Portfolio Management

Unnat Chauhan
M-09-34

Rajiv Gandhi Institute of Petroleum Technology

Objective: The objective of the project was to prepare a portfolio for the companies listed on NSE. The main aim of the project was to develop an understanding of making an decision about investment mix and policy, asset allocation for individuals and institutions and balancing risk against performance.

Initial Inputs: The historical data of the companies listed on NSE was taken. The historical span was 10 years i.e. from 19th April 2001 to 19th April2011. The market index used as reference was S&P Nifty. A list of around 35 companies were chosen and then each security was verified for it p value. 18 securities were discarded because of their insignificant p- value and mismatch of range values of security and market data. Each security has data for 2498 days and so does the S&P index. Expected return of each security is calculated as the average of return of all the days. The portfolio worksheet was prepared by using appropriate formulas. The worksheets for two cases were prepared, one considering short selling is allowed and other considering short selling is not allowed. Output: 1. When short selling was not allowed: The following 17 companies were considered: 1. ACC 2. Adani 3. BHEL 4. BPCL 5. Crompton Greaves 6. Cipla 7. Dena Bank 8. Grasim 9. Hero Honda 10. ICICI Bank 11. Indian Cement 12. MTNL 13. Ranbaxy 14. Raymond 15. SAIL 16. Tata Power 17. Wipro The following three companies were not added to the portfolio, as their Ci value was greater than Sharpe ratio.

ICICI bank, MTNL and Wipro. The value of Beta for the portfolio came out to be .058579398. The Vrp value of portfolio: 9.58525E-05. The maximum weightage was given to Crompton Greaves. .

2. When short selling was allowed: The same 17 companies were considered. The value of Beta was: .038082442. The Vrp value is: 9.38427E-05 The maximum weightage was given to Crompton Greaves.