CHAPTER – I

INTRODUCTION

1
 INTRODUCTION

Investment is the employment of funds with the aim of achieving additional income or
growth in value. The essential quality of an investment is that it involves ‘waiting’ for a reward.
It involves the commitment of resources which have been saved or put away from current
consumption in the hope that some benefits will accrue in future. The term ‘Investment’ does
not appear to be as simple as it has been defined. Investment has been further categorized by
financial experts and economists. It has also often been confused with the term speculation. The
following discussion will give an explanation of the various ways in which investment is related
or differentiated from the financial and economic sensex and how speculation differs from
investment. However, it must be clearly established that investment involves long-term
commitment.

On the other hand, the modern market place of Stock Markets, having well developed
risk management, transparent rules for entry and stringent regulation, is faceless. That the old
type system had to transform into a new is definitely clear they have played a very important role
in the past. In is merely that had to modern markets to keep up with the demand of the times.

Investment is the process of employing saved money in financial institutions with the
hope of gaining returns in the future. Investment management is the process of managing the
money employed in financial institutions with the hope of gaining positive returns. The financial
institutions are catalogued in a case known as an investment portfolio. An individual with saved
money may opt to invest it in financial institutions as a way of adding value to the money.
Investing for individuals involves identifying the sources of income for investment such as
savings and loans from others. The individual then comes up with investment objectives that will
guide his investment decisions. After the funds have been secured, the investor does a market
analysis to determine which the best investment opportunities available are for him. A market
analysis may be done through a “bottom top” approach or a “top bottom” approach. The “top
bottom approach” starts from a macroeconomic level of the market and works downwards
towards the different service sectors and industries, finishing with the specific corporate
institutions and their portfolio. Once at the corporate level, the investor can decide which
investments will afford better returns in the long run (Klammer 36).

2
 A competitive analysis is done by the potential investor to determine how his options
stand against the other investors. At this stage, the investor would find it advisable to come up
with a list of his investment methodology, investment system and investment philosophy. He
should also simultaneously provide for the improvement of the system, philosophy and
methodology through improved investment capital management and risk control as his
investments mature. A time line and milestones for the investment period should documented
and listed while also considering ways of measuring portfolio performance over the investment
period (Reichelstein 163).

3
 OBJECTIVES OF STUDY

 The project work was undertaken in order to have a reasonable understanding about the
investment industry. The project work includes knowing about the investment decisions
like equity, bond, real estate, gold and mutual fund. All investment decisions are
discussed with their types, workings and returns.

 To provide basic idea of different stock market investments.

 To study about various type of risk associated with various investment instruments.

 To study about P\E, P\BV and Beta that would help in selection of script and creation of
portfolio.

 To help investor in learning about investment in various segments.

4
 NEED FOR THE STUDY
 The main purpose of doing this project was to know about the investment and its
functions. It helps to know in detail the investments made right from its inception stage,
growth and future prospects.

 The project study was done to ascertain the investments made which would ultimately
help in understanding the benefits of investments to the investors

This research paper is an outcome of a case study of concept of the true for the
investment analysis as a whole. Resources available to the country any year can be
invested to produce goods and services over the next several years. If we accept the need
to apply a time valuation of money flows accruing in the future then we do not have to
look any further than the principles of compound growth (or compound interest) for
satisfactory arithmetical approach. We measure time in discrete units such as, years,
months, weeks in both directions from the present that is in past and future. When we
compound the growth of population, demand or accrued interest in a savings account, we
are looking to future growth and projecting forward the present when we discount we are
looking at the present value (or worth) of the future. This if we can expect to receive a
sum of money seven years ahead and wish to value this is in terms of a present value then
we reduce or discount the future valuation by some measure orate which reflects our
preference for money now rather than later to find the relevance of experience of the
financial analysts for significantly and effectively in developing investment risk reduction
and adaptation strategies’ is also brief discussed.

 To study about Investment Industry in India.

 To understand the various types of Investments available to the investor.

5
 SCOPE OF THE STUDY:

The business of investment has several facets, the employment of professional fund managers,
research (of individual assets and asset classes), dealing, settlement, marketing, internal auditing,
and the preparation of reports for clients. The largest financial fund managers are firms that
exhibit all the complexity their size demands. Apart from the people who bring in the money
(marketers) and the people who direct investment (the fund managers), there are compliance staff
(to ensure accord with legislative and regulatory constraints), internal auditors of various kinds
(to examine internal systems and controls), financial controllers (to account for the institutions'
own money and costs), computer experts, and "back office" employees (to track and record
transactions and fund valuations for up to thousands of clients per institution).

The present study has been undertaken to observe the risk and returns associated with few
selected stocks. The scope of the study consists of Company stocks from different sectors like
infrastructure, Pharmacy, Automobile, Power, Public Sector and Energy etc., the scope of the
study is confined to Companies.

6
 RESEARCH METHODOLOGY;

The present data is based upon Primary data and secondary data.

The primary data for the project regarding investment and various investment decisions
were collected through secondary data.

Secondary Source:

 Data collected from reports of the company

 Data collected from the publications of the company

 Data collected from journals, magazines and newspapers.

 Data collected from the reference books.

DATABASE: WEB SITES:

NSEindia.com, BSEindia.com, valueresearch.com, sharekhan.com

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 LIMITATIONS OF THE RESEARCH:

 The study is confined to the Indian stock markets.

 Study is limited selected companies and their portfolios.

 The data is collected from the secondary source.

 Time period is limited for the research so cannot be covered in all the dimensions.

 The time duration given to complete the report was not sufficient.

 The report is basically is made between the horizon of two months and the situation of

market is very dynamic so the conclusion or the return might not reflect the true picture.

 The study was limited to only six investment options.

 The data is compared and analyzed on the basis of performance of the investment options

over the past five years.

 While considering the returns from mutual funds only top performing schemes were

analyzed.

It was very difficult to obtain the date regarding the returns yielded by real estate and hence
averages were taken.

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 CHAPTER – II

REVIEW OF LITERATURE

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FUNDAMENTAL PRINCIPLES OF INVESTMENT STRATEGY:
-Stages in construction a portfolio

Suggestions for the fundamental stages in the construction of a portfolio for a particular
investor:-

1. Consideration of the individuals’ needs and circumstances of the investor.

2. Identification of the most important investment vehicle.
3. Identification of appropriate asset classes and sectors to be held within the selected
vehicles.
4. Assessment of the expected behavior of the portfolio over a given period of time.
5. Implementation, if the first four stages are considered appropriate.
6. Regular review of the portfolio to take account of the changing individual circumstances
and the performance of the constituents parts of the portfolio against the initial targets
and assumptions.

Identification of most appropriate investment vehicle

Selecting appropriate investment vehicles for an investor’s needs must bear in mind the ‘horses
for courses’ system so well accepted by horse race followers: a horse that consistently performs
well on one course may consistently under perform on the other race courses.
Investors have a number of investment needs and desires which may be fulfilled with different
investment vehicles however ascertainment of the appropriate investment vehicle for the investor
is the challenge.

INVESTMENT VEHICLES & ASSET CLASSES:

Investment asset classes cover the range of areas in which an investment may be made
either by direct purchase or indirectly through such collective investment schemes such as unit
trusts. The asset classes include equity, fixed-interest bond, and property. Investment vehicles
include unit trusts, pension funds and other such methods of investing in the asset classes.

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DETERMINING ACCOUNT OBJECTIVES:

The account administrator must determine the objectives of the account. This can be
accomplished through a combination of discussions with the settler and other interested parties,
as well as a review of the governing account instrument. In order to establish the account
objectives, the account administrator must first determine the specific income requirements and
needs of the account and/or the beneficiaries.
The account administrator must carefully consider the amount of income that the
beneficiaries need from the account. Although guidance for a specific amount may be found in
the governing instrument, most instruments simply provide that the beneficiaries should receive
income sufficient to maintain a standard of living to which they have grown accustomed or that
sufficient income be generated to meet the ascertainable standards of health, education,
maintenance and support. In order to determine this amount, the account administrator must be
aware of the beneficiary’s current financial condition, including the beneficiary’s current and
future expenses as well as income from other sources. Also important in determining the income
requirements are the interests of the remainder beneficiaries in preserving and increasing the
principal of the account. All this information must be weighted together and certain conclusions
reached which is then passed on to the portfolio manager to devise an investment strategy that
meets the needs of the account.

ASSET CLASSES:
The asset classes considered in this report are more on generalization per say rather than
specific consideration. These are classes which would be considered worth investing for any type
of corpus as well as type of client such as
Aggressive

Moderate

Defensive

The classes considered are as follows:

1) Mutual fund: This is considered as a safer option as compared to equity as discussed in
chapter 1. It also discusses the objective behind investing in mutual fund.

2) Insurance: Chapter 2 actually throws light on the principles of insurance along with the
various players in public and private sector.
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 3) Equity: Chapter 3 brings us to the most volatile and the most risky of all the
investments i.e. equity (stocks).

4) Commodity: Chapter 4 deals with investments in commodities such as gold which is

considered as long term investment.

5) Bonds: Chapter 5 is all about bonds as investments.

TYPES OF PORTFOLIOS:
To add a broader perspective to portfolio investment we have considered 3 types of
investors:

1) Aggressive: The type of portfolio constructed for an aggressive investor would include
majority of its investments into equities as shown.

2) Moderate: This type of portfolio would see a striking balance of investments between
equities, mutual funds, gold etc.

3) Defensive: This type of portfolio will have a stable return with minimum risk involved
with most of the investments in FD’s, bonds etc, however in our portfolio due to the high
risk free rates, the investments are diversified into equities across sectors.

We have also designed an ideal portfolio according to our analysis and the industry feedback
that we received after the surveys and interviews. The ideal portfolio is modeled on the
aggressive portfolio due to high rewards and sustainable risk.

The basic idea of the report is to communicate the basis on which portfolio is built
considering various factors such as; risk appetite, desired returns, key players involved behind
constructing a portfolio, market fluctuations, calculation of returns and finally zeroing on the
optimum portfolio. Thus there are 4 portfolios been designed and the last portfolio is the ideal
one according to the analysis, surveys and industry opinion.

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ASSET CLASS:

MUTUAL FUND

The simplest of the definition that could be ever given for a mutual fund would
be “A vehicle for investing in stocks and bonds”. It is not an alternative option to stocks and
bonds, but it pools the money of several investors and invests in stocks, bonds, money market
instruments and other types of securities. Buying a mutual fund is like buying a small slice of 16
inch pizza. The owner of mutual fund unit gets a proportional share of funds gains, losses income
and expenses.
Each mutual fund has a stated objective. The objective of the fund would be laid out in
fund’s prospectus. This is a legal document that contains information about the fund, its history,
its officers and its performance.

Fund Objective what the fund will invest in

Equity (Growth) Only in stocks
Debt (Income) Only in fixed-income securities
Money Market (including Gilt) in short-term money market instruments (including
government securities)
Balanced partly in stocks and partly in fixed-income securities, in order to maintain a 'balance' in
returns and risk

Who manages the mutual fund?

The fund is managed by Asset Management Company (AMC). This is defined as a
company that clubs together a mutual fund. An AMC may have several mutual fund schemes
with similar or varied objectives.

It hires a professional money manager, who buys and sells securities in line with the
funds stated objective. All AMC’s are regulated by SEBI and the funds are governed by boards
of directors. The SEBI mutual fund regulations require that the fund’s objective be clearly spelt
in the fund’s prospectus. In addition, every mutual fund has a board of directors that is supposed
to represent the shareholders’ interests, rather than the AMC’s.

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Benefits of investing in Mutual funds:
Professional Money Management

Fund managers are responsible for implementing a consistent strategy that reflects the
goal of the fund. They monitor the market and economic trends and analyze securities in
order to help the clients take accurate and satisfactory decisions about their investments.
Diversification

This is one of the best ways to reduce risk. Mutual fund provides an opportunity to
investors to invests across assets and diversify depending on their investments needs.

Liquidity

Investors can sell their mutual fund on any business day and receive the current market
value on their investments within a short period of time (within 3 to 5 days).

Affordability

The minimum initial investment for a mutual fund is fairly low for most of the funds
(as low as Rs. 500 for some schemes).

Mutual funds are liable to special set of regulatory, accounting and tax rules. Unlike most
other types of business entities, they are not taxed on their income as long as they distribute
substantially all of it to their shareholders. Also the type of income they earn is often unchanged
as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond
income are also tax-free to the shareholder. Taxable distributions can be either ordinary income
or capital gains, depending on how the fund earned those distributions.

NET ASSET VALUE:

The Net Asset Value or NAV is the current market value of fund’s holdings, usually
expressed as per-share amount. For most funds the NAV is determined daily, after the close of
trading on some specific financial exchange. This is not a thumb rule to be followed. Some funds
update it multiple times days during the trading day. In case of open-end funds the shares are
sold and redeemed at NAV so the orders are processed only after the NAV is determined. Close
end-funds may trade at a price a higher or lower than the NAV; this is know as premium or
14
discount, respectively. If a fund is divided into multiple classes of shares, each class will
typically have its own NAV, reflecting differences in fees and expenses paid by different classes.

Some mutual funds own securities which are not regularly traded on any formal exchange.
These may be shares in very small or bankrupt companies; they may be derivatives; or may be
private investments in unregistered financial instruments. In the absence of public market for
these companies, it is responsibility of the fund manager to form an estimate of their value when
computing their NAV. How much of a fund may be invested in such securities is stated in fund’s
prospectus.

TYPES OF MUTUAL FUND

Open end-funds.
Close end-funds.
Exchange traded funds.
Equity funds.
Growth funds.
Value funds.
Index funds.
Active management funds.
Bond funds.
Money market funds.
Funds of funds.
Hedge funds.

PLANS:
Fixed income plans (FMPS).
Gold exchange traded funds.
Systematic investment plans (SIP).
Monthly income plans
Equity linked saving scheme.

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INSURANCE:

Insurance could be defined both in law and economics as “form of risk management
primarily used to hedge against the risk of a contingent loss.” It is also defined as “equitable
transfer of the risk of a potential loss, from one entity to another, in exchange for the premium.”

Insurer is the company that sells the insurance. Insurance rate is a factor used to determine
the amount, a called the premium, to be charged for a certain amount of insurance coverage.

PRINCIPLES OF INSURANCE:

Commercially insurable risks typically share 7 common characteristics.

1) A large number of homogeneous exposure units.

2) Definite loss.

3) Accidental loss.

4) Large loss.

5) Affordable premium.

6) Calculable loss.

7) Limited risk of catastrophically large losses.

INSURER’S BUSINESS MODEL

Profit = Earned premium + investment income – incurred loss – underwriting

Expenses.
Life and general insurance in India is still a nascent sector with huge potential for various
global players with the life insurance premiums accounting to 2.5% of the country’s GDP while
general insurance premiums to 0.65% of India’s GDP. The insurance sector in India has gone
through a number of phases and changes, particularly in the recent years, when the govt. in 1999
opened up the insurance sector by allowing the private companies to solicit insurance and also

16
the allowing FDI up to 26%. Ever since, the Indian insurance sector is considered as a booming
market with every global insurance company wanting to have a lion’s share. Currently the largest
life insurance company is still owned by the government.

EQUITY

Stock market can be viewed as a market for trading of company stock and derivatives of
the same. Both these securities are listed on stock exchange as well as those only traded
privately.

EQUITY INVESTMENT:

This generally refers to buying and selling or of holding of shares of stock market. This
activity could be carried out by individuals as well as firms and funds in anticipation of income
from dividends capital gain as the value of stock rises.

When the investment is in infant companies, it is referred to as venture capital investing

and is generally understood to be higher risk than investment in listed going-concern situations.

DIRECT HOLDINGS AND POOLED FUNDS:

The equities held by private individuals are often held via mutual funds or other forms of
pooled investment vehicle, many of which have quoted prices that are listed in financial
newspapers and magazine. The mutual funds are typically managed by prominent fund
management firms (e.g. Fidelity or Vanguard)5

PROS

Access to professional investor skills and obtaining diversification of holdings.

Regular written reports.
Dividend payments.
CONS
Fees payable to the manager at entry, annually and exit.
Over diversify.
Huge costs as compared to dividends.

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COMMODITY
It can be defined as something that could be traded relatively easily. Also it can be
physically delivered and could be stored for a reasonable period of time. It is characteristic of
commodities that the prices are determined on the basis of an active market, rather than by
supplier on cost-plus basis.

TYPES;
Mineral products.
Agricultural products.
Iron ore
Crude oil
Ethanol
Sugar
Coffee
Aluminum
Rice
Wheat
Gold
Diamonds
Silver
Personalized computers

GOLD INVESTMENT IN INDIA

“Until 1990, the Gold Control Act forbade the private holding of gold bars in India.
There was physical investment in smuggled ten tola bars, but it was limited and often amounted
to keeping a few bars ready to be made into jewellery for a family wedding. Gold investment
essentially was in 22 carat jeweler.

Since 1990, investment in small bars, both imported ten tulas and locally-made small
bars, which have proliferated from local refineries, has increased substantially. GFMS estimate
that investment has exceeded 100 tones (3.2 million oz) in some years, although it is hard to
segregate true investment from stocks held by the 16,000 or more gold dealers spread across

18
India. Certainly gold has been used to conceal wealth, especially during the mid-1990s, when the
local rupee price increased steadily. It was also augmented in 1998 when over 40 tonnes (1.3
million oz) of gold from bonds originally issued by the RBI were restituted to the public.

In the cities, however, gold has to compete with the stock market, investment in internet
industries, and a wide range of consumer goods. In the rural areas 22 carat jewellery remains the
basic investment.

THE GOLD DEPOSIT SCHEME

The government announced a new initiative in its 1999/2000 budget to tap the hoard of
private gold in India by permitting commercial banks to take gold deposits of bars, coins or
jewellery against payment of interest. Interest levels can be set by each bank, and deposits must
be for three to seven years. Interest and any capital gains on the gold will be exempt from tax.
The banks can lend the gold to local fabricators or sell it in the Indian market or to local banks.
However, the depositor has to declare the origin of the gold; so that metal bought illegally to hide
wealth cannot be deposited. The SBI was the first to accept deposits. To date, the amount of gold
collected under this scheme (less than 10 tones or 0.32 million oz) has fallen well short of the
100 tones (3.2 million oz) that was mentioned when it was launched”.7

BONDS

It is a fixed income (debt) instrument issued for a period of more than 1 yr with the
purpose of raising capital. The central or state government, corporations and similar institutions
sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest
on a specified date, the maturity date.
Bond is negotiable certificate indebtedness. It is normally unsecured. A debt security is
generally issued by a company, municipality or government agency. A bond investor lends
money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified
maturity date. The issuer usually pays the bond holder periodic interest payments over the life of
the loan.

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TYPES OF BOND
ZERO COUPON BONDS: Bond issued at a discount and repaid at a face value. No
periodic interest is paid. The difference between the issue price and redemption price
represents the return to the holder. The buyer of these bonds receives only one payment, at
the maturity of the bond.

CONVERTIBLE BONDS: A bond giving the investor the option to convert the bond into
equity at a fixed conversion price.

TREASURY BILLS: Short-term (up to 1 yr) bearer discount security issued by

government as a means of financing their cash requirements.

THE CONCEPT OF RISK & RETURNS

The primary objective of any investor is to maximize his returns and minimize his risk
from his investments, subject to various constraints, of course. Return is a kind of motivation,
inspiring the investor in the form of rewards, for undertaking the investment. The importance of
returns in any investment decision can be traced to the following factors:
It enables investors to compare alternative investments in terms of what they have to offer
the investor.

Measurement of historical returns enables the investors to assess how well they have done.

Measurement of past returns also helps in estimation of future returns.

This reveals that there are 2 types of returns:

1) Realized or Historical returns

2) Expected returns.

REALIZED RETURNS

This is ex-post (after the fact) return, or return that was or could have been
earned. For example, a deposit of Rs. 1000/- in a bank on Jan 1, at a stated annual interest
rate of 10% will be worth Rs 1,100 exactly a yr later. The historical or realized return in this
case is 10%.
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 EXPECTED RETURNS

This is the return from an asset that investor anticipate or expect to earn over
some future period. The expected return is subject to uncertainty or risk and may or may
not occur. The investor compensates for the uncertainty in returns and the timing of those
returns by requiring an expected return is sufficiently high to offset the risk or
uncertainty.

COMPONENTS OF RETURN
What constitutes the return on any investment? Return is basically made up of 2
components:
The periodic cash receipts or income on the investment in the form of interest, dividends, etc.
The term yield is often used in connection with this component of return. Yield refers to the
income derived from a security in relation to its price, usually its purchase price. For
example, the yield on a 10% bond at a purchase price of Rs. 900 is 11.11%.

The appreciation (depreciation) in price of the asset is referred to as capital gain (loss). This
is the difference between the purchase price and the price at which the asset can be sold.

Many investors have capital gains as their primary objective and expect this component to be
larger than the income component.

MEASURING THE RATE OF RETURN

The rate of return is the total return the investor receives during the holiday period stated as a
percentage of the purchase price of the investment at the beginning of the holding period. In
other words, it is the income from the security in the form of cash flows and the difference in
price of the security between the holding periods expressed as percentage of purchase price of
the security at the beginning of the holding period.

The general equation for calculating the rate of return is shown below:

k = Dt + (Pt - Pt-1)
Pt-1

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Where, k = Rate of return
Pt = Price of the security at time‘t’ i.e. at the end of the holding
Period.
Pt-1 = Price of the security at time‘t-1’ i.e. at the beginning of the
Holding period or purchase price.
Dt = Income or cash flows receivable from the security at time‘t’.

Rates of return are usually stated at an annual percentage rate to allow comparison of returns
between securities. Let us first look at the calculation of rate of return of an equity stock then a
bond.

STOCK’S RATE OF RETURN

What are 2 components of return from shares? The first component “Dt” is the income in
cash from dividends and the second component is the price change (appreciation and
depreciation).

Illustration 1: If a share of ACC is purchased for Rs. 3,850 on FEB 8 of last yr and
sold for Rs, 3800 on FEB 9 of this yr and the company paid a dividend of Rs.35 for the
year, how do we calculate the rate of return?

k = 35 + (3800-3580) / 3580 = 7.12%

RATE OF RETURN OF BOND

In the case of bonds, instead of dividends, the investor is entitled to payments of interest
annually or semi-annually, based on the coupon rate. The investor also benefits if there is an
appreciation on the price of the bond.

PROBABILITIES AND RATES OF RETURNS

What are probabilities? A probability is a number that describes the chances of an event
taking place. Probabilities are governed by 5 rules and range from 0 to 1.
A probability can never be larger than 1. In other words maximum probability of an event
taking place is 100%.
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 The sum total of probabilities must be equal to 1.

A probability can never be a negative number.

If an outcome is certain to occur, it is assigned a probability of 1, while impossible outcomes

are assigned a probability of 0.

The possible outcomes must be mutually exclusive and collectively exhaustive.

How does probability affect the rate of return? In a world of uncertainty, the expected
return may or may materialize. In such situation, the expected rate of return for any asset is the
weighted average rate of return using the probability of each rate of return as the weight.

The expected rate of return ‘k’ is calculated by summing the products of rates of return
and their respective probabilities. This can be mathematically stated as follows:

k = ∑ i=1 to n Pi ki
Where,
k = Expected rate of return.
Pi = probability associated with the ith possible outcome.
ki = rate of return from the ith possible outcome.
n = number of possible outcomes.

RISK
Risk and return go hand in hand in investments and finance. One cannot talk about
returns without talking about risk, because, investments decisions always involve a trade-off
between risk and return. Risk can be defined as “the chance that the actual outcome from an
investment will differ from the experienced outcome”. This means that, the more variable the
possible outcomes that can occur, the greater the risk.

MEASUREMENT OF TOTAL RISK

Risk is associated with the dispersion in the likely outcomes. Dispersion refers to
variability. If an asset’s returns have no variability, it has no risk. An investor analyzing series of
returns on an investment over a period of years needs to know something about the variability of

23
its returns or in other words the asset’s total risk. There are different ways to measure variability
of returns.

The Range of the returns, i.e. the difference ways between the highest possible rate of
return and the lowest possible rate of return is one measure, but range is based on only 2 extreme
values.

The Variance of an asset’s rate can be found as the sum of the squared deviation of
each possible rate of return from the expected rate of return multiplied by the probability that the
rate of return occurs.

VAR (k) = ∑i=1 to n Pi (ki – k )2

Where, VAR(k) = Variance of returns
Pi = Probability associated with the ith possible outcome
ki = rate of return from ith possible outcome.
k = expected rate of return
n = number of years.

A third and most popular way of measuring variability of returns is standard deviation.
The standard deviation denoted by sigma is simply the square root of variance of the rates of
return

Sigma = √VAR (k) = [∑i=1 to n Pi (ki – k)2]1/2

The standard deviation and variance are conceptually equivalent quantitative measures of total
risk. Standard deviation is preferred to range because of the following advantages.

Unlike the range, standard deviation considers every possible event and assigns each a
weight equal to its probability.

Standard deviation is a very familiar concept and many calculators and computers are
programmed to calculate it.

24
 Standard deviation is a measure of dispersion around the expected value. This is in absolute
consensus with the definition of risk as “variability of returns”.

Standard deviation is obtained as the square root of squared differences multiplied by their
probabilities. This facilitates comparison of risk as measured by standard deviation and
expected returns as both are measured in the same costs. This is why standard deviation is
preferred to variance as a measure of risk.

DIVERSIFIABLE AND NON-DIVERSIFIABLE RISK:

The fact returns on stocks do not move in perfect tandem means that risk can be reduced
by diversification. But the fact that there is some positive correlation means that in practice risk
can never be reduced to zero. So, there is a limit on the amount of risk that can be reduced
through diversification. This can be traced to 2 major reasons.

Degree of correlation

The amount of risk reduction depends on the degree of positive correlation between
stocks. The lower the degree of positive correlation, the greater is the amount of risk reduction
that is possible.

The number of stocks in the portfolio

The amount of risk reduction achieved by diversification also depends on the number of
stocks in the portfolio. As the number of stocks increases, the diversifying effect of each
additional stock diminishes as shown in figure below.
The following illustration explains the above:-

25
 Risk
Total risk portfolio

Diversifiable

Non-diversifiable

1 2 3 4 5 6 7 8 910 11 12 13 14 15 16 17 18 19 20
Number of securities in the portfolio

As the figure indicates, the major benefits of diversification are obtained with the 1 st 10 to 12
stocks, provided they are drawn from industries that are not closely related. Additions to the
portfolio beyond this point continue to reduce total risk but benefits are diminishing.

From the figure it is also apparent that it is the diversifiable risk that is being reduced
unlike the non-diversifiable risk which remains constant whatever your portfolio is. What are
diversifiable or non-diversifiable risks? The risk of any individual stock can be separated into 2
components:
Diversifiable risk

Non-diversifiable risk.

Non-diversifiable is that type of risk that is related to general economy or the stock
market as a whole and hence cannot be eliminated by diversification. These are also referred to
as market risk or systematic risk.

26
FACTORS DETERMINING NON-DIVERSIFIABLE RISK

Major changes in tax rates

War and calamities
An increase or decrease in inflation rates
A change in economic policy
Industrial recession
An increase in international oil prices, etc.

FACTORS DETERMINING DIVERSIFIABLE RISK

Company strike
Bankruptcy of a major supplier
Death of a key company officer
Unexpected entry of new competitor into the market etc.

27
 CHAPTER III
THE INDUSTRY AND COMPANY
PROFILE

28
 INDUSTRY PROFILE

Investment options are contracts that permit the investor the right to sell or buy shares of
securities at specified prices before a specified date. It is an option since the investor has the
choice of honoring the contract or otherwise. There are two types of investment options which
include the “put” and the “call” option. A call option is an opportunity for an investor to
purchase a stock at a specified price before a specified date. The option premium is the price at
which an investor buys the Call option if he decides to honor the contract. Buying a call option is
like making a deposit in that you are allowed to purchase the stock at a price known as the strike
price. If the investor decides not to use the purchased stock option they can get a refund, the
same as in making a deposit, although the amount will be less the option premium (Options
Trading Strategies).

A Put option is the opposite of a call option in that it enables the investor to sell a stock
before a specified date. While Call options resemble deposits, Put options resemble insurance
policies. The Put option insures the investor by allowing him to affix a selling price for a stock
asset. Put options enables an investor to sell his stock asset at a fixed price at a later date without
the risk of his asset devaluing. In case the asset increases in value, he does not suffer any losses.
When this happens then the investor does not have to exercise his right on the Put option. Once
again all he has to pay is the option premium. Options are therefore ways of ensuring that the
investor is protected from any risk that may arise from dealing in the stock market (Options
Trading Strategies).

There are different strategies that can be employed in dealing with options depending on
the nature of the stock market. Both the Put and the Call options are available to the investor
whether the stock market is bullish or bearish. In a bullish market, the investor will find it
advisable to trade in Call options. This is because in a bullish market the stock asset is expected
to rise and therefore the investor would reap maximum benefits if he were to trade in Call
options. It is more prudent for the investor to have the option of purchasing a stock asset at a
specified price since this makes it possible for him to sell the same stock asset at a higher price
later on. The return on investment in a bullish market when an investor buys a Call option is
virtually limitless. On the other hand, if the market price of the stock asset were to reduce
drastically, the investor is not under any obligation to exercise his Call option and can reclaim
his paid amount less the call premium. This makes the Call option less of a risk when dealing in

29
a bullish market. In a bullish market, an investor can also purchase Put options. Put options,
unlike Call options, in a bullish market mean limited profitability on the stock asset. On the other
hand, the losses in trading Put options in a bullish market would be limitless. This is because the
investor is obligated to buy the stock asset if the put option follows through (Options Trading
Strategies).

In a bearish market, an investor can trade in both the Put and the Call options. When an
investor buys a Put option in a bearish market, his expectation would be that the market would
fall and therefore the value of his Put options would rise. Buying Put options in a bearish market
enables an investor would be able to decide whether to sell the asset at the stated price. In a
bearish market which is falling, this option is preferable to having to buy the asset at an increased
price. By buying the Put option, the investor stands a high chance of achieving unlimited returns
should the market fall. The lower the market falls the higher the returns that the investor would
accrue. On the other hand, if the market were to rise, the investor’s potential losses would be
limited to the premium to be paid on the Put option. For the investor who is pessimistic of the
stock market and expects a fall in the market prices, going short on a Call option would be an
ideal alternative to the Put option. The investor goes short on a Call option since he intends to
buy it back later (Options Trading Strategies).

A volatile market does not provide the certainty that he bearish and bullish markets
provides for investors. In a volatile market, a movement is expected but the investor is unsure
whether the move is going to be upwards or downwards. Either movement provides
opportunities for the investor to make profits. Straddles are one of the strategies that an investor
may employ in the trading of stock options in a volatile market. A straddle involves buying two
similar options, each of which is a Call and a Put option. Buying a straddle is to buy a Put and
Call option with the same expiration date and exercise price and vice versa for selling a straddle.
A straddle enables the investor to make returns in case the market turns out to be bullish or
bearish in the end. In either case the investor would exercise whichever of his options that would
be appropriate for the nature of the market. In a bearish market, the Put option while in a bullish
market the investor would exercise the Call option. This insulates the investor from losses and
ensures that the profitability of his options is unlimited. If the market does not rise nor fall, then
the investor only loses the premiums of the Call and Put option (Options Trading Strategies).

30
 In a stable market, a strangle is the best strategy for an investor. A strangle is the same as
the Put and Call options other than the fact that both options have different exercise prices.
Purchasing a strangle involves buying a Put and Call option with different exercise prices but the
same date of expiry (Options Trading Strategies).

INVESTMENT DECISION MAKING

Investment Management involves correct decision-making. As referred to earlier any

investment is risky and as such investment decision is difficult to make. Investment decision is
based on availability of money and information on the economy, industry and company and the
share prices ruling and expectations of the market and of the companies in question.

INVESTMENT MANAGEMENT

In the stock market parlance, investment decision refers to making a decision regarding
the buy and sell orders. As referred to already, these decisions are influenced by availability of
money and flow of information. What to buy and sell will also depend on the fair value of a
share and the extent of over valuation and under valuation and more important expectation
regarding them. For making such a decision the common investors may have to depend more
upon a study of fundamentals rather than technician’s, although technical are more important.
Besides, even genuine investors have to guard themselves against wrong timing regarding both
buy and sell decisions.
Its is necessary for a common investor to study the Balance Sheet and Annual Report of
the company or analysis the quarterly and half yearly results of the company and decide on
whether to buy that company’s shares or not. This is called fundamental analysis, and then
decision-making becomes scientific and rational. The likelihood of high-risk scenario will come
down to a low risk scenario and long-term investors will not lose.

CRITERIA FOR INVESTMENT DECISION:

Firstly, the investment decision depends on the mood of the market. As per the empirical
studies, share prices depends on the fundaments for the company only to the extent of 50% and
the rest is decided the mood of the market and the expectations of the company’s performance
and its share price. These expectations depend on the analyst’s ability to foresee and forecast the

31
future performance of the company. For price paid for a share at present depends on the flow of
returns in future, expected from the company.
Secondly and following from the above, decision to invest will be based on the past
performance, present working and the future expectations of the company’s performance, both
operationally and financially. These in turn will influence the share prices.
Thirdly, investment decision depends on the investor’s perception on whether the present
share price is fair, overvalued or undervalued. If the share price is fair he will hold it (Hold
Decision) if it is overvalued, he will sell it (sell Decision) and if it is undervalued, he will buy it
(Buy Decision). These are general rules, but exceptions may be there. Thus even when prices are
rising, some investors may buy as their expectations of further rise may outweigh their
conception of overvaluation. That means, the concepts of over valuation or under valuation are
relative to time, space and man. What may be overvalued a little while ago has become
undervalued following later developments; information or sentiment and mood may change the
whole market scenario and of the valuation of shares. There are two more decisions, namely,
Average up and average down of prices.
The investment decision may also depend on the investor’s preferences, moods, or
fancies. Thus an investor may go on a spending spree and invest in cats and dogs of companies,
if he has taken a fancy or he is flooded with money from lottery or prizes. A rational investor
would however make investment decisions on scientific study of the fundamentals of the
company and in a planned manner.
At present, investors mostly depend on hearsay an advice of friends, relatives, sub
brokers, etc for the investment decision, but not on any scientific study of the company’s
fundamentals. In view of the increasing mushroom growth of companies and lack of any track
record of many promoters, investment decision making became on hunches, hearsay etc.

RISK AND INVESTMENT:

Stock Market investment is risky and there are different types of investments, namely
equity, fixed deposits, debentures etc. Diversifying investment into 10 to 15 companies can
reduce company specific risk also called unsystematic risk. But the systematic risk relating to the
market cannot be reduced but can be managed by choosing companies with that much risk (high
or low) that the investor can bear.

32
INVESTMENT OBJECTIVES:

1) The first basic objective of investment is the return on it or yields. The yields are
higher, the higher is the risk taken by investors.
The risk less return is bank deposit rate of 9% at present or Bank rate of 6%. Here the risk is least
as funds are safe and returns are certain.
2) Secondly, each investor has his own asset preferences and choice of investments.
Thus some risk adverse operators put their funds in bank or post office deposits or
deposits/certificates with co-operatives and PSU’s. Some invest in real estate; land and building
while other invest mostly in gold, silver and other precious stones, diamonds etc.

3) Thirdly, every investor aims at providing for minimum comforts of house furniture,
vehicles, consumer durables and other household requirements. After satisfying these minimum
needs, he plans for his income, saving in insurance (LIC and GIC etc.) pension and provident
funds etc. In the choice of these, the return is subordinated to the needs of the investor.

4) Lastly, after satisfying all the needs and requirements, the rest of the savings would be
invested in financial assets, which will give him future incomes and capital appreciation so as to
improve his future standard of living. These may be in stock/capital market investments.

QUALITIES FOR SUCCESSFUL INVESTING

 Contrary thinking
 Patience
 Composure
 Flexibility and
 Openness

GUIDELINES FOR EQUITY INVESTMENT

Equity shares are characterized by price fluctuations, which can produce substantial gains
or inflict severe loses. Given the volatility and dynamism of the stock market, investor requires
grater competence and skill along with a touch of good luck too-to invest in equity shares. Here
are some general guidelines to play to equity game, irrespective of whether you are aggressive or
conservative.

33
  Adopt a suitable formula plan
 Establish value anchors
 Asses market psychology
 Combine fundamental and technical analysis
 Diversify sensibly
 Periodical review and revise your portfolio

STOCK ANALYSIS
The chief goal of trading in a stock exchange is to make money. This goal is not achieved
by many investors since they do not have the capabilities of analyzing the stock markets and
coming up with effective strategies that will ensure maximum returns (Cherry 30). During the
bullish season, almost all investors make money from trading in stocks. In the bearish season, the
stocks usually plummet and the investors incur losses. The analysis of stocks is a skill that can be
considered an art form. A prudent investor needs to imbibe the tools of analysis available to him
in order to take full advantage of the stock market opportunities, which are usually latent. Being
a good analyzer of stocks does not require an advanced college degree but requires that an
individual be well versed in the tools of analyzing stocks. These tools include common sense,
good trading skills, good mathematical skills and ability to keep track of historical events. Any
investor wishing to become good at analyzing stocks needs to be emotionally detached from the
stocks he is investing in since emotions can blur an individual’s vision and lead to bad decisions.

Common sense enables an investor to let go of his emotional attachments to his stocks and think
objectively about his investments. Objectivity is important for identifying stocks worth trading
in. A good knowledge of the trading history of a company can make the difference between a
good and bad investment. Companies who have historically incurred losses will be potentially
risky investments. A history of a company’s performance can liberate an investor from the
uncertainty of rumors and guess work and put him in the driver’s seat of his investment portfolio.
Knowledge about the stock market dynamics can minimize the perceived risk of an investment
and allow you to make high return investments that most investors try to avoid. Knowledge
about the sentiments of investors and what excites these sentiments is invaluable in stock trading.
An investor’s analyzing techniques can benefit from knowing why and how investors respond to
changes in the stock market, political scene and other factors that influence their trading
decision-making (Carr, Kolehmainen and Mitchell 172).

34
BOND ANALYSIS
Bonds, just as stocks, fluctuate on a daily basis and therefore an understanding of how
they fluctuate can help an investor to maximize on his investments. Returns on a bond can be
measured with the aid of the yield. Yield is calculated by dividing the coupon amount with the
price. The fluctuations in prices are directly proportional to the yield. The yield to maturity is a
calculation that enables the investor to know how much return on investment he would accrue if
he held the bond to maturity. The yield to maturity calculation is more accurate and reliable in
analyzing bonds. The yield to maturity enables an investor to make comparisons between
different coupons and maturity. In analyzing the bonds, the important factor to note is that yield
decreases when the price increases and vice versa. The characteristics that play a crucial role in a
bond’s price and therefore yield include maturity, face values and issuers. The most important
influential factor in the price of a bond is the economic interest rates. Increase in interest rates
causes bonds currently in the market to fall, raising the yield of bonds issued earlier and putting
them in the same price range with the bonds being currently issued. The converse is true when
interest rates decrease (Reilly and Brown 153).

MUTUAL FUNDS
Mutual funds are investment companies managed by professionals who “pool” money
from different individuals and collectively invest it in diverse securities. Mutual funds allow
individual investors to make investments that could only have been made by very wealthy
individuals or organizations. This means that the individual is able to benefit from the many
advantages that come from diversifying the investment portfolio and spreading the risk of
investment (Ackerman 343). The investment objectives set by the owners of the funds acts as a
guide on the type of investments that the manager should make. An investor willing to join a
mutual fund will also be guided by the investment objectives of the funds in which he hopes to
invest in. There are many different types of mutual funds depending on the investment objectives
and these include growth funds, income funds, and money market funds. One way an investor
can benefit from investment funds is to wait for the value of held stocks to rise and then sell
them for a profit. Capital gains are another way in which investors can make profits from their
investments. Capital gains are the gains that the mutual funds accrue from the sale of a security
for a selling price that was higher than the buying price. Another way of benefitting from mutual
funds is through interest or dividends that are disbursed annually.

35
 COMPANY PROFILE

Karvy Stock Broking Ltd is India’s leading Stock Broking House, it ranks among top 5
Depositary Participants in India, with the huge network of over 500 branches in 375 locations
across India and overseas at Dubai, executes 150,000+ trades in NSE/BSE. Karvy introduces
Karvy Fortune, a Partnership/Association concept to provide trade execution facilities for cash as
well as derivatives, on BSE.
Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely
towards attaining diverse goals of the customer through varied services. Creating a plethora of
opportunities for the customer by opening up investment vistas backed by research-based
advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping
the customer create waves in his portfolio and empowering the investor completely is the
ultimate goal.
It is an undisputed fact that the stock market is unpredictable and yet enjoys a high
success rate as a wealth management and wealth accumulation option. The difference between
unpredictability and a safety anchor in the market is provided by in-depth knowledge of market
functioning and changing trends, planning with foresight and choosing ones options with care.
This is what we provide in our Stock Broking services. We offer services that are beyond just a
medium for buying and selling stocks and shares. Instead we provide services which are multi
dimensional and multi-focused in their scope. There are several advantages in utilizing our Stock
Broking services, which are the reasons why it is one of the best in the country.
Having emerged as a leader in the registry business, the first of the businesses that we
ventured into, we have now transferred this business into a joint venture with Computershare
Limited of Australia, the world’s largest registrar. With the advent of depositories in the Indian
capital market and the relationships that we have created in the registry business, we believe that
we were best positioned to venture into this activity as a Depository Participant. We were one of
the early entrants registered as Depository Participant with NSDL (National Securities
Depository Limited), the first Depository in the country and then with CDSL (Central Depository
Services Limited). Today, we service over 6 lakhs customer accounts in this business spread
across over 250 cities/towns in India and are ranked amongst the largest Depository Participants
in the country. With a growing secondary market presence, we have transferred this business to
Karvy Stock Broking Limited (KSBL), our associate and a member of NSE, BSE and HSE.

36
KARVY – BACKGROUND:

In 1982, a group of Hyderabad –based practicing Chartered Accountants started Karvy

Consultants Limited with a capital of Rs. 1,50,000 offering auditing and taxation services
initially. Later, it forayed into the Registrar and Share Transfer activities and subsequently into
financial services. All along, Karvy’s strong work ethic and professional background leveraged
with Information Technology enabled it to deliver quality to the individual.

A decade of commitment, professional integrity and vision helped Karvy achieve a

leadership position. In its field when it handled the largest number of issues ever handled in the
history of the Indian stock Market in a year. Thereafter, Karvy made inroads into a host of
capital-market services, - corporate and Retail – which proved to be a sound business synergy.

Today, Karvy has access to millions of Indian shareholders, besides companies, banks,
financial institutions and regulatory agencies. Over the past one and half decades, Karvy has
evolved as a veritable link between Industry, finance and people. In January 1998, Karvy
became the first Depository Participant in Andhra Pradesh. An ISO 9002 company, Karvy’s
commitment to quality and retail reach has made it an integrated Financial Services Company.

CORE VALUES:
Karvy’s adherence to its core values – integrity, enterprise and innovation has earned it
an enviable reputation amongst all the intermediaries and regulatory authorities of the capital and
financial markets.
Karvy capability has now been extended service global customers. The foray into global
processing services began in 1999 to cater to health care industry needs. The first step Medical
Transcription a service then required capability in understanding a customer’s voice, conversion
to text with timeliness and accuracy and completion to a legally acceptable framework will now
provide its service globally.

37
VISION:
Karvy’s aspiration of establishing itself as an integrated financial services company is
propelled by a vision that is shared by its entire work force. Towards this end, Karvy has
dedicated itself to:
 To have a single minded focus on investor services;
 To establish Karvy as a household name for financial services;
 To set industry standards;
 To establish a leadership position in all chosen areas of business.

KARVY’S PHILOSOPHY:
Karvy’s core activities provide insights into the reasons for its consistent, positive
performance.
 Assistance beyond service
 Leadership through Quality
 Innovation & Market Creation
 Relationship Building
 Integrity & Transparency

KARVY’S COMPETITIVE EDGE:

 Human Resources
 Training
 Technology
 Software
 Mailroom

38
RANGE OF SERVICES
 Issue Servicing
 Corporate Shareholder Servicing
 Mutual Fund Investor Service
 Asset Financing
 Merchant Banking & Underwriting Services
 Corporate Advisory Financing & Project Financing
 Retail Financial Products
 Karvy Depositor Services
 Electronic Custodial Services
 Depository Participant
 Investor Services
 Karvy - The OTCEI Dealer
 Medical Transcription
 Financial Products Marketed Through Karvy:
 Initial Public Offerings
 Fixed Income Products
 Fixed Deposits
 Debt Instruments
 Bonds
 Mutual Funds
 Tax Saving Schemes

 Personal Banking Products

 Personal Loans & insurance

GROUP COMPANIES & DIVISIONS:

 KARVY CONSULTANTS LIMITED: Deals in Registrar and Investment Services

39
 KARVY STOCK BROKING LIMITED: Deals in buying and selling equity shares and
debentures on the National Stock Exchange (NSE), the Hyderabad Stock Exchange (HSE)
and the Over-The-Counter Exchange of India (OTCEI),

ALLIANCES:

Karvy has a strategic alliance with Jardine Fleming India Securities Limited (JFISL) –
one of Asia’s most prestigious investment bankers – to leverage on the latter’s investment
banking expertise. This would augment the retail distribution reach and provide the Indian
access to the best global and local insights on financial markets. Jardine is a respected
investment banker with a demonstrated track-record of delivering value to its clients spread over
43 countries. It is ranked amongst the world’s TOP 3 Foreign Institutional Investors (FIIs).

QUALITY POLICY:

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial services.
In the process, Karvy will strive to exceed Customer’s expectations.

QUALITY OBJECTIVES:

As per the Quality Policy, Karvy will:

 Build in-house processes that will ensure transparent and harmonious relationships with its
clients and investors to provide high quality of services.
 Establish a partner relationship with its investor service agents and vendors that will help in
keeping up its commitments to the customers.
 Provide high quality of work life for all its employees and equip them with adequate
knowledge & skills so as to respond to customer’s needs.
 Continue to uphold the values of honesty & integrity and strive to establish unparalleled
standards in the business ethics.
 Use state-of-the art information technology in developing new and innovative financial
products and services to meet the changing needs of investors and clients.
 Strive to be a reliable source of value-added financial products and services and constantly
guide the individuals and institutions in making a judicious choice of same.

40
 Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and
regulatory authorities) proud and satisfied.

KARVY–KEY PEOPLE:

Board of Directors – Karvy Consultants Limited

C. Parthasarathy - Chairman And Managing Director

M. Yugandhar - Managing Director
M.S. Ramakrishna - Director
Prasad V Potluri - Director
Dr. P.V.S. Jaganmohan Rao – Company Secretary
Price Water House, Hyderabad – Auditors
Bankers: UCO Bank, Bank Of Baroda, HDFC Bank, Standard Chartered Grindlays Bank.
Registered Office: “Karvy House”,46, Avenue 4, Street No.1, Banjara Hills, Hyderabad,
Andhra Pradesh, India.

KARVY MUTUAL FUND SERVICES (MFS DIVISION)

- building a heritage of confidence –

There is a wide range of mutual fund services available at KARVY MUTUAL FUND
SERVICES to the various categories like Asset Management Companies, Investors, Distributors
and General Users. We can use mutual fund services through web also, the web site is
karvymfs.com, with a click of the mouse we can enter into the karvy mutual fund services, this
provides Interactive Fund Service to query for account related details and register specific
services requests.

Since its inception in 1982, Karvy has demonstrated a dedication coupled with dynamism
that has inspired trust for various segments – corporate, government bodies and individuals.
Karvy has since been performing a pivotal role as the intermediary – the interface – between
these players.

With Mutual Funds emerging as a distinct asset class, Karvy has made a strategic choice
to leverage the power of latest technology to provide a cutting edge to its services. This, today,

41
service nearly 40% of the asset management companies (AMCs) across an extensive network of
service centers with assets under service in excess of Rs.10,000 crores.

Karvy’s ability to mass customize and offer a diverse range of products for diverse range
of customers has helped mutual fund companies to uniquely position themselves in the market
place. These diverse range of services cut across multiple delivery channels – service centers,
web, mobile phones, call center – has brought hone the benefits of technology to investors,
distributors, and the mutual funds.

Going forward, it shall strive to create new products and services, which would address
the needs of the end customer. Its single-minded focus in delivering products for customers has
given the distinguished position of being the preferred provider of financial services in the
country. These services can be broadly categorized as below:

 Investor Services
 Distributor Services
 AMC Services
 General Services or Information Services

a) INVESTOR SERVICES:
- Keeping ahead with the changing investor expectations -

Investor is a person who invests in the mutual funds in the mutual funds concept. He
placed in the bottom of the structure, but he plays a pivotal role, without investor we cannot
imagine the mutual funds. There is a wide range of investor services provided by karvy mutual
fund services to the investors and also Mutual Fund Investors have the convenience of logging
on to the web site and utilize various account related services. To utilize these web services the
investor has to first register himself with the karvymfs.com in the investor services with the web
site, the karvymfs.com gives authorized ID and Password to the registered user, with a click of
the mouse he can gets the services, without authorized ID and Password he cannot get the
services. The major online services for investors can be categorized as below:

 View their account statements online

 Get a snapshot of all their investment serviced by Karvy:
 Portfolio Valuation Services
42
  NAV Broadcast Services
 NAV Alert Services
 Receive Account statements by email
Apart from the afore-mentioned services, any visitor from the web site has the option to
know Mutual Fund Concepts, check out the latest NAVs of his/her favorite Mutual Funds, etc.,
obtain dividend information, get the latest load structure information etc.

b) DISTRIBUTOR SERVICES:
- Re-defining service -

Karvy recognizes the distributor, as on invaluable customer, in the Mutual Fund transaction
chain. Keeping this in mind, Karvy has engineered several initiatives for the distributors and for
the benefit of his clients.

AMC SERVICES

- your partners in progress -

There is wide range of AMC Services provided by Karvy Mutual Fund Services to the
registered Asset Management Company’s (AMCs).The AMC can now viewing investor
information and requesting various reports related to the investor, is possible through the web
site also, just by the click of the mouse. In order to use the respective AMC services on the site,
Mutual Fund AMCs must enter into agreement with Karvy Consultants Limited, whereby users
are assigned a User ID and Password at the fund level. AMC may use this ID and Password to
access all the site services. It provides registered AMCs can check out various ONLINE and
MAIL-BACK services and gets an update on the investments of its investors.

ONLINE SERVICES:

1. Investor Account Statements

2. Query on application number

3. Query on investors’ name

43
MAIL-BACK SERVICES:

1. Transaction Reports

2. Net Assets Under Management Report

3. Asset Movement Report

4. Slab Report

5. Status-wise holdings report

C) GENERAL/INFORMATION SERVICES:

In addition to the afore-mentioned services Karvy mfs provides general or information

services to the users. These services can be broadly classified as below:

1. Dividend History

2. Fund Information

3. Load Structures

4. Special Products

5. Karvy Network

MUTUAL FUNDS AT KARVY

The Mutual Fund umbrella of Karvy consists both Open-ended and Close-ended Mutual
Funds. The following are the various mutual fund AMCs for which Karvy acts as a Registrar.
1) BOB Mutual Fund
2) BOI Mutual Fund
3) DEUTSCHE Mutual Fund
4) GIC Mutual Fund
5) IDBI Mutual Fund
6) IL & FS Mutual Fund
7) MORGAN STANLEY Growth Fund
8) PNB Mutual Fund
9) RELIANCE Capital Mutual Fund
10) SBI Mutual Fund
11) UTI Mutual Fund

44
 CHAPTER IV
DATA ANALYSIS AND
INTERPRETATION

45
 DATA ANALYSIS OF THE TEN SHARES AND THE POSITION OF BSE
AND NSE
OVER THE SAMPLE PERIOD

Date BSE Nifty

20-Jan-2017 9100.55 -229.02 2796.60 -49.60
21-Jan-2017 8779.17 -321.38 2706.15 -90.45
22-Jan-2017 8813.84 34.67 2713.80 7.65
23-Jan-2017 8674.35 -139.49 2678.55 -35.25
27-Jan-2017 9004.08 329.73 2771.35 92.80
28-Jan-2017 9257.47 253.39 2849.50 78.15
29-Jan-2017 9236.28 -21.19 2823.95 -25.55
30-Jan-2017 9424.24 187.96 2874.80 50.85
02-Feb-2017 9070.39 -353.85 2766.10 -108.70
03-Feb-2017 9149.30 82.60 2783.90 17.25
04-Feb-2017 9201.85 52.55 2803.05 19.15

20.01.2017
Today the market had a bearish run. The BSE started on a loss mode and started with a
fall of around 200 points and it was at 9100 at the close of the days trading while nifty also
suffered losses and it ended with a loss of 49.60 and ended at 2796.00. The swearing in
ceremony of American president Barack Obama and its impact on the outsourcing business
resulted in the world over bearish market run.

21.01.2017
The bear run continued on Wednesday and the markets fell by 321 points and by 90.45
points in the BSE and nifty respectively. The Asian and the European markets also registered a
negative response with regard to trading and investors.

46
22.01.2017
The bear run continued till Thursday as such the markets had a positive response from the
initial trading hours where in a positive trading was continued but was on the later on the day end
the market fell by 34.67 and 7.65; the BSE and NSE closed on a marginal loss at 8813.84 and
2713.80 respectively.

23.01.2017
The weeks last day in trading was no other different from the rest days as the day saw
more bearish run and more points were lost in the last day. The BSE and NSE closed at 8674.35
and 2678.58. BSE lost 139.49 and NSE lost 35.25 points.

27.01.2017
The day after the republic day celebrations the market showed some positive move and
the market opened on a positive note and it was also a good day in the global scenario. The
sensex BSE gained 329.73 points and NSE gained 92.80 points. It was a very dull day of trade
with the market closing flat. Sensex shut shop at 9201, up 52 points and Nifty at 2803, up 19
points from the previous close. Top Nifty gainers included Tata Steel, DLF and Sterlite while
losers included Mahindra & Mahindra, Suzlon and HDFC Bank.

29.01.2017
The BSE lost about 21 points and NSE lost nearly 25s point and both ended 9236.28 and
2823.98 respectively. The majors gainers are the information technology sectors and the losers
were the oil and gas companies.

30.01.2017
Technical analysts say that the market would stabilize around april or there after at 12000
odd points and the successful operation done on the PM added on the market as market rose up
in the trading activities. The BSE gained 187.96 points and closed on 9236.28 while NSE ended
on 2874.80 points.

47
02.02.2017
The market out of global recession saw a fall in the both the BSE and NSE, the BSE fell
by 353.85 points and closed on the 9070.39 and the NSE fell by 108.70 points and closed at
2766.10 points. The investors preferred selling out their shares. The week’s first day closed on a
disastrous note.

03.03.2017
The Tuesday trade had a positive opening and the day ended on a positive note. The BSE
closed at 9149.30 and NSE closed at 2783.90 a growth of 82.60 and 17.25 points respectively.

04.02.2017
The positive run continues on Wednesday and BSE closed at 9201.85 up by 52.55 points
and NSE closed at 2803.05 up by 19.15 points. But the day’s trading was much fluctuated by the
investors with the IT companies losing out and the oil and natural sectors gained.

ANALYSIS OF THE INDIVIDUAL STOCKS FOR THE PERIOD 2013-2017

GAIL

210

205

200

195

190

185

180

175
20.01.2009 21.01.2009 22.01.2009 23.01.2009 27.01.2009 29.01.2009 30.01.2009 02.02.2009 03.02.2009 04.02.2009

20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.10.2017 02.02 2017 03.02.2017 04.02.2017

Mean 200.075
Standard Error 1.716573622
Median 200.925
Mode N/A
Standard Deviation 5.428282417
Sample Variance 29.46625
Range 18.15
Minimum 188.65
Maximum 206.8
Count 10

48
 TOOLS 2013 2014 2015 2016 2017

MEAN 120.54 85.76 43.76 135.56 176.45

Standard
0.76 0.54 0.87 1.45 1.35
Error
Median 256.45 287.34 198.54 154.45 187.34
Standard
2.45 1.65 3.45 4.56 4.98
Deviation
Sample
76.34 65.76 29.65 34.65 45.76
Variance
Range 23.54 45.67 87.45 56.21 45.98

Minimum 65.87 54.32 45.34 35.23 55.5

Maximum 276.45 254.32 221.1 187.34 198.34

Count 238 234 242 251 265

From the above it can be inferred that the portfolio over a period of 5 years exhibiting wrong
signals to the investors by showing abnormal changes in the returns and deviations. This may be
due to the increasing trend in the standard error estimates showing an extraordinary tendency in
the movement.

The minimum and maximum values are also depicting an inconsistent trend in the market
this is due to the government policy towards the gas sector announcements over the years (2013-
2017).

The number of observations are also in the range of 230 to 260. Overall the stock can be
hold for long run only that is for 5 years.

49
FOR HDFC:
HDFC BANK

930
920
910
900
890
880
870
860
850
840
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

Mean 898.42
Standard Error 5.175515004
Median 894.2
Mode N/A
Standard Deviation 16.36641548
Sample Variance 267.8595556
Range 52.25
Minimum 872.35
Maximum 924.6
Count 10

TOOLS 2013 2014 2015 2016 2017

MEAN 453.23 547.3 653.3 564.3 723.2

Standard
1.34 2.34 3.12 3.33 4.87
Error

Median 563.2 654.3 763.2 687.4

Standard
35.476 87.56 45.32 28.93 33.76
Deviation
Sample
173.23 165.44 187.34 165.34 177.34
Variance

Range 76.45 112.34 65.45 87.34 98.33

Minimum 456.44 332.23 452.34 987.34 1243.3

Maximum 764.3 654.3 873.2 965.23 1298.2

50
 Count 238 234 242 251 265

One more stock that was in lime light over the past 5 years is HDFC bank, as because of
its innovation and creative in practice the stock at 365.23 reached to 1387 in the year 2017 and it
is the efficiency of the management involved in the bank and branch expansion policy also made
the company to rose great heights within a short span of time in the banking industry. One of the
main observations is with increase in standard error estimates and standard deviation factors are
also increasing and depicting a high volatility in the industry. This can be observed from the
stocks median also over a period of 5 years.

FOR INFOSYS:
INFOSYS

1450

1400

1350

1300

1250

1200

1150

1100
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

51
 Mean 898.42
Standard Error 5.175515004
Median 894.2
Mode N/A
Standard Deviation 16.36641548
Sample Variance 267.8595556
Range 52.25
Minimum 872.35
Maximum 924.6
Count 10
TOOLS 2013 2014 2015 2016 2017
MEAN 478.34 546.3 653.2 763.2 789.12
Standard
2.34 5.23 3.42 2.198 4.1649
Error
Median 562.3 652.3 562.3 453.8 763.7
Standard
22.4 43.65 54.23 22.54 23.21
Deviation
Sample 167.3
137.56 121.8 113.87 157.9
Variance 2
Range 34.23 65.23 87.45 65.21 45.23
Minimum 543.2 653.2 765 687 734
Maximum 665 743 784 863 1879
Count 243 236 223 217 243

During the study period Infosys stock represented a constant growth in its movement
from 2013 to 2017. In a comprehensive study of five years it has been observed that the security
minimum price in a trading day is Rs. 543 to a maximum of Rs. 2000. The security is moving in
between vary high levels of oscillations in the market this may be due to the tendency of frequent
trades in the stock made the security to reach new heights in the market. And one more important
observation is over the years the standard deviation of the stock is reducing day by day due to the
increasing consistency and performance of the stock over the years and also the recent move of
the company to acquire new business western countries also fetched a positive result to the stock
movement.

In the sample period of 10 days of observation the stock represented a mean of 896 and a
standard deviation of 16.71 with a sample variance of 267.85. This is purely based on the
technical analyst’s opinion about the stock in the short run.
52
 FOR ITC:
ITC

182
180
178
176
174
172
170
168
166
164
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

Mean 174.835
Standard Error 1.490116513
Median 173.225
Mode #N/A
Standard Deviation 4.71216216
Sample Variance 22.20447222
Range 10.75
Minimum 170.4
Maximum 181.15
COUNT 10

TOOLS 2013 2014 2015 2016 2017

MEAN 87.34 98.17 121.45 165.23 170.34
Standard
0.76 0.376 0.667 0.987 1.1765
Error
Median 87.31 96.45 89.56 121.87 141.69
Standard
2.78 1.987 1.69 2.65 3.876
Deviation
Sample
14.76 19.56 11.76 10.765 21.76
Variance
Range 9.87 8.53 7.65 9.65 10.11
Minimum 119.87 106.76 134.76 145.98 154.98
Maximum 324.87 393.79 265.76 278.98 350.76
Count 243 236 223 217 243
53
 One of the major tobacco products company in the world represented a study growth over
a period of five years from 2013 – 2017. The stock represented a mean of 89.56 with a median of
96.45. The stock minimum quoted price in the market is 278.98 with heavy bump of 54 per cent
in a span of five years study period and the stocks technical reports also indicating the stock have
a lower standard deviation over the study period of five years as a result the stock can be
recommended for the long run of five years in the investor portfolio.

FOR RANBAXY:
RANBAXY

220
215
210
205
200
195
190
185
180
175
170
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

Mean 204.17
Standard Error 3.283436547
Median 207.575
Mode #N/A
Standard Deviation 10.38313804
Sample Variance 107.8095556
Range 29.6
Minimum 186.1
Maximum 215.7
Count 10

TOOLS 2013 2014 2015 2016 2017

MEAN 187.34 198.17 221.45 365.23 470.34

Standard
11.76 32.376 45.667 36.987 51.1765
Error
Median 187.31 296.45 289.56 121.87 200.69
Standard
12.78 15.987 10.69 12.65 13.876
Deviation

54
 Sample
104.76 219.56 181.76 160.765 321.76
Variance
Range 19.87 58.53 47.65 69.65 65.11

Minimum 119.87 106.76 134.76 145.98 154.98

Maximum 324.87 393.79 265.76 278.98 850.76

Count 243 236 223 217 243

One more sector in this portfolio paid heavy returns to the investors is Pharmaceuticals
that is Ranbaxy which generated a heavy percentage of returns over a period of five years in the
study period. The stock indicated a variance of 104 in 2013 and end up with 321 in 2015,
represented a heavy increase in variance is an indication of churning in the portfolio and it
should be controlled in the long run , to keep the portfolio study in returns and the average
observations are in the range of 217 to 236.

The same way of trend was observed in the ten days study period with a standard
deviation of 10.383 and a variance of 107.89.

FOR RELIANCE PETRO:

RELIANCE PETRO

88
86
84
82
80
78
76
74
72
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

Mean 80.975
Standard Error 0.956476462
Median 80.825
Mode #N/A
Standard Deviation 3.024644148
Sample Variance 9.148472222
Range 9.55
Minimum 55 76.85
Maximum 86.4
Count 10
 TOOLS 2013 2014 2015 2016 2017

MEAN 87.34 98.17 122.45 65.23 70.34

Standard
11.76 32.376 45.667 36.987 51.1765
Error
Median 17.31 29.45 27.56 99.87 120.69
Standard
12.78 15.987 10.69 12.65 13.876
Deviation
Sample
14.76 19.56 18.76 16.765 21.76
Variance
Range 19.87 8.53 4.65 6.65 5.11

Minimum 119.87 106.76 114.76 87.56 98.65

Maximum 122.77 99.76 118.76 98.67 120

Count 243 236 223 217 243

The stock reliance petro represented a close movement with it stocks in the market over the study
period and the minimum and maximum prices are closely moving with each other as a neck to
neck competition with other petroleum stocks in the market and its market expansion policy in
this five years period majorly effected the company’s revenue system this was clearly evident
from the financial statements of the company. The government policy on petroleum sector also
effected the stock to a major extent but the positive fact is its recent invention of petrol in KGB
-6 well paid heavy attention to the stock in the market as a result of this the stock with 87
minimum touched to 122 maximum with in a short period. The standard deviation of the stock is
also lower than compared to other petroleum stocks in the market.

56
 FOR IBM:

IBM

70

60

50

40

30

20

10

0
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

TOOLS 2013 2014 2015 2016 2017

MEAN 65.15 76.54 87.25 98.36 33.7

Standard
1.65 5.65 6.87 3.76 2.65
Error

Median 17.31 29.45 7.56 9.87 12.69

Standard
12.78 15.987 10.69 12.65 13.876
Deviation

Sample
143.76 169.56 148.76 126.765 21.76
Variance

Range 19.87 78.53 54.65 26.65 35.11

Minimum 119.87 206.76 354 387.56 6.65
Maximum 334 278 238.76 598.67 113.2
Count 243 236 223 217 243

During this recession one more that was affected with management practices is Satyam,
where the technical analysts opinion is in the past company with a SD OF 5.65 in 2014 able to
maintain a stock price of 345 for fairly long period but in the recent times because of recent news
and issues in the market the stock heavily lost in the market and as a result these analysis facts
are exempted to this stock and it is purely in the hands of government and take over company’s
has to decide the future of the security in the Indian market.

57
FOR SUN PHARMA:
SUN PHARMA

1160
1140
1120
1100
1080
1060
1040
1020
1000
980
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

Mean 1084.915
Standard Error 11.5444336
Median 1074.65
Mode #N/A
Standard Deviation 36.50670448
Sample Variance 1332.739472
Range 96.9
Minimum 1046.3
Maximum 1143.2
Count 10

TOOLS 2013 2014 2015 2016 2017

MEAN 653.15 576.54 887.25 398.36 645.3

Standard
11.65 35.65 16.87 13.76 23.65
Error
Median 517.31 529.45 657.56 439.87 512.69
Standard
42.78 35.987 20.69 22.65 33.876
Deviation
Sample
343.76 569.56 648.76 826.765 421.76
Variance
Range 59.87 78.53 65.65 34,87 76.98

Minimum 219.87 126.76 254 564 654

Maximum 267 278 334.76 765.67 987.2

Count 243 236 223 217 243

58
59
As the stock is in compulsory rolling settlement and increasing settlements in the F& O segment
the stock reached to new heights in the market and also the standard deviation factors also went
to top levels with in an indication of FIIs investment in the stock and pharmacy policies in the
respective countries also effected the stock to new levels and it is a caution for investors and the
stock is preferable only in the long run and not in the short run.

FOR TATA POWER:

TATA POWER

780
770
760
750
740
730
720
710
700
690
680
670
20.01.2017 21.01.2017 22.01.2017 23.01.2017 27.01.2017 29.01.2017 30.01.2017 02.02.2017 03.02.2017 04.02.2017

Mean 742.505
Standard Error 7.039832897
Median 750.375
Mode #N/A
Standard Deviation 22.2619063
Sample Variance 495.5924722
Range 60.6
Minimum 709.35
Maximum 769.95
Count 10

TOOLS 2013 2014 2015 2016 2017

MEAN 65.15 76.54 87.25 98.36 33.7

Standard
1.65 5.65 6.87 3.76 2.65
Error
Median 77.31 89.45 67.56 119.87 542.69
Standard
10.78 12.987 12.69 11.65 20.876
Deviation
Sample
143.76 169.56 148.76 126.765 21.76
Variance

60
 Range 19.87 78.53 54.65 26.65 35.11

Minimum 176 189 212 198 546

Maximum 234 243 356 256 657

Count 243 236 223 217 243

TATA POWER

The two companies Tata Power and Tata Steel are moving with good fundamentals and
technical analysis charts also supporting the movement of the stock in the long run only. For
steel sector as the Government is controlling the stock prices there was a threat to the stock
prices because of policy announcements in the market and that is why stock have high volatility
in the study period.

TATA STEEL

Mean 179.17
Standard Error 2.821880775
Median 179.175
Mode #N/A
Standard Deviation 8.923570536
Sample Variance 79.63011111
Range 28.65
Minimum 166.35
Maximum 195
Count 10

TATA STEEL

TOOLS 2013 2014 2015 2016 2017

MEAN 65.15 76.54 87.25 98.36 33.7

Standard
1.65 5.65 6.87 3.76 2.65
Error
Median 37.31 59.45 47.56 59.87 112.69
Standard
7.78 8.987 9.69 11.65 10.876
Deviation
Sample
43.76 69.56 38.76 26.765 65.76
Variance
Range 19.87 38.53 14.65 26.65 25.11

61
 Minimum 65 53 48 22 94

Maximum 91 65 88.76 76 113.2

Count 243 236 223 217 243

TATA STEEL

Almost the stocks like Tata power and Tata steel are moving in the same trend and the
average movement of the stock is in the range of 11.54 to 65.43 with a heavy load on steel sector
and steel stocks. The stock has a minimum price of 22 in the year 2016 and went up to 113.2 in
2015 and also in 2017 in went to new levels because of positive news on the stock and the
fundamentals are strongly supporting the company movements.

OTHER PORTFOLIO IN THE SAMPLE PERIOD

CLG CLG NSE SECTORAL
COMPANY NAME
PRICE INDEX INDEX
Ambuja Cements 69.6 2796.6 1761.08

BHEL 1401.7 2796.6 5125.89

Blue Dart Express 430 2796.6

Hero Honda 836.8 2796.6 2542.44

HPCL 293.8 2796.6 6020.4

Idea Cellular 43.4 2796.6 1817.28

ITC 170.65 2796.6 1975.69

Jet Airways 168.05 2796.6

MRF 1796.75 2796.6 2542.44

WIPRO 228.15 2796.6 2168.57

Market Outlook:
 Markets opened on a flat note taking cues from its global peers. Markets remained range
bound due to lack of direction.

62
  Tata Communications has acquired a further 30% stake in South African telecom
operator Neotel. With this, Tata Communications now has a controlling stake in the
company.

 Hero Honda standalone net sales were up 4.77% at Rs 2881 crore versus Rs 2743.07 on
year on year [YoY] basis. The company's standalone net profit was up 9.24% at Rs
300.42 crore versus Rs 275.01 crore on YoY basis.

 Jet airways and ICICI Lombard General Insurance have collaborated to launch a
unique overseas and domestic travel insurance product called ‘Jet Protect’ which offers
security against possible risks during travel.

 Sadbhav Engineering has been awarded a contract by the National Highway Authority
of India for the construction and operation & maintenance of 97 Km of a national
highway in Maharashtra. The contract is worth Rs 1415 Cr and has a concession period
of 18 years, including the construction period of 30 months.

OTHER PORTFOLIO IN THE SAMPLE PERIOD

CLG CLG NSE SECTORAL
COMPANY NAME
PRICE INDEX INDEX
AMBUJA
CEMENTS
70.6 2706.15 1702.77

BHEL 1349 2706.15 5143.06

BLUE DART
EXPRESS
428.1 2706.15
HERO HONDA 841.5 2706.15 2476.47

HPCL 285.85 2706.15 5863.59

IDEA CELLULAR 42.05 2706.15 1772.46

ITC 171.25 2706.15 1963.07

JET AIRWAYS 164.15 2706.15

MRF 1780 2706.15 2476.47

WIPRO 219.7 2706.15 2146.01

Market Outlook:
 The Markets opened on a weak note, taking cues from the weak Asian peers. The markets
traded in the negative territory throughout the day and showed no signs of recovery as

63
 FIIs continued to sell heavily in the domestic markets. Aggressive selling was witnessed
across all the sectors barring Power and PSU. The overall market breadth was negative
with 1018 advances against 1342 declines. By the day’s close the Sensex and the Nifty
shut shop with a loss of 2.45% and 1.74% respectively.

 TCS has signed a multi-year deal with Ducati Motor Holding Spa, Italy for implementing
an ERP package for supply chain management.

 HERO HONDA’S stock prices were gone up after an announcement from Pawan
Munjal, MD, Hero Honda Motors Ltd regarding the sales strategies and Q3 results.

 WIPRO announced its third quarter numbers. It’s Q3 consolidated net profit went up
3.52% at Rs 1,003.9 crore as against Rs 969.8 crore on QoQ basis.

OTHER PORTFOLIO IN THE SAMPLE PERIOD

CLG CLG NSE SECTORAL
COMPANY NAME
PRICE INDEX INDEX
Ambuja Cements 70.05 2713.8 1641.35

BHEL 1368.45 2713.8 5006.37

Blue Dart Express 430 2713.8  

Hero Honda 849.45 2713.8 2443.26

HPCL 283.75 2713.8 5642.03

Idea Cellular 42.15 2713.8 1717.34

ITC 170.6 2713.8 1979.56

Jet Airways 161.6 2713.8  

MRF 1741.95 2713.8 2443.26

WIPRO 218 2713.8 2104.71

Market Outlook:
 The markets opened on a weak note, in line with the global markets. With no specific
measures being announced by the new President of the United States, the global markets
witnessed a huge sell off.

 FMCG stocks like HUL and ITC ended in red. Sterlite Industries, Zee Ltd, HDFC, Tata
Power and ICICI Bank ended as major losers
64
  The markets would also be watching out for index heavyweight Reliance Industries’ third
quarter results that are scheduled to be released today.

 The Securities and Exchange Board of India has resolved that the promoters of
companies need to disclose their pledged shares. The disclosures need to be event based
as well as on a quarterly basis and would come into effect from the quarter ended Dec
31st, 2015.

OTHER PORTFOLIO IN THE SAMPLE PERIOD

CLG CLG NSE SECTORAL

COMPANY NAME
PRICE INDEX INDEX
Ambuja Cements 66.1 2678.55 1551.57

BHEL 1320.75 2678.55 4978.36

Blue Dart Express 420 2678.55  

Hero Honda 846.6 2678.55 2404.77

HPCL 273.05 2678.55 5664

Idea Cellular 42.8 2678.55 1739.17

ITC 170.4 2678.55 1960.64

Jet Airways 160.05 2678.55  

MRF 1653.15 2678.55   2404.77

Market WIPRO 213.55 2678.55 2112.2

Outlook:
 The markets
opened in the positive territory, taking cues from its Asian peers. Positive results from
telecom major Bharti lent some support to the broader indices. Markets then came off
their highs and remained range bound in the morning session. sectoral indices Teck,
Bankex, Oil & Gas and IT indices ended positive while continued selling was seen in
Realty, Consumer Durables, Metals and Capital Goods

65
  Inflation, as measured by the Wholesale Price Index, came in at 5.60% for the week
ended January 10th, 2017 as compared to 5.24% seen in the previous week. The higher
prices of fruits and vegetables mainly contributed to the rise in inflation.

 Wipro has liquid investments to the tune of Rs 5,830.6 crore at the end of the December
quarter, parked in various instruments such as cash deposits, money market mutual funds
and certificate of deposits.

 MRF reported its Q1 standalone net loss at Rs 38.3 crore versus net profit of Rs 51.8
crore, YoY. The company's net sales stood at Rs 1,351.3 crore versus Rs 1155.6 crore.

 Ambuja Cements Ltd has informed BSE that a meeting of the Board of Directors of the
Company will be held on February 06, 2017, to consider Annual Accounts for the
Corporate Financial Year ended December 31, 2015

OTHER PORTFOLIO IN THE SAMPLE PERIOD

Clg NSE
Company Name Clg Price Sectoral Index
Index
Ambuja Cements 69.6 2771.35 1513.63

BHEL 1378.75 2771.35 4880.84

Blue Dart Express 435 2771.35  

Hero Honda 857.15 2771.35 2370.7

HPCL 278.6 2771.35 5678.48

Idea Cellular 44.5 2771.35 1708.48

ITC 170.8 2771.35 1963.73

Jet Airways 167.55 2771.35  

MRF 1633.65 2771.35  2370.7

WIPRO 226.05 2771.35 2069.14

Market Outlook:
 Indian benchmark indices opened on a flat note due to weak cues from its Asian peers
and remained volatile during the trade. The markets then turned choppy as selling was
seen in technology, power, capital goods, metal, banking and power stocks.

66
  On the sectoral front the Bankex lost more than 4%, followed by Metals, Capital Goods,
Realty and IT indices, which were down 3.35% to 2.04%. Tata Motors, Reliance India,
Ranbaxy, Cipla and NTPC stood as major gainers among the index pack while M&M,
Tata Steel, NALCO, ZEEL and Ambuja Cements were the major losers.

 IDEA Cellular declared its third quarter results. Its net profit was up by 52.7% at Rs 220
crore as against Rs 144.07 crore in previous quarter. The company's revenues were up by
18.52% to Rs 2,730.5 crore from Rs 2,303 crore. Its EBIDTA stood at 25.16% versus
33.29% YoY and 26.3% QoQ and also bagged the prestigious Golden Peacock Award
2015 for its innovative product, ‘My Gang’, at the “19th World Congress on Total
Quality” held at Mumbai.

 ITC announced its third quarter numbers. It has reported net profit of Rs 903 crore for the
quarter ended December 2015 versus Rs 830.7 crore in same period of last year. Net sales
went up at Rs 3,833 crore versus Rs 3,449 crore, YoY. Its EBITDA was at 8.7% to Rs
1352.7 crore. Its EBITDA margins were at 35.2% versus 34.78%.

OTHER PORTFOLIO IN THE SAMPLE PERIOD

Clg NSE
Company Name Clg Price Sectoral Index
Index
Ambuja Cements 70.75 2849.5 1546.71

BHEL 1398.45 2849.5 4942.09

Blue Dart Express 435 2849.5  

Hero Honda 870.8 2849.5 2411.5

HPCL 270.55 2849.5 5868.9

Idea Cellular 46.6 2849.5 1783.44

ITC 175.65 2849.5 1957.13

Jet Airways 167.65 2849.5  

MRF 1658.4 2849.5 2411.5

WIPRO 234.12 2849.5 2152.88

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Market Outlook:

 Markets opened firmly in the green on the back of positive cues coming in from the
global markets. The market sentiment remained upbeat ahead of the Reserve Bank of
India’s monetary policy review. Although no interest rate cuts were announced by the
RBI, the markets continued to strengthen as the day progressed. Markets shrugged off a
weak opening in the European markets and closed firmly in the green. Heavy buying was
witnessed across all the sectors.

 Metal, Power, Tech, IT and Oil & Gas stood as major gainers.

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 CHAPTER-V
FINDINGS, SUGGESTIONS
AND CONCLUSIONS

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 FINDINGS OF THE STUDY

 One of the major findings in the study is as most of the stocks are in compulsory rolling
settlement the stocks are frequently breaking their levels in the market and as a result it
will create a panic situation in the mind of investors especially the stocks like satyam, sun
pharma and Tata steel etc.,

 All most all the stocks in the study period are performed fairly well in the market with
low standard deviations and high returns.

 But the stocks maximum and minimums are also widely swinging in the market and it is
an indication of over exposure on the stock by the mutual funds, FIIs and others.

 The stocks like jet airways , idea cellular and Ambuja cements etc are closing moving in
accordance with the index and stocks rally was over the normal levels. In this portfolio
the sector also considered for evaluation in the long run.

 While evaluating the sector specific stocks it is observed that they are closing moving in
association with the respective indexes that is also showed in the analysis.

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 SUGGESTIONS AND RECOMMENDATIONS

 Always prefer the stocks with consistent track record other wise the stocks will reach new
heights and creates panic situation in the market.

 As a result majorly the stocks selected for analysis are A group scrip’s and less number of
B group scrip’s. Most of the stocks are in the compulsory rolling settlement and as a
result their volatility will monitored on a time to time basis by the regulator.

Especially the stocks in the segment of IT/ ITES related stocks are faced tuff situation in
the market.

 The stocks in the capital goods segment are mostly suggested for long run like the stocks
BHEL.

 Aviation related stocks like jet airways and GAIL and Reliance Petro are suggested for
the long run to the investors in the portfolio with a return of 3.45 %.

 Almost all the pharm stocks performed well in the market and technical analysts
suggested for the intra day trading sessions and these stocks are suitable for delivery
mode only for one week or two week reports of the industry.

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 CONCLUSIONS OF THE RESULT

As with many areas of financial planning, the range of investment options has increased
significantly with new investment products being introduced regularly. Moreover, many more
areas of investment opportunities have become available to the ordinary investor which
previously could be considered only by large institutional investors for e.g. investments in
foreign equities and commercial property, both of which are accessible through collective
investment vehicles. This increased complexity of the investment market has led on one hand for
many investors adopting a more sophisticated approach towards planning their portfolio.

The following highlighted pointers are portfolio investment in a nutshell and are the factors
undermining portfolio management.

Review of portfolio required due to: -

∆ Tax Position
∆ Financial Position
∆ Aspirations/plans

Investment Strategy = ↑Returns ↓ Risk

Factors determining appropriate asset class / vehicles as follows:

 Risk profile and expected returns
 Income & Capital needs of the investor – now and in the future
 Tax position of the investor.

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BIBLIOGRAPHY

73
 BIBLIOGRAPHY
BOOKS

Financial Management – ICFAI publication

Financial Management – Khan& Jain
Finance in a nutshell – Javier Estrada
Financial Management – Stephen Forrester
Modern Portfolio theory & investment analysis – Elton & Gruber
Security analysis and portfolio management – Fischer and Jordan
Investment banking and brokerage – Marshall & Ellis
Investment management – Cowdell & Billings
Investment analysis and portfolio management – Reily & Brown
International portfolio management – Watsham
NCFM beginner’s module
NCFM Capital market module
OTS trust & asset management handbook July 2001

WEBSITES
www.wikipedia.com
www.esnips.com
www.ehow.com
www.careers-in-finance.com
www.jagooindia.com
www.investopedia.com
www.chartadvisor.com
www.icicidirect.com
www.rediff.com/news
www.moneycontrol.com
www.moneypore.com
www.indiainfoline.com
www.theshapeofmoney.co.nz

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