Fulfillment of Requirement for the award Master in Business Administration

Submitted by
KALINGA KUMAR MAHALIK
ROLL NO-0906227023
INTERNAL GUIDE EXTERNAL GUIDE
Asst.Prof. S.C Das Abhishek Parhi ,
Dept. of Management (Sales Manager)
C.V.Raman college of Bonanza Portfolio ltd,
Engineering,BBSR. BBSR.
C.V.RAMAN COLLEGE OF ENGINEERING,BBSR

TO WHOMSOEVER IT MAY CONCERN

This is to certify that the project entitled “A Study on the portfolio management
and beta analysis of Bonanza Portfolio Limited” is a bonafide work of Kalinga kuma
r Mahalik, a student of CVRCE, Bhubaneswar, bearing Regd No-0906227023, and was
successfully conducted at Bonanza Portfolio Limited”, Bhubaneswar, for the partial
fulfillment of the course Master in Business Administration of CVRCE,Bhu
baneswar.

We wish him all the best for all the future endeavors.

Date: Mr Abhishek Parhi

Sales Manager
Bonanza portfolio ltd
Bhubaneswar
CERTIFICATE

This is to certify that Kalinga kumar Mahalik bearing Regd. No-0906227023 a bona
fied student of CVRCE, Bhubaneswar, has concluded the Project work on “-“A Study on
the portfolio management and beta analysis of BONANZA portfolio Limited” in Bhuban
eswar as a partial fulfillment of the requirement for the degree of MBA of BPUT
University. He has worked with all honesty and sincerity.
I wish him all the success in life.

Date:

CERTIFICATE

This is to certify that Kalinga kumar Mahalik bearing Regd. No-0906227023, a

bonafied student of CVRCE, Bhubaneswar, has concluded the Project work on “A Stud
y on portfolio management and beta analysis of Bonanza portfolio Limited” in Bhub
aneswar as a partial fulfillment of the requirement for the degree of MBA of BPU
T University. He has worked with all honesty and sincerity.
I wish him all the success in life.

Date:-
Asst Porf. S.C Das
Internal
Guide
 CVRCE , BBSR

ACKNOWLEDGEMENT

I take pleasure to express my heartfelt gratitude to my project guide of BONANZA

PORTFOLIO Ltd .Mr. Abhishek Parhi for his whole hearted support ,guidance and
encouragement all the time without which is project could not have been accompli
shed
I am really grateful to Asst.Proof. S.C Das,Faculity, Finance and all the staf
fs of the management department of C.V Raman College of Engineering.

Finally I would like to thanks my friends, parents for their constant inspirat
ion, co-operation and support.

Kalinga kumar Mahalik

Regd.no-0906227023

DECLARATION
I hereby declare that the project report entitled “A STUDY ON PORTFOLIO MANAGEMENT
AND BETA ANALYSIS OF BONANZA PORTFOLIO LTD. is the produce of my sincere effor
t. This Summer Internship Project Report is being submitted by me alone, at c.v
raman college, Bhubaneswar, for the partial fulfillment of the course MBA, and t
he report has not been submitted to any other educational institutions for any o
ther purpose.

Date: -
Signature
Regd. No:-0906227023
CONTENTS
CHAPTER 1: INTRODUCTION
Objectives,methodology
CHAPTER 2: COMPANY PROFILE
CHAPTER 3: DATA ANALYSIS
CHAPTER 4: RESEARCH FINDINS

CHAPTER 1

INTRODUCTION
OBJECTIVES AND METHODOLOGY

AIM OF THE STUDY:

The study focuses its attention on the functioning of stock markets and Construc
tion of the equity portfolio. The stock markets have become attractive investmen
t options for the common man. But the need is to be able to effectively and effi
ciently manage investments in order to keep maximum returns with minimum risk.

OBJECTIVES:
To study the investment decision process.
To analysis the risk return characteristics of sample scripts.
Ascertain portfolio weights.
To construct an effective portfolio which offers the maximum return for minimum
risk

METHODOLOGY:
Visiting Bonanza portfolio Ltd, Bhubaneswar and collecting information
Discussions were conducted with the personnel of Bonanza portfolio Ltd.

SOURCES OF INFORMATION

The study uses extensively both primary and secondary data

PRIMARY DATA:
Information was collected through this source comprises of discussions with the
personnel of Bonanza portfolio Ltd.
SECONDARY DATA:
The secondary data includes information obtained from various sources that inclu
des newspaper articles, business magazines and web.

LIMITATIONS

1. The project work is mainly based on the above mentioned sources of infor
mation.
2. The study was made in purview of the guidelines of SEBI, NATIONAL STOCK
EXCHANGE OF INDIA and BONANZA PORTFOLIO Ltd as applicable to that period onl
y.
3. Limited time period restricted to go in for more details.
4. Markets were widely dispersed and so there was more time consumptions fo
r movement from one market to another.

COMPANY PROFILE

In this world everybody wants to increase their earnings. GDP of our country is
growing continuously. So individual has some money in his/her hand to invest. Pe
ople can invest his/her saved money in share market with proper guidance and get
a good return unlikable of any other type of investment. Trading in share mark
et is full of risk and return. One who wants to take risk more than there is a c
hance of getting more return on investment or vice-versa.
Bonanza is the retail arm of SSKI group, has been established in the year 1922.
SSKI group has an experience of more than 80 years in institutional banking, inv
estment banking and retail banking. Bonanza is the retail broking brand which ha
s its branches and franchisees.
The SSKI group comprises of institutional broking and corporate finance. SSKI wa
s earlier known as Kevanitilal Kantilal Securities Pvt Ltd. It was changed to SS
KI Investor Services Pvt Ltd on 24th June 1995. The institutional broking divisi
on caters to the domestic aforeign institutional investors, while the corporate
finance division focuses on niche areas such as infrastructure, telecom and medi
a. SSKI has been voted as the top domestic brokerage house in the research categ
ory, twice by Euro Money Survey and four times by Asia Money Survey. SSKI has be
en voted the best domestic brokerage in India by Asia Money Polls’ 2004.
Bonanza Ltd is India’s leading online retail broking house with its presence throu
gh 1288‘Share Shops’ in 325 cities and serving more than 8, 00,000 customers across
the nation. Launched on Feb 8th 2000 as an online trading portal, Bonanza offers
its clients
trade execution facilities for cash as well as derivatives, on BSE and NSE, depo
sitory services, mutual funds, initial public offerings (IPOs), and commodities
trading facilities on MCX and NCDEX. Besides high quality investment advice from
an experienced research team Bonanza provides market related news, stock quotes
fundamental and statistical information across equity, mutual funds, IPOs and m
uch more.
Bonanza has set category leadership through pioneering initiatives like ‘Speed Tra
de’, a net based executable application that emulates a broker terminal besides pr
oviding information relevant to Day traders. Their second initiative, ‘First Step’ i
s targeted at empowering first time investors. Bonanza has also set their global
footprints through the ‘India First’ initiative, a series of seminars conducted by
Sharekhan to help NRIs participate and benefit from the huge investment opportun
ities in India.
Pioneers of online trading in India- bonanzaonline.com was launched in 2000 and
is now the second most visited broking site in India. It has one of the largest
networks of Share shops in the country. It has attracted investment from leading
Private equity players of the world.

CORPORATE STRUCTURE:-

RESEARCH SECTION Of BONANZA:-

Research team of Bonanza gives suggestion to the investor for trading in stock m
arket with deep understanding the fluctuation of the volatile market. It gives c
ustomer an easy way to earn profit from the market. Bonanza has seen a sustained
one-way rise in the SENSEX since early April with the easing of the domestic co
ncern over hardening interest rates. However, globally the uncertainty over inte
rest rates (particularly in the USA) persists which could give rise to volatilit
y in the emerging markets. The mega IPOs on the offering, earnings downgrades an
d the availability of liquidity would add to volatility in our market in the nea
r term.

RESEARCH PRODUCT OF SHARE KHAN:

Intra-day Trading- Suggest share to be traded on the basis of intra-day.
Short term trading- It refers shares to be kept for short term on holding basis.
Long term Investing- It advises to retail investors who keep their shares for a
long term basis at least for six months.
High Yield Products- Such products give higher returns on short term.
Hedging Products- It is safer side of trading for best ways of getting brokerage
. This product mainly deals with future and option.
By research works Bonanza always educating and empowering the investors which ar
e:-
Very easy to understand for investors.
Maintain discipline.
Retail specific.
The relationship management of bonanza gives good quality services which are att
ained by:-
Client interaction through phone or personal meeting.
Dealing support.
Personalized Care.
 “MAKE MONEY NOT MISTAKE”
Personalized Bonanza research advice through website, mail, SMS, message. Resear
ch teams of Bonanza always keep its vigil in market situation of stock market an
d interpret, and make analysis by applying effective skills. Team is suggesting
by understanding the interest of investors.

SHAREHOLDERS & THE MANAGEMENT TEAM:

SHAREHOLDERS:
CITI VENTURE CAPITAL AND OTHER PRIVATE EQUITY FIRMS
BARINGS PVT EQUITY ASIA
IDFC
EMPLOYEES

MANAGEMENT TEAM:
TARUN SHAH- CEO
JAIDEEP ARORA DIRECTOR- PRODUCTS & TECHNOLOGY
SHANKAR VAILAYA DIRECTOR- OPERATIONS
LIST OF KEY FOREIGN INSTITUTIONAL CLIENTS:
Alliance Capital Management.
Emerging Markets Investment Management.
Edinburgh Fund Management Ltd.
Foreign and Colonial Emerging Markets.
Goldman Sachs Investment Management.
Government of Singapore Investment Corporation.
Grantham, Mayo, Van Otterloo and Co.
Indosuez Asset Management.
Jardine Fleming Investment Management Ltd.
LGT Asset Management.
Lloyd George Investment Management.
Martin Currie Investment Management Ltd.
Morgan Stanley Asset Management.
TIAA-Cref Investment Management.
UBS.
LIST OF KEY DOMESTIC INSTITUTIONAL CLIENTS:
BOI Mutual Fund.
Birla Capital Mutual Fund.
BOB Mutual Fund.
Can bank Investment Management Services Ltd.
Chatterjee Group (SOROS).
GIC Mutual Fund.
HDFC Bank.
IDBI Mutual Fund.
Indbank Mutual Fund.
ICICI Mutual Fund.
ITC Thread needle Mutual Fund.
Kotak Mahindra Asset Management.
Kothari Pioneer Mutual Fund.
PNB Mutual Fund.
SBI India Magnum Fund.
 UTI.
UTI of shore.
Corporation Bank.
LIC/LIC Mutual Fund/LIC Housing Finance

INTRODUCTION

INTRODUCTION, IMPORTANCE & NEED OF STUDY:

Portfolio management or investment helps investors in effective and efficient ma

nagement of their investment to achieve the goal of getting higher returns at lo
w risk.
The rapid growth of capital markets in India has opened up new investment avenue
s for investors.
The stock markets have become attractive investment options for the common man.
But the need is to be able to effectively and efficiently manage investments in
order to keep maximum returns with minimum risk.
Hence this study on “PORTFOLIO MANAGEMENT & RISK ANALYSIS” to examine the role proc
ss and merits of effective investment management and decision.
PORTFOLIO MANAGEMENT

PORTFOLIO:
A portfolio is a collection of securities since it is re
ally desirable to invest the entire funds of an individual or an institution or
a single security, it is essential that every security be viewed in a portfolio
context. Thus it seems logical that the expected return of the portfolio. Portfo
lio analysis considers the determine of future risk and return in holding variou
s blends of individual securities
Portfolio expected return is a weighted average of the expected r
eturn of the individual securities but portfolio variance, in short contrast, ca
n be something reduced portfolio risk is because risk depends greatly on the co-
variance among returns of individual securities. Portfolios, which are combinati
on of securities, may or may not take on the aggregate characteristics of their
individual parts.
Since portfolios expected return is a weighted average of the expected
return of its securities, the contribution of each security the portfolio’s expect
ed returns depends on its expected returns and its proportionate share of the in
itial portfolio’s market value. It follows that an investor who simply wants the g
reatest possible expected return should hold one security; the one which is cons
idered to have a greatest expected return. Very few investors do this, and very
few investment advisors would counsel such and extreme policy instead, investors
should diversify, meaning that their portfolio should include more than one sec
urity.

OBJECTIVES OF PORTFOLIO MANAGEMENT:

The main objective of investment portfolio management is
to maximize the returns from the investment and to minimize the risk involved i
n investment. Moreover, risk in price or inflation erodes the value of money and
hence investment must provide a protection against inflation.
SECONDARY OBJECTIVES:
The following are the other ancillary objectives:
• Regular return.
• Stable income.
• Appreciation of capital.
• More liquidity.
• Safety of investment.
• Tax benefits.
Portfolio management services helps investors to make a
wise choice between alternative investments with pit any post trading hassle’s thi
s service renders optimum returns to the investors by proper selection of contin
uous change of one plan to another plane with in the same scheme, any portfolio
management must specify the objectives like maximum return’s, and risk capital app
reciation, safety etc in their offer.
Return From the angle of securities can be fixed income securities such as:
(1) (a) Debentures –partly convertibles and non-convertibles debentures debt with
tradable Warrants.
(b) Preference shares (c) Government securities and bonds (d) Other debt ins
truments
(2) Variable income securities
(a) Equity shares
(b) Money market securities like treasury bills commercial papers etc.
A portfolio manager has to decide up on the mix of securities on the b
asis of contract with the client and objectives of portfolio.
NEED FOR PORTFOLIO MANAGEMENT:
Portfolio management is a process encompassing many activities of investment
in assets and securities. It is a dynamic and flexible concept and involves reg
ular and systematic analysis, judgment and action. The objective of this service
is to help the unknown and investors with the expertise of professionals in inv
estment portfolio management. It involves construction of a portfolio based upon
the investor’s objectives, constraints, preferences for risk and returns and tax
liability. The portfolio is reviewed and adjusted from time to time in tune with
the market conditions. The evaluation of portfolio is to be done in terms of ta
rgets set for risk and returns. The changes in the portfolio are to be effected
to meet the changing condition.
Portfolio construction refers to the allocation of surplus funds in hand amon
g a variety of financial assets open for investment. Portfolio theory concerns i
tself with the principles governing such allocation. The modern view of investme
nt is oriented more go towards the assembly of proper combination of individual
securities to form investment portfolio.
A combination of securities held together will give a beneficial r
esult if they grouped in a manner to secure higher returns after taking into con
sideration the risk elements.
The modern theory is the view that by diversification risk can be re
duced. Diversification can be made by the investor either by having a large numb
er of shares of companies in different regions, in different industries or those
producing different types of product lines. Modern theory believes in the persp
ective of combination of securities under constraints of risk and returns.

PORTFOLIO MANAGEMENT PROCESS:

Investment management is a complex activity which may be broken down into t
he following steps:
1) Specification of investment objectives and constraints:
The typical objectives sought by investors are current income,
capital appreciation, and safety of principle. The relative importance of thes
e objectives should be specified further the constraints arising from liquidity,
time horizon, tax and special circumstances must be identified.
2) Choice of the asset mix :
 The most important decision in portfolio management is the asset mix decisi
on very broadly; this is concerned with the proportions of ‘stocks’ (equity shares a
nd units/shares of equity-oriented mutual funds) and ‘bonds’ in the portfolio.
The appropriate ‘stock-bond’ mix depends mainly on the risk tolerance and
investment horizon of the investor.

ELEMENTS OF PORTFOLIO MANAGEMENT:

Portfolio management is on-going process involving the following basic tasks:
Identification of the investor’s objectives, constraints and preferences.
Strategies are to be developed and implemented in tune with investment policy fo
rmulated.
Review and monitoring of the performance of the portfolio.
Finally the evaluation of the portfolio

RISK ANALYSIS
Risk:
Risk is uncertainty of the income /capital appreciation or loss or both. All in
vestments are risky. The higher the risk taken, the higher is the return. But pr
oper management of risk involves the right choice of investments whose risks are
compensating. The total risks of two companies may be different and even lower
than the risk of a group of two companies if their companies are offset by each
other.
The two major types of risks are:

Systematic or market related risk.

Unsystematic or company related risks.

Systematic risks affected from the entire market are (the problems, raw mater
ial availability, tax policy or government policy, inflation risk, interest risk
and financial risk). It is managed by the use of Beta of different company shar
es.
The unsystematic risks are mismanagement, increasing inventory, wrong financi
al policy, defective marketing etc. this is diversifiable or avoidable because i
t is possible to eliminate or diversify away this component of risk to a conside
rable extent by investing in a large portfolio of securities. The unsystematic r
isk stems from inefficiency magnitude of those factors different form one compan
y to another.
BETA:
The concept of Beta as a measure of systematic risk is useful in portfolio ma
nagement. The beta measures the movement of one script in relation to the market
trend. Thus BETA can be positive or negative depending on whether the individua
l scrip moves in the same direction as the market or in the opposite direction a
nd the extent of variance of one scrip vis-à-vis the market is being measured by B
ETA. The BETA is negative if the share price moves contrary to the general trend
and positive if it moves in the same direction. The scrip’s with higher BETA of m
ore than one are called aggressive, and those with a low BETA of less than one a
re called defensive.
It is therefore it is necessary, to calculate Betas for all scrip’s and
choose those with high Beta for a portfolio of high returns. Normally the Beta v
alue of a company is regarded good when it lies in the range of 0.4-1.9
Formula of Beta:
βA = Cov AM/ Var M
βA: Beta of company A.
Cov AM: Covariance of company A and Market.
Var M: Variance of Market Return or Market Price.
Cov AM: (for historical data) is calculated as: (A-A) (M-M)/N-1.
Var M: (for historical data) is calculated as: (M-M)2/N-1.
N: Num er of period.

BENEFITS:
Beta values are calculated over a num er of years and as such changes in any one
year may not reflect the degree of volatility of scrip.
High risk and high volatility go together and that is seen in the speculative sc
rips.
In the long run, high Beta Portfolios have provided larger return through BETA c
alculation.
Who are the rational investors & they get the information a out the market in wh
ich scrip he/she will invest through the Beta.
LIMITATIONS:
All investors are risk avenue and higher the risk, the higher the return. Invest
ors ignore the transaction cost, information cost, rokerage, taxes, etc.
Investors are more concerned with company related risk than the market related r
isk.
 Past price movements are very poor predictor of the future. Betas are merely rea
r-view mirrors, reflecting very little of what lies ahead.

RETURNS ON PORTFOLIO:
Each security in a portfolio contri utes return in the proporti
on of its investments in security. Thus the portfolio expected return is the wei
ghted average of the expected return, from each of the securities, with weights
representing the proportions share of the security in the total investment. Why
does an investor have so many securities in his portfolio? If the security ABC g
ives the maximum return why not he invests in that security all his funds and th
us maximize return? The answer to this questions lie in the investor’s perception
of risk attached to investments, his o jectives of income, safety, appreciation,
liquidity and hedge against loss of value of money etc. this pattern of investm
ent in different asset categories, types of investment, etc., would all e descr
i ed under the caption of diversification, which aims at the reduction or even e
limination of non-systematic risks and achieve the specific o jectives of invest
ors
RISK ON PORTFOLIO:
The expected returns from individual securities carry some degree
of risk. Risk on the portfolio is different from the risk on individual securit
ies. The risk is reflected in the varia ility of the returns from zero to infini
ty. Risk of the individual assets or a portfolio is measured y the variance of
its return. The expected return depends on the pro a ility of the returns and th
eir weighted contri ution to the risk of the portfolio. These are two measures o
f risk in this context one is the a solute deviation and other standard deviatio
n.
Most investors invest in a portfolio of assets, ecause as to sp
read risk y not putting all eggs in one asket. Hence, what really matters to t
hem is not the risk and return of stocks in isolation, ut the risk and return o
f the portfolio as a whole. Risk is mainly reduced y Diversification.
RISK RETURN ANALYSIS:
All investment has some risk. Investment in shares of companies has its own ris
k or uncertainty; these risks arise out of varia ility of yields and uncertainty
of appreciation or depreciation of share prices, losses of liquidity etc
The risk over time can e represented y the variance of the returns. While the
return over time is capital appreciation plus payout, divided y the purchase pr
ice of the share.

Normally, the higher the risk that the investor takes, the
higher is the return. There is, how ever, a risk less return on capital of a out
12% which is the ank, rate charged y the R.B.I or long term, yielded on gover
nment securities at around 13% to 14%. This risk less return refers to lack of v
aria ility of return and no uncertainty in the repayment or capital. But other r
isks such as loss of liquidity due to parting with money etc., may however remai
n, ut are rewarded y the total return on the capital. Risk-return is su ject t
o variation and the o jectives of the portfolio manager are to reduce that varia
 ility and thus reduce the risky y choosing an appropriate portfolio.
Traditional approach advocates that one security holds the etter,
it is according to the modern approach diversification should not e quantity t
hat should e related to the quality of scripts which leads to quality of portfo
lio.
Experience has shown that eyond the certain securities y adding more securitie
s expensive.
Simple diversification reduces:
An asset’s total risk can e divided into systematic plus unsystematic risk, as sh
own elow:
Systematic risk (undiversifia le risk) + unsystematic risk (diversified risk) =T
otal risk =Variance (r).
Unsystematic risk is that portion of the risk that is unique to the firm (for ex
ample, risk due to strikes and management errors.) Unsystematic risk can e redu
ced to zero y simple diversification.
Simple diversification is the random selection of securities that are to
e added to a portfolio. As the num er of randomly selected securities added to
a portfolio is increased, the level of unsystematic risk approaches zero. Howeve
r market related systematic risk cannot e reduced y simple diversification. Th
is risk is common to all securities.

PERSONS INVOLVED IN PORTFOLIO MANAGEMENT:

Investor:
Those people who are interested in investing their funds are known as in
vestor.
Portfolio Managers:
Is a person who is in the wake of a contract agreement with a client, a
dvices or directs or undertakes on ehalf of the clients, the management or dist
ri ution or management of the funds of the client as the case may e.
Discretionary Portfolio Manager:
Means a manager who exercise under a contract relating to a p
ortfolio management exercise any degree of discretion as to the investment or ma
nagement of portfolio or securities or funds of clients as the case may e.
The relation ship etween an investor and portfolio manager is of a highly inter
active nature.
The portfolio manager carries out all the transactions pertainin
g to the investor under the power of attorney during the last two decades, and i
ncreasing complexity was witnessed in the capital market and its trading proc
edures in this context a key (uninformed) investor formed ) investor found him
self in a tricky situation, to keep track of market movement ,update his knowle
dge, yet stay in the capital market and make money, there fore in looked forward
to resuming help from portfolio manager to do the jo for him . The portfolio
management seeks to strike a alance etween risk’s and return.
The generally rule in that greater risk more of the profits ut
 S.E.B.I. in its guidelines prohi its portfolio managers to promise any return t
o investor. Portfolio management is not a su stitute to the inherent risk’s associ
ated with equity investment.

Who can e a Portfolio Manager?

Only those who are registered and pay the required license fee are
eligi le to operate as portfolio managers. An applicant for this purpose should
have necessary infrastructure with professionally qualified persons and with a m
inimum of two persons with experience in this usiness and a minimum net worth o
f Rs. 50lakh’s. The certificate once granted is valid for three years. Fees paya l
e for registration are Rs 2.5lakh’s every for two years and Rs.1lakh’s for the third
year. From the fourth year onwards, renewal fees per annum are Rs 75000. These
are su jected to change y the S.E.B.I.
The S.E.B.I. has imposed a num er of o ligations and a code of con
duct on them. The portfolio manager should have a high standard of integrity, ho
nesty and should not have een convicted of any economic offence or moral turpit
ude. He should not resort to rigging up of prices, insider trading or creating f
alse markets, etc. their ooks of accounts are su ject to inspection to inspecti
on and audit y S.E.B.I... The o servance of the code of conduct and guidelines
given y the S.E.B.I. are su ject to inspection and penalties for violation are
imposed. The manager has to su mit periodical returns and documents as may e re
quired y the SEBI from time-to- time.
Functions of portfolio managers:
The main function of portfolio managers are:
• Advisory role: advice new investments, review the existing ones, identification
of o jectives, recommending high yield securities etc.
• Conducting market and economic service: this is essential for recommending good
yielding securities they have to study the current fiscal policy, udget proposa
l; individual policies etc further portfolio manager should take in to account t
he credit policy, industrial growth, foreign exchange possi le change in corpora
te law’s etc.
• Financial analysis: he should evaluate the financial statement of company in ord
er to understand, their net worth future earnings, prospectus and strength.
• Study of stock market : he should o serve the trends at various stock exchange
and analysis scripts so that he is a le to identify the right securities for i
nvestment
• Study of industry: he should study the industry to know its future prospects, te
chnical changes etc, required for investment proposal he should also see the pro
lem’s of the industry.
• Decide the type of port folio: keeping in mind the o jectives of portfolio a por
tfolio manager has to decide weather the portfolio should comprise equity prefer
ence shares, de entures, converti les, non-converti les or partly converti les,
money market, securities etc or a mix of more than one type of proper mix ensure
s higher safety, yield and liquidity coupled with alanced risk techniques of po
rtfolio management.
A portfolio manager in the Indian context has een Bro
kers (Big rokers) who on the asis of their experience, market trends, Insider
trader, helps the limited knowledge persons.
The one’s who use to manage the funds of portfolio, now
eing managed y the portfolio of Merchant Bank’s, professional’s like MBA’s CA’s And m
any financial institution’s have entered the market in a ig way to manage portfol
io for their clients.
According to S.E.B.I. rules it is mandatory for portfoli
o managers to get them self’s registered. Registered merchant ankers can act’s as p
ortfolio manager’s
Investor’s must look forward, for qualification and performance and a ility and re
search ase of the portfolio manager’s.

Technique’s of portfolio management:

As of now the under noted technique of portfolio management are in vogue in our
country.
Equity Portfolio: is influenced y internal and external factors the internal fa
ctors effect the inner working of the company’s growth plan’s are analyzed with refe
renced to Balance sheet, profit & loss a/c (account) of the company.
Among the external factor are changes in the government policies, Trade cycle’s, P
olitical sta ility etc.
Equity Stock Analysis: under this method the pro a le future value of a share of
a company is determined it can e done y ratio’s of earning per share of the com
pany and price earning ratio.

EPS = PROFIT AFTER TAX___

NO: OF EQUITY SHARES

PRICE EARNING RATIO= __ MARKET PRICE____

E.P.S (earning’s per share
)

One can estimate trend of earning y EPS, which reflects trends of earning quali
ty of company, dividend policy, and quality of management.
Price earning ratio indicate a confidence of market a out the company future, a
high rating is prefera le.
The following points must e considered y portfolio managers while analyzing th
e securities
1. Nature of the industry and its product: long term trends of industries, compe
tition with in, and out side the industry, Technical changes, la our relations,
sensitivity, to Trade cycle.
2. Industrial analysis of prospective earnings, cash flows, working capital, div
idends, etc.
3. Ratio analysis: Ratio such as de t equity ratio’s current ratio’s
net worth, profit earning ratio, return on investment, are worked out
to decide the portfolio.
The wise principle of portfolio management suggests that “Buy when the market is
low or BEARISH, and sell when the market is rising or BULLISH”.
Stock market operation can e analyzed y:
a) Fundamental approach :- ased on intrinsic value of share’s
) Technical approach:- ased on Dowjone’s theory, Random walk theory, etc.
Prices are ased upon demand and supply of the market:
i. Traditional approach assumes that
ii. O jectives are maximization of wealth and minimization of risk.
iii. Diversification reduces risk and volatility.
iv. Varia le returns, high illiquidity; etc.

CAPITAL ASSET PRICING MODEL (CAPM)

William F. Sharpe and John Linter developed the Capital Asset Pricing Model (CAP
M). The model is ased on the portfolio theory developed y Harry Markowitz. The
model emphasizes the risk factor in portfolio theory and is a com ination of tw
o risk i.e., systematic risk and unsystematic risk.
The model suggests that a security’s return is directly related to its systematic
risk which cannot e neutralized through diversification. The com ination of ot
h types of risk stated a ove provides the total risk. CAPM explains the ehaviou
r of security prices and provides a mechanism where y investors could assess the
impact of a proposed security investment on the overall portfolio risk and retu
rn.
CAPM suggests that the prices of the securities are determined in such a way tha
t the risk premium or excess returns are proportional to systematic risk, which
is indicated y the eta coefficient. The model is used for analyzing the risk-r
eturn implications of holding securities. CAPM refers to the way in which securi
ties are valued in line with their anticipated risk and returns.
Capital Assets pricing approach (CAPM) pay’s more weightage to risk or portfolio d
iversification of portfolio.
Diversification of portfolio reduces risk ut it should e ased on certain asse
ssment such as:
Trend analysis of past share prices.
Valuation of intrinsic value of company (trend-marker moves are known for their
Uncertainties they are compared to e high, and low prompts of wave market trend
s are constituted y these waves it is a pattern of movement ased on past).
The following rules must e studied while cautious portfolio manager efore deci
de to invest their funds in portfolio’s.
1. Compile the financials of the companies in the immediate past 3 years such a
s turn over, gross profit, net profit efore tax, compare the profit earning of
company with that of the industry average nature of product manufacture service
render and it future demand ,know a out the promoters and their ack ground, div
idend track record, onus shares in the past 3 to 5 years ,reflects company’s comm
itment to share holders the relevant information can e accessed from the RDC(re
gistrant of companies)pu lished financial results financed quarters, journals an
d ledgers.
2. Watch out the high’s and lows of the scripts for the past 2 to 3 years and th
eir timing cyclical scripts have a tendency to repeat their performance ,this h
ypothesis can e true of all other financial ,
3. The higher the trading volume higher is liquidity and still higher the cha
nce of speculation, it is futile to invest in such shares who’s daily movements ca
nnot e kept track, if you want to reap rich returns keep investment over along
horizon and it will offset the wild intra day trading fluctuation’s, the minor mov
ement of scripts may e ignored, we must remem er that share market moves in pha
ses and the span of each phase is 6 months to 5 years.
a. Long term of the market should e the guiding factor to ena le you to in
vest and quit. The market is now ullish and the trend is likely to continue for
some more time.
. Shares giving a low return for quite sometime must find a last place in
portfolio or rather e exchanged with new companies shares.

How at all one should avoid such scripts in future?

(1) Never invest on the asis of an insider trader tip in a company which is
not sound (insider trader is person who gives tip for trading in secur
ities ased on prices sensitive up price sensitive un pu lished information re
lating to such security).
(2) Never invest in the so called promoter quota of lesser known company.
(3) Never invest in a company a out which you do not have appropriate knowledge.
(4) Never at all invest in a company which doesn’t have a stringent financial reco
rd your portfolio should not a stagnate
(4) Shuffle the portfolio and replace the slow moving sector with active ones ,
investors were shatter when the technology , media, software , stops have taken
a down slight.
(5) Never fall to the magic of the scripts don’t confine to the lue chip company‘s,
look out for other portfolio that ensure regular dividends.
(6) In the same way never react to sudden raise or fall in stock market index
such fluctuation is movement minor correction’s in stock market held in consolidat
ion of market their y reading out a weak player often taste on wait for the dus
t and dim to settle to make your move”.

METHODOLOGY:-
Random Sampling Method.
Company Name:
1. GLAXO
2. REDICON
3. AXIS BANK
4. PRICOL
5. PNB
6. IFLEX
7. HCL
8. NIRMAN
9. ACCENTURE
10. NIPPO BATTRIES
11. IBM
12. BHARTI AIRTEL
13. HUL
14. ITC
15. TATA TEA
16. RELIANCE
17. IVRCL
18. SBI
19. DR. REDDY
20. TCS
21. WIPRO
22. TATA INVESTMENT
23. STI INDIA
24. SINTEX
25. SOLAR EX
26. SPARC
27. RPL
28. SAIL
29. ICICI
30. TVS MOTORS
31. GAM
32. INFOSYS
33. SATYAM
34. CIPLA
35. BAJAJ AUTO
36. MTNL
37. VSNL
38. TATA CEMENT
39. SIEMENS
40. TATA MOTORS
41. GAMMON
42. RANBAXY
43. IDBI
44. NTPC
45. OCL INDIA
46. HDFC
47. SUZOLON
48. JBM AUTO
49. L&T
50. TECH MAHINDRA
Sample Size: 20
From the a ove sample size we are randomly selected 20 companies of different in
dustries for the analysis. These are:
IT SECTOR
INFOSYS
TCS
WIPRO
PHARMACEUTICALS SECTOR
CIPLA
RANBAXY
DR. REDDY
FMCG SECTOR
ITC
HUL
AUTOMOBILES SECTOR
HERO HONDA
TATA MOTORS

TELECOM SECTOR
MTNL
IDEA
BHARTI AIRTEL
ICICI BANK
HDFC BANK
SBI
PNB
 INFRASTRUCTURE SECTOR
DLF
GAMMON
BANKING SECTOR
ICICI BANK
HDFC BANK
SBI
PNB

NOTES
• The share prices and market index is taken for 24 months starting from July 2007
to June 2009.
• The market index taken in S & P Nifty.
• The data collected are secondary and are collected from www.nseindia.com.
• The market index is taken for the last day of the month.
• The share price is taken for the last day of the month.
• All the calculations are done in the MS-Excel package.

CALCULATION OF β OF A SECURITY ‘X’IS AS AN EXAMPLE:

YEAR Return on security: (Rx) Return on market portfolio: (Rm)
Rxi - Rx Rmi -Rm (Rxi –Rx)*(Rmi-Rm) (Rmi-Rm)
1 5 11 -2 2 -4 4
2 7 12 0 3 0 9
3 -3 -9 -10 -18 180 324
4 11 13 4 4 16 16
5 15 18 8 9 72 8
35 45 0 0 264 434

Expected return on security X: Portfolio :

Rx =(5+7-3+11+15)/5
=35/5
=7(Seven)
Expected retun on market:
Rm=(11+12-9+13+18)/5
=45/5
=9(Nine)

The covariene etween return on security X & the return on market portfolio is:
Covxm=∑[(Rxi-Rx)(Rmi-Rm)]/N-1
=264/5-1
=66

Varience of return on the market portfolio(б2m) is calculated:

62M=∑(Rmi-Rm)2/N-1
=434/5-1
=108.5

Thus, β of security X can e calculated as:

βx=cov(Rx,Rm)/Var(Rm)
=66/108.5
=0.61
Since β of security X is 0.61 (Which is less than 1),we may infer that it’s return i
s less volatile than the return on the market portfolio.I f the return on market
portfolio increases or decreases y 10% than return on security X Would e expe
cted to increase y 0.61*10%=6.1%
FINDINGS
After analysis of 20 companies of different sectors, it is found that 17 compani
es have their BETA value positive.
BETA values of those companies are as follows:
INFOSYS 0.17
WIPRO 0.09
TCS 0.18
RANBAXY 0.09
DR. REDDY 0.07
ITC 0.0083
TATA MOTORS 0.21
MTNL 0.03
IDEA 0.03
BHARTI AIRTEL 0.10
RELIANCE 0.18
DLF 0.26
GAMMON 0.18
ICICI BANK 0.26
HDFC BANK 0.24
SBI 0.37
PNB 0.07
It can e interpreted that the stock market index is directly proportional to th
e share price of the a ove companies. If the stock market index moves up then th
e share prices of the a ove companies also moves up.

CHAPTER 4
RESEARCH FINDINGS

CONCLUSION
The income of the people is continuously increasing. So people have some money i
n their hand to invest in the stock market. Most of the people invest in share m
arket. Technology is growing very fast & comparatively easy access to the intern
et is possi le nowadays. People are aware of the share market ut due to the lac
k of proper knowledge a out the risk factor, what amount should e invested from
the saving which will in turn give them high return with low risk, they are hes
itating to invest in the share market.
The risk factor shows that how the risky whether low or high of a scrips of a co
mpany & return should e.
For any investment the factors to e considered are returns on investment
and risk associated with the investment. Diversified investment in to differ
ent stocks can reduce the risk. Before making any investment one needs to study
the past returns given y the stocks. Fundamentals or the usiness model of the
company should e very well understood.

SUGGESTION
• To avoid the risk means to have investment in securities for short period of tim
e and to avoid long term investment.
• Investment diversification can also solve the pro lem. The investor has to diver
sify his investment in real estates, precious metals, arts & antiguos along with
the investment in securities.
• The investor has to study the price ehavior of the risk. Usually history repeat
s itself even though it’s not in perfect form. The stock that shows a growth patte
rn may continue to do so for some period.
• The eta indicates the volatility of the stock. Beta are availa le for the stock
s that are included in the indices, looking at the Beta values, the investor can
gauge the risk factor & make wise decision according to his risk tolerance.
• The investor should e prepared to hold the stock for a period of time to reap t
he enefits of the rising trends in the market, he should e careful in the timi
ng of the purchase & sale of the stock.
• A careful analysis of the past, planning & diversification of the investment can
moderate the rate of the various risk factors.

BIBILIOGRAPHY
REFERENCE:
Bonanza Value line
Security Analysis & Portfolio Management By Pandiyan
Bulls, Bears & The Mouse By Dr. Kamlesh N Agarwal, Deekash Agarwal
Investment Analysis & Portfolio Management By Prasan Chandra.

WEBSITES:
www.Bonanzaonline.com
www.nseindia.com
www.5paisa.com
www.capitalmarket.com
www.google.com