Professional Documents
Culture Documents
A PROJECT REPORT
ON
“PORTFOLIO MANAGEMENT”
AT
THOKALA PREMA
HT. No. 1077-18-672-011
(2018 – 2020)
DECLARATION
THOKALA PREMA
HT. NO. 1077-18-672-011
SUPERVISOR'S CERTIFICATE
ABSTRACT
● Heuristic models
● Scoring techniques
● Visual or mapping techniques
ACKNOWLEDGEMENT
I would like to express my gratitude for those who have been a constant source of
encouragement and motivation throughout this project, without whose support this
could not have been possible.
I am very thankful to the principal DR. RAZA SHAH, of DECCAN SCHOOL OF
MANAGEMENT and DR. MATEEN AHMED SIDDIQUI, professor & HEAD OF
DEPARTMENT and my supervisor for their valuable guidance and support on
completion of this project.
I also acknowledge with the deep sense of reverence, gratitude towards my parents and
members of my family, who have always supported me morally as well as
economically.
At last but not least gratitude goes to all my friends who directly or indirectly helped
me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
THOKALA PREMA
Table Of Contents
Contents Page numbers
Chapter 1:
Introduction 9- 15
Chapter 2:
Literature review 16- 51
Chapter 3:
Industry and company profile 52- 67
Chapter 4:
Data Analysis and Interpretation 68-80
Chapter 5:
Findings, Summary and Conclusions 81- 84
Bibliography 85-86
Serial Page.no
No. TITLE OF FIGURES
1 GRAPHICAL REPRESENTATION OF RETURNS OF ICICI 69
PRUDENTIAL MUTUAL FUNDS FOR THE MONTH
DECEMBER -2019
2 GRAPHICAL REPRESENTATION OF RETURNS OF 71
KOTAK STANDARD MULTICAP FUNDS FOR THE
MONTH DECEMBER-2019
3 GRAPHICAL REPRESENTATION OF RETURNS OF TATA 73
BANKING AND FINANCIAL SERVICES FUND FOR THE
MONTH OF DECEMBER-2019
4 GRAPHICAL REPRESENTATION OF KOTAK STANDARD 76
MULTICAP FUNDS & TATA BANKING AND FINANCIAL
SERVICES FUNDS
CHAPTER-I
INTRODUCTION
1.1 INTRODUCTION
PORTFOLIO MANAGEMENT
MEANING:
A portfolio is a collection of assets. The assets may be physical or financial like
Shares, Bonds, Debentures, Preference Shares, etc. The individual investor or a fund
manager would not like to put all his money in the shares of one company that would
amount to great risk. He would therefore follow the age old maxim that one should not
put all the eggs into one basket. By doing so, he can achieve the objective to maximize
portfolio return and at the same time minimize the portfolio risk by diversification.
10
To provide a balanced portfolio which not only can hedge against the inflation but
can also optimize returns with the associated degree of risk
instruments.
In the small firm, the portfolio manager performs the job of security analyst.
In the case of medium and large sized organizations, the job function of portfolio
manager and security analyst are separate.
11
Whatever may be the status of the capital market, over the long period capital
markets have given an excellent return when compared to other forms of
investment. The return from bank deposits, units, etc., is much less than from the
stock market.
The Indian Stock Markets are very complicated. Though there are thousands of
companies that are listed only a few hundred which have the necessary liquidity.
Even among these, only some have the growth prospects which are conducive for
investment. It is impossible for any individual wishing to invest and sit down and
analyze all these intricacies of the market unless he does nothing else.
Even if an investor is able to understand the intricacies of the market and separate
chaff from the grain, the trading practices in India are so complicated that it is
really a difficult task for an investor to trade in all the major exchanges of India,
looking after his deliveries and payments.
12
13
This study covers the Markowitz model. The study covers the calculation of
correlations between the different securities in order to find out at what percentage funds
should be invested among the companies in the portfolio. Also the study includes the
calculation of individual Standard Deviation of securities and ends at the calculation of
weights of individual securities involved in the portfolio. These percentages help in
allocating the funds available for investment based on risky portfolios. In 2015, ING
Vysya was merged with Kotak, creating the fourth largest private sector bank in India.
Here 3 funds have been used for the study, which are:
● ICICI PRUDENTIAL MUTUAL FUNDS
● KOTAK STANDARD MULTICAP FUNDS
● TATA BANKING AND FINANCIAL SERVICES FUNDS
14
Primary data:
The primary data is collected through the discussions from office staff and
managers of Kotak Mahindra.
Secondary data:
The secondary data refers to the data which has already been generated and
available for use. The data is collected from various financial books, magazines,various
websites and from stock lists of various newspapers.
1.6 LIMITATIONS
15
CHAPTER-II
LITERATURE REVIEW
16
Conceptual Framework
It is essential for individuals to invest wisely for the rainy days and to make their
future secure.
Portfolio
A portfolio refers to a collection of investment tools such as stocks, shares,
mutual funds, bonds, and cash and so on depending on the investor’s income, budget and
convenient period.
Following are the two types of portfolio:
1. Market Portfolio
Portfolio Management
The art of selecting the right investment policy for the individuals in terms of
minimum risk and maximum return is known as portfolio management.
17
portfolios to individuals.
18
Portfolio Manager
An individual who understands the client’s financial needs and designs a suitable
investment plan as per his income and risk taking abilities is called a portfolio manager.
A portfolio manager is one who invests on behalf of the client.
A portfolio manager counsels the clients and advises him the best possible investment
plan, which would guarantee maximum returns to the individual.
A portfolio manager must understand the client’s financial goals, objectives, and offer a
tailor made investment solution to him. No two clients can have the same financial needs.
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Elements Of PortfolioManagement:
Portfolio management is an ongoing process involving the following basic tasks.
RISK
Risk is uncertainty of the income/ capital appreciations or loss or both. All investments
are risky. The higher the risk taken, the higher is the return. However, proper
management of risk involves the right choices of investments whose risks are
compensating. The total risks of two companies may be different and even lower than the
risk of a group of two companies if their companies are offset by each other.
Systematic risks
Systematic risks affected from the entire market are (the problems, raw material
availability, tax policy or government policy, inflation risk, interest risk and financial
Unsystematic risks
Unsystematic risks are mismanagement, increasing inventory, wrong financial policy,
defective marketing etc. this is diversifiable or avoidable because it is possible to
eliminate or diversify away these components of risks to considerable extents by
investing in large portfolios of securities. The unsystematic risk stems from the
inefficiency magnitude of those factors different from one company to another.
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RETURNS ON PORTFOLIO
RISK ON PORTFOLIO
The expected returns from individual securities carry some degree of risk. Risk on the
portfolio is different from the risk on individual securities. The risk is reflected in the
variability of the return from zero to infinity. Risk of the individual assets or a portfolio is
measured by the variance of its returns. The expected return depends on the probability of
returns and their weighted contribution to the portfolio. These are two measures of risk in
this context, one is the absolute deviation and the other is standard deviation.
21
PORTFOLIO THEORIES
MARKOWITZ THEORY
Markowitz approach determines for the investor the efficient set of portfolio through
three important variables, i.e., Standard Deviation, Covariance and Coefficient of
Correlation. The Markowitz model is called the “Full Covariance Model ''. Through this
method, investors can check with the use of a computer, find out the efficient set of
portfolios by finding out the tradeoff between risk and return between the limits of zero
to infinity. According to this theory, the effects of one security purchase over the effects
of the other security purchase are taken into the consideration and then the results are
evaluated. Dr. Harry M.Markowitz is credited with developing the first modern portfolio
analysis Model in order to arrange for the optimum allocation of assets within the
portfolio. A portfolio is efficient when it is expected to yield the highest return for the
level of risk accepted or, alternatively, the smallest portfolio risk for a specified level of
expected return.
22
also necessary to know the standard deviation of the rate of return, which is being
offered on the investment. The rate of return and standard deviation are important
parameters for finding out whether investment is worthwhile for a person.
● The investor can reduce his risk if he adds investments in his portfolio.
● An investor should be able to get higher for each level of risk “by determining the
efficient set of securities.
● Under these assumptions, a single asset or portfolio assets is considered
“Efficient” if no other asset or portfolio of assets offers higher expected return
with the same risk or lower risk with the same expected return. Henry Markowitz
has given the following formula for a two-security portfolio. σ p = √A
PORTFOLIO SELECTION:
Portfolio analysis provides the input for next phase in portfolio management, which is
portfolio selection. The proper goal of portfolio analysis is to generate the portfolio that
provides highest returns at a given level of risk. The inputs from portfolio analysis can be
used to identify the set of efficient portfolios. From this, the optimal portfolio must be
selected for investment.
PORTFOLIO REVISION:
Having constructed the optimal portfolio, the investor has to constantly monitor the
Portfolio to ensure that it continues to be optimal. As the economy and financial markets
are Dynamic, the changes take place almost daily. The investor now has to revise his
portfolio in the light of developments in the market. This revision leads to purchase of
some new securities and sale of some of the existing securities from the portfolio.
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PORTFOLIO EVALUATION:
RISK:
Risk is uncertainty of the income/capital appreciation or loss or both. All
investments are risky. The higher the risk taken, the higher is the return. But proper
management of risk involves the right choice of investment whose risks are
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compensating. The total risk involves the right choice of investment whose risks are
compensating. The total risks of two of two companies may be different and even lower
than the risk of a group of two companies if their companies are offset by each other.
SOURCE OF INVESTMENT RISKS:
Business risk:
As a holder of corporate securities (equity shares or debentures), you are
exposed to the risk of poor business performance. This may be caused by a variety of
factors like heightened competition. Emergence of new technologies, development of
substitute products, shifts in consumer preferences, inadequate supply of essential inputs,
changes in governmental policies, and so on.
25
Systematic risk affected from the entire market are ( the problems, raw material
availability, tax policy or government policy, inflation risk, interest risk and financial
risk)..
Unsystematic risk are mismanagement, increasing inventory, wrong financial policy,
defective marketing etc. this is diversifiable or avoidable because it is possible to
eliminate or diversify away this component of risk to considerable extent
by investing in a large portfolio of securities.
Based on the below pyramid diagram the type of risks will be described
RETURN ON PORTFOLIO:
26
investment? Why does an investor have so many securities in this portfolio ? If the
security ABC gives the maximum return why not invest in that security all his funds and
thus maximize return? The answer to these questions lie in the investor’s perception of
risk attached to investments. Objectives of income, safety, appreciation, liquidity and
hedge against loss of values of money etc. this pattern of investment in different asset
categories, types of investment, etc.,
RISK ON PORTFOLIO:
The expected returns from individual securities carry some degree of risk. Risk on
the portfolio is different from the risk on the individual securities. The risk is reflected in
the variability of the returns from zero to infinity. Risk of the individual assets or a
portfolio is measured by the variance of its return. The expected return depends on the
probability of the returns and their weighted contribution to the risk of the portfolio.
These are two measures of risk in this context one is the absolute deviation and other
standard deviation.
Most investors invest in a portfolio of assets, because it spreads risk by not
putting all eggs in one basket. Risk is mainly reduced by Diversification.
All investment has some risk. Investment in shares of companies has its own risk
or uncertainty; these risks arise out of variability of yields and uncertainty of appreciation
or depreciation of shares prices, losses of liquidity etc.
The risk over time can be represented by the variance of the returns. While the
returns over time is capital appreciation plus payout, divided by the purchase price of the
share.
27
Normally ,the higher the risk that the investor takes , the higher is the return. There is,
however, a risk less return on capital of about 12% which is the bank rate charged by the
R.B.I or long term , yielded on government securities at around 13% to 14% . This risk
less return refers to lack of variability of return and no uncertainty in the repayment or
capital . But other risks such as loss of liquidity due to parting with money etc., may
however remain , but are rewarded by the total return on the capital , Risk-return is
subject to variation and the objectives of the portfolio manager are to reduce that
variability and
thus reduce the risk by choosing an appropriate portfolio.
Traditional approach advocates that one security holds the better , it is according
to the modern approach diversification should not be quantity that should be related to the
quality of scripts which leads to quality of portfolio.
An asset’s total risk can be divided into systematic plus unsystematic risk, as shown
below
Systematic risk(diversifiable risk ) + unsystematic risk(diversified risk) =Total risk=
Var(r).
Unsystematic risk is that portion of the risk that is unique to the firm
( for example, risk due to strikes and management errors.) Unsystematic risk can be
reduced to zero by simple diversification.
Simple diversification is the random selection of securities that are to be added to
a portfolio. As the number of randomly selected securities added to a portfolio is
increased , the level of unsystematic risk approaches zero . However market related
systematic risk cannot be reduced by simple diversification . This risk is common to all
securities.
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Investor:
Are the people who are interested in investing their funds?
Portfolio managers:
Is a person who is in the wake of a contract agreement with a client, advises or
directs or undertakes on behalf of the clients, the management or distribution or
management of the funds of the client as the case may be.
Nature:
The portfolio manager carries out all the transactions pertaining to the investor
under the power of attorney during the last two decades , and increasing complexity was
witnessed in the capital market and its trading procedures in this context a key
(uninformed) (investor formed)investor found himself in a tricky situation, to keep track
of market movement, update his knowledge, yet stay in the capital market and make
money, therefore in looked forward to resuming help from portfolio manager to do the
job for him. The portfolio management seeks to strike a balance between risk and return.
The general rule is that greater risks more of the profit but S.E.B.I in its guidelines
prohibits portfolio managers to promise any return to investors.
29
● Only those who are registered and pay the required license fee are eligible to
operate as portfolio managers,
● An applicant for this purpose should have necessary infrastructure with
professionally qualified persons and with a minimum of two persons with
experience in this business and a minimum net worth or Rs.50 lakhs .
● The Certificate once granted is valid for three years. Fees payable for
registration are Rs. 2.5 lakhs every for two years and Rs. 1 lakh for the third
year From the fourth year onwards , renewal fees per annum are Rs. 75000/-.
The S.E.B.I has imposed a number of obligations and a code of conduct on them. The
portfolio manager should have a high standard of integrity., honesty and should not have
been convicted of any economic offence or moral turpitude. He should not resort to
rigging up of prices, insider trading or creating false markets, etc. their books of accounts
are subject to inspection to inspection and audit by S.E.B.I
● Advisory role:
Advice new investments, review the existing ones, identification of
objectives, recommending high yield securities etc.
30
managers should take into account the credit policy, industrial growth , foreign exchange,
possible change in corporate law etc.
● Financials analysis:
He should evaluate the financial statement of the company in order to
understand their net worth, future earnings, prospectus and strength.
● Study of industry:
He should study industry to know its future prospects, technical changes etc,
required for investment proposal he should also see the problems of the industry
whether the portfolio should comprise equity preference shares, debenture, convertibles,
than one type of proper mix ensures higher safety, yield and liquidity. Investors must
look forward , for qualification and performance and ability and research base of the
portfolio manager’s.
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1. Equity portfolio:
It is influenced by internal and external factors. The internal factors affecting the
inner working of the company’s growth plan’s are analyzed with reference to the Balance
sheet, profit & loss a/c ( account) of the company.
Among the external factor are change in the government policies , Trade cycle’s
Political stability etc
EPS = N OP ROF IT AF T ER T AX
OF EQU IT Y SHARES
MARKET PRICE:
One can estimate trends of earnings by EPS, which reflects the trend of earning
quality of company , dividend policy , and quality of management.
Price earning ratio indicates a confidence of the market about the company's future, a
high rating is preferable.
32
33
Requirement of portfolio:
Maintain adequate diversification when relative values of various securities in the
portfolio change. Incorporate new information relevant for return investment.
Expand or contrast the size of portfolio absorb funds or withdraw funds
Reflect changes in investor risk disposition.
34
Abstract
Leverage entails a unique set of risks, such as margin calls, which can force investors to
liquidate securities at adverse prices. Investors often seek to mitigate these risks by using
a leverage constraint in conventional mean-variance portfolio optimization.
Mean-variance optimization is unable to identify the portfolio offering the highest utility,
however, because it provides the investor with little guidance as to where to set the
leverage constraint. An alternative approach—the mean-variance-leverage optimization
model—lets the leverage-averse investor determine the optimal leverage level (and thus
the highest-utility portfolio) by balancing the portfolio’s expected return against the
portfolio’s volatility risk and its leverage risk.
Abstract
This article explores the roles of risk premia strategies in institutional equity portfolios,
not only as potential replacements for existing passive beta investments, but for certain
active mandates as well. The authors quantify the degree to which active equity manager
35
returns (alpha) can be captured by using long-only factor portfolios, as reflected by the
MSCI Risk Premia indices. Using 10 years of historical data from January 2002 to March
2012, the authors find that risk premia can account for a substantial portion of alpha: as
much as 80%. They also propose a portfolio construction framework for incorporating
active managers who deliver the highest alpha, once risk premia are accounted for.
Abstract
In this paper, the authors apply a continuous-time stochastic process model developed by
Shiryaev and Zhutlukhin for optimally stopping random price processes that appear to be
bubbles, defined as price increases that are largely based on the expectation of higher and
higher future prices. Futures traders, such as George Soros, attempt to trade such markets,
trying to exit near the peak from a starting long position. The model applies equally well
to the question of when to enter and exit a short position. In this article, the authors test
the model in two technology markets. These include the price of Apple computer stock
from various times in 2009–2012 after the local low of March 6, 2009, plus a market in
which the generally very successful bubble trader George Soros lost money by shorting
the NASDAQ-100 stock index too soon in 2000. The model provides good exit points in
both situations; these would have been profitable to speculators who employed the mode.
36
Abstract
The empirical evidence presented in this article suggested that it is potentially possible
for an informed trader in after-hours trading to earn abnormal returns from identifying
and investing in stocks with a positive earnings surprise. The strategy is based on a
simple (naïve) moving average time series forecast of earnings, conditional on the
moving average forecast and the last analysts forecast both being positive, and with the
former being larger than the latter. These are likely firms that have been either subject to
aggressive downward earning guidance or just firms for which analysts have become less
favorably inclined about earnings prospects. These findings should prove useful to
informed investors who trade or construct portfolios based on the information in earnings
surprises.
Abstract
This article covers a non-financial topic that is nonetheless vital to investment
professionals: how to avoid common cognitive errors and make better investment
decisions. It reviews the extensive academic literature on how people actually make
decisions and how they can make better decisions. It also provides recommendations
about how analysts and managers might apply these findings to active investing.
Actually make decisions and how they can make better decisions. It also provides
recommendations about how analysts and managers might apply these findings to active
investing.
A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while
37
Over the past couple of years, the Indian banking sector has displayed a high level of
resiliency in the face of high domestic inflation, rupee depreciation and fiscal uncertainty
in the US and Europe. In order to stimulate the economy and support the growth of the
banking sector, the Reserve Bank of India (RBI) adopted severe policy measures such as
increasing the key monetary policy rates such as repo and reverse repo 16 times since
April 2'009 to Oct 2011 and tightening provisioning requirements. Amidst this economic
scenario, the key challenge for the Indian banking system continues in improving their
operational efficiency and implementing prudent risk management practices. Some of the
key trends expected to emerge in the near future are as under-Economic slowdown likely
to impact the demand for credit
High interest rates, subdued industrial production and domestic consumption impacted
the growth of the Indian economy which slowed down from 8.4% in FY11 to 6.5%
during FY13.The scheduled commercial banks' (SCBs) overall credit grew at a slower
pace during FY12 at 17% y-o-y as compared to 21.5% registered during FYll.As per the
recent RBI data, the non-food bank credit increased by 15.5% in Oct 2012 over its
corresponding month previous year, as compared to 18.2% witnessed in Oct 2011 over its
corresponding month previous year. Similarly, credit to the industry and services sector
recorded a slower growth of 15.2% and 13.7% respectively as against 23.1% and 18.4%
38
during the same period. As per RBI's second quarter review of monetary policy for FY14,
the GDP growth estimates for FY14 is revised downwards from 6.5% forecasted earlier
to 5.8%.Any further slowdown in the Indian economic growth is likely to impact the
demand for bank credit.
Inflation continued to remain sticky and much above the RBI's comfort zone through-out
the year. In fact headline inflation as measured by WPI remained above 7.5% from Feb to
Oct 2013. As a result the RBI has kept the repo rate at an elevated level, reducing it by 50
basis points only once during 2012, in April-13 to support growth.
However, in order to support the flow of funds to the productive sectors of the economy
and ease the liquidity crunch in the banking system the RBI has cut the CRR by 175 basis
points during the course of the year which stands at 4.25%, as of Nov 2012. Given the
easing of international commodity prices, particularly of crude, decline in core inflation
as demand conditions moderate, there has been some steady moderation in inflation in the
recent period. As a result the RBI might decide to ease the policy rate at the end of Jan
13.
During FY13, asset quality of banks was severely impaired, as revealed by the steep
increase in non-performing assets (NPAs) of SCBs, particularly for public sector banks
(PSBs) owing to their significant exposure to troubled sectors such as power, aviation,
real estate and telecom. There was a significant increase noted in the NPA levels during
FY12. Gross NPAs recorded a growth of45.3% and net NPAs registered a y-o-y growth
of 55.6% during FY13. As per RBI, this increase was due to inadequate credit appraisal
process coupled with unfavorable economic situation in the domestic as well as foreign
market.
39
Apart from an increase in NPAs, the weakening asset quality trend was also apparent
from the significant increase in restructured assets. Restructured standard advances of the
SCBs, recorded a y-o-y growth of around 58.5% during FY13 and the ratio of
restructured standard advances to gross advances also increased from about 3.5% in
FY12 to 4.7% in FY13.
As per the recent data available with CDR cell as of Sep 2014, a total of 466 cases have
been referred to the cell, with 327 cases amounting to Rs. 1,873.9 bn have been approved
since the start of CDR mechanism. Of the total cases referred, 64 cases corresponding to
Rs. 311.2 bn were under finalization of restructuring packages as on Sep 2012 as
compared to 34 cases amounting to Rs. 264.5 bn as on Sep 2013.
The slowdown in the economy increases in the risk of default and restructuring of loans
can increase which could further lead to deterioration of asset quality. However,
implementation of stringent policies could prevent a sharp deterioration in asset quality.
Traditionally, banks have derived limited income from fee based services such as wealth
management, credit card services, treasury services, investment banking and advisory
services. However, as the economy is showing signs of slowdown and the demand for
credit is slowed banks are struggling to keep their margins intact. Also, with changing
times, consumer needs have changed with various avenues of investment available. This
is likely to increase banks' focus on offering fee based services as the earnings from such
services are more stable than interest bearing products and it also helps in mitigating risk
via diversification of products and services.
As per census 2011, a huge section of Indian population is still unbanked. The overall
percentage of households availing banking services in India stood at around 59% as on
2011, which means still over 40% of total households lack access to formal banking
40
services. This is largely driven by rural areas and/or low income group (LIG) population,
due to their financial illiteracy, low level of income and savings, lack of collateral and
absence of verifiable credit history.
Thus, in recent years, the RBI and Gol have increased its focus on providing formal
banking/financial services to the huge unbanked population. It is encouraging banks to
develop low cost products and services designed to suit the requirements of this group of
population.
RBI has undertaken several policy initiatives to promote financial inclusion, such as
encouraging opening of no-frills accounts, engaging intermediaries to provide financial
and banking services. In the course of action, there has been an increase in the number of
no-frill accounts for 50.3 mn in FY10 to 105.5 mn in FY12, registering a CAGR of
44.8% during this period. Similarly, the number of business correspondent (BC) agents
also noted a CAGR of 70.2% during the same period.
RBI also advised banks to allocate minimum 25% of the total new branches in unbanked
rural centres during a year. In the process, the number of banking outlets in villages with
populations above 2,000 and less than 2,000 also witnessed a CAGR of 73.5% and 55.7%
during FY10 to FY12.
Further, in India there are several micro-finance institutions (MFIs) and self-help groups
(SHGs) which lend credit to the LIG. This is expected to play a significant role in
achieving financial inclusion by extending credit to the LIG.
The level of government regulation of the banking industry varies widely, with countries
such as Iceland, having relatively light regulation of the banking sector, and countries
such as China having a wide variety of regulations but no systematic process that can be
followed typical of a communist system.
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The oldest bank still in existence is Monte deiPaschi di Siena, headquartered in Siena,
Italy, which has been operating continuously since 1472.
HISTORY
The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above a
desk covered by a green tablecloth. However, there are traces of banking activity even in
ancient times, which indicates that the word 'bank' might not necessarily come from the
word 'banco'.
In fact, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards called
marcella on a long bench called a bancu, from which the words banco and bank are
derived. As a moneychanger, the merchant at the bancu did not so much invest money as
merely convert the foreign currency into the only legal tender in Rome—that of the
Imperial Mint.
In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and
a bank.
42
Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.
Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks that provide
payment services such as remittance companies are not normally considered an adequate
substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a
significant and in many cases adequate substitute for bank loans, and money market
funds, cash management trusts and other non-bank financial institutions in many cases
provide an adequate substitute to banks for lending savings to.
Entry Regulation
Usually the definition of the business of banking for the purposes of regulation is
extended to include acceptance of deposits, even if they are not repayable to the
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Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not
the case. In the UK, for example, the Financial Services Authority Licensed banks, and
some commercial banks (such as the Bank of Scotland) issue their own banknotes in
addition to those issued by the Bank of England, the UK government's central bank.
Definition
Under English common law, a banker is defined as a person who carries on the business
of banking, which is specified as:
In most English common law jurisdictions there is a Bills of Exchange Act that codifies
the law in relation to negotiable instruments, including cheques, and this Act contains a
statutory definition of the term banker: banker includes a body of persons, whether
incorporated or not, who carry on the business of banking' (Section 2, Interpretation).
Although this definition seems circular, it is actually functional, because it ensures that
the legal basis for bank transactions such as cheques do not depend on how the bank is
organised or regulated.
The business of banking is in many English common law countries not defined by statute
but by common law, the definition above. In other English common law jurisdictions
there are statutory definitions of the business of banking or banking business. When
44
looking at these definitions it is important to keep in mind that they are defining the
business of banking for the purposes of the legislation, and not necessarily in general. In
particular, most of the definitions are from legislation that has the purposes of entry
regulating and supervising banks rather than regulating the actual business of banking.
However, in many cases the statutory definition closely mirrors the common law one.
1. receiving from the general public money on current, deposit, savings or other
similar account repayable on demand or within less than [3 months] ... or with a
period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers[6]
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit,
direct debit and internet banking, the cheque has lost its primacy in most banking systems
as a payment instrument. This has led legal theorists to suggest that the cheque based
definition should be broadened to include financial institutions that conduct current
accounts for customers and enable customers to pay and be paid by third parties, even if
they do not pay and collect cheques.
Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and
45
credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets
and Expenses. This means you credit a credit account to increase its balance, and you
debit a debit account to decrease its balance.
This also means you debit your savings account every time you deposit money into it
(and the account is normally in deficit), while you credit your credit card account every
time you spend money from it (and the account is normally in credit).
However, if you read your bank statement, it will say the opposite—that you credit your
account when you deposit money, and you debit it when you withdraw funds. If you have
cash in your account, you have a positive (or credit) balance; if you are overdrawn, you
have a negative (or deficit) balance.
The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the bank's liability, so they are credit accounts (which
should have a positive balance). Conversely, your loans are your liabilities but the bank's
assets, so they are debit accounts (which should also have a positive balance).
Where bank transactions, balances, credits and debits are discussed below, they are done
so from the viewpoint of the account holder—which is traditionally what most people are
used to seeing.
Economic Functions
1. Issue of money, in the form of banknotes and current accounts subject to cheque
or payment at the customer's order. These claims on banks can act as money
because they are negotiable and/or repayable on demand, and hence valued at par.
They are effectively transferable by mere delivery, in the case of banknotes, or by
drawing a cheque that the payee may bank or cash.
2. Netting and settlement of payments – banks act as both collection and paying
agents for customers, participating in interbank clearing and settlement systems to
collect, present, be presented with, and pay payment instruments. This enables
46
banks to economise on reserves held for settlement of payments, since inward and
outward payments offset each other. It also enables the offsetting of payment
flows between geographical areas, reducing the cost of settlement between them.
3. Credit intermediation – banks borrow and lend back-to-back on their own account
as middle men.
4. Credit quality improvement – banks lend money to ordinary commercial and
personal borrowers (ordinary credit quality), but are high quality borrowers. The
improvement comes from diversification of the bank's assets and capital which
provides a buffer to absorb losses without defaulting on its obligations. However,
banknotes and deposits are generally unsecured; if the bank gets into difficulty
and pledges assets as security, to raise the funding it needs to continue to operate,
this puts the note holders and depositors in an economically subordinated
position.
5. Maturity transformation – banks borrow more on demand debt and short term
debt, but provide more long term loans. In other words, they borrow short and
lend long. With a stronger credit quality than most other borrowers, banks can do
this by aggregating issues (e.g. accepting deposits and issuing banknotes) and
redemptions (e.g. withdrawals and redemptions of banknotes), maintaining
reserves of cash, investing in marketable securities that can be readily converted
to cash if needed, and raising replacement funding as needed from various sources
(e.g. wholesale cash markets and securities markets).
Law of Banking
Banking law is based on a contractual analysis of the relationship between the bank
(defined above) and the customer—defined as any entity for which the bank agrees to
conduct an account.
The law implies rights and obligations into this relationship as follows:
47
1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the
customer; when the account is overdrawn, the customer owes the balance to the
bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to the
credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the
customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the customer's
account.
5. The bank has a right to combine the customer's accounts, since each account is
just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent
that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's
account—unless the customer consents, there is a public duty to disclose, the
bank's interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular
jurisdiction may also modify the above terms and/or create new rights, obligations or
limitations relevant to the bank-customer relationship.
Some types of financial institution, such as building societies and credit unions, may be
partly or wholly exempt from bank licence requirements, and therefore regulated under
separate rules.
48
The requirements for the issue of a bank licence vary between jurisdictions but typically
include:
1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or
senior officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.
Types of Banks
Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth
management services to high net worth individuals and families; and investment banking,
relating to activities on the financial markets. Most banks are profit-making, private
enterprises. However, some are owned by the government, or are non-profit
organizations.
● Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that
banks only engage in banking activities, whereas investment banks were limited
to capital market activities. Since the two no longer have to be under separate
49
ownership, some use the term "commercial bank" to refer to a bank or a division
of a bank that mostly deals with deposits and loans from corporations or large
businesses.
● Community Banks: locally operated financial institutions that empower
employees to make local decisions to serve their customers and the partners.
● Community development banks: regulated banks that provide financial services
and credit to under-served markets or populations.
● Postal savings banks: savings banks associated with national postal systems.
● Private banks: banks that manage the assets of high net worth individuals.
● Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
● Savings bank: in Europe, savings banks take their roots in the 19th or sometimes
even 18th century. Their original objective was to provide easily accessible
savings products to all strata of the population. In some countries, savings banks
were created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Nowadays, European
savings banks have kept their focus on retail banking: payments, savings
products, credits and insurances for individuals or small and medium-sized
enterprises. Apart from this retail focus, they also differ from commercial banks
by their broadly decentralized distribution network, providing local and regional
outreach—and by their socially responsible approach to business and society.
● Building societies and Landesbanks: institutions that conduct retail banking.
● Ethical banks: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.
● Islamic banks: Banks that transact according to Islamic principles.
50
● Investment banks "underwrite" (guarantee the sale of) stock and bond issues,
trade for their own accounts, make markets, and advise corporations on capital
market activities such as mergers and acquisitions.
● Merchant banks were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in the
form of shares rather than loans. Unlike venture capital firms, they tend not to
invest in new companies.
Both Combined
51
CHAPTER-III
52
COMPANY PROFILE
Established in 1985, the Kotak Mahindra group has been one of India's most reputed
financial conglomerates. In February 2003, Kotak Mahindra Finance Ltd, the group's
flagship company was given the license to carry on banking business by the Reserve
Bank of India (RBI). This approval created banking history since Kotak Mahindra
Finance Ltd. is the first non–banking finance company in India to convert itself into a
bank as Kotak Mahindra Bank Ltd. Today, the bank is one of the fastest growing banks
and among the most admired financial institutions in India.
The bank has over 323 branches and a customer account base of over 2.7 million. Spread
all over India, not just in the metros but in Tier II cities and rural India as well, it is
redefining the reach and power of banking. Presently it is engaged in commercial
banking, stock broking, mutual funds, life insurance and investment banking. It caters to
the financial needs of individuals and corporates. The bank has an international presence
through its subsidiaries with offices in London, New York, Dubai, Mauritius, San
Francisco and Singapore that specialize in providing services to overseas investors
seeking to invest into India.
53
● The bank offers complete financial solutions for infinite needs of all individual
and non–individual customers depending on the customer's need – delivered
through a state of the art technology platform. Investment products like Mutual
Funds, Life Insurance, retailing of gold coins and bars etc are also offered. The
bank follows a mix of both open and closed architecture for distribution of the
investment products. All this is backed by strong, in–house research on Mutual
Funds.
● The bank’s savings account goes beyond the traditional role of savings, and
allows us to put aside a lot more than just money. The worry–free feature of
Savings Account provides a range of services from funds transfer, bill
payments, 2–way sweep through our ActivMoney feature and much more. We
can place standing instructions for investment options that can be booked
through the Internet or through Phone banking services. The Savings Account
thus provides for attractive returns earned through a comprehensive suite of
products and services that offer investment options, all delivered seamlessly to
the customer by well integrated technology platforms.
● Apart from Phone banking and Internet banking, the Bank offers convenient
banking facilities through Mobile banking, SMS services, Netc@rd, Home
banking and BillPay facility among others.
● The Depository services offered by the Bank allows the customers to hold
equity shares, government securities, bonds and other securities in electronic or
Demat forms.
● The Salary 2 Wealth offering provides comprehensive administrative solutions
for Corporates with features such as easy and automated web based salary
upload process thereby eliminating the paperwork involved in the process, a
dedicated relationship manager to service the corporate account, customized
promotions and tie – ups and many such unique features. The whole gamut of
investment products and investment advisory services is available to the salary
account holders as well.
54
● For the business community, the bank offers comprehensive business solutions
that include the Current Account, Trade Services, Cash Management Service
and Credit Facilities. The bank’s wholesale banking products offer business
banking solutions for long–term investments and working capital needs, advice
on mergers and acquisitions and equipment financing. To meet special needs of
the rural market, the bank has dedicated business offerings for agricultural
financing and infrastructure. Its Agriculture Finance division delivers
customised products for capital financing and equipment financing needs of our
rural customers.
● For financial liquidity the bank offers loans that meet personal requirements
with quick approval and flexible payment options. To complete the personal
financial offerings space, the bank now offers Kotak Credit Card which is a
hassle–free, transparent product that also happens to be the first vertical credit
card in the industry.
● Kotak Mahindra Bank addresses the entire spectrum of financial needs of
Non–Resident Indians. The bank has tie–up with the Overseas Indian
Facilitation Centre (OIFC) as a strategic partner, which gives them a platform
to share their comprehensive range of banking and investment products and
services for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
Their Online Account Opening facility and Live Chat service helps to get in
touch at the comfort of homes and at the convenience. These offerings are
specifically designed to suit the overseas Indian's personal financial needs and
give the global Indians a near to home feel.
In 1985, Uday Kotak founded what later became an Indian financial services
conglomerate. In February 2003, Kotak Mahindra Finance Ltd. (KMFL), the group's
flagship company, received a banking licence from the Reserve Bank of India (RBI).
With this, KMFL became the first non-banking finance company in India to be converted
into a bank: Kotak Mahindra Bank Limited.
In a study by Brand Finance Banking 500 published in February 2014 by Banker
magazine (from The Financial Times stable), KMBL was ranked 245th among the
55
world's top 500 banks with brand valuation of around half a billion dollars ($481 million)
and brand rating of AA+.
Vision:
The customers will enjoy the benefits of dealing with a global Indian brand that best
understands their needs and delivers customised pragmatic solutions across multiple
platforms.
We are a world class Indian financial services group. Our technology and best practices
are bench-marked along international lines while our understanding of customers will be
uniquely Indian.
We are more than a repository of our customers' savings. We, the group, are a single
window to every financial service in a customer's universe.
Working with a home grown professionally managed company, which has benefited from
partnerships with international leaders, gives our people a perspective that is universal as
well as unique.
We have created an ethos of trust across all our constituents. Adhering to high standards
of compliance and corporate governance is an integral part of building trust.
Value Creation
Value creation rather than size alone will be our business driver.
Mission:
56
Statement of commitment:
Corporate Social Responsibility
57
including special education. Education will remain the primary CSR focus area for
the Bank, and the initiatives will focus on providing financial and other resources
support to schools by providing infrastructure including school buses, scholarships
and coaching to deserving children, parents, teachers, headmasters, principals and
administrators to provide holistic learning environment for children at school and
home. This will also include providing mid-day meals and creating relevant
infrastructure such as specialised food delivery vans, utensils, kitchens,
warehouses etc and other required nutrition and health related support to the
children. The education initiatives will be primarily implemented through Kotak
Education Foundation (KEF) as well as other identified implementing agencies
and by the Bank's CSR team.
● Enhancing vocational skills and livelihood projects: The Bank will work towards
imparting vocational skills to deserving children and youth, women, elderly, and
the differently-abled. The programmes/projects will aim at holistic development
of these children and youth, women, elderly, and the differently-able through
technical and soft skills and enhances their livelihood opportunities. The
vocational skills and livelihood projects in agri-based vocations such as farming,
dairy, etc. will be implemented through Kotak Education Foundation (KEF), BVV
Sangha Kotak Mahindra Bank Rural Self Employment Training Institute (RSETI),
government agencies, and the Bank's CSR team, and other not for profit
organisations, NGOs, and such other agencies who work in the interest of the
community in this space.
● Promoting preventive healthcare and sanitation: The Bank will undertake
projects/programmes directly and/or through implementing agencies working in
healthcare and sanitation domain including but not limited to improving access to
healthcare facilities by providing ambulances, screening vans, mobile health units
etc, providing preventive and curative care including palliative care, health
check-up camps for various age groups to spread awareness towards cancer
prevention, HIV/AIDS, Tuberculosis, Malaria and other communicable and
non-communicable diseases and illnesses, providing health check-ups for children
covered under education initiatives and sensitizing the children on personal and
community health and hygiene. On a case by case basis, the Bank will also
undertake projects/programmes in the fields of healthcare, sanitation, eradication
of hunger and malnutrition, and provision of access to safe drinking water. The
Bank will also conduct periodic blood donation drives.
● Reducing inequalities faced by socially and economically backward groups: The
Bank directly and/or through implementing agencies will support
projects/programmes towards rehabilitating socially and economically backward
sections of society by providing safe houses through community house building
initiatives. The Bank and its subsidiaries shall also support NGOs working
towards promoting gender equality, empowering women, setting up homes and
58
hostels for women and orphans, anganwadis, panchayats, community halls, setting
up old age homes, day care centres and other such facilities for senior citizens, and
reducing inequalities faced by socially and economically backward groups
including tribal, marginal / landless farmers, landless labourers, such people who
are below the poverty line across all segments.
● Sustainable Development: The Bank directly and/or through implementing
agencies including Kotak Education Foundation will support projects/programmes
towards sustainable development or sustainability activities such as tree plantation
either directly or through an external stakeholder / NGO. The Bank and its
subsidiaries shall provide support to NGOs working towards maintaining
ecological balance, protection of flora and fauna, animal welfare, agriculture,
agroforestry, forestry, conservation of natural resources and maintaining quality of
soil, air and water including investing in projects/programmes for water
conservation/ harvesting, adopting green technologies, waste reduction, recycling
and reusing (3Rs) and renewable energy. Further, the Bank will extend support to
Not for Profit Organisations, NGOs, Institutes, Institutional Bodies and other such
organisations that are committed to and work in areas of Environmental Social
Governance (ESG), Sustainability, CSR either through direct activities or in the
form of advisory, policy advocacy and stakeholder awareness etc.
● Relief and Rehabilitation: In cases of natural calamities and disasters, the Bank
will support relief and rehabilitation activities undertaken by the Prime Minister's
National Relief Fund, Chief Minister's Relief Fund or any Central or State
Government Body / Bodies or NGOs, Corporate entity or a group of Corporates
including the Bank for the Kotak Education Foundation directly.
● Clean India: The Bank will work directly and/or through implementing agencies
including Kotak Education Foundation working towards making India clean but
not limited to initiatives such as Swacch Bharat Kosh, Clean Ganga Fund, etc.
This would encompass a broad spectrum of initiatives including cleaning of roads,
bus stations, railway platforms and such other public facilities, building
community toilets and public sanitation facilities, cleaning Ganga and other rivers,
education and awareness generation on personal, household and environmental
sanitation.
● Sports: The Bank through Kotak Education Foundation or through NGOs and/or
not for profit Organisations support rural sports, nationally recognized sports,
Paralympic sports and Olympic sports including the training and development of
sportsmen of the said sports.
59
● The fund utilization report will conform to the format prescribed U/S 134 and U/S
135 of Companies Act, 2013 and as per the updates/revised notification(s) issued
by the Ministry of Corporate Affairs from time to time.
● The CSR team will ensure compliance and keep the CSR Committee and the
Board informed on CSR activities and CSR spends. In the event of a nil or no
activity or no expenditure the same will also be notified to the Board.
811 :
60
Investment:
ICAI Award – Excellence in Financial Reporting under Category 1 – Banking Sector for
the year ending 31st March, 2010
Asiamoney – Best Local Cash Management Bank 2010
IDG India – Kotak won the CIO 100 'The Agile 100' award 2010
IDRBT
IR Global Rankings – Best Corporate Governance Practices – Ranked among the top 5
companies in Asia Pacific, 2009
FinanceAsia – Best Private Bank in India, for Wealth Management business, 2009
Kotak Royale Signature Credit Card – Was chosen 'Product of the Year' in a survey
conducted by Nielsen in 2009
IBA Banking Technology Awards
61
● 1986 – Kotak Mahindra Finance Ltd started the activity of Bill Discounting
● 1987 – Kotak Mahindra Finance Ltd entered the Lease and Hire Purchase
market
● 2003 – Kotak Mahindra Finance Ltd. converted into a commercial bank – the
first Indian company to do so.
● 2009 – Kotak Mahindra Bank Ltd. opened a representative office in Dubai.
Entered Ahmedabad Commodity Exchange as anchor investor.
Mutual fund (MF) is a mechanism for pooling money by issuing units to the investors
and investing funds in securities in accordance with objectives disclosed in the offer
document.
62
Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is diversified because all stocks may not move in the same direction in
the same proportion at the same time. Mutual funds issue units to the investors in
accordance with the quantum of money invested by them. Investors of mutual funds are
known as unitholders.
Investors in proportion to their investments share the profits or losses. Mutual funds
normally come out with a number of schemes, which are launched from time to time with
different investment objectives. A mutual fund is required to be registered with the
Securities and Exchange Board of India (SEBI) before it can collect funds from the
public.
What is KYC and how to get KYC verified for mutual funds investment?
Know Your Client (KYC) registration is mandatory for all investors as per SEBI
guidelines. KYC is being centralized through KYC Registration Agencies (KRAs)
registered with SEBI. With this, each investor has to undergo the KYC process only once
in the securities market and the details would be shared with other intermediaries by the
KRAs.
Investment Account
The Investment Account is a unique facility where you can view your
portfolio of Mutual Funds online on a daily basis. With your Kotak
Investment Account you can:
63
Kotak Mahindra Bank Ltd is acquiring ING Vysya Bank Ltd in an all-stock
transaction that will create India’s fourth largest private sector lender with
nearly ₹ 2 trillion of assets and 10 million customers.
The deal entails the swap of 725 Kotak Mahindra shares for every 1,000 shares
in ING Vysya. It has been struck at a 16% premium to the one month-average
share price of ING Vysya, valuing the lender at $2.5 billion and making it the
biggest bank acquisition in India.
The transaction will create a lender with 1,200 branches and a combined
deposit base of ₹ 1.1 trillion. The combined entity will be the largest private
64
sector lender in India by assets after ICICI Bank Ltd, HDFC Bank Ltd and Axis
Bank Ltd.
We had a target of building 1,000 branches by 2016 and this deal enables us to
achieve it more quickly," said Uday Kotak, executive vice-chairman and
managing director of Kotak Mahindra Bank. “Kotak will get access to ING
Vysya’s SME (small and medium enterprises) business which is its strength.
We will also learn from their digital banking. The focus will be on cost
efficiency and not cost-cutting."
A key benefit of the deal for Kotak Mahindra will be the wider reach it will
gain, particularly in southern India. Until now, 80% of the bank’s branches
have been concentrated in the west and the north, while only 15% were in the
south. ING Vysya has 64% of its branches in the south.
65
The deal between Kotak Mahindra Bank and ING Vysya may spark hopes of
wider consolidation in the banking sector, although bank mergers have been
few and far between. A number of older private sector banks like Federal Bank
Ltd, South Indian Bank Ltd and Catholic Syrian Bank have been considered
merger candidates in the past. Consolidation among public sector banks has
been limited to mergers of weak banks with stronger ones at the behest of RBI.
66
Management of Kotak
3 C Jayaram Director
67
CHAPTER-IV
68
GRAPHICAL REPRESENTATION
RETURN (X-XBA
S NO Date NAV S (X-XBAR) R)2 SD
1 3-Dec-19 152.42 0.31 0.69 0.47
2 4-Dec-19 153.66 0.82 1.20 1.43
3 5-Dec-19 154.57 0.59 0.97 0.93
4 6-Dec-19 154.47 -0.06 0.31 0.10
5 7-Dec-19 155.35 0.57 0.95 0.89
6 10-Dec-19 154.96 -0.25 0.13 0.02
7 11-Dec-19 153.79 -0.76 -0.38 0.14
8 12-Dec-19 150.46 -2.17 -1.79 3.20
9 13-Dec-19 149.50 -0.64 -0.26 0.07
10 14-Dec-19 149.33 -0.11 0.27 0.07
11 17-Dec-19 153.19 2.58 2.96 8.75
12 18-Dec-19 153.28 0.06 0.44 0.19
13 19-Dec-19 151.62 -1.08 -0.71 0.50
14 20-Dec-19 150.85 -0.51 -0.13 0.02
15 21-Dec-19 148.96 -1.25 -0.87 0.76
16 24-Dec-19 145.58 -2.27 -1.89 3.59
17 26-Dec-19 145.88 0.21 0.58 0.34
18 28-Dec-19 145.43 -0.31 0.07 0.00
19 31-Dec-19 141.23 -2.89 -2.51 6.32
MEAN -0.38 VARIANCE 1.46 1.21
69
GRAPHICAL REPRESENTATION
Interpretation
The above graph represents the returns of ICICI PRUDENTIAL MUTUAL FUNDS . It
shows that there is continuous rise and fall in net asset value. If we see the table the
monthly mean is -0.38 with price variation of 1.46 and risk factor being 1. Thus it can be
said that risk is very high when compared to returns.
70
71
GRAPHICAL REPRESENTATION
Interpretation
The above graph represents the returns of KOTAK income fund. It shows that there is
continuous rise and fall in net asset value. If we see the table the monthly mean is 0.13
with price variation of 1.20 and risk factor being 1.09 Thus it can be said that risk is very
high when compared to returns.
72
73
GRAPHICAL REPRESENTATION
Interpretation
The above graph represents the returns of the TATA income fund. It shows that there is
continuous rise and fall in net asset value. If we see the table the monthly mean is 0.08
with price variation of 0.57 and risk factor being 0.75 thus it can be said that risk is very
high when compared to returns.
74
correlation
∑XY 0.63
∑X^2∑Y^2 0.42 0.65
CORRELATION( r ) 0.97
75
Interpretation
The above graph represents the correlation between KOTAK STANDARD MULTICAP
FUNDS & TATA BANKING AND FINANCIAL SERVICES FUNDS; it reveals that
there exists a positive correlation between both the companies in the half of the year.
Here the correlation lies below 1 which indicates a good correlation, thus we can say that
both the companies are going according to market conditions.
76
X=(X-ME Y=(Y-ME
S NO KOTAK ICICI AN) AN) X*Y X^2 Y^2
1 JUL 0.09 0.44 -0.02 0.30 0.00 0.00 0.09
2 AUG -0.54 -0.38 -0.64 -0.52 0.33 0.41 0.27
3 SEP -0.02 -0.02 -0.13 -0.17 0.02 0.02 0.03
4 OCT 0.47 0.37 0.37 0.22 0.08 0.14 0.05
5 NOV 0.48 0.34 0.38 0.20 0.07 0.14 0.04
6 DEC 0.13 0.11 0.03 -0.03 0.00 0.00 0.00
MEAN
X 0.10 ∑X ∑Y ∑XY ∑X^2 ∑Y^2
MEAN
Y 0.14 0.00 0.00 0.51 0.71 0.48
CORRELATION
∑XY 0.51
CORRELATION( r ) 0.871275
77
Interpretation
The above graph represents the correlation between KOTAK STANDARD MULTICAP
FUNDS & ICICI PRUDENTIAL MUTUAL FUNDS; it reveals that there exists a positive
correlation between both the companies in the half of the year. Here the correlation lies
below 1 which indicates a good correlation, thus we can say that both the companies are
going according to market conditions.
78
Y=(Y-MEAN
S NO ICICI TATA X=(X-MEAN) ) X*Y X^2 Y^2
1 JUL 0.44 0.15 0.30 0.05 0.02 0.09 0.00
2 AUG -0.38 -0.48 -0.52 -0.58 0.30 0.27 0.34
3 SEP -0.02 0.00 -0.17 -0.11 0.02 0.03 0.01
4 OCT 0.37 0.31 0.22 0.21 0.05 0.05 0.05
5 NOV 0.34 0.55 0.20 0.44 0.09 0.04 0.20
6 DEC 0.11 0.08 -0.03 -0.02 0.00 0.00 0.00
MEAN X 0.14 ∑X ∑Y ∑XY ∑X^2 ∑Y^2
MEAN
Y 0.10 0.00 0.00 0.47 0.48 0.59
CORRELATION
∑XY 0.47
∑X^2∑Y^2 0.28 0.532525268
CORRELATION( r ) 0.886362
79
Interpretation
The above graph represents the correlation between ICICI PRUDENTIAL MUTUAL
FUNDS & TATA BANKING AND FINANCIAL SERVICES FUNDS; it reveals that
there exists a positive correlation between both the companies in the first of the year.
Here the correlation lies below 1 which indicates a good correlation, thus we can say that
both the companies are going according to market conditions.
80
CHAPTER-V
5.1 FINDINGS
5.2 SUGGESTIONS
5.3 CONCLUSIONS
81
5.1 FINDINGS
82
5.2 SUGGESTIONS
❖ Buy stock with a disparity and discrepancy between the situation of the firm - and
the expectations and appraisal of the public (Contrarian approach vs. Consensus
approach).
❖ Don’t put your trust in only one investment. It is like “putting all the eggs in one
basket “. This will help lessen the risk in the long term.
❖ The investor must select the right advisory body which has sound knowledge
Professionalized research, analysis which will be helpful for reducing any kind of
risk to overcome.
83
5.3 CONCLUSION
• In the six months July-Dec there exists a positive correlation between Kotak &
Tata (0.97).
• In the first half of july-Dec there is a positive correlation between Kotak and icici
(0.87).
• In the first six months July-Dec there exists a positive correlation between icici
and Tata (0.88).
84
BIBLIOGRAPHY
1. INVESTMENT MANAGEMENT
-William .F.Sharpe,gordon,Alexander and
Jeffery.V.Bailey
2. PORTFOLIO MANAGEMENT
-Strong R.A
MAGAZINES
● Investors
● Business India
● The Indian Banker
E-NEWSPAPER
● Economic times
● Business standard
● The Hans India
● The Hindu
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WEB REFERENCES
● www.nseindia.com
● www.bseindia.com
● www.economictimes.com
● www.answers.com
● www.ing.com
● www.google.com
● WWW.KOTAK.COM
● www.kotakmahindrabank.com
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