ABSTRACT

Portfolio is a combination of securities that have Return and Risk

characteristics of their own. It is a combination of various assets and instruments of
investment with a combination of different features of risk and return, it is built up of wealth
or income of the investor over the period of time to suit his risk and return preferences.
Portfolio may or may not take on the aggregate characteristics of their individual parts.
Portfolio is the collection of financial or real assets such as equity shares, debentures,
bonds, treasury bills, and property etc.

The objective of portfolio management is security/safety of principal, stability of income,

capital growth, marketability, liquidity, and diversification and Favorable tax status.
Security is not only involves keeping the principal sum intact but also keeping intact its
purchasing power. Stability of income so as to facilitate planning more accurately and
systematically the reinvestment of income.

The investors who are risk averse can invest their funds in the portfolio combination
Cipla & Reliance, Indian Oil & Jindal Steel , in the calculated proportions. The investors
who are slightly risk averse or who are not so risk averse are suggested to invest in
Cipla & Indian Oil , Reliance & Jindal Steel and as these combinations bear slightly
high risk when compared with other combinations.

1
 CHAPTER – I
INTRODUCTION
SECURITY ANALYSIS:
The term investment is a word of many meanings. The investment refers to net
additions to the capital stock of the community. Investment decision is a part of our
economic life. Everybody takes such decisions in different context and at different times.
The investor deploys money in specific investment channels with the objective of better
returns. The investor has various alternative investment avenues. Savings are invested in
assets depending on their risky. An intelligent investor with skills of management can
reduce the risk and maximize returns.

CONCEPT OF SECURITY ANALYSIS:

Security analysis refers to the analysis of trading securities. It analyses the share
price returns and the risk involved in the investment. Every investment involves the risk and
the expected return is related to risk. The security analysis will help in understanding the
behavior of security prices, market and decision making for investment. If the analysis
includes scrip the analysis of a market with various securities it is known as macro picture
of the behavior of the market. The entire process of estimating return and risk of a security
is known as security analysis.
This traditional investment analysis when applied to securities emphasizes the
projection of prices ad dividends are known as security analysis. It involves the potential
price of a share and future dividend stream is forecast, then discounted back to the present
value. Such value is called as ‘’intrinsic value’’. Then the intrinsic value is compared with
the securities market price, If the current market price is lower than the intrinsic value, then
purchase is recommended. Further, the security analysis is built around the idea that
investors are concerned with two principal properties inherent in securities, the return that
can be expected from holding a security, and risk that is achieved will be less than the return
that was expected.

Generally, the investors are interested primarily in selling a security for more than they pay
for it. The investor hopes to achieve a higher reward than simply placing the money in a
saving account. An investor who seeks reward that exceeds those available on savings
account forces the real risk. There is no return without risk. The process of estimating return

2
 and risk for individual securities is known as ‘’security analysis’’. Security analysis is the
essence of valuation of financial instruments. The value of financial asset depends upon
their return and risk. The universal fact is that everyone must recognize the risk component
in risk situation

OBJECTIVES OF SECURITY ANALYSIS:

The following are the objectives of security analysis:
1. To estimate the risk and return related to a particular security.
2. To find out the intrinsic value of the security with a view to make a buy/sell decision
3. To identify the under valued securities to buy or over value securities to sell.
4. To analyze the stock market trends to understand the stock market pattern and behavior.
5. To forecast the future earning and dividends along with the price of the securities.
6. To find out the key determinants of the intrinsic value.
7. To analyse and point out the position of economy industry and the company with a view to
select the possible company for investment.

APPROACHES TO SECURITY ANALYSIS:

The security analysis aimed at identifying under securities to buy and over valued
securities to sell. It involves the entire process of estimating return and risk for an individual
security.
It is deeply rooted in fundamental concepts to measure the risk and return of security. It
emphasizes on the return and risk estimates rather than mere price and dividend estimates.
However, the return and risk estimates are dependent on share prices and accompanying
dividend stream.
Any forecast of security must necessarily consider the prospects of the economy. The
economic sets greatly influence the prospects of certain industries as well as the
psychological aspect of investing public.
The approaches for security analysis are broadly grouped into the following categories.
1) Fundamental analysis
2) Technical analysis
3) Efficient market hypothesis.

1) FUNDAMENTAL ANALYSIS:

3
 The first major analysis of securities analysis is the fundamental analysis. A
Fundamental analysis is a time honored value based approach depending. Upon a careful
assessment of the fundamental of an economy, industry and the company. The fundamental
analysis studies the general economic situation makes an evaluation of an industry and
finally does an in-depth analysis of both financial and the non financials of the company of
choice. The fundamental analysis is aimed at analyzing the various fundamentals or basic
factors that effect the risk return of the securities. The fundamental analysis involves the
analysis of the following:

A) THE ECONOMIC ANALYSIS

B) THE INDUSTRY ANALYSIS
C) THE COMPANY ANALYSIS

A) THE ECONOMIC ANALYSIS:

In the economic analysis the investor has to analyse the economic factor to forecast
of the economy in order to identify the growth of the economy and its trend. Further based
on the economic analysis the investor will identify the industry groups which are promising
in the coming years in order to choose the best company in such industry group. The
economic analysis provides the investor to develop a sound economic understand and be
able to interpret the impact of important economic indicators on the markets.

B) INDUSTRY ANALYSIS:
The object of the industry analysis is to assess the prospects of various industrial
groupings. The industry analysis helps to identify the industries with a potential for future
growth and to select companies from such industry to invest in its securities. The industry
analysis involves industry life cycle analysis, investment implication, structure and
characteristics of an industry.

C) THE COMPANY ANALYSIS:

Company analysis is the last leg in the economy, industry and company analysis sequence.
The company analysis is a study of variable that influence the future of a firm both
qualitatively and quantitatively. The purpose of company analysis is to know the intrinsic
value of a share of a company.
2) THE TECHNICAL ANALYSIS:

4
 As an approach to investment analysis, technical analysis is radically different from
fundamental analysis. The technical analysis is frequently used as a supplement to
fundamental analysis is, concerned with a critical study of the daily or weekly price volume
data of index comprising several shares. The technical analysis analyses the buying and
selling pressure, which govern the price trend. It helps the investors to buy cheap and sell
high, regardless of the type of company the investor choose. The technical analysis complies
a study of the market itself and not of the various external factors which effect the market.
According to technical analyst, all relevant factors get gets reflected in the volume of the
stock exchange transaction and the level of the share prices

3) EFFICIENT MARKET HYPOTHSIS:

The efficient market hypothesis is also called as “RANDOM WALK THEORY”. It
is the extension of fundamental and technical analysis to equity investment decisions.
Efficient market theory says that no investors can out perform the market for the simple
reason that there are numerous knowledgeable analysts and investors who would not allow
the market price to deviate from the intrinsic value due to their active buying and selling.
Therefore the current market price incorporates all fundamental information. According to
“WILLIAM SHARPE” A perfectly efficient market is one in which every security price
equalizes market value at all times. EUGEN FAMA expressed that “An efficient capital
market is a market that is efficient in processing in information. The prices of securities
observed at any time are based on “correct evaluation” of all information available at that
time. In an efficient market, prices fully reflect all available information.

The efficient market theory has the following three forms of efficiency:
1. Weak form of efficiency:
2. Prices reflect in all information found in the record of past prices and volumes.
3. Semi-strong- form of efficiency:
4. Prices reflect not only all information found in the records of past and volumes but also
other publicity available information.
5. Strong form of efficiency:
6. Prices reflect all available information, public as well as private.

5
CONCEPT OF PORTFOLIO MANAGEMENT:
Portfolio is the collection of financial or real assets such as equity shares,
debentures, bonds, treasury, bills and property etc. in a more general sense the term portfolio
may be used synonymous with the expression “collection of assets” which can even include
physical assets (gold, silver, real estate, etc). Portfolio means a collection of combination of
financial assets (securities) such as shares, debentures, government securities. Portfolios are
a combination of assets. Portfolio will consist of collection of securities. What is to be borne
in mind is that, in portfolio context, assets are held for investment purposes and not for
consumption purposes. These holding are the result of individual preferences and decisions
of the holders regarding risk and return an a host of other considerations.

Portfolio is the investment of funds in different securities in which the total risk of
the portfolio is minimized while expecting maximum return from it. Portfolio management
takes the ingredients of risk and returns for individual securities and considers the mixing of
these securities. The portfolio management in total includes the planning, super vision,
forming rationalism and conservatism involved in the collection of securities to meet
investor’s objectives. In entails choosing the one best portfolio to suit the risk-return
preferences of the investors. It also encompasses the evaluation and revising the portfolio in
view of changing risk, return and investors risk preferences

6
STATEMENT OF THE PROBLEM

It is a service activity which is associated with providing quantitative information

primarily financial in nature and that which may needed for making economic decisions
regarding reasoned choice among different alternative course of action. Financial
management is a process of identifying management, accumulation analysis, preparation,
interpretation and communication of financial information to plan evaluate and control.
Financial management is that specialized function of general management which is related
to the procurement of finance and its effective utilization for the achievement of the
common goal of the organization.
Security Analysis refers to the analysis of trading securities. It analysis the share
price returns and the risk involved in the statement. The security analysis aimed at
identifying under valued securities to buy and over valued securities to sell.
With the reasonable review of the literature a thorough work in studying the
effective functioning of the Security analysis and Portfolio management in Inter-connected
Stock Exchange, is felt a necessary in the explained circumstances, it is chosen for the
studying in Inter-connected Stock Exchange, Hyderabad.

7
NEED FOR THE STUDY:

 The investor today is looking at investing in securities, which would give him better
returns that an ordinary savings bank account or fixed deposits though at a certain
amount of risk.
 Every person save money by post poning consumption because future is uncertain. So,
they have to search out for efficient opportunities.
 Due to fast changing development in economic and industries scenario improving the
performance of the organization is essential.
 As a result undertaking an academic study on Security Analysis and Portfolio
Management will be a welcome step.
 This study will be defiantly help full in achieving the organization effectiveness.

8
 OBJECTIVES:

1) To study the investment pattern and it’s related risks and returns.

2) To understand, analyze and select the best Portfolio.

3) To find out the intrinsic value of security with a view to make a buy/ sell decision.

9
SCOPE OF THE STUDY

 Even though there are number of techniques for Portfolio analysis, Markowitz Model
has been choosing for the analysis.
 The scope of study has been restricted to Hyderabad Stock Exchange. SEBI role and
guidelines has been covered study, at large Indian stock market tendencies also has been
considered in the study.

10
 REAERCH METHODOLOGY

In attempting to pursue this research study topic qualitative as well as quantitative

approaches are undertaken.

Sources of Information:-
Both primary and secondary data were gathered and utilized for the study of Security
Analysis and Portfolio Management.

The statements cover the aspects of Security Analysis and Portfolio Management the and
associated issues. Personal interviews are taken with respondents to strengthen the
information.
Data collection tools, to obtain the data for the purpose of present study the following tools
used;

a) The data has been collected through HSE staff, the project guide and stock brokers.
b) The data has been collected through journals, news papers and internet.
Data analysis are analyzed using basic parametric techniques such as percentages and
averages etc, where ever they are required.

The data collection of the study consists of two kinds of data

1. Primary sources of data:

Which is first hand in nature, can be collected through.
 . Meeting with concerned peoples.
 . Personal observation.

2. Methods of collection of the data.

Secondary data: Which is already exists
Financial management text books.
 . Printed materials.
 . Journals & magazines.
 . News papers.

11
 . Text books.
 . Worldwide webs.

Sample size
Period of the study
A study covers for the financial year (2018– 2023)

Tools and Techniques

Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.

12
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
13
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
14
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
15
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
16
 Average returns.
Variance.
Standard deviation.
Correlation coefficient.
Beta.
 Average returns
 Variance
 Standard deviation
 Correlation coefficient
 Beta

17
LIMITATIONS OF THE STUDY:

 Limited access to company information.

 Detailed study of the topic was not possible due to limited size of the project.
 In this study the number of funds considered is only two funds of Motilal and they are
dividend fund and growth fund.
 In this study the statistical tools used are risk, return, average, variance, correlation.
 In this study specific data is collected.

18
 CHAPTER – II
REVIEW OF LITERATURE
Levine (2015)
States in the introduction of his book, “The emergency of PPM as a recognized set of
practices may be considered the biggest leap in project management technology since the
development of PERT and CPM in the late 1950s.” Project portfolio management is critical
for decision making, governance, and to ensure that business objectives are supported by the
right set of projects whereas project management is critical to ensure that budget, resource
allocation, activity and work are accurate and delivered on time. It appears clear that project
portfolio management differs significantly from management of individual projects and
programs. The development of project portfolio management starts with projects and thus
each framework will be discussed in the next two chapters.

PMI (2017)
A project is a “temporary endeavor to create a unique product, service, or results and it lasts
for a certain period of time” i.e., a project is unique and is of definite duration. Scope, Cost
and Time are major elements; Quality is ultimately affected by the balance between these
three elements. Projects can be seen as parts or “components” of the portfolio and hence it is
important to understand the relationship between them.

(Levine, 2015)
The project refers to three elements called triple constraints: Outcome, Cost and
Schedule/Duration. The triple constraints provided criteria for evaluation options for project
decision-making. Thus, the triple constraints solved problems for both the project manager
and upper management. Normally, if the feature does not satisfy the three criteria or if
extensions are not granted, then it is rejected. The project management process begins with
the initiation of a project, followed by planning, execution and control, and closing
processes. The Figure 1 below illustrates this process: (PMI, 2015).

Final Degree Project, Rasiha Delilbasic Project Portfolio Management 7 Figure 1:

Project Management five processes Relaying on triple constraints caused project managers

19
to chase after the wrong goal, satisfying constraints rather than satisfying the customer.
Something is nevertheless delivered by the deadline, but it is not really what the customer
wants. Consequently, lower customer acceptance leads to lower market sales and
organization profit. Since something was delivered somewhere near the budget, the project
was often considered a success, even if the project outcome was a failure. Obviously change
was needed. Future project managers need a longer-term business orientation that takes into
account project contribution to business results. That is why we have an extension of the
project management discipline to portfolio management. The portfolio combines a) the
organization’s focus of ensuring that projects selected for investment meet the portfolio
strategy b) the project management focus on delivering projects effectively and within their
planned contribution to portfolio. Figure 2 below describes the different aspects concerning
focus, scope, communication and organization between project portfolio management,
program management and project management. Figure 2: PPM, program and project
management relationship model.

(Rajegopal et al., 2017)A program is a group of related projects managed in a

coordinated way to obtain benefits and control NOT available from managing them
individually. Programs may include elements of related work outside of the scope of the
discrete projects in the program. Some projects within a program can deliver useful
incremental benefits to the organization before the program itself has completed." Final
Degree Project, Rasiha Delilbasic Project Portfolio Management 8 Program management
may provide a layer above the management of projects and focuses on selecting the best
group of projects, defining them in terms of their objectives and providing an environment
where projects can be run successfully. The key difference between a program and a project
is the finite nature of a project - a project must always have a specific end date, else it is an
ongoing program. There are two different views of how programs differ from projects. On
one view, projects deliver outputs, discrete parcels or "chunks" of change; programs create
outcomes .On this view, a project might deliver a new factory, hospital or IT system. By
combining these projects with other deliverables and changes, their programs might deliver
increased income from a new product, shorter waiting lists at the hospital or reduced
operating costs due to improved technology. The second view is that a program is nothing
more than either a large project or a set (or portfolio) of projects. On this view, the point of

20
having a program is to exploit economies of scale and to reduce coordination costs and
risks. The project manager's job is to ensure that their project succeeds.

According to “London (2014) shows that the US difference risk choice, defined as the
disparity between option-indirect deviation and realized difference, has predicting power for
international stock revenue. Taken together, these prior studies provide striking evidence
that the US market variables appear to have forecasting power for the returns of other
countries. The empirical evidence seems consistent with the notion that the US market
returns, and variances should be treated as state changing that can affect investors
„contribution opportunity sets in the international setting.” 2. According to “(G.D.F. Herzog
2017).

(H. Peyrl 2015) and (Z. Chen 2018)Considers some of the numerical challenges
associated with stochastic control problems in financial applications issue of strong MPC
utilizing straight grid imbalances. Accomplishments"

Krishi Prgati Awards"- 2017

Karvy Commodities regarded with Derivate House by the ASSOCHAM "- 2017.”Market
Excellence Awards, Commodities - Metal"- 2016 4. "The Skoch-BSE request of legitimacy
grant and the Skoch-BSE Aspiring Nation Award"- 2015 5. "NSDL Star Performer Award"-
2014A writing audit can be characterized as Investment Analysis and Portfolio Management
expresses that it is a methodology utilized in key intending to contrast different stocks with
each other so as to build up needs and choose the better and the great (Frank K. Reilly,
1987). Another key proportion used to relate the presentation of a portfolio in connection to
hazard and return is data proportion. It is utilized to check the exhibition of the speculation
director is connection to its benchmark. This proportion is only used to quantify the degree
to which the portfolio over - performed or failed to meet expectations in connection to a
benchmark, Richard C.

(Edwin J. Elton et al., 2014) demonstrate that a portfolio is something other than a rundown
of stocks and securities, it is a fair arrangement of speculation which remembers the hazard
looking for ability of the person without refuting the open doors that are covered up in it and

21
furthermore carrying into notice the dangers related with it. The way to make a portfolio is
to make one which suits the individual needs of the financial specialist (Jensen, 1969). Very
like this was Treynor measure, which gave the opportunity to decipher the relativity
between remunerations to hazard factor. A high trey nor measure is favored when contrasted
with a littler one. What's more, the creators pursued a Quantitative Equity Investing:
Techniques and Strategies expresses that a fixed salary security to be placed in
straightforward words is the fiscal responsibility of a firm to the financial specialist to pay
certain aggregate of cash at some predetermined pre arranged contract dates. A portion of
the principle backers of the U.K. government, neighborhood administrative committees and
organizations that are enormous in structure like IMF and World Bank (Pamela Peterson
Drake and Frank J. Fabozzi, 2010) and (Dimitris N. Chorafas, 2004).

This incorporates alternatives INFOKARA RESEARCH Volume 8 Issue 8 2019 740 ISSN
NO: 1021-9056 http://infokara.com/ which enable the holder to pick as to purchase, hold or
sell the stock at a predetermined time and at a predefined cost. The alternatives incorporated
into this are warrants and put and call options. Industry (SBI, Indian Bank, HDFC and
ICICI), IT–Software Industry (TCS, INFOSYS, WIPRO Ltd and HCL), Steel Industry
(SAIL, Jindal Steel and Power, Tata and Mahindra Ugine), Cement Industry (Ambuja
Cement Ltd, Ultra Tech, Madras and India Cement) and Auto Mobiles (Tata Motors, Maruti
Suzuki India Ltd, Hero Motocorp and Bajaj Auto). The information gathering was carefully
restricted to optional source. No essential information is related with the undertaking. The
optional information was gathered from the related diaries, books, paper, magazines and
organizations yearly reports during the long stretch of December 2018 to February 2019.

Fernando Ferreng (2012) it is commonly concurred that ongoing monetary emergency

heightened Worldwide challenge among money related organizations. This challenge has
direct effect on how bank manage their client and accomplish its destinations of store the
executives of banks is the key capacity for improving banks execution. Banks gainfulness
and accomplishment to an expansive degree relies upon bank office money related
execution.

Ramachandran Azhagasahi and Sandanvn Gejalakshmi (2012): In their investigation found

the effect of store stream the board effectiveness and bank estimate on the budgetary

22
execution of the open segment and private area bank. The examination uncovered that save
money with higher complete capital stores and absolute resources don't constantly imply
that they have better budgetary execution. The general financial division is firmly impacted
by resources use, finance the executive’s effectiveness and intrigue pay.

NutanTroke and P K Pachorkar (2012) The investigation related that the private area
banks the level of other salary in the all-out pay is higher than open division bank. Open
segment bank relies upon goal salary for their effectiveness and execution. The operational
proficiency of private segment banks is superior to anything open segment banks. Private
area bank utilizes their advantages quality superior to anything open part banks. Suppa-Aim
and Teerapan (2010) in the theory "subsidize execution in developing markets the instance
of Thailand" explicitly explores reserves stream rising economics, utilizing broad data than
past examinations; for venture approach, assessment reason contrasts, one of a kind qualities
of assets the board in Thailand. The creators examined how support administrators work and
what system they utilize dealing with their folios; store attributes clarify subsidize
execution.

Sawmaya and Ashok Banjara (2009) in the article entitled "Drawback hazard examination
of country reserve stream. An incentive in danger approach" set forward drawback hazard
loans of Indian reserve showcase utilizing a VaR measure. Dr, Hietesh S. (2009) "Asset
activation by finances industry" an endeavor to break down all out asset assembly by the
assets business for multiyear time span. Investigation titled "Asset 29 activation by
Industry" demonstrates 70 percent of the assets assembled by fluid salary reserves offered
by private division common finances offer of open segment has diminished to 8.81 percent
over the examination time frame.

Shard and tripathi (2017) "Attributes and execution assessment of chose common
assets in country" considered an example of open division supported and private segment
supported source of fluctuated for research the distinctions in level of benefits hold, folio
expansion and un fixed impacts of 38 broadening on speculation for the period may 2002 to
may2015.

23
Nalini Prva Tripathy (2015) In their examined the market timing capacities of Indian
Fund supervisor in type of two models, one by Treynor and Mazuy and the other by
Henriksson and Merton. The outcomes showed that Indian store chiefs are not ready to time
the market accurately. There is just a single plan out of 31 which displayed the planning
capacity of the reserve administrator.

Zarki Y (2015)Facilitated a case of socially careful accounts composed to heedlessly

pick customary resources of tantamount net focal points for look at differences in qualities
of advantages held, dimension of portfolio extension and variable effects of widening on
theory execution. The examination found that socially careful resources don't differentiate
basically from ordinary resources with respect to any of these qualities. Also, the effect of
expanding on endeavor execution isn't unmistakable between the two social events. The two
get-togethers neglected to meet desires Domini 400 Social Index and S and P 500 in the
midst of the examination time allotment.

24
 CHAPTER – III
INDUSTRY PROFILE
Brokerage Industry in India, Stock Broking sector in India. In The financial brokers offers
financial advice to the firm or the individual. India's broking industry is transitioning from a
transaction-based to a fee-based model, offering services such as investment advisory and
wealth management. Apart from advisory services, emphasis on fund-based activities,
including loan against shares and margin funding, is rising, allowing brokers to build
sustainable earnings. Financial brokers have developed their marketing ability to support
customers in achieving their goals. They offer wide-ranging products and services that
strengthen their relationship with clients.

The industry gained popularity, owing to a significant increase in trading activities.

Financial brokerage firms have generated revenues from stocks, commodities, and currency.
The financial brokerage market operates through different business verticals including full-
service, discount, and hybrid brokerage. The full-service brokers segment accounted for the
significant share of the brokerage market in FY 2020, followed by discount brokers and
hybrid.

Major players operating in the market include Angel Broking Limited, Geojit Financial
Services Limited, ICICI Securities Limited, and Kotak Securities Limited.

Impact of COVID-19The pandemic and prolonged global lockdown severely impacted

India's financial market and liquidity position. A struggling economy in India, coupled with
the outbreak of COVID-19, has led to an apprehension in which capital market investments
have become a challenge for investors.

While the Indian economy has been experiencing massive pressure of the COVID-19
pandemic, the trading volumes in the domestic capital market started to recover after the
lockdownwas lifted. It reached an all-time high in July 2020.

Market segment insights

In FY 2020, full-service brokers held the highest market share (~58%) of the overall
broking industry based on NSE active clients. The shift of the trading platform from offline
to online-offline mode increased the revenues generated by full-service brokers. However,

25
 in India, full-service brokers have been experiencing unstable growth as leading companies
are losing considerable market share to discount brokers.

Key growth drivers of the market

 Technological innovations is a significant driver for the increasing participation of investors

in equity markets. The pandemic resulted in a significant meltdown in the stock market.
Improved financial awareness lead to a 30% growth in Demat account openings. About 6.3
Mf accounts were opened in the first half of FY 2021. Post demonetization, fintech
companies have played a significant role in the growth of the brokerage market, backed by
increased smartphone users and high internet speed with low data costs. Retail investors use
mobile-based trading as they primarily invest in convenient and user-friendly apps with
secure platforms

 In India, brokerage houses offer global investment services that permit their customers to
own blue-chip stocks in the US. Investors' demand for portfolio diversification is one of the
key drivers that encourage firms to provide these services. Broking firms entered into
international partnerships, indicating a good demand for such services. In September 2020,
Kuvera, an online platform for investments in India's mutual funds, partnered with the US
Securities and Exchange Commission's listed investment adviser, Vested Finance. This
partnership permits investors to purchase stocks from the US on its online platform.

Key deterrents to the growth of the market

Lack of financial knowledge is a significant reason behind the under-penetration of the

brokerage market. Several Indians are not aware of shares, stocks, and mutual funds. They
do not know how to invest in them to reap high returns compared to traditional investment
tools. Most people are also ignorant of the basic financial concepts such as reward (return)
to variability (risk) ratio, asset allocation, and diversification benefits.

Companies Covered

26
 Angel Broking Limited
 Geojit Financial Services Limited
 ICICI Securities Limited
 IIFL Finance Limited
 Kotak Securities Limited
 Motilal Oswal Financial Services Limited
 Reliance Capital Limited
 SMC Global Securities Limited
 HDFC Securities Limited
 Sharekhan Limited
 Upstox
 5paisa
 Zerodha

Brokerage Industry | Stock Broking in India

January 2021 alone, 1.7 million new demat accounts were added marking it to be the
highest monthly increase.
As of January 2021, India’s total demat accounts stood at 53 million, compared to 41
million at the end of FY 2019-20. There was a surge in retail participation in the stock
market after people were forced to stay home since the outbreak of the coronavirus
pandemic.

27
Stock Discount brokerage Industry

Brokerage Industry in India

The functions of the financial market, including stock broking has witnessed a radical
change after digitization and has paved the way for new clients.
Unlike traditional brokers, the role of discount brokers is mainly limited to providing an
online trading platform to customers.

Discount brokerage industry

The growing surge in Smartphone users along with increasing internet penetration has made
it convenient for discount brokers to capitalize on the market opportunities and enable
customers trade online at almost zero cost.
This number is expected to rise by 820 million by 2022 according to the Economic Times
Study.

Another key factor driving the growth of the discount brokerage industry is India’s
demographic profile. India has the largest working-age population with millennials (those
with a median age of 18 to 35) accounting for 36% of the population and projected to be
50% of its workforce by 2025.

28
Millennials, who are more tech savvy and price conscious, have favored discount brokers
over traditional brokers because of the former’s simplicity and fast-paced nature of services.
Discount brokerage charges are usually close to nil which has attracted investors. Besides
low brokerage, independent advisory services, offering informative content free of cost
further gives an edge to the discount brokers.

Discount brokers provide unrestricted access to information on their website and

applications, which attracts large customers. Moreover, discount brokerages have no wested
interest in buying or selling a stock; that gives customers more confidence on their unbiased
services.
First-time investors are also more inclined towards the discount broker services at it
provides customization.

Going Forward and Future

The nature of interaction of stockbrokers with potential investors has undergone a massive
change over the years.

Recommended for you

While traditional or full-service brokers have always enjoyed a dominant presence and
preference among investors, a demographic shift towards technology has given rise to a new
breed of stockbrokers, known as discount brokers.

Unlike a traditional broker, a discount broker’s services are limited and restricted primarily
to providing a trading platform. A tectonic shift in investor patterns with respect to
participation in the market, has given a boost to discount brokerage services in India.
However, internet penetration coupled with smart phones has made it easier for investors
to cash in on a market opportunity by placing trade orders on platforms offered by discount
brokers.

Indian investors have always been price conscious. The emergence of discount brokers
offering low brokerage on a per-order basis has led to a shift in the market share of active
customers.

29
The integration of technology has brought in much-needed efficiency into a discount
broker’s day-to-day operation. Right from seamless account opening process to automated
integration of processes has made life easier for an investor. The demographic shift towards
technology augurs well for discount brokers in India.

30
COMPANY PROFILE
Motilal Oswal Financial Services Ltd. (MOFSL) was founded in 1987 as a small sub-
broking unit, with just 2 people running the show. Focus on a customer-first attitude, ethical
and transparent business practices, respect for professionalism, research-based value
investing, and implementation of cutting-edge technology has enabled us to blossom into a
9,800+ member team.

Today we are a well-diversified financial services firm offering a range of financial products
and services such as Private Wealth, Retail Broking and Distribution, Institutional Broking,
Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency
Broking, and Home Finance.

We have a diversified client base that includes retail customers (including High Net worth
Individuals), mutual funds, foreign institutional investors, financial institutions, and
corporate clients. We are headquartered in Mumbai and, as of March 2023, had a network
spread over 550 cities and towns comprising 2500+ Business Locations operated by our
Business Partners, us, and 55,00,000+ customers.
Research is the solid foundation on which MOFSL advice is based. Almost 10% of revenue
is invested in equity research, and we hire and train the best resources to become our
advisors. At present we have 25+ research analysts researching over 250 companies across

31
20 sectors. From a fundamental, technical, and derivatives research perspective, Motilal
Oswal’s research reports have received wide coverage in the media.

Our consistent efforts towards quality equity research have reflected in an increase in the
ratings and rankings across various categories in the AsiaMoney Brokers Poll over the
years. We have also been awarded the Best Performing Equity Broker (National) at the
CNBC TV18 Financial Advisor Awards for five years in a row & got inducted into the ‘Hall
of Fame’ at the 10th Financial Advisory Awards 2019.
Core Purpose & Values

Our core purpose is complemented by our organizational values. Living these values, we
believe, helps us achieve our core purpose.

Customers
At Motilal Oswal, we strive hard to connect with our customers beyond transactions and
help them achieve their personal goals. What makes this approach possible is a set of robust
technologies through which our customers can not only transact conveniently from various
platforms, but also have easy access to all our products & services. They are now better
equipped to get in touch with us.

32
2022
Leading Member Of The Exchange 2022

Motilal Oswal wins "Leading Member of the Exchange 2022" at MCX Awards 2022.
27th Wealth Creation Study

Raamdeo Agrawal, Chairman - MOFSL, launched 27th Edition of Wealth Creation

Study. This year the theme of the report was "Consistents and Volatiles - The two
dimensions of Wealth Creation".
The Asset Triple A Private Capital Awards 2022

Motilal Oswal Private Wealth hounoured with "Best Wealth Manager - India" at The Asset
Triple A Private Capital Awards 2022.
Private Banker International Global Wealth Awards 2022

33
Private Wealth business recognised as "Outstanding Private Bank for Growth Strategy -
Highly Commended" at Private Banker International Global Wealth Awards 2022.
18th Annual Global Investor Conference

Motilal Oswal Institutional Equities organised 18th Annual Global Investor Conference
which was attended by 160+ corporates and over 80% CXO level participation.
Launched New App - Research 360

The broking and Distribution business launched a new campaign to promote its new app,
Research 360, first-of-its-kind financial market research & analysis platform.
35th Motilal Oswal Foundation Day

Motilal Oswal entered its 35th successful year of wealth creation journey. All Motilal Oswal
employees celebrated this milestone.
On-Boarding Programme Of The Year

Motilal Oswal wins the title of On-boarding programme of the year at the 8th Edition Future
of L&D Summit and Awards 2022.

34
Campaign Media 360

Motilal Oswal wins two awards at Campaign Media 360.

INNOVATION IN CROSS - MEDIA MARKETING

Motilal Oswal wins for Innovation in cross-media marketing (D.I.Y Disasters Campaign)
2022.
Masters Of Modern Marketing Awards

Motilal Oswal wins three awards for DIY Disaster of Investing at the Masters of Modern
Marketing Awards 2022.
Best B2C Offline Marketing Campaign
Best ATL Campaign by Financial Services
Best Multi Channel campaign by Financial Services
MADDYS 2022

Another feather in the cap!!

Motilal Oswal wins Silver in the Best use of TV category at MADDYS 2022.
Best Digital Private Bank In India

35
Motilal Oswal Private Wealth awarded as Best Digital Private Bank in India at Asiamoney
Private Banking Awards 2022.
PE Fund Raise Of The Year

Motilal Oswal Alternates has been voted as the "PE Fund Raise of the Year" at the Venture
Intelligence APEX Awards 2021.
LIVE LIFE WITH NO FIKR

Our broking business launched a new campaign based on the insight that life presents you
with unexpected monetary challenges at various stages. Through this campaign, we have
highlighted that customers can use Motilal Oswal’s investment advice across multiple
products to help them plan for any monetary challenges life throws at them. This will help
customers live life tension free.
SAPNO KE TAALE KHOLE TAJURBE KI CHAABI

Motilal Oswal Home Finance launched a campaign for brand awareness, comprising a series
of digital films that share funny incidents of daydreaming that people can relate to when
planning to buy their own home. In this campaign, our main motto was to highlight Motilal

36
Oswal Groups legacy of over 30 years in the financial services business, and we use our
experience to provide hassle-free home loans to our customers.
Felicitating Our Compounding Contributors

We felicitated our 260 employees (our Heros) from across the country who have completed
more than 10 years with us, some even more than 25 yrs. Invited with their families to say a
Big Thank u to them and their families.
Unlocked Awards For Business Excellence

Motilal Oswal wins 2 golds for DIY Disaster Campaign at Unlocked Awards.
Transforming Future Agriculture – Farmer’s Training Centre

Motilal Oswal Foundation is supporting Global Parli to set up a state of art framer’s training
center at Taluka Parli in Beed District of Maharashtra. “Krishikul” – the training institute
will be spread over 25 acres and will have several model farms for farmers to have hands on
experience at learning. The center aims to revolutionize agriculture by training farmers in
new and systematic techniques of growing fruits and marketing it. Mr. Raamdeo Agrawal
performed the bhoomi pujan of the training center and interacted with farmers to motivate
them.
Best 360 Degree Marketing Campaign

37
Motilal Oswal wins Gold in the “Best 360 Degree Marketing Campaign” for the “Skin in
the game” campaign at National Marketing Excellence 2022.

Our Businesses
 Financial Services
 Broking & Distribution
 Asset Management
 Private Wealth
 Home Finance
 Institutional Equities
 Investment Banking
 Private Equity

Investor Relations
 Fact Sheet
 Financial Report
 Share Holding Pattern
 Presentation & Finsight
 Disclosures
 Corporate Policies & Codes

Media Room
 Press Release
 News
 Advertisement
 Interviews

38
 CHAPTER – IV
PORTFOLIO MANAGEMENT PROCESS

Portfolio management is a complex activity which may be broken down into

following steps;
1) Specification of investment objectives and constraints;
The typical objectives sought by investors are current income, capital
appreciation, and safety of principal. The relative importance of these objectives should be
specified. Further, the constraints arising from liquidity, tome horizon, tax, and special
circumstances must be identified.
2) choice of asset mix:
The most important decision in portfolio management is the asset mix
Decision. Very broadly, this is concerned with the proportions of ‘stocks’ (equity shares and
units / shares of equity // oriented mutual funds) and ‘bonds’ (fixed income investment
vechiles in general) in the portfolio. The appropriate ‘stock bond’ mix depends mainly on
the risk tolerance and investment tolerance horizon of the investor.
3) Formulation of portfolio strategy:
Once a certain asset mix is chosen, an appropriate portfolio strategy
has to be hammered out. Two broad choices are available: an active portfolio strategy or a
passive portfolio strategy. An active portfolio strategy strives to earn superior risk-adjusted
returns by resorting to market timing, or sector rotation, or security selection, or some
combination of these. A passive portfolio strategy, on the other hand involves holding a
broadly diversified portfolio and maintaining a pre-determined level of risk exposure.

4) Selection of securities
Generally, investors pursue an active stance with respect to security
selection. For stock selection, investors commonly go by fundamental analysis and / or
technical analysis. The factors that are considered in selecting bonds (or fixed income
instruments) are yield to maturity, credit rating, term to maturity, tax shelter, and liquidity.
5) Portfolio execution:
This is the phase of portfolio management which is concerned with implementing
the portfolio plan by buying and/ or selling specified securities in given amounts. Though
often glossed over in portfolio management discussions, this is an important practices step
that has a bearing on investment results.

39
6) Portfolio revision:
The value of a portfolio as well as its composition the relative proportions of stock and bond
components may change as stocks and bonds fluctuate. Of course the fluctutations of stocks
is often the dominant factor underlying this change. In response to such changes, periodic
rebalancing of the portfolio is required. This primarily involves a shift from stocks to bonds
or vice versa. In addition, it may call for sector rotation as well as security switches.
7) Performance evaluation:
The performance of a portfolio should be evaluated periodically. The key dimensions
of portfolio performance return are commensurate with its risk exposure. Such a review may
provide useful feedback to improve the quality of the portfolio management process on a
continuing basis.

Sources of investment risk:

As an investor you are exposed to may variety of risks. Among these there are three major
ones: business risk, interest rate risk. While a detailed discussion of these is woven in the
entire book, at this juncture a brief idea may be given.
1) Business risk:
As a holder of corporate securities (equity shares or debentures), you are exposed
to the risk of poor business performance. This may be caused by a variety of factors like
heightened competition, emergence of new technologies, development of substitute
products, shifts in consumer preferences. Inadequate supply of essential inputs, changes in
government policies, and so on. Often, of course, the principal factor may be inept and in
component management. The poor business performance definitely affects the interest of
share holders, who have a residual claim on the income and wealth of the firm. It can also
affect the interest of debenture holders if the ability of the firm to meet its interest and
principal interest payment obligation is impaired. In such a case, debenture holders face the
prospect of default risk.
2) Interest rate risk:
The changes in interest have a bearing on the welfare of the investors. As the interest
rate goes up., the market price of existing fixed income securities falls, and vice versa. This
happens because the buyer of a fixed income security would not buy it at its par value of
share value if its fixed interest rate ids lower than the prevailing rate interest rate on a
similar security. For example, a debenture that has a face value of Rs 100anda fixed rate of
12% will sell at discount if the interest rate moves up, say, 12% to 14%. While changes in

40
interest rate will have a direct bearing on the prices of fixed income securities, they affect
equity prices too, albeit some what indirectly. The changes in the relative yields of
debentures and equity shares influence equity prices.
3) Market risk:
Even if the power of the corporate sector and the interest rate structure remain more or
less unchanged, prices of securities, equity shares in particular, tend to fluctuates. While
there can be several reasons for fluctuation, the main cause appears to be the changing
psychology of the investors. There are periods when investors become bullish and their
investments horizons lengthen. Investor optimism, which may border on euphoria, during
such periods drives share prices to great heights. The buoyancy created in the wake of this
development is pervasive, affecting all most ass the shares. On the others hand, when a
wave of pessimism (which often is an exaggerated response to some unfavorable political or
economic development) sweeps the market, investors turn bearish and myopic prices of all
most all equity shares register as decline as fear and uncertainly pervade the market. The
market tends to move in cycles. As john says: “you need to get deeply in to your bones the
sense that any market, and certainly the stock market, moves in cycles, so that you will
infallibly wonderful bargains every few years, and have a chance to sell again at
ridiculously high prices a few years later.”
The cycles are caused by mass psychology. As john train explains: “the ebb
and flow of mass emotion quite regular: panic is followed by relief, and relief by optimism;
then comes enthusiasm, then euphoria and rapture, then the bubble bursts, and public feeling
slides off again into concern, desperation ,and finally a new panic.” One would expect large
participation of institutions to dampen the price fluctuations in the market. After all
institutional investors have core professional expertise to de fundamental analysis and
greater financial resources to act on fundamental analysis. However nothing of this kind has
happened. On the contrary, price fluctuation seen to have become wider after the arrival of
the institutional investors in larger numbers. Why? Perhaps the institutions and their
analysis have not displayed more presence and rationality than the general investing public
and have succumbed in equal measure to the temptation to the speculation. As john
Maynard Kenyes has argued, factors that contribute to the volatility of the market are not
likely to diminish when expert professionals possessing best judgement and knowledge
compete in the market place. Why? According to Kenyes, even these people are concerned
with speculation (the activity of forecasting the psychology of the market) and not the
enterprise (the activity of forecasting the prospective yield of assets over their whole life).

41
 PORTFOLIO THEORY THE BUSINESS OF DIVERSIFICATION:
Very broadly speaking the investment process consists of two types. The first task is
security analysis which focuses on assessing the risk and risk returns characteristic of the
available investment vehicles. The second task is portfolio selection, which involves
portfolio selection, which involves choosing the best portfolio from the set of feasible
portfolios.
We begin our discussion with the second task with the help of portfolio theory. Portfolio
theory, originally proposed by ‘’HARRY MARKOEITZ’’ in the 1950s, was the first formal
attempt to quantify the risk of aportfolio and develop a methodology for determining the
optimal portfolio. Prior to the development of portfolio theory, investors dealt with the
concepts of return and risk somewhat loosely. Intuitively smart investors knew the benefit of
diversification which is reflected in the traditional adage: ‘’do not put all your eggs in one
basket. ‘’HARRY MARKOWITY’’ was the first person to show quantitively why and how
diversification reduces risk. In recongnition of his seminal contribution in the field was
awarded the Nobel prize in Economic in 1990.

The investor need not, however feel unduly overwhelmed by the belwildering range of
possibilities shown in the exhibit because what really matters to him is the north west of the
feasible range defined by the thick darkline. Referred to as the efficient frontier, this
boundary contains all the efficient portfolio options available to him.
It may be useful to clarify here what exactly a portfolio is. A portfolio is efficient if (and
only if) there is no alternative with
i. the same E(Rp) and a lower σ p , or
ii. the same σ p and a higher E(Rp), or
iii. a higher E(Rp) and a lower σ p.

Thus in exhibit while all the available portfolio are contained in the region AFXMNO, only
the portfolio which lie along the boundary AFX are efficient. AFX represents the efficient
frontier. All the other portfolios are inefficient. A portfolio like z is inefficient because
portfolio like B and D, among others, dominate it. The efficient frontier is the same for all
the investors because portfolio theory is based on the assumption that investors have
homogenous expectations
We have merely defined what is meant by set of efficient portfolios. How can this
actually obtained from the innumerable from the innumerable portfolio possibilities that lie

42
before the investors ? the set of efficient portfolios may be determined with the help of
graphical analysis, or calculus analysis, or quadratics programming analysis, the major
advantage of graphical analysis is that it is easier to grasp. Its advantage is hat it cannot
handle
Portfolios containing more than three securities. Mathematical analysis can grapple with the
n- dimensional space. However, the calculus method is not capable of handling constraints
in the form of inequalities Quadratic programming analysis is the most versatile of all the
three approaches. It can handle any number of securities and cope with inequalities as well.
For all practical, the quadratic programming approach is the most useful approach.
Expected
Return, E(Rp)

Expected
returns

RISK RETURN INDIFFERENCE CURVES:

Once the efficient frontier is delineated, the next question is: What is the optimal portfolio
for the investor? To determine the optimal portfolio on the efficient portfolio on the efficient
frontier, the investor’s risk returns trade off must be known. Exhibit represents the to
illustrative indifference curves which reflect risk and return tradeoff functions note that all
points lying on an indifference curve provide the same level of satisfaction. The indifference
curves Ip and Iq represents the risk return tradeoffs of two hypothetical investors, P and Q

43
both P and Q like most investors are risk averse. They want higher returns to bear more risk.
Q is how ever more risk averse than P Q wants a higher expected return for bearing a given
amount of risk as compared to P. In general, the steeper the slope of the indifference curve
the greater the degree of risk aversion.

Each person has a map of indifference curves. Exhibit shows the indifference map
for P .in this figure, four risk-return indifference curves, Ip1,Ip2,Ip and Ip4 are shown. All
the points lying on a given indifference curve offer the same level of satisfaction. For
example, points A and B, which lie on the indifference curve Ip1 offer the same level of
satisfaction; likewise, points R and S, which lie on the indifference curve Ip2 represents a
higher level of satisfaction as compared to the indifference curve Ip1,the indifference curve
Ip3 represents a higher level of satisfaction when compared to the indifference curve Ip4
and so on.
Optimal portfolio:
Given the efficient frontier and the risk-return indifference curves, the optimal portfolio is
found at the point of tangency between the efficient frontier and a utility indifference curve.
In exhibit two investors P and Q, confronted the same efficient frontier, but having having
different utility indifferences curves (Ip1,Ip2,and Ip3 for P and Iq1,Iq2, and Iq3 for Q )are
shown to achieve their highest utility indifference curves ( Ip1,Ip2, and Ip3 for P and
Iq1,Iq2, and Iq3 for Q ) are shown to achieve their highest utility at points P* and Q*
respectively.
Expected return

Optimal portfolio with lending and borrowing:

Let us introduce yet another opportunity. Suppose that the investor can also lend and
borrow money at a risk free rate of R percent as shown in the exhibit. If he lends a portion
of his funds at Rf and invests the balance in S (S is the point of the efficient frontier of risky
portfolios where the straight line emanating from R is tangential to the efficient frontier of
risky portfolios), he can obtain any combination of risk and return along the line that
connects Rf and S further, if he borrows some more money and invests it along with his own
funds, he can reach a point G, beyond S, as shown in the exhibit. Thus, with the opportunity
of lending and borrowing, the efficient frontier changes. It is no longer AFX. Rather, it
becomes Rf SG because RfSG which is superior to the point on AGX> For example,

44
compared to C on AFX, D on RfSG offers a higher expected return for the same standard
deviation, likewise, compared to Y on AFX, Z on RfSG offers the same expected return
with a lower standard deviation: and so on.
Since RfSG dominates AFX, every investor would do well to choose some
combination of R and S a conservative investor may choose a point like u, where as an
aggressive investor may choose a point like V. However, note that both investors choose
some combination of Rf and S. While the

Conservative investor weighs R more in his portfolio, the aggressive investor weighs S more
in his portfolio (in fact, in his portfolio, the weight assigned to Rf is negative and that
assigned to S is more than 1).

Thus, the task of portfolio selection can be separated in to two steps:

a) identification of, the optimal portfolio of risky securities.
b) Choice of combination of R and S depending one’s risk attitude. This is the import
of the celebrated separation theorem, first enunciated by James Tobin, a Nobel laureate in
Economics.
Portfolio management frame work
Selection of asset mix:
In your scheme of investments, you should accord top priority to a residential cover. In
addition, you must maintain a comfortable liquid balance in a convenient form to meet
expected and unexpected expenses in the short run. Once these are adequately provided for,
your asset mix decision in concerned mainly with financial assets which may be divided into
broad categories, via stocks and bonds. ‘stocks’ include equity shares (which in turn may be
classified into income shares, growth shares, blue chip shares, cyclical shares, speculative
shares, and so on) and units / shares of equity-oriented schemes of mutual funds (like Master
shares,Birla advantage, and so on).

‘Bonds’, defined very broadly, consist of non convertible-debentures of private

companies, public sector bonds, gilt-edged securities, RBI relief bonds, units / shares of
debt-oriented schemes, deposits in the national savings shame, and so on. The basic
characteristics of this investment are that they earn a fixed or near-fixed return. Should the
long-term stock-bond mix be 50:50 or 75:25 or any other? Referred to as the strategic-asset
mix decision (policy asset maxi decision), this is by far the most important decision to be

45
made by the investor. Empirical studies have shown that nearly 90percent of the variance of
the portfolio return is explained by its asset mix. Put differently, only 10 percent of the
variance of the portfolio return is explained by the other elements like’ sector rotation’ and’
security selection. Given the significance of the asset-mix decision, you should hammer it
out carefully.

Conventional wisdom on asset mix:

The conventional wisdom on asset mix is embodies in two propositions:
Other things being equal, an investor with greater tolerance for risk should tilt the portfolio
in favors of stocks; where as an investor with lesser tolerance for frisk should tilt the
portfolio in favour of bonds. This is because in general, stocks are riskier than bonds and
hence raen higher returns than bonds. JAMES H.LORE summed up the long view well
when he stated:’ the most enduring relation in all finance perhaps is the relation ship
between returns on equities or stocks and returns on bonds.’ a similar observation can be
made when we look at the returns on stocks and bonds in India for the last two decades.
Other things being equal, an investor with a long investment horizon should tilt his portfolio
in favor of stocks where as investor with a shorter investor horizon tilts his portfolio in
favour of bonds. This is because while the expected return from stocks is not sensitive to the
length of the investment period, the risk from stocks diminishes as the investment period
over the period 1950-1980 in the U.S capital market. One can reasonably expect a similar
pattern in other capital markets as well. Why does the risk of stocks diminish as the
investment period lengthens? As the investment period lengthens, the average yearly return
over the period is subject to lesser volatility because low returns in some years may be
Offset by high returns in other years and vice versa. Put differently there is benefit of ‘time
diversification’. As period, they invest through many periods. Hence they are more
comfortable investing in riskly assets over long run that over the short run.’

The implication of the above proposition are captures in exhibit which shoes how the
appropriate percentage allocate to the stock component of the portfolio is influenced by the
two basic factors, viz risk tolerance and investment horizon. To obtain the corresponding
percentage allocation for the bond component of the portfolio, simply subtract the number
given in the exhibit from 100.you will find this matrix, helpful in resolving in your asset-
mix decision.(of course, before using this matrix, you should define your risk tolerance /
short time horizon may be raised to 10 percent or so. In a similar manner, the 100 percent,

46
given for the cell high risk tolerance / long time horizon the benefit of diversification across
stocks and bonds.

47
 CHAPTER – V
DATA ANALYSIS AND INTERPRETATION

Summary of trading Motivations, Time horizons, and Time vs price preferences

Who wins, who loses

Who wins and who loses in the trading game which is essentially a zero sum game. It appear

that the IBT’S odds of winning are the highest, assuming that his information is

substantiated by the market he is followed by the VBT, LBT, and PIBT in the that order.

Put differently, the, the above question may be answered as follows:

The IBT seems to have a distinct edge over others.

The VBT tends to lose against the IBT but gains against the LBT and PIBT.

The LBT may have some advantage over the PIBT.

48
 Scripts Which I Have Selected
S.L.N.O SECTOR COMPANY

1 ENERGY RELIANCE

2 OIL INDIAN OIL CORP

3 PHARMA CIPLA

4 STEEL JINDAL STEEL

CALUCALTION OF STANDARD DEVIATION OF CIPLA

R SHARE R R-R [R-R} SQUARE

DATE
PRICE AVARAGE DEVIATIONS DEVIATIONS

6/1/2023 292.2000 297.1196 -4.9196 24.2025

6/2/2023 289.3000 297.1196 -7.8196 61.1461

6/3/2023 290.7500 297.1196 -6.3696 40.5718

6/5/2023 289.5000 297.1196 -7.6196 58.0583

6/6/2023 289.8500 297.1196 -7.2696 52.8471

6/7/2023 289.8000 297.1196 -7.3196 53.5756

6/8/2023 295.4000 297.1196 -1.7196 2.957

6/9/2023 293.6000 297.1196 -3.5196 12.3876

6/10/202
291.4500 297.1196 -5.6696 32.1444
3

49
6/13/202
290.1000 297.1196 -7.0196 49.2748
3

6/14/202
290.4000 297.1196 -6.7196 45.153
3

6/15/202
288.2000 297.1196 -8.9196 79.5593
3

6/16/202
285.9500 297.1196 -11.1696 124.76
3

6/17/202
284.9500 297.1196 -12.1696 148.0992
3

6/19/202
284.7500 297.1196 -12.3696 153.007
3

6/20/202
304.8500 297.1196 7.7304 59.7591
3

6/21/202
312.4560 297.1196 15.3304 235.0211
3

6/22/202
310.7000 297.1196 13.5804 184.4273
3

6/23/202
314.3000 297.1196 17.1804 295.1661
3

6/24/202
310.7000 297.1196 13.5804 184.4273
3

6/26/202
310.9000 297.1196 13.7804 189.8994
3

6/27/202
310.0000 297.1196 12.8804 165.9047
3

6/28/202
313.6500 297.1196 16.5304 273.2541
3

50
TOTAL 6833.7500 2525.6037

Average (R) = 6833.7500/23 =297.1196

Variane = 1/23-1(2525.6037)

Variance =114.8002

Standard Deviation = Variance

Standard Deviation = 114.8002

Standard Deviation = 10.7145

CALUCALTION OF STANDARD DEVIATION OF IOC

R SHARE R R-R [R-R]2SQUARE

DATE PRICE AVARAGE DEVIATIONS DEVIATIONS

6/1/2023 463.6500 445.6374 18.0126 251.622

6/2/2023 461.5000 445.6374 15.8626 254.8045

6/3/2023 461.6000 445.6374 15.39626 193.5604

6/5/2023 459.5500 445.6374 13.9126 179.8978

6/6/2023 459.0500 445.6374 13.4126 174.5728

6/7/2023 458.8500 445.6374 13.2126 168.029

51
 6/8/2023 458.0000 445.6374 12.9626 134.8524

6/9/2023 457.2500 445.6374 11.6126 62.6092

6/10/2023 453.5500 445.6374 7.6126 57.9517

6/13/2023 453.2500 445.6374 7.6126 27.9649

6/14/2023 450.9000 445.6374 5.2626 19.9148

6/15/2023 450.1000 445.6374 4.4626 2.0661

6/16/2023 444.2000 445.6374 -1.4374 27.9566

6/17/2023 440.3500 445.6374 -5.2874 70.3485

6/19/2023 437.2500 445.6374 -8.33874 206.9973

6/20/2023 431.2500 445.6374 -14.3874 232.1784

6/21/2023 430.1000 445.6374 -15.2374 232.1784

6/22/2023 429.3500 445.6374 -16.2874 265.2794

6/23/2023 432.0500 445.6374 13.5874 184.6174

6/24/2023 433.1000 445.6374 -12.5374 157.1864

6/26/2023 431.0000 445.6374 -14.6374 214.2535

6/27/2023 429.7500 445.6374 -15.8874 252.4095

6/28/2023 423.4000 445.6374 -22.2374 494.502

TOTAL 10249.6500 3958.0283

Average (R) = 10249.6500/23 =445.6374

Variane = 1/23-1(3958.0283

Variance = 179.8981

52
Standard Deviation = Variance

Standard Deviation = 179.8981

Standard Deviation = 13.4126

CALUCALTION OF STANDARD DEVIATION OF RELIANCE

R SHARE R R-R [R-R]2SQUARE

DATE PRICE AVARAGE DEVIATIONS DEVIATIONS

53
 6/1/2023 541.0000 593.5456 -52.5456 2761.0401

6/2/2023 529.8500 593.5456 -63.6956 4057.1294

6/3/2023 533.1500 593.5456 -60.6956 3647.6285

6/5/2023 555.2000 593.5456 -38.3456 1470.385

6/6/2023 552.3000 593.5456 -41.2456 1701.1995

6/7/2023 547.8500 593.5456 -45.6956 2088.0879

6/8/2023 558.4500 593.5456 -35.0956 1231.7011

6/9/2023 559.0500 593.5456 -34.4956 1189.9464

6/10/2023 566.5500 593.5456 -26.9956 726.6044

6/13/2023 569.6000 593.5456 -23.9456 573.3918

6/14/2023 574.0500 593.5456 -19.4956 380.0784

6/15/2023 574.9500 593.5456 -26.9956 345.7963

6/16/2023 590.2500 593.5456 -3.2956 10.8609

6/17/2023 600.2500 593.5456 6.7044 44.9489

6/19/2023 630.5000 593.5456 36.9544 1365.6276

6/20/2023 646.1500 593.5456 52.6044 2767.2228

6/21/2023 654.5500 593.5456 61.0044 3721.5368

6/22/2023 650.6000 593.5456 57.0544 3255.2045

6/23/2023 654.6500 593.5456 61.1044 3733.4948

6/24/2023 648.6500 593.5456 55.1044 3036.4948

6/26/2023 629.5500 593.5456 36.0044 1296.3168

6/27/2023 641.8500 593.5456 48.3044 2333.315

6/28/2023 642.5500 593.5456 49.0044 2401.4312

TOTAL 13651.5500 44139.6957

54
Average (R) = 13651.55/23 = 593.5456

Variane = 1/23-1(44139.6957)

Variance = 2023.3498

Standard Deviation = Variance

Standard Deviation = 2023.3498

Standard Deciation = 44.7922

CALUCALTION OF STANDARD DEVIATION OF JINDAL STEEL

R R-R [R-R]2SQUARE
R SHARE PRICE
AVARAGE DEVIATIONS DEVIATIONS

DATE

6/1/2023 905.6000 898.0435 7.5565 57.1006

6/2/2023 898.6500 898.0435 0.6065 0.3678

6/3/2023 900.6000 898.0435 2.5565 6.5357

6/5/2023 903.0500 898.0435 5.0065 25.065

6/6/2023 905.0500 898.0435 7.0065 49.091

6/7/2023 901.9000 898.0435 3.8565 14.8726

6/8/2023 899.5500 898.0435 1.5065 2.2695

6/9/2023 900.0000 898.0435 1.9565 3.8279

6/10/2023 900.0500 898.0435 2.0065 4.026

6/13/2023 900.0000 898.0435 1.9565 3.8279

6/14/2023 886.5500 898.0435 -11.4935 132.1005

6/15/2023 899.3000 898.0435 1.2565 1.5788

6/16/2023 879.5500 898.0435 -18.4935 342.0095

6/17/2023 886.0000 898.0435 -12.0435 145.0459

6/19/2023 895.3000 898.0435 -2.7435 7.5267

55
6/20/2023 897.8500 898.0435 -0.1935 0.0374

6/21/2023 914.0000 898.0435 -15.9565 254.6099

6/22/2023 920.3000 898.0435 22.2565 495.3518

6/23/2023 922.4000 898.0435 24.7065 593.23914

6/24/2023 922.7500 898.0435 24.3565 610.4111

6/26/2023 897.8500 898.0435 -0.1935 0.0374

6/27/2023 888.6000 898.0435 -9.4435 89.1797

6/28/2023 830.0000 898.0435 -68.0435 4626.9179

TOTAL 20654.9000 7468.0298

Average (R) = 20654.9000/23 =898.0435

Variane = 1/23-1(7468.0298)

Variance =339.4559

Standard Deviation = Variance

Standard Deviation = 339.4559

Standard Deviation = 18.4243

CALUCLATED AVERAGE AND STANDARD DEVIATION

Reliance 593.5456 44.7922

Indian Oil 445.6374 13.4126

Cipla 297.1196 10.7145

56
 STANDARD DEVIATION
Jindal Steel 898.0435 18.4243
COMPANY NAME PERCENTAGE

RELIANCE 29%

INDIAN OIL 9%

CIPLA 7%

JINDAL STEEL 12%

CORRELATION BETWEEN CIPLA & RELIANCE

DEVIATION OF DEVIATION COMBINED DEVIATION

CIPLA RELIANCE

DATE RA-RA RB-RB (RA-RA)(RB-RB)

6/1/2023 -4.9196 10.5848 -52.0729

6/2/2023 -7.8196 0.7848 -6.1368

6/3/2023 -6.3696 -0.1152 0.7338

6/5/2023 -7.6196 -3.7152 28.3083

57
6/6/2023 -7.2696 0.7348 -5.3417

6/7/2023 -7.3196 3.1848 -23.3115

6/8/2023 -1.7196 10.8348 -18.6315

6/9/2023 -3.5196 18.6348 -65.5870

6/10/202

3 -5.6696 6.7348 -38.1836

6/13/202

3 -7.0196 11.4348 -80.2677

6/14/202

3 -6.7196 13.5348 -90.9484

6/15/202

3 -8.9196 11.5348 -102.8858

6/16/202

3 -11.1696 10.1348 -113.2017

6/17/202

3 -12.1696 5.1848 -63.0969

6/19/202

3 -12.3696 3.4348 -42.4871

6/20/202

3 7.7304 -2.8152 -21.7626

6/21/202

3 15.3304 -16.0152 -245.5519

6/22/202

3 13.5804 -19.0152 -258.2340

6/23/202

3 17.1804 -20.4152 -350.7413

6/24/202

3 13.5804 -3.9652 -53.849

58
 6/26/202

3 13.7804 -21.6152 -284.0857

6/27/202

3 12.8804 -17.4652 -224.9588

6/28/202

3 16.5304 -1.6152 -26.6999

TOTAL -2138.9937

CO-Variance (COVAB)=1/23 (-2138.9937)

-92.9997

COVAB

Correlation Coefficient

(PAB)=

(Std.A) (Std.B)

-99.9997

-0.7349

(10.7145)(11.81)

CALUCLATED CORRELATION CO-EFFICIENT AND PORTFOLIO

RISK BETWEEN TWO COMPANIES

COMPANY NAME Correlation coefficient Risk (%) Portfolio

CIPLA & RELIANCE -0.6442 15.8189

RELIANCE & INDIAN OIL -0.9343 6.6600

59
 PORTFOLIO RISK

P = X 2
√ 1 12 + X22 22 + 2(X1) (X2) (12) 12

Where X1 = Proportion of Investment in Security 2.

X2 = Proportion of Investment in Security 1.

60
 1 = Standard Deviation of Security 1.

2 = Standard Deviation of Security 2.

X
12 = Correlation Co-Efficient between Security 1 and 2.

p = Portfolio Risk.

1. CIPLA & RELIANCE

X1 = 0.83 1 = 11.81

X12 = -0.6442

X2 = 0.17 2 = 44.7922

P = X 2
√ 1 12 + X22 22 + 2(X1) (X2) (12) 12

2 2 2 2
(0.83) (11.81) + (0.17) (44.7922) +2(0.83)(0.17) (-0.6442)(11.81)(44.7922)

0.6889 Х 139.4761 + 0.0289 Х 2023.3412 + 96.1679

96.0851 + 154.1516 15.8189

PORTFOLIO RISK

P = X 2
√ 1 12 + X22 22 + 2(X1) (X2) (12) 12

Where X1 = Proportion of Investment in Security 2.

X2 = Proportion of Investment in Security 1.

61
 1 = Standard Deviation of Security 1.

2 = Standard Deviation of Security 2.

X
12 = Correlation Co-Efficient between Security 1 and 2.

p = Portfolio Risk.

2. RELIANCE & IOC

X1 = 0.68 1 = 13.4126

X12 = -0.9343

X2 = 0.32 2 = 44.7922

P = X 2
√ 1 12 + X22 22 + 2(X1) (X2) (12) 1
2 2 2 2
(0.68) (13.4126) + (0.32) (44.7922) +2(0.68)(0.32) (-0.9343) (13.4126)(44.7922)

83.1847 + 205.4493 – 244.2815

6.66

PORTFOLIO WEIGHTS

CIPLA & RELIANC

FORMULA:

2b – Pab a b

Xa =

2a + 2b -2Pab a b

Xb = 1 – Xa

62
Xa = CIPLA

Xb = RELIANCE

a = 11.81 b = 44.7922 Pab = -0.64422

2
(44.7922) – (-0.6442) (11.81) (44.7922)

Xa =

(11.81)2 + (44.7922)2 – 2(-0.6442) (11.81 ) (44.7922)

2023.3412 + 340.7791

139.4761 + 2023.3411 + 681.

2347.1203

2827.3754

= 0.83

Xb = 1 – Xa

Xb = 1 – 0.83 = 0.17

RELIANCE & IOC

FORMULA:

2b – Pab a b

Xa =

2a + 2b -2Pab a b

Xb = 1 – Xa

Xa = IOC

63
Xb = RELIANCE

a = 13.4126 b = 44.7922 Pab = -0.9343

2
(44.7922) – (-0.9343) (13.4126) (44.7922)

Xa =

(13.4126)2 + (44.7922)2 – 2(-0.9343) (13.4126 ) (44.7922)

2023.3412 + 561.3086

179.8978 + 2479.2639 + 1122.6172

2567.6498

3781.7782

= 0.68

Xb = 1 – Xa

Xb = 1 – 0.68 = 0.32

CHAPTER – VI

SUGGESTIONS:

 Select your investments on economic grounds.

Public knowledge is no advantage.

64
  Buy stock with a disparity and discrepancy between the situation of the firm - and the

expectations and appraisal of the public (Contrarian approach vs. Consensus

approach).

 Buy stocks in companies with potential for surprises.

 Take advantage of volatility before reaching a new equilibrium.

 Listen to rumors and tips, check for yourself.

 Don’t put your trust in only one investment. It is like “putting all the eggs in one

basket “. This will help lesson the risk in the long term.

 The investor must select the right advisory body which is has sound knowledge about

the product which they are offering.

 Professionalized advisory is the most important feature to the investors.

Professionalized research, analysis which will be helpful for reducing any kind of risk
to overcome.

FINDINGS

1. Cement sector has got the returns was 38.23 and risk was 44.23 thus we can say the

risk is very high level compare to returns.

65
2. Pharmaceutical sector has got negative values of returns and the risk was very high

48.63 thus we can say the risk factors is very high level compare to returns .

3. The telecom industry has got stable result where the risk and returns is same level

and the returns were 253.99 risk was 252.45.

4. Banking sector has got very significant and good result; where the returns was 48.32

and risk was 38.81 in this sector thus we can say the risk is very low when compare

to returns.

5. it sector has got negative value of returns and risk was 28.47 in thus we can say the

risk is very high when compare to returns .

6. As market is not doing well, investor should wait for sometimes, in order to get positive
returns.

7. In order to enjoy more returns, he should invest in more; investor should invest in more
risky securities as a risk taker.
8. If he is a risk-averse investor, then he should invest in less risky securities and enjoy normal
returns.
1.The portfolio – A has got the returns was 8.81 and risk was 12.69 and the portfolio

–B has got returns was 49.374 risk was 58.3

2. portfolio – B was given very significant result when compare to portfolio those we can say
under this portfolio management .

66
 Conclusions

1. CIPLA & RELIANCE

In this combination, as per calculations and study CIPLA bears a proportion of 0.83 and

where as RELIANCE bears a proportion of 0.17, which is less compared CIPLAproportion,

the deviation of two companies are 11.8100 for CIPLA and 44.7922 for RELIANCE

Here risk of CIPLA is lesser than the RELIANCE i.e. 11.8100<44.7922. So

investors can invest their money or fund in CIPLA, which has less standard deviation means

less risk.

Where as, the portfolio risk of two companies are reduced to 15.8189.

2. RELIANCE & INDIAN OIL

As per this combination portfolio weights are 0.68 and 0.32 for Indian Oil and Reliance

respectively and standard deviation of Indian Oil is 13.4126 which is less compare to the

standard deviation of Reliance i.e. 44.7922, which means less risk involved in Indian Oil

compare to Reliance. So, to any investor wants to invest his money or fund in this portfolio,

it is suggested that he can invest some portion of fund in Indian Oil and rest of part in

Reliance.

The portfolio risk of the companies Reliance and Indian Oil 6.6600, which is less

than the individual companies risk

67
 BIBLIOGRAPHY

V A avadhani, Security Analysis and Portfolio Management, Himalaya publishing house,Pp

1-18,

Ibid. 436-450.

Donald E fisher and Ronald j jardan, Security Analysis and Portfolio Management, 6th

edition, Pearson education, Pp 2-5.

Ibid. 285.

S.Kevin, Portfolio Management, Prentic, hall India pvt ltd.2003, Pp 1-18.

Prasanna Chandra, Investment Analysis Portfolio Management, Tata Mc Graw-hill

Publishing Company ltd, Pp 218-220.

V k Bhalla, Investment management, 10th edition, S chand and company Ltd, Pp 701-710.

WEB SITES:

http://www.Amfindja.Com/

htpp://www.Utimf.Com/

http://www.BseIndia.Com/

http://www.sebi.govt.in/

http://www.hseindia.com/

68