Assignment

FMS

Submitted By

Vishal Mehta

Roll No- 42

Program of Marketing Management

XAVIER INSTITUTE OF SOCIAL SERVICE

DR. CAMIL BULCKE PATH, RANCHI

Session: 2020-22
1. Mr. A aged 26 is chalking out an investment program to invest in common
stocks. Mr. A is married and working in an MNC. He is paid nearly 5
lakhs per year. He is having a well-furnished house and a car. He is a
member of the life insurance scheme. He has purchased his house on loan
scheme. The MNC with whom he is working has given him 15 years of job
contract. They may or may not renew their contract. Assist him in his
investment plan. Advise him about the components of his portfolio worth
of 5 lakhs.

Ans: As per portfolio definition, it is a collection of a wide range of assets that

are owned by investors. The said collection of financial assets may also be
valuables ranging from gold, stocks, funds, derivatives, property, cash
equivalents, bonds, etc. Individuals put their money in such assets to
generate revenue while ensuring that the original equity of the asset or
capital does not erode.

Depending on one’s know-how of the investment market, individuals may

either manage their portfolio or seek the assistance of professional financial
advisors for the same. As per financial experts, diversification is a vital
concept in portfolio management.
So thus, with a 5-lakh income, 15 years’ time horizon and home loan and
insurance to be paid. Considering all these he can go for moderate risk
investment. Therefore, he should invest in the following manner:
• Equity 30%
• Fixed Income Securities 20%
• Gold 10%
• Mutual Funds 18%
• NPS 2%: 2% on NPS should be spent as it is a govt initiated investment
which aims to fulfil retainment needs and gives a return of 8-10% and as
well risk free. Another 5% he should invest on mutual funds of large
company with high capitalization as dividend return can be enjoyed.
• 10% cash in hand should be kept as liquid funds.
2.The economy is doing well and the growth in the industrial sector is
moderate. On a particular date, the news of fall of the government at the
center hit the market. Immediately hysterical selling began, and many
stock prices fell by 10% to 20%. The Sensex fell by 300 points in two hour
time. However, within few days the shares resumed the same price they
had been before the fall of the government. The market regained too. In
your opinion, did the market collapsed temporarily because of interest
rate risk, purchasing power risk, management risk or what else? Analyse.

Ans: The investor would not have that a lot of trust in new government and the
economic situation would be exceptionally unpredictable. The choice made by
the new government may be in the blessing of investor or probably will not be
in the blessing of investor yet as the investor realize that the offer market history
repeats the same thing. That is the motivation behind why financial backers
have shown certainty after some time and as it was a transitory breakdown of
the market. Because of the transitory breakdown the investor would not have
sold every one of their offers rather than they hold by then of time. Since they
realize market will recapture once more. That is the reason it was a brief
breakdown.
Reasons of temporary collapse –
 Because of loss of trust in dynamic.
 Uncertainty of the market after the fall of the public authority because of
that need. as the modern area was performing acceptable that is the reason
investor have shown certainty and begun contributing once more. That is the
fundamental explanation of Sensex to ascend to its typical point around
there.
 Loss of certainty by the public authority: The breakdown of an
administration makes a frenzy among the investor as considering the
administration hazard, the instability of the offer market and because of loss
of trust in government by the investor.
 As it is an impermanent fall so there will not buy power hazard and interest
hazard will likewise not effect. In the drawn out it will not influence the
offers that is the reason the investor thought to hang on a specific position
so they could acquire a specific measure of interest and benefit which bring
about gain of Sensex.
3. It is argued that Gold is a non- productive investment and generates no
income in the form of interest0, dividend etc. Gold prices move only when
times are uncertain . Do you agree?
Ans: Yes, I agree with the statement.
Gold is only a never-ending zero-coupon bond, which keeps up the buying
worth of any money basically because it cannot be printed freely not at all like
government securities which can have limitless issuances. Typically, in some
occasions, it is expected to find that individuals have become more risk averse
and begin looking for monetary security more effectively. It is normal for
people to pick safe ventures which give significant returns or possibly stay
aware of inflations.
The restricted regular stock of gold persuades that this valuable metal would
guard them in dubious occasions.
Gold is basically a supporting item. The fundamental conviction is that would
consistently exchange as there would consistently be a giver and a taker who
would pay its value. However, if the economy is progressing nicely, it could be
smarter to put resources into the financial exchange, since the profits would
higher, and you will likewise get profit. However, assuming the economy is not
developing great, somebody ought to go for interests in gold.
4. What is best for the investors for investment in this pandemic Mutual
funds or Gold or Shares or some other financial instrument?
Ans:
 Gold Investments: As a standard asset allocation, 10% to 12% of the
portfolio is usually kept in gold as a hedge against riskier investments.
Sovereign Gold bonds give 2.5% returns over and above gold price
appreciation at the same time long term capital gains is exempt on maturity
and hence is best way to take exposure to gold compared to any other
physical, electronic, or paper mode of holding gold.
 Mutual Fund investments: In CY2020, RBI reduced the repo rate by 115
bps to 4%. As interest rates fall, bond prices rise and so debt mutual fund
investments across the spectrum benefited. Long-dated bonds like gilt, long
duration and dynamic bond funds delivered on an average 15% returns, even
medium to short term bond funds, corporate and banking PSU debt funds,
delivered double-digit returns.
 Investment in Shares: Since March lows, Indian indices are up by about
80%, driven by liquidity and low-interest rates. Liquidity, on account of
massive fiscal stimulus by governments all over the world and monetary
stimulus by global central banks has found its way to emerging markets.
After initial gains in the indices led by safety sectors such as IT, Pharma and
to some extent chemicals, telecom and FMCG and large-cap quality names
such as reliance, now economy-related sectors have started participating in
the rally as a vaccine is just around the corner and expected economic
recovery. Banks the biggest beneficiaries of economic recovery, consumer
discretionary, cyclicals, industrials and energy will do well. This trend is
expected to continue in CY 2021 where you may see profit booking in
defensives and money moving towards more economy-related themes.