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Portfolio Management of Reliance Securities
Portfolio Management of Reliance Securities
This project deals with the different investment decisions made by different
people and focuses on element of risk in detail while investing in securities. It also
explains how portfolio hedges the risk in investment and giving optimum return
to a given amount of risk. It also gives an in depth analysis of portfolio creation,
selection, revision and evaluation. The report also shows different ways of
analysis of securities, different theories of portfolio management for effective and
efficient portfolio construction. It also gives a brief analysis of how to evaluate a
portfolio.
OBJECTIVES OF THE STUDY
September 2007
In this study the statistical tools used are risk, return, average, variance,
correlation.
PORTFOLIO MANAGEMENT
ELEMENTS:
Portfolio policies
and strategies Portfolio construction
Attainment of
and revision asset
investor
allocation, portfolio
objectives
optimization, security
Capital market selection,
expectations implementation and
execution Performance
measurement
Relevant
Monitoring economic
economic, social,
and market input
political sector
factors
and security
considerations
Process of portfolio management:
The Portfolio Program and Asset Management Program both follow a disciplined
process to establish and monitor an optimal investment mix. This six-stage
process helps ensure that the investments match investor’s unique needs, both
now and in the future.
When the optimal investment mix is determined, the next step is to formalize
our goals and objectives in order to utilize them as a benchmark to monitor
progress and future updates.
4. SELECT INVESTMENTS
5 MONITOR PROGRESS
Just as markets shift, so do the goals and objectives of investors. With the
flexibility of the Portfolio Program and Asset Management Program, when the
investor’s needs or other life circumstances change, the portfolio has the
flexibility to accommodate such changes.
RISK:
Risk refers to the probability that the return and therefore the value of an asset or
security may have alternative outcomes. Risk is the uncertainty (today)
surrounding the eventual outcome of an event which will occur in the future. Risk
is uncertainty of the income/capital appreciation or loss of 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
compensation.
RETURN:
Return-yield or return differs from the nature of instruments, maturity period and
the creditor or debtor nature of the instrument and a host of other factors. The
most important factor influencing return is risk return is measured by taking the
price income plus the price change.
PORTFOLIO RISK:
Risk on portfolio is different from the risk on individual securities. This risk is
reflected by in the variability of the returns from zero to infinity. The expected
return depends on probability of the returns and their weighted contribution to
the risk of the portfolio.
RETURN ON PORTFOLIO:
GRAPHICAL REPRESENTATION
OF
.
LITERATURE REVIEW
Portfolio theory was introduced by Harry Markowitz (1952) with his paper on
“portfolio selection”. Before this work, investors focused on assessing the risks
and benefits of individual securities. Investment analysis identified securities that
offered the most promising opportunities for gain with the least amount of risk
and then constructed a portfolio from these securities. This approach resulted in a
set of securities that involved, for example, the pharmaceutical industry or the
automotive industry.
Determine these returns; Markowitz suggested the use of the observed values
for the past period.
Of science
Markowitz at this time pointed though that while diversification would reduce
risk, it still could not eliminate risk. He stated that an investor should maximize
the expected portfolio return, while minimizing expected variance return. One
stock might provide long-term growth while another might generate short term
dividends. Some stocks should be part of the portfolio in order to insulate it from
wide market fluctuations.
COMPANY PROFILE
Reliance Industries Limited is engaged in refining, including manufacturing of
refined petroleum products, and petrochemicals, including manufacturing of basic
chemicals, fertilizers and nitrogen compounds, plastic and synthetic rubber in
primary forms. The Company's segments include Refining, Petrochemicals, Oil
and Gas, Organized Retail and Others. The Refining segment includes production
and marketing operations of the petroleum products. The Petrochemicals segment
includes production and marketing operations of petrochemical products, including
polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, butadiene,
acrylonitrile, caustic soda and polyethylene terephthalate. The Oil and Gas
segment includes exploration, development and production of crude oil and natural
gas. The Organized Retail segment includes organized retail business in India. The
Others segment includes textile, Special Economic Zone (SEZ) development,
telecom or broadband business and media.
The number of shares of RIL are approx. 3.1 billion.[32] The promoter group,
Ambani family, holds approx. 46.32% of the total shares whereas the remaining
53.68% shares are held by public shareholders, including FII and corporate
bodies.[32] Life Insurance Corporation of India is the largest non-promoter
investor in the company, with 7.98% shareholding.[33]
Listing
The company's equity shares are listed on the National Stock Exchange of
India Limited (NSE) and the BSE Limited. The Global Depository
Receipts (GDRs) issued by the Company are listed on Luxembourg Stock
Exchange.[35][36] It has issued approx. 56 million GDRs wherein each GDR is
equivalent to two equity shares of the company. Approximately 3.46% of its total
shares are listed on Luxembourg Stock Exchange.[32]
Its debt securities are listed at the Wholesale Debt Market (WDM) Segment of the
National Stock Exchange of India Limited (NSE).[37]
It has received domestic credit ratings of AAA from CRISIL (S&P subsidiary) and
Fitch. Moody's and S&P have provided investment grade ratings for international
debt of the company, as Baa2 positive outlook (local currency issuer rating) and
BBB+ outlook respectively.[38][39][40] On the 28th of December, 2017, RIL
announced that it will be acquiring the wireless assets of Anil Ambani-
led Reliance Communications for about ₹23,000 crores
Values:
MANAGEMENT TEAM:
INDUSTRY PROFILE
1981–2000
In 1985, the name of the company was changed from Reliance Textiles Industries
Ltd. to Reliance Industries Ltd.[12] During the years 1985 to 1992, the company
expanded its installed capacity for producing polyester yarn by over 145,000
tonnes per annum.[12]
In 1993, Reliance turned to the overseas capital markets for funds through
a global depositary issue of Reliance Petroleum. In 1996, it became the first
private sector company in India to be rated by international credit rating
agencies. S&P rated Reliance "BB+, stable outlook, constrained by the
sovereign ceiling". Moody's rated "Baa3, Investment grade, constrained by the
sovereign ceiling".[17]
In 1995/96, the company entered the telecom industry through a joint venture
with NYNEX, USA and promoted Reliance Telecom Private Limited in India.[16]
2001 onwards
In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two
largest companies in terms of all major financial parameters. [18] In 2001–02,
Reliance Petroleum was merged with Reliance Industries.[13]
In 2002, Reliance announced India's biggest gas discovery (at the Krishna
Godavari basin) in nearly three decades and one of the largest gas discoveries
in the world during 2002. The in-place volume of natural gas was in excess of 7
trillion cubic feet, equivalent to about 1.2 billion barrels of crude oil. This was the
first ever discovery by an Indian private sector company.[13][19]
In 2005 and 2006, the company reorganized its business by demerging its
investments in power generation and distribution, financial services and
telecommunication services into four separate entities.[23]
In 2006, Reliance entered the organised retail market in India [24] with the launch
of its retail store format under the brand name of 'Reliance Fresh'.[25][26] By the
end of 2008, Reliance retail had close to 600 stores across 57 cities in India.[13]
In November 2009, Reliance Industries issued 1:1 bonus shares to its shareholders.
In 2010, Reliance entered the broadband services market with acquisition of Infotel
Broadband Services Limited, which was the only successful bidder for pan-India
fourth-generation (4G) spectrum auction held by the government of India.[27][28]
In the same year, Reliance and BP announced a partnership in the oil and gas
business. BP took a 30 per cent stake in 23 oil and gas production sharing contracts
that Reliance operates in India, including the KG-D6 block for $7.2
billion.[29] Reliance also formed a 50:50 joint venture with BP for sourcing and
marketing of gas in India.[30]
In 2017, RIL set up a joint venture with Russian Company Sibur for setting up
a Butyl rubber plant in Jamnagar, Gujarat, to be operational by 2018. [31]
Shareholding
The number of shares of RIL are approx. 3.1 billion.[32] The promoter group,
Ambani family, holds approx. 46.32% of the total shares whereas the remaining
53.68% shares are held by public shareholders, including FII and corporate
bodies.[32] Life Insurance Corporation of India is the largest non-promoter
investor in the company, with 7.98% shareholding.[33]
Listing
The company's equity shares are listed on the National Stock Exchange of
India Limited (NSE) and the BSE Limited. The Global Depository
Receipts (GDRs) issued by the Company are listed on Luxembourg Stock
Exchange.[35][36] It has issued approx. 56 million GDRs wherein each GDR is
equivalent to two equity shares of the company. Approximately 3.46% of its total
shares are listed on Luxembourg Stock Exchange.[32]
Its debt securities are listed at the Wholesale Debt Market (WDM) Segment of the
National Stock Exchange of India Limited (NSE).[37]
It has received domestic credit ratings of AAA from CRISIL (S&P subsidiary) and
Fitch. Moody's and S&P have provided investment grade ratings for international
debt of the company, as Baa2 positive outlook (local currency issuer rating) and
BBB+ outlook respectively.[38][39][40] On the 28th of December, 2017, RIL
announced that it will be acquiring the wireless assets of Anil Ambani-
led Reliance Communications for about ₹23,000 crores[41].
Operations
In July 2012, RIL informed that it was going to invest US$1 billion over the next
few years in its new aerospace division which will design, develop, manufacture,
equipment and components, including aircraft, engine, radars, avionics and
accessories for military and civilian aircraft, helicopters, unmanned airborne
vehicles and aerostats.[42]
On 31 March 2013, the company had 123 subsidiary companies and 10 associate
companies.[33]
RNAM is the asset manager of Reliance Mutual Fund (RMF) Schemes. Sundeep
Sikka is the Executive Director and Chief Executive Officer of RNAM.
As per March 2017, RMF manages the highest assets from the ‘beyond Top 15
cities’ category across all AMCs in the industry.
RNAM acts as the advisor for India focused Equity and Fixed Income funds in
Japan (launched by Nissay Asset Management) and Korea (Samsung Asset
Management). RNAM also manages offshore funds through its subsidiaries in
Singapore and Mauritius thereby catering to investors across Asia, the Middle East,
the UK, the US, and Europe.
Reliance Nippon Life Insurance Company is among the leading private sector life
insurance companies in India in terms of individual WRP (weighted received
premium) and new business WRP. The company is one of the largest non-bank
supported private life insurers with over 10 million policy holders, a strong
distribution network of over 700 branches and over 75,000 advisors as on March
31, 2017. The company holds one of the top claim settlement ratios in the industry:
it stands at 95.21% as of March 31, 2017.[4][16]
Ashish Vohra is the Executive Director and Chief Executive Officer of RNLI.[17]
In fiscal year 2016, after the enabling regulations, Nippon Life increased its stake
in Reliance Life from 26% to 49%, subsequent to the receipt of all regulatory
approval. Nippon Life Insurance, also called Nissay, is Japan's largest private life
insurer, with 25% market share. The company, with over 29 million policies in
Japan, offers a wide range of products, including individual and group life and
annuity policies through various distribution channels. It mainly uses face-to-face
sales channel for its traditional insurance products. The company primarily
operates in Japan, North America, Europe and Asia and is headquartered in Osaka,
Japan. It was ranked 114th in Global Fortune 500 firms in 2016.