Professional Documents
Culture Documents
Angel Harmonized Ascend Fund: Chitkara Business School
Angel Harmonized Ascend Fund: Chitkara Business School
Fund
“A new Portfolio Product for Angel Broking”
Submitted to
1
Declaration
_______________________
(Student's Name & Signature)
_______________________
(Roll No.)
Date: __________________
2
Acknowledgement
I would like to express my gratitude to all those who gave me the possibility to complete
this project. I want to thank the Department of Chitkara Business School for giving me
the opportunity to do such an interesting and wide topic, i.e., to create a portfolio product
for Angel Broking.
I would like to thank my Branch Manager for being a support throughout my Project
work. Mr. Deepak Chaudhary has always encouraged me to stay focused towards my
project no matter what the conditions are.
I have furthermore to thank my respected Project Guide Dr. Renuka Sharma who gave
and confirmed this permission and encouraged me to go ahead with my Project. She
always guided me in the right direction whenever I asked her for help.
I would also like to thank God for giving me the patience throughout my project and my
parents who supported me and helped me in all ways. Without all, I could not have
successfully completed my project properly in time with adequate data and relevant
substance in it.
Thanking you,
Mehak Mehta
CUN120550046
3
Executive Summary
This project is about creating a portfolio product that would help Angel Broking. We all
know that stock market is a risky investment alternative for all but it is good if investor
can make money out of it. The regulatory body for the stock market is SEBI who controls
all the activities of the market on daily basis and try to do transaction in a legal way so as
to avoid the scams and to protect the interest of the investors. Now days there are many
Portfolio managers and Fund managers who invest on the behalf of the investors and they
assured them fixed rate of return on their investment in a particular period of time. They
all applied various kinds of model to measure the risk available in the market and the
tools to manage that risk.
There are various kinds of risk which is mainly categorize in two parts
The above are the broad categories of the risk in the market. As we can see from the
recession that the global markets also have their impact on the Indian market because
now a days companies are doing business at global level so the market of one country can
affect the market of other countries also. So we cannot avoid the risk but we can manage
the risk and minimize it. In my project I have done the same thing by applying the
various models or tools which are helpful to manage the risk while doing an investment.
The purpose of the study is to give a portfolio product to Angel Broking as per the
needs of the population of Ludhiana region.
Endeavour to create wealth over the medium to longer term through investments
in equities, across market capitalization by focusing solely on the following:-
To measure the risk available in the market, taking into consideration the
Nifty 50 stocks.
To look deep into the fundamentals of the companies as well as the
concerned industry.
To calculate the expected return from the shortlisted stocks as well as from
their concerned industry.
To measure the risk/reward value of investors’ assets class choices
4
Research Methodology Used in the Project:-
Type of research project is Descriptive and Exploratory. To make a research project we
need to see that whether there would be scope of this study or not, because if our study is
not having scope then the whole work done will not be effective.
The scope of this study is there in the market because in today scenario everyone looks
for the safe and risk free return but they don’t know how to manage the risk which is
there in the market so by the help of this study and after seeing the relevance, the
Financial managers or the investment companies can take benefit out of it. Because by
this they will come to know about the tools to manage the risk and they will be able to
sell more investment products because by using it they will be able to give safe return to
the investors which will lead to an increase in their goodwill in the market.
Findings:- After applying all the above models I have come to know the Beta of my
portfolio, expected return that my portfolio will generate. CAPM help us to know that
how much would be expected return on the stock and then we can compare the actual
return with the expected return and invest accordingly. Beta helps us to know the
volatility of risk in the market and then we can do risk return tradeoff so as to invest in
best stock as per our analysis. And Result of Sharpe ratio helps us to compare with the
expected return and then do the Sortino ratio if required.
5
Table of Contents
Review of articles
Need of the study
Objectives of the study
VII. Glossary
VIII. Bibliography
6
Chapter-1
Introduction to the
corporation and
company
7
Business carried on
by the parent
company
8
Angel Broking
Registered Office Corporate Office
G-1, Ackruti Trade Center, Road No -7, 6th Floor, Ackruti Star, Central Road -
MIDC, MIDC,
Andheri (E), Mumbai - 400 093. Andheri (E), Mumbai - 400 093.
Tel: (022) 2835 8800 / 3083 7700 Tel: (022) 3935 7600
9
About the company
Angel Broking's tryst with excellence in customer relations began in 1987. Today, Angel
has emerged as one of the most respected Stock-Broking and Wealth Management
Companies in India. With its unique retail-focused stock trading business model, Angel is
committed to providing ‘Real Value for Money’ to all its clients.
The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock
Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX &
MCX. Angel is also registered as a Depository Participant with CDSL.
Vision
To provide best value for money to investors through innovative products, trading/investments
strategies, state of the art technology and personalized service.
Motto
10
CRM Policy
“A Customer is the most Important Visitor on our premises. He is not dependent on us,
but we are dependent on him. He is not an interruption in our work. He is the purpose of
it. He is not an outsider in our business. He is part of it. We are not doing him a favour by
serving him. He is doing us a favour by giving us an opportunity to do so.”
- Mahatma Gandhi
Business Philosophy
11
Evolution of Angel Group
1997-2003
2004
2005
12
2006
2007
2008
2009
2010
Nov’10: “Major volume driver” award for the 6th consecutive time
13
2011
ANGEL LOGO
14
Membership
Angel Group Memberships:
BSE- Cash and F&O
NSE- Cash and F&O
NCDEX & MCX – Commodities & Currency Futures
15
Angel Business
Commodity NCDEX,
Broking MCX
Broking Business
Currency
NSE, MCX
Trading
E-Broking
Core Business
Portfolio
management
Wealth Management and
Distribution Business
Mutual Funds
IPO Advisory
Global Partner
16
Unique Propositions
One of the highest success ratios in both technical and fundamental calls.
An excellent IT infrastructure in place with over 18144 trading terminals and 610
VSATs with a server uptime of 99.9%.
100% Retail centric focus and total commitment towards retail customers.
Some of the best fund managers running our Portfolio Management Services to
enable clients to minimize their risk, enhance return and diversify their portfolios.
Training Programs to upgrade the knowledge base & competency levels of our
employees, channel partners & even our end customers.
Our KYC operations run 24/7 to ensure a TAT of less than 48 hours to generate
client codes.
A client can use all the three online trading platforms with same login and
password
Our fund managers and analysts have been featuring daily on various business
news channels like
CNBC TV18
ET Now
Zee Business
Bloomberg UTV
NDTV Profit
CNBC Awaaz
17
Awards & Recognition
The most trusted retail centric brokerage house with service truly personalized.
Awarded the coveted 'Major Volume Driver' trophy by the BSE for 6 years
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2011
Best Sector Analyst
18
Research & Advisory Reports
Market Outlook
Provides price-sensitive information just Before the opening bell and analyzes its
Impact on the Market in terms of:
Key Corporate developments
Policy announcements
Geo-political news and views
Weekly Reviews on
Comprehensive market overview pertaining to the week and likely trends going
ahead
FII and Mutual Fund activity for the week
Update on International markets
Analysis of new IPOs hitting the market
Top picks based on in-depth analysis of fundamental & technical factors
Technical Analysis of major indices and scrips as well as future outlook
Short and long-term outlook on scrips and suggested trading strategies
End of the week Derivative Analysis
Commodities’ update on Bullion, Agri & Energy futures for both exchanges
Updated stock view of about 70 prominent stocks
19
Angel Products and Services
Angel Commodities
Personalized services through branches & regional hubs
Trading & Relationship Mgmt. Services in Bullion, Base Metals, Energy &
Agri. futures
Opportunities in hedging & portfolio diversification, speculation & arbitrage
Training & Educational Seminars on Commodities
Angel Gold
Personalized Investment Advisory
Portfolio Restructuring & Continuous Monitoring
Guidance from Experienced Research Team
Periodic Group Meetings with Investors.
Specialized Products
Margin Funding
Facility to allow clients to take higher exposure
20
Instant Liquidity for Clients
Margin is deposited in Cash as well as Collaterals
Enabling Clients grab Earning Opportunity
Pre-Paid Brokerage
Zero Account Opening Charges
Attractive Brokerage Rates
Free DP AMC for 1 year
Assured gifts worth thousands with every account
Easy & Fast Recharge
Free Financial Investment Application with every account
Depository Services
No physical instruction required for the client’s sell obligations
Lowest transaction charges in the country
Acceptance & execution of instruction on fax
A combined monthly ‘Bill-Transaction-Holding cum Ledger’ statement
Efficient pledge mechanism
NRI Services
NRI Service Desk for personalized Assistance
Dedicated Offline Equity Dealing Desk
Online Equity Trading Platform
NRI Investment Advisory Desk
PAN Card Assistance
Support for Banking – PIS Accounts
Portfolio Management, Mutual Fund, IPO services
M-Connect Service
Market News/Analysis & Expert Views 24X7
Stock Updates & Market Statistics
Real time Equity, F&O, Commodities and MF rates on a single screen
Top 10 Local & Global indices
Back-office Data i.e. Ledger, Open Positions, Holdings, PMS
21
SMS Application for clients
Automated SMS at specified Intervals at no additional cost
Example – Trade Confirmation, Weekly Ledger update etc
Request response SMS
Example – DP Holding, Pool Holding, Ledger update etc
Insurance
Products to meet the triple objectives of risk coverage, investment and tax
planning
Assessment of your Insurance needs after proper risk profiling
A wide array of individual life cover plans to meet your Protection, Savings
and Retirement needs
Mutual Funds
Tie- ups with all major AMCs
Dedicated Relationship Manager for Business Partners
Exclusive MF Research Reports by Angel
(Daily/ Weekly/Monthly Mutual Fund Reports)
MF Portfolios as per Investors Financial Goal
Common Gateway for all Mutual Funds related queries
22
Distribution Model
23
Business carried on
by the particular
firm
24
Angel Broking
Regional Office
SCO 13, Shanghai Towers,
Feroze Gandhi Market,
Ludhiana- 141001
Tel: (0161) 3941394
25
Angel Harmony
26
PRAGATI – What an Idea!
27
E-broking
Unique Online Trading products customized to suit different Investment / Trading needs
–
Angel Investor
Angel Diet
Angel Trade
Back-Office
28
Advisory
Angel Trading
29
Main Competitors
30
History of broking firms
The birth of Karvy was on a modest scale in 1981. It began with the vision and
enterprise of a small group of practicing Chartered Accountants who founded the
flagship company, Karvy Consultants Limited.
They started with consulting and financial accounting automation and carved
inroads into the field of registry and share accounting by 1985.
Since then, karvy utilized its experience and superlative expertise to go from
strength to strength, to better their services, to innovate, diversify and in the
process, evolved as one of India’s premier integrated financial service enterprise.
IWTL has launched and established an online trading service on the Website.
31
India Infoline.com Securities Pvt. Ltd. is a wholly owned subsidiary of India.
Infoline.com Ltd and is the stock broking arm of India Infoline.com.
5paisa.com is a trade name owned by the India Infoline.com group. IILSPL has
applied for trading membership of the BSE under Securities and Exchange Board
of India (Stock Brokers and Sub-Brokers) Rules 1992.
www.hdfcsec.com also reserves the right to decide on the criteria based on which
customers would be chosen to participate in these services.
The present web site (www.hdfcsec.com) contains features of services that they
offer/propose to offer in due course.
The launch of new services is subject to the clearance of the regulators i.e. SEBI,
NSE and BSE.
At present, ISL accounts for approximately 3% of the total daily turnover of the
Exchange with 32,359 client relationships and 70 branches spread across the
country as of April 30, 2004.
32
Competition Analysis
Investors like
Rakesh
Jhunjhunwala
Minimum Minimum
brokerage – Rs. brokerage – Rs. Minimum brokerage
3000 to Rs. 4000 2500 on the first – Rs. 1000 to Rs.
on the first trading trading month of 2000 on the first
month of every every client trading month of
33
client every client
COMMODITY COMMODITY
Intraday 3x Intraday 3x
COMMODITY Carry 2x Carry 1x
Intraday 6x
Delivery CURRENCY CURRENCY
1x Intraday 2x Intra day 2x
Carry 1x Carry 1x
CURRENCY
No limits
Software They use their own They use ODIN They use ODIN
version product both for software software
Software and Back
Office.
They didn’t
disclose the
products name.
All the clearances Pay in/ Pay out are Third party pay out
through HDFC accepted and paid are also possible.
Bank are reflected through cheques
on the same day. only. In Commodity
payout is reflected
All the clearances on the same day.
through other
banks are reflected In Equity payout is
on the next day. reflected after 2
days.
34
Number of employees
Ludhiana – Regional Office
35
Organizational Structure
36
Study of functioning of all departments of the
company
Angel Broking, Ludhiana has following departments:-
Sales department
Dealing department
Operations
Back-Office
Risk Management Services
Sales department has a team of around 10 Sales Executives and 1 Assistant Unit
Manager.
Sales Executives go to the market, hunt for prospective clients, fixes up a meeting
with the interested clients and explains the company, its products and services.
Unit Manager keeps a track of the whole sales team. Guides them on how to pitch
in to a new client or existing client.
The system works on a principle that “No Lead received by any employee should go
unattended”.
That’s why it is obligatory that any lead should be entered in LMS. As soon as a lead is
entered in the system, it goes into the pending leads pool of the Executive.
FOLLOW UP
37
All follow-ups done on a prospective client are captured once the data is entered using
this link. This helps the user in checking history of the meetings with a particular lead.
It’s a useful reference tool for the user.
Active Leads = 75
Closures
= 15
All leads do not get converted to a meeting. Based on the data entered in LMS by
the Sales Executives, it has been found that only 50% of the prospective clients
agree to a meeting. The balance 50% takes the details and drop out.
Active leads are the ones wherein the prospective client has agreed to meet the
Sales Executive. This shows that they are interested to know the details of our
products and services and hence, the chances of conversation are better.
Based on the data entered in LMS by the Sales Executives, it has been found out
that only 20% of the Active Leads are closed.
The balance 80% either drop out or want to take some more time.
All Active Leads are met at least once (75*1 meetings a month). All Closure
cases take an average of three meetings, i.e., two extra meetings (15*2 meetings a
month) totaling 105 meetings per Executive per month, i.e., average of four
meetings per day.
Every Investment Advisor has a large number of clients. If any client wants to
trade online then he has PC and Mobile software. But if a client wants to trade
offline then he can trade at any point of time through these Investment Advisors.
38
Long term fundamental calls
Short term calls
Intraday calls
BTST calls
There is a single terminal for all the three markets i.e., equity, commodity and
currency. It is good because every person can have complete knowledge of every
market and also the clients can have a good relation with their IA or RM because
their account is completely held by a single person.
There is only one employee in Back-Office. The task of Back Office department
is to have a proper communication system between the Regional Office with it’s
sub offices and also between the Regional Office and the Head Office.
There are two employees in Operations department. They take care of the
following heads :-
Finance/Cash
KYC
Finance department takes into consideration all the requirements while any pay
in/ pay out are made. It keeps into account the requirements of the banks that are
tied up with the Ludhiana Branch.
KYC department takes into consideration all the documentation part of the clients
and all the other details of the client. These details are kept confidential and are
never disclosed to any employee of the firm. The details are only communicated
to the Head Office.
RMS department helps the clients in avoiding some of the risks like credit risk,
interest rate risk, liquidity risk and re-investment risk on debt investments and
other fixed-income securities.
They use derivative instruments like index futures, stock futures, and options
contracts, warrants, convertible securities, swap agreements or any other
derivative instruments for the purpose of hedging and portfolio balancing, as
permitted under the regulations and guidelines.
RMS department uses Stop loss and other schemes to avoid the risks associated
with trading volumes, liquidity and settlement systems in equity and debt markets.
39
Sources of finance
BROKERAGE – The major source of finance for Angel Broking is the
brokerage on the turnover being generated by:-
B2B clients
B2C clients
B2B clients are being charged as follows:-
Intraday on Equity, Commodity and Currency – 0.03%
Delivery on Equity, Commodity and Currency – 0.30%
ANGEL PRODUCTS – Angel Broking earns a lot from its products such as:-
Margin Funding
LIFE INSURANCE – Angel Broking has a tie up with BSLI (Birla Sun Life
Insurance) for distribution of the following products:-
Dream Solution Common
Dream Endowment
Dream Child
Dream Retirement
Saral Solution
Saral Wealth
Saral Child
Freedom 58
Titanium Plus
Platinum Premier Plus
40
SWOT Analysis
STRENGTHS WEAKNESSES
• Experienced player in the market • Angel still could not meet the
• Broad product range fuller customer satisfaction
• Wide range of distribution • There is a stiff competition
network from the banks
• Marketing team is proficient • After sale services
enough to cover various • Software problems
segments
• Excellent image in the market
• Customer Orientation
• Efficient and Skilled Manpower
• Excellent image in the market
• Investment Advice
OPPORTUNITIES THREATS
• Ever increasing market in • Price war
investment field • Substitute products
• Emerging new technology • Computer literacy in the
• Unfilled needs of the customer prospect investors
• Education level • New competitors
• Untapped market • Technology based business
41
Financial Statement Analysis of the company
Sources of funds
Paid up capital
Application of funds
42
Summarized Financial Statements (as per audited annual reports)
(Amount in Rs. Lac)
43
Trend Analysis
Trend percentage of Balance Sheet
Sources of funds
Paid up capital
Application of funds
1600
1400
1200
200
0
2010 2011 2012
1000
900
800
700
200
100
0
2010 2011 2012
45
Trend percentage of Income Statement
46
Graphical presentation of Trend percentage of Income Statement
120
100
80
60 Total Income
Total Expenditure
40
20
0
2010 2011 2012
120
100
80
Profit before depr.
60 Depreciation
Profit before taxes
40 Profit after tax
20
0
2010 2011 2012
47
Strategies adopted
Marketing
Finance
Human Resource
Marketing Strategy
Angel Diet and Angel Trade is focused on capturing the significant growth opportunities
in the financial services market and its strategy is driven by the following key principles:-
Client Referral Programs: Client referrals are the most reliable and most cost-effective
source of new clients. We help firms maximize their success by creating process and
tools that make generating client a referrals a natural and systematic part of the practice.
Financial Strategy
Financial Strategy talks about the cost effectiveness in the work that is being done in the
organization.
Targets: Every dealer and sales executive is being given targets so as to reduce the
overall cost for the organization. This helps the company generate business from dealers
and sales executives more effectively.
Plans & Schemes: Angel Broking has some good plans and schemes which though seem
to be inexpensive to the client but actually it is not like that. The schemes and plans are as
such which ultimately generates a lot of profit for the organization.
48
Advances: Angel Broking asks for advance brokerage from the clients. In that way the
company receives the money in advance and saves the risk of any default. Moreover, this
advance money can be easily invested in good projects.
Revenue Sharing: Angel Broking has a concept of Revenue Sharing wherein if a sales
executive or a dealer reaches a particular level in meeting its targets then that particular
person is being given share in the company’s profits. It is strategy to motivate employees
to not just meet monthly targets but also to focus on the Revenue Sharing target.
Moreover, this is also helpful in employee retention.
HR Strategy
HR Strategy talks about the hiring of people and most importantly the grooming and
training of the employees, staff and even the people working at managerial levels in the
organization.
Talent Building Program: The ATP Session is about grooming and making the
employee ready for the next level of responsibility in the Organization. The ATP is
conducted for all the levels i.e., A, B & C in the organization.
Training programs for staff members: There is special MDPS to develop talent within
the organization. They provide training in Customer Relationship Management (CRM),
in order to augment the level of customer service beyond the expectations of clients.
Functional training programs for employees at all levels.
Training programs for channel partners: Orientation programs are for franchisees,
sub-brokers, remisers for a better understanding of Angel’s products and services,
Angel’s advantages and Angel’s Unique Selling Points.
49
Profitability Analysis
Profitability differs from profit in a very important way. Profitability is not measured in
terms of money, but in terms of return on some asset. This means that a profit of $100 has
nothing to do with profitability. Profitability measures how much output you can get from
employing a certain amount of an asset.
Angel Broking is not a listed company and thus there is very limited information about
the financial details of the company.
Since the “sales data” is missing, I’m unable to measure the profitability ratios.
Thus only few ratios are taken into consideration, which are as follows:-
Total Income has reduced from 40,853.45 lack to 30,633.07 lack in the year
ending 31-03-2012
The percentage reduction in Total Income is *100 = 25.017%
Total Expenditure has reduced from 38268.39 lack to 27760.34 lack in the year
ending 31-03-2012
The percentage reduction in Total Expenditure is *100 = 27.458%
Although there is a fall in both the Total Income and Total Expenditure, there is
an increase in the Profit after tax.
Profit after tax has increased from 850.17 lack to 1032.69 lack in the year ending
31-03-2012
The percentage increase in the Profit after tax is *100 = 21.468%
50
Chapter-2
51
Review of Literature
This article talks about the 5 most popular types of portfolios that investors
should consider before allocating their funds into any of these.
1
http://www.investopedia.com/articles/basics/11/5-popular-portfolio-types.asp
2
http://www.investopedia.com/articles/investing/040313/how-adjust-your-portfolio-bear-or-
bull-market.asp
52
While investors shouldn't feel compelled to change their portfolios radically in
reaction to the market's daily moves, small adjustments in the face of a bull or
bear market could be a prudent move.
Investors should turn towards safe havens during a bear market. That could
mean adjusting the percentage of bonds you hold upward.
At the same time focusing on blue chips could also prove to be fruitful.
During a bull run investors should feel confident to take on more risk.
This article talks about the three main things one should do to ensure an
adequately diversified portfolio:-
Picking different investments with different rates of return will ensure that
large gains offset losses in other areas.
The portfolio theory tells us that after 10-12 diversified stocks, you are very
close to optimal diversification. You just need to buy stocks of different sizes
and from various industries.
This article talks about the equity-dominated portfolios. It says that in the long
run, equities outperform bonds and cash; therefore, allocating your entire
portfolio to stocks will maximize your returns.
3
http://www.investopedia.com/university/risk/risk4.asp
4
http://www.investopedia.com/articles/stocks/07/100_equities.asp
53
However, the portfolio should be widely diversified across multiple asset
classes: domestic equities, international equities, emerging markets debt and
equities, real assets and even junk bonds.
The more diverse portfolio can be expected to reduce volatility and provide
some protection against inflation and deflation.
5. Simplify Your
5
Portfolio
(December 22 2012)
This article states that a simple and straightforward approach can be employed
by anyone who wants to establish and maintain an effective long-term
investment strategy.
Our approach does not have to be overly complicated, it does not have to be
time consuming, and it does not require a vast array of products or accounts.
In the end, we may actually find that less is more.
6. Achieving Better
6
Returns In Your Portfolio
(February 21 2012)
Investors can structure portfolios that deliver above global market index
returns by designing a strategic portfolio.
Fundamental theories like asset allocation and the three-factor model can have
a dramatic impact on the way you invest.
Designing a portfolio that favors small and value companies over pure market
risk should deliver higher expected returns over extended periods of time.
5
http://www.investopedia.com/articles/basics/08/simplified-approach.asp
6
http://www.investopedia.com/articles/05/021705.asp
54
7. Make Your Portfolio Safer With Risky Investments
(September 04 2011) 7
Many investors look only at the risk of their individual securities, not at the
combined effect on their portfolio. In fact, portfolios can be made safer by
investment strategies that by themselves might be risky, but that in the context
of the portfolio make it safer.
Some of the strategies that are mentioned in this article are hedging strategies,
buying insurance with options, using low-correlation assets, reducing
benchmark or active risk and understanding your real risk.
This article provides an overview of defensive stocks and shows how we can
use them to guard our portfolio.
Some of the sectors that would be deemed defensive are foods, beverages &
tobacco products, water, gas and electric utilities, pharmaceuticals and
medical stocks.
7
http://www.investopedia.com/articles/financial-theory/08/reduce-risk.asp
8
http://www.investopedia.com/articles/stocks/07/defensive_stock.asp
55
9. The 2011 Billionaire Investment Portfolio
(February 16, 2011) 9
Investing billionaires became wealthy by putting all of their eggs in one (or
just a few) basket and watching that basket very closely.
This article puts an insight into the portfolios of the top 5 billionaires like
Carlos Slim, Bill Gates, Warren Buffet, Mukesh Ambani and Lakshmi Mittal.
This article states that asset allocation takes care of nearly 94% of our
portfolio’s investment profile. The rest is influenced by individual security
selection and market timing.
We need to confirm that we are exposed to all areas of the asset class in order
to minimize unsystematic risk.
9
http://www.investopedia.com/stock-analysis/2011/the-2011-billionaire-investment-portfolio-
tmx-nyt-sks-rsg-ko-mt0216.aspx
10
http://www.investopedia.com/articles/basics/08/allocation-in-one-step.asp
56
Need and Usefulness of the study
Angel Broking: - This study will be useful for Angel Broking, especially to the
Ludhiana Branch where the internship was undertaken. Angel Broking can
suggest the same portfolio to its clients. It would be helpful for the Portfolio
Managers and Stock Brokers as well. The company can either suggest this fund
directly to its clients or can make some changes and then suggest the same.
Investors: - This study will also be useful for the investors who want
good/moderate return on their investment with low risk. Because stocks are
selected on the basis of the fundamental analysis and for the risk parameters I had
considered BETA, CAPM, SHARPE and SORTINO models. These will help us
to evaluate the expected return from each stock in relation to the risk involved
with it. I have also taken into consideration the excess return that we can make
with the investment. Usually investors face huge losses during the time of switch
over, thus SORTINO ratio will be useful.
Students: - This study will also be helpful for the students in understanding the
basic concepts of investing and managing the risk on behalf of the clients by
applying the fundamental analysis and it will help them to learn the fundamentals
and stock selection criteria as well.
Endeavour to create wealth over the medium to longer term through investments in
equities, across market capitalization by focusing solely on the following:-
To measure the risk available in the market, taking into consideration the Nifty 50
stocks.
To look deep into the fundamentals of the companies as well as the concerned
industry.
To calculate the expected return from the shortlisted stocks as well as from their
concerned industry.
57
Chapter-3
58
Research Methodology
Research Methodology has many dimensions, it include not only research methods but
also considers the logic behind the methods used in the context of the study and explains
why only a particular method of technique has been used so that research leads to proper
evaluations. Thus in a way it is a written game plan for concluding research therefore in
order to solve research problem it is necessary to design a research methodology for the
problem as the same differ from problem to problem.
Research Design:
Data Collection:
After the research problem has been defined and the research design has been chalked out,
the task of date collection begins. The data collection technique would be Secondary Data
Collection. Secondary data would be collected from the internet and different websites
and newspaper articles. And other research paper would be taken into consideration to
find out the better result from the research paper.
Tools and techniques are used for the stock selection and to manage the risk and return on
the portfolio. Major things to be considered are the sector preference for the selection of
the stock because diversification should be into different sectors so as to maximize the
return and taking advantage of whole economy related environment and news. Stock
selection will be based on the Fundamental analysis and Beta for the stock selection.
Capital Asset Pricing Model and Sharpe Ratio will be used vis-à-vis to manage the risk
and selection of stock as well.
59
For the selection of the stock nifty 50 stocks, stocks of large capitalization and
those stocks who had major contribution in their sector and cheap via valuation
will be selected. (All Nifty 50 stocks are shortlisted due to the index preference.)
The first stock selection criteria would be to analyze the industry from a macro
point of view.
Then industry analysis and the company analysis will be done for the final stocks
which are good as per the selection criteria.
In another part I will apply the fundamentals for selecting the specific stocks for
my portfolio.
For the further analysis and to manage the returns and risk involved in the
investment CAPM and SHARPE will be implemented on the stocks.
We know the stock market is a risky investment tool and so as to avoid the wrong
decision of elimination or for the restructuring purpose and for the eliminating of
the stocks which are not giving good returns or are giving negative returns,
SORTINO will be used.
Note:-
However we all know that the stock market is always a risky investment tool but the
above analysis part will be used for the stocks and investment decision will be made on
the behalf of above analysis. The investment amount limit will be same as it has been set
by SEBI (Min 25lacs for the portfolio).
The above analysis is made to the best of my knowledge. There will be fee charged by
the fund manager or portfolio manager or by the company who will manage this
investment on the behalf of the client.
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Chapter-4
61
Portfolio Management Services
Definition
When one invests in PMS, investor owns individual securities unlike a mutual fund
investor, who owns units of the entire fund. One has the freedom and flexibility to tailor
the portfolio to address personal preferences and financial goals.
Although portfolio managers may oversee hundreds of portfolios, individual account may
be unique.
Angel’s Portfolio Managers are equipped to design an investment portfolio across various
investment avenues like Equities, Fixed Deposits, and Bonds etc. in sync with the client’s
unique needs.
Approach to PMS
Risk Profiling
Research & Asset Allocation
Stock Selection
Review & Rebalancing
Angel, with years of experience and research expertise, offers the best in class Portfolio
Management Services.
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Benefits at Angel
PMS products:-
The objective of the scheme is to generate capital appreciation in medium to long term
through equity and equity related instruments mainly comprising of large-cap companies.
The objective of the scheme is to render capital appreciation in medium to long term,
through equity and equity related instruments largely comprising of mid-cap and small-
cap companies.
3. ANGEL GOLD
In a volatile market, it is very difficult for an investor to pick up value stocks which will
give decent returns in the long run.
Angel Gold helps investor’s with professional financial advises and assists investors in
making wise and profitable decisions.
63
Angel
Harmonized
Ascend Fund
64
Overview
As market becomes extremely dynamic and there is multiplicity of information and
opinion, it becomes very difficult to take decision at the right time.
Moreover, as your responsibilities and challenges increase, it may be more difficult for
you to find the time to make well informed decisions with regard to your portfolio.
A good investment decision is the right decision taken at the right time, which is why my
focus is on understanding the customers investment needs, their risk profile and the
investment time horizon that client’s normally look for.
Investment Objective
To generate long term capital appreciation from a portfolio that is invested predominantly
in the fundamentally strong equity and equity related instruments.
Individuals
NRIs
Hindu Undivided Families
Association of persons
Companies
Partnership Firms
Societies, and Overseas Trusts (subject to RBI approval)
65
Investment Strategy
Scheme Details
66
Custodian Fees Nil
*In the case of redemption (Partial for full) with in the first year, a fixed management fee
of 2% will be levied on the average assets under management for the residual period.
Residual Period =
365 days- Actual number of days for which the investor participated in the respective
scheme.
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Benchmark – CNX Nifty 50
The CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index
based derivatives and index funds.
CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL),
which is a joint venture between NSE and CRISIL. IISL is India's first specialized
company focused upon the index as a core product.
The CNX Nifty Index represents about 68.03% of the free float market capitalization of
the stocks listed on NSE as on March 28, 2013.
The total traded value for the last six months ending March 2013 of all index constituents
is approximately 50.23% of of the traded value of all stocks on the NSE.
Impact cost of the CNX Nifty for a portfolio size of Rs.50 lakhs is 0.06% for the month
March 2013.
CNX Nifty is professionally maintained and is ideal for derivatives trading.
From June 26, 2009, CNX Nifty is computed based on free float methodology.
68
Finance - Housing 2
Financial Institution 2
Gas 2
Mining 6
Oil Exploration 4
Paints 2
Pharmaceuticals 10
Power 8
Refineries 4
Steel & Steel Products 4
Telecommunication 2
Automobiles - 2 & 3
wheelers
Automobiles - 4
wheelers
Banks
Computers - Software
Construction
Diversification
Electrical Equipment
Engineering
Finance - Housing
Financial Institution
Gas
Mining
Oil Exploration
Paints
Pharmaceuticals
Power
Refineries
Telecommunication
69
Chapter-5
70
Stocks Selection Criteria
Industry Analysis
Industry Analysis
The first step that I have taken into consideration is the macro level returns. Before
selecting a particular stock in a portfolio one must look deep into the industry which that
particular stock comes under.
71
Industry Analysis
The first and foremost thing that one needs to do before selecting any stock for
investment purposes is to look for the growth of the particular industry that the
stock comes under.
In my study I have taken into account Nifty 50 companies. Nifty comprises of 22
sectors at present.
I have studied the basis and most considered sectors for my study. Some of them
are FMCG, Banking, Auto, IT, Pharmaceutical etc which imposes serious impact
on the index Nifty.
Following is a graph showing the last 1 year returns of the most considered
sectoral indices.
Returns(%)
CNX REALTY
CNX PSU BANK
CNX PHARMA
CNX METAL
CNX MEDIA
CNX IT
CNX FINANCE Returns(%)
CNX ENERGY
CNX BANK
CNX AUTO
CNX FMCG
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Following is the Performance of various indices as of end Apr 2013(in %)
Interpretation
The maximum growth can be seen in Media Sector but I cannot take this
sector into consideration because there is no company in Nifty 50 which is
covered by this sector.
The next best growth is seen in FMCG sector which will be my top most
priority sector when it comes to stock selection.
Finance and Banking are the other 2 sectors that are performing quite well in
the market.
Thus, these sectors are bound to perform well no matter what the market
conditions are.
73
CNX FMCG
Statistics
CNX PHARMA
Statistics
74
CNX BANK
Statistics
CNX FINANCE
Statistics
75
CNX IT
Statistics
CNX AUTO
Statistics
76
Individual Stocks Analysis
It can be clearly seen in the Chart 1 that the Market Price of ITC is increasing on
continuous basis.
Chart 2 shows that the Market Capitalization is almost stable for last 5-6 years but
its Net Profit and Net Sales are increasing on annual basis.
From the FMCG sector I have shortlisted ITC because it is a fully diversified
product portfolio, which reduces our investment risk.
Although, it’s BETA is comparatively much more than the other FMCG sector
stocks but following 2 reasons makes it a good company to invest in:-
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Another most innovative initiative by ITC is its E-chaupal concept.
Last but not the least, it is a fully diversified product portfolio in different sectors
like hotels, FMCG, Cigarettes, Stationary etc.
78
It can be clearly seen in the Chart 1 that the Market Price of Sun Pharma is
increasing on continuous basis.
Chart 2 shows that the Market Capitalization is almost stable since 2009 but the
sales and profits have reduced. The decline in net profit has never created an
impact on the overall performance of the company.
The last Chart shows the shareholding pattern of different investment houses in
the company. The maximum stake is held by the promoters which is a bullish
trend for the company.
General public is having a very less stake in comparison to the promoters’ stake
which seems to be a very supportive point for us.
Sun Pharmaceuticals is the low BETA stock in the pharma sector and it has its
orders books fully filled with orders.
It has a very strong research team which provides them with innovative and good
patents for its products.
Ranbaxy is a highly volatile stock due to its high BETA among Sun Pharma,
Cipla and itself.
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It can be clearly seen in the Chart 1 that the Market Price of CIPLA Ltd. is
increasing on continuous basis.
Chart 2 shows that the Market Capitalization of CIPLA Ltd. is the same since
2009.
The Net Profit and Sales of CIPLA Ltd. is increasing year on year.
CIPLA Ltd. sells very expensive Cancer and Heart disease medicines and which
still has huge demand in the market. Thus its earnings due to these two variants
are the best.
It gives a very good dividend per share and is a well known and trusted brand in
the market.
Ranbaxy is a highly volatile stock due to its high BETA among Sun Pharma,
Cipla and itself.
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In Chart 1 it can be clearly seen that the market price of SBI is not increasing but
rather its fluctuating. Thus it is a good bet earning huge profits.
This is going to be an investment which will help the investors earn a lot from
their portfolio.
Chart 2 shows a huge jump in the net profits of SBI from March 2011 to March
2012. This shows that this company has a huge potential to come out with huge
profits even in poor conditions.
The last Chart shows the shareholding pattern of different investment houses in
the company. The maximum stake is held by the promoters which is a bullish
trend for the company.
General public is having a very less stake in comparison to the promoters’ stake
which seems to be a very supportive point for our portfolio.
SBI is a leading public sector bank, having a very good market. Though it has got
a good weight on Nifty index but still it is on the expansion mode.
Another reason is that most of the Government financial transactions are done
through SBI only, thus it plays a crucial role in the decision making for all the
other banks.
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Stock No.5 – HDFC Bank Ltd.
It can be clearly seen in the Chart 1 that the Market Price of HDFC Bank is
increasing on continuous basis.
Chart 2 shows that the Market Capitalization of HDFC Bank Ltd. is the same
since March 2009. There is a consistent increase in the Net Sales and Net Profit of
the company.
There was a huge rise followed by a huge fall during March 2011-12. Since then
the company is earning stable returns.
Like SBI which is a leading bank in Public Sector, HDFC Bank is a leading bank
in Private Sector.
There is no doubt that HDFC Bank already has a good weight on the index, but
still much more momentum is expected upside due to its aggressive operational
work and efficiency of the service.
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Axis Bank is also a growing bank in the private sector but I have not considered
the same due to its higher BETA. My portfolio is more towards a balance growth
so I am selecting a bit defensive stock rather than being more aggressive by
selecting Axis Bank.
It can be clearly seen in the Chart 1 that the Market Price of TCS is increasing on
continuous basis.
Chart 2 shows that a very high percentage of shareholding of TCS is with the
promoters of the company.
The maximum stake being with the promoters shows a bullish trend for the
company.
General public is having a very less stake in comparison to the promoters’ stake
which seems to be a very supportive point for our portfolio.
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TCS has the lowest BETA in comparison to other Nifty 50 stocks of IT sector and
it also has less weight on Nifty index in comparison to Infosys.
TCS has major business operations in India only whereas Infosys has its major
business in exports. Thus TCS is a comparatively safer bet than Infosys.
From returns perspective Infosys has grown to its maximum level and now the
returns are less likely to be expected in near future.
HCL technologies is another giant in IT sector but it has a very high BETA in
comparison to other IT sector stocks
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It can be clearly seen in Chart 1 that the Market Price of Mahindra & Mahindra
was consistent till July 2012 but post that period the price has increased
continuously month after month.
Chart 2 shows that the Market Capitalization is stable since March 2009. The Net
Profit and Net Sales has been consistently increasing year on year.
Beta of M&M is less in its industry in comparison to other stocks. No doubt its
weight in Nifty is already high but still if we talk about the marketing strategy and
product preference, it is much better than its competitors.
Most of the Indian market stays in rural areas and M&M has a good hold in the
rural sector, which is a positive point for this company.
In order to compete with the Sedan and SUV segment, M&M has launched
Quanto and XUV500.
M&M has one of the best technologies for SUVs segment and Maruti Suzuki has
a good range of Sedan. It is good for M&M because the taste of Indian customers
is gradually shifting from Sedans to SUVs due to more comfort and space that is
involved in SUVs.
Thus from competition as well as risk point of view it is a worth investing stock.
85
It can be clearly seen in the Chart 1 that the Market Price of Bajaj Auto is
increasing on continuous basis.
Chart 2 shows that although Net Sales are more or less the same, but Net Profit
has increased due to its innovation and marketing strategies.
Bajaj Auto has its major competition with Hero Motor Corp. BETA of Bajaj Auto
is less than that of Hero Motor Corp. but the weight of Bajaj Auto is
comparatively higher in Nifty index.
Hero Motor Corp. has good management leaders who are leading the company
and the product diversification is comparatively good than other 2 and 3 wheeler
automobiles.
86
It can be clearly seen in Chart 1 that GAIL’s Market Price has continuously
reduced during the last 1 year.
Chart 2 shows that the sales are increasing year on year but still the net profits are
falling down.
BETA and weight of GAIL in Nifty index is comparatively less and in the near
future it is expected that GAIL will outperform in the industry like CAIRN and
ONGC are currently doing.
ONGC and CAIRN are facing tough competition from GAIL due to an increase in
its efficiency of operational process.
GAIL is on the growth stage while ONGC and CAIRN had already grown and
had given sufficient returns to their investors.
87
It can be clearly seen in Chart 1 that the Market Price of Tata Steel Ltd. is
continuously falling. And now is a good time to invest in this stock.
Chart 2 shows that the Market Capitalization of Tata Steel Ltd. is stable but the
Net Sales and Net Profit are highly correlated.
It has a very big client base (corporate client + industry client) that makes a good
hold of this company in the steel market.
The management of this company is very sound and it is a leader in Steel market
for a very long time.
Thus, strong management, good client base and market leader kind of qualities
makes this stock a good buy for my portfolio.
88
It can be clearly seen in Chart 1 that the Market Price of Larsen & Turbo fell for
some months but now for last 4-5 months it is giving good returns.
Chart 2 shows that the Market Capitalization of Larsen & Turbo is stable since
March 2009. The Net Profit and Net Sales are highly correlated.
In terms of returns it is a stable company and also it’s a large cap company.
The management and order books of Larsen & Turbo are always filled and they
are duly met.
It is into many diversified businesses like motors, mutual funds and finance etc.
Thus there is huge potential in this company and hence it is being considered in
portfolio for investment purposes.
89
It can be clearly seen in the Chart 1 that the prices of Coal India has been falling
for some months and now it’s is good move to buy this stock.
Chart 2 shows the Net Profit and Net Sales where we can see that the Net Sales
are stable throughout the year but the Net Profit is fluctuating. This is because
coal is demanded at a particular period during a month.
Chart 3 shows the shareholding pattern where the maximum hold is with the
promoters.
The maximum stake with the promoters is the strength of a company and also is
bullish for the company.
Coal India came up with its IPO which had an all time high fund requirement
from general public and still the share were oversubscribed that time.
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Chapter-6
91
Findings of the study
Portfolio classification
Sectoral Allocation
Cigarettes
5% 10%
9% Pharmaceuticals
2% PSU Banks
12%
7% Private Banks
5% Computers - Software
Automobiles 4 wheelers
4%
Automobiles 2 & 3 wheelers
7%
11% Gas
Steel & Steel Products
15% Engineering
13%
Mining
Cash
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Portfolio BETA
Valiant investors trade aggressively by investing in high beta (high risk) stocks like realty,
metals etc. But the cautious ones should stick to quality stocks which are fundamentally
strong.
Cautious or long term investors however are cautioned to stay invested in good quality
sectors and selectively book profits.
This is the reason that I have suggested a Balanced Growth Fund to Angel Broking.
It is a fund for cautious investors who don’t want to play aggressively rather who want to
play safe with quality stocks.
It means that for every 100% change in CNX Nifty, there will be around
85% change in the fund that I have created.
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Portfolio CAPM
No matter how much we diversify our investments, it's impossible to get rid of all the risk.
As investors, we deserve a rate of return that compensates us for taking on risk.
The capital asset pricing model (CAPM) helps us to calculate investment risk and what
return on investment we should expect.
Risk free rate - Generally, return on government bonds, interest rates on fixed deposits
for one year, 365-day T-Bills, and so on serve as a good proxy for the risk free rate
prevailing in the market.
For the purpose of computation in the present study, risk-free rate was used as one of the
inputs to the capital asset pricing formula. The one-year term deposit rate of the State
Bank of India (SBI) was used as a proxy for the risk-free rate.
The term deposit rate of State Bank of India is 7.50-10%. While the domestic term
deposit rate of SBI for 1 year to less than 2 years in 8.75%.11
Beta of the portfolio - According to CAPM, beta is the only relevant measure of a stock's
risk.
It measures a stock's relativevolatility - that is, it shows how much the price of a
particular stock jumps up and down compared with how much the stock market as a
whole jumps up and down.
If a share price moves exactly in line with the market, then the stock's beta is 1.
11
https://www.sbi.co.in/user.htm?action=viewsection&id=0,16,384,385
94
My portfolio BETA is = 0.8516
Expected Market Return - The market rate of return is the return that an investor expects
from an investment in a market portfolio.
The annualized rate of return of the market over the years can be calculated in several
ways. The following procedure was used in this study.
The daily closing price of CNX NIFTY index from 1st May 2012 to 30th April 2013 was
taken and the logarithmic scale was used to get the daily rate of return.
The average of this value provides the average daily rate of return; multiplying this with
365 yields the average yearly rate of return.
This shows that by investing in the portfolio that I have created, an investor
can expect a return of 16.8231%.
This is a really good return in comparison to the normal return of 15% (at
the most) that one can expect from Equity Market.
12
http://nseindia.com/products/content/equities/indices/historical_index_data.htm
95
Portfolio Standard Deviation
The Standard Deviation is a measure of how spread out the prices or returns of asset are
on average. It is the most widely used risk indicator in the field of investing and finance.
A large standard deviation usually indicates that the data points are far from the mean and
a small standard deviation indicates that they are clustered closely around the mean.
13
http://www.macroaxis.com/invest/technicalIndicator/ITC.BO--Standard_Deviation
96
Portfolio Sharpe Ratio
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment
decisions or a result of excess risk.
This measurement is very useful because although one portfolio or fund can reap higher
returns than its peers, it is only a good investment if those higher returns do not come
with too much additional risk.
The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. A
negative Sharpe ratio indicates that a risk-less asset would perform better than the
security being analyzed.
Thus the value of my portfolio is 4.21389 and it shows the excess returns
that the investors can expect for the extra volatility they are exposed to by
holding a riskier asset.
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Angel Harmonized Ascend Fund
“A new Portfolio Product for Angel Broking”
98
Recommendations of the Study
Following are some of the recommendations of the study that is being carried on the
existing portfolio products of Angel Broking and on the basis of technical and
fundamental analysis giving a new product to Angel Broking, Ludhiana:-
Angel Broking can check out the performance and returns for 2- 3 years of the
portfolio that I have created and only after that I should of using this portfolio.
Angel Harmonized Ascend Fund is a product for all those investors who want
good returns but who are afraid of playing aggressively.
Angel Broking must look for the new product that I have suggested because my
focus was basically to judge the psyche of the people living in Ludhiana.
People in Ludhiana have a lot of money that they want to invest in stock market
but the only problem that they face is lack of awareness about stock market and
also lack of time.
Ludhiana Branch of Angel Broking should focus more on its portfolio products
instead of the simple demat account opening because of the psyche of the
population living in and near Ludhiana.
Portfolio Management Services according to me are more for such areas where
people have money but they either don’t have awareness or they don’t have time.
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Glossary
Benchmark The performance of a predetermined set of securities, for comparison
purposes. Such sets may be based on published indexes or may be customized to
suit an investment strategy.
Capital asset pricing model (CAPM) An economic theory that describes the
relationship between risk and
expected return, and serves as a model for the pricing of risky securities. The
CAPM asserts that the only risk that is priced by rational investors is systematic
risk, because that risk cannot be eliminated by diversification.
The CAPM says that the expected return of a security or a portfolio is equal to the
rate on a risk-free security plus a risk premium.
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Bibliography/ References
http://www.angelbroking.com/
www.nseindia.in
www.bseindia.in
www.rbi.ors.in
www.sbi.com
www.investopedia.com
www.investing.com
www.moneycontrol.com
http://investmentperformanceguy.blogspot.in/2012/01/making-sense-of-negative-
sharpe-ratios.html
http://www.aaii.com/computerizedinvesting/article/interpreting-the-sharpe-ratio
www.economictimes.com
http://www.money-zine.com/calculators/investment-calculators/capm-calculator/
http://articles.economictimes.indiatimes.com/2013-04-
22/news/38736159_1_corporate-bonds-10-year-bonds-yields
http://www.investopedia.com/search/default.aspx?q=expected%20market%20return
http://www.investopedia.com/ask/answers/11/cfa-031511.asp
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