BSE (532285). Over the years the name of the company got changed from Geojit Securities Ltd. to Geojit Financial Services Ltd. (GFSL) and finally to Geojit BNP Paribas Financial Services LTD in April 2009. Trade In: BSE and NSE Online Stock Trading Platforms:
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Geojit BNP Paribas offers an Advanced Online Investment Platform called FLIP (Financial Investment Platform) that comes with multiple conveniences and flexibilities. Geojit BNP Paribas offers 3 different online trading platforms to its customers. Investor can select from any of the three trading platforms that Geojit BNP Paribas offers as per investors requirement. 1. FLIP Lite FLIP Lite is a browser based version and will help to trade even if someone have a low bandwidth connection. Its Light and easy to use. FLIP Lite is designed to work on mobile devices. 2. FLIP Gold Platform FLIP Gold Platform is a browser based version that can be accessed from around the world. This Platform is offered absolutely FREE to all online customers. FLIP Gold Platform is ideal for those who travel often and hence cannot access their own computer for trading. Key Features of Gold Platform: 1. Live streaming quotes 2. Real-time configurable Market Watch with auto save functionality 3. Live top gainers, top losers and most active script 4. Tick by Tick Intraday Charting and advanced charting with 60 technical studies 5. Live exchange-broadcasting messages 6. Optimized to work on low bandwidth 7. Works behind proxy & firewall 8. Real-time Research & Trade Execution notification via pop-up 9. Platinum user can login to Gold & Lite platforms with the same login id 10. Instant trade confirmation & Online fund transfer facility 11. After market hours, orders can also be placed in both the Exchanges 12. Online investment of Mutual Funds and IPOs 3. FLIP Platinum platform Platinum platform is a virtual dealer terminal. It is best suited for active traders, who take advantage of minor movements in the price. This EXE program can be downloaded on the
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clients computer. This platform is FREE if brokerage criteria is met else clients can opt for the refundable fee option. Key Features of Platinum Platform: 1. All the features of Gold are available in Platinum 2. Professional, Classic, Customized Market Watches 3. Fast trade execution with instant trade confirmation through pop-up 4. View Cash, F&O and Currency quote in a single market watch screen 5. Real-time updation of Index & Tick by Tick updation of index chart 6. Intraday & EOD 7. Sophisticated studies such as Technical indicators can be performed by using appropriate parameters 11. Kotak Securities
Incorporated in 1994, Kotak Securities Limited, the leading stock broking house of India is 100% subsidiary of Kotak Mahindra Bank. Company offering includes stock broking through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management service. It also offers portfolio management services to high net worth individuals and corporate customers. Kotak securities also distributes a range of financial products, including company fixed deposits, mutual funds, initial public offerings, secondary debt, equity, and small savings schemes. Most of the services provided by the company are available through its internet portal. In early 2009 company launched Saxo's global trading platform in India. This platform provide direct access to equities, ETF's and REITS spanning 24 stock exchanges across the USA, Europe, Asia and Australia. Kotak Securities is a corporate member of both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Currently, Kotak Securities is one of the largest broking houses in India with wide geographical reach. Trade In: BSE and NSE Account Types:
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Kotak offers different account types according to users requirement: 1. Super Derivatives Super Derivatives account is specially made for those investors who are averse to taking risks and trade high volumes in futures and options. Risk would be reduced in this account as account is mainly focused on derivative investments. Kotak has dedicated teams for technical and derivative analysis. Kotaks analyzing team analyzes various parameters of derivative data, so investor need not to waste their time on data analyzing. An investor gets access to both dealers and experts so they can speak to them directly via phone/chat. This opportunity gives investor to know the rationale behind a particular position or strategy at all times, identify opportunities and know details on market movements etc. In Super Derivatives account an investor also will be able to use advanced strategies. Kotaks experts suggest strategies to their investors positions where the risk return ratio is much lower. One can activate Kotak securities Super Derivatives account with minimum amount Rs. 25 lakh as margin, by way of cash or stock. For Derivative brokerage - Futures is .05% both sides and for Derivative brokerage - Options is 0.05% or Rs 150 per contract whichever is higher (both sides). Delivery Brokerage is 0.45%. 2. AutoInvest AutoInvest is a unique Online Trading Account which provide investment planning in Gold ETFs (Exchange Traded Funds), Equities and Mutual Funds to their customers. Gold ETFs are mutual fund schemes that will invest the money collected from their investors in standard gold bullion. Kotak's advisor gives the recommendation according to investor's risk capability and investment plans. Minimum investment of Rs 5000 required for AutoInvest account. 3. Kotak Gateway Kotak Gateway account opens the gateway to a world of investing opportunities for beginners. Kotak Gateway user can trade anywhere, anytime using internet. Kotak also offers call and trade facility. Kotak Securities provide SMS alert, research report, free news and market updates to the account holders. Best feature of Kotak gateway is call and trade facility. Anybody can activate Kotak Gateway account with any amount between Rs 20,000 to 5, 00,000. This
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can be in form of cash deposit or the value of the shares you buy. Brokerage will be charged based on the account type. For intraday trading brokerage is .06% both sides for less then 25 lakhs and .023% for more then 25 crores. 4. Kotak Privilege Circle Kotak Privilege Circle is the premium investment account offed by Kotak Securities. Along with Kotak Gateway account benefits Kotak provides independent market expertise and support through a dedicated relationship manager and a dedicated customer service desk which provides assistance in opening accounts, handling day-to-day problems, and more. They provides KEAT premium which is an exclusive online tool that lets you monitor what is happening in the market and view your gains and losses in real-time. One can activate Kotak Privilege Circle account with any amount more than Rs. 10,00,000 as margin, by way of cash or stock. For intraday trading brokerage is .06% both sides for less than 25 lakhs and .03% for more than 25 crores. Other then above 4 accounts, Kotak Securities also provide following accounts: 1. Kotak Freedom for Mutual Fund Investments. 2. Kotak Super Saver, a Flat Brokerage and a Low Margin account. 3. PMS (Portfolio Management Service), an account for people who need an expert to help to manage their investments. 4. NRI Account, a online trading an investment account for NRI investors. 12. Angel Trade
Angel Group has emerged as one of the top 3 retail broking houses in India. Incorporated in 1987, it has memberships on BSE, NSE and the two leading commodity exchanges in India i.e. NCDEX & MCX. Angel is also registered as a depository participant with CDSL. Angel's retail stock broking house offering a gamut of retail centric services.

Ebroking Investment Advisory Portfolio Management Services
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Wealth Management Services Commodities Trading
Trade In: BSE and NSE Trading Platforms: Angel Trade provides 4 trading platforms, 2 are browser based & 2 are application based. 1. Angel investor It is a browser based trading platform. The rates are updated on clicking the refresh button. This facility ensures it is not blocked by firewall. Thus it is useful for investor who needs to access information from places where firewall blocks such data. 2. Angel Trade It is a browser based trading platform. The rates are updated automatically. This platform is useful for investors & traders to access market from different terminals. 3. Angel Diet It is an application based trading platform where rates are updated automatically. All segments are available on a single screen. This is ideal platform for the daily traders. 4. Angel Anywhere It is an application based trading platform where rates are updated automatically. This is ideal for investors & traders who are inclined towards trading based on charts & technical tools.
13. Reliance Money
Reliance Money, A Reliance Capital Limited Company, is the financial services division of Reliance Anil Dhirubhai Ambani (ADA) Group. Reliance ADA group is among top 3 business houses in India with wide range of presence across various sectors. Groups major interests ranges from communications (Reliance Communications) and financial services (Reliance Capital Ltd), to generation, transmission and distribution of power (Reliance Energy), infrastructure and entertainment.
Reliance Money has over 22 lakhs customers and more than 10'000 branches in around
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5000 cities in India. Company is among the largest broking and distribution house of financial products and having share of more than 3% of total stock market volume at BSE & NSE. RelianceMoney.com is the web based investment portal (with Online Stock Trading) from Reliance Money. This website enables its customer to invest & manage most of the services provided by Reliance Money including Equity (Stock) Trading, Commodity Trading, Derivatives, Mutual Fund Investment, IPO Investment, Life Insurances, General insurances, Money Transfer, Forex exchange, Gold Coins and Credit Cards Services. Company recently entered in to Wealth Management with tools like investment in equitylinked portfolio management services, structured products, insurance and mutual funds. The Reliance Money stock trading websites uses special security features 'Security Token', which makes your online trading experience more secure without complexity. Stock Trading through RelianceMoney.com is available for BSE and NSE stock exchanges. Offline trading is also available through Reliance Money partners in more than 5000 city across India and through phone by dialing 022-39886000. Investment Options The investment options available with Reliance Money online portal are as below: 1. 2. 3. 4. 5. 6. 7. 8. Equity (Stock) Trading at BSE, NSE and NSE F&O IPO Investment Derivatives Trading Forex Trading Commodity Trading(Gold, Silver, Crude etc....) at MCX, NCDEX and NMCE Mutual Fund Investment Life & General Insurance 'Pure Swiss' Gold Coins (99.99% pure, 24 carat)
14. IDBI Paisa Bulider
Idbipaisabuilder.in is a multipurpose online stock trading website from IDBI Capital Market Services Ltd., a leading provider of financial services in India and is a 100% subsidiary ofIndustrial Development Bank of India (IDBI).
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Idbipaisabuilder.in allows investing in equity shares, derivatives (futures & options) mutual funds & IPO's in India Stock Markets. You can buy or sell securities on NSE and BSE Stock exchanges. Type of Account 1. Paisa Power Classic Account Paisa Power Classic Account is online stock trading account for beginners and low volumn traders in India Stock Market. It allows investor to invest in Equity, Mutual Funds and IPOs online. Following are few popular features of this account: a. Online trading account for investing in Equities and Derivatives. b. Short learning curve helps you to start quickly. c. Easy to use features. d. Evaluate & buy mutual funds schemes online and check on fund rankings through our performance map. e. Apply for IPOs online. No paper work or check required for applying in IPOs. f. Integration of: Online trading + Bank + Demat account g. Trading is available in both BSE and NSE. 2. Paisa Power Streaming Account Paisa Power Streaming Account for online trading is for high volume and frequent equity traders. As classic account this account also provides investment options in Stocks, Mutual Funds and Initial public offers online. Following are few popular features of this account: a. Live refreshing equity prices, which enable you to keep track of every price movement as soon as it takes place. b. Setting price alerts on the scripts in order to notify you as soon as your scrip reaches a particular price point. c. Multiple market watches, message window and trading window. d. Evaluate & buy mutual funds schemes online and check on fund rankings through our performance map. e. Apply for IPOs at the click of a button without any of the hassle of tedious paperwork and processes involved in an offline IPO application. f. Trading is available in both BSE and NSE.
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15. Standard Chartered STCI Capital Markets Limited
Standard Chartered STCI Capital Markets Limited (formerly UTI Securities Ltd), is a leading broking company in India, provides a wide range of financial services including Investment Banking, Institutional Equity & Derivative Broking, Fixed Income, Research, Retail Equity, Portfolio Management, Distribution of financial products and Depository services. On 11 January 2008, Standard Chartered Bank Ltd (SCBM) acquired 49% stake in UTI Securities Limited from Securities Trading Corporation of India (STCI). Accordingly, the name of the company was changed from UTI Securities Limited to Standard Chartered STCI Capital Markets Limited. Standard Chartered STCI Capital Markets Limited is registered as a trading and clearing member with Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE) and MCX Stock Exchange Limited. The Company is also registered as Depository Participant with Central Depository Services (India) Limited (CDSL) as well as National Securities Depository Limited (NSDL). Trade In: BSE and NSE Type of Platforms: STCI offers 3 different online trading platforms to its customers: 1. Easy Trade: Easy Trade is a powerful and user friendly browser based online trading website for beginners. It provides unique integrated account which link banking, broking, and demat accounts. Trader can get the latest stock quotes, unlimited access to trading history, current order status, access to all back end reports and data. 2. Advanced Trade: Advance Trade is an Applet-based system, designed especially for active traders. Advance Usec gives access to their traders to view live streaming quotes which enables them to keep track of real-time price movement. Multiple market watch, message window and
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trading window, all in one screen help customers to track individual stocks and make timely trades when investing online. 3. Super Trade: Super Trade is an advanced, customizable online trading platform built exclusively for active traders. It offers professional and complimentary tools which enable their user to view streaming, intraday, daily and weekly charts, personalized quick stock quote lists and real-time update.
1.7 Financial Companies other than brokers: 1. Equity master Equitymaster Agora Research Private Limited is an equal joint venture between Quantum Information Services Pvt. Ltd. and Agora Inc. 2. Way2wealth Way2Wealth today has established itself as one of Indias Premier Investments Consultancy Firms, known for making investing simpler, more understandable and profitable for the investors. We offer a wide range of products & services viz: Equity, Derivatives, Currency Futures, Commodities Trading, IPO's, Insurance (Life/Non-Life), Mutual Funds, Portfolio Management Services & Depository Services all under one roof, for the convenience and benefit of our customers. We service our customer relationships through a team of over 1000 wealth managers spread across 100 easily accessible 'Investment Outlets' in almost all major towns and cities in India. 3. Valuenotes ValueNotes is a leading provider of business intelligence and research, with expertise across industries, particularly in financial services, media, engineering, healthcare, IT and the outsourcing industry. Our strengths lie in our analytical ability, and the research and data collection skills of our researchers and analysts. We have built strong capabilities in the collection, interpretation and analysis of data - both qualitative and quantitative. ValueNotes.com: The website provides for an independent and unbiased aggregation of views, opinions, research, analysis and insights on the Indian financial markets. We seek to understand,inform and educate the investor, and partner with banks, asset managers,
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stockbrokers, insurers, merchant bankers, distributors and independent financial analysts. Custom Research: They provide a wide range of bespoke business and financial research services about specific markets, industries, companies and competitive environments. They serve leading global corporations, consulting firms, research and B2B publishers, PE and VC firms, and money managers. ValueNotes Sourcing Practice: They publish proprietary market intelligence on the (services) outsourcing industry - in BFSI, e-learning, engineering, healthcare, legal and publishing - with an emphasis on knowledge services or KPO. SourcingNotes.com is now one of the largest information providers on the outsourcing industry. Our subscribers include buyers of outsourcing services, providers, consultants and investors. 4. Investmentz Established in the year 1986, Asit C. Mehta Investment Interrmediates Ltd. (ACMIIL) is the most trusted and reputed brokerage house known for providing investment related services in the capital market, money market and depository services in India. The company has been jointly promoted by noted stock market professionals, Mr. Asit C. Mehta and Mrs. Deena A. Mehta and is a part of Mumbai-based Nucleus Group of Companies. The other group companies are engaged in commodity, derivatives, inter-bank forex broking, development of databases, back-office applications for banks, corporate document management solutions and Geographical Information Systems (GIS). Corporate Purpose: Envisioned to be the Trusted Financial Intermediary, the group has etched out a very specific corporate purpose. To reach appropriate financial products, services and solutions to every Indian entity. Our Beliefs : That every household can, should, and will need to participate in the financial markets directly or indirectly to protect their financial interests. That regulatory/legal compliance ensures economic sustainability. That transparency and fairness are the cornerstones of all dealings. That knowledge rather than capital is the key driver of this business. That product, process, and technology led innovations are necessary preconditions for
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continuously adding value for all our constituents. That given the environment every person will realize her/ his potential. 1.8 Competitors doing same business as LiveTips: 1. CRN India crnindia.com was registered on the internet on 28th August 1998. and since then has been giving technical analysis of Indian Stock Market. According to them, their biggest strength today is that they are online since 10 years and have seen all the bullish and bearish phases of the stock market, which has strengthened their understanding of the market and given them the power to sustain through all the cycles. They believe, that the 10 years presence in the field of share market shows acceptability and the fact that all major search engines rank them among their top searches in the key word Indian stock market goes to show the credibility. 2. ShareTips Info Sharetipsinfo provides live Indian stock market recommendations on mobile phone and on yahoo messenger. Sharetipsinfo is one of the leading tips provider in India. They have a specialized team of stock market analyst who study market daily. They dont mind whether market is bullish or bearish as they know how to deal with both of these in best way. 3. Indian-Share-Tips Indian Share Tip has been in the business of stock market for more than two decades and has seen number of ups and downs in the market and knows Indian stocks as a back of its palm. It is a worldwide site that provides accurate and profitable stock tips for Indian stock market based on technical analysis for individual investors in India, U.S, UK and a number of other countries. Indian Share Tips focuses on accurate opinion, analysis and transparency to bring unbiased top stock tips of the country which will help the clients make money daily from Indian Stock Market. The site has established itself as one of the premier platforms for accurate tips backed with technical analysis and is bringing perfect day trading tips to make money daily in India. It is one of the few sites providing research and information on Indian capital markets mainly based on Technical Analysis and enjoys a strong reputation amongst investors, brokers and researchers.
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Company LiveTips Market Research 2.1 Introduction

LiveTips Market Research is promoted by DreamINDIA group, which has an extensive network in the financial services industry. The Company is headquartered at Bangalore supported by well-equipped infrastructure and technology. The company has grown exponentially by offering investment advisory services of global standards through various centers in operation across the country. The products offered are well researched on fundamental and technical aspects. It offers regular alerts through SMS and e-mail / Live Chat through our website. The only aim is to help clients accomplish their financial targets ranging from Short term to Long term, serving them to visualize a better tomorrow. By means of companys experience, research, judgment, and skill Live Tips wish to improvise the financial aspects of our clients life, Live Tips guides clients to invest and manage their capital in a variety of sectors, reducing the risk by diversifying and increasing their long term savings. The organization is driven with passion and has an earnest desire in advising and seeking the clients financial goals, which has helped the organization in realizing its dreams to build and accomplish every goal of our investors. The company, LiveTips, believes in Quality rather than quantity and work towards the achievement of the same. The growth is supported by the highly-efficient Research Team, which works day in-and-out for maintaining the quality assurance. The Research team is further divided into equity, commodities and forex. The research is well experienced and posses a deep knowledge about the respective industries. They work in a well defined structure shown below. To explain this in detail, the research team tries to find opportunity to invest in the market based on the technical analysis for the short term, fundamental analysis for the long term and then news based which could be quarterly earnings announcements, monetary policy announcements etc.
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Research Process at LiveTips Market Research Pvt Ltd:
Figure.2 The Research team leaves no stone unturned to ensure that they give our clients what they say. They believe, this strategy makes them different from other players of this industry. Success of their services is the result of all the background work which consists of core analyzing the market, before releasing any Tips. After studying the industry Live Tips have concluded that before Investing into equity market an investor is confronted with many questions like; Is it the right time to Buy / sell.. ? Is it the right company to invest.. ? Is this the right price to Buy / sell.. ?
LiveTips provides one stop solution for all these queries. Tips make it easy for people to invest into stocks without wasting their precious time. 2.2 Origin: The company is promoted by DreamINDIA group, who has an extensive network in the financial services industry. In 9 years of existence since establishment, The Company has grown as powerhouse providing services in equity market. The company started as a small venture with around 5 employees and with time and experience the company has grown to a strength of 40 employees across research team, sales and marketing, finance and human resources. The company is determined to mark its presence in the financial industry by catering to both domestic as well as international clients.
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Vision, Mission and Values of LiveTips:

Vision To have a global presence as a sought after Indian research brand
Mission To help our customers make informed and profitable investment decisions
Values Quality Client Satisfaction Unbiased
Figure.3 Certifications: LiveTips is an QMS/ISO 9001-2008 certified organization. The ISO 9001:2008 standard provides a quality management system model for determining and meeting customer requirements and enhancing its satisfaction. The immediate benefit that can be realized from the implementation of ISO 9001 is the collective alignment of the activities of internal processes that are focused towards the enhancement of customer satisfaction which will result in many other benefits, whether internal or external. 2.3 Growth and Development: Since establishment the company has grown enormously with respect to: Market coverage Quality of service Client satisfaction Infrastructure Techniques of analysis
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Market Coverage: LiveTips has more than 15,000 retail clients and more than 12 corporate tie-ups across the globe. These figures seem to be increasing forever, helping the company to expand in business in the world-class platform. Quality of Service: The company belief in quality is so strong that they have never failed in any of their analysis so far, they ensure profit to the respective clients irrespective of the market behavior. Bulls and Bears hardly have any effect on the performance of the business, as they take care of both the extremes. Client Satisfaction: Clients are never disheartened with respect to returns on their investment. Tips are 90% accurate which always ensures a minimum valuable return of 30-40 % on investments. Company encourages clients for time to time feedbacks, so that it can improvise further. Live Tips clients aspire to work with company for a long period of time after experiencing the service.
Infrastructure: We have a well-built up infrastructure with sophisticated softwares to enable us to maintain industry standards. We always welcome new technologies in order to help us grow and to remain ahead of our counterparts in the industry. Technique of Analysis: Our analysis touches perfection by deploying various techniques. We have an expert research team who study market every moment and come out with the best possible result.
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2.4 Services Offered LiveTips has services packaged into three major categories: 1. Commodities 2. Forex 3. Equity Commodity: The Commodity Trading packages include Buy/Sell indications and recommendations emerging in technical charts of: Bullions: Gold, Silver Energy: Crude oil and Natural Gas Base Metals: Copper, Zinc, Nickel, Lead and Aluminium Combos: Bullions, Energy and Base Metals Services provided: Weekly and daily research reports on commodities are published on the companys website to give an edge which is needed to succeed in the commodities market. Customers are alerted through SMS regarding various trading strategies as and when Buy/Sell patterns emerges in each commodity. Forex: LiveTips unique trading solutions are designed to help traders of every level pursue their goals regardless of their experience or trading strategy in forex market. They provide tips to do spot transactions which is one of the main financial trading tools on the international currency markets. Provide services on cross currencies such as EUR/USD GBP/USD USD/JPY AUD/USD
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Equity: This service includes Intraday, Delivery and F&O trading tips. Super combo offer brings together a powerful mix of both trader and investor packs with timely expert advice, stock news and recommendations based on extensive research, credible reports & unbiased analysis. It is especially designed for traders looking to tap the profit opportunities in the volatile markets. Traders get trading calls before markets open from the stock market experts. It includes Mid-day trading calls, Breaking news, Analysis, Grapevine and much more. 2.5 Present status: The Company is headquartered at Bangalore with regional offices in state capitals supported by well-equipped infrastructure and technology. The company has a well-built up infrastructure with sophisticated softwares to enable Live Tips to maintain industry standards. The company always welcomes new technologies in order to grow and to remain ahead of the counterparts in the industry. Company analysis touches perfection by deploying various techniques. Live Tips has a knowledgeable research team who study market every moment and come out with the best possible result. The company has well structured teams as shown below to carry on the research efficiently without leaving any stone unturned, be it a Technical or Fundamental Analysis. Foray into International Market LiveTips has ventures in Singapore & a global research unit in US, which acts as a centralized Hub and will be functioned in many nations In the international market, LiveTips provides investment advisory services of global standards with extensive research in operation across the Global Village and supported by well-equipped infrastructure and technology. They have an extensive network in the financial services industry. By means of experience and skill they wish to improvise the
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financial aspects of customers life, Live Tips guides the customers to invest and manage their capital in a variety of sectors, reducing the risk by diversifying and increasing the long term savings. 2.6 SWOT Analysis: Strengths: 1. Strong Research Team: LiveTips has a team of research analysts who are experienced and have a deep understanding of the commodities, forex and Indian share market. 2. Products: They provide investment recommendations on commodities, forex and Indian share market. 3. Business model: They not only cater to the day traders but also to a long term investor by providing fundamental research analysis and by providing asset management services. 4. Software Used: They use the best available software to conduct analysis. 5. Management: The management team is very motivated and result oriented. Weakness: 1. Not much of a face to face contact with the clients, so relationship building is limited. Opportunities: 1. Since the commodities and forex market is global, the company has a greater opportunity to foray in the world markets. Infact, they are trying to enter the Gulf market, other Asian countries such as China, Singapore, Malaysia and Hongkong and the US market. 2. The company can become a full fledged investment service provider by adding new products to its range of products such as insurance, mutual fund etc.
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Threat: 1. High competition, the major threat are the brokers. Since the industry is primarily dominated by the stock brokers.
Organization structure
CEO
Sales and marketing
Market Research
Finance
Human Resources
Equity
Commodities
Currency
Fundamental analysis
Technical analysis
Figure.4
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3.1 Statement of problem

Creation of a good portfolio is a difficult task as far as investors are concerned. But if we are able to create a good portfolio the return will be very high at the same time risk can be reduced to a minimum. For this we have to select the right stocks in to our portfolio depending upon our return expectations and risk carrying capabilities. Here is an attempt to create an ideal portfolio with minimum risk and maximum returns.
3.2 Objective of study

The project attempts to create and evaluate an ideal portfolio. The main objectives are: To study equity market basics and understand how to evaluate a company on different parameters. To apply different tools for company evaluation and stock selection. To analyze different companies and to calculate the risk and return associated with them. To pool the better performing companies to make a portfolio which is a well diversified one with less risk and maximum return. To apply portfolio models to make efficient portfolio.
3.3 Scope of study

This project outlines how to evaluate different stocks and to pick them for creating an efficient portfolio. The project covers the risk and return associated with individual stocks and how to evaluate them. It covers the methods to diversify the portfolio and to reduce the risk.
3.4 Operational Definitions

Introduction to the study: Investment involves making of a sacrifice in the present with the hope of deriving future benefits. An organized view of the investment process involves analyzing the basic nature of investment decisions and organizing the activities in the decision process. Investment process is governed by t h e two important facts of
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investment they are risk and return. Therefore, we first consider these two basic parameters that are of critical importance to all investors and the trade off that exists between expected return and risk.
Given the foundation for making investment decisions the trade off between expected return and risk- we next consider the decision process in investments as it is typically practiced today. Although numerous separate decisions must be made, for organizational purposes, this decision process has traditionally been divided into a two step process: security analysis and portfolio management. Security analysis involves the valuation of securities, whereas portfolio management involves the management of an investors investment selections as a portfolio (package of assets), with its own unique characteristics.
Security Analysis
Traditional investment analysis, when applied to securities, emphasizes the projection of prices and dividends. That is, the potential price of a firms common stock and the future dividend stream are forecasted, and then discounted back to the present. This intrinsic value is then compared with the securitys current market price. If the current market price is below the intrinsic value, a purchase is recommended, and if vice versa is the case sale is recommended.
Although modern security analysis is deeply rooted in the fundamental concepts just outlined, the emphasis has shifted. The more modern approach to common stock analysis emphasizes return and risk estimates rather than mere price and dividend estimates.
Portfolio Management
Portfolios are combinations of assets. Traditional p o r t f o l i o p l a n n i ng e m p h a s i z e s o n the character and the risk bearing capacity of the investor. For example, a young, aggressive, single adult would be advised to buy stocks in newer, dynamic, rapidly growing firms. A retired widow would be advised to purchase stocks and bonds in old-line, established, stable firms, such as utilities. Modern portfolio theory suggests that the
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traditional approach to portfolio analysis, selection, and management may yield less than optimum results. Hence a more scientific approach is needed, based on estimates of risk and return of the portfolio and the attitudes of the investor toward a risk-return trade-off stemming from the analysis of the individual securities.
3.5 Characteristics of Investment The characteristics of investment can be understood in terms of as - return, - risk, - safety, - liquidity etc. Return and Risk The Basis of Investment Decisions: Return: Stated in simplest terms, investors wish to earn a return on their money. Cash has an opportunity cost: By holding cash, you forego the opportunity to earn a return on that cash. Furthermore, in an inflationary environment, the purchasing power of cash diminishes, with high rates of inflation bringing a relatively rapid decline in purchasing power. In investments i t i s c r i t i c a l t o d i s t i n g u i s h b e t w e e n a n e x p e c t e d r e t u r n (the
anticipated return for some future period) and a realized return (the actual return over some past period). Investors invest for the future for the returns they expect to earn but when the investing period is over, they are left with their realized returns. What investors actually earn from their holdings may turn out to be more or less than what they expected to earn when they initiated the investment. This point is the essence of the investments process; Investors must always consider the risk involved in investing.
Risk: Risk is explained theoretically as the fluctuation in returns from a security. A security that yields consistent returns over a period of time is termed as ri sk less security o r risk free security. Risk is inherent in all walks of life. An investor cannot foresee the future definitely; hence, risk will always exist for an investor. Risk is in fact the watchword for all investors who enter capital markets. Investment risk can be an extraordinary stress for many investors. When the secondary market does not respond to rational expectations, the risk components of such markets are relatively high and most investors fail to recognize the
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real risk involved in the investment process. Risk aversion is the criteria commonly associated with many small investors in the secondary market.
Factors influence risk: Traditionally, investors have talked about several factors causing risk such as business failure, market fluctuations, change in the interest rate inflation in the economy, fluctuations in exchange rates changes in the political situation etc. Based o n the factors affecting the risk the risk can be understood in following manners-
Interest rate risk: The variability in a security return resulting from changes in the level of interest rates is referred to as interest rate risk. Such changes generally affect securities inversely, that is other things being equal, security price move inversely to interest rate.
Market risk: The variability in returns resulting from fluctuations in overall market that the company is a part of stock market is referred to as market risk. Market risk includes a wide range of factors exogenous to securities themselves, like recession, wars, structural changes in the economy, and changes in consumer preference. The risk of going down with the market movement is known as market risk.
Inflation risk: Inflation in the economy also influences the risk inherent in investment. It may also result in the return from investment not matching the rate of increase in general price level (inflation). The change in the inflation rate also changes the consumption pattern and hence investment return carries an additional risk.
Business risk: The changes that take place in an industry and the environment causes risk for the company in earning the operational revenue creates business risk.
Financial risk: The use of debt financing by the company to finance a larger proportion of assets causes larger variability in returns to the investors in the faces of different business situation.
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Liquidity risk: An investment that can be bought or sold quickly without significant price concession is considered to be liquid. The more uncertainty about the time element and the price concession the greater the liquidity risk. The liquidity risk is the risk associated with the particular secondary market in which a security trades.
Exchange rate risk: The change in the exchange rate causes a change in the value of foreign holdings, foreign trade, and the profitability of the firms, there by returns to the investors. The exchange rate risk is applicable mainly to the companies who operate oversees.
TYPES OF RISK Dividing total risk in to its two components, a general (market) component and a specific (issue) component, we have systematic risk and unsystematic risk which are additive: Total risk = general risk + specific risk = market risk + issuer risk = systematic risk + non systematic risk Systematic risk: Variability in a securities total return that is directly associated with overall moment in the general market or economy is called as systematic risk. This risk cannot be avoided or eliminated by diversifying the investment. Normally diversification eliminates a part of the total risk the left over after diversification is the non-diversifiable portion of the total risk or market risk. Virtually all secur i t i es have some systematic risk because systematic risk directly encompasses the interest rate, market and inflation risk. The investor cannot escape this part of the risk, because no matter how well he or she diversifies, the risk of the overall market cannot be avoided. If the stock market declines sharply, most stock will be adversely affected, if it rises strongly, most stocks will appreciate in value. Clearly mark risk is critical to all investors. Non-systematic risk: Variability in a security total return not related to overall market variability is called unsystematic (non market) risk. This risk is unique to a particular security and is associated with such factors as business, financial risk and as well as liquidity risk. Although all securities tend to have some nonsystematic risk, it is generally connected with common stocks.
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3.6 Methodology
Data sources The data used for this project consist of primary as well as secondary data. The primary data includes information taken from the equity analysts in LiveTips Market Research, where I did my project. Secondary data includes data regarding stock information, company balance sheet, P&L statement etc. the secondary data is gathered from Sensex, company websites and various other websites , magazines etc. related to equity market. Interpretation The data analysis is done with the perspective of achieving the objective of the study. Detailed analysis of stocks is done from the first step of portfolio ie stock picking till calculation of returns and risk associated with portfolio.
3.7 Limitations of the study

During analysis only most commonly used tools are utilized and there are many more methods for evaluation. The tools used are based on certain assumptions and calculations which may not be applicable in future. Also there is a chance of errors coming from secondary data sources. Also the assumptions taken in analysis may contain errors.
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Analysis
4.1 Stock picking the most important task
One of the difficult tasks in portfolio management is stock picking. Because we need to go through a large number of stocks to select those which are satisfying our criteria. The method I followed here is a standard one which helps to pick the better stocks. The method is explained below.
CAN SLIM CAN SLIM is a philosophy of screening, purchasing and selling common stock. Developed by William O'Neil, the co-founder of Investor's Business Daily, it is described in his highly recommended book "How to Make Money in Stocks".
C = Current Earnings Here emphasizes is given to choosing stocks whose earnings per share (EPS) in the most recent quarter have grown on a yearly basis. The system strongly asserts that investors should know how to recognize low-quality earnings figures - that is, figures that are not accurate representations of company performance. Because companies may attempt to manipulate earnings, the CAN SLIM system maintains that investors must dig deep and look past the superficial numbers companies often put forth as earnings figures.
Once we confirm that a company's earnings are of fairly good quality, it's a good idea to check others in the same industry. Solid earnings growth in the industry confirms the industry is thriving and the company is ready to break out.
A = Annual Earnings CAN SLIM also acknowledges the importance of annual earnings growth. The system indicates that a company should have shown good annual growth (annual EPS) in each of the last five years.
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It's important that the CAN SLIM investor, like the value investor, adopt the mindset that investing is the act of buying a piece of a business, becoming an owner of it. This mindset is the logic behind choosing companies with annual earnings growth within the 25-50% range.
N = New The third criterion for a good company is that it has recently undergone a change, which is often necessary for a company to become successful. Whether it is a new management team, a new product, a new market, or a new high in stock price but always it results in creating a new trend- up or down.
S = Supply and Demand The S in CAN SLIM stands for supply and demand, which refers to the laws that govern all market activities. The analysis of supply and demand in the CAN SLIM method maintains that, all other things being equal, it is easier for a smaller firm, with a smaller number of shares outstanding, to show outstanding gains. The reasoning behind this is that a large cap company requires much more demand than a smaller cap company to demonstrate the same gains.
L = Leader or Laggard In this part of CAN SLIM analysis, distinguishing between market leaders and market laggards is of key importance. In each industry, there are always those that lead, providing great gains to shareholders, and those that lag behind, providing returns that are mediocre at best. The idea is to separate the contenders from the pretenders.
I = Institutional Sponsorship CAN SLIM recognizes the importance of companies having some institutional sponsorship. Basically, this criterion is based on the idea that if a company has no institutional sponsorship, all of the thousands of institutional money managers have passed over the company. CAN SLIM suggest that a stock worth investing in has at least three to 10 institutional owners. If a stock has too much institutional ownership, any kind of bad news could spark a spiraling selloff.
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M = Market Direction The final CAN SLIM criterion is market direction. When picking stocks, it is important to recognize what kind of a market you are in, whether it is a bear or a bull.CAN SLIM maintains that the best way to keep track of market conditions is to watch the daily volumes and movements of the markets. This component of CAN SLIM requires the use of some technical analysis tools, which are designed to help investors/traders discern trends.
Here's a recap of the seven CAN SLIM criteria: 1. C = Current quarterly earnings per share - Earnings must be up at least 18-20%. 2. A = Annual earnings per share These figures should show meaningful growth for the last five years. 3. N = New things - Buy companies with new products, new management, or significant new changes in industry conditions. Most importantly, buy stocks when they start to hit new price highs. Forget cheap stocks; they are that way for a reason. 4. S = Shares outstanding - This should be a small and reasonable number. CAN SLIM investors are not looking for older companies with a large capitalization. 5. L = Leaders - Buy market leaders, avoid laggards. 6. I = Institutional sponsorship - Buy stocks with at least a few institutional sponsors who have better-than-average recent performance records. 7. M = General market - The market will determine whether you win or lose, so learn how to discern the market's overall current direction, and interpret the general market indexes (price and volume changes) and action of the individual market leaders
Here is a breakdown of some of the numbers value investors use as rough guides for picking stocks. These are guidelines that I follow, not hard-and-fast rules: 1. Share price should be no more than two-thirds of intrinsic worth. 2. Look at companies with P/E ratios at the lowest 10% of all equity securities. 3. PEG should be less than one. 4. Stock price should be no more than tangible book value. 5. There should be no more debt than equity (i.e. D/E ratio < 1) or in comparable range. 8. Current assets should be in par with current liabilities.
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4.2 Selection process Primary screening

As the first step the study concentrated on BSE constituents 30 companies. Then fundamental analysis of companies was done. The various ratios like current ratio, liquidity ratio, quick ratio, debt ratio etc were analyzed. In addition to this PEG ratio is calculated. The BSE constituents are SENSEX CONSTITUENTS Beta Values P/E ratio EPS GROWTH RATE PEG Ratio
ACC BHEL BHARTIARTL DLF GRASIM HDFCBANK HEROHONDA HINDALCO HINDUNILVR HDFC ICICIBANK INFOSYSTCH ITC JPASSOCIAT LT M&M MARUTI NTPC ONGC RCOM
0.78 0.97 0.78 1.54 0.7 0.8 0.65 1.35 0.37 1.14 1.43 0.68 0.62 1.56 1.26 1.04 0.72 0.62 0.75 1.27
10.36 31.79 11.7 130.1 11.19 30.05 17.08 21.92 21.41 28.37 25.66 26.42 25.89 13.88 23.19 16.8 14.95 19.15 14.59 8.36
32% 10% 24% -32% 15% 20% 33% 5% 35% 15% 2% 32% 9% 46% -8% -20% -15% 12% -1% 64%
0.32 3.18 0.49 -4.07 0.75 1.50 0.52 4.14 0.61 1.89 12.83 0.83 2.88 0.30 -2.90 -0.84 -1.00 1.60 -14.59 0.13
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RELIANCE RELINFRA SBIN STER CIPLA TCS TATAMOTORS TATAPOWER TATASTEEL WIPRO
1.11 1.34 1.16 1.31 0.46 0.79 1.11 0.75 1.36 0.8 Table 1
21.83 20.7 14.69 76.07 23.92 26.47 18.4 29.33 12.24 19.9
14% 15% 30% 26% 14% 48% 25% 8% 8% 3%
1.56 1.38 0.49 2.93 1.71 0.55 0.74 3.67 1.53 6.63
Those stocks which have PEG ratio below 1 were selected. It was wondering that only 25% of BSE index satisfied the conditions.ie following the previously mentioned criterias and good fundamentals. The significance of PEG ratio is explained later in detail. Then the study focuses on different sectors. In each sector 10 best performing stocks were selected and studied. Computer software Polaris Ramco System Rolta Saksoft Hinduja Venture Mahindra Satyam Mastek Mindteck Mphasis
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Banks private sector Federal Bank Karnataka Bank KOTAK Mahindra South Indian Bank Yes bank Bank of Rajasthan ICICI Bank Dhanalakshmi bank Pharmaceutical sector Biocon Cadila health Cipla Dr Reddys Lab Lupin Ranbaxy TTK health care Wockhardt Piramal health Cement Dalmia cements Chettinad caments
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Madras cements Prism cement Construction and contracting GMR Infra Maytas infra Unitech constructions Sobha developers DLF Puravankara Consumer goods- electronic Videocon industries BPL Domestic appliances Ttk prestige Bajaj electric Panasonic Engineering BEML Suzlon energy UB engineering Engineers India ltd Hotels
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Indian hotels Hotel leela Taj GVK hotels Mining minerals Sesa goa GMR industries Miscellaneous V Guard industries Oil drilling and exploration Gail Reliance natural Ongc Aban offshore Paints Asian paints Berger paints Power generation and distribution GVK power Torrent power Jp power Jsw energy
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India bulls power Tata power Power transmission Sujana towers Refiniries BPCL Essar oil Retail Pantaloon retail Trent Shoppers stop Shipping Great offshore ABG shipyard Steel Jsw steel SAIL Sugar industry Sree renuka sugars Uttam sugars EID parry
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Transportation Abc logistics Aqua logistics Kingfisher air Tyres appolo tyres MRF tyres Ceat tyres Jk tyres Dunlop india Tiles Kajaria ceramics Entertainments Sun network Balaji films The above list of companies after primary screening has been shortlisted and the following have been taken for detailed analysis. GROWTH PEG COMPANY GVK POWER JP POWER TORRENT POWER BETA 1.33 1.34 0.93 P/E 309.94 116.68 18.93 ( EPS) -20 48 64 2.30 0.30 RATIO
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CESC VIDEOCON YES BANK KOTAK BANK SOUTH INDIAN BANK KARNATAKA BANK DALMIA MADRAS CEMENTS KAJARIA CERAMICS GMR SHOBHA DEVELOPERS PANTALOON TRENT APPOLO JK TYRE CEAT MRF JSL JSW NAVABHARAT SESA GOA EID PARRY SHREE RENUKA SUGARS INDIAN HOTELS LEELA VENTURES ENGINEERS INDIA
0.89 1.08 1.18 1.28
11.45 10.97 19.45 47.10
19 11.25 60.6 15
0.60 0.97 0.33 3.14
0.90 0.70 0.59 0.83
7.10 10.19 10.46 6.53
45 20 -50 40
0.16 0.51
0.20
0.60 1.18
12.91 873.10
-9 60 14.10
0.95 0.95 0.42 0.84 0.72 0.62 0.59 1.03 1.30 0.90 1.21 0.72
22.81 47.73 46.75 10.01 3.76 2.91 7.15 5.50 11.04 6.60 15.23 15.25
45 -4 2 15 20 3 50 -25 45 46 20 -20
0.50
23.00 0.60 0.19 0.97 0.14
0.25 0.14 0.76
0.91 1.07 0.99 0.84
7.28 63.30 19.75 30.17
-4 3 3 41 21.10 6.58 0.74
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TTK UB ENGG SUN NETWORK V GUARD GAIL ASIAN PAINTS TTK HEALTH CARE CADILA HEALTHCARE BIOCON DR REDDY'S MPHASIS BPCL GREAT OFFSHORE ABC
0.56 0.56 0.83 0.52 0.69 0.32 0.02
14.01 10.53 33.59 11.59 17.52 29.76 32.85
60 40 -20 3 16 34 -20
0.23 0.26
3.86 1.10 0.88
0.28 0.91 0.34 0.77 0.44 0.48 0.28
26.04 22.87 26.31 15.51 4.41 9.30 78.75 Table 2
12 21 26 62 -10 24 62
2.17 1.09 1.01 0.25
0.39 1.27
The above listed companies have taken through fundamental analysis and the best have been shortlisted. The various ratios mainly looked in detail are Liquidity ratio Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations. This is done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities. In general, the greater the coverage of liquid assets to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its ongoing operations. On the other hand, a company with a low coverage rate should raise a red flag for investors as it may be a sign that the company will have difficulty meeting running its operations, as well as meeting its obligations.
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Current ratio The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better. Formula:
The current ratio is used extensively in financial reporting. However, while easy to understand, it can be misleading in both a positive and negative sense - i.e., a high current ratio is not necessarily good, and a low current ratio is not necessarily bad. Depending up on the industry and companys growth liquidity ratio varies. Quick ratio The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position. Formula:
The quick ratio is a more conservative measure of liquidity than the current ratio as it removes inventory from the current assets used in the ratio's formula. By excluding
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inventory, the quick ratio focuses on the more-liquid assets of a company.
The basics and use of this ratio are similar to the current ratio in that it gives users an idea of the ability of a company to meet its short-term liabilities with its short-term assets. Another beneficial use is to compare the quick ratio with the current ratio. If the current ratio is significantly higher, it is a clear indication that the company's current assets are dependent on inventory. Cash ratio The cash ratio is an indicator of a company's liquidity that further refines both the current ratio and the quick ratio by measuring the amount of cash, cash equivalents or invested funds there are in current assets to cover current liabilities. Formula:
The cash ratio is the most stringent and conservative of the three short-term liquidity ratios (current, quick and cash). It only looks at the most liquid short-term assets of the company, which are those that can be most easily used to pay off current obligations. It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted to cash in a timely matter to meet current liabilities. Very few companies will have enough cash and cash equivalents to fully cover current liabilities, which isn't necessarily a bad thing, so no need to focus on this ratio being above 1:1. Debt ratio The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the
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stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. Formula:
The easy-to-calculate debt ratio is helpful to investors looking for a quick take on a company's leverage. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. The more debt compared to assets a company has, which is signaled by a high debt ratio, the more leveraged it is and the riskier it is considered to be. Generally, large, well-established companies can push the liability component of their balance sheet structure to higher percentages without getting into trouble. However, one thing to note with this ratio: it isn't a pure measure of a company's debt (or indebtedness), as it also includes operational liabilities, such as accounts payable and taxes payable. Companies use these operational liabilities as going concerns to fund the day-today operations of the business and aren't really "debts" in the leverage sense of this ratio. Debt equity ratio The debt-equity ratio is another leverage ratio that compares a company's total liabilities to its total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. To a large degree, the debt-equity ratio provides another vantage point on a company's leverage position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets in the debt ratio. Similar to the debt ratio, a lower the percentage means that a company is using less leverage and has a stronger equity position. Formula:
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The debt-equity ratio appears frequently in investment literature. However, like the debt ratio, this ratio is not a pure measurement of a company's debt because it includes operational liabilities in total liabilities.
Nevertheless, this easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage. Generally, large, well-established companies can push the liability component of their balance sheet structure to higher percentages without getting into trouble. The debt-equity ratio percentage provides a much more dramatic perspective on a company's leverage position than the debt ratio percentage. Interest coverage ratio The interest coverage ratio is used to determine how easily a company can pay interest expenses on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by the company's interest expenses for the same period. The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be questionable. Formula:
The ability to stay current with interest payment obligations is absolutely critical for a company as a going concern. While the non-payment of debt principal is a seriously negative condition, a company finding itself in financial/operational difficulties can stay alive for quite some time as long as it is able to service its interest expenses. In a more positive sense, prudent borrowing makes sense for most companies, but the operative word here is "prudent." Interest expenses affect a company's profitability, so the cost-benefit analysis dictates that borrowing money to fund a company's assets has to have
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a positive effect. An ample interest coverage ratio would be an indicator of this circumstance, as well as indicating substantial additional debt capacity. Investment ratios Price to book ratio A valuation ratio used by investors which compares a stock's per-share price (market value) to its book value (shareholders' equity). The price-to-book value ratio, expressed as a multiple (i.e. how many times a company's stock is trading per share compared to the company's book value per share), is an indication of how much shareholders are paying for the net assets of a company. The book value of a company is the value of a company's assets expressed on the balance sheet. It is the difference between the balance sheet assets and balance sheet liabilities and is an estimation of the value if it were to be liquidated. The price/book value ratio, often expressed simply as "price-to-book", provides investors a way to compare the market value, or what they are paying for each share, to a conservative measure of the value of the firm. Formula:
The P/B ratio therefore has its shortcomings but is still widely used as a valuation metric. It is probably more relevant for use by investors looking at capital-intensive or financerelated businesses, such as banks. In terms of general usage, it appears that the price-to-earnings (P/E) ratio is firmly entrenched as the valuation of choice by the investment community. P/E Ratio The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio has its imperfections, but it is nevertheless the most widely reported and used
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valuation by investment professionals and the investing public. The financial reporting of both companies and investment research services use a basic earnings per share (EPS) figure divided into the current stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per each dollar of EPS). It's not surprising that estimated EPS figures are often very optimistic during bull markets, while reflecting pessimism during bear markets. Also, as a matter of historical record, it's no secret that the accuracy of stock analyst earnings estimates should be looked at skeptically by investors. Nevertheless, analyst estimates and opinions based on forwardlooking projections of a company's earnings do play a role in Wall Street's stock-pricing considerations. Historically, the average P/E ratio for the broad market has been around 15, although it can fluctuate significantly depending on economic and market conditions. The ratio will also vary widely among different companies and industries. Formula:
Variations: The basic formula for calculating the P/E ratio is fairly standard. There is never a problem with the numerator - an investor can obtain a current closing stock price from various sources, and they'll all generate the same dollar figure, which, of course, is a per-share number. A stock with a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to the overall market, as investors are paying more for today's earnings in anticipation of future earnings growth. Hence, as a generalization, stocks with this characteristic are considered to be growth stocks. Conversely, a stock with a low P/E ratio suggests that investors have more modest expectations for its future growth compared to the market as a whole.
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The growth investor views high P/E ratio stocks as attractive buys and low P/E stocks as flawed, unattractive prospects. Value investors are not inclined to buy growth stocks at what they consider to be overpriced values, preferring instead to buy what they see as underappreciated and undervalued stocks, at a bargain price, which, over time, will hopefully perform well. Note: Though this indicator gets a lot of investor attention, there is an important problem that arises with this valuation indicator and investors should avoid basing an investment decision solely on this measure. The ratio's denominator (earnings per share) is based on accounting conventions related to a determination of earnings that is susceptible to assumptions, interpretations and management manipulation. This means that the quality of the P/E ratio is only as good as the quality of the underlying earnings number. Whatever the limitations of the P/E ratio, the investment community makes extensive use of this valuation metric. It will appear in most stock quote presentations on an updated basis, i.e., the latest 12-months earnings (based on the most recent reported quarter) divided by the current stock price. Investors considering a stock purchase should then compare this current P/E ratio against the stock's long-term (three to five years) historical record. PEG Ratio The price/earnings to growth ratio, commonly referred to as the PEG ratio, is obviously closely related to the P/E ratio. The PEG ratio is a refinement of the P/E ratio and factors in a stock's estimated earnings growth into its current valuation. By comparing a stock's P/E ratio with its projected, or estimated, earnings per share (EPS) growth, investors are given insight into the degree of overpricing or underpricing of a stock's current valuation, as indicated by the traditional P/E ratio. The general consensus is that if the PEG ratio indicates a value of 1, this means that the market is correctly valuing (the current P/E ratio) a stock in accordance with the stock's current estimated earnings per share growth. If the PEG ratio is less than 1, this means that EPS growth is potentially able to surpass the market's current valuation. In other words, the
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stock's price is being undervalued. On the other hand, stocks with high PEG ratios can indicate just the opposite - that the stock is currently overvalued. Formula:
While the P/E ratio represents a very simple and widely used method of valuing a stock, it does lack one very important variable. The assumption with high P/E stocks (generally of the growth variety) is that investors are willing to buy at a high price because they believe that the stock has significant growth potential. The PEG ratio helps investors determine the degree of reliability of that growth assumption. Although the PEG ratio improves upon (i.e. provides additional valuation insight) the P/E ratio, it is still far from perfect. The problem lies with the numerator and the denominator in the equation. Misreading of a company's and/or analysts' predictions of future earnings are very common. Also, investor sentiment regarding a stock's pricing and earnings prospects is usually overly optimistic during bull markets and overly pessimistic in bear markets. The question of where investors can source the data necessary to calculate the PEG ratio focuses entirely on the estimated future growth of per-share earnings. A stock's P/E ratio appears in virtually all price quotes regardless of their origin. Estimated earnings growth shows up in investment research reports and financial analysts' comments in the financial press but may require some digging to find it. The other main things which are focused are: Dividend yield A stock's dividend yield is expressed as an annual percentage and is calculated as the company's annual cash dividend per share divided by the current price of the stock. Formula:
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A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. For example, steady, mature businesses, such as utilities and banks, are generally good dividend payers. Its significance depends upon the type of investment.,ie short or longterm. Profit margin analysis Basically, it is the amount of profit (at the gross, operating, pretax or net income level) generated by the company as a percent of the sales generated. The objective of margin analysis is to detect consistency or positive/negative trends in a company's earnings. Positive profit margin analysis translates into positive investment quality. To a large degree, it is the quality, and growth, of a company's earnings that drive its stock price. Formulas:
To obtain the gross profit amount, simply subtract the cost of sales (cost of goods sold) from net sales/revenues. The operating profit amount is obtained by subtracting the sum of the company's operating expenses from the gross profit amount. Generally, operating expenses would include such account captions as selling, marketing and administrative, research and development, depreciation and amortization, rental properties, etc. Return on assets This ratio indicates how profitable a company is relative to its total assets. The return on assets (ROA) ratio illustrates how well management is employing the company's total
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assets to make a profit. The higher the return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by comparing net income to average total assets, and is expressed as a percentage. Formula:
Return on equity This ratio indicates how profitable a company is by comparing its net income to its average shareholders' equity. The return on equity ratio (ROE) measures how much the shareholders earned for their investment in the company. The higher the ratio percentage, the more efficient management is in utilizing its equity base and the better return is to investors. Formula:
The above mentioned companies are taken for different ratios as part of the fundamental analysis and they have been shortlisted.
4.3 Secondary screening of companies

The companies which are short listed for under and fairly valued stocks are taken for further analysis. The return of the stocks is calculated. Two methods are employed to calculate the return. a) Five year average b) Compound interest method Five year average method involves calculating the return of past five years on yearly basis and calculating the average return of it. The problem with this technique is that after 200809 recession the companies had shown an upward trend, which may not be in relation to their fundamentals.
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In compound interest method the return over a five year period is calculated. This helps to eliminate the fluctuations that have happened over years. Also we can see that this method is more accurate and reasonable compared to average method. Company compounded return % ACC LTD. GRASIM INDUSTRIES LTD HDFC BANK LTD HERO HONDA MOTORS LTD HINDUSTAN UNILEVER LTD. INFOSYS TECHNOLOGIES LTD. JAIPRAKASH ASSOCIATES LIMITED NTPC LTD. RELIANCE INDUSTRIES LTD. RELIANCE INFRASTRUCTURE LTD STATE BANK OF INDIA CIPLA Ltd. TATA CONSULTANCY SERVICES LIMITED TATA MOTORS LTD. TATA STEEL LIMITED. TORRENT POWER CESC VIDEOCON YES BANK SOUTH INDIAN BANK KARNATAKA BANK MADRAS CEMENTS SHOBHA DEVELOPERS 12% 10% 41% 14% 0% 33% 22% 11% 32% -5% 67% 44% 79% 25% 27% 91% 56% 28% 40% 28% 21% 18% 29% 29% 13% 21% 15% 19% 26% 13% 25% 5% 15% 31% 27% 36% 37% 20% 22% 24% 21% 50% 36% 35% 29% 17% 5 year avg %
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APPOLO JK TYRE CEAT MRF JSW NAVABHARAT SESA GOA ENGINEERS INDIA ltd TTK UB ENGG GAIL ASIAN PAINTS BIOCON DR REDDY'S MPHASIS GREAT OFFSHORE ABC POLARIS
20% 23% 19% 18% 26% 52% 64% 44% 66% 34% 13% 39% -8% 34% 21% -11% 41% 7% Table.3
47% 123% 116% 50% 85% 74% 104% 90% 151% 76% 22% 54% 7% 45% 41% 4% 207% 26%
4.4 Shorlisting of Companies based on consistent returns

From the above list again short listing has done on the basis of returns and consistent performance over past five years. Thus the new list of companies with better performance has made. Company ACC LTD. GRASIM INDUSTRIES LTD HDFC BANK LTD HERO HONDA MOTORS LTD Beta 0.78 0.7 0.8 0.65 return % 21% 18% 29% 29%
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INFOSYS TECHNOLOGIES LTD. NTPC LTD. RELIANCE INDUSTRIES LTD. RELIANCE INFRASTRUCTURE LTD STATE BANK OF INDIA TATA CONSULTANCY SERVICES LIMITED TORRENT POWER CESC YES BANK SOUTH INDIAN BANK MADRAS CEMENTS APPOLO MRF JSW NAVABHARAT SESA GOA ENGINEERS INDIA TTK UB ENGG GAIL ASIAN PAINTS DR REDDY'S MPHASIS ABC 0.79 0.93 0.89 1.18 0.9 0.83 0.84 0.59 1.3 0.9 1.21 0.84 0.56 0.56 0.69 0.32 0.34 0.77 0.28 Table 4 18% 41% 14% 33% 22% 32% 20% 18% 26% 52% 64% 44% 66% 34% 13% 39% 34% 21% 41% 1.34 1.16 13% 25% 0.68 0.62 1.11 21% 19% 26%
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4.5 Stock weights

Our next step ahead is to give weightage to these stocks. For this sector study is done and those sectors which are expected to outperform are given proportional weightage. From study it was clear that pharmaceutical sector will be booming in coming years, IT and banks will continue its growth. Also in coming years there is a chance for rapid development in infrastructure hence cement, power and steel sectors are important. From government side also initiatives are taken for infrastructure development, therefore we need to emphasis on those sectors. In recent years Engineering sector is showing an amazing growth, hence our portfolio has given much importance to that sector also. India is one of the countries showing two digit growth rate continuously over years in automobile sector. In recession time also Indian automobile sector was far better than other countries. Tyre sector grow along with automobile sector. If auto sector is growing, the tyre sector also will grow and viceversa. After detailed analysis, we have made the weightages as follows. SECTOR AUTO - 2& 3 WHEELERS BANKS CEMENT COMPUTERS SOFTWARE DIVERSIFIED DOMESTIC APPLIANCES ENGINEERING METALS OIL & GAS PAINTS PHARMACEUTICALS POWER WEIGHTS 2.0% 9.5% 6.0% 12.0% 9.5% 2.0% 9.5% 7.0% 6.0% 3.5% 9.5% 8.5%
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STEEL TRANSPORT TYRES Table 5
5.0% 3.0% 7.0%
2.0% 3.0% 7.0% 9.5% 6.0% 8.5% 12.0% 9.5%
auto - 2& 3 wheelers banks cement computers software diversified domestic appliances engineering metals oil & gas paints
5.0%
3.5% 6.0% 7.0% 9.5%
9.5%
pharmaceuticals power steel
2.0%
transport tyres
Figure. 5 Since the sectorial allocation is over the major task before us is to distribute the weights across the companies in most beneficial way, so that it gives best returns with minimum risk. The company list is as follows COMPANY HERO HONDA MOTORS LTD STATE BANK OF INDIA SOUTH INDIAN BANK HDFC BANK LTD COMPANY WEIGHT 2.0% 3.5% 1.5% 2.5%
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YES BANK ACC LTD. MADRAS CEMENTS INFOSYS TECHNOLOGIES LTD. MPHASIS TATA CONSULTANCY SERVICES LIMITED GRASIM INDUSTRIES LTD NAVABHARAT TTK ENGINEERS INDIA UB ENGG SESA GOA RELIANCE INDUSTRIES LTD. ASIAN PAINTS DR REDDY'S NTPC LTD. TORRENT POWER JSW STEEL ABC APPOLO MRF Table 6
2.0% 3.0% 3.0% 4.5% 3.0% 4.5%
3.0% 6.5% 2.0% 6.5% 3.0% 7.0% 6.0% 3.5% 9.5% 4.0% 4.5% 5.0% 3.0% 3.0% 4.0%
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HERO HONDA MOTORS LTD STATE BANK OF INDIA South indian bank HDFC BANK LTD
3% 3% 5% 5% 4%
4%
2%
2% 4% 3% 2% 3% 3% 5% 3%
Yes bank ACC LTD. MADRAS CEMENTS INFOSYS TECHNOLOGIES LTD. MPHASIS TATA CONSULTANCY SERVICES LIMITED GRASIM INDUSTRIES LTD NAVABHARAT TTK
10%
5% 3% 4% 6% 7% 6.5%, 7% 3% 2% 7%
Engineers india UB ENGG SESA GOA RELIANCE INDUSTRIES LTD. ASIAN PAINTS DR REDDY'S NTPC LTD. TORRENT POWER JSW Steel ABC APPOLO MRF
Figure 6 The next step is to calculate the return and risk. 4.6 Return and risk The expected return on a portfolio is simply the weighted average of the returns on the individual securities in the portfolio. R=
74
R=Return on the portfolio =Weight of security I in the portfolio =Return on the security i Number of securities in the portfolio. COMPANY COMPANY HERO HONDA MOTORS LTD STATE BANK OF INDIA SOUTH INDIAN BANK HDFC BANK LTD YES BANK ACC LTD. MADRAS CEMENTS INFOSYS TECHNOLOGIES LTD. MPHASIS TATA CONSULTANCY SERVICES LIMITED GRASIM INDUSTRIES LTD NAVABHARAT TTK ENGINEERS INDIA UB ENGG SESA GOA RELIANCE INDUSTRIES LTD. ASIAN PAINTS DR REDDY'S NTPC LTD. 4.5% 3.0% 6.5% 2.0% 6.5% 3.0% 7.0% 6.0% 3.5% 9.5% 4.0% 18% 18% 52% 66% 44% 34% 64% 26% 39% 34% 19% 0.0081 0.0054 0.0338 0.0132 0.0286 0.0102 0.0448 0.0156 0.01365 0.0323 0.0076 0.79 0.7 0.9 0.56 0.84 0.56 1.21 1.11 0.32 0.34 0.62 0.03555 0.021 0.0585 0.0112 0.0546 0.0168 0.0847 0.0666 0.0112 0.0323 0.0248 4.5% 3.0% 21% 21% 0.00945 0.0063 0.68 0.77 0.0306 0.0231 WT 2.0% 3.5% 1.5% 2.5% 2.0% 3.0% 3.0% WT. RETURN RETURN BETA 34% 25% 22% 29% 33% 21% 32% 0.00676 0.00875 0.0033 0.00725 0.0066 0.0063 0.0096 0.65 1.16 0.9 0.8 1.18 0.78 0.83 WT. BETA 0.013 0.0406 0.0135 0.02 0.0236 0.0234 0.0249
75
TORRENT POWER JSW STEEL ABC APPOLO MRF
4.5% 5.0% 3.0% 3.0% 4.0% 100%
41% 26% 41% 20% 18%
0.01845 0.013 0.0123 0.006 0.0072
0.93 1.3 0.28 0.84 0.59
0.04185 0.065 0.0084 0.0252 0.0236
RETURN = Table 7 Return = 33.5 % Beta = 0.79 4.7 Correlation Analysis: A key practice in achieving portfolio diversification A correlation coefficient of +1.00 indicates that two securities move in the same direction at all times. If security A gains in value, we would expect security B to gain as well. A correlation coefficient of 0 indicates that the price movements are totally random. A gain by security A provides no insight into the expected movement of security B. A correlation coefficient of -1.00 indicates that two securities move in the opposite direction at all times. If security A gains in value, we would expect security B to decline in value. Correlation simply measures the relationship of movement between two securities. Investors seek diversification as a way to reduce risk in their portfolio. The fundamental premise behind diversification is that portfolio risk and volatility can be lowered by investing in a number of differing asset classes (also known as asset allocation) which has varying levels of risk, volatility and return. Effective asset allocation should reduce what is known as unsystematic risk (the risk associated with owning an individual security).In order to achieve effective diversification, portfolio holdings should not be highly correlated. The relationship between correlation and proper diversification is most 33.5% BETA= 0.794
typically inverse. When correlation increases, diversification decreases and when correlation decreases, diversification increases.
76
Correlation between stocks : Spearman method : -0.653 to + 0.952 Pearsons method :-0.777 to +0.954
Conclusion
The portfolio made by us seems to be a very good one giving returns of 33.5%. the beta value is 0.79, means that portfolio is less affected by market index. The portfolio is well diversified one. It covers 16 sectors and 25 companies. This makes our portfolio less risky one and even if unusual happens to one sector, other sectors will take care of the portfolio. The correlation between the stocks are also very less. Proper diversification is contingent upon the right mix of investments within a portfolio and the assumption that portfolio holdings offer varying levels of correlation. Portfolios that exhibit high levels of correlation across their holdings may be exposed to a higher degree of risk. Correlation levels can fluctuate across asset classes throughout time. The correlation varies from -0.653 to + 0.954.
4.8 Sharpes single index model

William sharp has developed a model for portfolio analysis, also called as Market model. According to him the portfolio risk can be reduced by diversifying but beyond a limit the risk cannot be reduced. That part of risk which cannot be further reduced by diversifying is called systematic risk. Sharp has estimated with a simple regression equation considering the returns or market index as an independent variable and returns on individual stocks as dependent variable. The construction of an optimal portfolio is simplified if a single number measures the desirability of including a stock in the optimal portfolio. If we accept the single-index model, such a number exists. In this case, the desirability of any stock is directly related to its excess return-to-beta ratio (Rj Rf)/i. If the stocks are ranked by excess return to beta (from highest to lowest), the ranking
77
represents thedesirability of any stock's inclusion in a portfolio. The number of stocks selected depends on a unique cutoff rate such that all stocks with higher ratios of (Ri Rf)/i will be included and all stocks with lower ratios excluded. To determine which stocks are included in the optimum portfolio, the following steps are necessary: Calculate the excess return-to-beta ratio for each stocks under review and the rank them from highest to lowest. The optimum portfolio consists of investing in all stocks for which (Ri Rf)/i
is greater than a particular cut off point C*. All securities whose excess return-to-beta ratios are above the cutoff rate are selected and all whose securities with the ratios below the cutoff rate are rejected. The value of C* is computed from the characteristics of all securities that belong in the optimum portfolio. To determine C* it is necessary to calculate its value as if different numbers of securities were in the optimum portfolio. For a portfolio of i stocks, Ci is given by:
Where, 2m = variance in the market index 2ei = variance of a stock's movement that is not associated with the movement of the market index; this is the stock's unsystematic risk Ri = expected return of stock i Rf = risk-free rate of return After getting the Ci of each security, investors select highest Ci value that is C* among all the securities and develop a ranking on all securities. Then investors compare C* with excess return to beta of each security. Then, the securities having value greater than C* are selected. Once investors know which securities are to be included in the optimum
78
portfolio, investors must calculate the percent invested in each security. The percentage invested in each security is:
The above expression determines the relative investment in each security. The first expression simply scales the weights on each security so that they sum to 1 (ensure full investment). The residual variance on each security ei plays an important role in determining how much to invest in each security. Then the portfolio return can be obtained by using following equation:
Where Wi = weight/proportion of investment in security i i = beta of stock i i = standard deviation of stock i ei = unsystematic risk of security i By following the above-mentioned procedure, the optimum portfolio can be obtained under Sharpe model.
79
4.9 Sharpe Analysis

COMPANY RETU RN % BET A ST D DE V RARF/BE TA RA-RF (RARF )* BETA (RARF )* BETA /STD DEV ABC 40.9% 0.28 0.62 1.24518 0.3486 5 TTK 66.4% 0.56 0.48 1.07791 5 ASIAN PAINTS 39.0% 0.32 0.23 1.02973 1 DR REDDY'S 34.0% 0.34 0.23 0.82352 9 NAVABHARAT 51.8% 0.9 0.2 0.50850 6 UB ENGG 34.0% 0.56 0.23 0.5 0.4576 56 0.28 0.4118 9 0.1568 0.6036 33 0.3295 14 0.28 0.0976 22 0.3380 34 0.1054 44 0.0952 0.1574 55 0.7042 38 0.4584 54 0.4139 13 2.0594 51 0.6817 39 SESA GOA 64.0% 1.21 0.34 0.47933 9 ENGINEERS INDIA HERO HONDA MOTORS LTD TORRENT POWER MADRAS CEMENTS HDFC BANK LTD 31.0% 0.8 0.13 34.0% 0.83 0.11 41.0% 0.93 0.31 33.8% 0.65 0.13 44.5% 0.84 0.39 0.45804 2 0.38461 5 0.37634 4 0.31325 3 0.3125 0.25 0.2 0.26 0.2158 1.9618 18 1.5384 62 0.049231 0.062627 0.35 0.3255 1.05 0.0279 0.3847 55 0.25 0.3231 94 0.1625 0.58 0.7018 2.0641 18 0.8287 04 1.25 0.0325 0.018092 0.043062 0.013635 0.0405 0.005026 0.004452 0.006533 0.001265 BETA2/S TD DEV (RARF )* BETA /STD DEV 0.1574 55 0.8616 93 1.3201 47 1.7340 6 3.7935 11 4.4752 51 6.5393 68 7.3680 72 8.6180 72 9.6680 72 11.629 89 13.168 35 0.304823 0.255592 0.192965 0.165065 0.132565 0.114473 0.071411 0.057776 0.017276 0.01225 13.1 0 16.3 9 25.9 3 27.9 9 32.2 2 33.3 3 33.3 3 33.5 0 33.6 0 33.4 8 0.007798 8.95 0.001265 1.75 BETA /S TD DEV
2
Ci
INFOSYS TECHNOLOGIE S LTD. MRF
24.0%
0.68
0.18
0.26470 6
0.18
0.1224
0.68
0.025689
13.848 35
0.330512
33.0 5
21.0%
0.59
0.3
0.25423 7
0.15
0.0885
0.295
0.011603
14.143 35
0.342115
32.8 4
YES BANK
35.0%
1.18
0.31
0.24576 3
0.29
0.3422
1.1038 71
0.044916
15.247 22
0.387031
32.0 6
NTPC LTD.
20.0%
0.62
0.05
0.22580 6
0.14
0.0868
1.736
0.07688
16.983 22
0.463911
30.7 4
MPHASIS
21.5%
0.77
0.32
0.20086 6
0.1546 67 0.1517 71
0.1190 94 0.1183 81
0.3721 68 0.4082 1
0.018528
17.355 39
0.482439
30.4 0
ACC LTD.
21.2%
0.78
0.29
0.19457 8
0.020979
17.763 6
0.503419
30.0 1
80

RELIANCE INDUSTRIES LTD. SOUTH INDIAN BANK GRASIM INDUSTRIES LTD STATE BANK OF INDIA APPOLO 20.0% 0.84 0.29 25.4% 1.16 0.16 0.16728 3 0.16666 7 JSW 25.8% 1.3 0.32 0.15247 0.1982 11 TCS 15.0% 0.79 0.19 0.11392 4 GAIL 13.4% 0.69 0.15 0.10654 7 CESC 14.3% 0.89 0.15 0.09334 7 RELIANCE INFRASTRUCT URE LTD 13.1% 1.34 0.14 0.05291 4 0.0735 18 0.0830 79 0.0709 04 0.0507 27 0.0739 4 0.0950 12 0.09 0.2576 74 0.0711 0.1940 48 0.14 0.2250 96 0.1176 1.4068 48 0.4055 17 0.8052 32 0.3742 11 0.3381 81 0.4929 34 0.6786 55 0.128257 0.052807 0.03174 0.032847 0.052813 0.024331 0.0841 26.264 13 26.669 65 27.474 88 27.849 09 28.187 27 28.680 21 29.358 86 1.305993 1.177736 1.124929 1.093189 1.060341 1.007529 0.983198 24.5 1 24.3 3 23.9 2 23.5 7 23.2 3 22.6 5 21.0 5 18.0% 0.7 0.13 22.1% 0.9 0.24 0.17922 5 0.17157 3 0.1613 02 0.1201 01 0.1451 72 0.0840 71 0.6048 83 0.6466 97 0.037692 0.03375 24.210 59 24.857 29 0.899098 0.861406 25.4 9 25.1 7 26.0% 1.11 0.03 8 0.18018 0.2 0.222 5.8421 05 0.324237 23.605 71 0.827656 25.7 7
Table 8 Then the stocks whose returns above cut off rate are selected. Company return % ABC TTK ASIAN PAINTS DR REDDY'S NAVABHARAT UB ENGG SESA GOA ENGINEERS INDIA HERO HONDA 40.9% 66.4% 39.0% 34.0% 51.8% 34.0% 64.0% 44.5% 33.8% 0.28 0.56 0.32 0.34 0.9 0.56 1.21 0.84 0.65 0.62 0.48 0.23 0.23 0.2 0.23 0.34 0.39 0.13 beta std dev
81
MOTORS LTD TORRENT POWER MADRAS CEMENTS 41.0% 34.0% 0.93 0.83 0.31 0.11
Table 9 4.10 Weightage Applying sharpes formula for weightage calculation the proportion has been calculated. The stocks and their respective proportions are shown below. (RiCompany ABC TTK ASIAN PAINTS DR REDDY'S NAVABHARAT UB ENGG SESA GOA ENGINEERS INDIA HERO HONDA MOTORS LTD TORRENT POWER 38.4615385 4.861538462 0.019152 37.6344086 4.034408602 Table 10 0.02274 2% 2% Rf)/beta (Ri-Rf)/beta -C weights % 15% 25% 13% 10% 9% 6% 11% 6%
124.51795 90.91795008 0.154288 107.791549 74.19154889 0.251806 102.973124 69.37312415 0.134544 82.3529412 48.75294118 0.100463 50.8506446 17.25064465 0.094096 50 47.9338843 45.804208 16.4 0.055662 14.3338843 0.105117 12.204208 0.062132
82

2.27% ABC 15.43% TTK ASIAN PAINTS DR REDDY'S 5.57% 25%, 25.18% 9.41% NAVABHARAT UB ENGG SESA GOA ENGINEERS INDIA 10.05% 13.45% HERO HONDA MOTORS LTD TORRENT POWER
1.92%
6.21% 10.51%
Figure 7
4.11 RISK AND RETURN OF THIS PORTFOLIO

Return Return of portfolio is calculated as weighted average of individual stocks.
Beta calculation COMPANY ABC TTK ASIAN PAINTS BETA 0.28 0.56 0.32 % WT 15% 25% 13% BETA* WT 0.043201 0.141012 0.043054
83
DR REDDY'S NAVABHARAT UB ENGG SESA GOA ENGINEERS INDIA HEROHONDA MOTORS TORRENT POWER
0.34 0.9 0.56 1.21 0.84 0.65 0.93
10% 9% 6% 11% 6% 2% 2%
0.034157 0.084687 0.031171 0.127192 0.052191 0.012449 0.021148
Table 11 Return calculation Company ABC TTK ASIAN PAINTS DR REDDY'S NAVABHARAT UB ENGG SESA GOA ENGINEERS INDIA HERO HONDA MOTORS LTD TORRENT POWER 0.019152 0.02274 1 return= 49.50606 Table 12 4.12 Variance calculation
Company ABC TTK weights 0.154288 0.251806 beta 0.28 0.56 Wi*beta 0.043201 0.141012 (Wi*beta)^2 0.001866 0.019884 std.dev% 62 48 std.dev%^2 3844 2304 wt. std .dev^2 593.083 580.1622
weights 0.154288 0.251806 0.134544 0.100463 0.094096 0.055662 0.105117 0.062132
% 15% 25% 13% 10% 9% 6% 11% 6%
return %
tot return
41% 6.304983 66% 16.7107
39% 5.240693 34% 3.415727 52% 4.870947 34% 1.892497 64% 6.7275
44% 2.763341
2% 2%
34% 0.647334 41% 0.932333
84

ASIAN PAINTS DR REDDY'S NAVABHARAT UB ENGG SESA GOA ENGINEERS INDIA HERO HONDA MOTORS LTD TORRENT POWER 0.02274 0.93 0.021148 0.000447 31 961 21.85298 0.019152 0.65 0.012449 0.000155 13 169 3.236669 0.062132 0.84 0.052191 0.002724 39 1521 94.50234 0.134544 0.100463 0.094096 0.055662 0.105117 0.32 0.34 0.9 0.56 1.21 0.043054 0.034157 0.084687 0.031171 0.127192 0.001854 0.001167 0.007172 0.000972 0.016178 23 23 20 23 34 529 529 400 529 1156 71.174 53.14469 37.6385 29.44503 121.5155
sum=
0.59026
0.052418
1605.755
Table 13 Return = 49.50% Portfolio variance = 1612.448 Standard deviation = 40.15 Beta of portfolio = 0.59 Conclusion From this we can conclude that Sharpe Model helps to optimise our portfolio with minimum risk and maximum return. For our portfolio the return obtained is 49.50% with a standard deviation of 40.15. The beta value is 0.59, which shows that portfolio is defensive ie less correlated to market. In other words we can say that our portfolio is less subjected to market risk. Also that Sharpe Model helps to optimize our portfolio with minimum risk and maximum return. For our portfolio the return obtained is 49.50% with a standard deviation of 40.15.
85
The beta value is 0.59, which shows that portfolio is defensive ie less correlated to market. In other words we can say that our portfolio is less subjected to market risk.
86
5.1 Findings
The portfolio made by us seems to be a very good one giving returns of 33.5%. The beta value is 0.79, means that portfolio is less affected by market index. The portfolio is well diversified one also. It covers 16 sectors and 25 companies. This makes our portfolio less risky one and even if unusual happens to one sector, other sectors will take care of the portfolio. The correlation between the stocks are also very less. Proper diversification is contingent upon the right mix of investments within a portfolio and the assumption that portfolio holdings offer varying levels of correlation. Portfolios that exhibit high levels of correlation across their holdings may be exposed to a higher degree of risk. In this portfolio correlation varies from -0.653 to + 0.954. So we can conclude that our portfolio is a well diversified one since stocks are less correlated to each other. Also we can conclude that Sharpe Model helps to optimize our portfolio with minimum risk and maximum return. For our portfolio the return obtained is 49.50% with a standard deviation of 40.15. The beta value is 0.59, which shows that portfolio is defensive ie less correlated to market. In other words we can say that our portfolio is less subjected to market risk. The portfolio is a well diversified one with ten different companies. The fund allocation is also done in the most optimum way, thereby giving the maximum returns with reduced risk. Our portfolio is giving excellent results in both models. On comparing the risk and return also the portfolio is an excellent one giving high returns at lower risk.
87
5.2 Suggestions
More appropriate techniques can be used to calculate the fund allocation for different sectors. While allocating weightages priority should be given to those sectors which are expected to outperform in future rather than sticking to the past data. Also economic conditions and prospects of different sectors should be studied in detail before funding the sectors. Instead of using compound interest rate of return of the equities, more accurate methods of return calculation should be used where seasonal effects are taken in to consideration and nullified. This will help to better forecast the return of the portfolio. Also correlation between stocks should be given more importance while creating a well diversified portfolio because less correlated stocks helps us to make portfolio with less risk since they are independent of each other.
88
Conclusion
Investment portfolio management is the most crucial thing that every investor must keep in mind. For creating their portfolio investors should try to think by their own rationality and knowledge rather than influencing from others. Though investment in stock market is risky compared to deposits in banks, no other investments give better return than this. The need of an efficient portfolio comes in this situation. If we do all the steps in portfolio management in the most appropriate way, a better return than risk free securities can be assured. Since the Indian economy is continuing its growth momentum, we can expect a stable market condition in coming years also. Most of the Indian companies have been back to their development motion after recession. In our portfolio which is less risky, well diversified and at the same time giving good returns is expected to outperform than the stock market and other risk free securities. Sectorial diversification and appropriate fund distribution makes our portfolio a better one. Also our stocks are less correlated to each other which give our portfolio an edge over others. The portfolio made by us seems to be a very good one giving returns of 33.5% and the beta value is 0.79, means that portfolio is less affected by market index. The portfolio is well diversified one. It covers 16 sectors and 25 companies. This makes our portfolio less risky one and even if unusual happens to one sector, other sectors will take care of the portfolio. The correlation between the stocks are also very less. Proper diversification is contingent upon the right mix of investments within a portfolio and the assumption that portfolio holdings offer varying levels of correlation. Portfolios that exhibit high levels of correlation across their holdings may be exposed to a higher degree of risk. Correlation levels can fluctuate across asset classes throughout time. The correlation varies from -0.653 to + 0.954. Also that Sharpe Model helps to optimize our portfolio with minimum risk and maximum return. For our portfolio the return obtained is 49.50% with a standard deviation of 40.15. The beta value is 0.59, which shows that portfolio is defensive ie less correlated to market. In other words we can say that our portfolio is less subjected to market risk.
89
My Learning
In addition to the equity market, I gained some insight about the commodity and currency market at LiveTips. I learned about the economic indicators given by different countries which tell about the economy of that particular economy. In every sector there are few companies which outperform the others. Analyzing the individual company as well as the industry is important to determine which stock is going to do well in future. Return can be maximized and risk can be reduced to make a good portfolio. The Sharpe Single Index method gives the optimum portfolio consisting of lesser stocks.
90
REFERENCES Reference books

Security Analysis And Portfolio Management, Sudhindra Bhat, Excel Books. Investment Analysis And Portfolio Management, Reilly & Brown, Cengage Learning.
Articles and research material

Investment Analysis, Gareth D Myles, May 2003
Websites
www.bseindia.com www.nseindia.com www.livetips.biz www.capitalmarket.com www.bloomberg.com www.in.reuters.com www.moneycontrol.com www.investopedia.com www.investware.com www.money.livemint.com
91
Correlation Analysis
VARIABLE
VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 VAR00019 VAR00020 VAR00021 VAR00022 VAR00023
COMPANY
ACC APOLLO TYRES ASIAN DR REDDY ENGG INDIA GRASIM INDUSTRIES HDFC HERO HONDA INFOSYS JSW MADRAS CEMENTS MPHASIS MRF TYRES NAVABHARATH NTPC RELIANCE SBI BANK SESAGOA SOUTH IND BANK TCS TTK TORRENT YES BANK
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Overview of Indian Financial System

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Brokers Investment Bankers Stock Exchanges Underwriters

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