212 - F - Aditya Birla-A Study On Portfolio Management at Aditya Birla Group

A STUDY ON PORTFOLIO MANAGEMENT
AT ADITYA BIRLA GROUP
ABSTRACT
Portfolio management entails choosing from alternatives the best securities or projects to
invest in order to maximize wealth. An investment manager has to choose good securities
based on risk and return characteristics of the securities. The role of investment analysis
and portfolio management extends to making decisions on the stocks to hold on, scale up
investment or to sell. A investment manager may also decide to combine several
securities in order to reduce the risks of the investment. In deciding which securities to
combine, one has to carry out correlation analysis of the various stocks in order to know
which securities to invest in. Investment analysis and portfolio management process is
done in steps which are gathering of information, analysis of the information, making a
choice, investing in the securities chosen and then managing the investment. In this
project, we will analyze the stocks of six companies listed on NSE and make 2 portfolios
using three securities in each. Then the risk – return is compared and contrasted to make
recommendations on the best stocks to invest in and also recommend on the target price
for reselling. The project tracked share prices of six securities – RIL, BHEL, WIPRO,
Jindal Steel, Tech Mahindra & Crompton Greaves. The two portfolios gave similar risk-
return profiles. Though the second portfolio had inverse correlation between 2 stocks and
so Markowitz Diversification was observed. In the stock market, in order to earn higher
returns one must carefully select stocks to create a portfolio. Systematic and non-
systematic risks will impact portfolio risk and return. Though not too simplistic, security
analysis and portfolio management is not rocket science either. Basic principle is to buy
undervalued stocks and sell over valued ones. To reduce risk, diversify across asset classes
and industries. However, the simple maxim of investing is to earn more, bear more risk.
1
CONTENTS
CHAPTER NO NAME OF THE CHAPTER PAGE NOS.
CHAPTER-I INTRODUCTION 03
Need Of The Study
Scope Of The Study
Objectives Of The Study
Research Methodology
Limitations Of The Study
CHAPTER -II REVIEW OF LITERATURE 14
CHAPTER -III INDUSTRY & COMPANY PROFILE 32
CHAPTER - IV DATA ANALYSIS AND INTERPRETATION 47
CHAPTER -V CONCLUSION, FINDINGS & 61

SUGGESTIONS
APPENDICES QUESTIONNAIRE, 65
BIBLIOGRAPHY
2
CHAPTER I
INTRODUCTION
3
INTRODUCTION
CONCEPT OF PORTFOLIO:
Portfolio is the collection of financial or real assets such as equity shares, debentures,
bonds, treasury bills and property etc. portfolio is a combination of assets or it consists of
collection of securities. These holdings are the result of individual preferences, decisions
of the holders regarding risk, return and a host of other considerations.
PORTFOLIO MANAGEMENT
 An investor considering investment in securities is faced with the problem of
choosing. From among a large number of securities. His choice depends upon the risk
return characteristics of individual securities. He would attempt to choose the most
desirable securities and like to allocate his funds over his group of securities. Again he is
faced with the problem of deciding which securities to hold and how much to invest in
each.
 The investor faces an infinite number of possible portfolio or group of securities.

The risk and return characteristics of portfolios differ from those of individual securities
combining to form a portfolio. The investor tries to choose the optimal portfolio taking
into consideration the risk-return characteristics of all possible portfolios.
 As the economic and financial environment keeps the changing the risk return
characteristics of individual securities as well as portfolio also change. An investor invests
his funds in a portfolio expecting to get a good return with less risk to bear.
 Portfolio management concerns the construction & maintenance of a collection of

investment. It is investment of funds in different securities in which the total risk of the
Portfolio is minimized while expecting maximum return from it. It primarily involves
reducing risk rather that increasing return. Return is obviously important though, and the
ultimate objective of portfolio manager is to achieve a chosen level of return by incurring
the least possible risk.
4
FEATURES OF PORTFOLIO MANAGEMENT
 The objective of portfolio management is to invest in securities in such a way that
one maximizes one's return and minimizes risks in order to achieve one's investment
objective.
 I) Safety of the investment: the first important objective investment safety or

minimization of risks is of the important objective of portfolio management. There are
many types of risks. Which are associated with investment in equity stocks, including
super stocks there is no such thing called Zero-risk investments moreover relatively low -
risk investment give corresponding lower the returns.
 2) Stable current returns: Once investment safety is guaranteed, the portfolio should
yield a steady current income. The current returns should at least match the opportunity
cost of the funds of the investor. What we are referring to here is current income by of
interest or dividends, not capital gains.
 3) Appreciation in the value of capital: A good portfolio should appreciate in value

in order to protect the investor from erosion in purchasing power due to inflation. In other
words, a balance portfolio must consist if certain investment, which tends to appreciate in
real value after adjusting for inflation.
 4) Marketability: A good portfolio consists of investment, which can be marketed

without difficulty. If there are too many unlisted or inactive share in your portfolio, you
will face problems in enchasing them, and switching from one investment to another. It is
desirable to invest in companies listed on major stock exchanges, which are actively
traded.
 5) Liquidity: The portfolio should ensure that there are enough funds available at
the short notice to take of the investor's liquidity requirements.
 6) Tax Planning: Since taxation is an important variable in total planning, a good

portfolio should let its owner enjoy favorable tax shelter. The portfolio should be
developed considering income tax, but capital gains, gift tax too. What a good portfolio
aims at is tax planning, not tax evasion or tax avoidance.
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For making proper investment involving both risk and return, the investor has to make
study of the alternative avenues of the investment-their risk and return characteristics, and
make a proper projection or expectation of the risk and return of the alternative
investments under consideration. He has to tune the expectations to this preference of the
risk and return for making a proper investment choice. The process of analyzing the
individual securities and the market as a whole and estimating the risk and return expected
from each of the investments with a view to identify undervalues securities for buying and
overvalues securities for selling is both an art and a science that is what called security
analysis.
SECURITY:
The security has inclusive of shares, scripts, bonds, debenture stock or any other
marketable securities of like nature in or of any debentures of a company or body
corporate, the government and semi government body etc.
In the strict sense of the word, a security is an instrument of promissory note or a method
of borrowing or lending or a source of contributing to the funds need by a corporate body
or non-corporate body, private security for example is also a security as it is a promissory
note of an individual or firm and gives rise to claim on money. But such private securities
of private companies or promissory notes of individuals, partnership or firm to the intent
that their marketability is poor or nil, are not part of the capital market and do not
constitute part of the security analysis.
ANALYSIS OF SECURITIES:
Security analysis in both traditional sense and modern sense involves the projection of
future dividend or ensuring flows, forecast of the share price in the future and estimating
the intrinsic value of a security based on the forecast of earnings or dividend.
Security analysis in traditional sense is essentially on analysis of the fundamental value of

shares and its forecast for the future through the calculation of its intrinsic worth of share.
6
Modern security analysis relies on the fundamental analysis of the security, leading to its
intrinsic worth and also rise-return analysis depending on the variability of the returns,
covariance, safety of funds and the projection of the future returns.
If the security analysis based on fundamental factors of the company, then the forecast of
the share price has to take into account inevitably the trends and the scenario in the
economy, in the industry to which the company belongs and finally the strengths and
weaknesses of the company itself. Its management, promoters backward, financial results,
projection of expansion, term planning etc.
APPROACHES TO SECURITY ANALYSIS:

 Fundamental Analysis
 Technical Analysis
 Efficient Market Hypothesis
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NEED OF THE STUDY
Portfolio Management has been a popular field in the west, given its insatiable appetite for
capital and inherent culture of entrepreneurship. India’s economic growth, particularly due
to the service sector, has brought in a class of economically well-off professionals &
entrepreneurs who are keen to stretch the value of their rupee. Given the inflationary
pressure on savings and consistent need for capital to meet professional & personal goals,
this class of Indians is now looking at the secondary market to invest for long-term gains.
Online demat trading has literally brought the stock market to the investors’ home. Many
young professionals are keen to learn about investing in equities as they want to fulfil their
financial goals within a shorter period of time, if possible. The purpose of the study is to
explore the process of selecting stocks to create a portfolio and then to track the
performance of the same.
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SCOPE OF THE STUDY
The scope of the report is to analyze the portfolio management services landscape in India.
Few of the leading portfolio management providers have been selected for in depth
analysis of their business model; with a special emphasis on their investment
process/philosophy and the products provided by them. The report aims to understand the
product offerings and customized services provided by the PMS houses. It will also help
to understand the future prospects of portfolio services.
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OBJECTIVES OF THE STUDY
 To study the technical aspects of portfolio management

 To examine to create two portfolios and compare as well as contrast their risk return
profile
 To analyse to select an optimum portfolio
 To evaluate to create the greatest probability that all financial goals (anything
requiring both money and planning to achieve) are accomplished by the target date, and
 To summerize to have a frequently-updated sensible plan that is proactive enough
to accommodate any major unexpected financial event which could negatively affect the
plan
HYPOTHESIS:
H (01): There is No linear relationship between income smoothing and systematic risk.
H (02): There is No linear relationship between income smoothing and a company's
abnormal return.
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RESEARCH METHODOLOGY
PRIMARY DATA:
Real time prices of six stocks on NSE.

Interviews and informal conservations with brokers and retail investors
SECONDARY DATA:-
 Data collected from various Books, Newspapers and Internet.
Method of data collection:-

Secondary sources:-
It is the data which has already been collected by someone or an organization for some
other purpose or research study .The data for study has been collected from various
sources:
 Books
 Journals
 News pares & electronic media
 Internet sources
Statistical Tools Used & strategies applied
Simple tools like tabulation have been used.
TOOLS USED FOR ANALYSIS – TABULATION:

A Table is a systematic arrangement of statistical data in rows and columns. Rows are
horizontal arrangements whereas columns are vertical arrangements. Tabulation is a
systematic presentation of data in a form suitable for analysis and interpretation.
PRESENTATION OF DATA:
Statistical data can be effectively presented in the form of tables. The diagrams used are as
follows:
 Pie charts: The Pie charts are used to represent a component on a percentage basis.
Each part of a component is shown as the percentage of whole component. Pie
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Charts are used to represent the percentage share of Equity, Debt & Money Market
components of Balanced Growth Fund.
 Bar diagrams: The Bar Diagrams are used specifically for categorical data series.
They consist of the group of equidistant rectangles, one for each group or category of
data in which the values of magnitudes are represented by length or height of
rectangles.
 The data that is considered for the Comparative analysis of various Mutual Funds
returns of Open-Ended. Growth Fund are only for a short period of one year and
performance during this period may not be same in future. Project period is only 45
days , so I have taken two months portfolios into consideration
 As the project period is limited, the long-term data of Mutual Funds are not taken
into consideration in analysis section.
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LIMITATIONS OF THE STUDY
 The data collected is basically confined to secondary sources, with very little
amount of primary data associated with the project.
 There is a constraint with regard to time allocated for the research study.
 The availability of information in the form of annual reports & price fluctuations of
the companies is a big constraint to the study.
 In this study the statistical tools used are risk, return, average, variance,
correlation.
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CHAPTER II
LITERATURE REVIEW
14
LITERATURE REVIEW
Lee et al (2008) defined a project portfolio as a set of projects that will be implemented
within a central coordination. The portfolio management conducts the projects of an
organization to ensure that the right set of projects will be done through the allocation of
the necessary resources to them.
The project selection and resources’ allocation must be reviewed and amended
periodically to reduce project costs, minimize the risks to which the organization is
exposed and optimize benefits the proper projects’ execution (Dettbarn Jr. et al, 2005).
Furthermore, the portfolio is a way to keep the organization focus on the long term
(Munson and Spivey, 2006), making the long term clearer for the organization (Miller and
Evje, 1999)
Anderson (2008) presented the objectives of the portfolio management as: define goals
and objectives, make trade-offs, manage risks, monitor portfolio performance, and achieve
the organization´s objectives. Complementary, to achieve its objectives, the portfolio
management has three main steps: strategic considerations, individual project evaluation,
and portfolio selection (Gabriel et al, 2006). The risk management is also a concern in the
portfolio management due to the portfolio´s risk should be appropriate due to the portfolio
´s financial return (Pereira and Veloso, 2009).
The public administration is different from the private sector and this differentiation has
impacts in the public sector’s objectives that, among others, are: maximize the innovation,
maximize the number of direct beneficiaries and maximize the number of agents indirectly
benefited (Duarte and Reis, 2006).
Khedkar (2014) analysed on portfolio investment on commercial banks in India with in

the period of 2000-2010, data collection from annual reports of bank SBI, PNB, Canara
bank, ICICI bank, Citi bank and RBI published bulletin, trend analysis on correlation,
regression, analysis of variance (ANOVA),the research shows that the commercial banks
role in security market develops the financial market in to inclination.
15
Vasantha, Uma Maheswari and Subashini, (2013), Evaluating the Performance of some
chose open finished value enhanced Mutual reserve in Indian common store Industry. The
goal of the exploration paper is to assess the execution of particular open finished value
enhanced Mutual store in the Indian value advertise. Reason for existing is to direct this
investigation over the time of 60 months information which is from January 2008 to
December 2012 on HDFC top 200 store (g).Reliance top 200(g) ICICI prudential best
200(g). Canara Robeco value differentiated reserve (g).Birla Sun Life bleeding edge
value (g) shared assets. The examination has been made based on Sharpe, Treynor ratio
and Jenson alpha.
Zahir and Sharma (1982) evaluated on the performance on commercial banks with
nationalized banks and also comparison with interbank with intra bank level, duration
1970-79 by bank annual reports, area sampling method is applied on investment, result
shows that performing branch of commercial banks provided growth in the economy.
Hilsted (2012) provided review on active portfolio management and portfolio

construction-implementation an investment strategy. Providing risk reduction and
acquiring high return on combining assets in to single asset investment from January 1992
to December 2011. Data have been extracted from DataStream, MSCI Barra and
Statistikbanken. CAPM model and Markowitz mean, varience portfolio model is used for
analysis, this result shows fixed systematic risk crosses the benchmark risk then portfolio
return is positive significant.
Carlsen (1970) researched on the risk balanced execution and underscored. The
conclusions drawn from figuring of profit depends for the day and age yearly information
for 82 regular stock supports over the 1948-67 periods, sort of store and the decision of
benchmark. Recalculated the Jensen and Shape comes about. The outcomes repudiated
both Sharpe and Jensen measures.
Prajapati and Patel (2012) assessed Comparative Study On Performance Evaluation of

Mutual Fund Schemes Of Indian Companies. The investigation term is first January 2007
16
to 31st December, 2011. Execution assessment of Indian common assets is helped out
through relative execution list, hazard return investigation, Treynor's proportion, Sharp's
proportion, Sharp's measure, Jensen's measure, and Fama's measure. Research procedure
is utilizing on information utilized is every day shutting NAVs. The wellspring of
information is site of Association of Mutual Funds in India (AMFI). The aftereffects of
execution measures positive return.
C.Yadav and Hemanth (2014), have assessed on Performance of Selected Equity Growth
Mutual Funds in India. Concentrate amid first June 2010 to 31st May 2013. The
investigation assesses execution of chose development value subsidizes in India, utilizing
portfolio execution assessment strategies, for example, Sharpe and Treynor measure.
Information gathered from S&P CNX NIFTY has taken as the benchmark utilizing 15
value development Schemes (NAV) were taken from top 10 AMCs. At long last presumed
that exceptional yield saw from definite outcome.
Klemosky (1973) broke down venture execution of 40 stores in view of quarterly returns.
Study has been finished amid the period 1966-71.Study recognized predispositions in
Sharpe, Treynor, and Jensen's measures and expelled by utilizing mean supreme deviation
and semi-standard deviation as hazard contrasted with the composite measures got from
the CAPM (Capital Asset Pricing Model).
Gupta (1974) inspected the execution of common reserve industry. Span of the
investigation began 1962-1971.Research had been utilizing Sharpe, Treynor and Jensen
models. Assets had picked in this examination beat the market without considering of
market list accepting return per unit of hazard which fluctuated with the level of
unpredictability and reasoned that assets with higher instability displayed predominant
execution. At long last outcomes demonstrated that indistinguishable outcomes gave by all
the three models.
Shah (2015) investigated that construction of optimal portfolio using Sharpe index model
and CAPM model, descriptive research is done during 2000- 2015,datas are collected
from monthly data on BSE top 15 securities on market capitalization, tools used are
standard deviation, expected return, variance, Sharpe model and also using CAPM model,
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Sharpe Model suggests the portfolio of equities but CAPM indicates individual securities,
hence in portfolio, if some securities returns are negative then investor can cover his loss
from other securities included in his portfolio.
James R.F. Fellow (1978) analyzed the risk balanced execution of UK venture trusts
through the use of Sharpe and Jensen measures. The examination reasons that no trust had
shown better execution analyzed than the London Stock Exchange Index. Fama (1972)
built up an approach for assessing speculation execution of oversaw portfolios and
recommended that the general execution could be separated into a few components.
George argon and Wayne E Ferson (2006) investigated on portfolio performance

evaluation on monthly return during 1963-2000 for Sharpe ratio and 1990-2000 for Jensen
ratio. Performance is perfectly matched with benchmark hence added for the benefit to the
investor.
Gupta and Ramesh (1993) examined an examination on "Portfolio Management for an

Individual Investor" had experienced the significance of people interests in portfolio
administration. By examining an Individual investors’ situation of their own attributes, for
example, age, well being condition, family obligation, business or expert circumstance and
assessment status every one of these variables influence the financial specialist's ability to
go out on a risk.
Rajarajan (2002) looked into with 54 articles on "Determinants of Portfolio Choice of

individual Investors" in the midst of the season of 2001- 2005. The examination reveals an
outcome of luckiness, possibility and fate et cetera, in this way theorists with cut down
expected rate of return, cut down risk bearing cutoff and incident avoiding conduct slant
toward the portfolio with a more noteworthy measure of settled assets likewise the money
related pros with high expected rate of return, high danger bearing point of confinement
and less of hardship avoidance lead support a portfolio with a more noteworthy measure
of perilous assets. In this way from the result it has assumed that the examiners slant
toward a portfolio with a more prominent measure of dangerous asset.
18
Seth, Deepika (2013) analyzed the performance of portfolio management on asset
management companies asset management company’s in India, explored on investors
interest on investment during the period of 2006-2011 through descriptive and explanatory
research and data’s are collected from SEBI, companies annual reports and other
government agencies and fund managers, concluded with the result that an efficient
financial investment with minimum risk can be achieved through portfolio management.
Lamba (2014) has completed a printed material on Portfolio Management in India. The
reason for the investigation is to dissect the extension and significance of portfolio
administration in India. Printed material additionally demonstrates that the sorts and
ventures of portfolio administration and which speculation should taken by a portfolio
chief to give most extreme returns and least hazard to his customers for their speculations.
Mahajan, Mahesh (2012) examined the management of portfolio research study of

investor in Mumbai city, with an objective of maximizing wealth with respective
individual needs and risk preference, duration of the study from July 2011 to January
2012,descriptive and casual research had been designed for the relative questionnaire and
data’s were taken from journals, magazines and websites. Finally results shows that
investor in Mumbai are highly educated hence depending upon their objectives, investing
in different investment in order to get wealth maximizing, tax savings, life insurance,
mutual funds, post office schemes and real estate, gold and silver investment avenues.
Vandell and Finn (1982) investigated on the article “Portfolio Objective: Win big, lose
little!” was published on the Journal of Portfolio Management, concluded that
systematically the market does not appear for risk-taking, hence it is a game of full of
opportunities for “those investor who have sufficient skills of trading in stock market.”
Jensen (1968) assessed a composite portfolio assessment system principally on risk
balanced returns. Amid the period 1945-66 assessed 115 store chiefs in choosing the
securities and net returns of 39 reserves had better than expected returns however 76
finances anomalous poor returns. In any case, in net returns 48 stores were better than
expected outcomes and 67 supports underneath the normal. Consequently Jensen inferred
that, 22 reserves perform essentially superior to anything other expected by support
19
administrators and they were not able figure securities value developments in stock
exchange.
Baker and Solak (2014) defined the portfolio success in the public sector as the
maximization of the expected social utility.
Scheinberg and Stretton (1994) stipulated that the main parameters to measure the
portfolio’s success in the public sector are defined by the political authorities or contracts
made with partners. In the early 1980s, the public sector initiates a reform that is known as
New Public Management (NPM). The NPM is important because it made that the public
sector adopted management techniques from the private sector in order to improve the
public service’s efficiency and results.
Private and public organizations aim to grow, and, for this, is necessary to coordinate
changes and the organization's strategy. Projects are responsible for organizational changes
and the strategies’ implementations are done through the projects execution (Rwelamila
and Purushottam, 2012).
Lee et al (2008) defined a project portfolio as a set of projects that will be implemented
within a central coordination. The portfolio management conducts the projects of an
organization to ensure that the right set of projects will be done through the allocation of
the necessary resources to them.
The project selection and resources’ allocation must be reviewed and amended periodically
to reduce project costs, minimize the risks to which the organization is exposed and
optimize benefits the proper projects’ execution (Dettbarn Jr. et al, 2005).
Furthermore, the portfolio is a way to keep the organization focus on the long term
(Munson and Spivey, 2006), making the long term clearer for the organization (Miller and
Evje, 1999).
Anderson (2008) presented the objectives of the portfolio management as: define goals and
objectives, make trade-offs, manage risks, monitor portfolio performance, and achieve the
20
organization´s objectives. Complementary, to achieve its objectives, the portfolio
management has three main steps: strategic considerations, individual project evaluation,
and portfolio selection (Gabriel et al, 2006).
The risk management is also a concern in the portfolio management due to the portfolio´s
risk should be appropriate due to the portfolio´s financial return (Pereira and Veloso,
2009).
The public administration is different from the private sector and this differentiation has
impacts in the public sector’s objectives that, among others, are: maximize the innovation,
maximize the number of direct beneficiaries and maximize the number of agents indirectly
benefited (Duarte and Reis, 2006).
Another difference, according to Stentoft et al (2015), is that the services provided by the
public sector to citizens are done without a direct payment.
In the same way, Baker and Solak (2014) defined the portfolio success in the public sector
as the maximization of the expected social utility.
On the other hand, Scheinberg and Stretton (1994) stipulated that the main parameters to
measure the portfolio’s success in the public sector are defined by the political authorities
or contracts made with partners. In the early 1980s, the public sector initiate a reform that
is known as New Public Management (NPM).
The NPM is important because it made that the public sector adopted management
techniques from the private sector in order to improve the public service’s efficiency and
results (Young et al, 2012). The project portfolio management is one of the private sector
techniques that were adopted by the public sector.
Chai and Xiao (2012) showed the bibliometric as a technique that uses a literature´s
quantitative analysis through statistics, social and natural sciences tools in order to make a
citation, co-citation or keywords analysis.
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Chen et al (2010) presented the semantic analysis as a technique that summarizes and
categorizes terms and expressions to have a coherent interpretation of the research area’s
concepts.
Finally, Tsai and Wen (2005) described the content analysis as a technique to explore the
current status of the research area and is used when the research area is not well explored or
when the researchers need to focus on a specific aspect of the research area.
PPM is well-established in the “new product development” (NPD) phase (Cooper et al.,
2001) and already well understood in the scope of companies that develop radical or
incremental products. It is less studied and applied by companies that develop new services
(Aas et al., 2017), and research on the use of PPM by not-for-profit organizations still
seems to be nonexistent (Barczak et al., 2006).
WHAT IS PORTFOLIO MANAGEMENT?
Portfolio management is said to be an ongoing process of construction of portfolios aimed

at balancing an investor’s rapidly changing goals supported by the portfolio manager’s
study of the future. In the framework developed by the investor’s investment policy,
several strategies will be employed which ensure the accomplishment of the investor’s
long-term objectives. More often, the particular tactics possibly employed by the portfolio
manager are also defined. The established portfolio is then carefully monitored so as to
enable adjustments of the strategy and tactics in order to accommodate the end results as
well as changes in the investor’s objectives.
Portfolio Management is primarily used for selecting a portfolio of new product

development projects in order to achieve the following objectives:
Provide balance
Heighten the value and profitability of the portfolio
Support the strategies of the organization
In other words, portfolio management is considered to be the sole responsibility of the
senior management team of a company or business unit. This business unit, also termed as
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the Product Committee holds regular meetings to discuss about the management of the
product pipeline and to make appropriate decisions on the product portfolio. Further, this is
the same team that carries out the stage-gate reviews for the company.
Creation of product strategy

Logically, a starting point is considered for creating a product strategy, such as customers,
market sectors, products, strategy approaches, competitive stress, and so on. Second step is
to accurately study the budget and available resources for balancing the portfolio against.
Next, every project is assessed for rewards, resources or investment prerequisites, risks as
well as other appropriate factors. The overall statistics of the objectives in making
decisions in regards to products varies from organization to organization. However,
companies are required to accurately balance these goals, namely
New products vs. improvements

Risk vs. profitability
Strategy vs. rewards
Market vs. product pipeline
Short term vs. long term
Numerous forms of techniques are being employed for supporting the portfolio
management process. They are heuristic models, scoring methods, mapping, graphical, or
visual methods.
Background:
Portfolios are referred to the mix or combination of investments. Investors are mainly
institutions or private individuals. Any entity holding a specific value of is capable of
retaining its value can be taken as an option by the investors where they could escrow
assets. And such assets can be securities including stocks, warrants, bank notes, bonds,
mutual funds, contracts, stock options, etc. Furthermore, it could also be private individual
assets like real estate and properties, gold certificates, machineries, as well as other
production amenities.
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In general, institutions may conduct own large-scale investment analysis whereas
individual investors could rely on professional financial advisors, needless to say, who
have profound similarity to stockbrokers, portfolio managers as well as financial planners.
The key objective of investment portfolio managers lies central to addressing particular
investment issues and targets for the benefit of the investors. Simply put, these
professionals must be highly proficient with respect to diversification or the treatment of
degrading different risks and their effects on their organization.
There are several decisions to which investors first acquaint with. But not every investor is
well-learnt about which assets to include or must be included within their portfolio, or what
steps can be taken to withstand risks at a given level, or how to react to the rapidly-
changing stock markets, and so on. In essence, there is a certain drive to enhance the
investors’ knowledge about the basics of investment portfolio management and offer them
various choices on how to improve the overall process of managing their portfolios.
The earliest portfolio management schemes were aimed at optimizing the financial returns
and the project’s profitability through the exhaustive use of mathematical or heuristic
models. But this approach hardly paid any significant attention on balancing or alignment
of the portfolio of the company’s strategy. Evaluating technique weights as well as score
criteria to consider account investment prerequisites, risk, rewards, and strategic alignment.
However, the drawback of this approach could be an over-concentration on the financial
measures and an uncertainty to optimize the combination of projects. Furthermore,
mapping techniques are based on graphical presentation in order to visualize a portfolio’s
balance. Such schemes are generally demonstrated in the form of a two spatial dimensional
graph which depicts the exact pattern of trade-offs or balance among two factors like
profitability vs. risks, market vs. product line coverage, etc.
How it Works
While portfolio techniques differ broadly from organization to organization, the common
denominator for the companies is the objective management tries to achieve. Experts of
portfolio management have advocated that three primary goals influence the success of a
company, by adopting the “best-practise” strategy. These goals are:
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Value Maximization
It involves allocation of resources in order to maximize the value of the portfolio through
several key objectives, like profitability, Return on Investment, acceptable risk, etc. A vast
variety of techniques are being employed for achieving this maximization goal, which
ranges from scoring models to financial methods.
Balance
This helps an organization to achieve a targeted or desired balance of projects through a
number of specific parameters, such as risk vs. return, long-term vs. short-term; throughout
several different market sectors, business areas as well as technologies. In general,
techniques used for revealing balance involve pie-charts, histograms, and bubble diagrams.
Alignment with Business Strategy

This goal focuses on ensuring that the portfolio of projects perfectly depicts the business
strategies and that the division of investing adjusts with the company’s strategic priorities.
Furthermore, three key approaches included are:
Top-down, also termed as strategic buckets
Bottom-up, also termed as effective gating and criteria
Top-down & bottom-up, termed as strategic check
Portfolio Management: A drawback

The past few years have seen a increased interest in portfolio management, not just
pertaining to the technical community, but also within the CEO’s office. Notwithstanding
its increasing popularity, latest benchmarking research have realized portfolio management
as the weakest area within the product innovation management. Here, management teams
have claimed that there are hardly any serious Go-Kill decision points and particularly, no
criteria for making the Go-Kill decisions. As a consequence, organizations tend to
encounter too many projects with very limited sources available!
Importance of portfolio management

Companies which lack efficient new product portfolio management as well as project
selection encounter a very slippery road downhill. Majority of the drawbacks that tend to
infect innovation initiatives could be directly claimed to be inefficient and ineffective
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portfolio management. As per the benchmarking studies conducted by practitioners
worldwide, specific problems arising whenever a good portfolio management is lacking
within a company are:
A powerful unwillingness to terminate Projects

Lack of reproducible standards for Go/Kill decisions
An optimum outcome, projects simple pile up when they are added to the 'active list' of
projects without any clear directional focus
No uniform distribution of the resources; lengthy delays to market; weak quality of
execution; and unanticipated and higher-than-satisfactory failure rates
Poor project selection and Go/Kill Decisions

Several average-scale projects within the pipeline, such as enhancements, extensions, and
absence of high profitability projects
Fewer reasonable projects that do exist amid the lack of resources, consume too much of
time to get to market and cannot achieve desired potential
Incorrect selection of Projects:

Decisions are not based on realities and not driven by objective criteria, but depend more
on politics, emotions and opinions.
Most of these 'ill-selected' projects tend to fail in bringing profits and reward to the
organization
Strategic Criteria are Missing

Lack of strong strategic direction for project selection thus, projects lack alignment with
the business's strategy
Selected Projects are normally a bad and ugly fit with strategy and the overall expense and
investment fails to represent the strategic priorities of the entire business
In this context, Portfolio Management is concerned with doing the right projects. In case
the right projects are picked, the outcome is a desirable portfolio of extreme value projects;
it witnesses the generation of a portfolio which is in proper alignment and balance and
most significantly, supports the business strategy.
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Benefits of Portfolio Management
When implemented accurately and carried out on a regular basis, Portfolio Management
can be a high impact, high value activity. In other words, portfolio management has the
following benefits:
Portfolio management heightens the return on product innovation investments
It sustains the company’s competitive position
It helps companies in achieving efficient allocation of starved resources
It forms a connection between project selection and business strategies
It achieves focus and effectively communicates the business priorities
Portfolio management helps in achieving balance
It allows for objective project selection
Experts and top performers provide more emphasis on the link between the project
selection and the company business strategy.
Fundamental Analysis
Definition of Fundamental Analysis
Fundamental analysis is defined as the practise of examining the fundamentals of an
organization in order to determine if a business has turned out to be a good investment.
Fundamental analysis aims are answering questions related to the business finance and
capital investment, such as “what are the probabilities that this business investment is going
to fail or become bankrupt” and “how sure can a portfolio manager be that the stock
continues to pay dividends?” In other words, fundamental analysis involves detailed study
in regards to financial statements like the balance sheet. It is considered as a complete
contrast to technical analysis.
Fundamental analysis deals with the analysis of the financial, economic, as well as other
quantitative and qualitative elements associated with a security with the sole intention of
determining its intrinsic value. Even though this technique is employed for evaluating the
value of a firm’s stock, it can additionally be used for any form of security, such as
currency and bonds. Also known as quantitative analysis, fundamental analysis involves
digging into a corporation’s financial statements, including profit and loss accounts,
balance sheet, etc, in order to analyze different types of financial indicators like earnings,
revenues, expenses, assets and liabilities. This type of study is typically conducted by
analysts, brokers and investors.
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Two approaches:
While conducting a fundamental analysis, analysts and investors are most likely to use any
of the two schemes described below:
Top-down scheme: This approach deals with the study of both national as well as
international economic indicators, such as the GDP growth rates, energy rates, interest rates
and inflation. The hunt of the optimal security then reduces to the analysis of total sales,
levels of price, and foreign competition within a sector for identifying the best business
within the sector.
Bottom-up scheme: This approach allows the investor to start the search with certain
business, regardless of their region, sector or industry
How does it work?

Fundamental analysis is driven by the primary intention of predicting the future
performance of the organization for which it is carried out. It is solely based on the
assumption that the market price of a particular security is likely to shift towards its “real”
or intrinsic value”. Therefore, if the intrinsic value of a security becomes greater it’s the
market value, then it represents a time to make a purchase. Furthermore, if the value of the
security is at lower value relative to its market price, then it’s an indicator to investors for
making a sale, i.e. the investors must sell the security.
Fundamental analysis involves the following steps:
Macroeconomic analysis that includes commodities, currencies, and indices
Analysis of the industry sector that is based on the analysis of firms being part of a sector
or industry
Situational analysis of an organization
Financial analysis of an organization
Valuation
Furthermore, the valuation of a security is performed via the discounted cash flow model,
i.e. DCF model that takes the following aspects into account:
Dividends obtained by investors
Cash flows or earnings of an organization
Debts that is estimated with the help of debt to equity ratio as well as the current ratio
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Advantages of Fundamental analysis
Fundamental analysis is beneficial for:
Identification of the intrinsic value of a security
Identification of long-term investment opportunities because it includes real time data
Intuitive appeal: Employing fundamental analysis for predicting future prices is based on
the principle of “one thing causes another”, and hence tries to recognize the causing
factors. Therefore, with this concept, the approach of fundamental analysis is said to be
intuitively appealing.
Objectivity: Because relationships are examined by mathematical and statistical techniques,

fundamental analysis is objective. Those relationships that fail are removed, whereas those
that successfully pass are considered to be credible. Further, there is no room for personal
opinion or bias. Many traders greatly depend on objectivity and hold little confidence in
their ability to predict prices on pure discretion basis. Furthermore, future traders do not
find it difficult to attempt to predict variables through the process of fundamental analysis.
Organizations attempt to predict sales, government agencies attempt to predict

unemployment and meteorology specialists attempt to predict the weather conditions. With
all of these sectors trying to harness the power of fundamental analysis, one advantage of
using fundamental analysis is the enhancement and refinement in the pool of techniques
available for fundamental analysis. For instance, if an effective technique is developed for
predicting the weather, it can be easily applied to future prices and help in obtaining
satisfactory outcomes. And this is just how a specific form of fundamental analysis termed
as the Chaos Theory, entered the realm of the future traders.
However, fundamental analysis is equipped with the following drawbacks:
Disadvantages of Fundamental Analysis

It can be used only for analyzing long-term investments
Too many economic indicators together with widened macroeconomic data tends to
produce confusion for new investors
Similar set of information regarding macroeconomic indicators may impose different
effects on the same currencies at varied times.
29
Labour Intensive: A substantial amount of human labour is needed for fundamental
analysis, including time and energy. Additionally, recent techniques have gotten
increasingly complex and few individuals have turned towards obtaining help from trained
economists who can properly apply the available technology. For example, large banks
usually hire teams of economists for devising their in-house prediction models.
Data Intensive: Fundamental analysis entirely counts on a significant quantity of data to
analyze the importance of variables. Such data are most often difficult to acquire and, most
importantly, are rarely available without extra charge. Data are also contaminated with
notable errors that must first be detected and repaired.
It is often not very easy, even though data, time and energy are acquirable, to define a
relationship which is very robust and which allows for satisfactory price prediction. In part,
this may be due to the fact that numerous variables are connected together, each having a
diverse effect on the other, that it becomes difficult to realize causal relationships. A lot of
time, energy and money could be spent looking for causal relationships, but never land up
finding one.
Technical Analysis
Definition of Technical Analysis:
Technical analysis is the process of utilizing past trading information and stock price trends
related to a specific security, and then equating those to how other likewise investments
have responded throughout history to similar patterns. Further, when a pattern is identified,
the investor can predict that the future pricing of the target investment is likely to respond
in a similar manner to patterns observed earlier.
Technical analysis is based on the study if past market data associated with volume and
price with the primary purpose of forecasting future price movements. Furthermore,
technical analysis is not used for making sheer prediction; instead it assists in projecting the
potential price movement across time. Functionally speaking, technical analysis can be
applied to commodities, futures, stocks, forex or foreign exchange, indices or any tradable
entity, whose price is driven by supply and demand trends of the market. Additionally, it is
employed by day traders as well as short-term investors who participate in investment
30
markets, including foreign exchange market and the stock market. Hedgers are also active
users of this form of analysis.
How does Technical Analysis work?

Technical analysis is carried out on the premise that price discounts each individual aspect
and data in the market. This type of analysis is also driven by the belief that price
movements are not entirely arbitrary and rely on a trend. A technical analyst, through
technical analysis, is enabled to detect an ongoing trend, trade on the basis of the trend and
produce profits as the trend proceeds.
Following are the methods used for performing technical analysis:

Moving averages: This technique is used for the identification of a variety of support and
resistance levels for the short-term and long-term. Moreover, the most widespread moving
averages are the 30-day moving averages and 200-day moving averages, commonly known
as DMAs.
Patterns and Charts: This method involves extensive charts to be generated from historical
data on price movements. Further, these charts are commonly used to identify shapes and
patterns, like double top, double bottom, triple bottom, head and shoulders. Briefly,
technical analysis makes extensive use of charts as well as technical indicators for
forecasting the price movement of a given currency. Several technicians embrace this
approach in order for price prediction whereas fundamentalists will not use it. Almost all
traders are aware that technical analysis has its own benefits and drawbacks; however, it
also has certain limitations. Many foreign exchange traders utilize only charting methods
while other use a mix of approaches.
Advantages of Technical Analysis:

Powerful focus on price movement: The key focus of technical analysis is laid on the
movement of prices. In other words, charts are used for depicting how prices move or don’t
move, when prices trend, and the strength of those trends. Further, volume, momentum and
oscillators show a clearer image in regards to market action. This information can be
acquired at a glance. Technicians, unlike fundamentalists, do not employ economic reports
which examine the demand for a particular currency.
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Patterns are easily found: One of the fundamental aspects of market action is that it re-
generates itself in clean, accurate patterns. Charts enables and aids the trader to identify
patterns and forecast the price movements on the basis of these patterns. Similar to start
constellations, charts and patterns can be composite and complicated. In essence, head-and-
shoulder patterns, round tops and bottoms, descending and ascending triangles, as well as
double and triple tops are highly effective patterns followed by several currency prices.
Therefore, they possess powerful predictive capabilities. Also, they cannot be detected
without using a chart.
Trends are easily detected: With just a glance at a moving averages line instantly shows a
price that is stuck or trending in a range. A chart can immediately display a currency which
exhibits a trend, whether or not it is up, down, or oblique. Trends are vital to technicians
since a currency will continue to move in the direction of the trend, and these trends can be
clearly and accurately shown by charts.
Charting is fast and cheap: As computer workstations have relieved most individuals from
the burden of doing complicated mathematical operations, the Internet holds a pool of
various technical indicators which help the trader to make more reliable and more
productive trades. Several brokers provide to their clients, such forms of technical
indicators as part of their package. Toward that end, technical analysis is inexpensive, less
time consuming, as compared to fundamental analysis. It can also be performed within a
few countable minutes and the services are most commonly offered for free or at a low
price.
Charts offer a wealth of data: Indicators and charts are capable of offering a massive
quantity of information. Trends can easily be detected; resistance as well as support levels
are instantly found. Volatility, momentum and trading forms are quickly and easily
accessible. There exist greater than fifty types of indictors and each offers crucial
information on various aspects regarding the exact movement of a currency. This
information is said to be vital to technicians for making sound and productive trades.
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Additionally, charts depict the representation of the price movement and personality of a
currency. This representation can be complicated with several different kinds of ups and
downs in terms of the data distribution. Furthermore, charts can provide only the
fundamental information on a trend or resistance and support. Nonetheless, they become
much more profound in providing information regarding the intensity of a trend, how
momentum is heightening, and whether or not formations are being developed that can
allow trading.
Disadvantages of Technical Analysis:

As Technical analysis is employed by numerous traders worldwide, for trading stocks, it is
attractive as it is driven by mathematics and statistics, thereby giving outputs as the illusion
of correctness and predictability. Nevertheless, technical analysis is equipped with several
flaws which trader should be aware of. The limitations of technical analysis are as
following:
At the core, every technical indicator, irrespective of how its complexity, is based on price,
which is a mere reflection of what has already taken place in the market. Therefore,
technical analysis is said to be highly reactive and not truly predictive about what will
happen.
Currently, markets are much more disorderly and jerky in comparison to earlier decades.
This is due to hedge funds as well as automated ultra-short term trading. Consequently, the
result is more false signs and non-uniform patterns from technical analysis methods.
Almost all technical traders try their hand at trend-following. Even while trend following
method are capable of making big money over time; however, they also have a low rate of
accuracy and a high draw down. A good example of this is that most trades are complete
losses and are very common to be down by 50 to 60% at a given point. Furthermore,
several traders are unable to handle this after-effect psychologically, and end up overriding
trading signals and changing between systems.
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A major flaw indicates that the bulk of technical traders continue relying on certain
indicators that were first created during the 2070's. As a consequence, traders tend to
overuse these indicators and, therefore, the markets render them less efficient.
Classical trading chart patterns may be seen in graphs of non-market pertained actions,
such as temperature charts. Additionally, chart patterns may appear as well as disappear
according to the scaling of the chart. And this strongly advises that chart patterns are
nothing but a trick of the human eye and do not have any predictive value.
Fundamental Analysis Vs. Technical Analysis

While analyzing price movement, forex trade uses two primary types of analysis. Those
concentrating on price movement and neglect other factors choose to guide their efforts at
enhancing their skills at technical analysis, whereas traders preferring to examine the
economic events which cause the market action mainly throw light on their efforts in
analyzing fundamental analysis.
Most traders wish to mix the information supplied by these two kinds of analysis in order
to generate accurate trading signals. Others focus on one aspect of analysis and discard the
other type from the computations, and yet it can be said that either of the approaches can be
valid with respect to the circumstances. In essence, there are traders who have been
acquiring reputation as well as wealth by trading effectively based on fundamental analysis.
But as both of these people disagree in several subjects, they would most probably agree
with the fact that discipline and emotional control are said to be the most significant aspects
of a productive trading career, even prior to analytical prowess.
The technical analysts may view his charts, detect the extreme values assigned with the
indicators, and may alert against following a trend that is in danger of being suffered from
a sharp reversal as the unavoidable countertrend action takes place. On the other hand, the
fundamental analyst will see the euphoria in analyst community as well as news sources,
take into account the various declarations of government agencies and personages, and will
broadcast the same warning message. As the instruments and indicators employed by these
two types of individuals vary, their actions typically coincide with each other.
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Technical and fundamental analysis is not exactly the same; the predictive strength of the
fundamental studies is substantially greater, at least in the long run. However, these two
types of analysis are closely related to two different languages used to describe the same
phenomenon, and they present the same direction and come at the same conclusion, at least
on the hindsight.
Simply put, technical analysts perform their investments or trades based solely on the
volume and price actions of securities. By using charts and several other tools, they trade
on momentum, irrespective of the fundamentals. Although it is quite possible to use both
the analysis methods in combination, yet one of the basic notions of technical analysis is
that, as mentioned previously, the market discounts every entity. Similarly, all news
regarding a firm is already prices into a stock, and hence, price actions of a stock can
provide more insight relative to the underlying fundamental elements of the overall
business itself.
However, followers of the effective market hypothesis commonly disagree with both
technical and fundamental analysis. In this context, the efficient market hypothesis argues
that it is basically impossible to generate market-beating returns for the longer term, by
using either technical or fundamental analysis. In essence, the principle for this debate is
that, as the market effectively prices all stocks about an ongoing basis, any valid
opportunities for excess returns gained from technical or fundamental analysis would be
immediately reduced by the market’s players, thereby making it impossible for any trader
to meaningfully outdo the market on a long term.
Functionally, both the analysis techniques are used for selecting investments whose prices
are will move in a productive and profitable direction for the trader/ investor; ‘up’ for
traders who want to buy an investment and ‘down’ for traders who want to sell or reduce
and investment. Fundamental analysis allows the investor to find an investment which is
mispriced within the market in comparison to its real value as identified by the investor’s
analysis. Technical analysis allows the investor to identify investments whose patterns
match patterns that were previously seen, and will result in the price of investment moving
in the required direction when followed.
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Lastly, fundamental analysis sees the market as a rational sector. It also assumes that a
security’s price eventually reflects the true value of the investment. Contrastingly, technical
analysis sees the marketplace as a repetition of itself and its past trends, and a security’s
price eventually moves in a similar way as other investment prices move
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CHAPTER-III
INDUSTRY & COMPANY PROFILE
37
INDUSTRY PROFILE
Companies in this industry manufacture a wide variety of goods; major product groups
include food and beverages, chemicals, machinery, transportation equipment, and
computers and electronics. Major companies include Boeing, Caterpillar, Dow DuPont,
Ford, GE, GM, HP, IBM, Pfizer, Procter & Gamble, and Tyson Foods (all based in the
US); Nestlé (Switzerland), Sanofi (France), Siemens (Germany), and Toyota Motor
(Japan).
The global manufacturing sector generates about $12 trillion in annual revenue, according
to the UN. Top manufacturing countries include China, the US, Japan, Germany, South
Korea, India, Italy, France, and the UK. Leading exporting countries include China, the
US, Germany, the UK, Japan, France, the Netherlands, and South Korea. Growth drivers
include rapid industrialization in the developing world, along with the use of technology to
improve products and supply chains.
The US manufacturing sector consists of about 256,000 companies with combined annual
sales of about $5.4 trillion.
COMPETITIVE LANDSCAPE
Globalization has opened new markets and opportunities for manufacturers but has also
created new challenges, including how to manage far-flung supply chains and distribution
channels. Manufacturers have turned to digitalization to improve efficiency across every
area of operations, including product development, design, production, distribution, and
marketing. However, implementing a successful digital transformationstrategy --
including the leveraging of internet of things (IoT) technology and big data -- requires
careful planning and significant investment.
Manufacturing Industry
Definition: The branch of manufacture and trade based on the fabrication, processing, or
preparation of products from raw materials and commodities. This includes all foods,
chemicals, textiles, machines, and equipment. This includes all refined metals and minerals
dirrived from extracted ores. This includes all lumber, wood, and pulp products.
Definition Source: Standard Industrial Classification
38
Manufacturing Industry Categories:
Apparel Industry : All establishments producing clothing and fabricating products by
cutting and sewing purchased woven or knit textile fabrics and related materials, such as
leather, rubberized fabrics, plastics, and furs. This does not include knitting mills (see
Textile Mill Products) or custom tailors and dressmakers (see Retail Trade: Apparel and
Accessory Stores).
(Definition Source: Standard Industrial Classification)
Chemical and Allied Industry: All establishments producing basic chemicals, and
establishments manufacturing products by predominantly chemical processes. This does
not include the mining of natural chemicals and fertilizers (see Mining and Quarrying of
Nonmetallic Minerals), nor does it include establishments primarily engaged in packaging,
repackaging and bottling purchased chemical products (see Wholesale or Retail Trade).
Electronic and Electrical Equipment Industry: All establishments engaged in

manufacturing machinery, apparatus, and supplies for the generation, storage, transmission,
transformation, and utilization of electrical energy. This does not include industrial
machinery and equipment powered by built-in or detachable electric motors (see Industrial
and Commercial Machinery and Computer Equipment).
Fabricated Metal Industry: All establishments engaged in fabricating ferrous and

nonferrous metal products, such as metal cans, tinware, handtools, cutlery, general
hardware, nonelectric heating apparatus, fabricated structural metal products, metal
forgings, metal stampings, and a variety of metal and wire products not elsewhere
classified. (Definition Source: Standard Industrial Classification)
Food and Kindred Industry: All establishments manufacturing or processing foods and
beverages for human consumption, and certain related products, such as manufactured ice,
chewing gum, vegetable and animal fats and oils, and prepared feeds for animals and fowls.
This does not include chemical sweeteners (see Chemicals and Allied Products).
39
Furniture and Fixtures Industry: All establishments engaged in manufacturing
household, office, public building, and restaurant furniture; and office and store fixtures.
This does not include establishments engaged in the production of millwork or wood
kitchen cabinets (see Lumber and Wood Products); those manufacturing cut stone and
concrete furniture (see Stone, Clay, Glass and Concrete Products); those manufacturing
hospital furniture other than beds (see Measuring, Controlling and Analyzing Instruments);
nor, those manufacturing beauty and barber shop furniture (see Miscellaneous
Manufacturing Industries).
Industrial and Commercial Machinery Industry: All establishments engaged in

manufacturing industrial and commercial machinery and equipment and computers. This
includes machines powered by built-in or detachable motors, with the exception of
electrical household appliances. This includes power-driven handtools, but does not include
other electrical equipment (see Electronic and Other Electrical Equipment and
Components).
Leather Industry: All establishments engaged in tanning, currying, and finishing hides
and skins, leather converters, and establishments manufacturing finished leather and
artificial leather products and some similar products made of other materials.
Lumber and Wood Industry: All establishments engaged in cutting timber and
pulpwood; mills engaged in producing lumber and wood basic materials; and
establishments engaged in manufacturing finished articles made entirely or mainly of wood
or related materials. This does not include furniture and office and store fixtures (see
Furniture and Fixtures), musical instruments, toys and playground equipment, and caskets
(see Miscellaneous Manufacturing Industries). This also does not include wood
reconditioning and repair (see Nonmanufacturing Industries).
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Measuring, Analyzing and Controlling Instrument Industry: All establishments
engaged in manufacturing instruments for measuring, testing, analyzing, and controlling,
and their associated sensors and accessories; optical instruments and lenses; surveying and
drafting instruments; hydrological, hydrographic, meteorological, and geophysical
equipment; search, detection, navigation, and guidance systems and equipment; surgical,
medical, and dental instruments, equipment and supplies; ophthalmic goods; photographic
equipment and supplies; and, watches and clocks.
Miscellaneous Manufacturing Industries: All establishments primarily engaged in

manufacturing products not classified in any other manufacturing category. This includes
establishments engaged in the production of goods such as jewelry, musical instruments,
toys, sporting goods, etc.
Paper and Allied Industry: All establishments primarily engaged in the manufacture of
pulps from wood and other cellulose fibers, and from rags; the manufacture of paper and
paperboard; and the manufacture of paper and paperboard into converted products, such as
paper bags and paper boxes. Also included are establishments primarily engaged in
manufacturing bags of plastics, films and sheets. This does not include abrasive paper (see
Stone, Clay, Glass, and Concrete Products), carbon paper (see Miscellaneous
Manufacturing Industries), nor photosensitized and blueprint paper (see Measuring,
Controlling, and Analyzing Instruments).
Petroleum Refining and Related Industry: All establishments primarily engaged in

petroleum refining, manufacturing paving and roofing materials, and compounding
lubricating oils and greases from purchased materials. This does not include establishments
manufacturing and distributing gas to consumers (see Transportation, Communications,
and Utilities), nor those engaged in producing coke and byproducts (see Primary Metal
Industries).
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Primary Metal Industry: All establishments engaged in smelting and refining ferrous and
nonferrous metals from ore, pig, or scrap; in rolling, drawing, and alloying metals; in
manufacturing castings and other basic metal products; and in manufacturing nails, spikes,
and insulated wire and cable. This also includes the production of coke.
Printing, Publishing, and Allied Industry: All establishments engaged in printing and
those establishments which perform services in the printing trade, such as bookbinding and
plate making. This also includes establishments engaged in publishing newspapers, books,
and periodicals, regardless of whether they do their own printing. This does not include
establishments primarily engaged in textile printing and finishing fabrics (see Textile Mill
Products), nor does it include establishments manufacturing products that contain
incidental printing, such as advertising or instruction.
Rubber and Miscellaneous Plastic Industry: All establishments not elsewhere classified
manufacturing products from plastics resins and from natural, synthetic, or reclaimed
rubber, gutta percha, balata, or gutta siak. Many products made from these materials are
classified in other industries, such as boats, toys, Buttons, etc. This includes the
manufacture of tires, but does not include recapping and retreading automobile tires. This
also does not include the manufacture of synthetic rubber and synthetic plastics resins (see
Chemicals and Allied Products).
Stone, Clay, Glass, and Concrete Industry: All establishments engaged in manufacturing
flat glass and other glass products, cement, structural clay products, pottery, concrete and
gypsum products, cut stone, abrasive and asbestos products, and other products from
materials taken principally from the earth in the form of stone, clay, and sand. (Definition
Source: Standard Industrial Classification)
Textile Mill Industry: All establishments engaged in the preparation of fiber and
subsequent manufacturing of yarn, thread, braids, twine, and cordage; in manufacturing
broad woven fabrics, narrow woven fabrics, knit fabrics, and carpets and rugs from yarn; in
42
dyeing and finishing fiber, yarn, fabrics, and knit apparel; in coating, waterproofing, or
otherwise treating fabrics; in the integrated manufacture of knit apparel and other finished
articles from yarn; and in the manufacture of felt goods, lace goods, nonwoven fabrics, and
miscellaneous textiles.
Tobacco Industry: All establishments engaged in manufacturing cigarettes, cigars,

smoking and chewing tobacco, snuff, and reconstituted tobacco and in stemming and
redrying tobacco. This also includes the manufacture of nontobacco cigarettes. This does
not include the manufacture of insecticides from tobacco byproducts (see Chemicals and
Allied Products).
Transportation Equipment Industry: All establishments engaged in manufacturing

equipment for transportation of passengers and cargo by land, air and water. This includes
the manufacture of products such as motor vehicles, aircraft, guided missiles and space
vehicles, ships, boats, and railroad equipment. This does not include the manufacture of
mobile homes (see Lumber and Wood Products), nor the manufacture of equipment used
for moving materials on farms, in mines, on construction sites, in plants, etc. (see Industrial
and Commercial Machinery and Computer Equipment.)
43
COMPANY PROFILE
THE ADITYA BIRLA GROUP: A PREMIUM GLOBAL CORPORATION
A US $41 billion (Rs. 2,50,000 crore) corporation, the Aditya Birla Group is in the League
of Fortune 500. Anchored by an extraordinary force of over 120,000 employees, belonging
to 42 nationalities. Over 50 per cent of its revenues flow from its overseas operations
spanning 36 countries.
The Aditya Birla Group has been ranked fourth in the world and first in Asia Pacific in the
‘Top Companies for Leaders’ study 2011, conducted by Aon Hewitt, Fortune Magazine
and RBL (a strategic HR and leadership Advisory firm). The Group has topped the
Nielsen's Corporate Image Monitor 2015-16 and emerged as the Number one corporate, the
'Best in Class', for the third consecutive year.
Globally, the Aditya Birla Group is:

 A metals powerhouse, among the world's most cost-efficient aluminium and copper
producers. Hindalco-Novelis is the largest aluminium rolling company. It is one of
the three biggest producers of primary aluminium in Asia, with the largest single
location copper smelter
 No.1 in viscose staple fibre
 No.1 in carbon black
 The fourth-largest producer of insulators
 The fifth-largest producer of acrylic fibre
 Among the top 5 cement producers globally
 Among the best energy-efficient fertiliser plants
 The largest Indian MNC with manufacturing operations in the USA, wherein 95 per
cent of the workforce comprises of Americans
Aditya Birla Group – The Indian Scenario

 A top fashion (branded apparel) and lifestyle player
 The second-largest player in viscose filament yarn
 The largest producer in the chlor-alkali sector
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 Among the top three mobile telephony companies
 A leading player in life insurance and asset management
 Among the top two supermarket chains in the retail business
Aditya Birla Group – Beyond Business

 Reaches out annually to 7.5 million people through the Aditya Birla Centre for
Community Initiatives and Rural Development, spearheaded by Mrs. Rajashree Birla.
 Works in 5,000 villages globally.
 Focuses on: health-care, education, the girl child, sustainable livelihood, women
empowerment projects, infrastructure and espousing social reform.
 Runs 42 schools which provide quality education to 45,000 children. Of these
20,000 students belong to the underprivileged segment. Merit Scholarships are given to
24,000 children from the interiors.
 Its 20 hospitals tend to more than a million villagers.
 Ongoing education, healthcare and sustainable livelihood projects in Philippines,
Thailand, Indonesia, Egypt, Korea and Brazil, lift thousands of people out of poverty.
 Set up the Aditya Birla India Centre at the London Business School.
The Aditya Birla Group transcends conventional barriers of business because we care. We
believe it is our duty to facilitate inclusive growth as well.
VISION AND VALUES
OUR VISION
 To be a premium global conglomerate, with a clear focus on each of the businesses.
OUR MISSION
 To deliver superior value to our customers, shareholders, employees and society at

large.
OUR VALUES
 Integrity: Acting and taking decisions in a manner that is fair and honest.

Following the highest standards of professionalism and being recognised for doing so.
45
Integrity for us means not only financial and intellectual integrity, but encompasses all
other forms as are generally understood.
 Commitment: On the foundation of Integrity, doing all that is needed to deliver

value to all stakeholders. In the process, being accountable for our own actions and
decisions, those of our team and those in the part of the organisation for which we are
responsible.
 Passion: An energetic, intuitive zeal that arises from emotional engagement with
the organisation that makes work joyful and inspires each one to give his or her best. A
voluntary, spontaneous and relentless pursuit of goals and objectives with the highest level
of energy and enthusiasm.
 Seamlessness: Thinking and working together across functional groups,
hierarchies, businesses and geographies. Leveraging diverse competencies and perspectives
to garner the benefits of synergy while promoting organisational unity through sharing and
collaborative efforts.
 Speed: Responding to internal and external customers with a sense of urgency.
Continuously striving to finish before deadlines and choosing the best rhythm to optimise
organisational efficiencies.
Experience the 'Power of 5'

In 2015 we celebrated a decade of our Values. All our Businesses and all our people have
adopted these Values with understanding and enthusiasm. All of them have made a
consistent effort to make our Values, the heartbeat of our existence. In doing so, not only
the Values flourished but also our people and our Businesses. As we look back, we have
every reason to celebrate and every person to salute.
The “Power of 5” is our unique way of saluting, celebrating and cheering the inspirational
act of integrity, commitment, passion, seamlessness and speed by our people, over the last
decade. Through this platform we bring to you 25 inspiring stories of our people who have
exemplified living the values, which whilst selected at random tell a powerful story of our
voyage with Values.
46
MILESTONES
Established in 1957 in the tiny village of Pilani, Rajasthan, the Aditya Birla Group took
shape when Seth Shiv Narayan Birla ventured into cotton trading. Today, with operations
across 36 countries revenues of US$41 billion, the Group is a leading player in aluminium,
cement manufacturing, viscose staple fibre, chemicals, copper, insurance services, telecom,
branded apparels, fertilisers, software, viscose staple yarn, carbon black and insulators. We
trace the highlights of this remarkable journey, starting from the present:
2021
Business
 Novelis was recently recognised among the best companies in Brazil by Época
magazine. The special edition of the magazine, called Época Negócios 360°, ranked
Novelis in the top five in four categories – HR practices, innovation, vision of the future
and social responsibility.
 Novelis was named a Top Supplier in 2021 by both Automotive News’ Global and
North American lists for supplying flat-rolled aluminum sheet for multiple automotive
applications, including vehicle structures and body panels.
 AV Cell and AV Nackawic (Pulp & Fibre business) have emerged among the top
25 employers.
Corporate Social Responsibility

 Mrs. Rajashree Birla honoured with the Lifetime Achievement Award 2020 and
2021 by the Ladies’ Wing of the Indian Merchants’ Chamber Mrs. Rajashree Birla
honoured with the Lifetime Achievement Award 2020 and 2021 by the Ladies’ Wing of
Indian Merchants’ Chamber
Awards
 Mr. Kumar Mangalam Birla named the Chairman of the Board of Governors of the
prestigious Indian Institute of Management Ahmedabad (IIMA 2018).
 Indian Rayon, a division of Aditya Birla Nuvo, bagged the coveted Asian CSR
Award in the category of poverty alleviation (2019).
 Indo Gulf Fertilisers (a division of Aditya Birla Nuvo) bags the Indian Chemical
Council’s Award for Social Responsibility (2017).
47
 abof.com wins debutant e-retailer 2016 at the Indian Retail Congress 2016.
 abof.com emerges as the winner in the top 5 impactful debut brands category (2017.
 abof.com wins Customer Intimacy and Service Excellence Company of the Year
2021 at the 10th Express Logistics & Supply Chain Awards.
 Aditya Birla Retail Limited won the ‘hypermarket chain of the year’ award at the
Images Retail Awards for the second year in a row.
 Aditya Birla Financial Services Group (ABFSG) received a Certificate of
Achievement from the Society for Human Resource Management (SHRM) in the category
of ‘Excellence in Developing Leaders of Tomorrow’.
 Aditya Birla Financial Services Group’s Mutual Fund won Silver at Maddy’s 2018
in the category ‘In-App advertising’ for their investor empowerment campaign, ‘Jaanoge
Tabhi Toh Maanoge’.
 Birla Carbon was awarded Gold Recognition Level in sustainability performance
pursuant to the survey conducted by EcoVadis.
 “#UnboxWithLiva” won a silver in the 'Best use of blogs' at the Indian Digital
Media Awards, 2018, given by Exchange 4 Media.
 Grasim’s Harihar plant received the Frost & Sullivan Sustainability 4.0 Challengers
Award in the large business category while the Kharach unit was recognised with the
“Certificate of Merit”.
 Manufacturing Today bestowed its Excellence in Technology Award on Grasim’s
Kharach plant.
 Thai Rayon’s plant at Saraburi received an overwhelming applause from the
Thailand Institute of Occupational Safety and Health for its outstanding performance in
safety.
 General Motors won the 2018 Altair Enlighten Award for Innovation in
Automotive Vehicle Lightweighting for the Cadillac CT6. The automobile, which achieved
220 lbs in weight savings, is 62 per cent aluminum, and this has been supplied by Novelis
North America and Novelis Asia.
 Birla Carbon is credited for publishing ‘Asia’s Most Transparent Report’ and
‘Asia’s Best Materiality Report’. Birla Carbon also received commendation certificates for
‘Asia’s Best Supply Chain Reporting’, ‘Asia’s Best Community Reporting’ and ‘Asia’s
Best Environment Reporting’ at the Asia Sustainability Reporting Awards, organised by
CSRWorks Events, an arm of CSRWorks International.
48
LEADERSHIP TEAM
Our leadership team provides strategic direction to Group companies. The team comprises:
GROUP CHAIRMAN
Mr. Kumar Mangalam

Chairman Aditya Birla Group
Birla
BUSINESS DIRECTORS
Business Head Retail & Apparels

Mr. Pranab Barua
Managing Director Aditya Birla Fashion and Retail Limited
Group Corporate Services and

Mr. Rajiv Dube Director Domestic Textiles, Overseas Spinning
and Acrylic Fibre
Business Head Pulp & Fibre Business

Mr. Dilip Gaur
Managing Director Grasim Industries Limited
Mr. Himanshu
Managing Director Idea Cellular Limited
Kapania
Mr. K. K.
Managing Director UltraTech Cement Limited
Maheshwari
Director
Group Human Resources
Dr. Santrupt Misra Chief Executive
Carbon Black Business
Officer
Mr. Satish Pai Managing Director Hindalco Industries Limited
49
Mr. Ajay Srinivasan Director Financial Services
BUSINESS HEADS
Mr. H. K. Agarwal Business Head Fibre Business
Group CFO
Mr. Sushil Agarwal Whole Time Director &
Grasim Industries Limited
CFO
Group Executive E-Commerce, Solar Power,

Mr. Dev Bhattacharya President & Business Payment Bank and New
Head Ventures
Mr. Ashish Dikshit Business Head Madura Fashion & Lifestyle
Group Legal Counsel &

Mr. Ashok Gupta Corporate Legal
Chief Legal Officer
Business Head Cement

Mr. K.C. Jhanwar
Dy. Managing Director UltraTech Cement Limited
Textiles, Acrylic Fibre &

Mr. Thomas Varghese Business Head
Overseas Spinning
BUSINESS CEO
Minerals Resource Development

Sector Head
Mr. Tuhin Mukherjee Essel Mining & Industries
Managing Director
Limited
50
SENIOR LEADERS
Chairperson, The Aditya Birla Centre for Community

Mrs. Rajashree Birla
Initiative and Rural Development
Mr. Askaran Agarwala Birla Group Trusts & Special Community Project
Non-Executive Director – Hindalco, Vice Chairman –

Mr. Debu Bhattacharya Hindalco, Vice Chairman – Novelis, Group Mentor,
Chairman – BRC (Manufacturing)
Mr. Shailendra Jain Business Review Council
Mr. Ratan Shah Group Talent Mentor
51
CHAPTER IV
DATA ANALYSIS AND INTERPRETATION
52
FUNCTIONS OF PORTFOLIO MANAGER
The main functions of portfolio manager are
Advisory role:
He advises new investments, review of existing ones, identification of objectives,

recommending high yield securities etc.
Conducting Market and Economic Surveys:
There is essential for recommending high yielding securities, they have to study the
current physical properties, budget proposals, industrial policies etc. Further portfolio
manager should take into account the credit policy, industrial growth, foreign exchange
position, changes in corporate laws etc,.
Financial Analysis
He should evaluate the financial statements of a company in order to understand their net
worth, future earnings, prospects and strengths.
Study of Stock Market
He should see the trends of at various stock exchanges and analyze scripts, so that he is
able to identify the right securities for investments.
Study of Industry
To know its future prospects, technological changes etc. required for investment proposals
he should also foresee the problems of the industry.
Decide the type of Portfolio
Keeping in the mind the objectives of a portfolio, the portfolio manager have to decide
whether the portfolio should comprise equity, preference shares, debentures convertible,
non-convertible or partly convertible, money market securities etc. or a mix of more that,
one type.
A good portfolio manager should ensure that

53
 There is optimum mix of portfolios i.e. securities.
 To strike a balance between the cost of funds and the average return on investments
 Balance is struck as between the fixed income portfolios and dividend bearing
securities
 Portfolios of various industries are diversified ./ To decide the type of investment
 Portfolios are reviewed periodically for better management and returns ./ Any right
or bonus prospects in a company are taken into account
 Better tax planning is there
 Liquidity assets are maintained ./ Transaction cost are minimized
PORTFOLIO MANAGEMENT PROCESS:
Portfolio management IS a complex activity, which may be broken down into the
following steps:
1. Specification of investment Objectives and Constraints:-
The first step in the portfolio management process is to specify one's investment
objectives and constraints. The commonly stated investment goals are:
a) Income
b) Growth
c) Stability
The constraints arising from liquidity, time horizon, tax and special circumstances must be
identified.
2. Choice of Asset mix:
The most important decision in portfolio management is the asset mix decision. Very
broadly, this is concerned with the proportions of 'stocks' and 'bonds' in the portfolio.
3. Formulation of Portfolio Strategy:
Once a certain asset mix is chosen, an appropriate portfolio strategy has to be hammered
out. Two broad choices are available an active portfolio strategy or a passive portfolio
strategy. An active portfolio strategy strives to earn superior risk adjusted returns by
resorting to market timing, or sector rotation, or security selection, or some combination
54
of these. A passive portfolio strategy, on the other hand, involves holding a broadly
diversified portfolio and maintaining a pre-determined level of risk exposure.
4. Selection of Securities:
Generally, investors pursue an active stance with respect to security selection. For stock
selection, investors commonly go by fundamental analysis and / or technical analysis. The
factors that are considered in selecting bonds are yield to maturity, credit rating, term to
maturity, tax shelter and liquidity.
5. Portfolio Execution:
This is the phase of portfolio management which is concerned with implementing the
portfolio plan by buying and / or selling specified securities in given amounts.
6. Portfolio Revision.
The value of a portfolio as well as its composition - the relative proportions of stock and
bond components - may change as stocks and bonds fluctuate. In response to such
changes, periodic rebalancing of the portfolio is required. This primarily involves a shift
from stocks to bonds or vice versa. In addition, it may call for sector rotation as well as
security switches.
7. Performance Evaluation:
The performance of a portfolio should be evaluated periodically. The key dimensions of

portfolio performance evaluation are risk and return and the key issue is whether the
portfolio return is commensurate with its risk exposure.
PORTFOLIO MANAGEMENT HAS BEEN CHARACTERIZED
 Tradition portfolio theory
 Modern portfolio theory
55
Tradition portfolio theory
This theory aims at the selection of such securities that would fit in well with the asset
preferences, needs and choices of investor. Thus, a retired executive invest in fixed
income securities for a regular and fixed return. A business executive or a young
aggressive investor on the other hand invests in new and growing companies and in risky
ventures.
Modern portfolio theory
This theory suggests that the traditional approach to portfolio analysis, selection and
management may yield less than optimal result that a more scientific approach is needed
based on estimates of risk and return of the portfolio and attitudes of the investor towards
a risk return trade off steaming from the analysis of the individual securities.
In this regard India after government policy of liberalization has unleashed foreign market
forces. Forces that have a direct impact on the capital markets. An individual investor can't
easily monitor these complex variables in the securities market because of lack of time,
information and know-how. That is when investors look in to alternative investment
options. Once such option is mutual funds. But in the recent times investor has lot faith in
this type investment and has turned towards portfolio investment.
With portfolio investment gaining popularity it has emphasized on having a proper

portfolio theory to meet the needs of the investor and operate in the capital market using
through scientific analysis and backed by dependable market investigations to minimize
risk and maximize returns.
The scientific analysis of risk and return is modern portfolio theory and Markowitz laid
the foundation of this theory in 2051. He began with the simple observation that since
almost all investors invests in several securities rather that in just one, there must be some
benefit from investing in a portfolio of several securities.
SEBI GUIDELINES TO THE PORTFOLIO MANAGERS:

On 7th January 1993 securities exchange board of India issued regulations to the portfolio
managers for the regulation of portfolio management services by merchant bankers. They
are as follows:
56
 Portfolio management services shall be in the nature of investment or consultancy
management for an agreed fee at client's risk
 The portfolio manager shall not guarantee return directly or indirectly the fee should
not be depended upon or it should not be return sharing basis.
 Various terms of agreements, fees, disclosures of risk and repayment should be
mentioned.
 Client's funds should be kept separately in client wise account, which should be subject
to audit.
 Manager should report clients at intervals not exceeding 6 months.
 Portfolio manager should maintain high standard of integrity and not desire any benefit
directly or indirectly form client's funds.
 The client shall be entitled to inspect the documents.
 Portfolio manager should maintain high standard of integrity and not desire any benefit
directly or indirectly form client's funds.
 The client shall be entitled to inspect the documents.
 Portfolio manager shall not invest funds belonging to clients in badla financing, bills
discounting and lending operations.
 Client money can be invested in money and capital market instruments.
 Settlement on termination of contract as agreed in the contract.
 Client's funds should be kept in a separate bank account opened in scheduled
commercial bank.
 Purchase or Sale of securities shall be made at prevailing market price.
 Portfolio managers with his client are fiduciary in nature. He shall act both as an agent
and trustee for the funds received.
PORTFOLIO SELECTION
Portfolio analysis provides the input for the next phase in portfolio management, which is
portfolio selection. The proper goal of portfolio construction is to get high returns at a
given level of risk. The inputs from portfolio analysis can be used to identify the set of
efficient portfolios. From this set of portfolios, the optimal portfolio has to be selected for
investment.
57
MARKOWITZ MODEL
Harry M. Markowitz is credited with introducing new concept of risk measurement and
their application to the selection of portfolios. He started with the idea of risk aversion of
investors and their desire to maximize expected return with the least risk.
Markowitz used mathematical programming and statistical analysis in order to
arrange for .the optimum allocation of assets within portfolio. To reach this objective,
Markowitz generated portfolios within a reward-risk context. In other words, he
considered the variance in the expected returns from investments and their relationship to
each other in constructing portfolios. In essence, Markowitz's model is a theoretical
framework for the analysis of risk return choices. Decisions are based on the concept of
efficient portfolios.
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 or a specified level of expected
return. To build an efficient portfolio an expected return level is chosen, and assets are
substituted until the portfolio combination with the smallest variance at the return level is
found. As this process is repeated for other expected returns, set of efficient portfolios is
generated.
Assumptions
The Markowitz model is based on several assumptions regarding investor behavior:
i). Investors consider each investment alternative as being represented by a
probability distribution of expected returns over some holding period.
ii). Investors maximize one period-expected utility and possess utility curve,
which demonstrates diminishing marginal utility of wealth.
iii). Individuals estimate risk on the basis of the variability of expected returns.
iv) . Investors base decisions solely on expected return and variance (or standard
deviation) of returns only.
v). for a given risk level, investors prefer high returns to lower returns.
Similarly, for a given level of expected return, investor prefer less risk to more risk.
58
Under these assumptions, a single asset or portfolio of assets is considered to be
"efficient" if no other asset or portfolio of assets offers higher expected return with the
same (or lower) risk or lower risk with the same (or higher) expected return.
MARKOWITZ DIVERSIFICATION
Markowitz postulated that diversification should not only aim at reducing the risk of a
security by reducing its variability or standard deviation but by reducing the covariance or
interactive risk of two or more securities in a portfolio.
As by combination of different securities, it is theoretically possible to have a range of risk
varying from zero to infinity. Markowitz theory of portfolio diversification attached
importance to standard deviation to reduce it to zero, if possible.
CAPITAL MARKET THEORY

The CAPM was developed in mid-1960, the model has generally been attributed to
William Sharpe, but John Linter and Jan Mossin made similar independent derivations.
Consequently, the model is often referred to as Sharpe-Linter-Mossin (SLM) Capital
Asset Pricing Model. The CAPM explains the relationship that should exist between
securities expected returns and their risks in terms of the means and standard deviations
about security returns. Because of this focus on the mean and standard deviation the
CAPM is a direct extension of the portfolio models developed by Markowitz and Sharpe.
Capital Market Theory is an extension of the portfolio theory of Markowitz. This is an
economic model describes how securities are priced in the market place. The portfolio
theory explains how rational investors should build efficient portfolio based on their risk
return preferences. Capital Asset Pricing Model (CAPM) incorporates a relationship,
explaining how assets should be priced in the capital market.
ASSUMPTIONS OF CAPITAL MARKET THEORY

The CAPM rests on eight assumptions. The first 5 assumptions are those that underlie the
efficient market hypothesis and thus underlie both modern portfolio theory (MPT) and the
CAPM. The last 3 assumptions are necessary to create the CAPM from MPT. The eight
assumptions are the following:
1) The Investor's objective is to maximize the utility of terminal wealth.
2) Investors make choices on the basis of risk and return.
59
3) Investors have homogeneous expectations of risk and return.
4) Investors have identical time horizon.
5) Information is freely and simultaneously available to investors.
6) There is a risk-free asset, and investors can borrow and lend unlimited amounts at
the risk-free rate.
7) There are no taxes, transaction costs, restrictions on short rates or other market
imperfections.
8) Total asset quantity is fixed, and all assets are marketable and divisible.
PORTFOLIO ANALYSIS
A Portfolio is a group of securities held together as investment. Investors invest their
funds in a portfolio of securities rather than in a single security because they are risk
averse. By constructing a portfolio, investors attempts to spread risk by not putting all
their eggs into one basket. Portfolio phase of portfolio management consists of identifying
the range of possible portfolios that can be constituted from a given set of securities and
calculating their return and risk for further analysis.
Individual securities in a portfolio are associated with certain amount of Risk & Returns.
Once a set of securities, that are to be invested in, are identified based on Risk-Return
characteristics, portfolio analysis is to be done as next step as the Risk & Return of the
portfolio is not a simple aggregation of Risk & Returns of individual securities but,
somewhat less or more than that. Portfolio analysis considers the determination of future
Risk & Return in holding various blends of individual securities so that right combinations
giving higher returns at lower risk, called Efficient Portfolios, can be identified so as to
select an optimum one out of these efficient portfolios can be selected in the next step.
Expected Return of a Portfolio:

It is the weighted average of the expected returns of the individual securities held in the
portfolio. These weights are the proportions of total investable funds in each security.
RP = Expected return of portfolio

N = No. of Securities in Portfolio
XI = Proportion of Investment in Security i.
60
Ri = Expected Return on security i
Risk Measurement
The statistical tool often used to measure and used as a proxy for risk is the standard
deviation.
P = is the probability of security

N = Number of securities in portfolio
Ri = Expected return on security i
61
PORTFOLIO - A PORTFOLIO – B
BHEL TECH MAHINDRA
RELIANCE ENERGY WIPRO
CROMPTION GREAVES JINDAL STEEL
CALCULATION OF RETUN AND RISK OF EACH STOCK:
PORTFOLIO-A
BHARAT HEAVY ELECTRONICS LIMITED (BHEL):
DATE SHARE PRICE (X) (X-X') (X-X')2

4/4/2022 2,098 -62.00 3844.00
3/4/2022 2,099.45 -60.55 3666.30
29/3/2022 2,282 122.00 15884.00
28/3/2022 2,323.60 183.60 26764.96
27/3/2022 2,262.90 102.90 10588.41
26/3/2022 2,200.55 20.55 422.30
25/3/2022 2,085.10 -74.90 5610.01
22/3/2022 2,058.85 -101.16 10231.32
22/3/2022 2,092.05 -67.95 4620.20
20/3/2022 2,124.20 -35.80 1281.64
EXPECTED RETURN = 0.0, RISK = 0.039422
62
RELIANCE ENERGY

4/4/2022 1,510 -74.37 5530.90
3/4/2022 1,485.55 -98.62 9725.90
29/3/2022 1,568 -18.42 269.62
28/3/2022 1,600.70 18.53 273.24
27/3/2022 1831.35 47.20 2225.95
26/3/2022 1,697.25 114.08 12787.09
25/3/2022 1,622.70 38.53 1584.56
22/3/2022 1,555.90 -28.27 799.20
21/3/2022 1,595.05 10.88 120.37
20/3/2022 1,575.65 -8.52 72.59
CROMPTON GREAVES

4/4/2022 302 -8.92 79.66
3/4/2022 309.95 -0.97 0.95
29/3/2022 315 3.48 12.08
28/3/2022 326.10 16.20 230.28
27/3/2022 326.55 16.63 244.15
26/3/2022 311.80 0.88 0.77
25/3/2022 299.30 -11.62 145.15
22/3/2022 297.85 -14.07 200.96
21/3/2022 308.70 -2.22 4.95
63
20/3/2022 312.60 1.68 2.81
PORTFOLIO - B
TECH MAHINDRA

4/4/2022 406 -29.56 873.50
3/4/2022 411.95 -23.61 557.20
29/3/2022 434 -1.41 1.97
28/3/2022 446.80 11.25 126.45
27/3/2022 437.10 1.55 2.39
26/3/2022 449.75 15.20 201.50
25/3/2022 450.30 15.75 220.42
22/3/2022 438.80 3.25 10.53
21/3/2022 458.20 22.65 512.80
20/3/2022 422.50 -14.06 200.43

WIPRO

4/4/2022 420 -15.14 209.52
3/4/2022 420.70 -10.93 120.36
29/3/2022 435 4.02 18.20
28/3/2022 446.45 16.83 250.43
27/3/2022 439.90 9.27 86.03
26/3/2022 444.16 14.53 202.93
25/3/2022 439.55 8.93 79.66
22/3/2022 422.40 -8.23 67.65
21/3/2022 431.65 1.02 1.05
64
20/3/2022 411.30 -20.33 373.46
EXPECTED RETURN = -0.00116, RISK = 0.028923

JINDAL STEEL
DATE
SHARE PRICE (X) (X-X') (X-X')2
4/4/2022 1,007 -73.86 5454.56

3/4/2022 1,015.40 -66.36 4402.99
29/3/2022 1,062 -20.21 368.83
28/3/2022 1,079.80 -0.96 0.91
27/3/2022 1,063.55 -20.21 296.01
26/3/2022 1,093.55 12.79 183.71
25/3/2022 1,120.00 36.24 1414.70
22/3/2022 1,116.45 34.69 1203.74
21/3/2022 1,152.60 61.84 3824.80
20/3/2022 1,112.75 31.99 1023.68

PORTFOLIO-A
THE RISK AND RETURN OF EACH COMPANY IN PORTFOLIO ‘A’ ARE:
SL .No COMPANY RETURN (%) RISK (%)

1 BHEL 0 3.94
2 RELIANCE ENERGY 0.5 3.52
3 CROMPTON GREAVES 0.4 3.03
RETURN OF PORTFOLIO A = 0.3%

RISK OF THE PORTFOLIO A = 20.8%
65
PORTFOLIO-B
THE RISK AND RETURN OF EACH COMPANY IN PORTFOLIO ‘B’ ARE:
SI. COMPANY RETURN (%) RISK (%)

No
1 TECH MAHINDRA 0.5 4.15
2 WIPRO -0.1 2.9
3 JINDAL STEEL 1.15 2.27
RETURN OF PORTFOLIO B = 0.5%,

RISK OF THE PORTFOLIO = 3.12%
INTERPERATION
Applying Markowitz Diversification, using the return, standard deviation, correlation and
equal weights for three stocks each, 2 portfolios were created Portfolio A (having BHEL,
RIL & Crompton Greaves) and Portfolio B (Tech Mahindra, Wipro & Jindal Steel).
The analysis clearly depicts that the 2 portfolios are similar in their risk-return profiles.
However, if we look at the pure numerical, Portfolio B is better than portfolio A in returns
– its return is slightly higher. (Portfolio A’s return was almost 0.4% while Portfolio B’s
return was 0.5%) From risk point of view, Portfolio A is slightly better than Portfolio B –
its risk is lower than the other (Portfolio A’s risk was 2.8% while Portfolio B’s risk was
3%)
66
CHAPTER -V
FINDINGS
SUGGESTIONS
CONCLUSION
67
FINDINGS
Purchasing stocks you do not understand if you can't explain it to a ten year old, just don't
invest in it.
 Over diversifying: This is the most oversold, overused, logic-defying concept
among stockbrokers and registered investment advisors.
 Not recognizing difference between value and price: This goes along with the
failure to compute the intrinsic value of a stock, which are simply the discounted future
earnings of the business enterprise.
 Failure to understand Mr. Market: Just because the market has put a price on a
business does not mean it is worth it. Only an individual can determine the value of an
investment and then determine if the market price is rational.
 Failure to understand the impact of taxes: Also known as the sorrows of
compounding, just as compounding works to the investor's long-term advantage, the
burden of taxes because of excessive trading works against building wealth
 Too much focus on the market whether or not an individual investment has merit
and value has nothing to do with that the overall market is doing ...
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SUGGESTIONS
Portfolio is collection of different securities and assets by which we can satisfy the basic
objective "Maximize yield minimize risk. Further, we have to remember some important
investing rules.
 Investing rules to be remembered.
 Don't speculate unless it's full-time job
 Beware of barbers, beauticians, waiters-of anyone -bringing gifts of inside
information or tips.
 Before buying a security, its better to find out everything one can about the
company, its management and competitors, its earnings and possibilities for growth.
 Don't try to buy at the bottom and sell at the top. This can't be done-except by liars.
 Learn how to take your losses and cleanly. Don't expect to be right all the time. If
you have made a mistake, cut your losses as quickly as possible
 Don't buy too many different securities. Better have only a few investments that can
be watched.
 Make a periodic reappraisal of all your investments to see whether changing
developments have altered prospects.
 Study your tax position to known when you sell to greatest advantages.
 Always keep a good part of your capital in a cash reserve. Never invest all your
funds.
 Don't try to be jack-off-all-investments. Stick to field you known best.
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CONCLUSION
Security analysis refers to analyzing the securities from the point of view of the scrip
prices, return and risks. The analysis helps in understanding the behaviour of security
prices in the market for investment decision making. Security analysis entails in arriving
at investment decisions after collection and analysis of the requisite relevant information.
To find out basic value of a security “the potential price of that security and the future
stream of cash flows are to be forecast and then discounted back to the present value.” The
basic value of the security is to be compared with the current market price and a decision
may be taken for buying or selling the security. If the basic value is lower than the market
price, then the security is in the overvalued position, hence it is to be sold. On the other
hand, if the basic value is higher than the market price the security’s worth is not fully
recognized by the market and it is in under bought position, hence it is to be purchased to
gain profit in the future.
There are mainly three alternative approaches to security analysis, namely fundamental
analysis, technical analysis and efficient market theory. Investments are both important
and useful in the context of present day conditions. The following points have made
investment decision increasingly important.
1. Planning for retirement
2. Interest rate
3. High rate of inflation
4. Increase rate of taxation
5. Income
6. Investment channels
70
BIBILOGRAPHY
71
BOOKS
 INVESTMENT MANAGEMENT BY V.K. BHALLA.

 SECURITY ANALYSIS & PORTFOLIO MANAGEMENT BY E. FISCHER
& J. JORDAN.
 FINANCIAL SERVICES -- M.Y.KHAN
 ESSENTIALS OF INVESTMENT &
 TAX PLANNING -- ICFAI
 PERSONAL FINANCE -- ASHU DATT
WEBSITES
www.adityabirlagroup.com
www.bseindia.com.
www.nseindia.com.
www.moneycontrol.com.
MAGAZINES
Dalal Street magazine

Business Today magazine
Financial Express
Business Line
NEWS PAPERS
 The Economic Times
 The New Indian Express
72
73

212 - F - Aditya Birla-A Study On Portfolio Management at Aditya Birla Group

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A STUDY ON PORTFOLIO MANAGEMENT

AT ADITYA BIRLA GROUP

CHAPTER NO NAME OF THE CHAPTER PAGE NOS.

CHAPTER -II REVIEW OF LITERATURE 14

CHAPTER -III INDUSTRY & COMPANY PROFILE 32

CHAPTER - IV DATA ANALYSIS AND INTERPRETATION 47

CHAPTER -V CONCLUSION, FINDINGS & 61

 The investor faces an infinite number of possible portfolio or group of securities.

 Portfolio management concerns the construction & maintenance of a collection of

 I) Safety of the investment: the first important objective investment safety or

 3) Appreciation in the value of capital: A good portfolio should appreciate in value

 4) Marketability: A good portfolio consists of investment, which can be marketed

 6) Tax Planning: Since taxation is an important variable in total planning, a good

Security analysis in traditional sense is essentially on analysis of the fundamental value of

APPROACHES TO SECURITY ANALYSIS:

 To study the technical aspects of portfolio management

Real time prices of six stocks on NSE.

 Data collected from various Books, Newspapers and Internet.

Method of data collection:-

TOOLS USED FOR ANALYSIS – TABULATION:

Khedkar (2014) analysed on portfolio investment on commercial banks in India with in

Hilsted (2012) provided review on active portfolio management and portfolio

Prajapati and Patel (2012) assessed Comparative Study On Performance Evaluation of

George argon and Wayne E Ferson (2006) investigated on portfolio performance

Gupta and Ramesh (1993) examined an examination on "Portfolio Management for an

Rajarajan (2002) looked into with 54 articles on "Determinants of Portfolio Choice of

Mahajan, Mahesh (2012) examined the management of portfolio research study of

WHAT IS PORTFOLIO MANAGEMENT?

Portfolio management is said to be an ongoing process of construction of portfolios aimed

Portfolio Management is primarily used for selecting a portfolio of new product

Creation of product strategy

New products vs. improvements

Alignment with Business Strategy

Portfolio Management: A drawback

Importance of portfolio management

A powerful unwillingness to terminate Projects

Poor project selection and Go/Kill Decisions

Incorrect selection of Projects:

Strategic Criteria are Missing

How does it work?

Objectivity: Because relationships are examined by mathematical and statistical techniques,

Organizations attempt to predict sales, government agencies attempt to predict

Disadvantages of Fundamental Analysis

How does Technical Analysis work?

Following are the methods used for performing technical analysis:

Advantages of Technical Analysis:

Disadvantages of Technical Analysis:

Fundamental Analysis Vs. Technical Analysis

Electronic and Electrical Equipment Industry: All establishments engaged in

Fabricated Metal Industry: All establishments engaged in fabricating ferrous and

Industrial and Commercial Machinery Industry: All establishments engaged in

Miscellaneous Manufacturing Industries: All establishments primarily engaged in

Petroleum Refining and Related Industry: All establishments primarily engaged in

Tobacco Industry: All establishments engaged in manufacturing cigarettes, cigars,

Transportation Equipment Industry: All establishments engaged in manufacturing

Globally, the Aditya Birla Group is:

Aditya Birla Group – The Indian Scenario

Aditya Birla Group – Beyond Business

VISION AND VALUES

 To be a premium global conglomerate, with a clear focus on each of the businesses.

 To deliver superior value to our customers, shareholders, employees and society at

 Integrity: Acting and taking decisions in a manner that is fair and honest.

 Commitment: On the foundation of Integrity, doing all that is needed to deliver