Professional Documents
Culture Documents
Submitted by
KALINGA KUMAR MAHALIK
ROLL NO-0906227023
INTERNAL GUIDE EXTERNAL GUIDE
Asst.Prof. S.C Das Abhishek Parhi ,
Dept. of Management (Sales Manager)
C.V.Raman college of Bonanza Portfolio ltd,
Engineering,BBSR. BBSR.
C.V.RAMAN COLLEGE OF ENGINEERING,BBSR
This is to certify that the project entitled “A Study on the portfolio management
and beta analysis of Bonanza Portfolio Limited” is a bonafide work of Kalinga kuma
r Mahalik, a student of CVRCE, Bhubaneswar, bearing Regd No-0906227023, and was
successfully conducted at Bonanza Portfolio Limited”, Bhubaneswar, for the partial
fulfillment of the course Master in Business Administration of CVRCE,Bhu
baneswar.
We wish him all the best for all the future endeavors.
This is to certify that Kalinga kumar Mahalik bearing Regd. No-0906227023 a bona
fied student of CVRCE, Bhubaneswar, has concluded the Project work on “-“A Study on
the portfolio management and beta analysis of BONANZA portfolio Limited” in Bhuban
eswar as a partial fulfillment of the requirement for the degree of MBA of BPUT
University. He has worked with all honesty and sincerity.
I wish him all the success in life.
Date:
CERTIFICATE
Date:-
Asst Porf. S.C Das
Internal
Guide
CVRCE , BBSR
ACKNOWLEDGEMENT
Finally I would like to thanks my friends, parents for their constant inspirat
ion, co-operation and support.
DECLARATION
I hereby declare that the project report entitled “A STUDY ON PORTFOLIO MANAGEMENT
AND BETA ANALYSIS OF BONANZA PORTFOLIO LTD. is the produce of my sincere effor
t. This Summer Internship Project Report is being submitted by me alone, at c.v
raman college, Bhubaneswar, for the partial fulfillment of the course MBA, and t
he report has not been submitted to any other educational institutions for any o
ther purpose.
Date: -
Signature
Regd. No:-0906227023
CONTENTS
CHAPTER 1: INTRODUCTION
Objectives,methodology
CHAPTER 2: COMPANY PROFILE
CHAPTER 3: DATA ANALYSIS
CHAPTER 4: RESEARCH FINDINS
CHAPTER 1
INTRODUCTION
OBJECTIVES AND METHODOLOGY
OBJECTIVES:
To study the investment decision process.
To analysis the risk return characteristics of sample scripts.
Ascertain portfolio weights.
To construct an effective portfolio which offers the maximum return for minimum
risk
METHODOLOGY:
Visiting Bonanza portfolio Ltd, Bhubaneswar and collecting information
Discussions were conducted with the personnel of Bonanza portfolio Ltd.
SOURCES OF INFORMATION
LIMITATIONS
1. The project work is mainly based on the above mentioned sources of infor
mation.
2. The study was made in purview of the guidelines of SEBI, NATIONAL STOCK
EXCHANGE OF INDIA and BONANZA PORTFOLIO Ltd as applicable to that period onl
y.
3. Limited time period restricted to go in for more details.
4. Markets were widely dispersed and so there was more time consumptions fo
r movement from one market to another.
COMPANY PROFILE
In this world everybody wants to increase their earnings. GDP of our country is
growing continuously. So individual has some money in his/her hand to invest. Pe
ople can invest his/her saved money in share market with proper guidance and get
a good return unlikable of any other type of investment. Trading in share mark
et is full of risk and return. One who wants to take risk more than there is a c
hance of getting more return on investment or vice-versa.
Bonanza is the retail arm of SSKI group, has been established in the year 1922.
SSKI group has an experience of more than 80 years in institutional banking, inv
estment banking and retail banking. Bonanza is the retail broking brand which ha
s its branches and franchisees.
The SSKI group comprises of institutional broking and corporate finance. SSKI wa
s earlier known as Kevanitilal Kantilal Securities Pvt Ltd. It was changed to SS
KI Investor Services Pvt Ltd on 24th June 1995. The institutional broking divisi
on caters to the domestic aforeign institutional investors, while the corporate
finance division focuses on niche areas such as infrastructure, telecom and medi
a. SSKI has been voted as the top domestic brokerage house in the research categ
ory, twice by Euro Money Survey and four times by Asia Money Survey. SSKI has be
en voted the best domestic brokerage in India by Asia Money Polls’ 2004.
Bonanza Ltd is India’s leading online retail broking house with its presence throu
gh 1288‘Share Shops’ in 325 cities and serving more than 8, 00,000 customers across
the nation. Launched on Feb 8th 2000 as an online trading portal, Bonanza offers
its clients
trade execution facilities for cash as well as derivatives, on BSE and NSE, depo
sitory services, mutual funds, initial public offerings (IPOs), and commodities
trading facilities on MCX and NCDEX. Besides high quality investment advice from
an experienced research team Bonanza provides market related news, stock quotes
fundamental and statistical information across equity, mutual funds, IPOs and m
uch more.
Bonanza has set category leadership through pioneering initiatives like ‘Speed Tra
de’, a net based executable application that emulates a broker terminal besides pr
oviding information relevant to Day traders. Their second initiative, ‘First Step’ i
s targeted at empowering first time investors. Bonanza has also set their global
footprints through the ‘India First’ initiative, a series of seminars conducted by
Sharekhan to help NRIs participate and benefit from the huge investment opportun
ities in India.
Pioneers of online trading in India- bonanzaonline.com was launched in 2000 and
is now the second most visited broking site in India. It has one of the largest
networks of Share shops in the country. It has attracted investment from leading
Private equity players of the world.
CORPORATE STRUCTURE:-
MANAGEMENT TEAM:
TARUN SHAH- CEO
JAIDEEP ARORA DIRECTOR- PRODUCTS & TECHNOLOGY
SHANKAR VAILAYA DIRECTOR- OPERATIONS
LIST OF KEY FOREIGN INSTITUTIONAL CLIENTS:
Alliance Capital Management.
Emerging Markets Investment Management.
Edinburgh Fund Management Ltd.
Foreign and Colonial Emerging Markets.
Goldman Sachs Investment Management.
Government of Singapore Investment Corporation.
Grantham, Mayo, Van Otterloo and Co.
Indosuez Asset Management.
Jardine Fleming Investment Management Ltd.
LGT Asset Management.
Lloyd George Investment Management.
Martin Currie Investment Management Ltd.
Morgan Stanley Asset Management.
TIAA-Cref Investment Management.
UBS.
LIST OF KEY DOMESTIC INSTITUTIONAL CLIENTS:
BOI Mutual Fund.
Birla Capital Mutual Fund.
BOB Mutual Fund.
Can bank Investment Management Services Ltd.
Chatterjee Group (SOROS).
GIC Mutual Fund.
HDFC Bank.
IDBI Mutual Fund.
Indbank Mutual Fund.
ICICI Mutual Fund.
ITC Thread needle Mutual Fund.
Kotak Mahindra Asset Management.
Kothari Pioneer Mutual Fund.
PNB Mutual Fund.
SBI India Magnum Fund.
UTI.
UTI of shore.
Corporation Bank.
LIC/LIC Mutual Fund/LIC Housing Finance
INTRODUCTION
PORTFOLIO:
A portfolio is a collection of securities since it is re
ally desirable to invest the entire funds of an individual or an institution or
a single security, it is essential that every security be viewed in a portfolio
context. Thus it seems logical that the expected return of the portfolio. Portfo
lio analysis considers the determine of future risk and return in holding variou
s blends of individual securities
Portfolio expected return is a weighted average of the expected r
eturn of the individual securities but portfolio variance, in short contrast, ca
n be something reduced portfolio risk is because risk depends greatly on the co-
variance among returns of individual securities. Portfolios, which are combinati
on of securities, may or may not take on the aggregate characteristics of their
individual parts.
Since portfolios expected return is a weighted average of the expected
return of its securities, the contribution of each security the portfolio’s expect
ed returns depends on its expected returns and its proportionate share of the in
itial portfolio’s market value. It follows that an investor who simply wants the g
reatest possible expected return should hold one security; the one which is cons
idered to have a greatest expected return. Very few investors do this, and very
few investment advisors would counsel such and extreme policy instead, investors
should diversify, meaning that their portfolio should include more than one sec
urity.
RISK ANALYSIS
Risk:
Risk is uncertainty of the income /capital appreciation or loss or both. All in
vestments are risky. The higher the risk taken, the higher is the return. But pr
oper management of risk involves the right choice of investments whose risks are
compensating. The total risks of two companies may be different and even lower
than the risk of a group of two companies if their companies are offset by each
other.
The two major types of risks are:
Systematic risks affected from the entire market are (the problems, raw mater
ial availability, tax policy or government policy, inflation risk, interest risk
and financial risk). It is managed by the use of Beta of different company shar
es.
The unsystematic risks are mismanagement, increasing inventory, wrong financi
al policy, defective marketing etc. this is diversifiable or avoidable because i
t is possible to eliminate or diversify away this component of risk to a conside
rable extent by investing in a large portfolio of securities. The unsystematic r
isk stems from inefficiency magnitude of those factors different form one compan
y to another.
BETA:
The concept of Beta as a measure of systematic risk is useful in portfolio ma
nagement. The beta measures the movement of one script in relation to the market
trend. Thus BETA can be positive or negative depending on whether the individua
l scrip moves in the same direction as the market or in the opposite direction a
nd the extent of variance of one scrip vis-à-vis the market is being measured by B
ETA. The BETA is negative if the share price moves contrary to the general trend
and positive if it moves in the same direction. The scrip’s with higher BETA of m
ore than one are called aggressive, and those with a low BETA of less than one a
re called defensive.
It is therefore it is necessary, to calculate Betas for all scrip’s and
choose those with high Beta for a portfolio of high returns. Normally the Beta v
alue of a company is regarded good when it lies in the range of 0.4-1.9
Formula of Beta:
βA = Cov AM/ Var M
βA: Beta of company A.
Cov AM: Covariance of company A and Market.
Var M: Variance of Market Return or Market Price.
Cov AM: (for historical data) is calculated as: (A-A) (M-M)/N-1.
Var M: (for historical data) is calculated as: (M-M)2/N-1.
N: Num er of period.
BENEFITS:
Beta values are calculated over a num er of years and as such changes in any one
year may not reflect the degree of volatility of scrip.
High risk and high volatility go together and that is seen in the speculative sc
rips.
In the long run, high Beta Portfolios have provided larger return through BETA c
alculation.
Who are the rational investors & they get the information a out the market in wh
ich scrip he/she will invest through the Beta.
LIMITATIONS:
All investors are risk avenue and higher the risk, the higher the return. Invest
ors ignore the transaction cost, information cost, rokerage, taxes, etc.
Investors are more concerned with company related risk than the market related r
isk.
Past price movements are very poor predictor of the future. Betas are merely rea
r-view mirrors, reflecting very little of what lies ahead.
RETURNS ON PORTFOLIO:
Each security in a portfolio contri utes return in the proporti
on of its investments in security. Thus the portfolio expected return is the wei
ghted average of the expected return, from each of the securities, with weights
representing the proportions share of the security in the total investment. Why
does an investor have so many securities in his portfolio? If the security ABC g
ives the maximum return why not he invests in that security all his funds and th
us maximize return? The answer to this questions lie in the investor’s perception
of risk attached to investments, his o jectives of income, safety, appreciation,
liquidity and hedge against loss of value of money etc. this pattern of investm
ent in different asset categories, types of investment, etc., would all e descr
i ed under the caption of diversification, which aims at the reduction or even e
limination of non-systematic risks and achieve the specific o jectives of invest
ors
RISK ON PORTFOLIO:
The expected returns from individual securities carry some degree
of risk. Risk on the portfolio is different from the risk on individual securit
ies. The risk is reflected in the varia ility of the returns from zero to infini
ty. Risk of the individual assets or a portfolio is measured y the variance of
its return. The expected return depends on the pro a ility of the returns and th
eir weighted contri ution to the risk of the portfolio. These are two measures o
f risk in this context one is the a solute deviation and other standard deviatio
n.
Most investors invest in a portfolio of assets, ecause as to sp
read risk y not putting all eggs in one asket. Hence, what really matters to t
hem is not the risk and return of stocks in isolation, ut the risk and return o
f the portfolio as a whole. Risk is mainly reduced y Diversification.
RISK RETURN ANALYSIS:
All investment has some risk. Investment in shares of companies has its own ris
k or uncertainty; these risks arise out of varia ility of yields and uncertainty
of appreciation or depreciation of share prices, losses of liquidity etc
The risk over time can e represented y the variance of the returns. While the
return over time is capital appreciation plus payout, divided y the purchase pr
ice of the share.
Normally, the higher the risk that the investor takes, the
higher is the return. There is, how ever, a risk less return on capital of a out
12% which is the ank, rate charged y the R.B.I or long term, yielded on gover
nment securities at around 13% to 14%. This risk less return refers to lack of v
aria ility of return and no uncertainty in the repayment or capital. But other r
isks such as loss of liquidity due to parting with money etc., may however remai
n, ut are rewarded y the total return on the capital. Risk-return is su ject t
o variation and the o jectives of the portfolio manager are to reduce that varia
ility and thus reduce the risky y choosing an appropriate portfolio.
Traditional approach advocates that one security holds the etter,
it is according to the modern approach diversification should not e quantity t
hat should e related to the quality of scripts which leads to quality of portfo
lio.
Experience has shown that eyond the certain securities y adding more securitie
s expensive.
Simple diversification reduces:
An asset’s total risk can e divided into systematic plus unsystematic risk, as sh
own elow:
Systematic risk (undiversifia le risk) + unsystematic risk (diversified risk) =T
otal risk =Variance (r).
Unsystematic risk is that portion of the risk that is unique to the firm (for ex
ample, risk due to strikes and management errors.) Unsystematic risk can e redu
ced to zero y simple diversification.
Simple diversification is the random selection of securities that are to
e added to a portfolio. As the num er of randomly selected securities added to
a portfolio is increased, the level of unsystematic risk approaches zero. Howeve
r market related systematic risk cannot e reduced y simple diversification. Th
is risk is common to all securities.
One can estimate trend of earning y EPS, which reflects trends of earning quali
ty of company, dividend policy, and quality of management.
Price earning ratio indicate a confidence of market a out the company future, a
high rating is prefera le.
The following points must e considered y portfolio managers while analyzing th
e securities
1. Nature of the industry and its product: long term trends of industries, compe
tition with in, and out side the industry, Technical changes, la our relations,
sensitivity, to Trade cycle.
2. Industrial analysis of prospective earnings, cash flows, working capital, div
idends, etc.
3. Ratio analysis: Ratio such as de t equity ratio’s current ratio’s
net worth, profit earning ratio, return on investment, are worked out
to decide the portfolio.
The wise principle of portfolio management suggests that “Buy when the market is
low or BEARISH, and sell when the market is rising or BULLISH”.
Stock market operation can e analyzed y:
a) Fundamental approach :- ased on intrinsic value of share’s
) Technical approach:- ased on Dowjone’s theory, Random walk theory, etc.
Prices are ased upon demand and supply of the market:
i. Traditional approach assumes that
ii. O jectives are maximization of wealth and minimization of risk.
iii. Diversification reduces risk and volatility.
iv. Varia le returns, high illiquidity; etc.
METHODOLOGY:-
Random Sampling Method.
Company Name:
1. GLAXO
2. REDICON
3. AXIS BANK
4. PRICOL
5. PNB
6. IFLEX
7. HCL
8. NIRMAN
9. ACCENTURE
10. NIPPO BATTRIES
11. IBM
12. BHARTI AIRTEL
13. HUL
14. ITC
15. TATA TEA
16. RELIANCE
17. IVRCL
18. SBI
19. DR. REDDY
20. TCS
21. WIPRO
22. TATA INVESTMENT
23. STI INDIA
24. SINTEX
25. SOLAR EX
26. SPARC
27. RPL
28. SAIL
29. ICICI
30. TVS MOTORS
31. GAM
32. INFOSYS
33. SATYAM
34. CIPLA
35. BAJAJ AUTO
36. MTNL
37. VSNL
38. TATA CEMENT
39. SIEMENS
40. TATA MOTORS
41. GAMMON
42. RANBAXY
43. IDBI
44. NTPC
45. OCL INDIA
46. HDFC
47. SUZOLON
48. JBM AUTO
49. L&T
50. TECH MAHINDRA
Sample Size: 20
From the a ove sample size we are randomly selected 20 companies of different in
dustries for the analysis. These are:
IT SECTOR
INFOSYS
TCS
WIPRO
PHARMACEUTICALS SECTOR
CIPLA
RANBAXY
DR. REDDY
FMCG SECTOR
ITC
HUL
AUTOMOBILES SECTOR
HERO HONDA
TATA MOTORS
TELECOM SECTOR
MTNL
IDEA
BHARTI AIRTEL
ICICI BANK
HDFC BANK
SBI
PNB
INFRASTRUCTURE SECTOR
DLF
GAMMON
BANKING SECTOR
ICICI BANK
HDFC BANK
SBI
PNB
NOTES
• The share prices and market index is taken for 24 months starting from July 2007
to June 2009.
• The market index taken in S & P Nifty.
• The data collected are secondary and are collected from www.nseindia.com.
• The market index is taken for the last day of the month.
• The share price is taken for the last day of the month.
• All the calculations are done in the MS-Excel package.
The covariene etween return on security X & the return on market portfolio is:
Covxm=∑[(Rxi-Rx)(Rmi-Rm)]/N-1
=264/5-1
=66
CHAPTER 4
RESEARCH FINDINGS
CONCLUSION
The income of the people is continuously increasing. So people have some money i
n their hand to invest in the stock market. Most of the people invest in share m
arket. Technology is growing very fast & comparatively easy access to the intern
et is possi le nowadays. People are aware of the share market ut due to the lac
k of proper knowledge a out the risk factor, what amount should e invested from
the saving which will in turn give them high return with low risk, they are hes
itating to invest in the share market.
The risk factor shows that how the risky whether low or high of a scrips of a co
mpany & return should e.
For any investment the factors to e considered are returns on investment
and risk associated with the investment. Diversified investment in to differ
ent stocks can reduce the risk. Before making any investment one needs to study
the past returns given y the stocks. Fundamentals or the usiness model of the
company should e very well understood.
SUGGESTION
• To avoid the risk means to have investment in securities for short period of tim
e and to avoid long term investment.
• Investment diversification can also solve the pro lem. The investor has to diver
sify his investment in real estates, precious metals, arts & antiguos along with
the investment in securities.
• The investor has to study the price ehavior of the risk. Usually history repeat
s itself even though it’s not in perfect form. The stock that shows a growth patte
rn may continue to do so for some period.
• The eta indicates the volatility of the stock. Beta are availa le for the stock
s that are included in the indices, looking at the Beta values, the investor can
gauge the risk factor & make wise decision according to his risk tolerance.
• The investor should e prepared to hold the stock for a period of time to reap t
he enefits of the rising trends in the market, he should e careful in the timi
ng of the purchase & sale of the stock.
• A careful analysis of the past, planning & diversification of the investment can
moderate the rate of the various risk factors.
BIBILIOGRAPHY
REFERENCE:
Bonanza Value line
Security Analysis & Portfolio Management By Pandiyan
Bulls, Bears & The Mouse By Dr. Kamlesh N Agarwal, Deekash Agarwal
Investment Analysis & Portfolio Management By Prasan Chandra.
WEBSITES:
www.Bonanzaonline.com
www.nseindia.com
www.5paisa.com
www.capitalmarket.com
www.google.com