PORTFOLIO MANAGEMENT

Submitted By: - Harshit Arora

1. ASSETS CLASSES IN INDIA

In India, numerous asset classes are available for investment through a variety of financial
instruments. Depending on the employed categorization, the number of asset classes may vary, but
the following asset classes are common:

1. Equities- The shares or stocks of publicly traded corporations constitute equity.

2. Bonds- Governments, public sector organisations, and corporations are all issuers of bonds,
which are fixed-income securities. Government bonds, corporate bonds, and debentures are
examples.
3. Mutual Funds- Mutual funds invest in a diversified portfolio of assets, which may include stocks,
bonds, or a combination of both.
4. Exchange-Traded Funds (ETFs)- ETFs are similar to mutual funds but trade on stock exchanges
like individual stocks. They can track various indices, sectors, or specific asset classes.
5. Commodities- On commodity exchanges, commodities such as gold, silver, crude oil, agricultural
products, and base metals can be traded.
6. Real Estate- Real estate investments consist of residential, commercial, and industrial
properties.
7. Derivatives- The financial instruments that are derived from a base asset. Futures, options,
swaps, and forwards are some common derivatives.
8. Fixed Deposits- Banks offer fixed deposits with a fixed rate of interest for a specified time
period.
9. National Pension Scheme (NPS)- The National Pension Scheme (NPS) is a government-
sponsored retirement savings programme that provides a mix of stocks, corporate bonds, and
government securities.
10. Public Provident Fund (PPF)- PPF is a tax-advantaged, fixed-interest-rate long-term savings plan.
11. Insurance- Insurance policies such as life insurance, health insurance, and others may contain
investment and protection components.
12. Initial Public Offerings (IPOs)- Investing in the shares of companies that are going public and
offering their shares on stock exchanges for the first time.

These are some of the most prominent investment asset classes available in India. Because each
asset class carries its own risks and potential returns, it is prudent to conduct extensive research and
seek professional advice before making investment decisions.
2. Which asset class has the maximum amount of investment in
India and why?
Historically, stocks have been one of the most widely held asset classes in India. There are numerous
reasons for this:

Long-Term Potential for High Returns Equities have the potential to generate high returns over the
long term. The Indian stock market has experienced substantial growth over the years, and many
investors have benefited from capital appreciation and dividends.

India's economy is among the fastest-growing major economies in the world. As the economy
expands, businesses in various industries have the potential to generate profits and increase their
stock prices, thereby attracting investors.

The stock exchanges of India, such as the National Stock Exchange (NSE) and the Bombay Stock
Exchange (BSE), offer a high level of liquidity. This means that investors can buy and sell stocks with
ease, allowing them to enter and exit positions rapidly.

Diversification: Equities provide the opportunity to diversify investments across numerous industries
and companies, thereby reducing risk relative to investing in a single asset or asset class.
SEBI regulates the Indian capital markets in order to ensure transparency, investor protection, and
fair practises. This regulatory oversight increases investor confidence, thereby contributing to the
popularity of stocks.

It is essential to recognise that the popularity and amount of investment in different asset classes can
fluctuate over time depending on market conditions, economic factors, and investor preferences.

Bifurcate all the asset classes by stating which is (risky and non-
risky) and evaluate how much investment in percentage is there in
each asset class in past 3 years?
Risky Asset Classes:

a. Equities (stocks): Due to their volatility and potential for significant price fluctuations, equities are
regarded as relatively risky. Investing in the stock market can be affected by a number of factors,
including economic conditions, company performance, and market sentiment.

b. Commodities: Commodities, such as gold, silver, crude oil, and agricultural products, are
susceptible to price volatility as a result of supply and demand dynamics, geopolitical events, and
market speculation.

Due to their leverage and potential for substantial gains or losses, derivatives, such as futures,
options, swaps, and forwards, are typically regarded as high-risk instruments.

Non-Risky (or Almost Non-Risky) Asset Classes:

a. Bonds: Bonds are considered less risky than stocks due to their fixed interest payments and
predetermined maturity date. Government bonds, especially those issued by stable economies, are
viewed as less risky than corporate bonds in general.

b. Fixed Deposits Banks' fixed deposits are regarded as relatively secure investments because they
offer a fixed interest rate and the bank guarantees the principal up to a certain limit.

c. The National Pension Scheme (NPS): It is a government-sponsored retirement savings plan that
offers a mix of stocks, corporate bonds, and government securities. It carries some market risk due to
its equity exposure, which can be mitigated through diversification and long-term investment
strategies.

d. Public Provident Fund (PPF): PPF is a long-term savings scheme with a fixed interest rate and is
considered a government-backed, safe investment option.

Insurance policies, such as life insurance, health insurance, and general insurance, provide protection
against a variety of risks. Although they may not offer direct investment returns, they provide
financial security and risk mitigation.

It is crucial to recognise that risk levels within each asset class can vary based on the investment
product or strategy chosen. Individual investment preferences and risk tolerance may also vary.