INTRODUCTION :

Portfolio management and investment decision as a concept came to be familiar with the conclusion of second world war when thing can be in the stock market can be liberally ruined the fortune of individual, companies ,even government s it was then discovered that the investing in various scripts instead of putting all the money in a single securities yielded weather return with low risk percentage, it goes to the credit of HARYMERKOWITZ, 1991 noble laurelled to have pioneered the concept of combining high yielded securities with these low but steady yielding securities to achieve optimum correlation coefficient of shares.

Portfolio management refers to the management of portfolios for others by professional investment managers it refers to the management of an individual investors portfolio by professionally qualified person ranging from merchant banker to specified portfolio company.

1.1 NEED FOR THE STUDY:

Portfolio management has emerged as a separate academic discipline in India. Portfolio theory that deals with the rational investment decision-making process has now become an integral part of financial literature.Investing in securities such as shares, debentures & bonds is profitable Well as exciting. It is indeed rewarding but involves a great deal of risk & need artistic skill. Investing in financial securities is now considered to be one of the most risky avenues of investment. It is rare to find investors investing their entire savings in a single security. Instead they tend to invest in a group of securities. Such group of securities is called as PORTFOLIO. Creation of portfolio helps to reduce risk

without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory & practice of optimally combining securities into portfolios.

1.2 SCOPE OF STUDY

This study covers the Markowitz model. The study covers the calculation of

correlations between the different securities in order to find out at what percentage funds should be invested among the companies in the portfolio. Also the study includes the calculation of individual Standard Deviation of securities and ends at the calculation of weights of individual securities involved in the portfolio. These percentages help in allocating the funds available for investment based on risky portfolios.

1.3 OBJECTIVES:
1. To study the investment decision process. 2. To analyze the risk return characteristics of sample scripts. 3. Ascertain portfolio weights. 4. To construct an effective portfolio which offers the maximum return for minimum risk

1.4 METHODOLOGY:
Primary source Information gathered from interacting with Mrs. Swathi in the class room. And the data collect from the textbooks and other magazines.

Secondary Source Daily prices of scripts from news papers

1.5 LIMITATION :
1. Only two samples have been selected for constructing a portfolio. 2. Share prices of scripts of 5 years period was taken.

1.6 CHAPTERIZATION:

1. Chapter-1: 2. Chapter-II:

It Containt Introduction, Need for the study, Scope and objectives of

the study, the methodology of the study, Limitations and chapterization. It Containt conceptual framework and policies.

3. Chapter-III: It Containt industry profile and company profile and background of

the company.

4. Chapter-IV: 5. Chapter-V:

It Containt Data analysis and interpretation. It Containt findings and suggesting.

THEORITICAL FRAME WORK OR CONCEPTUAL FRAME WORK

PORTFOLIO:

A portfolio is a collection of securities since it is really 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. Portfolio analysis considers the determine of future risk and return in holding various blends of individual securities

Portfolio expected return is a weighted average of the expected return of the individual securities but portfolio variance, in short contrast, can be something reduced portfolio risk is because risk depends greatly on the co-variance among returns of individual securities. Portfolios, which are combination 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 portfolios expected returns depends on its expected returns and its proportionate share of the initial portfolios market value. It follows that an investor who simply wants the greatest possible expected return should hold one security; the one which is considered 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 security.

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 in 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 hassles this service renders optimum returns to the investors by proper selection of continuous change of one plan to another plane with in the same scheme, any portfolio management must specify the objectives like maximum returns, and risk capital appreciation, safety etc in their offer. Return From the angle of securities can be fixed income securities such as:

(a) Debentures partly convertibles and non-convertibles debentures debt with tradable Warrants. (b) Preference shares (c) Government securities and bonds (d) Other debt instruments (2) Variable income securities (a) Equity shares (b) Money market securities like treasury bills commercial papers etc. Portfolio managers has to decide up on the mix of securities on the basis 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 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 a portfolio based upon the investors 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 targets 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 among a variety of financial assets open for investment. Portfolio theory concerns itself with the principles governing such allocation. The modern view of investment 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 result if they grouped in a manner to secure higher returns after taking into consideration the risk elements. The modern theory is the view that by diversification risk can be reduced. Diversification can be made by the investor either by having a large number of shares of companies in different regions, in different industries or those producing different types of product lines. Modern theory believes in the perspective of combination of securities under constraints of risk and returns

PORTFOLIO MANAGEMENT PROCESS: Investment management is a complex activity which may be broken down into the 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 these 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 decision very broadly; this is concerned with the proportions of stocks (equity shares and 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 investors objectives, constraints and preferences. Strategies are to be developed and implemented in tune with investment policy formulated. Risk: Risk is uncertainty of the income /capital appreciation or loss or both. All investments are risky. The higher the risk taken, the higher is the return. But proper 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. SOURCES OF INVESTMENT RISK: Business risk: As a holder of corporate securities (equity shares or debentures), you are exposed to the risk of poor business performance. This may be caused by a variety of factors like heightened competition, emergence of new technologies, development of substitute products, shifts in consumer preferences, inadequate supply of essential inputs, changes in governmental policies, and so on. Review and monitoring of the performance of the portfolio. Finally the evaluation of the portfolio

Interest rate risk: The changes in interest rate have a bearing on the welfare on investors. As the interest rate goes up, the market price of existing firmed income securities falls, and vice versa. This happens because the buyer of a fixed income security would not buy it at its par value of face value o its fixed interest rate is lower than the prevailing interest rate on a similar security. For example, a debenture that has a face value of RS. 100 and a fixed rate of 12% will sell a discount if the interest rate moves up from, say 12% to 14%.while the chances in interest rate have a direct bearing on the prices of fixed income securities, they affect equity prices too, albeit some what indirectly. 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 material availability, tax policy or government policy, inflation risk, interest risk and financial risk). It is managed by the use of Beta of different company shares.

The unsystematic risks are mismanagement, increasing inventory, wrong financial policy, defective marketing etc. this is diversifiable or avoidable because it is possible to eliminate or diversify away this component of risk to a considerable extent by investing in a large portfolio of securities. The unsystematic risk stems from inefficiency magnitude of those factors different form one company to another.

RETURNS ON PORTFOLIO:

Each security in a portfolio contributes return in the proportion of its investments in security. Thus the portfolio expected return is the weighted 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 gives the maximum return why not he invests in that security all his funds and thus maximize return? The answer to this questions 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, types of investment, etc., would all be described under the caption of diversification, which aims at the reduction or even elimination of non-systematic risks and achieve the specific objectives of investors

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 securities. The risk is reflected in the variability of the returns from zero to infinity. Risk of the individual assets or a portfolio is

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measured by the variance of its return. The expected return depends on the probability of the returns and their weighted contribution to the risk of the portfolio. These are two measures of risk in this context one is the absolute deviation and other standard deviation.

Most investors invest in a portfolio of assets, because as to spread risk by not putting all eggs in one basket. Hence, what really matters to them is not the risk and return of stocks in isolation, but the risk and return of the portfolio as a whole. Risk is mainly reduced by Diversification.

RISK RETURN ANALYSIS:

All investment has some risk. Investment in shares of companies has its own risk or uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or depreciation of share prices, losses of liquidity etc

The risk over time can be represented by the variance of the returns. While the return over time is capital appreciation plus payout, divided by the purchase price of the share.

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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 about 12% which is the bank, rate charged by the R.B.I or long term, yielded on government securities at around 13% to 14%. This risk less return refers to lack of variability of return and no uncertainty in the repayment or capital. But other risks such as loss of liquidity due to parting with money etc., may however remain, but are rewarded by the total return on the capital. Risk-return is subject to variation and the objectives of the portfolio manager are to reduce that variability and thus reduce the risky by choosing an appropriate portfolio.

Traditional approach advocates that one security holds the better, it is according to the modern approach diversification should not be quantity that should be related to the quality of scripts which leads to quality of portfolio.

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Experience has shown that beyond the certain securities by adding more securities expensive.

Simple diversification reduces:

An assets total risk can be divided into systematic plus unsystematic risk, as shown below:

Systematic risk (un diversifiable risk) + unsystematic risk (diversified risk) =Total risk =Var (r). Unsystematic risk is that portion of the risk that is unique to the firm (for example, risk due to strikes and management errors.) Unsystematic risk can be reduced to zero by simple diversification.

Simple diversification is the random selection of securities that are to be added to a portfolio. As the number of randomly selected securities added to a portfolio is increased, the level of unsystematic risk approaches zero. However market related systematic risk cannot be reduced by simple diversification. This risk is common to all securities.

Persons involved in portfolio management:

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Investor: Are the people who are interested in investing their funds?

Portfolio managers:

Is a person who is in the wake of a contract agreement with a client, advices or directs or undertakes on behalf of the clients, the management or distribution or management of the funds of the client as the case may be.

Discretionary portfolio manager:

Means a manager who exercise under a contract relating to a portfolio management exercise any degree of discretion as to the investment or management of portfolio or securities or funds of clients as the case may be . The relation ship between an investor and portfolio manager is of a highly interactive nature

The portfolio manager carries out all the transactions pertaining to the investor under the power of attorney during the last two decades, and increasing complexity was witnessed in the capital market and its trading procedures in this context a key

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(uninformed) investor formed ) investor found him self in a tricky situation , to keep track of market movement ,update his knowledge, yet stay in the capital market and make money , there fore in looked forward to resuming help from portfolio manager to do the job for him .The portfolio management seeks to strike a balance between risks and return. The generally rule in that greater risk more of the profits but S.E.B.I. in its guidelines prohibits portfolio managers to promise any return to investor.Portfolio management is not a substitute to the inherent risks associated with equity investment.

Who can be a portfolio manager?

Only those who are registered and pay the required license fee are eligible to operate as portfolio managers. An applicant for this purpose should have necessary infrastructure with professionally qualified persons and with a minimum of two persons with experience in this business and a minimum net worth of Rs. 50lakhs. The certificate once granted is valid for three years. Fees payable for registration are Rs 2.5lakhs every for two years and Rs.1lakhs for the third year. From the fourth year onwards, renewal fees per annum are Rs 75000. These are subjected to change by the S.E.B.I.

The S.E.B.I. has imposed a number of obligations and a code of conduct on them. The portfolio manager should have a high standard of integrity, honesty and should not have been convicted of any economic offence or moral turpitude. He should not resort to rigging up of prices, insider trading or creating false markets, etc. their books of accounts

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are subject to inspection to inspection and audit by S.E.B.I... The observance of the code of conduct and guidelines given by the S.E.B.I. are subject to inspection and penalties for violation are imposed. The manager has to submit periodical returns and documents as may be required by the SEBI from time-to- time.

.Functions of portfolio managers:

Advisory role: advice new investments, review the existing ones, identification of objectives, 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, budget proposal; individual policies etc further portfolio manager should take in to account the credit policy, industrial growth, foreign exchange possible change in corporate laws etc.

Financial analysis: he should evaluate the financial statement of company in order to understand, their net worth future earnings, prospectus and strength.

Study of stock market : he should observe the trends at various stock exchange and analysis scripts so that he is able to identify the right securities for investment

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Study of industry: he should study the industry to know its future prospects, technical changes etc, required for investment proposal he should also see the problems of the industry.

Decide the type of port folio: keeping in mind the objectives of portfolio a portfolio manager has to decide weather the portfolio should comprise equity preference shares, debentures, convertibles, non-convertibles or partly

convertibles, money market, securities etc or a mix of more than one type of proper mix ensures higher safety, yield and liquidity coupled with balanced risk techniques of portfolio management.

A portfolio manager in the Indian context has been Brokers (Big brokers) who on the basis of their experience, market trends, Insider trader, helps the limited knowledge persons.

Registered merchant bankers can acts as portfolio managers Investors must look forward, for qualification and performance and ability and research base of the portfolio managers.

Techniques of portfolio management:

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As of now the under noted technique of portfolio management: are in vogue in our country 1. equity portfolio: is influenced by internal and external factors the internal factors effect the inner working of the companys growth plans are analyzed with referenced to Balance sheet, profit & loss a/c (account) of the company. Among the external factor are changes in the government policies, Trade cycles, Political stability etc. 2. equity stock analysis: under this method the probable future value of a share of a company is determined it can be done by ratios of earning per share of the company and price earning ratio

EPS ==

PROFIT AFTER TAX NO: OF EQUITY SHARES

PRICE EARNING RATIO=

MARKET PRICE E.P.S (earnings per share)

One can estimate trend of earning by EPS, which reflects trends of earning quality of company, dividend policy, and quality of management. Price earning ratio indicate a confidence of market about the company future, a high rating is preferable The following points must be considered by portfolio managers while analyzing the securities.

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1. Nature of the industry and its product: long term trends of industries, competition with in, and out side the industry, Technical changes, labour relations, sensitivity, to Trade cycle. 2. Industrial analysis of prospective earnings, cash flows, working capital, dividends, etc.

3. Ratio analysis: Ratio such as debt equity ratios current ratios 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 be analyzed by: a) Fundamental approach :- based on intrinsic value of shares b) Technical approach:-based on Dowjones theory, Random walk theory, etc.

Prices are based upon demand and supply of the market.

i. Traditional approach assumes that ii. Objectives are maximization of wealth and minimization of risk. iii. Diversification reduces risk and volatility.

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iv. Variable returns, high illiquidity; etc.

Capital Assets pricing approach (CAPM) it pays more weight age, to risk or portfolio diversification of portfolio.

Diversification of portfolio reduces risk but it should be based on certain assessment 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 be high, and low prompts of wave market trends are constituted by these waves it is a pattern of movement based on past).

The following rules must be studied while cautious portfolio manager before decide to invest their funds in portfolios.

1. Compile the financials of the companies in the immediate past 3 years such as turn over, gross profit, net profit before tax, compare the profit earning of company with that of the industry average nature of product manufacture service render and it future demand ,know about the promoters and their back ground, dividend track record, bonus shares in the past 3 to 5 years ,reflects companys commitment to share holders the relevant information can be accessed from the RDC(registrant of companies)published financial results financed quarters, journals and ledgers.

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2.

Watch out the highs and lows of the scripts for the past 2 to 3 years and their

timing cyclical scripts have a tendency to repeat their performance ,this hypothesis can be true of all other financial ,

3.

The higher the trading volume higher is liquidity and still higher the chance of

speculation, it is futile to invest in such shares whos daily movements cannot be kept track, if you want to reap rich returns keep investment over along horizon and it will offset the wild intra day trading fluctuations, the minor movement of scripts may be ignored, we must remember that share market moves in phases and the span of each phase is 6 months to 5 years.

a.

Long term of the market should be the guiding factor to enable you to invest and quit. The market is now bullish and the trend is likely to continue for some more time.

b .UN tradable shares must find a last place in portfolio apart from return; even capital invested is eroded with no way of exit with no way of exit with inside.

How at all one should avoid such scripts in future?

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(1) Never invest on the basis of an insider trader tip in a company which is not sound (insider trader is person who gives tip for trading in securities based on prices sensitive up price sensitive un published information relating to such security).

(2) Never invest in the so called promoter quota of lesser known company

(3) Never invest in a company about which you do not have appropriate knowledge.

(4) Never at all invest in a company which doesnt have a stringent financial record 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 dont confine to the blue chip companys, 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 corrections in stock market held in consolidation of market their by reading out a weak player often taste on wait for the dust and dim to settle to make your move . PORT FOLIO MANAGEMENT AND DIVESIFICATOIN:

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Combinations of securities that have high risk and return features make up a portfolio.

Portfolios may or may not take on the aggregate characteristics of individual part, portfolio analysis takes various components of risk and return for each industry and consider the effort of combined security.

Portfolio selection involves choosing the best portfolio to suit the risk return preferences of portfolio investor management of portfolio is a dynamic activity of evaluating and revising the portfolio in terms of portfolios objectives It may include in cash also, even if one goes bad the other will provide protection from the loss even cash is subject to inflation the diversification can be either vertical or horizontal the vertical diversification portfolio can have script of different companys with in the same industry. In horizontal diversification one can have different scripts chosen from different industries.

It should be an adequate diversification looking in to the size of portfolio. Traditional approach advocates the more security one holds in a portfolio , the better it is according to modern approach diversification should not be quantified but should be related to the quality of scripts which leads to the quality and portfolio subsequently experience can show that beyond a certain number of securities adding more securities become expensive.

Investment in a fixed return securities in the current market scenario which is passing through a an uncertain phase investors are facing the problem of lack of liquidity combined with

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minimum returns the important point to both is that the equity market and debt market moves in opposite direction .where the stock market is booming, equities perform better where as in depressed market the assured returns related securities market out perform equities.

It is cyclic and is evident in more global market keeping this in mind an investor can shift from fixed income securities to equities and vise versa along with the changing market scenario , if the investment are wisely planned they , fetch good returns even when the market is depressed most , important the investor must adopt the time bound strategy in differing state of market to achieve the optimum result when the aim is short term returns it would be wise for the investor to invest in equities when the market is in boom & it could be reviewed if the same is done. Maximum of returns can be achieved by following a composite pattern of investment by having, suitable investment allocation strategy among the available resources.

Never invest in a single securities your investment can be allocated in the following

areas:

1. 2. 3. 4.

Equities:-primary and secondary market. Mutual Funds Bank deposits Fixed deposits & bonds and the tax saving schemes The different areas of fixed income are as:Fixed deposits in company

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Bonds Mutual funds schemes with an investment strategy to invest in debt investment in fixed deposit can be made for the simple reason that assured fixed income of a high of 14-17% per annum can be expected which is much safer then investing a highly volatile stock market, even in comparison to banks deposit which gives a maximum return of 12% per annum, fixed deposit s in high profile esteemed will performing companies definitely gives a higher returns. BETA: The concept of Beta as a measure of systematic risk is useful in portfolio management. 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 individual scrip moves in the same direction as the market or in the opposite direction and the extent of variance of one scrip vis-vis the market is being measured by BETA. The BETA is negative if the share price moves contrary to the general trend and positive if it moves in the same direction. The scrips with higher BETA of more than one are called aggressive, and those with a low BETA of less than one are called defensive. It is therefore it is necessary, to calculate Betas for all scrips and choose those with high Beta for a portfolio of high returns

INVESTMENT DECISIONS

Definition of investment: According to F. AMLING Investment may be defined as the purchase by an individual or an Institutional investor of a financial or real asset that produces a return

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proportional to the risk assumed over some future investment period. According to D.E. Fisher and R.J. Jordon, Investment is a commitment of funds made in the expectation of some positive rate of return. If the investment is properly undertaken, the return will be commensurate with the risk of the investor assumes.

Concept of Investment: Investment will generally be used in its financial sense and as such investment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period of time. Investment is a commitment of a persons funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of the value of his principal capital. Many types of investment media or channels for making investments are available. Securities ranging from risk free instruments to highly speculative shares and debentures are available for alternative investments.

All investments are risky, as the investor parts with his money. An efficient investor with proper training can reduce the risk and maximize returns. He can avoid pitfalls and protect his interest. There are different methods of classifying the investment avenues. A major classification is physical Investments and Financial Investments. They are physical, if savings are used to acquire physical assets, useful for consumption or production. Some

physical assets like ploughs, tractors or harvesters are useful in agricultural production. A few useful physical assets like cars, jeeps etc., are useful in business.

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Many items of physical assets are not useful for further production or goods or create income as in the case of consumer durables, gold, silver etc. among different types of investment, some are marketable and transferable and others are not. Examples of marketable assets are shares and debentures of public limited companies, particularly the listed companies on Stock Exchange, Bonds of P.S.U., Government securities etc. non-marketable securities or investments in bank deposits, provident fund and pension funds, insurance certificates, post office deposits, national savings certificate, company deposits, private limited companies shares etc.

The investment process may be described in the following stages: Investment policy: The first stage determines and involves personal financial affairs and objectives before making investment. It may also be called the preparation of investment policy stage. The investor has to see that he should be able to create an emergency fund, an element of liquidity and quick convertibility of securities into cash. This stage may, therefore be called the proper time of identifying investment assets and considering the various features of investments. investment analysis:

After arranging a logical order of types of investment preferred, the next step is to analyze the securities available for investment. The investor must take a comparative analysis

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of type of industry, kind of securities etc. the primary concerns at this stage would be to form beliefs regarding future behavior of prices and stocks, the expected return and associated risks

Investment valuation: Investment value, in general is taken to be the present worth to the owners of future benefits from investments. The investor has to bear in mind the value of these investments. An appropriate set of weights have to be applied with the use of forecasted benefits to estimate the value of the investment assets such as stocks, debentures, and bonds and other assets. Comparison of the value with the current market price of the assets allows a determination of the relative attractiveness of the asset allows a determination of the relative attractiveness of the asset. Each asset must be value on its individual merit.

Portfolio construction and feed-back: Portfolio construction requires knowledge of different aspects of securities in relation to safety and growth of principal, liquidity of assets etc. In this stage, we study, determination of diversification level, consideration of investment timing selection of investment assets, allocation of invest able wealth to different investments, evaluation of portfolio for feed-back.

INVESTMENT DECISIONS- GUIDELINES 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 requires greater competence and skill-along with a touch of good luck too-to invest in equity

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shares. Here are some general guidelines to play to equity game, irrespective of weather you aggressive or conservative.

Adopt a suitable formula plan. Establish value anchors. Assets market psychology. Combination of fundamental and technical analyze. Diversify sensibly. Periodically review and revise your portfolio.

Requirement of portfolio:

1. Maintain adequate diversification when relative values of various securities in the portfolio change.

2. Incorporate new information relevant for return investment.

3. Expand or contrast the size of portfolio to absorb funds or with draw funds.

4. Reflect changes in investor risk disposition. . Qualitiles For successful Investing:

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Contrary thinking Patience Composure Flexibility Openness

INVESTORS PORTFOLIO CHOICE:

An investor tends to choose that portfolio, which yields him maximum return by applying utility theory. Utility Theory is the foundation for the choice under uncertainty. Cardinal and ordinal theories are the two alternatives, which is used by economist to determine how people and societies choose to allocate scare resources and to distribute wealth among one another.

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The former theory implies that a consumer is capable of assigning to every commodity or combination of commodities a number representing the amount of degree of utility associated with it. Were as the latter theory, implies that a consumer needs not be liable to assign numbers that represents the degree or amount of utility associated with commodity or combination of commodity. The consumer can only rank and order the amount or degree of utility associated with commodity.

In an uncertain environment it becomes necessary to ascertain how different individual will react to risky situation. The risk is defined as a probability of success or failure or risk could be described as variability of out comes, payoffs or returns. This implies that there is a distribution of outcomes associated with each investment decision. Therefore we can say that there is a relationship between the expected utility and risk. Expected utility with a particular portfolio return. This numerical value is calculated by taking a weighted average of the utilities of the various possible returns. The weights are the probabilities of occurrence associated with each of the possible returns. MARKOWITZ MODEL THE MEAN-VARIENCE CRITERION Dr. Harry M.Markowitz is credited with developing the first modern portfolio analysis in order to arrange for the optimum allocation of assets with in portfolio. To reach this objective, Markowitz generated portfolios within a reward risk context. In essence, Markowitzs model is a theoretical framework for the analysis of risk return choices. Decisions are based on the concept of efficient portfolios.

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A portfolio is efficient when it is expected to yield the highest return for the level of risk accepted or, alternatively, the smallest portfolio risk for a specified level of expected return. To build an efficient portfolio an expected return level is chosen, and assets are substituted until the portfolio combination with the smallest variance at the return level is found. At this process is repeated for expected returns, set of efficient portfolio is generated. ASSUMPTIONS: 1. Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period. 2. Investors maximize one period-expected utility and posses utility curve, which demonstrates diminishing marginal utility of wealth. 3. Individuals estimate risk on the risk on the basis of the variability of expected returns. 4. Investors base decisions solely on expected return and variance or returns only. 5. For a given risk level, investors prefer high returns to lower return similarly for a given level of expected return, Investors prefer risk to more risk.

Under these assumptions, a single asset or portfolio of assets is considered to be efficient if no other asset or portfolio of assets offers higher expected return with the same risk or lower risk with the same expected return

THE SPECIFIC MODEL

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In developing his model, Morkowitz first disposed of the investment behavior rule that the investor should maximize expected return. This rule implies that the nondiversified single security portfolio with the highest return is the most desirable portfolio. Only by buying that single security can expected return be maximized. The single-security portfolio would obviously be preferable if the investor were perfectly certain that this highest expected return would turn out be the actual return. However, under real world conditions of uncertainty, most risk adverse investors join with Markowitz in discarding the role of calling for maximizing expected returns. As an alternative, Markowitz offers the expected returns/variance of returns rule. Markowitz has shown the effect of diversification by reading the risk of securities. According to him, the security with covariance which is either negative or low amongst them is the best manner to reduce risk. Markowitz has been able to show that securities which have less than positive correlation will reduce risk without, in any way bringing the return down. According to his research study a low correlation level between securities in the portfolio will show less risk. According to him, investing in a large number of securities is not the right method of investment. It is the right kind of security which brings the maximum result. In order to know how the risk of the stock or script, we use the formula, which is given below: -----------Standard deviation =

variance

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Variance

= (1/n-1) (R-R) ^2 t =1

Where (R-R) ^2=square of difference between sample and mean. n=number of sample observed. After that, we need to compare the stocks or scripts of two companies with each other by using the formula or correlation co-efficient as given below. n

Co-variance (COVAB) = 1/n (RA-RA) (RB-RB) t =1 (COV AB) Correlation-Coefficient (P AB) = --------------------(Std. A) (Std. B) Where (RA-RA) (RB-RB) = Combined deviations of A&B (Std. A) (Std B) =standard deviation of A&B COVAB= covariance between A&B n =number of observation The next step would be the construction of the optimal portfolio on the basis of what percentage of investment should be invested when two securities and stocks are combined i.e. calculation of two assets portfolio weight by using minimum variance equation which is given below. FORMULAE (Std. b) ^2 pab (Std. a) (Std. b)

Xa

=------------------- ----------------------------------

34

(Std. a) ^2 + (std. b) ^2 2 pab (Std. a) (Std. b) Where Std. b= standard deviation of b Std. a = standard deviation of a Pab= correlation co-efficient between A&B The next step is final step to calculate the portfolio risk (combined risk) ,that shows how much is the risk is reduced by combining two stocks or scripts by using this formula: ___________________________________

p=

X1^21^2+X2^22^2+2(X1)(X2)(X12)1

Where X1=proportion of investment in security 1. X2=proportion of investment in security 2. 1= standard deviation of security 1. 2= standard deviation of security 2. X12=correlation co-efficient between security 1&2. p=portfolio risk

INDUSTRYPROFILE
HISTORY OF STOCK EXCHANGES IN INDIA

The origin of the stock exchange in India can be traced back to the later half of19th century .After the American civil war (1860-61) due to the share mania of the public the number of broker dealing in shares increased. The broker organized an informal association in Mumbai named the native stock and share brokers association in 1875.

35

Increased activity in trade and commerce during the first world war and second world resulted in an increase in stock trading. The growth of stock exchanges suffered asset back the end of world war. Worldwide depression affected them. Most of stock exchange in the early stages had a speculative nature of working without technical strength. After independence, government took keen interest to regulate the speculative nature of stock exchange working. In that direction, securities and contract government to regulation act 1956. was passed. This gave powers to central government to regulate the stock exchanges. Further to develop secondary market in the country, stock exchanges were established in different centers like Chennai, delhi, nagpur, kanpur, Hyderabad, and banglore. The SER Act recognized the stock exchanges in Mumbai, Chennai, delhi, Hyderabad, Ahemadabad, and indoor. The banglore stock exchange was recognized in 1963. at present there are 23 stock exchanges. The setting up of national stock exchange (NSE) and OTCEI (Over the counter exchange of india) with screen based trading facility resulted in more stock exchanges turning towards the computer based trading. Bombay stock exchange (BSE) introduced the screen based trading system in 1995, which is known as BOLT (Bombay on-line trading system). Madras stock exchange introduced Automated Network trding System (MANTRA) on October 7th 1996. apart from Bombay stock exchange , (BSE), Delhi, Pune , Bangalore,

DEFINITION OF STOCK EXCHANGE: Stock exchange means any body or individual whether in corporate or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. NEED FOR STOCK EXCHANGE:

36

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, where as investors demand liquidity. The solution to this problem gave way for the origin of Stock Exchange, which is a ready market for investment and liquidity. FUNCTIONS OF STOCK EXCHANGE: Maintains active trading Shares are traded on the stock exchanges, enabling the investors to buy and sell securities. The prices may vary from transaction. A continuous trading increases the liquidity or marketability of the shares traded on the stock exchanges. Fixation of prices: prices are determined by the transition that flow from investors demand and the supplies preference. Usually the trades prices are named known to the public. This helps the investors to make better decisions ENSURES SAFE AND FAIR DEALINGS: The rules, regulations and byelaws of the stock exchanges provide a measure of safety to the investors it get a fair deal. Aids in financing the industry. Continuous market for shares provides a favorable climate for rising capital. The negotiability and transferability of the securities help the companies to raise long term funds. Investor willing to subscribe the initial pubic offerings (IOP).This stimulates the capital formation.

DISSEMINATION OF INFORMATION: Stock exchange provide information through their various publics their publish the share prices traded on their basis along with the volume traded. Directory of corporate information is useful for the investors assessment regarding the corporate. Handbooks and pamphlets provide information regarding of the stock exchanges.

37

PERFORMANCE INDUCERS: The prices of stocks reflects the performance of the traded companies this makes the corporate more the with its public image tries to maintain good performance. SELF-REGULATING ORGANIZATION: The stock exchange monitors the integrity of the member brokers listed companies and clients continuous internal audit safeguards the investors against unfair practices it settles the disputes between member brokers investors and brokers.. INSTRUMENT TRADEED IN THE STOCK EXCHANGE: The securities in which individual investors are allowed ti trade in the exchange are as follows 1. Equity shares 2. Preference shares. 3. Convertible&party convertible debentures 4. Government securities.

STOCK EXCHANGE IN INDIA: S.No 1 2 3 4 5 6 NAME OF THE STOCK EXCHANGE BOMBAY Stock Exchange Hyderabad Stock Exchange Ahmedabad share & Stock Exchange Calcutta Stock Exchange association Limited Delhi Stock Exchange Association Limited Madras Stock Exchange Association Limited YEAR 1875 1943 1957 1957 1957 1957

38

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Indoor Stock Brokers Association Banglore Stock Exchange Cochin Stock Exchange Pine Stock Exchange Limited U.P Stock Exchange Association Limited Ludhiana Stock Exchange Association Limited Jaipur Stock Exchange Limited Gauhathi Stock Exchange Limited Mangalore Stock Exchange Limited Mabhad Stock Exchange Limited, Patna Bhuvaneswar Stock Exchange Limited Over the counter exchange of India, Bombay Saurashtra Kutch Stock Exchange Limited Vadodara Stock Exchange Limited Coimbatore Stock Exchange Limited Meerut Stock Exchange Limited National Stock Exchange Limited Integrarted Stock Exchange

1958 1963 1978 1982 1982 1983 1984 1984 1985 1986 1989 1989 1990 1991 1991 1991 1992 1999

STOCK EXCHANGE IN WORLD: S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 COUNTRY Russia Argentina Thailand Pakistan Indonesia US Czech Republic Mexico Brazil Japan Malaysia China Singapore South Korea Spain US India INDEX Moscow Times Merval SET Karachi 100 Jak comp NASDAQ PX50 IPC Bovespa Nikkei 225 KISE COMP Shanahai comp Straits Times Seoul COMP Madrid General S&P 500 SENSEX

39

18 19 20 21 22 23 24 25

US Germany Hong Kong Canada India UK Australia France

Dow jones Dax Hang seng S & P TSX COMPOSITE NIFTY FISE 100 All Ordinates CAC 40

BOMBAY STOCK EXCHANGE The Bombay stock exchange, existed in Mumbai, popularly known as BSE was established in 1875 as The Native Share and Stock brokers association as a voluntary non-profit making association. It has an evolved over the year into its present status as the premiere Stock exchange in the country it may be noted that the stock exchange the oldest one in Asia, even older than the Tokyo Stock Exchange, which was founded in 1878. The exchange, upholds the interest of the investors and insurers dressed 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 and conducing investor education programmers. A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange. The executives directors as the chief executive officer are responsible for the day to day administration of the exchange. The average daily turnover of the exchange during the year 2000-01 (April-March) was Rs.3984.19 cores and average number of Daily trades 5.69 lakes. However the average daily turnover of the exchange during the year 2001-02 has declined to Rs.1244.10 cores and number of average daily trades during the period to 5.17 lakes. The average daily turnover of the exchange during the year 2002-03 has declined and number of average daily trades during the period is also decreased. The Ban on all deferral products like BLESS AND ALBM in the Indian capital markets by SEBI with effect from

40

July 2, 2001, abolition of account period settlements, introduction of compulsory rolling settlements in all scripts traded on the exchange with effect from Dec 31, 2001, etc., have adversely imprecated the liquidity and consequently there is a considerable decline in the daily turnover of the exchange present scenario is 110363 lakes and number of average daily trades 1075 lakes.

BSE INDICES: In order to enable the market participants, analysts etc., to track the various ups and downs in the Indian stock market, the exchange has introduced in 1986 an equity stock index called BSE-SENSEX that subsequently became the barometer of the movements of the share prices in the Indian stock market. It is a market capitalization weighted index of 30 components stocks representing a sample of large, well-established and leading companies. The base year sensex is 1978-79. The sensex is widely reported in both domestic and international markets through print as well as electronic media. Sensex is calculated using a market capitalization weighted method. As per this methodology, the level of the index reflects the total market value of all 30 component stocks from different industries related to particular base period. The total market value of a company is determined by multiplying the price of its stocks by the number of shares outstanding. Statisticians call an all index of a set of combined variables (such as price and number of shares) a composite index. An indexed number is sued to represent the results of this calculation in order to market the value easier to work with and track over a time. It much easier to graph a chart based on indexed values than one based on actual values world over majority of the well-known indices are constructed using Market Capitalization weighted method. In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of the 30 companies in the index by a number called the index Divisor. The Divisor is the only link to the original base period value of the SENSEX. The Divisor keeps the Index comparable over a period or time and if the reference point for the entire index maintenance adjustments. SENSEX is widely used to

41

describe the mood in the Indian stock markets. Base year average is changed as per the formula new base year average = old base year average * (new market value/old market value.

National Stock Exchange: The NSE was incorporated in Nov 1992 with an equity capital of Rs.25 cores. The international securities consultancy (ISC) of Hong Kong has helped in setting up NSE. ISE has prepared the detailed business plans and installation of hardware and software systems. The promotions for NSE were financial institutions, insurances companies, banks and SEBI capital market Ltd, infrastructure leasing and financial services Ltd and stock holding corporation Ltd. It has been set up to strengthen the move towards professionalisation of the capital market as well provided nation wide securities trading facilities to investors. NSE is not an exchange in the traditional sense where brokers own and manage the exchange.A two tier administrative set up involving a company board and a governing abroad of the exchange envisaged. NSE is a national market for shares PSU bonds, debentures and government securities since infrastructure and trading facilities are provided. NSE-NIFTY: The NSE on April 22, 1996 launched a new equity index. The NSE-50. The new index, which replaces the existing NSE-100 index, is expected, to serve as an appropriate index for the new segment of futures and options. Nifty means National Index for Fifty Stocks. The NSE-50 comprises 50 companies that represent 20 broad industry groups with an aggregate market capitalization of around Rs.1, 70,000 cores. All companies included in the index have a market capitalization in excess of Rs.500 cores each and should have traded for 85% of trading days at an impact cost of less than 1.5%. The base period for the

42

index is the close of prices on Nov, 1995, which makes one year of completion of operation of Noses capital market segment. The base value of the index has been set at 1000.

COMPANY PROFILE

Unicon Investment Solutions

Unicon has been founded with the aim of providing world class investing experience to hitherto underserved investor community. The technology today has made it possible to reach out to the last person in the financial market and give him the same level of service which was available to only the selected few. We give personalized premium service with reasonable commissions on the NSE, BSE & Derivative market through our Equity broking arm Unicon Securities Pvt Ltd. and Commodities on NCDEX and MCX through our Commodity broking arm Unicon Commodities Pvt. Ltd. With our sophisticated technology you can trade through your computer and if you want human touch you can also deal through our Relationship Managers out of our more than 100 branches spread across the nation. We also give personalized services on Insurance (Life & General) & Investments (Mutual Funds & IPO's) needs, through our Insurance & Investment distribution arm Unicon Insurance Advisors Pvt. Ltd. Our tailor-made customized solutions are perfect match to different financial objectives. Our distribution network is backed by in-house back office support to serve our customers promptly. MISSION: To create long term value by empowering individual investors through superior financial services supported by culture based on highest level of teamwork, efficiency and integrity. VISION: To provide the most useful and ethical Investment Solutions - guided by values driven approach to growth, client service and employee development. 43

MANAGEMENT TEAM : Mr.Gajendra Nagpal (founder and CEO) Mr. Ram Gupta (Co-founder and president) Mr .Y P Narang (chairman for fixed assets group) Mr.sandeep Arora (Chief Operation Manager) Mr.Vijay chopra(National Head) OUR PRODUCTS AND SERVICES : customers have the advantage of trading in all the market segments together in the same window, as we understand the need of transactions to be executed with high speed and reduced time. At the same time, they have the advantage of having all Advisory Services for Life Insurance, General Insurance, Mutual Funds and IPOs also. Unicon is a customer focused financial services organization providing a range of investment solutions to our customers. We work with clients to meet their overall investment objectives and achieve their financial goals. Our clients have the opportunity to get personalized services depending on their investment profiles. Our personalized approach enables clients to achieve their Total INVESTMENT OBJECTIVES.

1. Equity 2. Commodity 3. Depository 4. Distribution 5. NRI Services 6. Back Office 7. Fixed Income

44

EQUITY :

1.UniconPlus Browser based trading terminal that can be accessed by a unique ID and password. This facility is available to all our online customers the moment they get registered with us. FEATURES : 1. Trading at NSE & BSE: Add multiple scrips on the market watch. 2. Greater exposure for trading on the available margin. 3. Common window for display of market watch and order execution. 4. Real time updating of exposure and portfolio while trading. 5. Offline order placement facility. 6. Proxy link to enable trading behind firewalls. 2.UNICON SWIFT : Application based terminal for active traders. It provides better speed, greater analytical features & priority access to Relationship Managers. FEATURES: Trading at NSE & BSE: 1. Add any number of scripts in the Market Watch. 2. Tick by tick live updation of Intraday chart. 3. Greater exposure for trading on the margin available 4. Common window for market watch and order execution. 5. Key board driven short cuts for punching orders quickly. 6. Facility to customize any number of portfolios & watch lists.

45

7. Stop-loss feature. COMMODITY: Unicon offers a unique feature of a single screen trading platform in MCX andNCDEX.Unicon offers both Offline & Online trading platforms. You can Walk in or place your orders through telephone at any of our branch locations Online Commodity Internet trading Platform through UniFlex. Live Market Watch for commodity market (NCDEX, MCX) in one screen. Add any number of scrips in the Market Watch. Tick by tick live updation of Intraday chart. 1. Greater exposure for trading on the margin available Common window for market watch and order execution. 2. Key board driven short cuts for punching orders quickly. 3. Real time updation of exposure and portfolio. 4. Facility to customize any number of portfolios & watchlists. 5. Market depth, i.e. Best 5 bids and offers, updated live for all scripts. 6. Facility to cancel all pending orders with a single click. 7. Instant trade confirmations. 8. Stop-loss feature.

DISTRIBUTION Unicon is fast emerging as a leader in the Insurance and Mutual Funds distribution space. Unicon has over 100 branches and a huge number of Business Development Executives who help to source and service the customers throughout the country. Unicon is fast becoming the preferred Vendor Independent distribution houses because of providing efficient service like free pick-up of collection of cheques/DDs, Keeping track of the premiums etc to its customers.

46

Definition by SEBI:

A portfolio management is the total holdings of securities belonging to any person. Portfolio is a combination of securities that have returns and risk characteristics of their own; port folio may not take on the aggregate characteristics of their individual parts. Thus a portfolio is a combination of various assets and /or instruments of investments. Combination may have different features of risk and return separate from those of the components. The portfolio is also built up of the wealth or income of the investor over a period of time with a view to suit is return or risk preference to that of the port folio that he holds. The portfolio analysis is thus an analysis is thus an analysis of risk return characteristics of individual securities in the portfolio and changes that may take place in combination with other securities due interaction among them and impact of each on others.

Security analysis is only a tool for efficient portfolio management; both of them together and cannot be dissociated. Portfolios are combination of assets held by the investors.

These combination may be various assets classed like equity and debt or of different issues like Govt. bonds and corporate debts are of various instruments like discount bonds, debentures and blue chip equity companies. 47 nor scripts of emerging Blue chip

Portfolio analysis includes portfolio construction, selection of securities revision of portfolio evaluation and monitoring of the performance of the portfolio. All these are part of the portfolio management

The traditional portfolio theory aims at the selection of such securities that would fit in will with the asset preferences, needs and choices of the investors. Thus, retired executive invests in fixed income securities for a regular and fixed return. A business executive or a young aggressive investor on the other hand invests in and rowing companies and in risky ventures.

The modern portfolio theory postulates that maximization of returns and minimization of risk will yield optional returns and the choice and attitudes of investors are only a starting point for investment decisions and that vigorous risk returns analysis is necessary for optimization of returns

Portfolio analysis includes portfolio construction, selection of securities, and revision of portfolio evaluation and monitoring of the performance of the portfolio. All these are part of the portfolio management.

48

Calculation of return of ICICI Year Beginning price(Rs) 141.45 297.90 375.00 587.70 892.00 Ending price(Rs) 295.45 371.35 585.05 891.5 1238.7 Dividend(Rs)

2006 2007 2008 2009 2010

7.50 7.50 8.50 8.50 10.00

Return=Dividend+(Ending Price-Beginning price) Beginning Price Return(2006)= Return(2007) Return(2008) Return(2009) Return(2010) 7.50+(295.45-141.45) * 100 = 114.17% 141.45 = 7.50+(371.35-297.90) * 100 = 27.17% 297.90 = 8.50+(585.05-375) 375 = 8.50+(891.5-587.70) 587.70 = 10.00+(1238.7-892) 892
* 100

=58.28% =53.13% =39.98%

* 100

* 100

49

CALCULATION OF RETURN OF HDFC Year 2006 2007 2008 2009 2010 Beginning Price 358.5 645.9 771 1195 1630 Ending price 645.55 769.05 1207 1626.9 2877.75 Dividend 3 3.50 4.50 5.50 7.00

Return=Dividend+(Ending Price-Beginning price) Beginning Price Return(2006) = 3+(645.55-358.5) *100 358.5 =80.9%

Return(2007) Return(2008) Return(2009) Return(2010)

= 3.50+(769.05-645.9) 645.9 = 4.50+(1207-771) 771

* 100

=19.60% =57.13% =36.6% =76.97%

* 100

= 5.00+(1626.9-1195) 1195.9 =

* 100

7.00+(2877.75-1630) 1630

* 100

50

Calculation of return of WIPRO Year Beginning price(Rs) 1630.60 1752.00 755.00 462.00 603.00 Ending price(Rs) 1736.05 748.8 463.35 605.9 525.65 Dividend(Rs)

2006 2007 2008 2009 2010

1.00 29.00 5.00 5.00 8.00

Return=Dividend+(Ending Price-Beginning price) Beginning Price Return(2006) = 1.00+(1736.05-1630.60) * 100 1630.60 = 8.184%

Return(2007) Return(2008) Return(2009) Return(2010)

= 29.00+(748.8-1752.00) 1752.00 = 5.00+(463.35-755.00) 755.00

* 100

-55.60%

* 100

= -37.96% = 32.23% = -11.5%

= 5.00+(605.9-462.00) * 100 462.00 = 8.00+(525.65-603.00) * 100 603.00

51

Calculation of return of ITC Year Beginning price(Rs) 667 990 1318.95 142 176.5 Ending price(Rs) 983.5 1310.75 142.1 176.1 209.45 Dividend(Rs)

2006 2007 2008 2009 2010

15 20 31.80 2.65 3.10

Return=Dividend+(Ending Price-Beginning p Beginning Price Return(2006)=15+(983.5-667) * 667

Return(2007)=20+(1310.75-990) * 990 Return(2008)=

100 = 49.7%

100 = 34.4%
*

31+(142.1-1318.95) 1318.95

100 = 86.87%

Return(2009) =

2.65+(176.1-142) * 100 = 25.8% 142

Return(2010)=3.10+(209.45-176.5) * 100 = 20.45 176.5

52

Calculation of return of COLGATE&PALMOLIVE Year Beginning price(Rs) 133.65 161.5 179.2 270.5 390.9 Ending price(Rs) 159.7 179.1 269.15 388.45 382.1 Dividend(Rs)

2006 2007 2008 2009 2010

6.75 6.75 7.25 6.00 11.25

Return=Dividend+(Ending Price-Beginning p Beginning Price Return(2006)=6.75+(159.7-133.65) * 100 = 24.5% 133.65

Return(2007)=6.75+(179.1-161.5) * 161.5 Return(2008)=

100 = 13.58

7.25+(269.15-179.2) * 100 = 54.2 179.2

Return(2009)=6.00+(388.45-270.5) * 100 = 45.8 270.5 Return(2010)=11.25+(382.1-390.9) * 100 = 0.62 390.9

53

Calculation of return of CIPLA

Year

Beginning price(Rs) 898.00 1334.00 320.00 447.95 251.5

Ending price(Rs) 1371.05 317.8 448 251.35 212.65

Dividend(Rs)

2006 2007 2008 2009 2010

10.00 3.00 3.50 2.00 2.00

Return=Dividend+(Ending Price-Beginning price) Beginning Price Return(2006)=10.00+(1375.05-898.00) * 100 = 898.00 Return(2007) Return(2008) Return(2009) Return(2010) = 3.00+(317.8-1334.00) 1334 = 3.50+(448-320.00) 320 = 2.00+(251.35-447.95) 447.95 = 2.00+(212.65-251.5) 251.5 54.23%

* 100

= -75.95% = 41.09% = -43.44% = -14.65%

* 100

* 100

* 100

54

Calculation of return of RANBAXY

Year

Beginning price(Rs) 598.45 1109.00 1268 363 391

Ending price(Rs) 1095.25 1251.15 362.75 391.8 425.5

Dividend(Rs)

2006 2007 2008 2009 2010

15.00 17.00 14.50 8.50 8.50

Return=Dividend+(Ending Price-Beginning price) Beginning Price Return(2006) = 15.00+(1095.25-598.45) * 100 = 598..45 Return(2007) Return(2008) Return(2009) Return(2010) = 17.00+(1251.15-1109.00) 1109 = 14.50+(362.75-1268.00) 1268.00 = 8.50+(391.8-363) 363
* 100

85.52%

* 100

14.35%

* 100

= -70.24% = 10.27% = 10.99%

= 8.50+(425.5-391.00) 391.00

* 100

55

Calculation of return of MAHENDRA&MAHENDRA Year Beginning price(Rs) 113.45 392.55 547.10 514.80 913.00 Ending price(Rs) 388.8 545.45 511.6 908.45 861.95 Dividend(Rs)

2006 2007 2008 2009 2010

5.50 9.00 13.00 10.00 11.50

Return=Dividend+(Ending Price-Beginning p Beginning Price Return(2006)=5.50+(388.8-113.45) * 100 = 247.55% 113.45

Return(2007)=9.00+(545.45-392.55) * 100 392.55
Return(2008)=

= 41.24%

13.00+(511.6-547.10) * 100 = _-4.11% 547.10

Return(2009)=10.00+(908.45-514.80) * 100 = 78.41% 514.50 Return(2010)=11.50+(861.95-913.00) * 100 = -4.3% 913.00

56

Calculation of return of BAJAJ AUTO Year Beginning price(Rs) 502 1125.05 1149.00 2016.00 2648.65 Ending price(Rs) 1136.3 1131.2 2001.1 2619.15 2627.9 Dividend(Rs)

2006 2007 2008 2009 2010

14.00 25.00 25.00 40.00 40.00

Return=Dividend+(Ending Price-Beginning p Beginning Price Return(2006)=14.00+(1136.3 -502) * 502

Return(2007)=25.00+(1131.2-1125.05) * 1125.05 Return(2008)=

100 = 129.14%

100 = 2.77%
*

25.00+(2001.1-1149.00) 1149.00

100 = _76.34%

Return(2009)=40.00+(2619.15-2016.00) * 100 = 31.9% 2016.00 Return(2010)=40.00+(2627.9-2648.65) * 100 = 0.726% 2648.65

57

Calculation of standard deviation of ICICI _ R 58.652 58.652 58.652 58.652 58.652 _ R-R 56.048 -31.482 -0.372 -5.522 -18.672 _ ( R-R )2 3486.6 991.11 0.138384 30.492 348.64 4856.98 = 293.26 = 58.652 5 _ 1 (R-R) 2 n-1

Year 2006 2007 2008 2009 2010

Return (R) 114.7 27.17 58.28 53.13 39.98 293.26

_ Average (R) = R N Variance =

Standard Deviation = =

Variance

1 (11905.379) 5-1

= 34.846

58

Year 2006 2007 2008 2009 2010

Return (R) 80.9 19.60 57.13 36.6 76.97 271.2

_ R 54.24 54.24 54.24 54.24 54.24

_ R-R 26.66 -34.64 2.89 -17.64 22.73

_ ( R-R )2 710.75 1199.92 8.3521 311.16 516.65 2476.8

Calculation of standard deviation of HDFC

_ Average (R) = R = 271.2 = 54.24 N 5 Variance = _ 1 (R-R) 2 n-1 Variance

Standard Deviation = = =

1 (2476.8) 5-1 24.88

59

Calculation of standard deviation of WIPRO Year 2006 2007 2008 2009 2010 Return (R) 8.184 -55.60 -37.96 32.23 -11.5 -64.646 _ R -12.93 -12.93 -12.93 -12.93 -12.93 _ R-R 21.114 -42.67 -25.03 45.16 1.43 _ ( R-R )2 445.81 1820.73 626.5 2039.4 2.0449 4934.5

_ Average (R) = R = -64.646 = -12.93 N 5 60

_ Variance = 1/n-1 (R-R)2 Standard Deviation = Variance

1 (4934.5) 4

= 35.12

Calculation of standard deviation of ITC

Year 2006 2007 2008 2009 2010

Return (R) 49.7 34.4 -86.87 25.8 20.4 43.43

_ R 8.686 8.686 8.686 8.686 8.686

_ R-R 41.04 25.714 -95.556 17.114 11.714

_ ( R-R )2 1682.14 661.209 9130.94 293.88 137.21 11905.379

_ Average (R) = R = N

43.43 5 __

= 8.686

61

Variance = 1 (R-R) 2 N- 1

Standard Deviation = Variance = 1 (11905.379) 5-1

S.D

54.55

Calculation of standard deviation of COLGATE&PALMOLIVE Year 2006 2007 2008 2009 2010 Return (R) 24.5 13.58 54.2 45.8 0.62 138.7 __ Average R = R N = 138.7 = 27.74 5 __ 62 _ R 27.74 27.74 27.74 27.74 27.74 27.74 _ R-R -3.24 -14.16 26.46 18.06 -27.12 _ ( R-R )2 10.5 200.5 700.13 326.16 735.5 1972.79

variance

= 1 (R-R )2 n-1

Standard Deviation = Variance 1 4 = 22.2

(1972.79

Calculation of standard deviation of CIPLA Year 2006 2007 2008 2009 2010 Return (R) 54.23 -75.95 41.09 -43.44 -14.65 -38.72 _ Average (R) = R = -38.72 = -7.744 N 5 _ Variance = 1/n-1 (R-R)2 _ R -7.744 -7.744 -7.744 -7.744 -7.744 _ R-R 61.974 -68.206 48.834 -35.696 -6.906 _ ( R-R )2 3840 4652 2384 1274 47.692 12197.692

63

Standard Deviation = Variance

= 1 (12197.692) 4 =55.22

Calculation of standard deviation of RANBAXY

Year 2006 2007 2008 2009 2010

Return (R) 85.52 14.35 -70.24 10.27 10.99 50.89

_ R 10.18 10.18 10.18 10.18 10.18

_ R-R 75.34 4.17 -80.42 0.09 0.81

_ ( R-R )2 5676 17.39 6467 0.0081 0.6561 12161

_ Average (R) = R = 50.89 = 10.18 N 5

64

Variance = 1 (R-R) 2 n-1 Standard Deviation = = Variance 1 (12161) 4 = 55.13

Calculation of standard deviation of MAHENDRA&MAHENDRA _ R 71.758 71.758 71.758 71.758 71.758 _ R-R 175.79 -30.52 -75.868 6.652 -76.058 _ ( R-R )2 30902.8 931.47 5755.95 44.25 5784.82 43419.3

Year 2006 2007 2008 2009 2010

Return (R) 247.45 41.24 -4.11 78.41 -4.3 358.79

__ Average R

= R 65

n = 358.79 =71.758 5 Variance = __ 1 (R-R )2 n-1

Standard Deviation = Variance = 1 4 ) = 104.186

(43419.3

Calculation of standard deviation of BAJAJ AUTO

Year 2006 2007 2008 2009 2010

Return (R) 129.14 2.77 76.34 31.9 0.726 240.876 __ Average R = R N

_ R 48.175 48.175 48.175 48.175 48.175

_ R-R 80.965 -45.405 28.165 -16.275 -47.449

_ ( R-R )2 6555.3 2061.6 793.3 264.9 2251.4 11926.5

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= Variance = 1 N-1

240.876 = 48.175 5 __ (R-R) 2

Standard Deviation = Variance = = 1 4 54.6 )

(11926.5

Correlation between HDFC & ICICI DEVIATIONOFHDFC ___ RA-RA 26.66 -34.64 2.89 -17.64 22.73 DEVIATION OF ICICI __ RB-RB 56.048 -31.482 -0.372 -5.522 -18.672 COMBINED DEVIATION ___ ___ (RA-RA ) (RB-RB) 1494.24 1090.5 -1.075 97.41 -424.4 2256.675

Year 2006 2007 2008 2009 2010

n Co-variance (COVAB ) =1/n (RA-RA) (RB-RB) t=1

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Co-variance (COVAB )=1/5 (2256.675) =451.335 Correlation Coefficient (PAB) = COV AB (Std. A) (Std. B) 451.335 (24.88) (34.846) = 0.5206 =

Correlation between ITC&COLGATE -PALMOLIVE

DEVIATIONOF ITC Year ___ RA-RA 2006 2007 2008 2009 2010 41.04 25.714 -95.556 17.114 11.714

DEVIATION OF COLGATEPALMOLIVE __ RB-RB -3.24 -14.16 26.46 18.06 -27.12

COMBINED DEVIATION ___ ___ (RA-RA ) (RB-RB) -132.97 -364.1 -2528.4 309.07 -317.68 -3034.08

n Co-variance (COVAB )=1/n (RA-RA) (RB-RB) 68

t=1 Co-variance (COVAB )=1/5 (-3034.08) =-606.816 Correlation Coefficient (PAB) = COV AB (Std. A) (Std. B) = 606.816 (54.55) (22.21)

= - 0.5008

Correlation between CIPLA & RANBAXY DEVIATION 0F CIPLA ___ RA-RA 61.974 -68.206 48.834 -35.696 -6.906 DEVIATION OF RANBAXI __ RB-RB 75.34 4.17 -80.42 0.09 0.81 COMBINED DEVIATION ___ ___ (RA-RA ) (RB-RB) 4669.12 -284.42 -3927.23 -3.213 -5.59 448.667

Year 2006 2007 2008 2009 2010

n Co-variance (COVAB )=1/n (RA-RA) (RB-RB) 69

t=1 Co-variance (COVAB )=1/5 448.667 = 89.7334 Correlation Coefficient (PAB) = COV AB (Std. A) (Std. B) = 89.7334 (55.22)(55.13) =0.0295

Correlation between BAJAJ AUTO &MAHENDRA Year 2006 2007 2008 2009 2010 DEVIATIONOF BAJAJ ___ RA-RA 80.965 -45.405 28.165 -16.275 -47.449 DEVIATION OF M&M ___ RB-RB 175.79 -30.52 -75.868 6.652 -76.058 COMBINED DEVIATION ___ ___ (RA-RA ) (RB-RB) 14232.84 1385.76 -1909.22 -108.26 3608.87 17210

n Co-variance (COVAB )=1/n (RA-RA) (RB-RB) t=1

70

Co-variance (COVAB )=1/5 (17210) =3442 Correlation Coefficient (PAB) = COV AB (Std. A) (Std. B) = = 0.605 3442 (54.60) (104.586)

Correlation between HDFC&WIPRO DEVIATION OF HDFC ___ RA-RA 26.06 -34.64 2.89 -17.64 22.73 DEVIATION OF WIPRO __ RB-RB 21.114 -42.67 -25.03 45.16 1.43 COMBINED DEVIATION ___ ___ (RA-RA ) (RB-RB) 550.23 1478.1 -72.34 -796.6 32.50 1191.89 n Co-variance(COVAB )=1/n (RA-RA) (RB-RB) t=1

Year 2006 2007 2008 2009 2010

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Co-variance(COVAB )=1/5 (1191.89) =238.38 Correlation Coefficient (PAB) = COV AB (Std. A) (Std. B) = 238.38 (24.88) (35.123)

=0.273

Correlation between BAJAJ& ITC DEVIATION OF BAJAJ ___ RA-RA 80.965 -45.405 28.165 -16.275 -47.449 DEVIATION OF ITC __ RB-RB 41.04 25.714 -95.556 17.114 11.714 COMBINED DEVIATION ___ ___ (RA-RA ) (RB-RB) 3322.80 -1167.54 -2691.33 -278.53 -555.82 -1370.42 n Co-variance(COVAB )=1/n (RA-RA) (RB-RB) t=1 Co-variance(COVAB )=1/5 (-1370.42) 72

Year 2006 2007 2008 2009 2010

=-274.08 Correlation Coefficient (PAB) = COV AB (Std. A) (Std. B) = =-0.092 - 274.08 (54.60) (54.55)

STANDARD DEVIATION COMPANY ITC COL-PAL BAJAJ M&M HDFC ICICI RANBAXY WIPRO CIPLA STANDARED DEVIATION 54.55 22.21 54.60 104.186 24.88 34.846 55.13 35.123 55.22

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STANDARD DEVIATION
120 100 80 60 40 20 0
I O J IT C O LPA L XY BA R AN M AJ A W IP R M & IP LA C DF C IC IC

AVERAGE
COMPANY ITC COLGATE&PALMOLIVE BAJAJ M&M HDFC ICICI RANBAXY WIPRO CIPLA AVERAGE 8.686 27.74 48.175 71.758 54.24 58.652 10.18 -12.93 -7.744

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Interpretation:
Standard deviation is the indication at risk associated with a security it shows uncertainty of return from a security from above analysis M&M have high Standard deviation and it has practical to get good return ITC is low risky

CORRELATION OF COEFFICIENT
COMPANY HDFC&ICICI ITC&COLGATE BAJAJAUTO&MAHINDRA CIPLA&RANBAXY HDFC&WIPRO BAJAJ&ITC CIPLA&BAJAJ R 0.5206 0.5008 0.605 0.0295 0.0273 -0.09 0.690

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PORTFOLIO WEIGHTS
HDFC&ICICI

Formula:

Xa

(Std.b) 2

p ab (std.a )(std.b)

(std.a) 2 + (std.b) 2 -2 pab (std.a) (std.b)

Xb = Where X a

1Xa = HDFC

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Xb Std.a Std.b p ab

ICICI = 24.88 = 34.85

= 0.5206

Xa

(34.85) 2 (0.5206) (24.88 )(34.85) (24.88) 2 + (34.85)

2

- 2 (0.5206) (24.88) (34.85)

Xb

1Xa

X a = 0.8199 X b = 0.1801

PORTFOLIO WEIGHTS

Formula:

Xa

(Std.b) 2 p ab (std.a )(std.b) (std.a) 2 + (std.b) 2 -2 pab (std.a) (std.b)

Xb = Where X a

1Xa = WIPRO

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Xa

(34.846) 2 (0.586) (35.123 )(34.846) (35.123) 2 + (34.846)

2

- 2 (0.586) (35.123) (34.846)

Xb Xa = Xb

1Xa 0.4905

0.5095

PORTFOLIO WEIGHTS
ITC&COLGATE:

Formula:

Xa

(Std.b) 2 p ab (std.a )(std.b) (std.a) 2 + (std.b) 2 -2 pab (std.a) (std.b)

Xb = Where X a

1Xa = ITC

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Xb Std.a Std.b p ab

= =

COLGATE 54.55

= 22.21 = 0.5008

Xa Xb Xa =

= =

(22.21) 2 (0.5008) (54.55 )(22.21) (54.55) 2 + (22.21) 2 - 2 (0.5008) (54.55) (22.21) 1Xa 0.0503

X b = 0.9497

PORTFOLIO WEIGHTS
CIPLA&RANBAXY:

Formula:

Xa

(Std.b) 2 p ab (std.a )(std.b) (std.a) 2 + (std.b) 2 -2 pab (std.a) (std.b)

Xb = Where X a

1Xa = CIPLA

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Xb Std.a Std.b p ab Xa =

= RANBAXY = 55.22 = 55.13 = 0.0295 (55.13) 2 0.0295 (55.22) (55.13) (55.22) 2 + (55.13) 2 - 2 (0.0295) (55.22) (55.13) 1Xa 0.49916

Xb Xa =

X b = 0.50084

PORTFOLIO WEIGHTS
BAJAJ AUTO&MAHENDRA:

Formula:

Xa

(Std.b) 2 p ab (std.a )(std.b) (std.a) 2 + (std.b) 2 -2 pab (std.a) (std.b)

Xb =

1Xa = BAJAJ AUTO

Where X a Xb

= MAHENDRA

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Std.a Std.b p ab Xa Xb

54.60

= 104.186 = 0.605 = = (104.19) 2 o.605 (54.60) (104.19) (54.60) 2 + (104.19) 2 - 2 (0.605) (54.60) (104.19) 1Xa

X a = 1.6206 X b = -0.6206

Two Portfolios

Correlation Coefficient

COMPANY Xa COMPANY Xb

PORTFOLI O RETURN Rp 114.24 26.835 1.2335 122.61

PORTFOLO RISK

p
31.14 22.77 49.43 171.22

ICICI&HDFC ITC&COLGATE CIPLA&RANBAXI M&M &BAJAJ

0.5206 0.5008 0.605 0.0295

0.8199 0.0563 0.49916 1.6206

..0.1801 0.9497 0.50084 -0.620

__

__

PORTFOLIO RETURN ( Rp)=(Ra)(Xa) + (Rb) (Xb)

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PORTFOLIO RISK=

___________________________________

p=

X1^21^2+X2^22^2+2(X1)(X2)(X12)12

Portfolio return Rp

ICICI&HDFC ITC&COLGATE CIPLA&RANBAXI M&M &BAJAJ

114.24 26.835 1.234 122.61

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Interpretation:
It is proved fact that portfolio is lower than individual risks at assets of portfolio we absurd from the calculations in that risk of portfolio.

Portfolio risk
ICICI&HDFC ITC&COLGATE CIPLA&RANBAXI M&M &BAJAJ 31.14 22.77 49.43 171.22

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Interpretation:
It is proved fact that portfolio is lower than individual risks at assets of portfolio we absurd from the calculations in that risk of portfolio.

FINDINGS:
1. As far as the average returns of the selected companies are concerned, M&M BAJAJ is performing well in isolation where as CIPLA &RANBAXY is performing very poor. 2. As far as the standard Deviation of the selected companies are concerned, M&M&ICICI is very high, where as ITC&COLGATE, is giving less risk than other companies. This means that the higher the risk the higher the return.

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3. As far as the correlation co-efficient is concerned the study selects only negatively correlated scripts as suggested by Markowitz.The combination of securities with ITC is negatively correlated. 4. As far as Portfolio Risk & Return are concerned the combination of securities of ITC & Bajaj Auto is giving more return and meanwhile the risk involved in that security is also more.

SUGGESTIONS

1. As the average return of securities BAJAJ,ICICI, HDFC and ITC are HIGH, it is suggested that investors who show interest in these securities taking risk into consideration.

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2. As the risk of the securities ITC, BAJAJ, M&M and CIPLA are risky securities it suggested that the investors should be careful while investing in these securities.

3. The investors who require minimum return with low risk should invest in WIPRO & CIPLA&COLGATE.

4. It is recommended that the investors who require high risk with high return should invest in ICIC and BAJAJ and M&M .

5. The investors are benefited by investing in selected scripts of Industries.

CONCLUSIONS
ICICI&HDFC The combination of ICICI and HDFC gives the proportion of investment is 1.1801 and 0.8199 for ICICI and HDFC, based on the standard deviations The standard deviation for ICICI is 34.846 and for HDFC is 24.88.

86

Hence the investor should invest their funds more in HDFC when compared to ICICI as the risk involved in HDFC is less than ICICI as the standard deviation of HDFC is less than that of ICICI.

ITC & COLGATE PALMOLIVE

The combination of ITC and COLGATE gives the proportion of investment is 0.0563 and 0.50084 for ITC and COLGATE, based on the standard deviations The standard deviation for ITC is 54.55 and for COLGATE is 22.2. Hence the investor should invest their funds more in COLGATE when compared to ITC as the risk involved in COLGATE is less than ITC as the standard deviation of COLGATE is less than that of ITC. CIPLA&RANBAXY The combination of CIPLA and RANBAXY gives the proportion of investment is 0.49916 and 0.50084 for CIPLA and RANBAXY, based on the standard deviations The standard deviation for CIPLA is 55.22 and for RANBAXY is 55.13. When compared to both the risk is almost same, hence the risk is same when invested in either of the security.

MAHENDRA & BAJAJ AUTO

The combination of M&M and BAJAJ AUTO gives the proportion of investment is 1.6206 and 0.6206 for M&M and BAJAJ AUTO, based on the standard deviations The standard deviation for M&M is 104.186 and for BAJAJ AUTO is 54.6.

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Hence the investor should invest their funds more in BAJAJ AUTO when compared to M&M as the risk involved in BAJAJ AUTO is less than M&M as the standard deviation of BAJAJ AUTO is less than that of M&M.

CONCLUSIONS FOR CORRELATION In case of perfectly correlated securities or stocks, the risk can be reduced to a minimum point.In case of negatively correlative securities the risk can be reduced to a zero.(which is companys risk) but the market risk prevails the same for the security or stock in the portfolio.

As the study shows the following findings for portfolio construction; Investor would be able to achieve when the returns of shares and debentures Resultant portfolio would be known as diversified portfolio. Thus portfolio construction would address itself to three major via., selectivity, timing and diversification In case of portfolio management, negatively correlated assets are most profitable .Correlation between the BAJAJ & ITC are negatively correlated which means both the combinations of portfolios are at good position to gain in future . Investors may invest their money for long run, as both the combinations are most suitable portfolios. A rational investor would constantly examine his chosen portfolio both for average return and risk.

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BIBLIOGRAPHY

TEXT BOOKS AUTHORNAME 1.DONALDE, FISHER BOOKNAME PUBLICATION EDITION 6THEDITION

SECURITIES ANYLISIS &PORTFOLIOMANAGEMENT 89

2.RONALD J.JODON 3.V.A.AVADHANI

INVESTMENTS MANAGEMENT INVESTMENT MANAGEMENT

S.CHAND

Website
4.
WWW. Investopedia.com

5. www.nseindia.com 6. www.bseindia.com. 7. www.unicon investmentsolutions.com

Newspapers& magazine
8. DAILY NEWS PAPERS. ECONOMIC TIME, FINANCIAL EXPRES.ETC

ANNEXURE

Implementation of study:
For implementing the study,8 securities or scripts constituting the sensex market are selected of one month closing share movement price data From Economic Times and financial express from jan 3rd to 31st jan 2009. 90

In order to know how the risk of the stock or script, we use the formula, which is given below.. _________ Standard deviation= variance n _ Variance= (1/n-1) (R-R)2 t=1 _ Where (R-R)2 = square of difference between sample and mean n = number of sample observed After that we need to compare the stocks or scripts of two companies with each other by using the formula or correlation coefficient as given below. n __ __ Covariance [COVAB] =1/n (RA-RA) (RB-RB) t=1 correlation-Coefficient (PAB ) = (COVAB ) (std.A) (std.B) Where (RA-RA)(RB-RB) = Combined deviation of A&B (std.A) (std.B)deviation of A&B COVAB = Covariance between A&B n= number of observations. The next step would be the construction of the optimal portfolio on the basis of what percentage of investment should be invested when two securities and stocks are combined i.e. calculation of two assets portfolio weight by using minimum variance equation which is given below.

FORMULA

Xa

(Std. b) ^2 pab (Std. a) (Std. b) =------------------- ---------------------------------(Std. a) ^2 + (std. b) ^2 2pab (Std. a) (Std. b) 91

Where Std. b= standard deviation of b Std. a = standard deviation of a Pab= correlation co-efficient between A&B The next step is final step to calculate the portfolio risk (combined risk),that shows how much is the risk is reduced by combining two stocks or scripts by using this formula: _________________________________-

p=

X1^21^2+X2^22^2+2(X1)(X2)(X12)12
Where X1=proportion of investment in security 1. X2=proportion of investment in security 2. 1= standard deviation of security 1. 2= standard deviation of security 2. X12=correlation co-efficient between securities p=portfolio risk.

92