Portfolio - MGT Ind Info

PORTFOLIO MANAGEMENT
A COMPARATIVE STUDY
On
“PERFORMANCE EVALUATION OF DIFFERENT SECURITIES”
In
INDIA INFOLINE Ltd - HYDERABAD
A project report submitted to the Department of Commerce and

Management Studies, Andhra University, Visakhapatnam in partial
fulfillment for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION

By
S.ZIYAUR RAHMAN
(Reg No.2055455099)
UNDER THE GUIDANCE OF
Prof. P. VISWANADHAM, Ph.D.,

Asst. PRINCIPAL,
DCMS - Andhra University
DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

ANDHRA UNIVERSITY (CAMPUS)
VISAKHAPATNAM
2005-2007
1
Acknowledgement
The feeling of gratitude when experienced in words is only a fraction
of acknowledgement I feel over whelmed to express my gratitude to all
those who extended their consistent support guidance and encouragement to
complete this task.
I am heartily grateful to Prof. D.Prabhakar Rao, Head of the

Department, DCMS-Andhra University for allowing me to do the project
work.
I extend my heart felt gratitude to my faculty guide

Prof.P.VISWANADHAM, Ph.D., DCMS – AU, Visakhapatnam, for his
consistent encouragement, benevolent criticism, inseparable suggestions,
which were the main reasons to bring work to present shape
I take privilege to express my profound gratitude to our young and

dynamic Territory manager Sri, RAVISH GUPTA for permitting me to
under go the project at INDIA INFOLINE Ltd, Hyderabad.
I am heartly grateful to MR.VENU for his valuable support and

guidance through out my work in the Company.
Finally I would like to express my deep sense of gratitude to my

beloved Parents as because without their support and encouragement I
would not have finished this work. I also express my sincere thanks to my
friends and well wishers too.
S.ZIYAUR RAHMAN
2
DECLARATION
I, S.ZIYAUR RAHMAN, here by declare that the project

“PERFORMANCE EVALUATION OF DIFFERENT SECURITIES-A
COMPARATIVE STUDY” is being submitted by me to the Department of
Commerce and Management Studies, Andhra University, Visakhapatnam, in
partial fulfillment for the award of the degree of
“MASTER OF BUSINESS ADMINISTRATION.” This is a bonafied
worth carried out by me under the guidance and supervision of
Prof.P.VISWANADHAM, Ph.D., Department of Commerce & Management
Studies-Andhra University.
I also declare that this project work is the result of my own effort and
that it has not been submitted to any other University for the award of the
degree or diploma earlier.
Place: Visakhapatnam
Date:
S.ZIYAUR RAHMAN
3
CERTIFICATE
This is to certify that the project report entitled “PERFORMANCE

EVALUATION OF DIFFERENT SECURITIES - A COMPARATIVE
STUDY” submitted by SYED ZIYAUR RAHMAN in partial fulfillment of
the requirement for the award of the degree of MASTER OF BUSINESS
ADMINISTRATION during the period 2005-07 is a bonafide required of
the work done by him under my supervision
Prof.P.VISWANADHAM, Ph.D
Project Guide
4
CONTENTS
Page No.
CHAPTER-1
 INTRODUCTION 07
 NEED FOR THE STUDY 07
 OBJECTIVE OF THE STUDY 09
 METHODOLOGY OF THE STUDY 09
CHAPTER-2
 INDUSTRY PROFILE 10
CHAPTER-3
 COMPANY PROFILE 19
 ORIGIN 20
 VISION & STRENGTH 21
 STRUCTURE 22
 INVESTORS RELATIONS 23
 SUBSIDIARIES 24
 5paisa.com 26
CHAPTER-4
 CONCEPTUAL FRAMEWORK 28
CHAPTER-5
 ANALYSIS AND INTERPRETATION 49
CHAPTER-6
 FINDINGS, SUGGESTIONS & SUMMARY 99
 BIBLIOGRAPHY 102
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CHAPTER-1
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INTRODUCTION
Indian financial market consists of money market and capital market. Money market is
mainly for the short-term needs and capital market for long term needs.
CAPITAL MARKET AND ITS STRUCTURE
Capital market is a financial market, which provides and facilitates an orderly exchange
of long term needs. The capital market in India is classified into
 Primary market or new issuance market

 Secondary market
The primary market deals with new issue of long term securities. Whereas the secondary
market deals with buying and selling of old, second hand, existing securities, which are
already listed in official trading list of recognized stock exchange.
Players of ‘New Issue Market’ are many, among them the most important are:
 Merchant banker’s
 Registrars
 Collecting and coordinating bankers
 Underwriters and brokers
The players of secondary market are:

 Issuers of securities like companies
 Intermediaries like brokers, and sub-brokers etc.
NEED FOR THE STUDY
As the business and industry expanded and economy became more complex in nature, a
need for permanent finance arose. Entrepreneurs require money for long-term needs,
were as investors demand liquidity the solution to this problem gave way for an origin of
stock exchange, which is a ready market for investment and liquidity.
As per the securities contract Act, 1956, Stock Exchange means any body of individuals
whether incorporated or not, constituted for the purpose of regulating or controlling the
business of buying, selling or dealing in securities.
SECURITIES INCLUDE
1. Shares, scrip's, stocks, bonds, debentures and other marketable

Securities.
2. Government securities
3. Rights or interests in securities.
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NATURE AND FUNCTION OF STOCK EXCHANGE
There is an extraordinary amount of ignorance and of prejudice born out of ignorance

with regard to nature and function of stock exchange as economic development proceeds;
the scope for acquisition and ownership of capital by private individuals also grows.
Along with it, the opportunity for a stock exchange to render the service of stimulating
private savings and challenging such savings into productive investment exists on a
vastly great scale. These are services, which the stock exchange alone can render
efficiently.
The stock exchange in India has an important role to play in the building of a real
shareholders democracy. To protect the interests of the investing public, the authorities of
the stock exchange have been increasingly subjecting not only its members to high
degree of discipline, but also those who use its facilities- joint stock companies and other
bodies in whose stocks and shares it deals.
The activities of the stock exchange are governed by a recognized code of conduct apart
from statutory regulations, investors both actual and potential are provided, through the
daily stock exchange quotations The job of the stock exchange and its members is to
satisfy the need of market for investments - to bring the buyers and sellers of investments
together, and to make the exchange of stock between them as simple and fair a process as
possible.
CHARACTERISTICS OF THE EXCHANGES IN INDIA
Traditionally, a stock exchange has been an association of individual members called

brokers, formed for the express purpose of regulating and facilitating the buying and
selling of securities by the public and institutions at large. A stock exchange in India
operates with the recognition from the government under the securities and contracts
(Regulation Act, 1956). The member brokers are essentially the middlemen, who transact
in securities on behalf of the public for a communism or on their behalf. There are at
present 26 stock exchanges in India. The largest among them is being the Bombay stock
exchange (BSE), which alone accounts for over 80% of due total volume of transactions
in shares in the country.
Securities and Exchanges Board of India (SEBI) has been setup in Bombay by the
Government to oversee the orderly development of stock exchanges in the country. All
companies wishing to raise capital from the public are required to list their securities on
at least one stock exchange thus, all ordinary shares, preferences shares and debentures of
publicity held companies are listed in one are more stock exchanges. Stock exchanges
also facilitate trading in the securities of the public sector companies as well as
government securities.
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OBJECTIVES OF THE STUDY
1 To evaluate the performance of 12 different companies

Based on Risk, Rate of return and Coefficient of
Correlation
2. To compare the returns of the company to that of NSE,
Nifty.
METHODOLOGY OF THE STUDY
The study is conducted to know the past performance of the selected companies and to
construct the optimum portfolio based on RISK and RATE OF RETURNS of the
companies
SOURCES OF THE DATA:
The source includes only the secondary data.

Secondary data is collected from the internet (www.nseindia.com)
LIMITATIONS OF THE STUDY:
1. The study is limited to only 12 companies.
2 Investors desired level of variance and desired expected return was not
Taken into consideration
3. There may be scope for committing statistical errors.
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CHAPTER-2
INDUSTRY PROFILE
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NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE) is India’s leading stock exchange covering
various cities and town across the country. NSE was set up by leading institutions to
provide a modern, fully automated screen – based trading system with national reach.
The exchange has brought about unparalleled transparency, speed and efficiency, safety
and market integrity. It has set up facilities that serve as a model for the securities
industry in terms of systems, practices and procedures.
NSE has played a catalytic role in reforming the Indian securities market in terms
of micro structure, market practices and trading volumes. The market today uses slate –
of – art information technology to provide an efficient and transparent trading, clearing
and settlement mechanism, and has witnessed several innovations in products and
services viz., dematerialization of stock exchange governance, screen based trading,
compression of settlement cycles, dematerialization and electronic transfer of securities,
securities lending and borrowing, professionalisation of trading members, fine – turned
risk management systems, emergence of clearing corporations to assume counter party
risks, market of debt and derivative instruments and intensive use of information
technology.
The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group of Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions (FIS) to
provide access to investors from all across the country on an equal footing. Based on the
recommendations, NSE was promoted by leading Financial Institutions at the behest of
the Government of India and was incorporated in November 1992 as a tax paying
company unlike other stock exchanges in the country.
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On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale
Debit Market (WDM) segment commenced operations in November 1994 operations in
Derivatives segment commenced in June 2000.
OUR MISSION
NSE’s, mission is setting the agenda for change in the securities markets in India. The
NSE was set-up with the main objectives of:
• Establishing a nation wide trading facility for equities, debt instruments and
hybrids.
• Ensuring equal access to investors all over the country through an appropriate
communication network.
• Providing a fair, efficient and transparent securities market to investors using
electronic trading systems.
• Enabling shorter settlement cycles and book entry settlements systems and
• Meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology have
become industry benchmarks and are being emulated by other market participants. NSE
is more than a mere market facilitator. It’s that force which is guiding the industry
towards new horizons and greater opportunities.
PROMOTERS
NSE has been promoted by leading financial institutions, banks, insurance companies and
other financial intermediaries:
• Industrial Development Bank of India Limited.

• Industrial Finance Corporation of India Limited.
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• Life Insurance Corporation of India
• State Bank of India
• ICICI Bank Limited
• IL & FS Trust Company Limited
• Stock Holding Corporation of India Limited
• SBI Capital Markets Limited
• The Administrator of the Specified Undertaking of Unit Trust of India
• Bank of Baroda
• Canara Bank
• General Insurance Corporation of India
• National Insurance Company Limited
• The New India Assurance Company Limited
• The Oriental Insurance Company Limited
• Punjab National Bank
• Oriental Bank of Commerce
• Corporation Bank
• Indian Bank
• Union Bank of India
OUR LOGO
The logo of the NSE symbolize a single nationwide securities trading facility
ensuring equal and fair access to investors, trading members and issuers all over the
country. The initials of the Exchange viz., N, S and E have been etched on the logo and
are distinctly visible. The logo symbolizes use of state of the art information technology
and satellite connectivity to bring about the change within the securities industry. The
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logo symbolizes vibrancy and unleashing of creative energy to constantly bring about
change through innovation.
CORPORATE STRUCTURE
NSE is one of the first demulualised stock exchanges in the country, where the
ownership and management of the Exchange is completely divorced from the right to
trade on it. Though the impetus for its establishment came from policy makers in the
country, it has been setup as a public limited company, owned by the leading institutional
investors in the country.
From day one, NSE has adopted the form of a demutualised exchange the
ownership, management and trading is in the hands of three different sets of people. NSE
is owned by a set of leading financial institutions, banks, insurance companies and other
financial intermediaries and is managed by professional, who do not directly or indirectly
trade on the Exchange. This has completely eliminated any conflict of interest and helped
NSE in aggressively pursuing policies and practices within a public interest framework.
The NSE model however, does not preclude, but in fact accommodates
involvement, support and contribution of trading members in a variety of way. Its board
comprises of senior executives from promoter institutions, eminent professionals in the
fields of law, economics, accountancy, finance, taxation, etc. public representative,
nominees of SEBI and one full time executive of the Exchange.
While the Board deals with broad policy issues decisions relating to market
operations are delegated by the Board to various committee constituted by it. Such
committee includes representatives from trading members, professionals, the public and
the management. The day-to-day management of the Exchange is delegated to the
Managing Director who is supported by a team of professional staff.
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BOMBAY STOCK EXCHANGE
The Stock Exchange, Mumbai, which was established in 1875 as “The Native
Share and Stockbrokers Association” (a voluntary non-profit making association), has
evolved over the years into it present status as the premier Stock Exchange in the country.
It may be noted that the Stock Exchange is the oldest one in Asia, even older than the
Tokyo Stock Exchange, which was founded in 1878.
The Exchange while providing an efficient market also upholds the interests of
the investors and ensures redressal of their grievances, whether against the companies or
its own member – brokers. It also strives to educate and enlighten the investors by
making available necessary informative inputs.
A Governing Board comprising of 9 elected directors (one third of them retire

every year by rotation) and Executive Director, three Government nominees, a Reserve
Bank of India nominee and five public representatives, is the apex which regulates the
exchange and decides its policies.
The Governing Board following the election of directors annually elects a

President, Vide President and an Honorary Treasurer from among the elected directors.
The Executive Director as the Chief Executive Officer is responsible for the day-
do-day administration of the Exchange.
The exchange has obtained permission from Securities and Exchange Board of
India (SEBI) for expansion of its BSE-on-Line Trading (BOLT) network to locations
outside Mumbai. In term of the permission granted by SEBI, the members of the
Exchange are free to install their trading terminals to cities where there are no Stock
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Exchange. However, at centers where the other exchanges are located, the Exchange is
required to sign a Memorandum of Understanding with these Exchanges permitting it to
install the BOLT terminals in their jurisdictional areas.
The expression of BOLT network was inaugurated by the Finance Minister,

Government of India, Sri P. Chidambaram on August 30, 1997. The Exchange has signed
Memorandum of Understanding with eleven Stock Exchanges, viz., Calcutta, Pune,
Adhmedabad, Saurashtra, Kulch (Rajkot), Madaypradesh, Vadodara, Bhubaneshwar and
Magadh (i.e., Patna) Jaipur, Coimbatore and Chennai (Madras) to provide BOLT
connections to the members of these Exchanges after obtaining necessary clearance from
SEBI. The BOLT network has been expanded to centers outside Mumbai and covers 232
centres having 726 VSATs (Very Small Aperture Terminals) and 1020 TWSs (Trader
Work Stations) as on October 31, 1999. Of these, 648 VSATs and 872 TWSs
respectively are installed outside Mumbai. With the expansion of BOLT outside Mumbai.
The total average daily turnover at the Exchange has increased from Rs.1064 crores in
August 1997 to Rs. 1404 crores in April 1998 and further to Rs.2885 crores in October
1999.
The average daily turnover at the Exchange has increased from Rs. 851 crores in
1997-98 to R.1284 crores in 1998-99 and further to Rs.2885 crores in 1999-2000 (April –
October 1999). Some of the important aspects of the working of the stock Exchange,
Mumbai are discussed below.
TRADING
The Exchange has switched over from the open outcry trading system to a fully
automated computerized mode of trading known as BOLT (BSE On Line Trading)
System. This system, which is both order and quote driven was commissioned on March
14, 1995. It facilitates more efficient processing, automatic order matching and faster
execution of trades. Above all, the system is more transparent. The members now enter
orders / quotes on their Trader Work Stations (TWSs) in their offices instead of
assembling in the trading ring.
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The strips traded on the Exchange have been classified into “A”, “B1”, “B2”,
“C”, “F” and “Z” group. The number of strips listed on the Exchange under “A”, “B1”
and “B2” groups which represent the equity segments as on October 1999 was 152, 1109
and 4510 respectively. The “F” group represents the debt market (fixed income
securities) segment wherein 670 securities were listed as at the end of October 1999. The
“Z” group was introduced in the month of July 1999 and covers the list of companies that
fail to comply with listing requirements and also fail to resolve investor complaints. The
“Z” group comprises of 539 scripts as of October 1999. The “C” group covers the odd
lot securities in “A”, “B1” and “B2” groups and Rights renunciations.
The stock Exchange, Mumbai, is the only Stock Exchange in the country to
provide a facility of on-line trading in odd lot securities and rights renunciations. This
facility of trading in odd lots of securities and Rights renunciations not only offers an exit
route to investors to dispose of their odd lot of securities but also provides them an
opportunity to consolidate their securities into market lots. Trading in this segment covers
all the scripts listed in the equity segment.
The trading cycle for all these groups of securities is weekly. The trading cycle
for “A, B1, B2”, “C” and “Z” group securities representing the equity segment is from
Monday to Friday and that for “F” group securities representing the debt market is from
Thursday to Wednesday. The Transactions in “A” group scripts are allowed to be carried
forward from one settlement to another settlement subject to a maximum of 75 days from
the date of outstanding positions in “A” group scripts. The trading session for carry
forward of transactions from one settlement to another is conducted on Saturdays, i.e., at
the end of every trading cycle in the equity segment.
Trading on the BOLT system is conducted from Monday to Friday between 10.00
a.m. and 3.30 p.m. while the carry – forward session for “A” group securities is
conducted on Saturdays between 10.00 a.m. and 12.30 p.m.
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The Information Systems Department of the Exchange generates the following
statements that can be downloaded by the members in their back offices on a daily basis :
a. Statements giving details of the daily transactions entered into by the members.
b. Statements giving details of margins payable by the members in respect of the

trades executed by them.
The members are allowed to enter into transactions on behalf of their Institutional
clients, viz., Scheduled Commercial Banks, Indian Financial Institutions (IFIs) and
Foreign Institutional Investors (FIIs) and Mutual Funds registered with SEBI. The
settlement of the trades (money and securities) done on behalf of the Institutions may be
either through the member himself or through a SEBI registered Custodian appointed by
an institution. In case the delivery / payment is to be given or taken by a Custodian on
behalf of an Institution; the former has to confirm the trade done by a member. For this
purpose, the Custodians have been admitted as members of the Clearing House. In case
the Custodian does not confirm an institutional transaction, the liability for pay in funds
or securities devolves on the concerned member.
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CHAPTER-3
COMPANY PROFILE
19
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ORIGIN
India Infoline was founded by a group of professionals in 1995, a seemingly distant past
in the international meticulous research was published and distributed in printed form to
a client base comprising the whole business including leading MNCs, investment banks
and consulting firms.
India Infoline saw the opportunity to expand out client base, from a few hundreds to
several millions and also value chain. In early 1999, when internet penetration in India
was at its infancy and the future unknown and hard decision of killing our earlier
business model and embracing the Internet, we discontinued delivering the printed form
and made available quality research at the click of mouse. Thus, was born
www.indiainfoline.com site has emerged as the most popular website on Indian business
and finance.
India Infoline is a one-stop financial services shop, most respected for quality of its
advice, personalized service and cutting-edge technology.
India Infoline Ltd is listed on both the leading stock exchanges in India, viz. the stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). The India Infoline
group, comprising the holding company, India Infoline Ltd and its subsidiaries, straddles
the entire financial services space with offerings ranging from Equity research, Equities
and derivatives trading, Commodities trading, Portfolio Management Services, Mutual
Funds, Life Insurance, Fixed deposits, Gol Bonds and other small savings instruments to
loan products and Investment banking. India Infoline also owns and manages the
websites, www.indiainfoline.com and www.5paisa.com.
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VISION
 To be the most respected company in the financial services space.

 To be the premier provider of investment advisory and financial planning services
in India.
Approach to research
The Company follow a simple approach to research as follows
 Data collection
 Analysis
 Communication
 Feedback
All the analysts of the firm have significant experience, which they share with each other.
They believe that they have an innovative sources of data, that helps to keep ahead to
identify trends.
It would be unfair on our part not to mention the immense contribution which our clients
and readers feed back forms to the QC as well as R&D for us. The feedback helps us in
all stages- data collection and communication, most importantly, in improving our
methodology as well.
STRENGTHS
The following are the strengths that set the firm apart.
 The firm has been in information services for the last seven years and has
assiduously built the necessary for the business.
 We have leveraged our content to create the India Infoline brand, which is
synonymous with credible information on business and finance.
 The firm’s top management team represents a skill set, which is mutually
exclusive but collectively exhaustive.
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 The strength of the organization has been to continuously innovate and reinvent
itself.
STRUCTURE OF INDIA INFOLINE LTD
CHAIRMAN
EXECUTIVE DIRECTOR
BOARD OF DIRECTORS
Independent Independent
Non-Executive Independent
Director Director
Director Director
THE MANAGEMENT TEAM
Mr. Nirmal jain

is the founder and Chairman of India Infoline Ltd. He holds an MBA degree from
IIM Ahmedabad and Chartered Accountant (All India Rank2) and a Cost Accountant.
Mr.R Venkataraman
Is the co-promoter and Executive Director of India Infoline Ltd. He holds a
B.Tech Electronics and Electrical Communications Engineer from IIT Kharagpur and an
MBA degree also.
THE BOARD OF DIRECTORS

Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline
comprises a Non-Executive Director and three Independent Directors. They are_
 Mr Sat Pal Khattar
 Mr Sanjiv Ahuja
 Mr Nilesh Vikamse
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 Mr kranti Singh
INVESTORS RELATIONS
The India Infoline group, comprising the holding company, India infoline ltd and its
wholly owned subsidiaries entire gamut of investment products ranging from Equities
and derivatives trading, Commodities trading, Management Services, Mutual Funds, Life
Insurance, Fixed Deposits, Gol bonds and other small savings. India Infoline also owns
and manages the websites, www.indiainfoline.com and www.5paisa.com. India Infoline
Ltd company listed on both the leading stock exchanges in India namely the Stock
Exchange, Mumbai(BSE) and National Stock Exchange (NSE). India Infoline is a
forerunner in the field of equity research. India Infoline acknowledged by none other than
forbes as ‘Best of the Web’ and ‘…a must read for investors in Asia.
India Infoline’s research is available not just over the internet but also on international
wire services Ltd. (code:IILL), Thomson First Call and Internet Securities where it is
amongst the most read Indian broking companies. India Infoline group has a significant
presence across the country owing to its 125 offices across 45 cities in India. These
offices are networked and are connected with the corporate office in Mumbai. The group
has initiated significantly in technology and research, the results of which are there for
everyone to see. The 5paisa.com is one the most advanced platforms available to retail
investor in India.
The group has memberships on BSE and NSE for equities trading and on MCX and
NCDEX for commodities and has a SEBI license for portfolio Management under which,
various schemes are offered which have been beating the benchmark indices since
inception. India Infoline is the one-stop shop for all investments in India.
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SUBSIDIARIES
India Infoline Securities Pvt Ltd
India Infoline securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is
engaged in the businesses of Equities broking and portfolio Management Services. It
holds memberships of both the leading stock exchanges of India viz. the Stock Exchange,
Mumbai (BSE) and the National Stock Exchange (NSE). It offers broking services in the
Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE.
India Infoline Commodities Pvt Ltd
India Infoline Commodities Pvt Ltd is q 100% subsidiary of India Infoline Ltd, which is
engaged in the business of commodities broking. Our experience in securities broking
empowered us with the requisite skills and technologies allow us offer commodities
broking as a contra-cyclical alternative to equities broking. We enjoy memberships with
the MCX and NCDEX, two leading Indian commodities exchanges, and recently
acquired membership of DGCX. WE have a multi-channel delivery model, making it
among the select few to online as well as offline trading facilities.
India Infoline distribution Co ltd (IILD)
India Infoline.com Distribution Co Ltd is a 100% subsidiary of India Infoline ltd and is
engaged in the business of distribution of Mutual Funds, IPOs, Fixed Deposits and other
small saving products. It is one of the largest ‘vendor-independent’ distribution houses
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and has a wide pan-India footprint of over 232 branches coupled with a huge number of
‘feet-on-street’, which help source and service customers across the length and breadth of
India. Its unique value proposition of free doorstep expert advice coupled with free pick-
up and delivery of cheques has been met with an enthusiastic response from customers
and fund houses alike. Our business has expanded to include the online offerings and
download application forms which they can later submit to the product provider.
India Infoline Insurance Services Ltd
India Infoline insurance services Ltd is also a 100% subsidiary of India Infoline Ltd and
is a registered corporate agent with the insurance regulatory and development authority
(IRDA). It is the largest corporate agent for ICICI Prudential Life Insurance Company
Ltd, which is India’s largest Pvt Life Insurance Company.
India Infoline Investment Services Ltd
India Infoline Services Ltd is also a 100% subsidiary of India Infoline Ltd. It has a NBFC
license from RBI and offers margin-funding facility to the broking customers.
India Infoline Insurance Brokers Ltd.
India Infoline Insurance Brokers Ltd is 100% subsidiary of India Infoline Ltd. and is a
newly formed subsidiary which will carry out the business of Insurance of Broking. We
have applied to IRDA for the insurance broking license and the clearance for the same is
awaited.
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5paisa.com
5paisa is the trade name of India Infoline Securites Private Limited (5paisa), member of
National Stock Exchange and The Stock exchange, Mumbai. 5paisa is a wholly owned
subsidiary of India portal. 5paisa has emrged as one of leading players in e-broking space
in India. Our key product offerings are as follows:
Investor Terminal (IT)
Investor Terminal is recommended for infreques=nt investors, who fall into the “buy and
Hold” school of investing, made very popular by warren Buffet – the Oracle of Omaha. A
typical retail investor is a busy corporate executive or a businessmen who makes equity
investments for long term and does not trade everyday. He prefers a trading interface
which works behind proxy and firewalls as they access the Internet and the stock markets
from their work place, where a direct connection is difficult because of corporate IT
security policies. This product does not have intra-day tick by tick charts.
Target of Investor Terminal
• Investors who invest quite often, churn their portfolios regularly and keep a close
watch on the market. They need to watch live quoted and live charts.
• Active stock market traders with medium volumes.
• Students and researchers who need live streaming quotes and intra day charts.
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• Corporate treasury people.
Trader terminal (TT)
Trader Terminal is for the dedicated day traders, who churn their portfolio on minor
movements in the market, sometimes several times a day. Their rapid and high volume
trading requires a powerful interface for lightning fast order execution. They monitor
marked to market positions on a minute-to-minute basis, with facilities for panic exit.
They need all the analysis – fundamental and technical, market gossip, price and volume
information and much more – all at one click.
Target of Trader Terminal
• It is for dedicated day traders, who churn their portfolio on minor movements in
the market, sometimes several times a day. Their rapid and high volume trading
requires a powerful interface for lightening fast order execution.
• High net worth individuals with large and active equities portfolio who need to
monitor and action swiftly.
• Large corporate or trust who have dedicated staff to monitor, analyze and shuffle
their portfolios.
Features of Trader Terminal
• Trade execution in a fraction of a second!

• Live streaming quotes. Price watch on any number of scrips.
• Intra day charts, updated live, tick-by-tick.
• Live margin, position, marked to market profit & Loss report.
• The lowest Brokerage on the face of the earth!
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• Set any number of price alerts on any no of scrips
• Flexibility to customize screen layout and setting
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• Facility to cancel all pending orders in one click.
• Top gainers, top losers, most active, updated live
• Index information : Index chart, Index stock Information value
• Market depth i.e. best 5 bids and offers, updated live for all scrips
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• Online fund transfer facility from leading banks.
• Online intra-day technical calls
• Exhaustive data base of over 5000 companies
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• India Infoline’s world- acclaimed news service and research
• Lots more….last but not the least ideas that help people make money.
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CHAPTER-4
CONCEPTUAL
FRAMEWORK
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INTRODUCTION TO PORTFOLIO MANAGEMENT
Investing in securities such as shares, debentures and bonds is profitable as well as

exciting. It in deeds it involves a great deal of risk. It is rare to find investors investing
their entire saving in a single security. Instead, they tend to invest in a group of securities.
Such, group of securities is called a portfolio creation of a Portfolio helps to reduce risk
without sacrificing returns.
WHAT IS PORTFOLIO MANAGEMENT?
An investor considering investment in securities is faced with the problem of choosing

from among a large number of securities His choice depends upon the risk - return
characteristics of individual securities. He would attempt to choose the most desirable
securities and like to allocate his funds over the group of securities. Again he is faced
with the problem of deciding which securities to hold and how much to invest in each.
The investor faces an infinite number of possible Portfolio or group of securities The risk
and return characteristics of Portfolios defer from those of individual securities
combining to form a Portfolio The investors tries to choose the optimal Portfolio taking
into consideration the risk - return characteristics of all possible Portfolios
As the economic and financial involvement keeps changing the risk - return
characteristics of individual securities as well as Portfolios also change. An Investor
invests his funds in a Portfolio expecting to get a good return with less risk to bear
Portfolio management comprises all the processes involved in the creation and
maintenance of an investment Portfolio. It deals specifically with security analysis,
Portfolio analysis, Portfolio selection, Portfolio revision and Portfolio evaluation
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OBJECTIVES OF PORTFOLIO MANAGEMENT
The objectives of investment Portfolio management can be classified into two categories.
1. BASIC OBJECTIVES
a) To maximize yield/return and b.) To minimize risk
2. SECONDARY OBJECTIVE:
a.) Regular return

b.) Stable income
c.) Appreciation of capital
d.) More liquidity
e.) Safety of investment
f.) Tax Benefit
NEED FOR PORTFOLIO MANAGEMENT
Portfolio Management is a process encompassing many activities of investments in assets

and securities. It is a dynamic and flexible concept and involves regular and systematic
analysis, judgment and action. The objective of this service is to help the unknown and
investors with the expertise of professionals in investment Portfolio management It
involves construction of Portfolio based upon the investor's objectives, constraints,
preferences for a risk and returns and tax liability. The Portfolio reviewed and adjusted
from time to time in tune with the market conditions The evolution of Portfolio is to be
done in term of targets set for risk and return The change in the Portfolio are to be
effected to meet the changing condition
Portfolio construction refers to the allocation of surplus funds in hand among the variety
of financial assets upon for investment Portfolio theory concerns itself with the principles
governing such allocation The modern view of investments is oriented more towards the
assembly of proper combinations of individual securities to form investment Portfolios A
combination of securities held together will give a beneficial result if they are grouped in
a manner to secure a high return after taking into consideration the risk element.
The modern theory is of the view that by diversification, risk can be reduced.
Diversification can made by the investor either by having a large number of shares of
companies in different reasons. In different industries are those producing different types
32
of product lines. Modern theories believe in the perspective of combination of securities
under constraints of risk and return.
ELEMENTS OF PORTFOLIO MANAGEMENT
Portfolio management is ongoing process involving the following basic tasks
1 Identification of investor’s objectives, constraints and preferences.
2. Strategies are to be developed and implemented in tune with investment

Policy formulated
3. Review and monitoring of the performance of the portfolio.
4 Finally the evolution of portfolio.
SEBI GUIDELINES TO THE PORTFOLIO MANAGERS
On7th"' January 1993, the Security Exchange Board of India issued regulations to the
Portfolio managers for the regulation of Portfolio management services by merchant
bankers. They are as follows
 Portfolio management services shall be in the nature of investment

or consultancy management for an agreed fee at clients risk.
 The Portfolio manager shall not guarantee return directly or
indirectly the fee should not be depended upon or it should not be
returned sharing basis
 Various term of agreements, fees, disclosures of risk and
repayment should be mentioned
 Client's funds should be kept separately in client wise account
which should be subject to audit?
 Manager should report clients at intervals not exceeding six
months
 Portfolio manager should maintain high standards of integrity and
not desire any benefit directly or indirectly from client's funds.
 The client shall be entitled to inspect the documents.
 Portfolio managers shall not invest funds belonging to clients in
badla financing, bills discounting and lending operations.
 Clients money can be invested in money and capital market
instruments Settlement on termination of contract as agreed in
the contract.
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 Client’s funds should be kept in a separate bank account opened in
scheduled commercial bank.
 Purchase or sale of securities shall be made at prevailing market
price.
 Portfolio managers with his Clint are fiduciary in nature. He shall
act both as an agent and trustee for the funds received.
PHASES OF PORTFOLIO MANAGEMENT
Each phase is an integral part of the whole process and the success of Portfolio
management depends upon the efficiency in carrying out each of the phases.
SECURITY ANALYSIS
The security available to an investor for investment is numerous and of various types the
shares of over seven thousand companies are listed in the stock exchange of the country.
Traditionally the securities were classified into ownership securities such as equity shares
and preference shares and creditor ship securities such as debentures and bonds. Security
analysis is the initial phase of the Portfolio management this consists of two alternative
approaches namely fundamental analysis and technical analysis
FUNDAMENTAL ANALYSIS
The primary motive of buying a share is to sell it subsequently at a higher rate An

investor would be interested to know the dividend to be paid on the share in the future as
also the future price of the share. These values can only be estimated and predicted with
certainty. These values are primarily determined by the performance of the company,
which in turn is influenced, by the performance of the industry.
An investor at the time of the investment has to evaluate a lot of information about the
past performance and the expected future performance of companies, industries and the
economy as a whole before taking the investment decision such evaluation or analysis is
called fundamental analysis.
Fundamental analysis insists that no one should purchase or sell a share on the basis of
tips and rumors. The fundamental approach calls upon the information about company
belongs and the economy this result in informed investing for the fundamentalist makes
use of EIC framework of analysis.
The multitude of factors affecting the performance of a company can be broadly
classified as
a company specific factors such as the age of its plant, the quality of management,
brand image of its labor management relations act, and these factors are likely to make a
company performance quite different from that of its competitors in the same industry
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b Industry wide factors such as demand supply gap in the industry, the emergence of
substitute products , change in government policy relating to industry etc And these
factors affect only those companies belonging to a specific industry.
c. Economy wide factors such as growth rate of the economy, inflation rate, and foreign
exchange rates etc, which affects all companies.
A. ECONOMY ANALYSIS
The performance of a company depends on the performance of the economy if the

economy is booming, income raises and the demand for the goods will increase, on the
other hand, if the economy is in recession, the performance of the companies will be
generally bad.
The following are the same of the key economic variable that an investor must monitor as
a part of his fundamental analysis
 Growth rate of national income

 Inflation
 Interest rate
 Governments revenue, expenditure and deficits
 Exchange rate
 Infrastructure
 Monsoon
 Economic and political stability
B. INDUSTRY ANALYSIS
Investors ultimately invest his money in the securities of one or more specific companies.
Each company can be characterized as belonging to an industry. The performance of
companies would therefore, be influenced by the fortunes of the industry to which it
belongs For this reason an analyst has to undertake an industry analysis so as to study the
fundamentals factors affecting the performance of different industries
INDUSTRY LIFE CYCLE
Marketing experts believes that each product has a life cycle. In the same way, an
industry is also said to have a life cycle This industry life cycle theory is generally
attributed to Julius Gowdinsky. According to the theory, the life of an industry can be
segregated into
1. Pioneering stage
2. The expansion stage
3. The stagnation stage
4. The decay stage
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C. COMPANY ANALYSIS
Company analysis is the final stage of fundamental analysis the economy analysis
provides the investor a board outline of prospectus of growth in the economy. The
industry analysis helps the investor to select the industry in which investment would be
rewarding. Now he has to decide the company in which he should invest his money.
Company analysis provides the answer to this question.
Company analysis deals with the estimation of return and risk of individual shares. This
calls for information this information influence investment decisions Information
regarding companies can be broadly classified into two board groups, internal and
external
Internal information sources include annual reports to shareholder, public and private
statement of officers of the company, the company's financial statements, etc, external
sources of information are those generated independently these are prepared by
investment services and the financial press
The prosperity of a company would depend upon its profitability and financial health.
The financial statements published by a company periodically help us to assess the
profitability and financial health's of the company are the balance sheet and the profit and
loss account The first gives us the picture of the company's assets and liabilities while the
second gives us a picture of its earnings.
Some of the factors to be analyzed at the time of selecting a company for investment are:
 Top management officials of that company

 The company's past performance.
 The rate of dividend declared by the company in the past
 Growth opportunities of the company
 Competitive opportunities of the company
 Company's Turnover rate
 Company's goodwill
 Past annual reports, etc
TECHNICAL ANALYSIS
The analysts believe that share prices are determined by the demand and supply forces
operating in the market. These demand and supply forces in turn are influenced by a
number of factors these factors cannot be qualified. The combined impact of all these
factors is reflected in the share price moment. Technical analysis is the name given to
forecasting techniques that utilize historical share price date
The basic premise of technical analysis sis that price move in trends or waves which may
be upward or down ward. It is believed that due present trends are influenced by the past
36
trends and that due projection of future trends is possible by an analysis of past price
trends. The technical analysis is really a study of past or historical price and volume
movement so as to predict the future stock price behavior.
DOW THEORY
Whatever is generally being accepted today as technical analysis has roots in due dow
theory Charles Dow formulated a hypothesis that the stock markets does not move on a
random basis but it is influenced by three distinct cyclical trends that guide its direction.
According to dow Theory,. The market has three moments & these moments are
simultaneous in nature. These moments are the primary moments, secondary reactions
and minor moments
The primary moment is the long range cycle that carries the entire market up or down
This is due long term trend in the market The secondary reactions act as a restraining
force on due primary moment These are in due opposite direction to the primary moment
and last only for a short while these are also known as corrections The third moment in
the market is the minor moments which are the day to day inculcations in the market
These moments are not significant and have a very short duration.
According to Dow theory, the price moment in the market can be identified by means of
a line chart In this chart, the closing prices of shares or the closing values of the market
index may be plotted against the corresponding trading days.
BASIC PRINCIPLES OF TECHNICAL ANALYSIS
 The market value of security is related to demand and supply factors operating in the
market.
 There are both rational and irrational factors which surround the supply and demand
factors of a security.
 Security prices behave in a manner that their moment in continuous in a particular

direction for same length of time
 Trends in stock prices have been seen to changes when there is a shift in the demand
and supply factors.
 The shifts in demand and supply can be detected through charts prepared specially
to show market action
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 Patterns which are projected by charts record price moments and these recorded
patterns are used by analysts to make forecasts about the moment of prices in future
Portfolio Analysis
A portfolio is a group of securities held together as investment. Investors invest their
funds in a portfolio of securities rather than in a single security because they are risk
averse. By constructing a portfolio, investors’ attempts to spread risk by not putting all
their eggs into one basket Portfolio phase of Portfolio management consists of
denitrifying the range of possible Portfolio that can be constituted from a given set of
securities and calculating their return and risk for further analysis.
PORTFOLIO SELECTION
Portfolio analysis provides the input for the nest phase in portfolio management, which is
Portfolio selection the proper goal of Portfolio construction is to get high returns at a
given level of risk. The inputs from Portfolio analysis can be used to identify the set of
efficient Portfolio. From this set of Portfolio the optimal Portfolio has to be selected for
investment.
PORTFOLIO REVISIONS
Having constructed the optimal Portfolio the investor has to constantly monitor the
Portfolio to ensure that it continues to he optimal As the economy and financial markets
are dynamic, the changes take place almost daily The investor now has to revise his
Portfolio The revision leads to purchase of new securities and sale of some of the existing
securities from the Portfolio.
Portfolio Evaluation
The objective of constructing a Portfolio and revising it periodically is to earn maximum
returns with minimum risk Portfolio evaluation is the process Which is concerned with
assessing the performance of a Portfolio over a selected period of time in terms of return
and risk Portfolio evaluation is useful in yet another way It provides a mechanism for
identifying weakens in the investment process and for improving these deficient areas
RISK
Every investment is characterized by return and risk A person making an investment
expects to get some return from the investment in the future It as future is uncertain, so is
the future expected return It is this uncertainty associated with the returns from an
investment that introduces risk into an investment
Risk distinguishes between the expected return and the realize return from an investment
The expected return is the uncertain future return that an investor expects to get from his
38
investment The realized return is the certain return that an investor has actually obtained
form his investments are the end of the holding period
The investor makes the investment decision based on the expected return from the
investment The actual return realized from the investment may not compare to the
expected return This possibility of variation of the actual return from the expected return
is termed risk.
TYPES OF RISK
MARKET RISK
Market risk arises due to ups and downs in the market this risk affects the share Market
prices of share move up or down consistently for some time period, a general rise in share
price is refereed to as a bullish trend, whereas a general fall in share prices is referred to
as a movement of share price indices such as a BSE Sensitive Index, BSF. National
index, NSE Index etc
INTEREST MARKET RISK
Interest rate risk is a type of risk that particularly affect debt securities like bonds,
debentures A bond or debenture normally has a fixed coupon rate of interest The issuing
company pays interest to the bondholder at this coup rate A bond is normally issued with
a coupon rate, which is equal to the interest rate prevailing in the market at the time of
issue The market interest rate may change but the coupon rate remains constant till the
maturity of the instrument
PURCHASING POWER RISK
This risk refers to the variation in investor return caused by inflation results in lowering
of the purchasing power of money this type or risk is more inflationary in fixed income
securities and less in variable return securities
BUSINESS RISK
Every company operates within a particular operating environment This operating

environment comprises both internal and external environment The impact of these
operation conditions is reflected in the operating costs of the company Business risk is
thus a function of the operating conditions faced by a company and is the variability in
operating income caused by the operating conditions of the company
FINANCIAL RISK
Financial risk is a function of financial leverage, which is the use of debt in the capital
structure The presence of debt in the capital structure creates fixed payments in the form
39
of interest This fixed interest payment creates more variability in the earnings per share
(EPS) available to equity share holders This variability in EPS due to the presence of debt
in the capital structure of a company is referred to as financial risk This risk is an
avoidable risk.
RETURN ON PORTFOLIO
Each security in a Portfolio contributes returns in the proportion of this investment in a

security Thus the Portfolio expected return is the weighted average of the expected return
from each of the securities, with weights representing the proportionate share of the
security in the total investment Why an investor does have so many securities in his
Portfolio9 If the security ABC gives the maximum return why not he invests in that
security all his funds and thus maximize the returns'1 The answer to this question lie in
the investors perception of risk attached to investments his objectives of income safety,
appreciation, liquidity and hedge against loss of value of money etc this pattern of
investment in different asset categories, security categories types of instruments etc ,
would all be described under the caption of diversification which aims at the reduction or
even elimination of non systematic or company related risk and achieve the specific
objectives of investors
PORTFOLIO RISK
return of the as Risk on a Portfolio is different from on individual securities The risk is
reflected in the variability of the returns form zero to infinity The expected return
depends on the probability of returns and their weighted contribution to the risk of the
Portfolio There are two measures of risk in this context, one is the absolute deviation and
the other is standard deviation Most investors invest in a Portfolio of assets as they do not
want to put all their eggs in one basket Hence, what really matters to them is not the risk
and return of the stocks in isolation but the risk and a whole
PORTFOLIO MANAGEMENT & DIVERSIFICATION
A combinations of securities that have risk & return feature make up a Portfolio Portfolio
may or may not take on the aggregate directive scrip's on the individual particulars
Portfolio analysis takes the various components of risk and return for each industry
considers mixed effect of combined securities
Portfolio selection involves choosing the best Portfolio to suit the risk return preferences
of the Portfolio investor, management of Portfolio is a dynamic activity of evaluating and
revising the Portfolio in terms of its objectives It is widely accepted that individual scrip's
carry a certain degree of risk
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Portfolio helps in spreading the risk over many securities This risk is reduced the basic
principle is that is a Portfolio holds several assets or securities, which may include cash
also if even one goes back the other, will provide protection from the loss The
diversification can be either vertical of Horizontal In vertical diversification a Portfolio
can have scrip's of different company's within the same industry In Horizontal
diversification one and have different scrip's chosen from different industries.
INVESTMENT DECISIONS
DEFINITIONS
According to F. Amiling investment may be defined as a purchase by an individual or

institutional investor of a financial or real asset that produces a return proportional to the
risk assumed over some future investment period According to D H Fischer and R J
Jordan investment is a commitment of funds made in the expectation of some positive
rate of return It the investment is properly undertaken the return will be commensurate
with the risk the investor assures.
CONCEPT OF INVESTMENT
Investment will generally be used in its financial sense and as such investment is the
allocation of monitory resources to assets that are expected to yield some gain or positive
return over a given period of time. Investment is a commitment of person’s funds to
derive future income in the form of interest, dividends, rent, premiums, pension benefits
are the appreciation of value of his principal capital.
Any investor would like to know the media or range of investments so that he can use his
discretion and safe in those investments, which will give him both security and stable
return The ultimate objective of the investor is to derive a variety of investments that
meet his preference for risk and expected return The investor will select the Portfolio that
will maximize his utility.
All investments is risky as the investor will put his money an efficient invest with proper
training can reduce the risk and maximize the returns He can avoid pitfalls and protect his
interest
Money and information are the basis and the first requirement of investment is the
availability of money or savings but money is not enough as investments are generally
made on the basis of information of the companies, instruments, industry and economy.
Both money and information flow do help making investment management
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GUIDE LINES FOR EQUITY INVESTMENT
Equity shares are characterized by price fluctuations, which can produce substantial gains
or inflict severe losses given the volatility and dynamism of” the stock market, investor
required greater competence and skill along with a touch of good luck too - to invest in
equity share. Here are some general guidelines to play to equity game, irrespective of
whether you are aggressive or conservative
 Adopt a suitable formula plan

 Establish value anchors
 Asses market psychology
 Combine fundamental and technical analyze
 Diversity sensibly
 Periodical review and revise you Portfolio
QUALITIES FOR SUCCESSFUL INVESTING
 Contrary thinking
 Patience
 Composure
 Flexibility and
 Openness
MARKET PORTFOLIO
It is very difficult for the company to manage the internal and the external risk The
internal risk is within the company which may be minimized, but external risk due to
market conditions, which cannot be minimized. To some extent the market risk may be
analyzed on the basis of the financial techniques namely:
 CAPM (Capital Asset Pricing Model)

 CML (Capital Market Line)
 SML (Security Market Line)
CAPITAL ASSET PRICING MODEL (CAPM)
The market will have efficient and inefficient securities But the investor cannot identity
only efficient securities, he may invest in both efficient (where minimum return is
guaranteed) and inefficient securities (where minimum risk is not guaranteed) this
analysis can be done under CAPM
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It was developed in the year I960 by William sharpe, John linter and Mission It was
developed on the basis of Markowitz Risk and return theorem Actually CAPM is an
extension f the Portfolio theory of Markowitz, The Portfolio theory is a description of
how rational investors should build efficient Portfolio's and select the optimal Portfolio.
CAPM is the one of the important model helping the company

As well as the investor, to know what the risk is involved in the market as well as the
overall return the market depends upon
 Systematic Risk and unsystematic risk

 Efficient and inefficient risk.
ASSUMPTIONS
I. The investors are well versed with the market and the risk
2 Investor will choose the Portfolio on the basis of expected return and the variance.
3 Minimum returns is guaranteed (R)
4. The investments are perfectly divisible.
5. The capital market is in equilibrium.
6. There is no imperfection in the market.
7 the investor should invest for a sine long period and all the investments are in uniform,
based on systematic and unsystematic risk.
Return of CAPM = Rf. + (ß (RM- RF))
Where:-
RI - risk free rate
RM =market return
ß =market risk
ß = (σj rjm) / σm
CAPITAL MARKET LINE (CML)
Hence all of them will ace the same efficient frontier every investor will seek As all
investors are assumed to have identical (homogenous) expectations to combine the risky
Portfolio with different levels of lending or borrowing according to his desired level of
risk. Because all investors hold the risky Portfolio, then it will include all risky securities
in the market. The Portfolio of all securities is referred to as the market Portfolio
This combination will lie along with the straight line protecting the investor under the
name called efficient frontier This line formed by the action of all investors mixing the
market Portfolio with the risk free assets is known as capital market line
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An investor wants to invest his saving in efficient securities if the return is more than his
expectation. In such case he will borrow more than his saving, taking more risk and
invest in efficient market to earn maximum income But, if the return is not to this
expectation he will not borrow from outside but he will lead the money to the market to
earn extra income in the name called CML risk return.
SECURITY MARKET LINE (SML)
SML is one of the methods to know the return; based on the market risk It is related to
C'APM Since the market consists of efficient and inefficient securities, out of which the
investor will select any one company to invest. Analyzing the return of the company in
relation with market condition is called SML
The security market line provides the relationship between the expected return and Beta
of a security or Portfolio This relationship can be expressed in the form of the following
equation the relationship between the expected return and Beta of a security can be
determined graphically
CML & SML
It is necessary to contrast SML with SMI. Both postulate a linear (straight line)
relationship between risk and return. In CML the risk is defined as total Risk and is
measured by standard deviation, while in SMI the risk is defined as Systematic Risk and
is measured by Beta CML is valid only for efficient Portfolio while SMI is valid for all
Portfolios and all individual securities as well CML is the basis of the capital market
theory while SML is the basis of CAPM.
PORTFOLIO PERFORMANCE
Portfolio performance is the last step in the process of Portfolio management Portfolio
analysis, selection and revision are undertaken with the objective of maximizing returns
and minimizing risk Portfolio performance is the stage where we examine to what extent
the objective has been achieved Through Portfolio performance the investor tries to find
out how well the Portfolio has performed Portfolio of securities held by an investor is the
result of his investment decisions Portfolio performance is the really a study of the impact
of such decisions Without Portfolio performance. Portfolio management would be
incomplete Performance is an appraisal of evaluation Portfolio performance refers to the
evaluation of the performance of the Portfolio. Portfolio performance essentially
comprises of two functions, performance measurement and performance evaluation
Performance measurement is an accounting function which measures the return earned on
44
a Portfolio during the holding period or investment period. Performance evaluation, on
the other hand addresses such issues as whether the performance was superior or inferior,
whether the performance was due to skill or luck etc ,
Evaluating the investment is nothing but Portfolio performance the performance can be
analyzed on the basis of
 Sharpe method
 Treynor method
 Jenson method
 Fama method
SHARPE METHOD
The performance measure developed by William sharpe is referred to as the Sharpe

model or adjusted performance Risk Method In this model sharpe consider only
systematic risk (i.e. expected risk) and eliminate unsystematic risk (i.e. unexpected risk)
The formula for calculating the performance through this model
TREYNOR METHOD
The performance measure developed by Jack Treynor is referred to as Treynor Model

This method is also called as velocity Risk adjusted method or Return to variability ratio
method or character line risk adjusted method. Treynor followed the same system of
sharpe, hut he considered both systematic and unsystematic risk In this model he
considered the market risk (i.e.) but not the Portfolio risk (i.e.).
Sharpe uses the total risk as measured by standard deviation, while treynor employs the
systematic risk as measured by the beta coefficient in a fully diversified Portfolio all
unsystematic risk would be diversified away and the relevant measure of risk would be
the Beta coefficient. For such a Portfolio Treynor model would be the appropriate
measure of performance evaluation For a Portfolio that is not so well diversified, the
Sharpe model using the total risk would be the appropriate performance measure
JENSON MODEL
Another type of risk adjusted performance measure has been developed by Michael
Jenson and is feferred to as the Jenson Measure or Model This model attempts to measure
the differential between the actual return earned on a Portfolio and the return expected
from the Portfolio given its level of risk Same like Treynor, Jenson considered both
Systematic and unsystematic
risk. He considered the market return based on CAPM technique
The CAPM model is used to calculate the expected return on Portfolio It indicates the
return that a Portfolio should earn for its given level of risk The difference between the
return actually earned on a Portfolio and the return expected from the Portfolio is a
measure of the excess return or differential return that has been earned over the above
45
what is mandated for its level of systematic risk The differential return gives as indication
of the Portfolio managers predictive ability or managerial skills.
FAMA METHOD
The performance measure discussed so far assess the overall performance of a Portfolio
tugena Fama has provided an analytical framework that allows a detail break down of
Portfolio performance into the source or components of performance. According to
Fame, the performance is analyzed, with risk and without risk along with selectivity and
diversification
When the investor is not satisfied with existing performance, he may switch over to a
new company within the industry called sensitivity and if he is not interested in the same
industry he may select different industries called diversification.
FAMA took both Systematic and Unsystematic Risk When there is no risk
The correlation is defined as
Where and are the standard deviations of and .
Correlation is a statistical technique which can show whether and how strongly pairs of
variables are related. For example, height and weight are related - taller people tend to be
heavier than shorter people. The relationship isn't perfect. People of the same height vary
in weight, and you can easily think of two people you know where the shorter one is
heavier than the taller one. Nonetheless, the average weight of people 5'5'' is less than the
average weight of people 5'6'', and their average weight is less than that of people 5'7'',
etc. Correlation can tell you just how much of the variation in peoples' weights is related
to their heights.
CORRELATION COEFFICIENT
The correlation is one of the most common and most useful statistics. A correlation is a
single number that describes the degree of relationship between two variables.
The formula for the correlation is:
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CO-EFFICIENT OF DETERMINATION.
It expresses the proportion of the total variation that has been explained i.e., the
percentage variation in the dependent variable that is accounted for by the independent
variable.
If we square the correlation of coefficient, we obtain a number called the coefficient of

determination.
Covariance and correlation are related parameters that indicate the extent to which two
random variables co-vary. Suppose there are two technology stocks. If they are affected
by the same industry trends, their prices will tend to rise or fall together. They co-vary.
Covariance and correlation measure such a tendency.
COVERIANCE
A statistical measure of correlation of the fluctuations is of two different quantities. In

finance, covariance is applied to the annual rates of return of different investments, to
measure the correlation of their year-to-year fluctuations in performance.
The definition is
Cov (r1, r2) = 1/n * (r1 i - r1 ave) * (r2 i - r2 ave)
47
Where the terms r1 i and r2 i are actual values of the annual rates of return of two
investments, taken over several years, n is the total number of values of r1 i and r2 i used,
and r1 ave and r2 ave are the average values of r1 i and r2 i.
VARIANCE
The variance is one of several indices of variability that statisticians use to characterize
the dispersion among the measures in a given data set. To calculate the variance of a
given data set, it is necessary to first calculate the mean of the scores, then measure the
amount that each score deviates from the mean and then square that deviation.
Numerically, the variance equals the average of the several squared deviations from the
mean
STANDARD DEVIATION
The standard deviation is one of several indices of variability that statisticians use to
characterize the dispersion among the measures in a given data set.
To calculate the standard deviation of a data set it is first necessary to calculate that data
set’s variance. Numerically, the standard deviation is the square root of the variance.
Unlike the variance, which is a somewhat abstract measure of variability, the standard
deviation can be readily conceptualized as a distance along the scale of measurement.
MEAN
The mean is the average of the scores in the data set. Numerically, it equals the sum of
the scores divided by the number of scores. It is of interest that the mean is the one value
which, if substituted for every score in a data set,, would yield the same sum as the
original scores, and hence it would yield the same mean.
CALCULATION OF PORTFOLIO WEIGHTS
The following formula is used for calculating Minimum risk portfolio
(σa)2 - Rab (σa) (σb)
Xa =
(σa)2 + (σb)2 - 2 * Rab * (σa) * (σb)
48
Where Xa=propotion of security ‘a’
Xb=proportion of security ‘b’
(σa) =standard deviation of security ‘a’
(σb)=standard deviation of security ‘b’
Rab=correlation coefficient between a & b.
Xb= 1- Xa
PORTFOLIO RETURNS
Formula for two securities portfolio
Rp=WaRa+WbRb
Formula for three securities portfolio
Rp=WaRa+WbRb+WcRc
Where Wa=weight of security a
Wb= weight of security b
Wc=weight of security c
Ra=return on security a
Rb=return on security b
49
Rc=return on security c.
Rp=return on portfolio.
CALCULATION OF PORTFOLIO RISK
The following formula is used to calculate portfolio risk in case of two securities.
(σp) = √ (( Xa)2 (σa)2 + (Xb)2 (σb)2 + 2 (Xa) (Xb) (σa)(σb) Rab
Where:-
(σp) = portfolio risk
Xa = proportion of investment in security a
Xb = proportion of investment in security b
(σa) = standard deviation of security a
(σb) = standard deviation of security b
Rab = correlation coefficient between security a & b.
The following formula is used to calculate portfolio risk in case of three securities.
(σp) = √((Xa)2 (σa)2+(Xb)2(σb)2+(Xc)2(σc)2+2 (Xa) (Xb) (σa)(σb) Rab+

2(Xa) (Xc) (σa)(σc) Rac+2 (Xc) (Xb) (σc)(σb) Rbc
Where: -
Xa ,Xb, Xc are the weights of the securities
(σa),(σb),(σc) are the standard deviations of the securities
50
Rab is the correlation coefficient between a & b.
Rbc is the correlation coefficient between b & c.
Rca is the correlation coefficient between c & a.
CHAPTER-5
ANALYSIS &
INTERPRETATION
51
52
INTRODUCTION
Table-1
It represents the monthly return on the security of

ARAVIND MILLS and risk associated with it basing on the
technical information provided regarding the security.
And it also describes the overall market return under NIFTY

and the market risk associated with it basing on the technical
information provided regarding the Market.
53
1. PERFORMANCE EVALUATION OF ARVIND MILLS
TABLE 1:
RETURN (RET- RETURN

CLOSE ON RET- RET’ ) ON NIFTY- MRKT
DATE PRICE PRICE RET’ SQ NINIFTY NIFTY NIFTY’ VAR
DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 114.3 0 0 0 1826.614 0 0 0 0
Apr-05 120 0.049869 0.059529 0.003544 1751.74 -0.04099 -0.07323 0.005363 -0.013701
May-05 142.3 0.185833 0.195493 0.038218 1771.907 0.011513 -0.02073 0.00043 0.174763
Jun-05 125.25 -0.11982 -0.11016 0.012135 1867.209 0.053785 0.021541 0.000464 -0.002372
Jul-05 128.45 0.025549 0.035209 0.00124 1965.675 0.052734 0.02049 0.00042 0.000721
Aug-05 132.85 0.034255 0.043915 0.001928 2088.009 0.062235 0.029991 0.000899 0.001317
Sep-05 132.9 0.000376 0.010036 0.000101 2219.117 0.062791 0.030547 0.000933 0.000306
Oct-05 105.75 -0.20429 -0.19463 0.03788 2174.05 -0.02031 -0.05255 0.002762 -0.24718
Nov-05 110.15 0.041608 0.051268 0.002628 2235.14 0.0281 -0.00414 1.72E-05 0.047128
Dec-05 95.45 -0.13345 -0.12379 0.015325 2401.532 0.074444 0.0422 0.001781 -0.005224
Jan-06 93.3 -0.02252 -0.01286 0.000166 2520.135 0.049386 0.017142 0.000294 -0.000220
Feb-06 98.85 0.059486 0.069146 0.004781 2613.179 0.03692 0.004676 2.19E-05 0.000323
Mar-06 94.65 -0.04249 -0.03283 0.001078 2740.078 0.048561 0.016317 0.000266 -0.000536
TECHNICAL INFORMATION:-
EXPRESSION RESULT
AVG RET OF SECURITY -0.00966
AVG RET OF MARKET 0.032244
VAR OF SECURITY 0.009926
VAR OF MARKET 0.001224
STDEV OF SECURITY 0.099631
STDEV OF MARKET 0.034989
BETA -0.342265
ALPHA 0.028938
CORR OF COEFF 28.9598
COEFF OF DETERMINATION 838.670
Cov -0.003722
54
INTERPRETATION
 Alpha is not only used to measure the extra return rewarded to you for
taking on risk posed by factors. Other than market variability.
 In this ARVIND MILLS alpha value is less than 1 i.e.(0.028938).alpha

value indicates market conditions.
 Beta represents changes in the market security. In this company beta

value is negative i.e. (-0.342265) this is called defensive securities. beta
indicates systematic risk.
 In this avg return on security is also negative i.e. (-0.00966).
 Correlation & coefficient is describes the degree of relationship between

2 variables. In the correlation &coefficient is (28.9598). It affected –ve
performance.
 Covariance represents year-to-year fluctuations in performance i.e.

(-0.003722) is also –ve.
 So, in this company risk is high.this scrip is not suitable for the portfolio.
55
GRAPHICAL REPRESENTATION:-
a rv in d m ills c o m p a ris io n w ith m a rk e t(2 0 0 5 -0 6 )

0 .4
0 .2
return
0
-0 .2 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3
-0 .4
p e rio d
re t nire t
56
INTRODUCTION
Table-2
It represents the monthly return on the security of BHARTI

TELE and risk associated with it basing on the technical
information provided regarding the security.

57
2. PERFORMANCE EVALUATION OF BHARTI TELE
TABLE 2:
RETURN RETURN
CLOSE ON RET- (RET- ON NIFTY- MRKT
DATE PRICE PRICE RET’ RET’ )SQNINIFTY NIFTY NIFTY’ VAR
DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 114.3 0 0 0 1826.614 0 0 0 0
Apr-05 120 0.049869 -0.00705 0.000049 1751.74 -0.04099 -0.07323 0.005363 0.000516
May-05 142.3 0.185833 0.128912 0.016618 1771.907 0.011513 -0.02073 0.00043 -0.002672
Jun-05 125.25 -0.11982 -0.17674 0.031237 1867.209 0.053785 0.021541 0.000464 -0.003807
Jul-05 128.45 0.025549 -0.03137 0.000984 1965.675 0.052734 0.02049 0.00042 -0.000643
Aug-05 132.85 0.034255 -0.02266 0.000514 2088.009 0.062235 0.029991 0.000899 -0.000679
Sep-05 132.9 0.000376 -0.05654 0.003197 2219.117 0.062791 0.030547 0.000933 -0.001727
Oct-05 105.75 -0.20429 -0.26121 0.068231 2174.05 -0.02031 -0.05255 0.002762 0.013726
Nov-05 110.15 0.041608 -0.01531 0.000234 2235.14 0.0281 -0.00414 1.72E-05 0.000063
Dec-05 95.45 -0.13345 -0.19037 0.036241 2401.532 0.074444 0.0422 0.001781 -0.008033
Jan-06 93.3 -0.02252 -0.07944 0.006310 2520.135 0.049386 0.017142 0.000294 -0.001362
Feb-06 98.85 0.059486 0.002565 0.000006 2613.179 0.03692 0.004676 2.19E-05 0.000012
Mar-06 94.65 -0.04249 -0.09941 0.009882 2740.078 0.048561 0.016317 0.000266 -0.001622
EXPRESSION RESULT
AVG RET OF SECURITY 0.056921
BETA -0.010691
ALPHA 0.032852
Covariance -0.000519
58
INTERPRETATION
 Alpha is not only used to measure the extra return rewarded to you for taking on
risk posed by factors. Other than market variability.
 In this BHARTI TELE alpha value is less than 1 i.e.(-0.032852).alpha value

indicates market conditions.
 Beta represents changes in the market security. In this company beta value is
negative i.e (-0.010691) this is called defensive securities.beta indicates
systematic risk.
 In this avg return on security is (0.056921).
 Correlation & coefficient is describes the degree of relationship between 2

variables.inthe correlation &coefficient is (0.904590).it effected –ve performance.
 Covariance represents year-to-year fluctuations in performance i.e (-0.000519)is

also –ve.
 So, in this company returns are good. So this scrip is suitable for the portfolio.
59
b h a r t i t e le 's c o m p a r is io n w it h m a r k e t
0 .4
0 .2
return
0
-0 .2 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3
p e r io d
re t n ire t
60
INTRODUCTION
Table-3
It represents the monthly return on the security of BHEL and

risk associated with it basing on the technical information provided
regarding the security.

61
3. PERFORMANCE EVALUATION OF BHEL
TABLE 3:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 766.4 0 0 0 1826.614 0 0 0 0
Apr-05 803.45 0.048343 -0.03874 0.001501 1751.74 -0.04099 -0.07323 0.005363 0.002837
May-05 882 0.097766 0.010676 0.000114 1771.907 0.011513 -0.02073 0.00043 0.000221
Jun-05 867.95 -0.01593 -0.10302 0.010613 1867.209 0.053785 0.021541 0.000464 0.002219
Jul-05 1006.85 0.160032 0.072942 0.005320 1965.675 0.052734 0.02049 0.00042 0.001494
Aug-05 1067.1 0.05984 -0.02725 0.000742 2088.009 0.062235 0.029991 0.000899 0.000817
Sep-05 1224.15 0.147175 0.060085 0.003610 2219.117 0.062791 0.030547 0.000933 0.001835
Oct-05 1129.95 -0.07695 -0.16404 0.026909 2174.05 -0.02031 -0.05255 0.002762 0.11149
Nov-05 1427.15 0.26302 0.17593 0.030951 2235.14 0.0281 -0.00414 1.72E-05 0.17179
Dec-05 1387.05 -0.0281 -0.11519 0.013268 2401.532 0.074444 0.0422 0.001781 0.004861
Jan-06 1795.6 0.294546 0.207456 0.043038 2520.135 0.049386 0.017142 0.000294 0.003556
Feb-06 2027 0.128871 0.041781 0.001745 2613.179 0.03692 0.004676 2.19E-05 0.000195
Mar-06 2135.55 0.053552 -0.03353 0.001125 2740.078 0.048561 0.016317 0.000266 0.000547
EXPRESSION RESULT
BETA 8.166814
ALPHA -0.679003
CORR OF COEFF -691.0594
Cov 0.025155
62
INTERPRETATION
 In this BHEL alpha value is less than 1 i.e (-0.679003).alpha value indicates
market conditions.
(8.166814) this is called agressive securities.beta indicates systematic risk.

variables.inthe correlation &coefficient is (-691.0594).it effected –ve
performance.
 Covariance represents year-to-year fluctuations in performance i.e (0.025155).
63
bhe l's com pa ris ion w ith m ark et

0 .4
0 .2
return
0
-0 .2 1 2 3 4 5 6 7 8 9 10 1 1 1 2 1 3
p e rio d
re t nire t
64
INTRODUCTION
Table-4

COLGATE and risk associated with it basing on the technical

65
4. PERFORMANCE EVALUATION OF COLGATE
TABLE 4:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 182.05 0 0 0 1826.614 0 0 0 0
Apr-05 204.2 0.12167 0.106866 0.011420 1751.74 -0.04099 -0.07323 0.005363 0.033636
May-05 217.9 0.067091 -0.00126 0.000002 1771.907 0.011513 -0.02073 0.00043 -0.021995
Jun-05 244.25 0.120927 0.052571 0.002764 1867.209 0.053785 0.021541 0.000464 0.001132
Jul-05 225.2 -0.07799 -0.14634 0.021417 1965.675 0.052734 0.02049 0.00042 -0.002998
Aug-05 247.85 0.100577 0.032221 0.001038 2088.009 0.062235 0.029991 0.000899 0.000966
Sep-05 250.45 0.01049 -0.05786 0.003348 2219.117 0.062791 0.030547 0.000933 0.001767
Oct-05 237.65 -0.05111 -0.11946 0.014272 2174.05 -0.02031 -0.05255 0.002762 0.172016
Nov-05 262.55 0.104776 0.03642 0.001326 2235.14 0.0281 -0.00414 1.72E-05 0.03228
Dec-05 269.15 0.025138 -0.04321 0.001867 2401.532 0.074444 0.0422 0.001781 0.001823
Jan-06 342.1 0.271038 0.202682 0.041079 2520.135 0.049386 0.017142 0.000294 0.003474
Feb-06 387.95 0.134025 0.065669 0.004312 2613.179 0.03692 0.004676 2.19E-05 0.000307
Mar-06 412 0.061993 -0.00636 0.000040 2740.078 0.048561 0.016317 0.000266 -0.001038
EXPRESSION RESULT
SAVG RET OF SECURITY 0.068356
BETA 5.132877
ALPHA -0.318619
Cov 0.018447
66
INTERPRETATION
 In this COLGATE alpha value is less than 1 i.e (-0.318619).alpha value indicates
market conditions.
(5.132877) this is called aggressive securities.beta indicates systematic risk.

variables.inthe correlation &coefficient is (-434.295).it effected –ve performance.
 Coverience represents year-to-year fluctuations in performance i.e (0.018447).
67
colgate's com parision with m arket

0.4
0.2
return
0
-0.2 1 2 3 4 5 6 7 8 9 10 11 12 13
period
ret niret
68
INTRODUCTION
Table – 5
It represents the monthly return on the security of DABUR

and risk associated with it basing on the technical information
provided regarding the security.

69
5. PERFORMANCE EVALUATION OF DABUR
TABLE 5:
RETURN RETURN
DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 111.05 0 0 0 1826.614 0 0 0 0
Apr-05 119.75 0.078343 0.056520 0.003194 1751.74 -0.04099 -0.07323 0.005363 -0.004139
May-05 128.65 0.074322 0.052499 0.002756 1771.907 0.011513 -0.02073 0.00043 -0.001088
Jun-05 131.35 0.020987 -0.00083 0.0000006 1867.209 0.053785 0.021541 0.000464 -0.000018
Jul-05 145.4 0.106966 0.085143 0.007249 1965.675 0.052734 0.02049 0.00042 0.001744
Aug-05 153.5 0.055708 0.033885 0.001148 2088.009 0.062235 0.029991 0.000899 0.001016
Sep-05 163.2 0.063192 0.041369 0.001711 2219.117 0.062791 0.030547 0.000933 0.001264
Oct-05 167.15 0.024203 0.002380 0.000005 2174.05 -0.02031 -0.05255 0.002762 -0.000125
Nov-05 173.7 0.039186 0.000855 0.0000007 2235.14 0.0281 -0.00414 1.72E-05 -0.000003
Dec-05 210.9 0.214162 0.192339 0.036994 2401.532 0.074444 0.0422 0.001781 0.008116
Jan-06 118.25 -0.43931 -0.46113 0.212644 2520.135 0.049386 0.017142 0.000294 -0.007905
Feb-06 110.4 -0.06638 -0.08820 0.007779 2613.179 0.03692 0.004676 2.19E-05 -0.000413
Mar-06 122.8 0.112319 0.090496 0.008189 2740.078 0.048561 0.016317 0.000266 0.014766
EXPRESSION RESULT
BETA 0.958800
ALPHA 0.011321
Cov 0.002242
70
INTERPRETATION
 In this DABUR alpha value is less than 1 i.e (0.011321).alpha value indicates
market conditions.
(0.958800) this is called defensive securities.beta indicates systematic risk.

variables.inthe correlation &coefficient is (-81.1245).it effected –ve performance.
71
d a b u r's c o m p a ris io n w ith m a rk e t

0 .5
return
0
1 2 3 4 5 6 7 8 9 10 11 12 13
-0 .5
p e io d
re t nire t
72
INTRODUCTION
Table-6
It represents the monthly return on the security of INFOSYS


73
6. PERFORMANCE EVALUATION OF INFOSYS
TABLE 6:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 2257.2 0 0 0 1826.614 0 0 0 0
Apr-05 1905.6 -0.15577 -0.18219 0.033193 1751.74 -0.04099 -0.07323 0.005363 0.013342
May-05 2250.45 0.180967 0.154547 0.023885 1771.907 0.011513 -0.02073 0.00043 -0.0032
Jun-05 2358.25 0.047902 0.021482 0.000461 1867.209 0.053785 0.021541 0.000464 0.000463
Jul-05 2268.45 -0.03808 -0.0645 0.004160 1965.675 0.052734 0.02049 0.00042 -0.001322
Aug-05 2376.1 0.047455 0.021035 0.000442 2088.009 0.062235 0.029991 0.000899 0.000631
Sep-05 2515.3 0.058583 0.032163 0.001034 2219.117 0.062791 0.030547 0.000933 0.000982
Oct-05 2521.95 0.002644 -0.02377 0.000565 2174.05 -0.02031 -0.05255 0.002762 0.001249
Nov-05 2684.45 0.064434 0.038014 0.001445 2235.14 0.0281 -0.00414 1.72E-05 -0.000157
Dec-05 2996.85 0.116374 0.003074 0.000009 2401.532 0.074444 0.0422 0.001781 0.000129
Jan-06 2880.3 -0.03889 -0.06531 0.004265 2520.135 0.049386 0.017142 0.000294 -0.001119
Feb-06 2828.95 -0.01783 -0.04425 0.001958 2613.179 0.03692 0.004676 2.19E-05 -0.000206
Mar-06 3043 0.075664 0.049244 0.002425 2740.078 0.048561 0.016317 0.000266 0.000804
EXPRESSION RESULT
BETA 0.093577
ALPHA 0.029772
Cov 0.000500
74
INTERPRETATION
 In this INFOSYS alpha value is less than 1 i.e (0.029772).alpha value indicates
market conditions.

75
in fosys'scomparision w ith market

0.4
0.2
return
0
-0.2 1 2 3 4 5 6 7 8 9 10 11 12 13
-0.4
period
ret niret
76
INTRODUCTION
Table-7
It represents the monthly return on the security of JET

AIRWAYS and risk associated with it basing on the technical

77
7. PERFORMANCE EVALUATION OF JET AIRWAYS
TABLE 7:
RETURN RETURN
DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 1211.55 0 0 0 1826.614 0 0 0 0
Apr-05 1320.7 0.090091 0.106771 0.011400 1751.74 -0.04099 -0.07323 0.005363 -0.00781
May-05 1341.5 0.015749 0.032429 0.001051 1771.907 0.011513 -0.02073 0.00043 -0.00067
Jun-05 1265.15 -0.05691 -0.04023 0.001618 1867.209 0.053785 0.021541 0.000464 -0.00087
Jul-05 1281.55 0.012963 0.029643 0.000879 1965.675 0.052734 0.02049 0.00042 0.000607
Aug-05 1136.15 -0.11346 -0.09678 0.009366 2088.009 0.062235 0.029991 0.000899 -0.00290
Sep-05 1116.55 -0.01725 -0.00057 0.0000003 2219.117 0.062791 0.030547 0.000933 -0.00001
Oct-05 1006.75 -0.09834 -0.08166 0.006668 2174.05 -0.02031 -0.05255 0.002762 0.004291
Nov-05 1199.85 0.191805 0.208485 0.043466 2235.14 0.0281 -0.00414 1.72E-05 -0.00086
Dec-05 1143.7 -0.0468 -0.03012 0.000907 2401.532 0.074444 0.0422 0.001781 -0.00127
Jan-06 996.65 -0.12857 -0.11189 0.012519 2520.135 0.049386 0.017142 0.000294 -0.00192
Feb-06 981.05 -0.01565 0.00103 0.000001 2613.179 0.03692 0.004676 2.19E-05 0.000004
Mar-06 931.6 -0.05041 -0.03373 0.001138 2740.078 0.048561 0.016317 0.000266 -0.00055
EXPRESSION RESULT
AVG RET OF SECURITY -0.01668
BETA -0.051735
ALPHA 0.031381
Cov -0.000997
78
INTERPRETATION
 In this JET AIRWAYS alpha value is less than 1 i.e (0.031381).alpha value
negative i.e (-0.051735)this is called defensive securities.beta indicates systematic
risk.
 In this avg return on security is also negative i.e (-0.01668).

 Coverience represents year-to-year fluctuations in performance i.e (-0.000997)is

also –ve.
79
je t a irw a y's c o m pa ris io n w ith m a rk e t

0 .5
0
return
-0 .5 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3
-1
-1 .5
p e rio d
re t nire t
80
INTRODUCTION
Table-8
It represents the monthly return on the security of HERO

HONDA and risk associated with it basing on the technical

81
8. PERFORMANCE EVALUATION OF HERO
HONDA
TABLE 8:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 548 0 0 0 1826.614 0 0 0 0
Apr-05 521 -0.04927 -0.08877 0.007880 1751.74 -0.04099 -0.07323 0.005363 0.006500
May-05 552.9 0.061228 0.021726 0.000472 1771.907 0.011513 -0.02073 0.00043 -0.00045
Jun-05 582.5 0.053536 0.014034 0.000197 1867.209 0.053785 0.021541 0.000464 0.000302
Jul-05 622.7 0.069013 0.029511 0.000870 1965.675 0.052734 0.02049 0.00042 0.000605
Aug-05 646.4 0.03806 -0.00144 0.000002 2088.009 0.062235 0.029991 0.000899 -0.00004
Sep-05 741.3 0.146813 0.107311 0.011515 2219.117 0.062791 0.030547 0.000933 0.003278
Oct-05 707.9 -0.04506 -0.08456 0.007150 2174.05 -0.02031 -0.05255 0.002762 0.004444
Nov-05 833.75 0.177779 0.138277 0.019120 2235.14 0.0281 -0.00414 1.72E-05 -0.00057
Dec-05 859.2 0.030525 -0.00897 0.000080 2401.532 0.074444 0.0422 0.001781 -0.00038
Jan-06 857.2 -0.00233 -0.04183 0.001749 2520.135 0.049386 0.017142 0.000294 -0.00072
Feb-06 889.3 0.037448 -0.00205 0.000004 2613.179 0.03692 0.004676 2.19E-05 -0.00009
Mar-06 885.55 -0.00422 -0.04372 0.001911 2740.078 0.048561 0.016317 0.000266 -0.00071
TECHNICAL INFORMATION: -
EXPRESSION RESULT
BETA -0.171863
ALPHA 0.039032
Cov 0.001079
82
INTERPRETATION
 In this HEROHONDA alpha value is less than 1 i.e (0.039032).alpha value

negative i.e (-0.171863)this is called defensive securities.beta indicates systematic
risk.
 In this avg return on security is also negative i.e

 (0.039502).

83
h ero h on da's comparision w ith market

0.3
0.2
0.1
return
0
-0.1 1 2 3 4 5 6 7 8 9 10 11 12 13
-0.2
period
ret niret
84
85
INTRODUCTION
Table-9
It represents the monthly return on the security of WIPRO


86
9. PERFORMANCE EVALUATION OF WIPRO
TABLE 9:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 670.95 0 0 0 1826.614 0 0 0 0
Apr-05 643.35 -0.04114 -0.04688 0.002197 1751.74 -0.04099 -0.07323 0.005363 0.003433
May-05 715.75 0.112536 0.106796 0.011405 1771.907 0.011513 -0.02073 0.00043 -0.00221
Jun-05 766.3 0.070625 0.064885 0.004210 1867.209 0.053785 0.021541 0.000464 0.001397
Jul-05 736.35 -0.03908 -0.04482 0.002008 1965.675 0.052734 0.02049 0.00042 -0.00091
Aug-05 364.65 -0.50479 -0.51053 0.260640 2088.009 0.062235 0.029991 0.000899 -0.01531
Sep-05 371.45 0.018648 0.012908 0.000167 2219.117 0.062791 0.030547 0.000933 0.000394
Oct-05 364.6 -0.01844 -0.02418 0.000584 2174.05 -0.02031 -0.05255 0.002762 0.001271
Nov-05 423.25 0.160861 0.155121 0.024062 2235.14 0.0281 -0.00414 1.72E-05 -0.00064
Dec-05 463.35 0.094743 0.089003 0.007921 2401.532 0.074444 0.0422 0.001781 0.003756
Jan-06 529.7 0.143196 0.137456 0.018894 2520.135 0.049386 0.017142 0.000294 0.002356
Feb-06 520.45 -0.01746 -0.0232 0.000538 2613.179 0.03692 0.004676 2.19E-05 -0.00011
Mar-06 569.85 0.094918 0.089178 0.007952 2740.078 0.048561 0.016317 0.000266 0.001455
EXPRESSION RESULT
BETA -0.022755
ALPHA 0.032374
Cov -0.000428
87
INTERPRETATION
 In this WIPRO alpha value is less than 1 i.e (0.032374).alpha value indicates
market conditions.
systematic risk.

variables.inthe correlation &coefficient is (-1.925348).it effected –ve
performance.
 Coverience represents year-to-year fluctuations in performance i.e (-0.000428)is

also –ve.
88
w ip ro 's c o m p a ris io n w ith m ark e t

0.4
0.2
0
return
-0 .2 1 2 3 4 5 6 7 8 9 10 11 12 13
-0 .4
-0 .6
p e rio d
re t nire t
89
INTRODUCTION
Table-10
It represents the monthly return on the security of SBI and

risk associated with it basing on the technical information provided
regarding the security.

90
10. PERFORMANCE EVALUATION OF SBI
TABLE 10:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
Mar-05 654.8 0 0 0 1826.614 0 0 0 0
Apr-05 604.2 -0.07728 -0.11101 0.012324 1751.74 -0.04099 -0.07323 0.005363 0.008129
May-05 670.45 0.109649 0.075916 0.005763 1771.907 0.011513 -0.02073 0.00043 -0.001573
Jun-05 681.9 0.017078 -0.01665 0.000277 1867.209 0.053785 0.021541 0.000464 -0.000358
Jul-05 800.25 0.173559 0.139826 0.019551 1965.675 0.052734 0.02049 0.00042 0.002865
Aug-05 796.3 -0.00494 -0.03867 0.001495 2088.009 0.062235 0.029991 0.000899 -0.00116
Sep-05 938.2 0.178199 0.144466 0.020870 2219.117 0.062791 0.030547 0.000933 0.004413
Oct-05 839.1 -0.10563 -0.13936 0.019422 2174.05 -0.02031 -0.05255 0.002762 0.007324
Nov-05 896.65 0.068585 0.034852 0.001214 2235.14 0.0281 -0.00414 1.72E-05 -0.00014
Dec-05 908.15 0.012826 -0.02090 0.000437 2401.532 0.074444 0.0422 0.001781 -0.00088
Jan-06 886.35 -0.024 -0.05773 0.003333 2520.135 0.049386 0.017142 0.000294 -0.00099
Feb-06 877.5 -0.00998 -0.04371 0.001910 2613.179 0.03692 0.004676 2.19E-05 -0.000204
Mar-06 965.65 0.100456 0.066723 0.004451 2740.078 0.048561 0.016317 0.000266 0.001089
EXPRESSION RESULT
BETA 0.042535
ALPHA 0.030809
Cov 0.001542
91
INTERPRETATION
 In this SBI alpha value is less than 1 i.e (0.030809).alpha value indicates market
conditions.

variables. In the correlation & coefficient is (-3.598966).it effected –ve
performance.
92
s b i's c o m p a r is io n w ith m a r k e t
0 .4
0 .2
return
0
-0 .2 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3
p e r io d
re t nire t
93
INTRODUCTION
Table-11
It represents the monthly return on the security of ICICI

BANK and risk associated with it basing on the technical

94
11. PERFORMANCE EVALUATION OF ICICI BANK
TABLE 11:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
5-Mar 392.8 0 0 0 1826.614 0 0 0 0
5-Apr 379.15 -0.03475 -0.07324 0.005364 1751.74 -0.04099 -0.07323 0.005363 0.005363
5-May 392.05 0.034023 -0.00447 0.000020 1771.907 0.011513 -0.02073 0.00043 0.000092
5-Jun 425.75 0.085958 0.047464 0.002252 1867.209 0.053785 0.021541 0.000464 0.001022
5-Jul 534.45 0.255314 0.21682 0.047010 1965.675 0.052734 0.02049 0.00042 0.004443
5-Aug 481.8 -0.09851 -0.13700 0.018770 2088.009 0.062235 0.029991 0.000899 -0.00411
5-Sep 601.7 0.248858 0.210364 0.044253 2219.117 0.062791 0.030547 0.000933 0.006426
5-Oct 498.6 -0.17135 -0.20984 0.044034 2174.05 -0.02031 -0.05255 0.002762 0.011028
5-Nov 538.05 0.079122 0.040628 0.001650 2235.14 0.0281 -0.00414 1.72E-05 -0.00017
5-Dec 585.05 0.087352 0.048858 0.002387 2401.532 0.074444 0.0422 0.001781 0.002062
6-Jan 609.25 0.041364 0.00287 0.000008 2520.135 0.049386 0.017142 0.000294 0.000049
6-Feb 615.25 0.009848 -0.02864 0.000820 2613.179 0.03692 0.004676 2.19E-05 -0.00013
6-Mar 592.6 -0.03681 -0.07530 0.005670 2740.078 0.048561 0.016317 0.000266 -0.00123
EXPRESSION RESULT
BETA 0.048649
ALPHA 0.030371
Cov 0.002070
95
INTERPRETATION
 In this ICICI BANK alpha value is less than 1 i.e (0.030371).alpha value indicates
market conditions.

96
icici's comparision w ith m arket

0.4
0.2
return
0
-0.2 1 2 3 4 5 6 7 8 9 10 11 12 13
-0.4
period
return niret
97
INTRODUCTION
Table-12

PANTALOON and risk associated with it basing on the technical

98
12. PERFORMANCE EVALUATION OF PANTALOON
TABLE 12:
RETURN (RET- RETURN

DX=(X- DM=(M-
X X’) (X-X’)2 M M’) (M-M’)2 DX*DM
5-Mar 772.8 0 0 0 1826.614 0 0 0 0
5-Apr 917.6 0.187371 0.104826 0.010988 1751.74 -0.04099 -0.07323 0.005363 -0.007676
5-May 1186.45 0.292993 0.210448 0.044288 1771.907 0.011513 -0.02073 0.00043 -0.004362
5-Jun 1377.75 0.161237 0.078692 0.006192 1867.209 0.053785 0.021541 0.000464 0.001695
5-Jul 1503.8 0.09149 0.008945 0.000080 1965.675 0.052734 0.02049 0.00042 0.000183
5-Aug 1553.5 0.03305 -0.04949 0.002449 2088.009 0.062235 0.029991 0.000899 -0.001484
5-Sep 1874.85 0.206855 0.12431 0.015453 2219.117 0.062791 0.030547 0.000933 0.003797
5-Oct 1507.65 -0.19586 0.278405 0.077509 2174.05 -0.02031 -0.05255 0.002762 0.014630
5-Nov 1803.2 0.196034 0.113489 0.012879 2235.14 0.0281 -0.00414 1.72E-05 -0.000470
5-Dec 1696.65 -0.05909 -0.14163 0.020060 2401.532 0.074444 0.0422 0.001781 -0.005977
6-Jan 1692.6 -0.00239 -0.08493 0.007214 2520.135 0.049386 0.017142 0.000294 -0.001456
6-Feb 1732 0.023278 -0.05926 0.003512 2613.179 0.03692 0.004676 2.19E-05 -0.000277
6-Mar 1971.2 0.138106 0.055561 0.003087 2740.078 0.048561 0.016317 0.000266 0.0009065
EXPRESSION RESULT
BETA -1.005814
ALPHA 0.115268
Cov -0.000040
99
INTERPRETATION
 In this PANTALOON alpha value is less than 1 i.e (0.115268).alpha value

systematic risk.

 Coverience represents year-to-year flactuations in performance i.e (-0.000040)is

also –ve.
100
pantaloon's comparision w ith market

0.4
0.2
return
0
-0.2 1 2 3 4 5 6 7 8 9 10 11 12 13
-0.4
period
return niret
101
COVARIANCE
ARVIND BHARTI BHEL COLGATE DABUR INFOSYS
ARVIND 0.009151
BHARTI 0.002929 0.004614
BHEL 0.005363 0.003017 0.01064
5
COLGATE 0.00198 -0.00045 0.00407 0.007227
7
DABUR -0.00061 0.00132 -0.00891 -0.00914 0.02168
7
INFOSYS 0.000585 0.00116 -0.00107 -0.00129 0.00389 0.006298
9
JETAIRWAYS 0.003602 0.001112 0.00282 -0.00058 0.00408 -0.0005
6 5
HEROHONDA 0.001999 0.002308 0.00327 -0.00059 0.00145 0.002185
2 6
WIPRO -0.00135 -0.00136 0.00409 0.001582 -0.00394 0.002301
3
SBI 0.003215 0.004507 0.00322 -0.00256 0.00361 0.00293
6
ICICI 0.002356 0.003919 0.00520 -0.00202 0.00169 0.000907
7 5
PANTALOON 0.008528 0.005345 0.00453 0.001614 0.00342 0.002033
7 2
COVARIANCE
102
JETAIRWAYS HEROHONDA WIPRO SBI ICICI PANTALOON
Jetairways 0.006846
Herohonda 0.002602 0.00391
Wipro 0.004396 0.001636 0.02619
9
Sbi 0.001736 0.003633 0.00257 0.00699
7 7
Icici 0.002774 0.004791 0.00607 0.00758 0.01324
9 5 1
Pantaloon 0.006013 0.003965 0.00426 0.00622 0.00639 0.01563
9 4
COEFFICIENT OF CORRELATION
103
ARVIND 1
BHARTI 0.451107 1
BHEL 0.543138 0.43062 1
COLGATE 0.240954 -0.07296 0.46489 1
2
DABUR -0.04305 0.131971 -0.58628 -0.72976 1
INFOSYS 0.077004 0.21531 -0.13011 -0.19133 0.33361 1
5
JETAIRWAYS 0.45504 0.19788 0.33106 -0.08252 0.33525 -0.0759
1 7
HEROHONDA 0.334128 0.54354 0.50720 -0.11018 0.15815 0.440198
4 9
WIPRO -0.08733 -0.12375 0.24513 0.114994 -0.16524 0.17914
4
SBI 0.401684 0.793268 0.37342 -0.36036 0.29356 0.441428
3
ICICI 0.213967 0.501454 0.43867 -0.2069 0.10002 0.099352
7
PANTALOON 0.712947 0.629513 0.35180 0.151857 0.18584 0.204905
2 9
COEFFICIENT OF CORRELATION

JETAIRWAYS 1
HEROHONDA 0.502861 1
WIPRO 0.328268 0.161625 1
SBI 0.250832 0.694573 0.19032 1
2
ICICI 0.291399 0.665777 0.32641 0.78802 1
1 9
PANTALOON 0.581318 0.507193 0.21094 0.59474 0.44448 1
5 2 3
104
COEFFICIENT OF DETERMINATION

ARVIND 1
BHARTI 0.203497 1
BHEL 0.294998 0.185433 1
COLGATE 0.058058 0.005323 0.216124 1
DABUR 0.001853 0.017416 0.343724 0.532549 1
INFOSYS 0.005929 0.046358 0.016928 0.036607 0.11299 1
6
JETAIRWAYS 0.207061 0.039156 0.109601 0.006809 0.11239 0.005761
7
HEROHONDA 0.111641 0.29544 0.257255 0.012139 0.02501 0.19377
WIPRO 0.007626 0.015314 0.060091 0.013223 0.02730 0.03209
4
SBI 0.16135 0.629274 0.139445 0.129859 0.08617 0.194858
1 7
ICICI 0.045781 0.251456 0.192437 0.042807 0.01000 0.009871
5 3
PANTALOON 0.508293 0.396286 0.123764 0.023061 0.03453 0.041986
9
COEFFIECIENT OF DETERMINATION

JETAIRWAYS 1
HEROHONDA 0.252869 1
WIPRO 0.107759 0.026122 1
105
SBI 0.062916 0.482431 0.03622 1
ICICI 0.084913 0.44325 0.10654 0.62098 1
4 9
PANTALOON 0.337931 0.25724 0.04449 0.34371 0.19756 1
8 5
GRAPHICAL REPRESENTATION
OF
COMPANIES GROWTH RATE:-
178.646 155.0
200 CAGR 724
126.3114
150 99.5419
50.8655
100 34.81
61.5967
47.4725
10.580
50 8
0
-17.1916
-23.1067 -15.068
-50
L AR
COLGATE
VI INFOSYS SBI
WIPRO
BHARTI JETAIR ICICI
DAB
BHE ND
NDA
UR
PANTALOON
OHO
HER
CAGR
This graph shows the cumulative annual growth rate for the various companies. the
companies with highest return are:
1. BHEL
2. PANTALOON
3. COLGATE.
106
OF
COMPANIES RISK & RETURN’S:-
0.08709
0.082545
0.1 0.068356
0.08 0.056921
0.039502
0.06 0.023537
0.038494
0.033733
0.02642 0.028384
0.040.009926 0.021822
0.007441
0.014
477 0.017544
0.01221 0.007682
0.02 0.005288
0.008249 0.006885 0.00574
0.004376
0
ND
VI
-0.00966
-0.01668
-0.02 ND S UR E L RTI ICICI SBI RO
NDA AIR OSYDAB GAT BHE BHA WIP OON
ARVI
OHO JET INF TAL
COL
HER PAN
RETURN VARIANCE
This graph explains us the amount of risk associated with each company.
107
OF
COMPANIES COVARIANCES:-
Covariance 0.001904
0.002
0.001169 0.001417
0.0015 0.00103
0.000934
0.000687
0.001
0.0005 0.000097
0
-0.0000151 -0.0000535
-0.0005 -0.00031
-0.0004
-0.00092
-0.001 ICICI SBI RO AIR S UR L
RTI
OON WIP NDA JET OSY DAB E BHE
TAL OHO GAT BHA
HER INF COL
PAN
Covariance
 Companies ICICI, SBI, INFOSYS, and BHARTI are performing well in relation
to the market movement therefore it is advisable to invest in those shares to get
the maximum profits.
 Companies WIPRO, JETAIRWAYS, ARVIND are not performing according to

the market.
108
OF
COMPANIES ALPHA & RETURN’S:-
0.1
0.08
0.06
0.04
0.02
0
-0.02 :
SBI
ICICI
BHEL
ARVIND
BHARTI
JETAIR
WIPRO
DABUR
INFOSYS
COLGATE
PANTALOON
HEROHONDA
that
d
lude
conc m rkt re t a lpha
be
can
it
dia,
ARn
109
OF
COMPANIES BETA:-
1% 3% BETA ARVIND
12% BHARTI
22%
BHEL
8% COLGATE
1% DABUR
0% INFOSYS
JETAIR
16% 13% HEROHONDA
WIPRO
4%
SBI
10%
10% ICICI
PANTALOON
BETA is a measure of systematic risk. This pie chart tells us that the value of Beta is
highest for ICICI, followed by SBI.
110
LIST OF COMPANIES
High Growth Portfolio (in descending order):
1. BHEL
2. PANTALOON
3. COLGATE
4. BHARTI
5. HEROHONDA
6. ICICI
7. SBI
High Risk Portfolio (in descending order):
1. WIPRO
2. DABUR
3. PANTALOON
4. ICICI
5. BHEL
6. ARVIND
7. COLGATE
ANALYSIS/FINDINGS
COMPANIE’S RETURNS
TABLE 13
COMPANY BETA RETURN (%)

ARVIND -0.342265 -17.1916
BHARTI -0.010691 99.5419
BHEL 8.166814 178.646
COLGATE 5.132877 126.3114
DABUR 0.958800 10.5808
INFOSYS 0.093577 34.81
JETAIR -0.051735 -23.1067
HEROHONDA -0.171863 61.5967
WIPRO -0.022755 -15.068
SBI 0.042535 47.4725
111
ICICI 0.048649 50.8655
PANTALOON -1.005814 155.0724
MARKET 1 50
BETA:
The BETA coefficient is a measure of systematic risk. BETA is the measure of

volatility/responsiveness of the individual security with respect to the changes in the
market security.
THREE CASE OF BETA:
1. If BETA=1, the securities are called normal securities i.e. a given change in
market say 10% is followed by an incidental change in the security.
2. If BETA>1, the securities are called Aggressive securities i.e a given change in
market is followed by a more than proportionate change in the security.
Ex: If the change in the market is 10% and BETA of the security is say 1.5 there will
be 15% change in the individual securities return.
3. If BETA<1, the securities are called Defensive securities i.e. a given change in
market is followed by a less than proportionate change in the individual security.
Ex: if the change in the market is 10% and Beta of security is 0.5 there will be 5%
change in the individual securities return.
ANALYSIS OF BETA
For the 2005-06 is equal to 50%.comparing all other selected firms the return of BHEL is
the highest with 178.646%. Followed by PANTALOON with 155.07%. BHARTI is
giving a return of 99.54% which accounts it third position.
The two firms SBI, ICICI though have a greater BETA of 1.157, 1.55 respectively were
only able to provide returns of 47.47%, 50.86% respectively for the year 2005
1. From the above table (Table 1) we can see that except for the BETA of SBI &
ICICI (1.1575,1.555) all other firms have their BETA less than that of market (1).
2. INFOSYS Beta is 0.9545 i.e. almost equal to the market that means these firms
returns are more affected by changes in the market conditions.
3. ARVIND, DABUR, JETAIRWAYS, WIPRO, PANTALOON are having

negative value of Beta it implies they are Defensive securities.
112
DEFINITION OF ALPHA
ALPHA
Alpha is not only used to measure the extra return rewarded to you for taking on risk
posed by factors other than market volatility, it also measures how much if any of this
extra risk helped the fund outperform its corresponding benchmark.
Using Beta, alpha’s computation compares the fund’s performance to that of the
benchmark’s risk adjusted returns and establishes if the fund’s returns outperformed the
markets given the same amount of risk.
For example, if a fund has an alpha of 1, it means that the fund outperformed the
benchmark by 1%. Negative alphas are bad in that they indicate that the fund
underperformed for the amount of extra, fund-specific risk the fund’s investors.
ALPHA VALUES OF THE FIRMS
TABLE 14:
COMPANY ALPHA
PANTALOON 0.115268
HEROHONDA 0.039632
BHARTI 0.032852
WIPRO 0.032374
JETAIRWAYS 0.031381
SBI 0.030809
ICICI 0.030371
INFOSIS 0.029772
ARVIND 0.028938
DABUR 0.011321
COLGATE -0.318619
BHEL -0.679003
113
PROPORTION OF INVESTMENT FOR DIFFERENT
PORTFOLIO’S:
PORTFOLIO WEIGHT 1 WEIGHT2

ICICI & SBI 0.799978 0.200022
WIPRO & INFOSYS 0.804781 0.195219
DABUR & COLGATE 0.64666 0.35333
HEROHONDA&BHARTI 0.397239 0.602761
BHEL & ICICI 0.424551 0.575449
PANTALOON & 0.709929 0.2990071
COLGATE
SBI & BHARTI 0.918923 0.081077
HEROHONDA & 0.304854 0.695146
INFOSYS
The above table tells us the proportion of investment in different portfolios. Based upon
the risk and return of the portfolio and the investor’s decision various alternates can be
formed. The portfolio which gives the maximum return would be select.
114
PORTFOLIO RETURN AND RISK
PORTFOLIO RETURN in % RISK in %

ICICI & SBI 50.18682 0.03635
WIPRO & INFOSYS -5.33086 0.136551
DABUR & 51.47225 0.078905
COLGATE
HEROHONDA & 84.46857 0.062159
BHARTI
BHEL & ICICI 105.1149 0.09922
PANTALOON & 146.7297 0.101432
COLGATE
SBI & BHARTI 51.69415 0.085295
HEROHONDA & 42.97604 0.068979
INFOSYS
When we form the optimum portfolio of two securities by using minimum variance
equation, then the return of the portfolio may decrease in order to reduce the portfolio
risk.
From the above table it can be observed that the return is highest for the portfolio
consisting of Pantaloon & Colgate with a risk of 0.101432. A person who invests in this
particular portfolio can reap huge profits..
115
CHAPTER-6
FINDINGS & SUGGESTIONS
116
FINDINGS
Based on the analysis and evaluation of the twelve firms, it can be concluded that
 The investor can know the risk and returns of the shares using this analysis.
 The analysis is useful for investors who want to invest in long, short&medium
term.
 Technical analysis is used to predict short-term share price movement.
 PANTALOON, HEROHONDA, BHARTI have performed well in relation to the

market conditions.
 PANTALOON returns are very high i.e (155.0724) so this is scrip is suitable for
portfolio.
 BHARTI returns are good i.e (99.5419). So this scrip is suitable for portfolio.
 HEROHONDA returns are good i.e (61.5967). So this scrip is suitable for
portfolio. Market was rising this could be seen by the market index which was
(1826.614)in the month of march 2005 and it increased to (2740.078) by march
2006.it means it had a return of 50%.
 ARVIND MILLS, WIPRO, JETAIRWAYS has not performed well according to

the market conditions. They were having –ve returns.
 Various portfolio have been formed and the portfolio with maximum returns and
minimum risk is to be selected
 ARVIND MILLS have less returns i.e (-17.1916) so this scrip is not suitable for
portfolio.
 WIPRO, JETAIRWAYS have also less return so these companies are not suitable
for portfolio.
117
SUGGESTIONS & RECOMMENDATIONS
 The investor can avoid purchasing of shares in the secondary market directly.
 The investor should consider investing in steady and long growth shares only.
 The investor must have the knowledge of not only about the company they have
invested even about other company to know the financial position of the total
market.
 Mutual funds and open-ended shares are in demanded in the market at the present
moments.
 The investor has to consider both risk and returns of the company before investing
in it.
 The investor can eliminate diversifiable risk by holding a large enough portfolio
of securities.
 Investors need to have high level of empowerment and access to financial advice
so that they can take appropriate decisions based on their risk return appetite.
 The investor has to analyze the performance of the company before making
investment decisions.
118
BIBLIOGRAPHY
BOOKS:
1. Security Analysis and Portfolio Management -Donald

E.Fischer, Ronald J.Jordan
2. Portfolio Management -S.Kevin
3. Investment Management -V.K.Bhalla
4. Portfolio Management -Barua,
Ramanathan
5. Security Analysis and Portfolio Management-Punitavathy
pandyan
Web Sites:
1. www.nseindia.com
2. www.hseindia.com
3. www.indiainfoline.com
4. www.moneypore.com
5. www.sebi.com
6. www.moneycontrol.com
7. www.bseindia.com
8. http://finance.yahoo.com/q/hp?s=TCS.NS
119

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PORTFOLIO MANAGEMENT

A project report submitted to the Department of Commerce and

MASTER OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF

Prof. P. VISWANADHAM, Ph.D.,

DEPARTMENT OF COMMERCE AND MANAGEMENT STUDIES

I am heartily grateful to Prof. D.Prabhakar Rao, Head of the

I extend my heart felt gratitude to my faculty guide

I take privilege to express my profound gratitude to our young and

I am heartly grateful to MR.VENU for his valuable support and

Finally I would like to express my deep sense of gratitude to my

I, S.ZIYAUR RAHMAN, here by declare that the project

This is to certify that the project report entitled “PERFORMANCE

 FINDINGS, SUGGESTIONS & SUMMARY 99

CAPITAL MARKET AND ITS STRUCTURE

 Primary market or new issuance market

The players of secondary market are:

NEED FOR THE STUDY

1. Shares, scrip's, stocks, bonds, debentures and other marketable

There is an extraordinary amount of ignorance and of prejudice born out of ignorance

CHARACTERISTICS OF THE EXCHANGES IN INDIA

Traditionally, a stock exchange has been an association of individual members called

1 To evaluate the performance of 12 different companies

METHODOLOGY OF THE STUDY

SOURCES OF THE DATA:

The source includes only the secondary data.

LIMITATIONS OF THE STUDY:

1. The study is limited to only 12 companies.

3. There may be scope for committing statistical errors.

• Industrial Development Bank of India Limited.

A Governing Board comprising of 9 elected directors (one third of them retire

The Governing Board following the election of directors annually elects a

The expression of BOLT network was inaugurated by the Finance Minister,

b. Statements giving details of margins payable by the members in respect of the

 To be the most respected company in the financial services space.

The Company follow a simple approach to research as follows

THE MANAGEMENT TEAM

Mr. Nirmal jain

THE BOARD OF DIRECTORS

India Infoline Securities Pvt Ltd

India Infoline Commodities Pvt Ltd

India Infoline distribution Co ltd (IILD)

India Infoline Insurance Services Ltd

India Infoline Investment Services Ltd

India Infoline Insurance Brokers Ltd.

Investor Terminal (IT)

Target of Investor Terminal

• Active stock market traders with medium volumes.

Trader terminal (TT)

Target of Trader Terminal

Features of Trader Terminal

• Trade execution in a fraction of a second!

Investing in securities such as shares, debentures and bonds is profitable as well as

WHAT IS PORTFOLIO MANAGEMENT?

An investor considering investment in securities is faced with the problem of choosing

a) To maximize yield/return and b.) To minimize risk

a.) Regular return

NEED FOR PORTFOLIO MANAGEMENT

Portfolio Management is a process encompassing many activities of investments in assets

ELEMENTS OF PORTFOLIO MANAGEMENT

Portfolio management is ongoing process involving the following basic tasks

1 Identification of investor’s objectives, constraints and preferences.