Professional Documents
Culture Documents
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INDUSTRY PROFILE
Indian Stock Markets are one of the oldest in Asia. Its history dates
back to nearly 200 years ago. The earliest records of security
dealings in India are meager and obscure. The East India Company
was the dominant institution in those days and business in its loan
securities used to be transacted towards the close of the eighteenth
century.
In 1860-61 the American Civil War broke out and cotton supply from
United States of Europe was stopped; thus, the 'Share Mania' in
India begun. The number of brokers increased to about 200 to 250.
However, at the end of the American Civil War, in 1865, a
disastrous slump began (for example, Bank of Bombay Share which
had touched Rs 2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of
Civil War in 1874, found a place in a street (now appropriately
called as Dalal Street) where they would conveniently assemble
and transact business. In 1887, they formally established in
Bombay, the "Native Share and Stock Brokers' Association" (which
is alternatively known as "The Stock Exchange "). In 1895, the
Stock Exchange acquired a premise in the same street and it was
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inaugurated in 1899. Thus, the Stock Exchange at Bombay was
consolidated.
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COMPANY PROFILE
Our core strengths are our expertise in equity research and a wide
retail distribution network. We have an outstanding research
division involved in macro – economic studies, industry and
company specific equity research, with analyst specializing in
particular economic sectors and large cap stocks.
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Kotak Securities Limited is one of the larger players in distribution of
IPOs - it was ranked number One in 2003-04 as Book Running
Lead Manager in public equity offerings by PRIME Database. It has
also won the Best Equity House Award from Finance Asia - April
2004.
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OBJECTIVE OF THE STUDY
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Research problem:
To identified the Stock Market Investment Avenue and methods to
help investor in selection of script to create portfolio. And the
measures of hedging the portfolio with the use of derivative
instrument future.
Research design:
Research design is exploratory as the basic objective is to identified
the stocks and methods to create and protect portfolio.
Data collection:
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ANALYSIS OF INVESTMENT
WHAT IS INVESTMENT?
TYPES OF INVESTMENT:-
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Economic investments:-
Financial Investments:-
General Investments:-
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rate of the country. The organizations like the Central Statistical
Organization (CSO) regularly takes the study of the investments
made in the household sector which shows that the level of
consumptions in the domestic markets.
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CHARACTERISICS OF INVESTMENT
1.Return: -
All investments are characterized by the expectation of a return. In
fact, investments are made with the primary objective of deriving a
return. The return may be received in the form of yield plus capital
appreciation. The difference between the sale price & the purchase
price is capital appreciation. The dividend or interest received from
the investment is the yield. Different types of investments promise
different rates of return. The return from an investment depends
upon the nature of investment, the maturity period & a host of other
factors.
2.Risk: -
Risk is inherent in any investment. The risk may relate to loss of
capital, delay in repayment of capital, nonpayment of interest, or
variability of returns. While some investments like government
securities & bank deposits are almost risk less, others are more
risky. The risk of an investment depends on the following factors.
0 The longer the maturity period, the longer is the risk.
1 The lower the credit worthiness of the borrower, the higher is
the risk.
The risk varies with the nature of investment. Investments in
ownership securities like equity share carry higher risk compared to
investments in debt instrument like debentures & bonds.
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3. Safety: -
The safety of an investment implies the certainty of return of capital
without loss of money or time. Safety is another features which an
investors desire for his investments. Every investor expects to get
back his capital on maturity without loss & without delay.
4. Liquidity: -
An investment, which is easily saleable, or marketable without loss
of money & without loss of time is said to possess liquidity. Some
investments like company deposits, bank deposits, P.O. deposits,
NSC, NSS etc. are not marketable. Some investment instrument
like preference shares & debentures are marketable, but there are
no buyers in many cases & hence their liquidity is negligible. Equity
shares of companies listed on stock exchanges are easily
marketable through the stock exchanges.
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IMPORTANCE
1. Retirement planning: -
Investment decision has become significant as people retire
between the ages of 55 & 60. Also, the trend shows longer life
expectancy. The earning from employment should, therefore, be
calculated in such a manner that a portion should be put away as a
savings. Savings by themselves do not increase wealth; these must
be invested in such a way that the principal & income will be
adequate for a greater number of retirement years. Increase in
working population, proper planning for life span & longevity have
ensured the need for balanced investments.
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3. Rates of interest: -
It is also an important aspect for sound investment plan. It varies
between investment & another. This may vary between risky & safe
investment, they may also differ due different benefits schemes
offered by the investments. These aspects must be considered
before actually investing. The investor has to include in his portfolio
several kinds of investments stability of interest is as important as
receiving high rate of interest.
4. Inflation: -
Since the last decade, now a day’s inflation becomes a continuous
problem. In these years of rising prices, several problems are
associated coupled with a falling standard of living. Before funds
are invested, erosion of the resource will have to be carefully
considered in order to make the right choice of investments. The
investor will try & search outlets, which gives him a high rate of
return in form of interest to cover any decrease due to inflation. He
will also have to judge whether the interest or return will be
continuous or there is a likelihood of irregularity. Coupled with high
rate of interest, he will have to find an outlet, which will ensure
safety of principal. Beside high rate of interest & safety of principal
an investor also has to always bear in mind the taxation angle, the
interest earned through investment should not unduly increase his
taxation burden otherwise; the benefit derived from interest will be
compensated by an increase in taxation.
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5. Income: -
For increasing in employment opportunities in India., investment
decisions have assumed importance. After independence with the
stage of development in the country a number of organization &
services came into being.
For example: -
The Indian administrative services,
Banking recruitment services,
Expansion in private corporate sector,
Public sector enterprises,
Establishing of financial institutions, tourism, hotels, and education.
More avenues for investment have led to the ability & willingness of
working people to save & invest their funds.
6. Investment channels: -
The growth & development of country leading to greater economic
activity has led to the introduction of a vast array of investment
outlays. Apart from putting aside saving in savings banks where
interest is low, investor have the choice of a variety of instruments.
The question to reason out is which is the most suitable channel?
Which media will give a balanced growth & stability of return? The
investor in his choice of investment will give a balanced growth &
stability of return? The investor in his choice of investment will have
try & achieve a proper mix between high rates of return to reap the
benefits of both.
For example: -
0 Fixed deposit in corporate sector
1 Unit trust schemes.
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INVESTMENTS AVENUES:-
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Investment
Deposits
Mutual Fund
Financial Derivatives
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EQUITY SHARES: -
Ordinary Shares
Preference Shares
Equity Warrants
These are long term rights that offer holders the right to purchase
equity shares in a company at a fixed price (usually higher than the
current market price) within a specified period. Warrants are in the
nature of options on stocks.
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• Dividend Yield for a stock is the ratio of dividend paid per share
to current market price. Low P/E stocks usually have high
dividend yields. In India, at least in the past, investors have
indicated a preference for the high dividend paying shares. What
matters to fund managers is the potential dividend yields based on
earnings prospects.
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Based on companies' anticipated earnings and in the light of the
investment management experience the world over, stocks are
classified in the following groups:
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This segment provides trading facilities for a variety of debt
instruments including Government Securities, Treasury Bills and
Bonds issued by Public Sector Undertakings/ Corporates/ Banks
like Floating Rate Bonds, Zero Coupon Bonds, Commercial Papers,
Certificate of Deposits, Corporate Debentures, State Government
loans, SLR and Non-SLR Bonds issued by Financial Institutions,
Units of Mutual Funds and Securitized debt by banks, financial
institutions, corporate bodies, trusts and others.
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Business Growth in WDM Segment
Certificate of Deposit
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Certificates of Deposit (CD) are issued by scheduled commercial
banks excluding regional rural banks. These are unsecured
negotiable promissory notes. Bank CDs have a maturity period of 91
days to one year, while those issued by FIs have maturities
between one and three years.
Commercial Paper
Corporate Debentures
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Government Securities
Treasury Bills
Bank/FI Bonds
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been issued both as regular income bonds and as discounted long-
term instruments (deep discount bonds).
PSU Bonds are medium and long term obligations issued by public
sector companies in which the government share holding is
generally greater than 51%. Some PSU bonds carry tax
exemptions. The minimum maturity is 5 years for taxable bonds and
7 years for tax-free bonds. PSU bonds are generally not guaranteed
by the government and are in the form of promissory notes
transferable by endorsement and delivery. PSU bonds in electronic
form (demat) are eligible for repo transactions.
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DEPOSITS
LIFE INSURANCE
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REAL ESTATE
For the bilk of the investors the most important asset in their
portfolio is a residential house. In addition to a residential house,
the more affluent investors are likely to be interested in the following
types of real estate:
Agricultural land
Semi-urban land
PRECIOUS
PRECIOUS OBJECTS
OBJECTS: -
FINANCIAL DERIVATIVES
FINANCIAL DERIVATIVES: -
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RISK – RETURN OF VARIOUS INVESTMENT
AVENUES
Meaning of Risk
Risk & uncertainty are an integrate part of an investment
decision. Technically ‘risk’ can be define as situation where
the possible consequences of the decision that is to be taken
are known. ‘Uncertainty’ is generally defined to apply to
situations where the probabilities cannot be estimated.
However, risk & uncertainty are used interchangeably.
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Types of risks
1. Systematic risk: -
Systematic risk is non diversifiable & is associated with the
securities market as well as the economic, sociological, political, &
legal considerations of prices of all securities in the economy. The
affect of these factors is to put pressure on all securities in such a
way that the prices of all stocks will more in the same direction.
Example: -
During a boom period prices of all securities will rise & indicate that
the economy is moving towards prosperity. Market risk, interest rate
risk & purchasing power risk are grouped under systematic risk.
RISKS
SYSTAMATIC
UNSYSTAMATIC
Market Risk Business Risk
Interest Rate Risk Financial Risk
Purchasing power Risk
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1. Systematic Risk
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2. Unsystematic Risk: -
Every corporate organization has its own objectives and goals and
aims at a particular gross profit & operating income & also accepts
to provide a certain level of dividend income to its shareholders. It
also hopes to plough back some profits. Once it identifies its
operating level of earnings, the degree of variation from this
operating level would measure business risk.
Example:-
If operating income is expected to be 15% in a year, business risk
will be low if the operating income varies between 14% and 16%. If
the operating income were as low as 10% or as high as 18% it
would be said that the business risk is high.
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leverage for the common stock holders. As long as the earnings of
the company are higher than the cost of borrowed funds, the
earning per share of common stock is increased. Unfortunately, a
large amount of debt financing also increases the variability of the
returns of the common stock holder & thus increases their risk. It is
found that variation in returns for shareholders in levered firms
(borrowed funds company) is higher than in unlevered firms. The
variance in returns is the financial risk.
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Managem
Market Purchasing
ent Business Interest
Investment Risk Power
Decision Risk Risk
Risk
Required
H Growth stock H H L L
Speculative
H H H L L
common stock
M Blue chips M M L L
Convertible
M M M L L
referred stock
Convertible
L M M L L
debentures
Corporate
L L L H H
bonds
Government
L L L H H
bonds
Short-term
L L L L H
bonds
Money market
L L L L H
funds
O Life insurance L L L H
Commercial
O L L L H
banks
O Unit trusts L L L M-H
O Saving a/c L L L H
O Cash L L L H
So, there are so many investment options & the different option
have different benefits & limitations in the sense risk associated
with it. So it is difficult for them to chose option, which give
maximum return at minimum risk.
PORTFOLIO
Meaning of portfolio:-
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Portfolio
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that he has to bear. The return realized from the portfolio has to be
measured and the performance of the portfolio has to be evaluated.
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PORTFOLIO DESIGN
R1
Expected Returns
R2
Risk less
Investment
M1 M2
Risk
From the above figure we can see that when the investor is ready
to take risk of M1, he is likely to get expected return of R1, and if
the investor is taking the risk of M2, he will be getting more returns
i.e. R2. So we can conclude that risk and returns are directly
related with each other. As one increases the other will also
increase in same of different proportion and same if one
decreases the other will also decrease.
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From the above discussion we can conclude that the investors
can be of the following three types:
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Your age will help you determine what a good mix is / portfolio is
Age Portfolio
below 30 80% in stocks or mutual funds
10% in cash
10% in fixed income
30 t0 40 70% in stocks or mutual funds
10% in cash
20% in fixed income
40 to 50 60% in stocks or mutual funds
10% in cash
30% in fixed income
50 to 60 50% in stocks or mutual funds
10% in cash
40% in fixed income
above 60 40% in stocks or mutual funds
10% in cash
50% in fixed income
These aren't hard and fast allocations, just guidelines to get you
thinking about how your portfolio should look. Your risk profile will
give you more equities or more fixed income depending on your
aggressive or conservative bias. However, it's important to always
have some equities in your portfolio (or equity funds) no matter
what your age. If inflation roars back, this will be the portion of your
investments that protects you from the damage, not your fixed
income.
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Diversifying in equities and bonds means more than buying a
number of positions. Each position needs to be scrutinized as to
how it fits into the stocks or bonds that already are in your portfolio,
and how they might be affected by the same event such as higher
interest rates, lower fuel prices, etc. Put your portfolio together like
a puzzle, adding a piece at a time, each one a little different from
the other but achieving a uniform whole once the portfolio is
complete.
1. Random portfolio
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• Generally in India most of the portfolio are selected
according to this random methods as no investor himself in
that much analysis of the script.
• There is every chance that you may select a script that has a
very bad background in the market.
• Not every time the tips pay off for you. You need to have
strong reason to select that script.
• Such portfolios are not able to sustain when there is a crisis
in the market.
• There is a very high risk and return involve in such portfolio.
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There is always the possibly many scripts in the sector may not be
giving that much good attractive return as others. They may eat the
profits from other scripts.
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Book value is based on historical costs, not current values, but can
provide an important measure of the relative value of a company
over time. Book value can be figured as assets minus liabilities, or
assets minus liabilities and intangible items such as goodwill; either
way, the figure that results is the company's net book value. This is
contrasted with its market capitalization, or total share price value,
which is calculated by multiplying the outstanding shares by their
current market price.
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First, one can obtain some idea of a reasonable price to pay for the
stock by comparing its present P/E to its past levels of P/E ratio.
One can learn what is a high and what is a low P/E for the individual
company. One can compare the P/E ratio of the company with that
of the market giving a relative measure. One can also use the
average P/E ratio over time to help judge the reasonableness of the
present levels of prices. All this suggests that as an investor one
has to attempt to purchase a stock close to what is judged as a
reasonable P/E ratio based on the comparisons made. One must
also realize that we must pay a higher price for a quality company
with quality management and attractive earnings potential.
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that SBI is trading at a very low P/E of around 8 but if you see that
in banking sector that to public sector banks the normal industry
P/E is 8 all most all banks are trading around 8 or bellow the P/E of
8.
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RANDOM PORTFOLIO
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beta of 1 or develop a portfolio that has stocks with betas greater
than 1 and less than 1 so that they have the whole portfolio with an
average beta of 1.
A beta for a stock is derived from historical data. This means it has
no predictive value for the future, but it does show that if the stock
continues to have the same price patterns relative to the market in
general as it has in the past, you've got a way of knowing how your
portfolio will perform in relation to the market. And with a portfolio
with an average beta of 1, you can create your own index fund
since you'll move more or less in tandem with the market.
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Interpretation of Beta
THAT IS
PORTFOLIO
- 50 -
DEFENSIVE PORTFOLIO
- 51 -
RETURN ON INDIVIDUAL SCRIPTS
1ST MONTH
31-01-
SR NO. SCRIPT BETA 2-01-2006 06 RETURN
IN %
1 ACC 0.72 530.45 574.20 8.25
2 CIPLA 0.78 440.00 442.25 0.51
3 DR REDDY 0.69 963.00 1121.25 16.43
4 GRASIM 0.76 1375.30 1454.25 5.74
5 HDFC BANK 0.76 713.45 762.45 6.87
6 ITC 0.81 140.10 154.80 10.49
7 RANBUXY 0.69 444.35 399.40 -10.12
8 HERO HONDA 0.80 846.10 857.20 1.31
9 HDFC 0.82 1191.30 1339.70 12.46
10 GLAXO 0.61 1111.60 1282.80 15.40
2ND MONTH
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= 1166628.41 - 1000000
= 166628.41
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MODRATE PORTFOLIO
BHEL
9 1.00 1389.90 10.83
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RETURN ON INDIVIDUAL SCRIPTS
1ST MONTH
31-01-
SR NO. SCRIPT BETA 2-01-2006 06 RETURN
IN %
1 BHARTI 0.99 340.05 357.25 5.06%
2 GUJARAT AMBUJA 0.86 79.30 88.55 11.66%
3 BAJAJ AUTO 0.85 450.05 513.25 14.04%
4 HLL 0.88 195.10 195.25 0.08%
5 HINDALCO 1.00 146.20 164.80 12.72%
6 LT 0.86 1825.65 2172.10 18.98%
7 MTNL 0.89 142.15 141.70 -0.32%
8 ZEE 0.90 157.90 164.70 4.31%
9 BHEL 1.00 1389.90 1795.60 29.19%
10 PNB 1.00 472.00 465.35 -1.41%
2ND MONTH
2-01-
SR NO. SCRIPT BETA 2006 28-02- RETURN
06 IN %
1 BHARTI 0.99 340.05 361.05 6.18%
2 GUJARAT AMBUJA 0.86 79.30 88.30 11.35%
3 BAJAJ AUTO 0.85 450.05 550.10 22.23%
4 HLL 0.88 195.10 243.70 24.91%
5 HINDALCO 1.00 146.20 153.35 4.89%
6 LT 0.86 1825.65 2396.95 31.29%
7 MTNL 0.89 142.15 142.65 0.35%
8 ZEE 0.90 157.90 196.60 24.51%
9 BHEL 1.00 1389.90 2027.00 45.84%
10 PNB 1.00 472.00 442.10 -6.33%
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= 162912.70 Rs.
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AGGRESSIVE PORTFOLIO
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RETURN ON INDIVIDUAL SCRIPTS
1ST MONTH
31-01-
SR NO. SCRIPT BETA 2-01-2006 06 RETURN
IN %
1 ICICI BANK LTD 1.09 597.00 609.25 2.05
2 INFOSYS 1.07 2979.35 2880.30 -3.32
3 ONGC 1.02 1191.65 1237.30 3.83
4 RELIANCE 1.05 441.05 480.15 8.87
5 SATYAM 1.23 731.55 746.75 2.08
6 SBIN 1.09 904.90 886.35 -2.05
7 TATA POWER 1.11 434.20 471.80 8.66
8 TATA MOTER 1.19 639.55 708.45 10.77
9 TATA STEEL 1.13 379.00 404.45 6.72
10 WIPRO 1.33 461.70 529.70 14.73
2ND MONTH
28-02-
SR NO. SCRIPT BETA 2-01-2006 06RETURN
IN %
1 ICICI BANK LTD 1.09 597.00 615.25 3.06
2 INFOSYS 1.07 2979.35 2828.95 -5.05
3 ONGC 1.02 1191.65 1136.40 -4.64
4 RELIANCE 1.05 441.05 500.55 13.49
5 SATYAM 1.23 731.55 769.65 5.21
6 SBIN 1.09 904.90 877.50 -3.03
7 TATA POWER 1.11 434.20 511.20 17.73
8 TATA MOTER 1.19 639.55 816.20 27.62
9 TATA STEEL 1.13 379.00 431.00 13.72
10 WIPRO 1.33 461.70 520.45 12.72
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RETURN IN AGGRESSIVE PORT FOLIO
= 1084397.28 Rs - 1000000Rs
= 84397.28 Rs.
- 59 -
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DERIVATIVES
The derivatives are securities under the (SC(R)A) and hence the
trading of derivatives is governed by the regulatory framework
under the (SC(R)A).
- 61 -
TYPES OF DERIVATIVES
- 62 -
INTRODUCTION TO FUTURE
- 63 -
FUTURE TERMINOLOGY
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the cost of carry. This measures the storage cost plus the
interest that is paid to finance the asset less the income
earned on the asset.
- 66 -
DIFFERENCE BETWEEN FUTURES AND OPTIONS
Buying put option means that you are buying insurance. To buy a
put option on Nifty is to buy insurance which reimburses the full
extent to which Nifty drops below the strike price of the put option.
This is attractive to many people, and to mutual funds creating
“guaranteed return products”. The Nifty index fund industry will find
it very useful to make a bundle of a Nifty index fund and a Nifty put
option to create a new kind of a Nifty index fund, which gives the
investor protection against extreme drops in Nifty.
- 67 -
1220
0
Nifty
Loss
- 68 -
Profit
1220
0
Nifty
Loss
- 69 -
Hedging
Hedge Terminology:
- 70 -
• Hedge Contract Month- Maturity month of the contract
through which hedge is accomplished.
• Hedge Ratio - Number of future contracts required to hedge
the position.
Speculation
- 71 -
HEDGING
The second outcome happens all time. A person may buy Reliance
at Rs.190 thinking hat it would announce good results and the stock
price would rise. A few days later, Nifty drops, so he makes losses,
even if his understanding of Reliance was correct.
- 72 -
If we think that WIPRO is under evaluated, the position LONG
WIPRO is not purely about WIPRO; it is also partly about Nifty.
Every trader who has a LONG WIPRO position is forced to be an
index speculator, even though he may not have no interest in the
index.
Those who are bullish about the index should just buy
Nifty futures; the need not trade individual stocks.
Those who are bullish about WIPRO do wrong by
carrying along a long position on Nifty as well.
NOTE: hedging does not remove losses. The best that can be
achieved by using hedging is the removal of unwanted exposure,
i.e. unnecessary risk. The hedged position will make less profit than
the un-hedged position, half the time. One should not enter into a
hedging strategy hoping profit for sure; all that can come out of
hedging is reduced risk.
- 73 -
H2: Short stock, long Nifty futures
If a person feels that the stock is over evaluated or the profits and
the quality of the company made it worth a lot less as compared to
what the market thinks, he can take a short position on the cash
market. This will give rise to two types of risks:
The second outcome happens all time. A person may sell Reliance
at Rs.190 thinking that Reliance would announce poor result and
the stock price would fall. And if after few days if the Nifty rises, he
will incur loss, even if the intrinsic understanding of Reliance was
correct.
- 74 -
Even if we think that WIPRO is overvalued, the position SHORT
WIPRO is not purely about WIPRO; it is also about the Nifty. Every
trader who has a SHORT WIPRO position is forced to be an index
speculator, even though he may not have any interest in the index.
Those who are bearish about the index should just sell
Nifty futures; the need not trade individual stocks.
Those who are bearish about WIPRO do wrong by
carrying along a short position on Nifty as well.
- 75 -
Here in this case, with the index futures market, a third and a
remarkable alternative becomes available:
- 76 -
- 77 -
- 78 -
favorable prices. This takes time, and during this time, he is
exposed to the risk of missing out if the Nifty goes up.
3. In some cases, such as land sale above, the person may not
simply have cash to immediately buy the shares, hence he is
forces to wait even if he feels that Nifty is unusually cheap.
He is exposed to the risk of missing out if Nifty rises.
- 79 -
SPECULATION
We may sometimes think that the market index is going to rise and
we can make profits by adopting a position on the index. After a
good budget, or good corporate results, or the onset of the stable
government, many people may feel that the index would go up.
Now a days people have the following two strategies to get benefit
from an upward movement in the index:
- 80 -
S2: Bearish index, short Nifty futures
We may sometimes think that the market is going to fall and we can
make profit by adopting a position on the index. After a bad budget,
or bad corporate results, or the onset of a coalition government,
many people feel that the index would go down. So to get the
benefit from the downward movement in the index we are having
the following two choices:
- 81 -
does not always make money. The best way that can be achieved
using hedging is the removal of unwanted exposure, i.e.
unnecessary risk. The hedged position will make less profit than the
unhedged position. One should not enter into a hedging strategy
hoping to make excess profits for sure; all that can come out of
hedging is reduced risk. So one should go for hedging only if the
movement of market makes him uncomfortable.
The BETA of a scrip can be easily found out from the website of
National Stock Exchange and also from the website of Bombay
stock exchange
Here for the purpose of hedging we will have to short nifty futures
as we are having the portfolio and the future contracts may not be
available for all the scrip. But as we have seen earlier that all scrip
have hidden exposure to nifty. So we will short the nifty future
contract for the purpose of hedging our portfolio.
The current nifty lot size is 200. Now for the purpose of hedging the
portfolio we will have to decide about the number of lots of Nifty that
the investor will have to sell in order to hedge his position. To find
out that figure we will have to do the following calculations: -
- 82 -
DEFENSIVE PORTFOLIO
= 1000000 * 0.75
2813.7
= 266.55
As the nifty that are required to be short comes out to be 266.55 but
as we know that the nifty is available in the lot size of 300 so this
will give our portfolio a partial hedge as we are unable to short the
exact nifty figure that we have calculated.
During this two month the nifty has moved to 3064.4 this shows that
nifty has increased by 250.70 in % terms nifty has gone up by 8.91
%
- 83 -
MODERATE PORTFOLIO
= 162612.70* 0.93
2813.7
= 53.74 ~ 54
During 2 month the nifty has moved to 3064.4 this shows that nifty
has increased by 250.70 in % terms nifty has gone up by 8.91 %
- 84 -
AGGRESSIVE PORTFOLIO
= 10,00,000 *1.14
2813.7
= 405.16
As the nifty that are required to be short comes out to be 405.16 but
as we know that the nifty is available in the lot size of 400 so this
will give our portfolio a partial hedge as we are unable to short the
exact nifty figure that we have calculated.
During this two month the nifty has moved to 3064.4 this shows that
nifty has increased by 250.70 in % terms nifty has gone up by 8.91
%
Now as we have short position of one nifty contract we would
require to pay the buyer of contract 250.70*400 =1,00,280Rs.
- 85 -
SECTOR PORTFOLIO
e.g. In late 1990’s sector that was providing the highest return was
information technology. Investors who have invested their money
in these securities had earned very high return.
- 86 -
Industry analysis
Telecom sector
- 87 -
• Strengthen research and development efforts in the country
and provide an impetus to build world-class manufacturing
capabilities.
• Achieve efficiency and transparency in spectrum
management.
• Protect defence and security interests of the country.
- 88 -
Subscribers Base
The Mobile (GSM and CDMA) Industry has reached the 65.07
million subscribers mark (GSM 50.86 million & CDMA 14.21 million)
for the quarter ending 30th September 2005.
Growth Rate
The growth rate for this quarter is 13.42% (13.16% in GSM and
14.37% in CDMA) as against 9.86% (9.44% in GSM and 12.43% in
CDMA) for the quarter ending June 2005. M/s Bharti remains the
largest mobile operator followed by M/s Reliance and M/s BSNL.
- 89 -
Change in Market Structure
Subscriber Base
Bharat Sanchar Nigam Ltd. 37%
Mahanagar Telephone Nigam Ltd. 20%
Sify Ltd. 14%
Videsh Sanchar Nigam Ltd. 8%
Reliance Communications Infrastructure Ltd. 5%
Data Infosys others 4%
Bharti Televentures Ltd.(Bharti Infotel) 3%
- 90 -
Company analysis
Telecom sector
Company at glance
Industry: - Telecommunications
52 Week High: - 377.00
52 Week Low: - 195.80
Volume: - 59847
Face Value: - 10.00
P/E Ratio: - 57.24
EPS: - 6.29
The bellow given chart shows the performance of the script in the
bse for last three months. It shows the volatility of the stock for the
months of November, December and January.
- 91 -
FINANCIAL PERFORMANCE
Operating
62.97 71.35 62.98 8,142.44
Income
No. of
Shares (in 185.34 185.34 185.34 185.34
crore)
Adjusted
0 0 0 6.29
EPS (Rs)
Book value
per Share 25.99 26.01 26.03 24.12
(Rs)
Dvdnd per
0 0 0 0
Share (Rs)
Net Profit
0.19 0.58 0.58 14.83
Margin (%)
Current
74.86 668.08 233.91 0.51
Ratio
Lt Debt
0 0 0.1 0.98
Equity
- 92 -
Company at glance
Industry: Telecom
52 Week High: 531.00
52 Week Low: 289.00
P/E Ratio: 30.15
EPS: 13.73
Volume: 878
Face Value: 10.00
The bellow given chart shows the performance of the script in the
bse for last three months. It shows the volatility of the stock for the
months of November, December and January.
- 93 -
FINANCIAL PERFOMANCE
- 94 -
3. Videsh Sanchar Nigam Ltd.
Industry: Telecom
52 Week High: 444.60
52 Week Low: 161.00
P/E Ratio: 31.18
EPS: 12.21
Volume: 2365926
Face Value: 10.00
The bellow given chart shows the performance of the script in the
bse for last three months. It shows the volatility of the stock for the
months of November, December and January.
- 95 -
FIANCIAL PERFOMANCE
- 96 -
4. Mahanagar Telephone Nigam Ltd.
Industry: Telecom
52 Week High: 154.50
52 Week Low: 108.00
P/E Ratio: 10.79
EPS: 12.86
Volume: 76690
Face Value: 10.00
The bellow given chart shows the performance of the script in the
bse for last three months. It shows the volatility of the stock for the
months of November, December and January.
- 97 -
FIANCIAL PERFOMANCE
- 98 -
RATIO ANLYSIS
- 99 -
Net Operating Income Per Share
- 100 -
Profitability Ratio
Operatig Margin in %
- 101 -
Return on long term fund in %
Profitability Ratio
Average Return
50 Operatig Margin in
40 %
30
20 Gross Profit
10 margin in %
0
Net Profit Margin
Bharti Tata VSNL MTNL
in %
Tele tele
Return on long
Company term fund in %
- 102 -
Portfolio in Telecom Sector
= 963730.3 – 1000000
= -36269.7
- 103 -
• We can see in the plotted graph that all the four script in the
sector portfolio are following a same kind of trend in the
given one month of the study. It is due to the fact that they all
belong to the same sector and they all face same systematic
risk as other in the sector. So the performance of the scripts
rightly indicates the need of diversification to remove the
systematic risk from the portfolio. As its gets highly risky
investment, such portfolio are very rarely been used by
individual in the general scenario.
- 104 -
FINDING OF THE REPORT
Findings of the report gives the fruit of the all the analysis done on
the research of measuring and comparing performance of the
portfolio with the market portfolio.
Random portfolio
- 105 -
But in our case we have scene that Moderate portfolio
having Beta < 1 has given more return as compared to
Aggressive Portfolio.
• And we have also scene the Derivative- Future how one can
use it for the purpose of speculation and hedging. But
hedging is only for the removal of unnecessary risk or
exposure one should not go for hedging for earning excess
return.
- 106 -
Sector portfolio
- 107 -
RECOMMENDATION
From the above given findings and the conclusions of the study
done by me, here are the list of recommendations that comes out of
the study.
• Form the study it is also proven that even in short run sector
portfolio is highly risky option for investment. Here in the
study it is providing negative return. That shows that
investors who want to have safe return must think twice
before selecting sector portfolio for a long term investment.
- 108 -
Bibliography
Books
Web – Bibliography
1. www.kotaksecurities.com
2. www.nseindia.com
3. www.bseindia.com
4. www.derivativesindia.com
5. www.moneycontrol.com
6. www.icicidirect.com
Others
1. Magazines
- Business World
2. News Papers
- Economic Times of India
- Times of India
- 109 -
Annexure
- 110 -
of Qouted
Investment
- 111 -
- 112 -
Equity Share 630.00
630.00 630.00 630.00 630.00
Capital
Reserves & 10,313.8 9,697.63 8,866.97 8,309.64 7,718.15
Surplus 3
Other 11,797.7 11,083.6 10,087.9 8,024.41
Liabilities & 5 5 1 5,658.39
Provisions
22,741.5 21,411.2 221.38 184.63
Total 133.64
8 8
ASSETS
Cash & 1,815.39 2,444.65
Balances with 2,517.40 2,553.07 2,482.83
RBI
Investments 397.47 380.69 371.01 102.68 0.00
Fixed Assets
14,252.2 13,562.9 12,665.2 11,732.2 10,680.95
Gross Block
5 3 1 2
Less: 7,783.62 7,352.65 7,148.03 6,420.43
Accumulated 5,653.07
Depreciation
Net Block 6,468.63 6,210.28 5,517.17 5,311.80 5,027.89
Capital Work- 508.25
651.51 918.74 797.81 815.50
in-progress
815.50 14,312.0 12,777.9 13,370.7 11,044.15
Other Assets
5 6 7
Miscellaneous 0.00 0.00 0.00 0.00 0.72
Expenses not
written off
25,258.9 23,964.3 21,400.2 22,027.7
Total 19,370.37
8 4 7 1
Contingent 6,477.15 3,965.93 3,922.25 15.47
4,853.10
liabilities
Book Value 9.09 0.09 0.09 0.05 0.00
of Unqouted
Investment
Market Value 0.00 0.00 0.00 0.00
of Qouted 0.12
Investment
- 113 -
NIFTY VALUES
- 114 -
50 ZEETELE 412,505,012 0.51% 1.05 0.16 2.86
NIFTY JUNIOR
- 115 -
47 UTIBANK 2,786,241,460 3.72% 0.83 0.12 2.4
48 VIJAYABANK 4,335,178,000 1.01% 1.2 0.29 1.74
49 INGVYSYABK 905,644,160 0.55% 0.94 0.2 1.35
50 WOCKPHARMA 546,903,005 2.29% 1.02 0.24 2.04