A

PROJECT REPORT ON

“PORTFOLIO MANAGMENT”

AT

INDIA INFOLINE

Submitted

by

Name: T PRIYA BHARATI

Enrollment No: 14CS602900128

Name of the department: Master of Business Administration

(MBA)

University: Madurai Kamaraj University, Madurai, Tamil Nadu.

Year: 2014-2016

1
 DECLARATION

I hereby declare that the project report titled “ PORTFOLIO

MANAGEMENT” submitted by me to the Department of Business

Administration, “VILLA MARIE DEGREE COLLEGE FOR WOMEN” , is a

bonafide work undertaken by me and it is not submitted to any other

University or Institution for the award of any Degree/Diploma certificate or

published any time before.

Place: Hyderabad MS. FEREEN DODHIYA

2
 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 GAIL & Titan , Infosys & BHEL , in the calculated proportions. The

investors who are slightly risk averse or who are not so risk averse are suggested

to invest in BHEL & Titan , Wipro & Jindal Steel and as these combinations

bear slightly high risk when compared with other combinations.

3
 ACKNOWLEDGEMENT

I would like to thank STRATEGEM SOLUTIONS for giving me an opportunity to do a

project work in the company. I would like to extend my sincere thanks to Mr.K.Mallesh

for taking time of his busy schedule and guiding me through out the course of project.

I would also like to thank Dr. Y. Philomena mam, Principal of villa marie degree

college for women for her support.

I would like to thank Mrs. SapnaMathur, Head Of Department for her inspiration and

timely support in successful completion of this project work.

I am deeply indebted to Ms. Shalini Menon, facultymember for her valuable guidance

throughout the course.

4
FEREEN DODHIYA

CONTENTS

CHAPTER 1 INTRODUCTION 1-19

1.1 Introduction

1.2 Objectives of the study

1.3 Scope and Period of the Study

1.4 Conceptual and Methodological Framework

1.5 Plan of the Study

1.6 Limitations of the Study

CHAPTER 2 REVIEW OF LITERATURE 20-23

CHAPTER 3 COMPANY PROFILE 24-34

CHAPTER 4 ANALYSIS& INTERPRETATION 35-62

CHAPTER 5 SUMMARY & CONCLUSIONS 63-65

CHAPTER 6 RECOMMENDATIONS 66-67

BIBLIOGRAPHY

5
 LIST OF TABLES

Table. Name of the Table Page No

No

1. Standard Deviation of HCL Technologies 37

2. Standard Deviation of reliance industries 39

3. Standard Deviation of Wipro 42

4. Standard Deviation of jindal steel 44

5. Standard Deviation of Infosys 47

6. Standard Deviation of BHEL 49

7. Standard Deviation of GAIL 52

8. Standard Deviation of Titan 54

9 Average Returns & Standard Deviation of Securities 57

10 Correlations & Portfolio Risk 60

6
 LIST OF CHARTS

Chart. No Name of the Chart Page No

1. Average return of selected securities 58

2. Standard Deviation securities 59

3. Correlation Coefficient 61

4. Portfolio Risk 62

7
 CHAPTER 1
INTRODUCTION

8
 Chapter 1
INTRODUCTION
1.1 INTRODUCTION
Portfolio management in common parlance refers to the selection securities and
their continues shifting in the portfolio to optimize returns to suit the objectives of an
investor. This, however, requires financial expertise in selecting the right mix of
securities in change market conditions to get the best out of the stock market. In India, as
well as in a number western countries, portfolio management service has assumed the role
of a specialized service now-a-days and a number of professional merchant bankers
compete aggressively to provide the best to high net worth clients, who have little time to
manage their investment. The idea is catching on with the boom in the capital market and
an increasing number of people are inclined to make profits out of their hard-earned
savings.

Portfolio management service is one of the merchant banking activities recognized

by Securities Exchange Board of India (SEBI). The Portfolio management service can be
rendered either by the SEBI authorized categories I&II Merchant Bankers or portfolio
managers or discretionary portfolio manager as defined in clauses (e) and (f) of rule 2 of
Securities and Exchange Board of India RULES, 1993. Portfolio is the collection of
financial or real assets such as equity shares, debentures, bonds, treasury bills,
and property etc.

PORTFOLIO:
Holding of different securities is called portfolio
(OR)
Managed of securities is called portfolio

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PORTFOLIO MANAGEMENT:
Portfolio Management guides the investor in a method of selecting
the best available securities that will provide the expected rate of return for any given
degree of risk and also to mitigate (reduce) the risks. It is a strategic decision which is
addressed by the top-level managers. Portfolio management is concerned with efficient
management of portfolio investment in financial assets, including shares and debentures
of companies. Portfolio is the combination of assets (or) it can also be called as the
combination of securities The art and science of making decisions about investment mix
and policy, matching investments to objectives, asset allocation for individuals and
institutions, and balancing risk against performance. Portfolio management is all about
strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic
vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt
to maximize return at a given appetite for risk.

There are many types of portfolios including the market portfolio and the zero-
investment portfolio.[4] A portfolio's asset allocation may be managed utilizing any of the
following investment approaches and principles: equal weighting, capitalization-
weighting, price-weighting, risk parity, the capital asset pricing model, arbitrage pricing
theory, the Jensen Index, the Treynor Index, the Sharpe diagonal (or index) model, the
value at risk model, modern portfolio theory and others.

There are several methods for calculating portfolio returns and performance. One
traditional method is using quarterly or monthly money-weighted returns, however the
true time-weighted method is a method preferred by many investors in financial
markets.[5] There are also several models for measuring the performance attribution of a

10
portfolio's returns when compared to an index or benchmark, partly viewed as investment
strategy.

Portfolios are the securities held by individuals and it may be recalled that the
expected return from individual’s securities carries some degree of risk. Risk can be
defined as the standard deviation around the expected return. The simple fact that
securities carried different degrees of expect risk leads most investors to the notion of
holding more than one security at a time in a attempt to spared risk by “not putting all
their eggs into one basket” In the case of mutual and exchange-traded funds (ETFs), there
are two forms of portfolio management: passive and active. Passive management simply
tracks a market index, commonly referred to as indexing or index investing. Active
management involves a single manager, co-managers, or a team of managers who attempt
to beat the market return by actively managing a fund's portfolio through investment
decisions based on research and decisions on individual holdings. Closed-end funds are
generally actively managed.

Modern portfolio theory (MPT) refers to the theory of investment that seeks to
maximize the expected return of portfolio at a given level of risk. Similarly it also
attempts to diminish risk for a given level of return expected. To achieve this, portfolio
manager choose the proportions of different assets in a portfolio carefully. The modern
portfolio theory is extensively used for practice in the financial industry, however basic
assumptions of this theory has faced certain challenges in fields like behavioral
economics.

Modern Portfolio theory (MPT) presents the concept of diversification in

investing by using mathematical formulation. It aims to select a collection of investment
assets which has lower risk than any individual asset. It can be observed spontaneously as
dynamic market conditions cause changes in value of different types of assets in
conflicting ways. The prices in the bond market may fall independently from prices in the
stocks market, thus there is overall lower risk in a collection of both bond and stocks
assets as compared to individual asset. Moreover, the diversification reduces the risk even
if cases where assets’ returns are positively correlated.

11
 A Portfolio Manager is responsible for building a portfolio of assets such as
stocks, bonds and other assets that generates the maximum possible rate of return at the
least possible level of risk. The portfolio management involves allocation of funds in
various assets to achieve diversification of portfolio that offer maximum return at the
lowest possible risk. A stock portfolio management refers to the management of
investment decisions for a stock portfolio and it is usually performed by stock
management professional due to its complex nature. The stock portfolio managers are the
experts in the field of stocks and well suited for making decisions for those who want to
manage their own investment.

1.2 Objectives of the Study:

To evaluate the optimal portfolio which gives optimal return at a minimal risk to
the investor.
 To examine whether the portfolio risk is less than individual risks of the
securities on whose basis the portfolios are constituted.
 To evaluate the yield of the selected portfolio.
 To examine which industries / sectors combination is yielding a good
return or not.
To study the risk – return characteristics of the selected portfolios.

1.3 Scope and Period of the Study:

This Study covers the Markowitz model. Herein, the study covers the
calculation of correlation between the different securities in order to select the
optimal combination securities where the fund should be invested. Also the study
includes the calculation of the individual standard deviations of securities and ends
with the calculation of weights of individual securities involved in the portfolios.
The study covers the returns of randomly selected 20 equity scripts for a period
of 12 months i.e., from April 2011 to March 2012

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 OBJECTIVES OF PORTFOLIO MANAGEMENT:
The following are the objectives of portfolio management
 Security/safety of principal
 Marketability
 Liquidity
 Diversification
 Favorable tax status
 Capital appreciation
 Stability of income
 Risk avoidance

NEED FOR PORTFOLIO MANAGEMENT:

Portfolio management is a process encompassing many activities of
investment in assets and securities. It is a dynamic and flexible
concept and involves regular and systematic analysis, judgments and
actions .The objective of this service is to help the unknown investor’s
with the expertise of professionals in investment portfolio management.
It involves construction of a portfolio based upon the investor’s
objectives, constraints, preferences for risk and returns and tax liability.
The portfolio is reviewed and adjusted from time to time intune with the
market conditions. The evaluation of a portfolio is to be done in terms of targets
set for a risk and return, the changes in the portfolio are to be effected to meet
the changing conditions.

Portfolio construction refers to the allocation of surplus funds in hand

among a variety of financial assets open for investment. Portfolio theory concerns
itself with the principals governing such allocations. The modern view of investments
is oriented more towards the assembly of the proper combinations of individual
securities to form investment portfolios. A combination of securities held together
will give a beneficial result if they are grouped in a manner to secure higher
return after taking into consideration the risk elements.

13
 The modern theory is of the view that by diversification, risk can be reduced.
The investor can make diversification either by having large number of shares of
companies in different regions, in different industries or those producing different
Types of product lines. Modern theory believes in the perspective of combinations
of securities under constraints of risk and return.

ACTIVITIES IN PORTFOLIO MANAGEMENT

The following three major activities are involved in an efficient portfolio
management:
(a) Identification of assets or securities, allocation of investment and identifying assets
classes
(b) Deciding about major weights/proportion of different assets/securities in the portfolio
(c).Securities selection within the asset classes as identified earlier.

The above activities are directed to achieve the sole purpose to maximize return
and minimize risk in the investment. This will however be depending upon the class of
assets chosen for investment

BASIC PRINCIPLES OF PORTFOLIO MANAGEMENT

There are two basic principles for effective portfolio management
(I) Effective investment planning for The Investment In Securities By
Considering The Following Factors
(a) Fiscal, financial and monetary policies of the government of India and the
Reserve Bank of India
(b) Industrial And Economic Environment And Its Impact On Industry Prospect
In Terms Of Prospective Technological Changes, Competition In The Market,
Capacity Utilization With Industry And Demand Prospect Etc.
(II) Constant review of investment:
(a) Assessment of quality of management of the companies in which investment
Has already been made or is proposed to be made
(b) The analysis of securities market and its trend is to be done on a continuous
basis.

14
1.4 Conceptual & methodological frameworks
Approaches to the Portfolio Management
In this portfolio management there are two approaches

a) TRADITIONAL APPROACH
The traditional approach to the portfolio management concern itself with the study
of the investors objectives, investment strategic diversification and selection of individual
investment.

Traditional security analysis recognizing the key importance of risk and return to
the investor. Most traditional methods recognize the return as some dividend receipt and
price appreciation over a forward period. But the return for an individual security is not
always over the some common holding period and the rates of return are also not
necessarily time adjusted

The traditional approach to portfolio management is to maximize the investor’s

wealth, diversification reduces volatile of returns and risks hence adequate equity
diversification is required..

THE TRADITIONAL APPROACH COVERS THE FOLLOWING:

(i) Balancing fixed interest securities against equity.
(ii) Balancing high dividend Payout Company against high earning growth
companies.
(iii) Finding the income of growth portfolio.
(iv) Balancing high income tax payable against capital gains tax.
(v) Balancing transition cost against capital gains from rapid securities and
retaining some liquidity to size up on bargains.

15
 Selection of individual investment:
(i) Calculating the intrinsic value of a share and compare at which the
market value.
(ii) Study of published accounts to calculate book value and trading
intrinsic value.
(iii) Tradicit feature share prices from past price movements by following
technical analysis.
(iv) By way of inside information the switch over Quigley to winner than
losing companies.
(v) Companies with good asset backing, dividend growth, good earning
record, high quality management with appropriate dividend polices
(or) traced out constantly for selection of portfolio holdings.
(vi) By adhering to the expect advice

b) Modern Approach
In this modern approach in portfolio management consists of the
discussion of camp (capital asset pricing model) and Markowitz approach

CAPITAL ASSET PRICING MODEL (CAPM)

CAMP explains how the price and interest rates on risk financial assets
securities are determined the capital Market .It combines the principal of portfolio theory
with certain assumptions regarding investors , expectation and market characteristics.
Assumptions:
The individual are Rick avers.
(1) Individual have homogeneous expectations regarding risk and
return of securities
(2) Individuals can borrow and lend free at risk, free rate of interest.
(3) The market is perfect and competitive.
(4) There are no trancation cost and no taxes.
(5) Securities are completely divisible.

16
 CAPM Express The Following Concept:

(1) The required rate of an all financial assets depends on risk less rate
of interest.
(2) The higher risk the greater is the expected return.
(3) Investors should be primarily concerned with risk that can’t be
diversified away by holding portfolios.
(4) Investors require a premium for bearing risk and premium times
the securities (beta) β which measure the it’s relative market risk.

ARBITRAGE PRICING THORY

Arbitrage pricing theory is one of the tools used by the investors and
Portfolio managers. The capital asset pricing theory explains the returns of the Securities
on the basis of their respective betas. According to the previous models, the investors
choose the investment on the basis of expected return variance. The alternative model
devolved in asset pricing by Stephen Ross is known as arbitrage pricing theory (APT).
The apt theory explains the nature of equilibrium in the asset pricing in a less complicated
manner with fewer assumptions compared to CAPM

ARBITARAGE
Arbitrage is a process of earning profit by taking advantage of differential pricing
for the same asset. The process generates risk less profit. In the security market, it is of
selling security as a high price and the simultaneous purchase of the same security as a
relatively lower price .Since the profit earned through arbitrage is risk less, the investors
have the incentive to undertake this whenever an opportunity arises. In general, some
investors indulge more in this type of activities than other. However, the buying and
selling activities of the arbitrageur reduce and eliminate the profit margin, brining the
market price to the equilibrium level.

17
 Markowitz Model
a) The Mean Variance Criterion:
Professor Harry M Markowitz formulated the risk-return relationship in a situation
with market in efficiency. He developed the concept of efficient frontier. He defined as
the other “hedge of set portfolios when each portfolio when each portfolio in the frontier
provides the highest possible expected return any degree of risk (or) the lowest possible
degree of risk of any expected return.

To the help of efficient frontier and indifference curves the optional investment
point can be located where the indifference curves is tangency reflex level respectable to
the investor in order to achieve a desired return and provide efficient return for a level of
risk.

The portfolio various indicates the importance of diversification for reducing risk
and shows how to diversity Markowitz advocate that the various of the rate of return is a
meaningful measure of risk under reasonable setoff assumptions and derives the formula
for computing the various of portfolio

He credited with developing the first modern portfolio analysis model in

order to arrange for the optimum allocation of assets within portfolio. To which
this objective Markowitz generated portfolios within a rewards – a risk context. In
essence Markowitz model is theoretical framework for the analysis of risk return
choices. Decisions are based on the concept of efficient portfolios.

A portfolio is efficient when it is expected to yield the highest return for

the level of risk accepted or alternatively the smallest portfolio risk for a specified
level of expected return to build an efficient portfolio an expected return level is
chosen, and the assets are substituted until the portfolio combination with the
smallest variance at the return level is found this process is repeated for other
expected returns. Hence, a set of efficient portfolio is generated.
Assumptions of Markowitz Model:

18
 The Markowitz model is based on several assumptions regarding investor
behavior.
1. Investor’s consider each investment alternative as being represented by a
probability distribution of expected returns over some holding period.
2. Investor’s maximize one period expected utility curve which demonstrates
diminishing marginal utility of wealth.
3. Individual’s estimate risk on the basis of variability of expected returns.
4. Investor base decisions solely on expected return and variance of returns only.
5. For a given risk level, investor’s prefer high returns to lower returns similarly,
for a given level of expected return investor’s prefer less risk to more risk.

Under these assumptions a single asset or portfolio of assets is considered

to be “Efficient” if no other assets or portfolio of assets offers higher expected
return with the same risk or lower risk with the same expected return.

b) The Specific Model:

In developing this model Markowitz first disposed of the investment
behavior rule that the investor should maximize expected return. This rule implies
that the non-diversification single – security portfolio with the highest expected
return is the most desirable portfolio. Only by buying that single security can
expected return be maximized. The single – security portfolio would obviously be
preferable if the investor work perfectly certain that this highest expected return
would turn out to be the actual return. However, under real world conditions of
uncertainty, most risk averse investor’s join with Markowitz in discarding the role
of calling for maximizing expected returns. As an alternative Markowitz offers the
“expected returns / variance of returns” rule.

The goal of portfolio manager should be to minimize portfolio risk for any
level of expected returns and suggested that this can be accomplished by
following equation.

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Minimize Portfolio Risk:
1/ 2

 N 22 N N 
P = 
 A1W A    W W r
A A1 B 1 A B AB
Subject to:
A minimum Stated Expected Return.
N
E(Rp) = 
A 1
WA E(RA)

Efficient Frontier or Efficient Portfolio:

The portfolio manager’s task is to select the investment weights that will
result in dominant investments. These dominant assets are called as “Efficient
Portfolios”. An efficient portfolio is any asset or combination of assets that has
1. The maximum expected return in its risk class.
2. The minimum risk at its level of expected return.

The objective of portfolio management is to analyze different individual

assets and delineate efficient portfolios. The group of all efficient portfolios will
be called as efficient set of portfolios which compresses the “efficient frontiers”.
The efficient frontier is the locus of points in risk return space having the
maximum return at each risk class. The efficient frontier dominates all other
investments. The risk and return can be seen in the following graph:

20
 The vertical axis denotes expected return (ER) while the horizontal axis
measures the standard deviation of the return given its expected returns and
standard deviation , any investment option can be represented by a point on such
a plane and the set of all potential options can be enclosed by an area. The
efficient portfolios are given by arc AB and is a boundary of an attainable set.
The shaded area represents the attainable set of portfolio consideration. Any point inside
the shaded area is not as efficient as corresponding point on efficient frontier.

Point X1 offers the same expected returns ER1 as X2 but has a smaller
standard deviation. Any point below X1 such as X3 has the same standard
deviation as X1 but a smaller expected return. The portfolio on the efficient
frontiers are said to be dominant. The set of attainable set is called ‘Feasible Region’.

Concept of Efficient Portfolio:

The dominance principle states that among all the investment opportunities
available with a given return, the investment with the least risk is the most
desirable one or among the investment in the given risk class, the one with the

21
highest return with the most desirable one. Risk principle is called as efficient set
theorem.

In the light of this the segment AB is a relevant portion of the feasible set
is called the Markowitz Efficient Frontier. It is so called because all efficient
portfolios lies on this frontier.

An efficient portfolio is one that gives the highest return for a given return
or a minimum risk for a given return, these efficient portfolios are also referred
as mean –variance efficient portfolios. The shape of the efficient frontier is given
by ∆Rp / ∆σp.

Selection of Appropriate Portfolio:

After the generation of the efficient frontier, the investor must select the
most appropriate portfolio from among the many portfolios present on the efficient
frontier.

The Markowitz model allows a trade of between expected returns and risks,
which depends upon the each investor’s risk preferences. Investor’s unique
personal preferences can be described by using indifference curve as follows:

22
Efficient Frontier with Indifferent Curve
The arc AB shows the efficient frontier and the investor’s utility
preference functions are assumed to take the shapes of the curve I1, I2, and I3.
The investor would prefer curve I3 or I2 because curve I3 provide more return
per unit than curve I2 at any point on the curve. The same can be said of curve
I2 related to I1. But point N1, the point of tangency between an indifference
curve I1 and the efficient frontier gives the optimal portfolio because the portfolio
at point N maximizes utility. It is the most satisfied available portfolio.

METHODOLOGICAL FRAMEWORK
For implementing the study 20 securities or stocks (equity stock)
constituting the Nifty market are selected, of one year opening and closing sharing
moment prices data from NSE dated from April 2005 to March 2006.
In order to know the return of each stock or security the formulae that is used is
given below:

Closing price - Opening price

R= --------------------------------------------------X 100
Opening price

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 To know the average (R’) the following formula has been used.

Average (R’) =
R
N
The next step is to know the risk of the stock or security the formula is
given below.

( R  R' ) 2
Standard Deviation (σ) =
T
Where
(R – R’)2 = Square of the difference between sample return and mean return.
T = Number of sample observations for a period.

After that, the correlation of the securities is calculated by using the

following formula:
COV AB
(rAB) =
 A B

 R  R' A RB  R' B 

1
Covariance (COVAB) = A
N T 1

Where,
RA  R' A RB  R'B  = Combined Deviations of Security A & Security B.
σA σB = Standard Deviation of Security A and Security B
COVAB= Covariance between A and B.
N = number of observations.

The next step would be the construction of the optimal portfolio on the
basis of what percentage of investment should be invested when two securities
and stocks are combined i.e., calculation of two assets portfolio weights by using
minimum variance equations, which is as follows:
 B  B  rAB A 
WA =
   B2  2rAB A B
2
A

WB=1-WA

24
Where,
WA = Proportion of investment in security A
WB = Proportions of investment in Security B
The next and final step is to calculate the portfolio risk (combined risk)
that shows how much risk would be reduced by combining 2 stocks or securities
with the use of the following formula:

σP =  A2W A2   B2WB2  2rAB A BW AWB

Where
σp = Portfolio Risk
σA = Standard Deviation of Security A
σB = Standard Deviation of Security B
WA = Proportion of Investment in Security A
WB = Proportion of Investment in Security B
rAB = Correlation coefficient between Security A and Security B.

1.5 Plan of the study:

The present study is divided into five chapters:
Chapter 1: Covers introduction, need and importance of study, scope of
study, objectives and limitations of the study.
Chapter 2: Company profile, which gives an introduction to HSE and
how it carries out day to day activities is concerned in this chapter.
Chapter 3: It covers the conceptual and methodological framework which
deals with the following:
The conceptual framework deals with the Markowitz model and investment
divisions.
The methodological consists of the various formulae that are used in the
calculations of the return, standard deviation, variance, correlation coefficient,
covariance of securities, weights and risk return of portfolio.
Chapter 4: It consists of the analysis and interpretation.
Chapter 5: Deals with findings and conclusions.

25
1.6 Limitations of the Study:
The Study has certain limitations / Constraints which has led to the
obstruction of widening the scope and objectives of study.
1. The fulfillment of project limited to 60 days.
2. Construction of portfolio restricted with two – assets based on
Markowitz model.
3. From NSE listing a very few and randomly selected scripts are
Analyzed.
4. Limited industries are only covered in the study.
5. Some of the securities that are covered under the study are not the
Representative stocks in NSE Nifty.

26
 CHAPTER 2

REVIEW OF LITERATURE

27
 Chapter 2

REVIEW OF LITERATURE
1. Portfolio Management in General Insurance Industry1
1) Overview of Study:
The main purpose of the study is to examine the policy adopted for decision
Making in the area of portfolio management in general insurance corporation (GIC) with
a special focus on portfolio management of NIACL.

2) Scope and Period of the Study:

The present study covers through examination of procedure of decision-making.
Portfolio management environment, selection of securities, weight of different securities
and earnings of portfolio of NIACL. The data is collected from secondary sources
comprises of published reports of Government of India,RBI,GIC and Annual Reports Of
NIACL for the time period from 1994-95 To2011-12

3) Conclusion:
The new India assurance company limited (NIACL), which is a subsidiary of
General Insurance Company (GIC), is playing a crucial role as a custodian of public
funds for investment in various securities and loans. The study reveals that the Stock
Exchange Securities in India and outside India have shown an increasing trend whereas
the Loan Securities denoted a decreasing trend. The analysis regarding the sector –wise
investment shows that in Public and Private and Private sectors Investment showed an
increasing trend whereas Co-operative sector recorded a decreasing trend. Though the
investments in Mutual Funds are at the inception stage, it recorded an increasing trend,
which is higher than both the Public and private sectors.

There seem better prospects for investment by NIACL IN Mutual Fund the study
relating to Investment and Income denotes an increasing trend throughout the study
period. Thus, the study indicates that the resources of general Public, Government and all

28
the other investor’s funds are safe and secure in the hands of NIACL as it has selected
portfolios asper the norms, directions of IRDA.

4) Findings:
1. The trend of the Stock Exchange Securities in India has shown increasing trend.
On an average, the investment in such securities increased by 183.47%yearly over the
study period. The average increase in Investment in this case is 184.77% per year over the
study period
2. Investment in the stock exchange securities in outside India has also shown
increasing trend over the study period except in the year 2000-01, which denotes a
significant decline to 4.21%
3. The average increase in Investment in this case is 184.77% per year over the
study period

2. Portfolio Selection Using the CAPM 2

1) Overview of the study:
The present study aims to measure the actual risk and return of securities. The
actual expected returns of securities and calculated using SML. The study aims to suggest
a lest portfolio mix and also assist the investors in making rational investment decision

2) Scope and Period of the Study:

The scope of the study is limited to the use of the Securities Market Line as a tool
for selecting securities and advising the investors about the best portfolio mix. The period
chosen for study is August 2013- December 2013

3) Conclusion:
This system is linear, since the weights (xi’) are the variables and they are all of
degree one; thus the system may be solved as a system of linear equations. This system
may be solved in different ways with matrix notation, the inverse of the coefficient

29
matrix, denoted C1, and may be used to find the solution (weight) vector X as shown
below. I denote the identity matrix. The weights in the first nine equations sum to unity
are a linear function of E*, and represent the weights of the nine securities in the efficient
portfolio at the point where(rp) = E*. Varying E* generates the weights of all the efficient
portfolios.

4) Findings
1. There is significant difference between expected returns and actual returns.
2. The securities are said to be undervalued when their expected return is more
than actual return.
3. It can be observed that the undervalued securities are Cipla, Dr.Reddy Labs,
HDFC Bank, HPCL, Infosys, ITC, MTNL, Ranbaxy and Satyam.

30
 CHAPTER 3
COMPANY PROFILE

31
 COMPANY PROFILE

INTRODUCTION TO INDIAINFOLINE
IndiaInfoline founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as
an independent business research and information provider. We gradually evolved into a
one-stop financial services solutions provider. Our strong management team comprises
competent and dedicated professionals.

We are a pan-India financial services organization across 1,361 business locations and a
presence in 428 cities. Our global footprint extends across geographies with offices in
New York, Singapore and Dubai. We are listed on the Bombay Stock Exchange (BSE)
and the National Stock Exchange (NSE).

We offer a wide range of services and products comprising broking (retail and
institutional equities and commodities), wealth management, credit and finance,
insurance, asset management and investment banking.

We are registered with the BSE and the NSE for securities trading, MCX, NCDEX and
DGCX for commodities trading, CDSL and NSDL as depository participants. We are
registered as a Category I merchant banker and are a SEBI registered portfolio manager.
We also received the FII license in IIFL Inc. IIFL Securities Pte Ltd received approval
from the Monetary Authority of Singapore to carry out corporate advisory and dealing in
securities operations. Two subsidiaries – India Infoline Investment Services and
Moneyline Credit Limited – are registered with RBI as non-deposit taking non-banking
financial services companies. India infoline Housing Finance Ltd, the housing finance
arm, is registered with the National Housing Bank.

32
HISTROY OF INDIAINFOLINE
The IndiaInfoline Group was originally incorporated on October 18, 1995 as
Probity Research and Services Private Limited at Mumbai under the Companies Act,
1956 with Registration No. 11 93797. The IndiaInfoline Group commenced its operations
as an independent provider of information, analysis and research covering Indian
businesses, financial markets and economy, to institutional customers. We became a
public limited company on April 28, 2000 and the name of the Company was changed to
Probity Research and Services Limited. The name of the Company was changed to India
Infoline.com Limited on May 23, 2000 and later to India Infoline Limited on March 23,
2001.

In 1999, The IndiaInfoline Group identified the potential of the Internet to cater to
a mass retail segment and transformed our business model from providing information
services to institutional customers to retail customers. Hence we launched our Internet
portal, www.indiainfoline.com in May 1999 and started providing news and market
information, independent research, interviews with business leaders and other specialized
features.

In May 2000, the name of our Company was changed to India Infoline.com
Limited to reflect the transformation of our business. Over a period of time, we have
emerged as one of the leading business and financial information services provider in
India.

In the year 2000, The India Infoline Group leveraged it’s position as a provider of
financial information and analysis by diversifying into transactional services, primarily
for online trading in shares and securities and online as well as offline distribution of
personal financial products, like mutual funds and RBI Bonds. These activities were
carried on by our wholly owned subsidiaries.

The India Infoline Group’s broking services was launched under the brand name
of 5paisa.com through our subsidiary, India Infoline Securities Private Limited and

33
www.5paisa.com, the e-broking portal, was launched for online trading in July 2000. It
combined competitive brokerage rates and research, supported by Internet technology
Besides investment advice from an experienced team of research analysts, we also offer
real time stock quotes, market news and price charts with multiple tools for technical
analysis.

Acquisition of Agri Marketing Services Limited ("Agri")

In March 2000, The IndiaInfoline Group acquired 100% of the equity shares of
Agri Marketing Services Limited, from their owners in exchange for the issuance of
508,482 of our equity shares. Agri was a direct selling agent of personal financial
products including mutual funds, fixed deposits, corporate bonds and post-office
instruments. At the time of our acquisition, Agri operated 32 branches in South and West
India serving more than 30,000 customers with a staff of, approximately 180 employees.
After the acquisition, we changed the company name to India Infoline.com Distribution
Company Limited.

The India Infoline group, comprising the holding company, India Infoline Ltd
(NSE: INDIAINFO, BSE: 532636) and it’s subsidiaries, is one of the leading players in
the Indian financial services space. India Infoline offers the entire gamut of financial
services covering investment products ranging from Equities and derivatives,
Commodities, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed
deposits, Loans, Investment Banking, GoI bonds and other small savings instruments. It
owns and manages the website, www.indiinfoline.com, which is one of India’s leading
online destinations for personal finance, stock markets, economy and business.

34
A forerunner in the field of equity research, IndiaInfoline’s research is acknowledged by
none other than Forbes as ‘Best of the Web’ and ‘…a must read for investors in Asia’.
IndiaInfoline’s research is available not just over the internet but also on international
wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities
where it is amongst the most read Indian brokers.
A network of 753 business locations spread over 346 cities across India, facilitates the
smooth acquisition and servicing of a large customer base. All these offices are connected
with the corporate office in Mumbai with cutting edge networking technology.
The group caters to a customer base of over 500,000 over a variety of mediums viz.
online, over the phone and at our branches. The Group is strengthening its institutional
broking and investment banking services and has built a team of experienced research
analysts, sales and trading professionals

IndiaInfoline refers to IndiaInfoline Ltd and its subsidiaries. The consolidated figures will
give a more meaningful picture of the Company to the investors. Reference to the
company or IndiaInfoline is to the business done by the company and its subsidiaries,
unless otherwise specified.

VISION
Our vision is to be the most respected company in the financial services space.

MISSION

“To become a full-fledged financial services company known for its quality of advice,
personalized services and cutting edge technology”

35
COMPANY PHILISOPHY
The IndiaInfoline Group is committed to placing the Investor First, by continuously
striving to increase the efficiency of the operations as well as the systems and processes
for use of corporate resources in such a way so as to maximize the value to the
stakeholders. The Group aims at achieving not only the highest possible standards of legal
and regulatory compliances, but also of effective management.

COMMITTEE

Audit Committee
Terms of reference & Composition, Name of members and Chairman: The Audit committee
comprises Mr Nilesh Vikamsey, Chairman of the Committee, Mr Sat Pal Khattar, Mr Sanjiv
Ahuja and Mr Kranti Sinha, three of whom are independent Directors. The top Executivess
and Internal Auditors are invitees to the Meeting. The Terms of reference of this committee
are as under: - To investigate into any matter that may be prescribed under the provisions of
Section 292A of The Companies Act, 1956 - Recommendation and removal of External
Auditor and fixation of the Audit Fees. - Reviewing with the management the financial
statements before submission of the same to the Board. - Overseeing of Company’s financial
reporting process and disclosure of its financial information. - Reviewing the Adequacy of the
Internal Audit Function.

Compensation/ Remuneration Committee

Terms of reference & Composition, Name of members and Chairman: The Compensation
/ Remuneration Committee comprises Mr Sanjiv Ahuja, Chairman of the Committee, Mr
Nilesh Vikamsey and Mr Kranti Sinha, all of whom are independent Directors. The
Terms of reference of this committee are as under: - To fix suitable remuneration package
of all the Executive Directors and Non Executive Directors, Senior Employees and

36
officers i.e. Salary, perquisites, bonuses, stock options, pensions etc. - Determination of
the fixed component and performance linked incentives alongwith the performance
criteria to all employees of the company - Service Contracts, Notice Period, Severance
Fees of Directors and employees. - Stock Option details: whether to be issued at discount
as well as the period over which to be accrued and over which exercisable. - To conduct
discussions with the HR department and form suitable remuneration policies.

Share Transfer and Investor Grievance Committee

Details of the Members, Compliance Officer, No of Complaints received and pending and
pending transfers as on close of the financial year. The committee functions under the
Chairmanship of Mr Kranti Sinha, a Non-executive independent Director. The other
Members of the committee are Mr Sanjiv Ahuja, Independent Director and Mr R
Venkataraman, Executive Director. Ms Komal Parikh, Company Secretary is the
Compliance Officer of the Company.

COMPANY STRUCTURE
IndiaInfoline Limited is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member
of both the exchanges. It is engaged in the businesses of Equities broking, Wealth
Advisory Services and Portfolio Management Services. It offers broking services in the
Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is
registered with NSDL as well as CDSL as a depository participant, providing a one-stop
solution for clients trading in the equities market. It has recently launched its Investment
banking and Institutional Broking business.

37
A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients.
These services are offered to clients as different schemes, which are based on differing
investment strategies made to reflect the varied risk-return preferences of clients

PRODUCT & SERVICES

Equities
India Infoline provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist
prior to India Infoline. India Infoline leveraged technology to bring the convenience of
trading to the investor’s location of preference (residence or office) through
computerized access. India Infoline made it possible for clients to view transaction costs
and ledger updates in real time.

Over the last five years, India Infoline sharpened its competitive edge through the
following initiatives:

38
Multi-channel delivery model:
The Company is among the few financial intermediaries in India to offer a complement
of online and offline broking. The Companies network of branches also allows
customers to place orders on phone or visit our branches for trading.

Integrated middle and back office:

The customer can trade on the BSE and NSE, in the cash as well as the derivatives
segment all through the available multiple options of Internet, phone or branch
presence.

Multiple-trading options:
The Company harnessed technology to offer services at among the lowest rates in the
business.

Membership:
The Company widened client reach in trading on the domestic and international
exchanges.

Technology:
The Company provides a prudent mix of proprietary and outsourced technologies,
which facilitate business growth without a corresponding increase in costs.

Content:
The Company has leveraged its research capability to provide regular updates and
investment picks across the short and long-term.

Service:
Clients can access the customer service team through various media like toll-free lines,
emails and Internet- messenger chat for instant query resolution. The Companies
customer service executives proactively contact customers to inform them of key
changes and initiatives taken by the Company. Business World rated the Companies
customer service as Best in their survey of online trading sites carried out in December

39
2003.

Key features :
Membership on the Bombay Stock Exchange Limited and the National Stock
Exchange

Registered with the NSDL as well as CDSL as a depository participant, providing a

one-stop solution for clients trading in the equities market

Broking services in cash and derivative segments, online as well as offline.

Presence across 350 cities and towns with a network of over 850 business locations
Equity client base of over 500,000 clients

Provision of free and world-class research to all clients

Commodities
India Infolines extension into commodities trading reconciles its strategic intent to
emerge as a one stop solutions financial intermediary. Its experience in securities
broking has empowered it with requisite skills and technologies. Increased offering: The
Companies commodities business provides a contra-cyclical alternative to equities
broking. The Company was among the first to offer the facility of commodities trading
in Indias young commodities market (the MCX commenced operations only in 2003).
Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to
Rs 20.02 bn. The commodities market has several products with different and non-
correlated cycles. On the whole, the business is fairly insulated against cyclical
gyrations in the business.

IndiaInfoline distinguished its business through the interplay of knowledge and

technology:

Complete solution:
The Company provides a complete - advice to execution solution facilitated by
information and advice on likely commodity trends in the Indian and international
environment.

40
 Technology:
The Company has extended the trading terminal to the investors home/workplace
reinforced with real-time commodity information and ledger position.

Rates :
The Company harnessed technology to offer services at among the lowest rates in the
business. Membership: The Company widened client reach in trading on the domestic
and international exchanges.

Key Features :
Enjoys memberships with the MCX and NCDEX, two leading Indian commodities
exchanges
Recently acquired membership of the DGCX
Multi-channel delivery model, making it among the select few to offer online as
well as offline trading facilities

Extended commodity trading to retail investors, among the few Indian financial
intermediaries to do so

Online business at 80% of revenues dominates commodities trading revenues

Provides regular commodity updates pertaining to the Indian and international
environment

INSURANCE
An entry into this segment helped complete the client's product basket; concurrently, it
graduated the Company into a one stop retail financial solutions provider. To ensure
maximum reach to customers across India, we have employed a multi pronged approach and
reach out to customers via our Network, Direct and Affiliate channels. Following the opening
of the sector in 1999-2000, a number of private sector insurance service providers commenced
operations aggressively and helped grow the market

The Companies entry into the insurance sector derisked the Company from a predominant
dependence on broking and equity-linked revenues. The annuity based income generated from
insurance intermediation result in solid core revenues across the tenure of the policy.

41
Over the last five years, India Infoline sharpened its competitive edge in this business segment
through the following initiatives:

Client base :
Grew its 40,000 strong client base through knowledge-led analysis, translating into an
attractive opportunity to cross-sell products and generate referral business.

Distribution network :
Invested in a distribution network of 177 branches across 19 states, which provided it with an
unmatched reach within its segment.

Hands-on training :
Invested aggressively in training its field force more than 100 hours a year in product
attributes across the insurance sector - highlighting various product details and marketing
skills apart from regular meets where best practices are shared.

Technology :
The Company provides a prudent mix of proprietary and outsourced technologies, which
facilitate business growth without a corresponding increase in costs.

Research and advice :

Provided clients with advice on diverse investment products based on the customers existing
and prospective financial profile.

42
Key features :
India Infoline was the first corporate in India to get the agency licence in early 2001

The Company is the biggest corporate agency in India for life insurance products

The Company operates multiple channels, namely branch network, preferred client
group, direct marketing, corporate tax advisory, walk-ins and seminars, to reach out
to customers.

INVEST ONLINE

India Infoline has made investing in Mutual funds and primary market so
effortless. All you have to do is register with us and that’s all. No paperwork no
queues and No registration charges.

If you are 5p customer use your existing login ID and Ledger (fund transfer)
password. Indiainfoline offers you a host of mutual fund and IPO choices under one
roof; backed by in-depth information and research to help you invest effortlessly.

INVEST IN MF
Indiainfoline offers you a host of mutual fund choices under one roof, backed by in-
depth research and advice from research house and tools configured as investor
friendly. Investing in Mutual Funds has never been easier

APPLY IN IPOs
You could also invest in Initial Public Offers (IPOs) online without going through the
hassles of filling ANY application form/ paperwork.

Know more about IPO

Get in-depth analyses of new IPOs issues (Initial Public Offerings) which
are about to hit the market and analysis on these recent IPO listings,
prospectus/offer documents, and IPO reports are few of the features, which
help you, keep on top of the IPO markets.

43
Loans
They say you mustn't trust a man till you know his house. Everyone likes hearing people
say Wow, what a beautiful house you have! From cave dwelling, we have evolved and
now a house provides far more than just shelter...it also becomes a source of pride. A
Housing Loan is used as finance to help you buy or modify that perfect home.

The different Housing Loan products can be classified as:

 Home Loans & Home Extension Loans
 NRI Loans
 Land Loans
 Home Equity Loans

 What is a housing loan?  Repayment capacity

 Who can apply?
 General Terms and conditions
of a Housing Loan product.
 Charges applicable to housing
loan products.
 Credit documentation
 Legal documentation
 Tax Benefits
 Property Insurance

What is a housing loan?

They say you mustn't trust a man till you know his house. Everyone likes hearing people
say "Wow, what a beautiful house you have!" From cave dwelling, we have evolved and
now a house provides far more than just shelter...it also becomes a source of pride. A
Housing Loan is used as finance to help you buy or modify that perfect home. The
different Housing Loan products can be classified as:

Home Loan

Home Extension Loans

Home Improvement Loans

Land Loans

NRI Loans

44
Home Equity Loans

Short term Bridging Loans

Balance Transfer

Who can apply?

As long as you want to buy a house in India, you can apply for a Home Loan. You could
be a Resident Indian or an NRI; you could want to buy a property now or in the future,
but you may still apply for a Home Loan. In case you go with the last option and want to
wait before you consider nests, all you have to be sure of is the amount you are willing to
spend on this property and the HfIs will let you know your eligibility based on your
income which will help you plan out your budget. To find out your eligibility, please use
our calculator.

General Terms and Conditions of a Housing Loan Product

You are allowed to visit zoos on the condition that you do not feed the animals. When
you're 18, you are allowed to go for that late night party on the condition that someone
drops you home before 12. Every step we take requires condition to be fulfilled.
Similarly, these are the general terms & conditions of a Home Loan. For more details,
please refer to the individual product.

 LTV Ratio will not exceed a particular percentage. This percentage differs from
HFI to HFI and the components of the value of property are covered in Cost of
Property
 Elastic can be stretched only to a certain extent. The loan tenure also will not go
beyond 20 years. However, HFIs do provide for different tenures with different
terms and conditions.
 Your EMI normally does not exceed 50% of your Gross Monthly income.
 The total monthly payment towards all the loans you have availed of, including
the present one, will normally not exceed 50% of your Gross Monthly Income.
 Your loan eligibility is calculated using LTV, IIR and FOIR norms and the lowest
from the three is chosen.

45
  Your profile is considered by the HFI before your repayment capacity is judged.
 If the HFI insists on a personal guarantor, you need to provide one before the
disbursement of your loan.
 Your property should be both technically and legally clear before your loan can
get disbursed by the HFI.
 In case you have bought an under construction property, your loan will be partly
disbursed, as per the stages of construction and PEMI needs to be paid on it.
 The disbursement, in most cases, will be in the name of the builder or the seller or
the society or the development authority unless you have made some payment to
them.
 Repayment of the loan is either via Deduction Against Salary, Post Dated
Cheques, standing instructions or by cash / DD.
 You can either choose to repay the loan using the Annual rests or Monthly rests.

Charges applicable to Housing Loans

The different kinds of charges applicable to Home Loans are listed below:

 Upfront Fees
 Rate of Interest
 Legal and Technical Charges
 Stamp Duty and Registration Charges
 Personal Guarantee from Charges
 Cheque Bounce Charges
 Delayed Payment Charges
 Additional Charges
 Incidental Charges
 Prepayment Charges
 PDC Swapping Charges

46
Legal and technical charges :

Some HFIs charge you for the legal and technical checks undertaken on your documents
and property, by lawyers and the technical team of the HFI.

Stamp duty and registration charges:

If you go in for a registered mortgage, these charges incurred by the HFI are passed onto
you. Sometimes these charges are rather heavy depending on the State laws in the state
from where you purchase your property.

Personal Guarantee form charges:

A piece of paper signed does not have much value unless stamped and validated by the
concerned authority. That power of attorney document that you signed with your spouse
would not be credible unless signed on a Rs.100 stamp paper. Similarly, HFIs currently
charge you a minimum of Rs.100 to get the personal guarantee validated and stamped in
the eyes of the law.

PDC swapping charges:

In case you want to exchange the PDCs you gave the HFIs for EMI repayments because
of a change in bank accounts, a change in EMI amount, etc., the HFis might charge a flat
fee for it.

Repayment capacity
Your repayment capacity is judged according to your income and your income is
considered differently if you are salaried and differently if you are self-employed. Income
is used to calculate the amount of money that you will be able to shell out every month
towards your loan installment using IIR and FOIR norms. FOIR calculation also takes
into account the installments of loans you are currently repaying. The lower between the
IIR and FOIR is chosen as your maximum repayment capacity. This is then compared to

47
the loan amount that you have requested for and the loan eligibility as per LTV norms and
the lowest of these would be your final loan eligibility.

Salaried Self-employed
Any extra income on your salary slip Any non-recurring income that affects profit
(including overtime, etc.) is subtracted (like sale of asset) is subtracted.
50% of the average variable income over the Any non-recurring expense that adversely
last 6 months is added affects profits and was not capitalized (like
repairs and maintenance) is added
Any fixed cash or voucher payment that can 50% of the average depreciation of the last
be proved is added. two years is added.
HRA that can be received and is not being
received is added.
50% of the average annual income of the
last two years is added.

Credit Documentation
Would you trust any Tom, Dick or Harry with any matter at all? We all require a certain
assurance from people before we trust them; some sort of guarantee that they are
trustworthy. For HFIs this guarantee rests in the form of tangible documents. Credit
documents are required by all HFIs but vary in kind based on your occupation, employer,
qualifications, experience, etc. Credit documents can be classified as
Income documents:

Money money money...no one can take a chance on the credibility of money matters
because at the end of the day, business is business. Almost everything about your loan is
based on your income and therefore proof regarding the same is required by the HFI to
ensure that no miscommunications occur.

48
Personal documents:

Previously, tribes and clans had passwords without which you could not enter into the
territory; as proof of who he was, King Solomon had a ring as identification. Throughout
history, proof of identity has been important as mistaken identity has never been
uncommon. To prevent any such shams, HFIs also require a set of documents, for a
general Home Loan Product, identifying who you are.

He following list out all the documents needed. {under this line will be placed the
document sent separately as an excel sheet}

Legal Documentation
We might be living in the electronic age but that doesn't take away the importance and
monopoly of paper as everything to do with law will always be on paper. To stick by this
unwritten rule, there are legal documents that need to be submitted by you to the HFI for
mortgaging and these differ from state to state and also depend on your property type.
The following form a broad outline of the documents required and a detailed list can be
found here.

 Copy of the offer letter sent by the HFI, accepted by you.

 Title documents of the property which include
-Duly registered sale agreement.
-Receipts of your own contribution.
-Allotment letter
-Registration receipt
-If needed, land documents indicating ownership.
-Possession letter
-Lease agreement, if the property is bought from a development authority
-Mortgage deed if the HFI opts for a registered mortgage.
 No Objection Certificate from the developer, society or development authority
 Personal Guarantees, if required.
 Documents for alternate or additional security.
 Post dated cheques for the EMIs.

49
These documents do NOT cover the entire list needed and if it is a resale property, the
pertaining agreements, etc. will also need to be attached.

Tax Benefits
Tax benefits are currently available only under Home Loans and Home Extension loans.
The details are given under the respective sections.

Property Insurance
Some events are not in our hands and are completely unavoidable. Floods, drought and
storms uproot trees and destroy the land. Along with this the birds lose their homes and
while building a nest may not be that bad and the loss is not that great, the money that you
invest in your cosy home might just be washed away. For this reason insuring your
property is a good idea as you safeguard the asset against damage or loss.. Property
insurance is not compulsory though some HFIs insist on a mortgage redemption life
insurance policy and you will therefore get a reduced interest rate. Some of the points that
need to be noted regarding property insurance are:

 You can choose the tenure of your insurance.

 The premium is charged up front
 The longer your tenure, the greater the discounts insurance companies offer you.

News Letter
The Daily Market Strategy is your morning dose on the health of the markets. Five
intra-day ideas, unless the markets are really choppy coupled with a brief on the global
markets and any other cues, which could impact the market. Occasionally an investment
idea from the research team and a crisp round up of the previous day's top stories. That's
not all. As a subscriber to the Daily Market Strategy, you even get research reports of
India Infoline research team on a priority basis
The IndiaInfoline Weekly Newsletter is your flashback for the week gone by. A weekly
outlook coupled with the best of the web stories from India Infoline and links to
important investment ideas, Leader Speak and features is delivered in your inbox every
Friday evening.

50
Portfolio Management
You get recessions. You have stock market declines. If you don't understand that's going
to happen, then you're not ready; you won't do well in the markets. No need to worry. We
at India Infoline would take care of all issues related to managing your hard earned
money.

Our Portfolio Management Service is a product wherein an equity investment portfolio is

created to suit the investment objectives of a client. We at India Infoline invest your
resources into stocks from different sectors, depending on your risk-return profile. This
service is particularly advisable for investors who cannot afford to give time or don't have
that expertise for day-to-day management of their equity portfolio.

It is all about your money, being managed by the experts, while you continue with your
routine life. Isn't it simple and totally hassle free.

What's more, you can keep track of your dividends / bonus / rights issues with paperless
tracking. So you always know how fast your investment is growing. It basically means
assigning the right job to the right person.

Research
IIFL special research cell where some of India's finest financial analysts bring you
intensive research reports on how the stock market is faring, when is the right time
to invest, when to execute your order and more
IIFL make sure that investors are always prepared to make own investment decision
when the opportunity arises
IIFL bring you intensive research reports - whether sectoral or company-wise or more -
that tell you exactly when and where to invest. So whenever there is an exciting
investment opportunity, you are in the know and always ready to invest. Research
reports IIFL will help you choose your investments wisely, without wasting time.
Presented in a lucid and easy-to-understand format; these reports help you make
informed decisions.

51
ASSET MANAGEMENT
India Infoline is a leading pan-India mutual fund distribution house associated with
leading asset management companies. It operates primarily in the retail segment
leveraging its existing distribution network to reach prospective clients. It has received
the in-principle approval to set up a mutual fund.

The group recently commenced its offshore asset management business under the ‘IIFL
Capital’ brand. Also, IIFL Securities Pte Ltd received approval from the Monetary
Authority of Singapore to carry out global asset management operations. The Singapore
arm can now offer broking, asset management and investment banking services.

IIFL Inc received an FII license, thereby facilitating the investment of dedicated funds in
India.

With offices in New York, Singapore and Dubai, IIFL Capital aims to offer India-
focused equity products, fund management and advisory services for offshore and
domestic wealth management customers.

52
 MILESTONES ACHIEVED
1995

Incorporated as an equity research and consulting firm with a client base that included
leading FIIs, banks, consulting firms and corporates.

1999

Restructured the business model to embrace the internet; launched

archives.indiainfoline.com mobilised capital from reputed private equity investors.

2000

Commenced the distribution of personal financial products; launched online equity

trading; entered life insurance distribution as a corporate agent. Acknowledged by Forbes
as ‘Best of the Web’ and ‘...must read for investors’.

2004

Acquired commodities broking license; launched Portfolio Management Service.

2005

Listed on the Indian stock markets.

2006

Acquired membership of DGCX; launched investment banking services.

2007

Launched a proprietary trading platform; inducted an institutional equities team; formed a

Singapore subsidiary; raised over USD 300 mn in the group; launched consumer finance
business under the ‘Moneyline’ brand.

2008

Launched wealth management services under the ‘IIFL Wealth’ brand; set up India
Infoline Private Equity fund; received the Insurance broking license from IRDA; received
the venture capital license; received inprinciple approval to sponsor a mutual fund;
received ‘Best broker- India’ award from FinanceAsia; ‘Most Improved Brokerage-
India’ award from Asiamoney.

53
2009

Received registration for a housing finance company from the National Housing Bank;
received ‘Fastest growing Equity Broking House - Large firms’ in India by Dun &
Bradstreet.

MARKET SHARES OF COMPANY

 Retail broking:
IndiaInfoline has around 3 lakh customers. It has a tie-up with Bank of
Baroda for e-broking.

 Institutional broking:
IndiaInfoline has roped in Bharat Parajia, director of sales at CLSA in
Singapore, H Nemkumar, CLSA's country head for India, Aniruddha Dange,
CLSA's head of research in India, and Vasudev Jagannath, CLSA's head of sales
in India. While Parajia will join as head of institutional sales at India Infoline,
Dange will be head of research and Nemkumar head of investment banking.
Each one of them is bringing in more than 10 years of experience with
a top institutional brokerage in Asia. The CLSA foursome will also pick up
stakes in India Infoline through the preferential allotment route. Their collective
stake would add up to around 17%. Parajia already holds a 2.88% stake in India
Infoline. He will subscribe to 25 lakh equity warrants at Rs 440 each.Nemkumar
will pick up another 25 lakh, while Jagannath and Aniruddha Dange will
subscribe to 20 lakh warrants each. The preferential allotment includes the four
men buying 90 lakh equity warrants at a price of Rs 440 each, of which 10% will
be paid up front as their sign-on bonus. The remaining will be payable at the end
of eighteen months when the warrants will be convertible into shares.That is, all
these guys will have to cough up about Rs 360 crore to convert their warrants into
shares. Currently, the company's institutional equities team has 35 people,
including research analysts and dealers.

54
 Consumer Finance:

During the quarter, it managed a book size of Rs 25 crore and has suffered a loss
of Rs 5.5 crore. It expects to break even in 2-3 quarters. NIM of 6-8% on personal
loans and 3-4% on home refinancing. It is looking at a Rs 200 crore private-equity
funding for its consumer finance subsidiary. It intends to leverage its extensive
branch network to expand its consumer finance division to tier-II and tier-III cities
in the coming quarters. IndiaInfoline is going slow as it has just started this
business with a robust risk management system. The company has roped in
experts from Citi Financial and other banks.

Ticker: 532636
Exchanges: BOM
2009 Sales: 9,630,900,000
Major Financial
Industry:
Sub Securities
Industry: Brokerage
Country: INDIA
Employees: 16105

55
CHALLENGES FACES BY NDIAINFOLINE
Category related - the market is skewed primarily to the metros with Mumbai,
Ahmedabad, and New Delhi accounting for major bulk of the trading.

Competition related - due to high brand proliferation, the market from a consumer
standpoint has become “commoditized” given product parity in terms of offerings.

Brand related - challenge being to maintain high decibel and impactful communication on
a sustained basis.

Key executives
S.No Name Designation
1 Mr. Nirmal Jain Chairman and Managing director
2 Mr. A K Purwar Director
3 Mr. R Venkataraman Executive Director
4 Mr. Nilesh Vikamsey Independent Director
5 Mr. Kranti Sinha Independent Director
6 Mr. Sat Pal Khattar Non Executive Director

MARKETING STRATEGY OF INDIA INFOLINE

Market Positioning:
Market positioning statements of India Infoline are “At India Infoline we give you
single window service” and “We also ensure your comfort”. So, India Infoline focus on
the consumers who prefer almost all investment activities at same place by providing
number of various financial services. At India Infoline a person can purchase or sell

56
shares, debentures etc. and at the same place also demat it. India Infoline also provides
other investment option to the same person at same place like Mutual Fund, Insurance,
Fixed Deposit, and Bonds etc. and help the person in designing his portfolio. By this way
India Infoline provides comfort to its customers.

Target Market:
India Infoline uses demographic segmentation strategy and segment people based
on their occupation. India Infoline uses selective specialization strategy for market
targeting. Target person for the India Infoline Stock Broking and India Infoline
Investment Service are persons who can work as sub-broker for the companies.
Companies focus on Advisors of Insurance and post office, Tax consultants and CAs for
making sub-broker

Marketing channel System:

India Infoline uses one level marketing channel for investment product
distribution. Sub-brokers work as intermediary between consumer and company.
Company has both forward and backward flow of activity through channel. Company
distributes stationery, brokerage, and information forward to its sub-broker. The sub-
brokers send filled forms, queries, amount of investment etc. back to the company.

Training Channel Members:

India Infoline provides training to the sub-brokers because they will be viewed as
the company by the investors. The executives of India Infoline explain various new
schemes of investment to the sub-brokers with its objective, risk factors and expected
return. Company also periodically arrange seminar to guide sub-brokers.

Advertising and Promotion:

The objective of advertising of India Infoline is to create awareness about services
of India Infoline among investors and sub-brokers.
India Infoline also publishes its weekly Stock Market Newsletter ‘Market Mantra’.

57
 HUMAN RESOURCES
The India Infoline Group’s Human Resources policy is based on the philosophy of
“Owner Mindset”. We believe that the key to our continued growth lies in unleashing the
entrepreneurial energy of our employees. We encourage all employees to behave more as
51owners of their departments rather than employees. Our people are highly driven and
work towards increasing India Infoline’s brand and market share across product lines.
We have developed extensive in-house training modules. In addition, our staff is trained
by various Asset Management Companies and ICICI Prudential Life Insurance Company
Limited. We lay emphasis on “on the job training” where an experienced and senior
person mentors a junior executive.
In addition to salary, our employees get performance-based incentives on a quarterly
basis. We have also implemented an Employee Stock Option Plan.
As on December 31, 2009, the total employee strength of our company and our
subsidiaries was 1200.

58
 CHAPTER 4
ANALYSIS
&
INTERPRETATION

59
 Chapter 4
ANALYSIS & INTERPRETATION

The following portfolio combinations are selected. Calculated correlation

1. HCL Technologies & Reliance Industries.

2. Wipro & Jindal Steel Co...
3. Infosys Technologies & BHEL.
4. GAIL & Titan.

From the correlation table the above given portfolio combinations are
selected , as the correlation coefficient between securities is -1.0, then a perfect
correlation exists (rxy cannot be less than -1.0). If the coefficient of correlation is
zero , then returns are said to be independent of one another . If the returns on
two securities are perfectly correlated , the coefficient of correlation will be 1.0,
and perfect positive correlation is said to exist (rxy cannot exceed 1.0).

60
 Analysis and Interpretation of Each Set of Portfolio
1. HCL Technologies & Reliance Industries
Table: 1
Calculation of Standard Deviation of HCL Technologies Ltd
DEVIATIO SQUARE
DATE RETURN MEAN RETURN N DEVIATION
R R' ( R - R' ) ( R-R' )2
Apr-16 -9.743935 4.859175 -16.60309 213.2502375
May-16 8.323529 4.859175 3.464374 12.00188721
Jun-16 5.27027 4.859175 0.411117 0.179017543
Jul-16 2.436548 4.859175 -2.422607 5.869024676
Aug-16 16.125 4.859175 9.265845 85.85588356
Sep-16 -0.708833 4.859175 -5.567988 31.00249037
Oct-16 -7.868132 4.859175 -12.727287 171.9838344
Nov-16 20.236406 4.859175 17.377251 236.4598483
Dec-16 4.679612 4.859175 -0.179543 0.032235689
Jan-17 17 4.859175 11.160845 124.1184273
Feb-17 -2.563898 4.859175 -7.423053 55.10171784
Mar-17 8.1232956 4.859175 3.2641606 10.65461386

∑R = 58.3098626 936.4992163

61
 ∑R 58.30986
Average R' = ----- = ------------- = 4.85917
N 12

--------
√(R-R')2
Standard Deviation σ = --------
T
--------------
√936.49921
= ------------------
12

= 8.83412

62
 Table: 2
Standard Deviation of Reliance Industries
SQUARE
DATE RETURN MEAN RETURN DEVIATION DEVIATION
R R' ( R - R' ) ( R-R' )2
Apr-16 -5.19748654 3.229858282 -8.42734482 71.02016067
May-16 1.03871777 3.229858282 -2.19116251 4.801105511
Jun-16 19.4330855 3.229858282 17.20322722 262.5445723
Jul-16 9.385692068 3.229858282 6.175833786 37.8942896
Aug-16 2.332859175 3.229858282 -0.89699911 0.804607398
Sep-16 10.36856745 3.229858282 7.138709173 50.96117865
Oct-16 -2.86624204 3.229858282 -6.09610032 37.17243912
Nov-16 7.178597179 3.229858282 3.938738886 17.51366402
Dec-16 5.617577197 3.229858282 2.387718917 5.701201717
Jan-17 -20.055991 3.229858282 -23.2858493 542.2307787
Feb-17 -0.80464596 3.229858282 -4.03450424 17.27722445
Mar-17 12.33757062 3.229858282 9.107712339 82.95042405

∑R = 38.75829939 1127.861717

63
 ∑R 38.75829
Average R' = ----- = ------------- = 3.229858
N 12
-------
√(R-R')2
Standard Deviation σ = --------
T

-------------
√1127.8617
= ------------------
12
= 9.6947

PORTFOLIO RISK
HCL Technologies & Reliance Industries
---------------------------------------------------
σP = √ σA2 WA2+ σB2 WB2 + 2 rAB σA σB WA WB

------------------------------------------------------------------------------------------
= √(8.8341)2 (0.5462)2 +(9.6947)2(0.4538)2 +2(-
0.00278)(8.8341)(9.6947)(0.5462)(0.4538)

------------------------------
= √23.2824+19.3552-0.11830

= 6.5207

64
HCL Technologies & Reliance Industries
As per the calculations and the study, HCL Technologies bears a
proportion of 0.5462 and Reliance Industries bears a proportion of 0.4538. The risk
of HCL Technologies is less than that of Reliance Industries i.e. 8.3341<9.6947,
which means an investor can invest 54% of his/her funds in HCL technologies and
the remaining funds in Reliance Industries. Even the portfolio risk of 6.5207% is
less when compared to the individual risk of both the companies.

65
2. Wipro & Jindal Steel Co.
Table : 3
Calculation of Standard Deviation of WIPRO

DATE RETURN MEAN RETURN DEVIATION SQUARE DEVIATION

R R' ( R - R' )
Apr-16 -6.4094955 0.225945525 -6.6354411 44.02907824
May-16 12.010955 0.225945525 11.7850091 138.8864393
Jun-16 6.8758717 0.225945525 6.64992617 44.22171797
Jul-16 -1.82 0.225945525 -2.0459455 4.18589309
Aug-16 -50.047945 0.225945525 -50.273891 2527.464089
Sep-16 0.6639566 0.225945525 0.43801111 0.191853737
Oct-16 -2.8251799 0.225945525 -3.0511054 9.309244402
Nov-16 16.701897 0.225945525 16.4759517 209.5531717
Dec-16 9.0748588 0.225945525 8.84891323 78.30326539
Jan-17 16.65368 0.225945525 16.4277341 208.1795121
Feb-17 -1.8018868 0.225945525 -2.0278323 4.112103907
Mar-17 7.6346174 0.225945525 7.40866986 54.88838909
∑R = 2.7113463 3323.304558

66
 ∑R 2.71135
Average R' = ----- = ------------- = 0.22595
N 12

-------
√(R-R')2
Standard Deviation σ = --------
T

-------------
√3323.3046
= ------------------
12

=17.6417

67
 Table: 4

Standard Deviation of Jindal Steel Ltd

DATE RETURN MEAN RETURN DEVIATION SQUARE DEVIATION

R R' ( R - R' )
Apr-16 -2.791790764 5.980234702 -8.7718255 76.944922
May-16 -6.020408173 5.980234702 -12.000643 164.0174292
Jun-16 -7.497297297 5.980234702 -13.477532 181.6438688
Jul-16 18.09883721 5.980234702 12.1186025 166.8605267
Aug-16 17.26600985 5.980234702 9.28577517 86.22562016
Sep-16 22.25178428 5.980234702 17.2717496 264.7633257
Oct-16 -17.09855132 5.980234702 -23.078786 532.6303641
Nov-16 13.64746387 5.980234702 7.66722917 58.78640311
Dec-16 11.8891759 5.980234702 5.90894119 34.91758603
Jan-17 -0.390775164 5.980234702 -6.3710098 40.58976646
Feb-17 0.499671269 5.980234702 -5.4805634 30.03657555
Mar-17 23.90849673 5.980234702 17.928262 321.4225794
∑R = 71.76281743 1918.834967

68
 ∑R 71.76282
Average R' = ----- = ------------- = 5.98023
N 12

-------
√(R-R')2
Standard Deviation σ = --------
T

-------------
√1918.8349
= ------------------
12

=12.6453

69
PORTFOLIO RISK
Wipro & Jindal Steel Ltd
---------------------------------------------------
σP = √ σA2 WA2+ σB2 WB2 + 2 rAB σA σB WA WB

--------------------------------------------------------------------------------------------------------
-
= √(17.6417)2 (0.3827)2 +(12.6453)2(0.6173)2 +2(-
0.1672)(17.6417)(12.6453)(0.3827)(0.6173)

------------------------------
= √40.5608+60.9328-16.6358

= 9.3197

Wipro & Jindal Steel Ltd

As per the study ,Wipro bears a proportion of 0.0.3827 and Jindal Steel
bears a proportion of 0.6173. The risk of Jindal Steel is less than that of Wipro
i.e.12.6453<17.6417, which means an investor can invest 62% of his/her funds in
Jindal Steel and the remaining funds in Wipro. Even the portfolio risk of
9.3197% is less when compared to the individual risk of both the companies.

70
3. Infosys Technologies & BHEL
Table: 5
Calculation of Standard Deviation of Infosys

DATE RETURN MEAN RETURN DEVIATION SQUARE DEVIATION

R R' ( R - R' ) ( R-R' )2
Apr-16 -17.504425 2.674265 -19.178695 367.822342
May-16 18.608328 2.674265 17.934063 253.894364
Jun-16 4.567627 2.674265 1.893362 3.584819
Jul-16 -3.283582 2.674265 -5.957847 35.495941
Aug-16 7.901907 2.674265 5.227642 27.328241
Sep-16 4.704413 2.674265 2.030168 4.121701
Oct-16 -0.118812 2.674265 -2.793077 7.801279
Nov-16 5.254902 2.674265 2.580637 6.659687
Dec-16 11.412639 2.674265 8.738374 76.35918
Jan-17 -4.223478 2.674265 -6.897743 47.578858
Feb-17 -1.975052 2.674265 -4.649317 21.617169
Mar-17 5.746718 2.674265 3.072453 9.439967
32.091185 861.702328

71
 ∑R 32.09118
Average R' = ----- = ------------- = 2.6743
N 12

-------
√(R-R')2
Standard Deviation σ = --------
T

---------------
√861.70233
= ------------------
12

=8.4735

72
 Table: 6
Standard Deviation of BHEL

SQUARE
DATE RETURN MEAN RETURN DEVIATION DEVIATION
R R' ( R - R' ) ( R-R' )2
Apr-16 0.5583756 9.584336 -9.02596 81.467961
May-16 10.66499 9.584336 1.080654 1.177813
Jun-16 -1.5929705 9.584336 -11.177306 124.932181
Jul-16 17.07558 9.584336 7.491244 56.118737
Aug-16 5.6848569 9.584336 -3.899479 17.205936
Sep-16 16.943662 9.584336 5.359326 28.722375
Oct-16 -7.695135 9.584336 -17.279471 298.580118
Nov-16 25.740088 9.584336 17.175752 261.008323
Dec-16 -3.0034965 9.584336 -12.587832 178.453516
Jan-17 31.05613 9.584336 21.471794 461.037937
Feb-17 11.680441 9.584336 2.096105 4.393656
Mar-17 9.899509 9.584336 0.317173 0.099334
∑R = 117.01203 1691.187885

73
 ∑R 117.01203
Average R' = ----- = ------------- = 9.584336
N 12

-------
√(R-R')2
Standard Deviation σ = --------
T

---------------
√1691.18789
= ------------------
12

= 11.1675

74
PORTFOLIO RISK
Infosys & BHEL
---------------------------------------------------
σP = √ σA2 WA2+ σB2 WB2 + 2 rAB σA σB WA WB

--------------------------------------------------------------------------------------------------------
-
= √(8.4739)2 (0.6568)2 +(11.1674)2(0.3432)2 +2(-0.0543)(8.4739)(11.1674)(0.6568)(0.3432)

------------------------------
= √30.97654+16.63665-2.31242

=6.5803

Infosys & BHEL

As per the study, Infosys proportion of investment is 0.6568 and of BHEL’s
proportion is 0.3432. The risk of Infosys is less than that of BHEL
i.e.8.4739<11.1674, which means an investor can invest 66% of his/her funds in
Infosys and the remaining funds in BHEL. The portfolio risk of 6.5803% is less
when compared to the individual risk of both the companies

75
4. GAIL & Titan
Table: 7
Calculation of Standard Deviation of GAIL

MEAN
DATE RETURN RETURN DEVIATION SQUARE DEVIATION
R R' ( R - R' ) ( R-R' )2
Apr-16 -5.172790698 5.18763293 -10.35042363 107.1312693
May-16 4.730392177 5.18763293 -0.457240773 0.209069125
Jun-16 5.762081784 5.18763293 0.574448854 0.329991686
Jul-16 -0.702987698 5.18763293 -5.890620628 34.69941138
Aug-16 3.187250996 5.18763293 -2.000381934 4.001727883
Sep-16 12.12765957 5.18763293 6.940026644 48.17396982
Oct-16 10.70281124 5.18763293 5.517178317 30.41719184
Nov-16 12.20844717 5.18763293 7.020816223 49.29183235
Dec-16 -0.746268657 5.18763293 -5.933901787 35.21118804
Jan-17 9.943609023 5.18763293 4.755976092 22.61930859
Feb-17 -6.894197952 5.18763293 -12.08183088 165.9706375
Mar-17 17.09558824 5.18763293 11.90795531 161.7993995

62.25179517 619.8447968

76
 ∑R 62.25179
Average R' = ----- = ------------- = 5.18763
N 12

-------
√(R-R')2
Standard Deviation σ = --------
T

---------------
√619.84479
= ------------------
12

=7.1871

77
 Table: 8
Standard Deviation of Titan

DATE RETURN MEAN RETURN DEVIATION SQUARE DEVIATION

R R' ( R - R' ) ( R-R' )2
Apr-16 4.38784247 12.87764201 -8.4897995 72.07669633
May-16 21.9477627 12.87764201 9.0701207 82.26708939
Jun-16 25.4843517 12.87764201 12.60671 178.9291295
Jul-16 27.5591781 12.87764201 16.681717 217.5469135
Aug-16 1.3394683 12.87764201 -11.538174 133.1294525
Sep-16 16.9923628 12.87764201 2.1167208 4.472044117
Oct-16 1.18126273 12.87764201 -11.696379 136.8052883
Nov-16 32.19 12.87764201 19.312358 372.9671711
Dec-16 23.6917293 12.87764201 10.816087 117.9444844
Jan-17 -12.4787879 12.87764201 -25.35643 642.9485368
Feb-17 8.36313618 12.87764201 -4.5165058 20.38076294
Mar-17 5.87341772 12.87764201 -7.0042243 49.05917791
∑R = 174.531704 2005.526727

78
 ∑R 174.5317
Average R' = ----- = ------------- = 12.8776
N 12

-------
√(R-R')2
Standard Deviation σ = --------
T

---------------
√2005.5267
= ------------------
12

= 12.9277

79
PORTFOLIO RISK
GAIL& Titan

---------------------------------------------------
σP = √ σA2 WA2+ σB2 WB2 + 2 rAB σA σB WA WB

--------------------------------------------------------------------------------------------------------
-
= √(7.1871)2 (0.7452)2 +(12.9277)2(0.2548)2 +2(-0.08996)(7.1871)(12.9277)(0.7452)(0.2548)

------------------------------
= √28.68488+10.85029-3.17416

=6.03

GAIL & Titan

As per the study, GAIL’S proportion of investment is 0.7452 and that of Titan
is 0.2548. The risk of GAIL is less than that of Titan i.e.7.1871<12.9277, which
means an investor can invest 75% of his/her funds in GAIL and the remaining
funds in Titan. The portfolio risk of 6.03% is less when compared to the
individual risk of of both companies.

80
 Table: 9
Calculated Average Returns & Standard Deviation of Securities

Scrip Name Average Return Standard Deviation

HCL Technologies 4.8917 8.8341

Reliance Industries 3.2298 9.6947

Wipro 0.2259 17.6417

Jindal Steel Co 5.9802 12.6453

BHEL 9.5843 11.1675

GAIL 5.1876 7.1871

Grasim Industries 4.8088 10.9245

Infosys 2.6743 8.4739

Titan 12.8776 12.9277

81
Chart: 1

Average Return of Individual Securities

Average Return
12.8776
14
12 9.5843
10
8 5.9802 5.1876 4.8088
4.8916
6 3.2298
4 2.6743
2 0.2259 Average Return
0

Interpretation
As per chart, the average return of Titan is high; Titan’s performance in isolation
is well compared to other securities. Next higher return securities are BHEL, Titan, and
HCL &GAIL. The chart shows Wipro is the poor return security. Rest of the securities
is satisfactory.
The data for the above chart is taken from Table no: 9 .

82
 Chart: 2
Calculated Individual Standard Deviation of Securities

Standard Deviation
16.6416
18
16 12.6453 12.9277
14 11.1575 10.9245
12 8.8341 9.6947 8.4739
10 7.1871
8
6
4
2 Standard Deviation
0

Interpretation
The above chart represents the standard deviation of selected securities. The
securities such as Wipro, HLL, Titan and Jindal Steel are high risk securities .HDFC
Bank is less risky security among selected securities, all other securities are moderately
risky
The data for the above chart is taken from Table: 9

83
 Table: 10
Correlations & Portfolio Risk of Portfolio Combinations

Portfolio Correlations Portfolio Risk

HCL & Reliance Industries -0.00278 6.5207

BHEL & Reliance Industries -0.12198 6.8582

Wipro & Jindal Steel Co. -0.16717 9.3197

Wipro & Grasim Industries -0.02806 9.0135

BHEL & Titan -0.03834 8.280

Infosys Tech & BHEL -0.05429 6.5803

GAIL & Titan -0.08996 6.03

84
 Chart: 3

Correlations
0
-0.02 -0.00278

-0.04 -0.02806
-0.03834
-0.06 -0.05429
-0.08 Correlations
-0.1 -0.08996
-0.12
-0.12198
-0.14
-0.16
-0.15716

Interpretation
The chart represents the calculated correlation coefficient of selected portfolio
combinations. The Portfolios selected are perfect negatively correlated securities which
minimizes the risk level of individual securities. The Portfolios BHEL & Reliance
Industries, Wipro & Jindal Steel, GAIL & Titan are highly correlated securities where
(r<-1) selected. ICICI Bank & ACC are less correlated and remaining are medium
correlated securities.
The data for the above chart is taken from Table: 10

85
 Chart: 4

Portfolio Risk
9.3197 9.0135
10 8.28
9 6.5207 6.8582 6.5803
8 6.03
7
6
5
4
3
2
1
0 Portfolio Risk

Interpretation
The above chart represents the portfolio risk of the selected portfolio
combinations. As per the chart, the portfolio risk of Wipro & Grasim Industries, BHEL
& Titan and Wipro & Jindal Steel are high. The investor has minimum portfolio risk
with portfolio GAIL & Titan .All other portfolios are moderately risky.
The data for the above chart is taken from Table: 10

86
 CHAPTER 5
SUMMARY
&
CONCLUSIONS

87
 Chapter 5
SUMMARY & CONCLUSIONS
5.1 SUMMARY
The analytical part of study for the 12 month period reveals the following
1. As far as the average returns of the selected companies are
concerned, Titan is performing very well with the average return of 17% ,
followed by BHEL , Wipro is the poor performing security from the selected
securities. All other securities have medium returns.
2. As far as the standard deviations are concerned, HLL is highly risky
security, next high risk securities are Wipro, Titan, Jindal Steel Co. has less
standard deviation with a moderate return ,it is a low risk security. The
remaining securities are moderately risky.
3. As far as the correlations are concerned, the securities GAIL is
highly correlated with the minimum portfolio risk ,the investors who are
risk averse will invest in this combination which gives them good return
with low risk. The next high correlated securities are Wipro & Jindal Steel
Co and BHEL & Reliance Industries . The portfolio’s HLL & Reliance
Industries and Wipro & Jindal Steel are less correlated and remaining
portfolios are optimum correlated.
4. The portfolio risk of Wipro & Grasim Industries is high ,this
combination of portfolio is very risky with low returns and high risk.
The combinations such as BHEL & Titan , has high risk and high return
characteristics ,the investors who are ready to take high risk for high
returns can invest in these combinations. GAIL & Titan is combination
which gives a good return with a minimum risk is the suggested
portfolio.

88
5.2 CONCLUSIONS
1. The investors who are risk averse can invest their funds in the
portfolio combination GAIL & Titan , Infosys & BHEL , in the calculated
proportions.
2. The investors who are slightly risk averse or who are not so risk
averse are suggested to invest in BHEL & Titan , Wipro & Jindal Steel
and as these combinations bear slightly high risk when compared with
other combinations.

89
 CHAPTER 6
RECOMMENDATIONS

90
 Chapter 6
RECOMMENDATIONS

1. As the average returns of securities Titan, BHEL, is high it is suggested that

investors should invest in these securities taking their risk in to consideration
2. As the risk of the securities are concerned WIPRO, Titan & Jindal steel are risky
securities. it is suggested that investor should be careful which investing in these
securities
3. It is recommended to the investors who want high returns to high risk should
invest in portfolio BHEL & TITAN.
4. The investor who requires a minimum return with low risk should invest in GAIL.
5. The investors are benefited by investing in selected scripts of Banking Industries.

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BIBLIOGRAPHY

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 BIBLIOGRAPHY

TITLE OF THEBOOK AUTHOR

Security Analysis & Portfolio Management Donald E.Fisher&Ronald

J.Jordan

Portfolio Management Avadhani

JOURNALS AND MAGAZINES:

The management Accountant Dr. K.Rajender

Osmania journal of management Dr.SudhaVepa

WEBSITES:

www.nseindia.com

www.nseindia.org

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