Raksha Saraf (MBA/0076/58)

Shivangi Aggarwal (MBA/0285/58)

Abhishek Wagadre (MBA/0145/58)

Report 1
Investment Analysis and
Portfolio Management

Tanisha Chadha (MBA/0091/58)

Mayank Bhartia (MBA/0367/58)
Nandan Goel (MBA/0113/58)
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TABLE OF CONTENTS
INVESTMENT OBJECTIVE_________________________________________3
Defining Investment Objective_________________________________________________3
Goals____________________________________________________________________3

KEY INVESTMENT STRATEGIES___________________________________5

INDICATIVE ASSET ALLOCATION___________________________________7
KEY INVESTMENT RISKS__________________________________________8
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INVESTMENT OBJECTIVE

Defining Investment Objective

Akash, aged 32 years, is currently a Product Manager at Microsoft. He is an MBA graduate

from IIM Calcutta, currently living in Mumbai. He has been married for the last five years. His
wife Ashwini, 31 years old, is a Consultant at Boston Consulting Group. Both of them have
stable financial incomes and receive hefty bonuses each year. Both Akash and Ashwini love
to travel and try to plan at least two trips every year. They also have a daughter aged 3 years
named Aisha. Their day-to-day expenses are approximately 20% of their income. Akash’s
father recently passed away, leaving liquid assets worth INR 50,000,000 for him. After a few
days of the death, Akash visited his fund managers to seek advice on investing this amount.
While discussing, the following traits and habits were noticed -
His current income is enough to cover his expenses, leaving enough to save. Therefore, he
plans to invest this money to meet future long-term goals. Due to stable financial conditions,
Akash has a moderate appetite for risk.
Akash is ready to take risks for better returns. At the same time, he wants to diversify his
portfolio to have some liquid money for any unforeseen emergency situation.

The main objective of the investor is to satisfy his medium-term and long-term future goals.
As his expenses are satisfied with his current income and he doesn't possess any liability, he
would like to take a moderate risk.

Goals

Short-term Goals
 When Aisha turns 5 years (2 years from now), admission in a reputed international
school. This will require INR 25 lakhs (current prices); fund needed to meet recurrent
educational expenses.

Medium-term Goals
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 Shift to a new sea-facing well-furnished house worth INR 200 lakhs (current prices) in
6-7 years from now
 Gift a new car to parents costing INR 75 lakhs (current prices) in 5 years from now.

Long-term Goals
 Plan for Aisha’s higher education when she attains 18 years of age. Expected INR 100
lakhs would be required for meeting such expenses.
 Building two houses (one for himself and spouse, and another to gift to his children)
worth INR 500 lakhs.
 Akash plans to leave behind a will of INR 750 lakhs for Aisha which will be useful for
her after Akash’s death.
 Ashwini wants to plan a destination wedding for Aisha. The expected cost is INR 200
lakhs by the time Aisha is 26 years old.
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KEY INVESTMENT STRATEGIES

 Long Term Growth
The fund will achieve the goal of capital appreciation to serve the client's future needs mainly
through equity investments. Therefore, the investment portfolio consists mostly of those
equity stocks that have the potential to provide superior returns compared to other stocks in
the sector in the long run, albeit with increased risk. The fund believes that across sectors,
there are stocks with great potential to grow out of the bear market, and thus equity allocation
has been done accordingly. This would help ensure that the client's large expenditures like
his daughter's higher education, wedding, and expenses in building houses, which are mostly
planned in the medium to long run, are catered to.

 Income Investing
Keeping in mind the client's long-term planned expenditures, most of the fund investments
are made in equity stocks. However, the portfolio has also been diversified by investing in
fixed income and money market securities to stabilize the returns. The fixed-income securities
will ensure that the client has a steady source of predictable income (in the form of coupon
payments) in the medium to long term and can take advantage of any favorable interest rate
movements.

 Risk Control Measures

The following measures are taken to control the risk of the portfolio:
 Investments in different asset classes and across multiple sectors
 Equity stocks are majorly picked from NIFTY 50 index constituents and are large-cap
with strong fundamentals
 No equity stock has been given a weight of more than 15% to avoid an overly
concentrated portfolio
 Only AAA-rate corporate bonds are selected for the debt part of the portfolio
 The duration of the debt portfolio is kept low to reduce interest rate risk in this volatile
market condition
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 Diversification/ Diversified Allocation

To minimize the unsystematic risk, a healthy mix of asset classes i.e. money market
securities, debt securities and equities, has been ensured in the portfolio. This diversified
allocation is further drilled down within the asset classes as well. While the equity funds have
been allocated across multiple sectors, the debt funds have been invested in government as
well as corporate bonds of short-, medium- and long-term tenors. The money market part of
the portfolio has also been distributed among bills of varying maturities.

 Review:
The fund has an investment horizon of 5-years based on the medium to long term needs of
the client. The portfolio allocations have been made accordingly and a semi-annual
performance review interval has been decided to make any required changes to the portfolio
keeping in mind the portfolio complexity.
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INDICATIVE ASSET ALLOCATION

Taking into account the current financial situation, future obligation and the risk appetite of the
client, we have suggested Akash to invest in the following asset classes and in following
proportion -

ASSET CLASS ASSET ALLOCATION AMOUNT FROM CORPUS(INR)

Equity 65% 32,500,000

Debt 20% 10,000,000

Money Market Instruments 10% 5,000,000

Mutual Fund 5% 2,500,000

Reasons for allocations -

 Akash is young and well-established financially. Since Akash has a stable revenue
stream, he has a relatively high-risk tolerance. Hence, a major portion of the portfolio
(65%) is invested in Equities to earn higher returns.
 Investments in debt instruments will provide him with constant cash inflow, which can
be used to meet sundry expenses when his daughter will grow older. Debt investment
will also help him to diversify his portfolio.
 Money Market Instruments will ensure that there’s enough liquidity to meet any cash
requirements in urgent situations. This might also help them to finance their travel
plans.
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KEY INVESTMENT RISKS

 Market Risk - The movement of stock prices depends on market forces. The risk of
losses due to factors affecting overall markets is known as market risk. These are
unavoidable risk as they are mapped with market exposure.
 Regulatory Risk - Value of securities can be affected due to change in government
policies, tax system, or any other regulatory changes.
 Political Risk - Companies operations might be affected due to political instability of the
country. Hence, it’s one of the key risk every company faces.
 Liquidity Risk - The risk of being unable to sell securities at fair price when the investor
wants is known as liquidity risk. This risk is more significant in corporate bonds than
Government bonds.
 Credit Risk - The value of corporate bonds depends on the credit rating of the issuer.
Credit-rating depends on the macro-economic conditions of the economy as well as
the functioning of the company. This can significantly impact the value debt securities.
 Interest Rate Risk - Interest Rate risk refers to risk of losing value due to change in
interest rate movement. There is an associated reinvestment risk.
 Default Risk - Default risk arises when the issuer of fixed income securities is unable to
pay the obligated interest rate or principal amount in timely manner. Debt instruments
carry default risk.