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Project on Portfolio
Management

AIM OF THE PROJECT:

To construct a portfolio of capital Rs 1000000, keeping in mind the current Indian and
global market scenario so as to maximize the returns within time horizon of 5 years.

Submitted to: Submitted by:

Prof S S Nayak Anurag Goel

09BS0000807

PORTFOLIO MANAGEMENT

Anurag Goel -09BS000807

Portfolio Project
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India Facts and Overview

India, home to 1.17 billion people, is a classic example of the double-edged sword. With
a 625+ million strong working population, there are no limits to the heights of
productivity that India can scale but creating a relatively decent standard of life for this
overwhelming number of people, squeezed into just 2.4% of the world’s land area, also
taxes the public and governmental systems in ways that few countries can claim
experience to.

Facts:
India is the 14th largest economy in the world with a current GDP of USD 1.1 trillion and
is rapidly expanding.

By 2015, it is expected that India’s GDP will hit the USD 2 trillion mark, thereby creating
one of the largest sub-continental economies in the developing world.

India has large forex reserves, to the tune of USD 276 billion and will only increase
them in the next two decades.

Portfolio: It is the professional management of various securities (shares, bonds etc.)

and assets (e.g., real estate), to meet specified investment goals for the benefit of the
investors. Investors may be institutions (insurance companies, pension funds,
corporations etc.) or private investors.

Purpose: The goal of portfolio management is to bring together various securities and
other assets into portfolio that address investor needs, and then to manage those
portfolios in order to achieve investment objectives. Portfolio management primarily
involves reducing risk rather than increasing return.

Aim:
To construct a portfolio of capital Rs. 10,00,000 so as to provide returns of 100% in next
5 years

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Portfolio Project
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PROFILE
Name Age Annual Income
Mr. Sethi 32 Rs. 1200000
Mrs. Sethi 31 Rs. 800000
Ayush Sethi 4 Nil

Risk bearing capacity: Moderate

Objective:
• Long term investments
• Children plan
• Pensions
• Equity exposure

Investment: Rs 1000000 P.a.

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Portfolio Project
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ALLOCATION
After considering the risk taking capacity of the investor, the fund will be allocated to
various assets classes in the following manner:

Asset / Instrument Amount(Rs) Percentage(%)

Equity 370000 37
Bonds/F.D 225000 22.5
Mutual funds 200000 20
Pension fund & Child plans 60000 6
Liquid funds 145000 14.5

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Equity Allocation
Equity Stocks Sector CMP(Rs) Return (1 Yr.) Qty Amount(Rs)
Infosys I.T 3148 28.79% 20 62960
Axis Bank Banking 1324.1 29.64% 75 99308
Hindalco Ind Ltd Steel 220 49.26% 700 154000
ACC Ltd. Cement 1077 23.96% 50 53850
Total equity 370118

IT SECTOR
The Indian information technology (IT) industry has played a key role in putting India on the global map.

Over the past decade, the Indian IT-BPO sector has become the country’s premier growth engine,
crossing significant milestones in terms of revenue growth, employment generation and value creation, in
addition to becoming the global brand ambassador for India.

According to a research report published by National Association of Software and Service Companies
(NASSCOM), ‘IT-BPO Sector in India: Strategic Review 2010,’ the IT-BPO industry is estimated to
aggregate revenues of US$ 73.1 billion in FY2010, with the IT software and services industry accounting
for US$ 63.7 billion of revenues.

The report estimates export revenues to gross US$ 50.1 billion in FY2010, growing by 5.4 per cent over
FY2009, and contributing 69 per cent of the total IT-BPO revenues. Software and services exports
(including BPO) are expected to account for over 99 per cent of total exports, employing around 1.8
million employees.

IT services is expected to grow by 2.4 per cent in 2010, and 4.2 per cent in 2011 as companies coming
out of recession harness the need for information technology to create competitive advantage.

NASSCOM said that the domestic IT-BPO is expected to grow by 15-17 per cent during FY11. According
to NASSCOM, the industry will witness a healthy growth in 2010, led by growth in the core markets and
supplemented by significant contributions from emerging markets. Growth drivers include a thrust on
platform BPO, Analytics, Finance & Accounting, Remote Infrastructure Management, ADM, and Cloud
Services. The annual survey on the outlook for FY10-11 said that the growth in the domestic IT-BPO
spend is driven by a robust economy, increased IT spending by government and adoption of IT by SMBs.

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BANKING SECTOR
The Banking sector in India has always been one of the most preferred avenues of employment. In the
current decade, this has emerged as a resurgent sector in the Indian economy. As per the McKinsey
report ‘India Banking 2010’, the banking sector index has grown at a compounded annual rate of over 51
per cent since the year 2001, as compared to a 27 per cent growth in the market index during the same
period. It is projected that the sector has the potential to account for over 7.7 per cent of GDP with over
Rs.7,500 billion in market cap, and to provide over 1.5 million jobs.

Today, banks have diversified their activities and are getting into new products and services that include
opportunities in credit cards, consumer finance, wealth management, life and general insurance,
investment banking, mutual funds, pension fund regulation, stock broking services, custodian services,
private equity, etc. Further, most of the leading Indian banks are going global, setting up offices in foreign
countries, by themselves or through their subsidiaries.

STEEL SECTOR
India is the 5th largest producer of steel in the world. Credit Suisse says that India’s steel sector will
continue to grow by 16% annually until 2012 fuelled by demand for construction projects up to USD 1
trillion. The Ministry of Steel has projected that the steel capacity is likely to be 124.06 million tonnes by
2011-12. Also, based on the status of MOUs signed by the private producers with the various State
Governments, it is expected that India’s steel capacity would be nearly 293 million tonnes by 2020.

CEMENT INDUSTRY
The cement industry is one of the vital industries for economic development in a country. The total
utilization of cement in a year is used as an indicator of economic growth.

Cement is a necessary constituent of infrastructure development and a key raw material for the
construction industry, especially in the government’s infrastructure development plans in the context of
the nation’s socioeconomic development.

Future Trends

• The cement industry is expected to grow steadily in 2012-2013 and increase capacity by another
150 million tons in spite of the recession and decrease in demand from the housing sector.
• The industry experts project the sector to grow by 9 to 10% for the current financial year provided
India's GDP grows at 7%.
• India ranks second in cement production after China.

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Bond/F.D. Allocation
LIC Infrastructure Bonds

If you are tax payer then you can save more tax by investing in LIC Infrastructure Bond. Additional
Rs.20,000 Tax Exemption under Section 80CCF.

LIC Infrastructure Bond at Glance:

• Term: 10 years
• Minimum lock in period: 5 years
• Loan on Bond: After 5 years
• Interest Rate: 7.85%-7.95% after tax.
• Exit options: Buy back or through Demat account
• Open for Individual or HUF.

Any individual or HUF can invest in LIC’s Infrastructure Bonds Between Rs.5000 – Rs.20,000/- This will
be over the Rs.1 lakh deduction allowed under Section 80C.

tax benefit example:

If you are in highest tax payers bracket of 30% can save an additional Rs 6,000 and if you happen to fall
in the lower tax bracket then you can still save Rs.2,000/- by investing in LIC infrastructure bonds this
financial year.

LIC infrastructure bonds not only offers capital safety but also offers fixed returns through ECS.

Term:
The infrastructure bonds will have a maturity of 10 years and lock-in period of 5 years.

After lock in period is over, you can ask issuer (LIC) to buy back bonds Or you can trade these bonds in
stock Exchange.

Amount Invested: Rs 125000

Fixed Deposit

The investor is advised fix deposit of Rs 100000 and maintain a balance of Rs 100000 in his bank
account, this will help for unforeseen circumstances in the future and also help in getting a return of
around 8.5% p.a.

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Mutual Fund Allocation

Mutual funds Amount(Rs) Return

DSP Blackrock Micro Cap Fund - Growth 76905 15.06%
HDFC Monthly Income Plan-Growth 76905 12.50%
Fidelity Tax Advantage fund - Div 48000 17.70%
Total 201810

DSP Blackrock Micro Cap Fund – Growth

Seeks to generate long term capital appreciation and current income from a portfolio constituted of equity and
equity related securities as well as fixed income securities.

Type of Scheme Fund Manager Apoorva Shah .

Open Ended
SIP
Nature Equity & Debt
STP
Option Growth
SWP
Inception Date May 27, 1999
Expense ratio(%) 2.08
Face Value (Rs/Unit) 10
Portfolio Turnover
250
773.96 as on Nov 30, Ratio(%)
Fund Size in Rs. Cr.
2010

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Hdfc monthly income plan – growth

The primary objective of the Scheme is to generate regular returns through investment primarily in Debt and
Money Market Instruments. The Secondary objective of the scheme is to generate long term capital
appreciation by investing a portion of the Scheme’s assets in equity and equity related instruments.

Type of Scheme Vinay Kulkarni, Shobhit

Open Ended Fund Manager
Mehrotra .
Nature Debt SIP

Option Growth STP

Inception Date Dec 26, 2003 SWP

Face Value (Rs/Unit) 10 Expense ratio(%) 1.72

702.15 as on Nov 30, Portfolio Turnover

Fund Size in Rs. Cr. NA
2010 Ratio(%)

Fidelity Tax Advantage fund – Dividend

The investment objective of the Scheme is to generate long-term capital growth from a diversified portfolio of
predominantly equity and equity-related securities.

Type of Scheme Fund Manager Sandeep Kothari .

Open Ended
SIP
Nature Equity
STP
Option Income/Dividend
SWP
Inception Date Feb 27, 2006
Expense ratio(%) 2.00
Face Value (Rs/Unit) 10
Portfolio Turnover
25
1294.87 as on Oct 29, Ratio(%)
Fund Size in Rs. Cr.
2010

Pension Funds & Child Plans Allocation

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SBI Retirement Plan (pension fund)

Under SBI Horizon II Pension Plan, your money is invested in equity, bond or money pension
funds. The investment plans also vary according to the proportion of money invested in
equity funds. In case of SBI Unit Plus II Pension Plans, you get to choose between pure
pension and pension cum life cover plans with flexibility to increase regular contributions,
top up payments and customize the plan by addition of riders. Investment in SBI Life Long
Pension Plans helps you avail tax deduction of up to Rs. 1, 00, 000 p.a. with 4 % p.a.
minimum guaranteed returns and tax-free withdrawals of up to 33 % from the Personal
Pension Account.

Amount: Rs 33000

LIC- CHILD FUTURE PLAN

Introduction:
This plan is specially designed to meet the increasing educational, marriage and other needs of growing
children. It provides the risk cover on the life of child not only during the policy term but also during the
extended term (i.e. 7 years after the expiry of policy term). A number of Survival benefits are payable on
surviving by the life assured to the end of the specified durations.

Options:
You may choose Sum Assured (S.A.), Maturity Age, Policy Term, Mode of Premium payment and
Premium Waiver Benefit.

Payment of Premiums:
You may pay the premiums regularly at yearly, half-yearly, quarterly or through Salary deductions over
the term of policy. Premiums may be paid either for 6 years or upto 5 years before the policy term.

Amount: Rs 27000

Liquid Fund Allocation

GOLD: The amount to be invested in gold would be Rs 100000; it is a very liquid security and has
been appreciating over many years. Gold prices increased approximately by 30% in the current year.
Thus it would be a very beneficial investment based on liquidity and returns.

CASH: It is very important to maintain certain amount of cash in hand in order to cope up with
unforeseen circumstances that can arise over a period of time. The amount to be kept on hand would be
Rs 45000.

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Total Return
Asset / Instrument Return % Return
Equity 136323 36.83
Bond/F.D. 18163 8.07
Mutual Fund 29690 14.71
Gold* 15000 15
Total 199176 19.92
*The return for Gold is estimated using a very conservative approach

The return calculated for the period of 1 year is estimated to be 19.92%. Considering
the CAGR for the period of 5years, the return expected is 148%. However the return is
not guaranteed, it is totally based on the market scenario over the time horizon.

Anurag Goel -09BS000807

Portfolio Project