Portfolio Management

A
STUDYON
PORTFOLIO CONSTRUCTION
AT
HDFC SECURITIES LIMITED
BY
KESHAV DARAK
ROLLNO:1214-22-672-024
Under the guidance of
------------------------------------
A
SynopsissubmittedinpartialfulfilmentfortheawardoftheDegreeof
MASTERSOFBUSINESSADMINISTRATION
DEPARTMENTOFBUSINESSMANAGEMENT
ST. JOSEPH’S DEGREE&PGCOLLEGE(AUTONOMOUS)
(AFFILIATED TO OSMANIA UNIVERSITY)HYDERABAD
BATCH2022-2024
1
CHAPTER-I
INTRODUCTION
2
1.1 INTRODUCTION
Portfolio
A portfolio is a collection of assets. The assets may be physical or financial like Shares,
Bonds, Debentures, Preference Shares, etc. The individual investor or a fund manager would
not like to put this money in the shares of one company that would amount to great risk. He
would therefore, follow the age-old maxim that one should not put all the eggs into one
basket. By doing so, he can achieve objective to maximize portfolio return and at the same
time minimizing the portfolio risk by diversification.
Portfolio Construction
Portfolio Construction is the management of various financial assets which comprise the
portfolio. Portfolio Construction is a decision–support system that is designed with a view to
meet the multi-faced needs of investors. According to Securities and Exchange Board of
India Portfolio Manager is defined as: “Portfolio means the total holdings of securities
belonging to any person”. To frame the investment strategy and select an investment mix to
achieve the desired investment objectives.
Functions of Portfolio Construction
 To provide a balanced portfolio which not only can hedge against the inflation but can
also optimize returns with the associated degree of risk 3?
 To make timely buying and selling of securities.
 To maximize the after-tax return by investing in various tax saving investment
instruments.
3
Characteristics of Portfolio Construction
Individuals will benefit immensely by taking Portfolio Construction services for the
following reasons:
Whatever may be the status of the capital market over the long period capital markets have
given an excellent return when compared to other forms of investment. The return from bank
deposits, units, etc., is much less than from the stock market.
The Indian Stock Markets are very complicated. Though there are thousands of Companies
that are listed only a few hundred which have the necessary liquidity. Even among these, only
some have the growth prospects which are conductive for investment. It is impossible for any
individual wishing to invest and sit down and analyze all these intricacies of the market
unless he does nothing else.
Even if an investor is able to understand the intricacies of the market and Separate chaff from
the grain the trading practices in India are so complicated that it is really a difficult task for an
investor to trade in all the major exchanges of India, look after his deliveries and payments.
Importance of Portfolio Construction
Emergence of institutional investing on behalf of individuals. A number of financial
institutions, mutual funds and other agencies are undertaking the task of investing money of
small investors, on their behalf. Growth in the number and size of ingestible funds–a large
part of household savings is being directed towards financial assets.
4
Increased market volatility–risk and return parameters of financial assets are continuously
changing because of frequent changes in government‘s industrial and fiscal policies,
economic uncertainty and instability.
 Greater use of computers for processing mass of data.
 Professionalization of the field and increasing use of analytical methods (e.g., quantitative
techniques) in the investment decision–making.
Larger direct and indirect costs of errors or short falls in meeting portfolio objectives–
increased competition and greater scrutiny by investor.
5
1.2 NEED FOR THE STUDY
This project has been made to understand and gain practical knowledge relating to the
Portfolio construction of HDFC SECURITIES and other banking companies.
The study has been undertaken as a part of the MBA curriculum in the form of a project for
the fulfilment of the requirement of an MBA degree.
This project gave exposure and practical experience in the application of risk and return
theories and concepts to portfolio diversification, asset allocation and analysis of real-time
data of the portfolio of the Market.
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1.3 OBJECTIVES
 To study the concepts of portfolio analysis.
 To study the investing decision process in HDFC securities ltd.
 To identify the portfolio which results in low risk.
 To calculate the returns of various portfolios and identify the highest.
 To construct an effective portfolio which offers the maximum return for minimum risk.
 To analyze and select the best portfolio out of selected portfolios.
1.4 SCOPE OF THE STUDY

 The present study is centered on analyzing the portfolio analysis on banking sector.
 It gives an idea which is the right time invested.
 The results are based on the study conducted during last five years i.e., 2019-20 to 2022-
23. Portfolio analysis has emerged as a separate academic discipline in India.
 Helpful for investors for decision making
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1.5 RESEARCH METHODOLOGY
This report is based on secondary data, however secondary data collection was given more
importance since it is overhearing factor in attitude studies. One of the most important users
of research methodology is that it helps in identifying the problem, collecting, analyzing the
required information data and providing an alternative solution to the problem. It also helps
in collecting the vital information that is required by the top management to assist them for
the better decision making both day to day decision and critical ones.
Data Collection Methods

Secondary Data
Research is totally based on Secondary data can be used only for the study. Research has
been done by secondary collection. The secondary data has been collected through various
journals and websites.
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1.6 TOOLS AND TECHNIQUES USED
1. Portfolio Risk
√
σ p= x 2a σ 2a + x 2b σ 2b + ( 2 x a x b ) ρab σ a σ b
Where Xa= weight or proportion of investment in security a.
Xb= weight or proportion of investment in security b.
σ a= standard deviation of security a.
σ b =standard deviation of security b.
ρab = correlation co-efficient between securities.
σ p= portfolio risk.
2. Portfolio Return
R p =R a x a + R b x b
R p= Return on portfolio
R p= Return on investment a
Rb = Return on investment b
x a=Weight of investment a
x b=Weight of investment b
CHAPTERISATION
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CHAPTER -1 - INTRODUCTION
This chapter includes the introduction of the topic, need, scope, objectives of the study,
Project limitations and methodology of the study.
CHAPTER - 2 REVIEW OF LITERATURE
This chapter includes the theoretical background and articles written by different authors and
brief explanation of the topic.
CHAPTER - 3 - INDUSTRY PROFILE & COMPANY PROFILE
Introduction Of Industry Profile And Company Profile vision, mission
CHAPTER - 4 - DATA ANALYSIS AND INTERPRETATION
This chapter includes the five years data and it also includes the interpretation based on the
study.
CHAPTER - 5 – SUMMARY AND CONCLUSION
This chapter includes the overall summary of the project and the conclusion based on the
study during the period.
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CHAPTER-II
REVIEW OF LITERATURE
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2.1 THEORITICAL BACKGROUND
There are two approaches in construction of the portfolio of securities. They are
 Traditional approach
 Modern approach
Traditional Approach:
Traditional approach was based on the fact that risk could be measured on each individual
security through the process of finding out the standard deviation and that security should be
chosen where the deviation was the lowest. Traditional approach believes that the market is
inefficient and the fundamental analyst can take advantage of the situation. Traditional
approach is a comprehensive financialplan for the individual.
It takes into account the individual need such as housing, life insurance and pension plans.
Traditional approach basically deals with two major decisions. They are
a) Determining the objectives of the portfolio
b) Selection of securities to be included in the portfolio
Modern Approach:
Modern approach theory was brought out by Markowitz and Sharpe. It is the combination of
securities to get the most efficient portfolio. Combination of securities can be made in many
ways. Markowitz developed the theory of diversification through scientific reasoning and
method.
Modern portfolio theory believes in the maximization of return through a combination of
securities. The modern approach discusses the relationship between different securities and
then draws inter-relationships of risks between them. Markowitz gives more attention to the
process of selecting the portfolio. It does not deal with the individual needs.
Markowitz Model:
Markowitz model is a theoretical framework for analysis of risk and return and their
relationships. He used statistical analysis for the measurement of risk and mathematical
programming for selection of assets in a portfolio in an efficient manner. Markowitz
approach determines for the investor the efficient set of portfolio through three important
variables i.e.
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 Return
 Standard deviation
 Co-efficient of correlation.
Markowitz model is also called as an “Full Covariance Model “. Through this model the
investor can find out the efficient set of portfolios by finding out the tradeoff between risk
and return, between the limits of zero and infinity. According to this theory, the effects of one
security purchase over the effects of the other security purchase are taken into consideration
and then the results are evaluated. Most people agree that holding two stocks is less risky
than holding one stock. For example, holding stocks from textile, banking and electronic
companies is better than investing all the money on the textile company’s stock.
Markowitz had given up the single stock portfolio and introduced diversification. The single
stock portfolio would be preferable if the investor is perfectly certain that his expectation of
highest return would turn out to be real. In the world of uncertainty, most of the risk adverse
investors would like to join Markowitz rather than keeping a single stock, because
diversification reduces the risk.
Assumptions:
 All investors would like to earn the maximum rate of return that they can achieve from
their investments.
 All investors have the same expected single period investment horizon.
 All investors before making any investments have a common goal. This is the avoidance
of risk because Investors are risk-averse.
 Investors base their investment decisions on the expected return and standard deviation of
returns from a possible investment.
 Perfect markets are assumed (e.g. no taxes and no transition costs)
 The investor assumes that greater or larger the return that he achieves on his investments,
the higher the risk factor surrounds him. On the contrary when risks are low the return
can also be expected to be low.
 The investor can reduce his risk if he adds investments to his portfolio.
 An investor should be able to get higher return for each level of risk “by determining the
efficient set of securities”.
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 An individual seller or buyer cannot affect the price of a stock. This assumption is the
basic assumption of the perfectly competitive market.
 Investors make their decisions only on the basis of the expected returns, standard
deviation and covariance’s of all pairs of securities.
 Investors are assumed to have homogenous expectations during the decision-making
period.
 The investor can lend or borrow any amount of funds at the risk less rate of interest. The
risk less rate of interest is the rate of interest offered for the treasury bills or Government
securities.
 Investors are risk-averse, so when given a choice between two otherwise identical
portfolios, they will choose the one with the lower standard deviation.
The Effect of Combining Two Securities:

It is believed that holding two securities is less risky than by having only one investment in a
person‘s portfolio. When two stocks are taken on a portfolio and if they have negative
correlation then risk can be completely reduced because the gain on one can offset the loss on
the other. This can be shown with the help of following example.
Inter- Active Risk through Covariance:

Covariance of the securities will help in finding out the inter-active risk. When the covariance
will be positive then the rates of return of securities move together either upwards or
downwards. Alternatively, it can also be said that the inter-active risk is positive. Secondly,
covariance will be zero on two investments if the rates of return are independent. Holding
two securities may reduce the portfolio risk too. The portfolio risk can be calculated with the
help of the following formula:
Capital Asset Pricing Model (CAPM):

Markowitz, William Sharpe, John Lintner and Jan Mossin provided the basic structure of
Capital Asset Pricing Model. It is a model of linear general equilibrium return. In the CAPM
theory, the required rate return of an asset is having a linear relationship with asset‘s beta
value i.e., un-diversifiable or systematic risk (i.e. market related risk) because non market risk
can be eliminated by diversificationand systematic risk measured by beta.
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Therefore, the relationship between assets return and its systematic risk can be expressed by
the CAPM, which is also called the Security Market Line.
R= RfXf+ Rm(1- Xf)
Rp= Portfolio return
Xf= The proportion of funds invested in risk free assets
1- Xf =The proportion of funds invested in risky assets
Rf = Risk free rate of return
Rm = Return on risky assets
Formula can be used to calculate the expected returns for different situations, like mixing risk
less assets with risky assets, investing only in the risky asset and mixing the borrowing with
risky assets.
The Concept:
According to CAPM, all investors hold only the market portfolio and risk less securities. The
market portfolio is a portfolio comprised of all stocks in the market. Each asset is held in
proportion to its market value to the total value of all risky assets. For example, if Wipro
company share represents 15% of all risky assets, then the market portfolio of the individual
investor contains 15% of Wipro company shares. At this stage, the investor has the ability to
borrow or lend any amount of money at the risk less rate of interest.
E.g.: assume that borrowing and lending rate to be 12.5% and the return from the risky
assets to be 20%. There is a tradeoff between the expected return and risk. If an investor
invests in risk free assets and risky assets, his risk may be less than what he invests in the
risky asset alone. But if he borrows to invest in risky assets, his risk would increase more
than he invests his own money in the risky assets. When he borrows to invest, we call it
financial leverage. If he invests 50% in risk free assets and 50% in risky assets, his expected
return of the portfolio would be
Rp= RfXf+ Rm (1- Xf)
= (12.5 x 0.5) + 20 (1-0.5)
= 6.25 + 10 = 16.25%
if there is a zero investment in risk free asset and 100% in risky asset, the return is
15
= 0 + 20%
= 20%
if -0.5 in risk free asset and 1.5 in risky asset, the return is
= (12.5 x -0.5) + 20 (1.5)
= -6.25+ 30
= 23.75%
Evaluation of Portfolio:
Portfolio manager evaluates his portfolio performance and identifies the sources of strengths
and weakness. The evaluation of the portfolio provides a feed back about the performance to
evolve better management strategy. Even though evaluation of portfolio performance is
considered to be the last stage of investment process, it is a continuous process. There are
number of situations in which an evaluation becomes necessary and important.
 Self-Valuation: An individual may want to evaluate how well he has done. This is a
part of the process of refining his skills and improving his performance over a period of
time.
 Evaluation of Managers: A mutual fund or similar organization might want to
evaluate its managers. A mutual fund may have several managers each running a separate
fund or sub-fund. It is often necessary to compare the performance of these managers.
 Evaluation of Mutual Funds: An investor may want to evaluate the various mutual
funds operating in the country to decide which, if any, of these should be chosen for
investment. A similar need arises in the case of individuals or organizations who engage
external agencies for portfolio advisory services.
 Evaluation of Groups: Have different skills or access to different information.
Academics or researchers may want to evaluate the performance of a whole group of
investors and compare it with another group of investors who use different techniques.
Need for Evaluation of Portfolio:
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 We can try to evaluate every transaction. Whenever a security is brought or sold, we can
attempt to assess whether the decision was correct and profitable.
 We can try to evaluate the performance of a specific security in the portfolio to determine
whether it has been worthwhile to include it in our portfolio.
 We can try to evaluate the performance of portfolio as a whole during the period without
examining the performance of individual securities within the portfolio.
Portfolio Revision:
The portfolio which is once selected has to be continuously reviewed over a period of time
and then revised depending on the objectives of the investor. The care taken in construction
of portfolio should be extended to the review and revision of the portfolio. Fluctuations that
occur in the equity prices cause substantial gain or loss to the investors. The investor should
have competence and skill in the revision of the portfolio. The portfolio analysis process
needs frequent changes in the composition of stocks and bonds. In securities, the type of
securities to be held should be revised according to the portfolio policy. An investor
purchases stock according to his objectives and return risk framework. The prices of stock
that he purchases fluctuate, each stock having its own cycle of fluctuations. These price
fluctuations may be related to economic activity in a country or due to other changed
circumstances in the market. If an investor is able to forecast these changes by developing a
framework for the future through careful analysis of the behavior and movement of stock
prices is in a position to make higher profit than if he was to simply buy securities and hold
them through the process of diversification. Mechanical methods are adopted to earn better
profit through proper timing. The investor uses formula plans to help him in making
decisions for the future by exploiting the fluctuations in prices
Formula Plans:
The formula plans provide the basic rules and regulations for the purchase and sale of
securities. The amount to be spent on the different types of securities is fixed. The amount
may be fixed either in constant or variable ratio. This depends on the investor ‘s attitude
towards risk and return. The commonly used formula plans are
 Average Rupee Plan
 Constant Rupee Plan
 Constant Ratio Plan
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 Variable Ratio Plan
Advantages:
 Basic rules and regulations for the purchase and sale of securities are provided.
 The rules and regulations are rigid and help to overcome human emotion.
 The investor can earn higher profits by adopting the plans.
 A course of action is formulated according to the investor ‘s objectives
 It controls the buying and selling of securities by the investor.
Disadvantages:
 The formula plan does not help the selection of the security. The selection of the security
has to be done either on the basis of the fundamental or technical analysis.
 It is strict and not flexible with the inherent problem of adjustment.
 The formula plans should be applied for long periods, otherwise the transaction cost may
be high.
 Even if the investor adopts the formula plan, he needs forecasting. Market forecasting
helps him to identify the best stocks.
Portfolio analysis Using CAPM

Overview:
Portfolio analysis to measure this actual risk and return of securities and to calculate the
Expected returns of securities using Security market line to compare the expected
Return with actual return to assist investor in Making rational investment decision to which
Security to buy or sell using security market Line which is to suggested the best portfolio Mix
Scope:
The scope of the study is limited to this use of Security market line as a tool of selecting
Security and advising the investors about the Best portfolio mix.
Findings:
There is a significant difference between the Expected returns and actual returns. The next
Step is to identify the securities which are under Value when their expected returns is more
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than Actual returns, it can be observed undervalued Securities like Cipla, Dr. Reddy Labs,
Wipro etc., Wipro is linear since the Weights (X) are the variables
Investment:
Investment may be defined as an activity that commits funds in any financial form in the
present with an expectation of receiving additional return in the future. The expectations
bring with it a probability that the quantum of return may vary from a minimum to a
maximum. This possibility of variation in the actual return is known as investment risk. Thus,
every investment involves a return and risk. Investment is an activity that is undertaken by
those who have savings. Savings can be defined as the excess of income over expenditure.
An investor earns/expects to earn additional monetary value from the mode of investment
that could be in the form of financial assets.
 The three important characteristics of any financial asset are Return-the potential return
possible from an asset.
 Risk-the variability in returns of the asset form the chances of its value going down/up.
 Liquidity-the ease with which an asset can be converted into cash.
Investment Avenues:
There are a large number of investment avenues for savers in India. Some of them are
marketable and liquid, while others are non-marketable. Some of them are highly risky while
some others are almost risk less.
Investment avenues can be broadly categorized under the following head.
 Corporate securities
 Equity shares.
 Preference shares.
 Debentures/Bonds.
 Derivatives.
 Others.
Corporate Securities:
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Joint stock companies in the private sector issue corporate securities. These include equity
shares, preference shares, and debentures. Equity shares have variable dividend and hence
belong to the high risk-high return category; preference shares and debentures have fixed
returns with lower risk. The classification of corporate securities that can be chosen as
investment avenues can be depicted as shown below:
Figure: 2.1 Corporate Securities
Equity Preference Bonds Warrants Derivatives

Shares shares
mportance of Portfolio analysis

 Emergence of institutional investing on behalf of individuals. A number of financial
institutions, mutual funds and other agencies are undertaking the task of investing money
of small investors, on their behalf.
 Growth in the number and size of ingestible funds – a large part of household savings is
being directed towards financial assets.
 Increased market volatility – risk and return parameters of financial assets are
continuously changing because of frequent changes in government ‘s industrial and fiscal
policies, economic uncertainty and instability.
 Greater use of computers for processing mass of data.
 Professionalization of the field and increasing use of analytical methods (e.g. quantitative
techniques) in the investment decision – making
 Larger direct and indirect costs of errors or shortfalls in meeting portfolio objectives –
increased competition and greater scrutiny by investors.
Discretionary Portfolio analysis Service (DPMS):
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In this type of service, the client parts with his money in favor of the manager, who in return,
handles all the paper work, makes all the decisions and gives a good return on the investment
and charges fees. In the Discretionary Portfolio analysis Service, to maximize the yield,
almost all portfolio managers park the funds in the money market securities such as overnight
market,18days treasury bills and 90 days commercial bills. Normally, there turn of
such18investment varies from 14 to18 percent, depending on the call money rates prevailing
at the time of investment.
Non-Discretionary Portfolio analysis Service (NDPMS):

The manager functions as a counsel (or), but the investor is free to accept or reject the
manager‘s advice; the paper work is also undertaken by manager for a service charge. The
manager concentrates on stock market instruments with a portfolio tailor-made to the risk-
taking ability of the investor.
Criteria for Portfolio Decisions

 In portfolio analysis emphasis is put on identifying the collective importance of all
investor’s holdings. The emphasis shifts from individual assets selection to a more balanced
emphasis on diversification and risk-return interrelationships of individual assets within the
portfolio. Individual securities are important only to the extent they affect the aggregate
portfolio. In short, all decisions should focus on the impact which the decision will have on
the aggregate portfolio of all the assets held.
 Portfolio strategy should be molded to the unique needs and characteristics of the
portfolio‘s owner.
 Diversification across securities will reduce a portfolio‘s risk. If the risk and return are
lower than the desired level, leverages (borrowing) can be used to achieve the desired level.
 Larger portfolio returns come only with larger portfolio risk. The most important decision
to make is the amount of risk which is acceptable.
 The risk associated with a security type depends on when the investment will be
liquidated. Risk is reduced by selecting securities with a payoff close to when the portfolio is
to be liquidated.
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 Competition for abnormal returns is extensive, so one has to be careful in evaluating the
risk and return from securities. Imbalances do not last long and one has to act fast to profit
from exceptional opportunities.
Qualities of Portfolio Manager

1.Sound General Knowledge:
Portfolio analysis is an exciting and challenging job. He has to work in an extremely
uncertain and confliction environment. In the stock market every new piece of information
affects the value of the securities of different industries in a different way. He must be able
to judge and predict the effects of the information he gets. He must have sharp memory,
alertness, fast intuition and self-confidence to arrive at quick decisions.
2. Analytical Ability:
He must have his own theory to arrive at the intrinsic value of the security. An analysis of
the security‘s values, company, etc. is s continuous job of the portfolio manager. A good
analyst makes a good financial consultant. The analyst can know the strengths, weaknesses,
opportunities of the economy, industry and the company.
3. Marketing Skills:
He must be good salesman. He has to convince the clients about the particular security. He
has to compete with the stock brokers in the stock market. In this context, the marketing
skills help him a lot.
4. Experience:
In the cyclical behavior of the stock market history is often repeated, therefore the experience
of the different phases helps to make rational decisions. The experience of the different types
of securities, clients, market trends, etc., makes a perfect professional manager.
Portfolio Building:
Portfolio decisions for an individual investor are influenced by a wide variety of factors.
Individuals differ greatly in their circumstances and therefore, a financial program me well
suited to one individual may be inappropriate for another. Ideally, an individual’s portfolio
should be tailor-made to fit one‘s individual needs.
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Investor‘s Characteristics:
An analysis of an individual ‘s investment situation requires a study of personal
characteristics such as age, health conditions, personal habits, family responsibilities,
business or professional situation, and tax status, all of which affect the investor ‘s
willingness to assume risk.
Stage in the Life Cycle:

One of the most important factors affecting the individual‘s investment objective is his stage
in the life cycle. A young person may put greater emphasis on growth and lesser emphasis on
liquidity. He can afford to wait for realization of capital gains as his time horizon is large.
Family Responsibilities:
The investor‘s marital status and his responsibilities towards other members of the family can
have a large impact on his investment needs and goals.
Investor ‘S Experience:
The success of portfolio depends upon the investor‘s knowledge and experience in financial
matters. If an investor has an aptitude for financial affairs, he may wish to be more aggressive
in his investments.
Attitude towards Risk:

A person‘s psychological make-up and financial position dictate his ability to assume the
risk. Different kinds of securities have different kinds of risks. The higher the risk, the greater
the opportunity for higher gain or loss.
Liquidity Needs:
Liquidity needs vary considerably among individual investors. Investors with regular income
from other sources may not worry much about instantaneous liquidity, but individuals who
depend heavily upon investment for meeting their general or specific needs, must plan
portfolio to match their liquidity needs. Liquidity can be obtained in two ways:
1. By allocating an appropriate percentage of the portfolio to bank deposits, and
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2. By requiring that bonds and equities purchased be highly marketable.
Tax Considerations:
Since different individuals, depending upon their incomes, are subjected to different marginal
rates of taxes, tax considerations become most important factor in individual‘s portfolio
strategy. There are differing tax treatments for investment in various kinds of assets.
Time Horizon:
In investment planning, time horizon becomes an important consideration. It is highly
variable from individual to individual. Individuals in their young age have long time horizon
for planning, they can smooth out and absorb the ups and downs of risky combination.
Individuals who are old have smaller time horizon; they generally tend to avoid volatile
portfolios.
Individual‘s Financial Objectives:

In the initial stages, the primary objective of an individual could be to accumulate wealth via
regular monthly savings and have an investment programmed to achieve long term capital
gains.
Safety of Principle:
The protection of the rupee value of the investment is of prime importance to most investors.
The original investment can be recovered only if the security can be readily sold in the
market without much loss of value.
Assurance of Income:
Different investors have different current income needs. If an individual is dependent of its
investment income for current consumption, then income received now in the form of
dividend and interest payments become primary objective.
Investment Risk:
All investment decisions revolve around the trade-off between risk and return. All rational
investors want a substantial return from their investment. An ability to understand, measure
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and properly manage investment risk is fundamental to any intelligent investor or a
speculator. Frequently, the risk associated with security investment is ignored and only the
rewards are emphasized. An investor who does not fully appreciate the risks in security
investments will find it difficult to obtain continuing positive results.
Risk and Expected Return:

There is a positive relationship between the amount of risk and the amount of expected return
i.e., the greater the risk, the larger the expected return and larger the
Chances of substantial loss. One of the most difficult problems for an investor is to estimate
the highest level of risk he is able toassume.
 Risk is measured along the horizontal axis and increases from the left to right.
 Expected rate of return is measured on the vertical axis and rises from bottom to top.
 The line from 0 to R (f) is called the rate of return or risk less investments commonly
associated with the yield on government securities.
 The diagonal line form R (f) to E(r) illustrates the concept of expected rate of return
increasing as level of risk increases.
Types of Risks:
Risk consists of two components. They are
 Systematic Risk
 Un-systematic Risk
1. Systematic Risk:
Systematic risk is caused by factors external to the particular company and uncontrollable by
the company. The systematic risk affects the market as a whole. Factors affect the systematic
risk are
 economic conditions
 political conditions
 sociological changes
The systematic risk is unavoidable. Systematic risk is further sub-divided into three types.
They are
 Market Risk
 Interest Rate Risk
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 Purchasing Power Risk
Market Risk:
One would notice that when the stock market surges up, most stocks post higher price. On
the other hand, when the market falls sharply, most common stocks will drop. It is not
uncommon to find stock prices falling from time to time while a company‘s earnings are
rising and vice-versa. The price of stock may fluctuate widely within a short time even
though earnings remain unchanged or relatively stable.
Interest Rate Risk:

Interest rate risk is the risk of loss of principal brought about the changes in the interest rate
paid on new securities currently being issued.
Purchasing Power Risk:

The typical investor seeks an investment which will give him current income and / or capital
appreciation in addition to his original investment.
2. Un-Systematic Risk:
Un-systematic risk is unique and peculiar to a firm or an industry. The nature and mode of
raising finance and paying back the loans, involve the risk element. Financial leverage of the
companies that is debt-equity portion of the companies differs from each other. All these
factors affect the un-systematic risk and contribute a portion in the total variability of the
return.
 Managerial inefficiently
 Technological change in the production process
 Availability of raw materials
 Changes in the consumer preference
 Labor problems
The nature and magnitude of the above-mentioned factors differ from industry to industry
and company to company. They have to be analyzed separately for each industry and firm.
Un-systematic risk can be broadly classified into:
 Business Risk
 Financial Risk.
26
Business Risk:
Business risk is that portion of the unsystematic risk caused by the operating environment of
the business. Business risk arises from the inability of a firm to maintain its competitive edge
and growth or stability of the earnings. The volatility in stock prices due to factors intrinsic to
the company itself is known as Business risk. Business risk is concerned with the difference
between revenue and earnings before interest and tax. Business risk can be divided into.
I).Internal Business Risk:

Internal business risk is associated with the operational efficiency of the firm. The operational
efficiency differs from company to company. The efficiency of operation is reflected on the
company’s achievement of its pre-set goals and the fulfillment of the promises to its
investors.
II). External Business Risk:

External business risk is the result of operating conditions imposed on the firm by
circumstances beyond its control. The external environments in which it operates exert some
pressure on the firm.
The external factors are social and regulatory factors, monetary and fiscal policies of the
government, business cycle and the general economic environment within which a firm or an
industry operates.
a. Financial Risk:
It refers to the variability of the income to the equity capital due to the debt capital. Financial
risk in a company is associated with the capital structure of the company. Capital structure of
the company consists of equity funds and borrowed funds.
27
2.2 REVIEW OF LITERATURE
Review-1:Equity portfolio analysis within the MCDM frame
Authors: Panagiotis Xidonas, John Psarras
Publisher: International Journal of Banking Accounting and Finance,vol.1 No.3
Abstract
The current study provides a categorized bibliography on the application of the techniques of
multiple criteria decisions making (MCDM) to the problems and issues of portfolio analysis.
A large number of studies in the field of portfolio analysis have been compiled and classified
according to the different multicriteria methodological approaches that have been used.
Except the in-depth presentation of the MCDM contributions in the area of portfolio analysis,
the outmost aim of this paper is to stress the inarguable multiple criterion nature of the
majority of the problems that modern financial management faces.
28
Review- 2:The modern portfolio theory as an investment decision tool
Authors: IyiolaOmisore, Munirat Yusuf and Nwufo Christopher
Publisher: Journal of Accounting & Taxation, Vol.4 (2), pp. 19-28, March 2012
Abstract
This research paper is academic exposition into the modern portfolio theory (MPT) written
with a primary objective of showing how it aids an investor to classify, estimate, and control
both the kind and the amount of expected risk and return in an attempt to maximize portfolio
expected return for a given amount of portfolio risk, or equivalently minimize risk for a given
level of expected return. A methodology section is included which examined applicability of
the theory to real time investment decisions relative to assumptions of the MPT. A fair
critique of the MPT is carried out to determine inherent flaws of the theory while attempting
to proffer areas of further improvement (for example, the post-modern portfolio
theory [PMPT]). The paper is summarized to give a compressed view of the discourse upon
which conclusions were drawn while referencing cited literature as employed in the course of
the presentation.
29
Review-3:Balancing Risk and Return in a Customer Portfolio
Authors:Crina O. Tarasi, Ruth N. Bolton, Michael D. Hutt, Beth A. Walker
Publisher: SAGE Journals, Volume:75 issue:3
Abstract
Marketing managers can increase shareholder value by structuring a customer portfolio to
reduce the vulnerability and volatility of cash flows. This article demonstrates how financial
portfolio theory provides an organizing framework for (1) diagnosing the variability in a
customer portfolio, (2) assessing the complementarity/similarity of market segments, (3)
exploring market segment weights in an optimized portfolio, and (4) isolating the reward on
variability that individual customers or segments provide. Using a seven-year series of
customer data from a large business-to-business firm, the authors demonstrate how market
segments can be characterized in terms of risk and return. Next, they identify the firm's
efficient portfolio and test it against (1) its current portfolio and (2) a hypothetical profit
maximization portfolio. Then, using forward- and back-testing, the authors show that the
efficient portfolio has consistently lower variability than the existing customer mix and the
profit maximization portfolio. The authors provide guidelines for incorporating a risk overlay
into established customer management frameworks. The approach is especially well suited
for business-to-business firms that serve market segments drawn from diverse sectors of the
economy.
30
Review-4:Portfolio analysis under sudden changes in volatility and heterogeneous
investment horizons
Authors:Viviana Fernandez, Brian M.Lucey
Publisher: Physica A: Statistical Mechanics and its Applications, Volume 375, Issue 2
Abstract
We analyze the implications for portfolio analysis of accounting for conditional
heteroskedasticity and sudden changes in volatility, based on a sample of weekly data of the
Dow Jones Country Titans, the CBT-municipal bond, spot and futures prices of commodities
for the period 1992–2005. To that end, we first proceed to utilize the ICSS algorithm to detect
long-term volatility shifts, and incorporate that information into PGARCH models fitted to
the return’s series. At the next stage, we simulate returns series and compute a wavelet-based
value at risk, which takes into consideration the investor's time horizon. We repeat the same
procedure for artificial data generated from semi-parametric estimates of the distribution
functions of returns, which account for fat tails. Our estimation results show that neglecting
GARCH effects and volatility shifts may lead to an overestimation of financial risk at
different time horizons. In addition, we conclude that investors benefit from holding
commodities as their low or even negative correlation with stock and bond indices contribute
to portfolio diversification.
31
Review-5:Managing Portfolio Volatility
Authors:MichaelStamos and Thomas Zimmerer
Publisher: The Journal of Portfolio analysis Multi-Asset Special Issue 2021
Abstract
The authors revisit asset allocation strategies that aim at actively managing the volatility of
multi-asset-class portfolios in response to time-varying volatility forecasts. They use the
historical data of 29 major market indexes covering global equities, bonds, currencies, and
commodities and apply a common set of exponentially weighted volatility estimates to them.
The authors find that active volatility management is beneficial for most of these asset classes
and for mixed asset portfolios, leading to more consistent wealth accumulation over time. In
cross-validations, they find that fast-moving volatility forecasts seem beneficial because they
have better forecasting accuracy and produce economic gains in terms of risk accuracy and
performance. The authors also find significant reduction of tail risks for most assets, except
for bonds, where the reduction is minor.
32
Review-6: The influence of business strategy on project portfolio analysis and its success
—A conceptual frame work
Author: SaschaMeskendhal
Publisher: International Journal of Project Management
Abstract
Firms are facing more difficulties with the implementation of strategies than with its
formulation. Therefore, this paper examines the linkage between business strategy, project
portfolio analysis, and business success to close the gap between strategy formulation and
implementation. Earlier research has found some supporting evidence of a positive
relationship between isolated concepts, but so far there is no coherent and integral frame
work covering the whole cycle from strategy to success. Therefore, the existing research on
project portfolio analysis is extended by the concept of strategic orientation. Based on a
literature review, a comprehensive conceptual model considering strategic orientation, project
portfolio structuring, project portfolio success, and business success is developed. This model
can be used for future empirical research on the influence of strategy on project portfolio
analysis and its success. Furthermore, it can easily be extended e.g. by contextual factors.
33
Review-7:Portfolio analysis in New Product Development: Lessons from the Leaders.
Authors:Robert G.Cooper, Scott &Elko J. Kleinschmidt.
Publisher: Research-Technology management.
Abstract
A study of portfolio analysis practices in industry reveals three goals: maximizing the value
of the portfolio, achieving the right balance and mix of projects, and linking the portfolio to
the business's strategy. This first of two articles provides examples of portfolio methods used
to achieve the first two goals. Maximizing the portfolio's value is achieved by means of
various financial models, including the Expected Commercial Value method and the
Productivity Index, which are outlined and critiqued. Scoring models are also used to
maximize the value of the portfolio. Achieving a balanced portfolio is quite a different issue,
involving the use of bubble diagrams and other visual models.
34
Review-8: Interconnectedness Risk and Active Portfolio analysis.
Authors: Eduard Baitinger, Jochen Papenbrock.
Publisher: Journal of investing strategies.
Abstract
Interconnectedness is an alternative risk concept that so far has earned little attention in the
asset management academia and industry. In this paper, we show that this neglect is not
justified, as interconnectedness risk (i) has only moderate or no connection to conventional
portfolio optimization inputs and (ii) active investment strategies based on interconnectedness
information outperform their conventional peers. Utilizing a multi asset dataset, we measure
interconnectedness risk by the embeddedness intensity, i.e., centrality, of assets in a
correlation network, a concept from graph theory. Using the most common centrality
measures, we first conduct empirical similarity studies analyzing how different centrality
scores relate to each other and to conventional portfolio optimization inputs. Next, we outline
how centrality can be incorporated in a risk-based as well as in a risk-return-based
framework. Out-of-sample performance studies of centrality-optimized portfolios prove their
competitiveness.
35
Review-9: Clustering Indian stock market data for portfolio analysis.
Authors: S.R.Nanda, B.Mahanty and M.K.Tiwari.
Publisher: Expert systems and applications.
Abstract
In this paper a data mining approach for classification of stocks into clusters is presented.
After classification, the stocks could be selected from these groups for building a portfolio. It
meets the criterion of minimizing the risk by diversification of a portfolio. The clustering
approach categorizes stocks on certain investment criteria. We have used stock returns at
different times along with their valuation ratios from the stocks of Bombay Stock Exchange
for the fiscal year 2007–2008. Results of our analysis show that K-means cluster analysis
builds the most compact clusters as compared to SOM and Fuzzy C-means for stock
classification data. We then select stocks from the clusters to build a portfolio, minimizing
portfolio risk and compare the returns with that of the benchmark index, i.e. Sensex.
36
Review-10: Portfolio analysis under Stress.
Authors: Rebonato,Riccardo, Denev,Alexander.
Publisher: Cambridge Books, Cambridge University.
Abstract
Portfolio analysis under Stress offers a novel way to apply the well-established Bayesian-net
methodology to the important problem of asset allocation under conditions of market distress
or, more generally, when an investor believes that a particular scenario (such as the break-up
of the Euro) may occur. Employing a coherent and thorough approach, it provides practical
guidance on how best to choose an optimal and stable asset allocation in the presence of user
specified scenarios or 'stress conditions'. The authors place causal explanations, rather than
association-based measures such as correlations, at the core of their argument, and insights
from the theory of choice under ambiguity aversion are invoked to obtain stable allocations
results. Step-by-step design guidelines are included to allow readers to grasp the full
implementation of the approach, and case studies provide clarification. This insightful book is
a key resource for practitioners and research academics in the post-financial crisis world.
37
CHAPTER-III
INDUSTRY PROFILE
COMPANY PROFILE
38
INDUSTRY PROFILE
A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while enriching
investors. Government restrictions on financial activities by banks vary over time and
location. Banks are important players in financial markets and offer services such as
investment funds and loans. In some countries such as Germany, banks have historically
owned major stakes in industrial corporations while in other countries such as the United
States banks are prohibited from owning non-financial companies. In Japan, banks are
usually the nexus of a cross-shareholding entity known as the keiretsu. In France,
bancassurance is prevalent, as most banks offer insurance services (and now real estate
services) to their clients.
INTRODUCTION
India’s banking sector is constantly growing. Since the turn of the century, there has been a
noticeable upsurge in transactions through ATMs, and also internet and mobile banking.
Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in
2012, the landscape of the banking industry began to change. The bill allows the Reserve
Bank of India (RBI) to make final guidelines on issuing new licenses, which could lead to a
bigger number of banks in the country. Some banks have already received licenses from the
government, and the RBI's new norms will provide incentives to banks to spot bad loans and
take requisite action to keep rogue borrowers in check.
Over the next decade, the banking sector is projected to create up to two million new jobs,
driven by the efforts of the RBI and the Government of India to integrate financial services
into rural areas. Also, the traditional way of operations will slowly give way to modern
technology.
Market size
Total banking assets in India touched US$ 1.8 trillion in FY13 and are anticipated to cross
US$ 28.5 trillion in FY25.
Bank deposits have grown at a compound annual growth rate (CAGR) of 21.2 per cent over
FY06–13. Total deposits in FY13 were US$ 1,274.3 billion.
Total banking sector credit is anticipated to grow at a CAGR of 20.1 per cent (in terms of
INR) to reach US$ 2.4 trillion by 2020.
In FY15, private sector lenders witnessed discernable growth in credit cards and personal
loan businesses. HDFC Bank witnessed 151.6 per cent growth in personal loan disbursement
39
in FY15, as per a report by Emkay Global Financial Services. Axis Bank's personal loan
business also rose 49.8 per cent and its credit card business expanded by 31.1 per cent.
Investments
Bengaluru-based software services exporter Mphasis Ltd has bagged a five-year contract
from Punjab National Bank (PNB) to set up the bank’s contact centers in Mangalore and
Noida (UP). Mphasis will provide support for all banking products and services, including
deposits operations, lending services, banking processes, internet banking, and account and
card-related services. The company will also offer services in multiple languages.
Microfinance companies have committed to setting up at least 30 million bank accounts
within a year through tie-ups with banks, as part of the Indian government’s financial
inclusion plan. The commitment was made at a meeting of representatives of 25 large
microfinance companies and banks and government representatives, which included financial
services secretary Mr. GS Sandhu.
Export-Import Bank of India (Exim Bank) will increase its focus on supporting project
exports from India to South Asia, Africa and Latin America, as per Mr.YaduvendraMathur,
Chairman and MD, Exim Bank. The bank has moved up the value chain by supporting
project exports so that India earns foreign exchange. In 2012–13, Exim Bank lent support to
85 project export contracts worth Rs 24,255 crore (US$ 3.96 billion) secured by 47
companies in 23 countries.
Government Initiatives
The RBI has given banks greater flexibility to refinance current long-gestation project loans
worth Rs 1,000 crore (US$ 173.42 million) and more, and has allowed partial buyout of such
loans by other financial institutions as standard practice. The earlier stipulation was that
buyers should purchase at least 50 per cent of the loan from the existing banks. Now, they get
as low as 25 per cent of the loan value and the loan will still be treated as ‘standard’.
The RBI has also relaxed norms for mortgage guarantee companies (MGC) enabling these
firms to use contingency reserves to cover for the losses suffered by the mortgage guarantee
holders, without the approval of the apex bank. However, such a measure can only be
initiated if there is no single option left to recoup the losses.
SBI is planning to launch a contact-less or tap-and-go card facility to make payments in
India. Contact-less payment is a technology that has been adopted in several countries,
including Australia, Canada and the UK, where customers can simply tap or wave their card
over a reader at a point-of-sale terminal, which reads the card and allows transactions.
40
SBI and its five associate banks also plan to empower account holders at the bottom of the
social pyramid with a customer call facility. The proposed facility will help customers get an
update on available balance, last five transactions and cheque book request on their mobile
phones.
Road Ahead
India is yet to tap into the potential of mobile banking and digital financial services. Forty-
seven per cent of the populace have bank accounts, of which half lie dormant due to reliance
on cash transactions, as per a report. Still, the industry holds a lot of promise.
India's banking sector could become the fifth largest banking sector in the world by 2020 and
the third largest by 2025. These days, Indian banks are turning their focus to servicing clients
and enhancing their technology infrastructure, which can help improve customer experience
as well as give banks a competitive edge.
Exchange Rate Used: INR 1 = US$ 0.0173 as on October 28, 2015
The level of governmentregulation of the banking industry varies widely, with countries such
as Iceland, having relatively light regulation of the banking sector, and countries such as
China having a wide variety of regulations but no systematic process that can be followed
typical of a communist system.
The oldest bank still in existence is Monte deiPaschi di Siena, headquartered in Siena, Italy,
which has been operating continuously since 1572.
41
COMPANY PROFILE
HDFC Securities Limited is a financial services intermediary and a subsidiary of HDFC

Bank, a private sector bank in India. HDFC securities was founded in the year 2000 and is
headquartered in Mumbai with branches across major cities and towns in India.
History
HDFC securities began operations in April 2000. In the beginning it was a joint venture
between HDFC Bank Limited, HDFC Limited and IndoceaneSecurities Holdings Limited.
Along with offering stock broking services, HDFC securities is also a distributor of financial
products. In 2006, HDFC Bank bought HDFC Ltd.’s stake and in 2008 acquired another 4%
from IndoceaneSecurities. Currently HDFC securities is a subsidiary of HDFC Bank.
Management
 Mr. Bharat Shah - Chairman, HDFC securities Limited
 Mr.DhirajRelli - Managing Director & CEO, HDFC securities Limited
 Mr. CV Ganesh - Chief Operating Officer & Chief Financial Officer
Business
HDFC Securities Ltd, is a stock broking and distribution arm of the HDFC Group. One of the
oldest broking houses in India, its operations include stock broking and distribution of
various financial products. It is a corporate member of both the Bombay Stock Exchange
(BSE) and the National Stock exchange (NSE). HDFC securities is well known with
professional traders for its comprehensive online trading portal offerings.
Products and Services

HDFC securities provides a 3-in-1 Online Investment Account which is a combination of
HDFC Bank Savings and Demat Accounts along with an HDFC securities trading account.
Services:
 Equities – Invest online in stocks of listed companies
 Mutual Funds – Invest in mutual funds including equity, hybrid, tax saving or debt
schemes from asset management companies
 SIPs – Systematic investment plan that allows automated investments
 IPOs - Invest in initial public offerings (IPO)
 Derivatives – Hedge or speculate on the price movement of stocks or index through
its derivative products viz. Futures and Options
42
 Bonds, NCDs & Corporate FDs – Invest in fixed income instruments such as bonds,
NCDs and Corporate FDs
 ETFs - Invest in exchange-traded funds
 Value Added Services - Provides investing and trading ideas, along with financial
tools and calculators, tax solutions, will planning and robot advisors.
 MCX - Invest in bullion, metals, energy and agricultural commodities
 smallcases - Invest in a curated basket of stocks based on a theme or market trend.
Milestones
April 2000: Inception of HDFC securities. It was a joint venture among HDFC Bank
Limited, HDFC Limited and IndoceaneSecurities Holdings Limited.April 2000: Inauguration
of the first branch in Mumbai
May 2000: HDFC securities launched its own website
June 2000: Launched stock trading on Bombay Stock Exchange
August 2000: Launched stock trading on National Stock Exchange
November 2000: Introduction of online trading
August 2003: Rolled out online trading in Futures & Options
January 2006: Introduced online IPO/FD system that allowed investors to invest in IPOs and
Corporate Fixed Deposits online
March 2008: Pioneered the concept of SIP in equities by launching Do-It-Yourself (DIYSIP)
in equities and ETFs
December 2009: Launched BLINK: a trading engine that lets traders place stock orders at
lightning-fast speed,
November 2010: Launched state of the art website with several advanced features such as
unified search option, single sign on, search engine friendly architecture, portfolio tracker and
a robust research radar
February 2011: One of the first brokerage houses to launch mobile trading app for equity
trading
June 2011: Rolled out Futures & Options on mobile trading platform
December 2011: Launched an exclusive mobile trading app for Android phones and
Blackberry
March 2012: Launched an exclusive mobile trading app for iPhone
June 2012: Started offering National Pension System
August 2012: Launched Deep ORS, a sophisticated portfolio tracker that allows investors to
trade from their portfolio itself.
43
June 2013: Introduced e-filing of Income Tax Return
June 2013: Introduced online mutual fund service that allows customers to invest in mutual
fund units through their trading account
July 2013: Took DIYSIP online whereby the investors can invest, track and manage their
DIYSIP investments online.
April 2014: Launched an exclusive trading app for iPad
June 2014: Launched next generation trading app for iPhone which facilitates a holistic
investment experience
September 2014: Launched next generation trading app for Android Phone which facilitates
a holistic investment experience
May 2018: Roll out virtual assistant service through voice based IoT devices on Google
Home, Google Assistant and Amazon Alexa. One can Open an account, Get Investment
Options and invest in stocks and mutual funds with their virtual assistant "Arya"
Awards or Recognitions
2017:Winner in "Retail Broking" category by Outlook Money
2016: Runner up in the "Best e-brokerage House" category by Outlook Money
2014: Zee Business – India's Best Market Analyst Award 2014 under Equity Banking
2014: "Best Financial Markets Technology Implementation of the Year" award by The Asian
Banker
2011: "Largest e-brokerage house" by BSE-Dun & Bradstreet
44
CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION
45
TABLE: 4.1 - CALCULATION OF RETURN OF KOTAK
Beginning price Ending
Year (Rs) price(Rs) Dividend(Rs) Return (R)
2018-2019 1952.00 748.80 29.00 -60.15
2019-2020 755.00 463.35 5.00 -37.97
2020-2021 462.00 605.90 5.00 32.23
2021-2022 603.00 525.65 8.00 -11.50
2022-2023 521.54 635.68 8.50 23.51
AVERAGE RETURN 858.708

2000
1500
1000
Beginning price(Rs)
500 Ending price(Rs)
Dividend(Rs)
Return (R)
0
-500
Dividend+( Endingprice−BeginningPrice )
Return (R) = ∗100
BeginningPrice
29 .00+(748 . 80−1952 . 00)
Return(2018-2019) = ∗100 = -
1952 . 00
60.15%
5 .00+(463. 35−755 .00)
Return(2019-2020) = ∗100 = -
755 . 00
37.97%
5 .00+(605 . 90−462 . 00)
Return(2020-2021) = ∗100 =
462 .00
32.23%
8 .00 +(525 . 65−603 .00)
Return(2021-2022) = ∗100 = -
603 . 00
11.50%
46
8 .50+(635 . 68−521 . 54)
Return(2022-2023) = ∗100 =
521 . 54
23.51%
Interpretation:
After analyzing the data from the period 2019 to 2023 in HDFC. The dividend is decreased
up to three years and started rising further. The return of HDFC is fluctuating in every year.
So, investing in long term can give normal profits and in short term is riskier.
TABLE: 4.2 - CALCULATION OF RETURN OF HDFC
Beginning Ending
Year price(Rs) price(Rs) Dividend(Rs) Return (R)
2018-2019 898.00 1571.05 10.00 76.06
2019-2020 1534.00 319.8 3.00 -78.95
2020-2021 320.00 448 3.50 41.09

2021-2022 447.95 251.35 2.00 -43.44
2022-2023 251.5 213.65 2.00 -16.63
3000
2500
2000
Return (R)
1500
Dividend(Rs)
Ending price(Rs)
1000 Beginning price(Rs)
500
-500
Return (R) = ∗100
BeginningPrice
10 .00+(1571 . 05−898 . 00)
Return(2018-2019) = ∗100 =
898 . 00
76.06%
47
3 .00+(319 . 80−1534 .00)
Return(2019-2020) = ∗100 = -
1534 .00
78.95%
3 .50+(448 . 00−320 .00)
Return(2020-2021) = ∗100 =
320 . 00
41.09%
2. 00+(251 .35−447 .95)
Return(2021-2022) = ∗100 = -
447 . 95
43.44%
2. 00+(213 . 65−251 . 50)
Return(2022-2023) = ∗100 = -
215 . 50
16.63%
Interpretation:
After analyzing the data from the period 2019 to 2023 in KOTAK. The dividend is decreased
fortwo years and started rising then after started decreasing further. The return of KOTAK is
fluctuating in every year. So, investing in long term as well as in short term is risker.
TABLE: 4.3 - CALCULATION OF RETURN OF IDBI
Beginning Ending
Year price(Rs) price(Rs) Dividend(Rs) Return (R)
2018-2019 598.45 1095.25 17.00 85.85
2019-2020 1109.00 1351.17 19.00 23.55
2020-2021 1368.00 362.75 16.50 -72.28

2021-2022 363.00 391.80 8.50 10.27
2022-2023 391.00 425.50 8.50 10.99
48
100%
90%
80%
70%
60% Return (R)

Dividend(Rs)
50% Ending price(Rs)
Beginning price(Rs)
40%
30%
20%
10%
0%
Return (R) = ∗100
BeginningPrice
17 .00+(1095 . 25−598 . 45)
Return(2018-2019) = ∗100 =
598 . 45
85.85%
19 .00+(1351 .17−1109. 00)
Return(2019-2020) = ∗100 =
1109. 00
23.55%
16 .50+(362 .75−1368 . 00)
Return(2020-2021) = ∗100 = -
1368 . 00
72.28%
8 .50+(391 . 80−363 . 00)
Return(2021-2022) = ∗100 =
363 . 00
10.27%
8 .50+(425. 50−391. 00)
Return(2022-2023) = ∗100 =
391 . 00
10.99%
Interpretation:
After analyzing the data from the period 2019 to 2023 in IDBI. The dividend is decreasing.
The return of HDFC is fluctuating in every year. But mostly the returns are in positive so,
investing in long term as well as in short term can give profits.
TABLE: 4.4 - CALCULATION OF RETURN OF AXIS
Beginning Ending
Year Dividend(Rs) Return (R)
price(Rs) price(Rs)
49
2018-2019 502.00 1156.30 16.00 133.52
2019-2020 1135.05 1151.20 25.00 3.62
2020-2021 1169.00 2001.17 25.00 73.32
2021-2022 2021.00 2620.17 40.00 31.76
2022-2023 2648.65 2627.90 40.00 0.73
3000
2500
2000
Beginning price(Rs)
Ending price(Rs)
1500
Dividend(Rs)
Return (R)
1000
500
Return (R) = ∗100
BeginningPrice
16 .00+(1156 .30−502 .00)
Return(2018-2019) = ∗100 =
502 . 00
133.52%
Return(2019-2020) = 25 . 00+¿ ¿ = 3.62%
25 .00+(2001 . 17−1169 .00)
Return(2020-2021) = ∗100 =
1169. 00
73.32%
40 . 00+(2620 .17−2019 . 00)
Return(2021-2022) = ∗100 =
2019. 00
31.76%
40 . 00+(2627 . 90−2648 . 65)
Return(2022-2023) = ∗100 =
2648 .65
0.73%
Interpretation:
50
After analyzing the data from the period 2019 to 2023 in AXIS. The dividend is increasing.
The return of AXIS is fluctuating in every year. But the returns all are in positive So,
investing in long term as well as in short term can give profits.
51
TABLE: 4.5 – AVERAGE RETURN OF FOUR COMPANIES
COMPANY AVERAGE RETURN
IDBI 11.68
KOTAK -4.37
HDFC -10.78
AXIS 48.59
AVERAGE RETURN
50
40
30
AVERAGE RETURN
20
10
0
IDBI KOTAK HDFC AXIS
-10
-20
On seeing the above graph, we can see that the average return of AXIS is much more than all
other companies & also the returns of AXIS are all positive in all the 5 years. The average
Return of IDBI is most negative when compared with other companies. The average return of
HDFC is positive and KOTAK is negative.
52
TABLE: 4.6 - CALCULATION OF STANDRAD DEVIATION AND
VARIANCE OF HDFC
2
Year Return (R) R R−R (R−R)
2018-2019 -60.15 -10.78 -49.37 2437.40
2019-2020 -37.97 -10.78 -27.19 739.30
2020-2021 32.23 -10.78 43.01 1849.86
2021-2022 -11.50 -10.78 0.72 0.52
2022-2023 23.51 -10.78 34.29 1175.80
-53.88 6202.88
7000
6000
5000
4000 Series5
Series4
3000 Series3
Series2
Series1
2000
1000
0
1 2 3 4 5 6
-1000
Average ( R ) =
∑R
n
−53 .88
=
5
= -10.78
Variance = ∑ (R−R)2
n−1
6202. 88
=
5−1
= 1550.72
Standard Deviation(σ ) = √ Variance
= √ 1550 .72
= 39.38
53
Interpretation: After analyzing the data from the period 2019 to 2023 in HDFC. The
average return is -10.78. We can see the average return is negative, variance is 1550.72 and
the standard deviation is about 39.38.
VARIANCE OF KOTAK
2
2018-2019 76.06 -4.37 80.43 6468.98
2019-2020 -78.95 -4.37 -74.58 5562.18
2020-2021 41.09 -4.37 45.46 2066.61
2021-2022 -43.44 -4.37 -39.07 1526.46
2022-2023 -16.63 -4.37 -12.26 150.31
-21.87 15774.54
16000
14000
12000
10000
Series5
8000 Series4
Series3
6000 Series2
Series1
4000
2000
0
1 2 3 4 5 6
-2000
Average ( R ) =
∑R
n
−21. 87
=
5
= -4.37
n−1
15774 . 54
=
5−1
= 3943.63
54
= √ 3943 .63
= 62.80
Interpretation: After analyzing the data from the period 2019 to 2023 in KOTAK. The
average return is -4.37. we can see the average return is negative, variance is 3943.63 and the
standard deviation is about 62.80.
VARIANCE OF IDBI
2
2018-2019 85.85 11.68 74.17 5501.19
2019-2020 23.55 11.68 11.87 140.90
2020-2021 -72.28 11.68 -83.96 7049.28
2021-2022 10.27 11.68 -1.41 1.99
2022-2023 10.99 11.68 -0.69 0.48
58.38 12693.84
100%
90%
80%
70%
60% Series5
Series4
50% Series3
Series2
40%
Series1
30%
20%
10%
0%
1 2 3 4 5 6
Average ( R ) =
∑R
n
58 .38
=
5
= 11.68
n−1
12693 .84
=
5−1
= 3173.46
55
= √ 3173 . 46
= 56.33
Interpretation: After analyzing the data from the period 2019 to 2023 in IDBI. The
average return is 11.68. we can see the average return is positive, variance is 3173.46 and the

VARIANCE OF AXIS
2
2018-2019 133.52 48.59 84.93 7213.10
2019-2020 3.62 48.59 -44.97 2022.30
2020-2021 73.32 48.59 24.73 611.57
2021-2022 31.76 48.59 -16.83 283.25
2022-2023 0.73 48.59 -47.86 2290.58
242.95 12420.80
14000
12000
10000
8000 Series5
Series4
6000 Series3
Series2
Series1
4000
2000
0
1 2 3 4 5 6
-2000
Average ( R ) =
∑R
n
242. 95
=
5
= 48.59
n−1
¿ ∑ ( ABOVE)12420.8 0
=
5−1
56
= 3105.20
= √ 3105 .20
= 55.72
Interpretation: After analyzing the data from the period 2019 to 2023 in AXIS. The
average return is 48.59. we can see the average return is positive, variance is 3105.20 and the
TABLE: 4.10 - STANDRAD DEVIATION OF FOUR COMPANIES
COMPANY STANDARD DEVIATION (RISK) (%)
IDBI 56.33
KOTAK 62.80
HDFC 39.38
AXIS 55.72
STANDARD DEVIATION (RISK) (%)

70
60
50
STANDARD DEVIATION (RISK) (%)
40
30
20
10
0
IDBI KOTAK HDFC AXIS
57
GRAPH: STANDRAD DEVIATION (RISK)
The above graph indicates the risk of the companies. The risk is high for HDFC when
compared to others and the risk is low for HDFC. The higher the standard deviation the
higher the risk and vice versa.
58
TABLE: 4.11 - CORRELATION BETWEEN HDFC& KOTAK
Year Deviation of HDFC Deviation of Combined
(RA−RA) KOTAK Deviation
(RB−RB) (RA−RA)(RB−RB)
2018-2019 -49.37 80.43 -3970.83
2019-2020 -27.19 -74.58 2027.83
2020-2021 43.01 45.46 1955.23
2021-2022 0.72 -39.07 -28.13
2022-2023 34.29 -12.26 -420.40
-436.3
34.29
-49.37
0.7200000000000
01
43.01
-27.19
n
Co-variance (COV AB ) = ∑ (RA−RA ¿)¿ ¿ ¿
t =1
−463 . 3
=
5
= -92.66
Co−variance
Correlation Coefficient ( P AB) =
( STDA)( STDB)
−92. 66
=
(39 . 38)(62. 80)
= -0.0374
59
Interpretation: The correlation coefficient of HDFC and KOTAK is about -0.0374. the
negative correlation indicates that the vice versa of gaining profits like one may be in more
profits and another may be in normal losses. This can avoid risk.
60
TABLE: 4.12 - CORRELATION BETWEEN KOTAK &IDBI
Deviation of Deviation of Combined
Year KOTAK IDBI Deviation
(RA−RA) (RB−RB) (RA−RA)(RB−RB)
2018-2019 80.43 74.17 5965.49
2019-2020 -74.58 11.87 -885.26
2020-2021 45.46 -83.96 -3816.82

2021-2022 -39.07 -1.41 55.09
2022-2023 -12.26 -0.69 8.46
1326.96
-12.26
-39.07
80.43
45.46
-74.58
n
t =1
1326 . 96
=
5
= 265.39
Co−variance
( STDA)( STDB)
265 .39
=
(62 . 80)(56 .33)
= 0.0750
61
Interpretation: The correlation coefficient of KOTAK and IDBI is about 0.0750. The
positive correlation indicates that gaining profits like two companies can give profit at a time
and as well as losses together. This is riskier.
TABLE: 4.13 - CORRELATION BETWEEN IDBI &AXIS
Year IDBI AXIS Deviation
2018-2019 74.17 84.93 6299.26
2019-2020 11.87 -44.97 392.90
2020-2021 -83.96 24.73 -2076.33
2021-2022 -1.41 -16.83 23.73
2022-2023 -0.69 -47.86 33.02
4672.58
-1.41 -0.690000000000001
74.17
-83.96
11.87
n
t =1
876 . 43
=
5
= 934.52
Co−variance
( STDA)( STDB)
934 .52
=
(56 . 33)(55 .72)
62
= 0.3014
Interpretation: The correlation coefficient of IDBI and AXIS is about 0.3014.The
positive correlation indicates that gaining profits like two companies can give profit at a time
and as well as losses together. This is riskier.
TABLE: 4.14 - CORRELATION BETWEEN AXIS&HDFC
Year AXIS HDFC Deviation
2018-2019 84.93 -49.37 -4192.99
2019-2020 -44.97 -27.19 1222.73
2020-2021 24.73 43.01 1063.64
2021-2022 -16.83 0.72 -12.12

2022-2023 -47.86 34.29 -1641.12
-3559.86
-47.86
84.93
-16.83
24.73
-44.97
n
t =1
−3559 .86
=
5
= -711.97
Co−variance
( STDA)( STDB)
63
−711. 97
=
(55 . 72)(39 . 38)
= -0.3244
Interpretation: The correlation coefficient of AXIS and HDFC is about -0.3244. the
TABLE: 4.15 - CORRELATION BETWEEN IDBI & HDFC
Year Deviation of HDFC Deviation of HDFC Combined
(RA−RA) (RB−RB) Deviation
(RA−RA)(RB−RB)
2018-2019 -49.37 74.17 -3661.77
2019-2020 -27.19 11.87 -322.74
2020-2021 43.01 -83.96 -3611.12
2021-2022 0.72 -1.41 -1.01
2022-2023 34.29 -0.69 -23.66
-7620.30
34.29
-49.37
0.7200000000000
01
43.01
-27.19
n
t =1
−7620 .30
=
5
= -1524.06
64
Co−variance
( STD A)(STD B)
−1524 . 06
=
(39 . 38)(56 .33)
= -0.6870
Interpretation: The correlation coefficient of IDBI and HDFC is about -0.6870. the
TABLE: 4.16 - CORRELATION BETWEEN KOTAK &AXIS
Year HDFC AXIS Deviation
2018-2019 80.43 84.93 6830.92

2019-2020 -74.58 -44.97 3353.86
2020-2021 45.46 24.73 1124.22
2021-2022 -39.07 -16.83 657.55
2022-2023 -12.26 -47.86 586.76

12553.31
100%
90%
80%
70%
60%
Combined Deviation
50% Deviation of AXIS
Deviation of KOTAK
40% Year
30%
20%
10%
0%
1 2 3 4 5
n
t =1
65
12553 .31
=
5
= 2510.66
Co−variance
( STD A)(STD B)
2510.66
=
(62.80)(55.72)
= 0.7175
Interpretation: The correlation coefficient of KOTAK and AXIS is about -0.0374. the
TABLE: 4.17 – CORRELATION COEFFICIENT
COMPANIES CORRELATION COEFFICIENT

HDFC&KOTAK -0.0374
KOTAK&IDBI -0.0750
IDBI&AXIS 0.3014
AXIS&HDFC -0.3244
IDBI&HDFC -0.6870
KOTAK&AXIS 0.7175
CORRELATION COEFFICIENT
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
COMPANIES
66
Interpretation: The correlation coefficient of HDFC and KOTAK is about -0.0374. the
67
PORTFOLIO WEIGHTS:
Formula:
2
(σ 2 ) −P AB (σ 1 )(σ 2)
Xa = 2 2
(σ 1) +(σ 2) −2 P AB ( σ 1)(σ 2 )
Xb = 1 - Xa
PORTFOLIO WEIGHT OF HDFC&KOTAK:
σ 1 = 39.38
σ 2 = 62.80
P AB = -0.0374
2
(62.80) −(−0.0374 )(39.38)(62.80)
Xa =
(39.38)2 +(62.80)2−2 (−0.0374)(39.38)(62.80)
3943.84+ 92.49
=
1550.78+3943.84+184.98
4036.33
=
5679.6
= 0.7106
Xb = 1 - Xa
= 1 – 0.7106
= 0.2894
PORTFOLIO WEIGHT OF KOTAK AND IDBI:

σ 1 = 62.80
σ 2 = 56.33
P AB = -0.0750
2
(56.33) −(−0.0750)(62.80)(56.33)
Xa =
(62.80)2 +(56.33)2−2(−0.0750)(62.80)(56.33)
3173.07 +265.31
=
3943.84+3173.07+ 530.62
3438.38
=
7647.53
= 0.4496
Xb = 1 - Xa
= 1 – 0.4496
= 0.5504
68
69
PORTFOLIO WEIGHT OF IDBI&AXIS:
σ 1 = 56.33
σ 2= 55.72
P AB = 0.3014
2
(55.72) −(0.3014)(56.33)(55.72)
Xa =
(56.33)2 +(55.72)2−2(0.3014 )(56.33)(55.72)
3104.72−946.01
=
3173.07+3104.72−1892.02
2158.71
=
4385.77
= 0.4922
Xb = 1 - Xa
= 1 – 0.4922
= 0.5078
PORTFOLIO WEIGHT OF AXIS&HDFC:

σ 1 = 55.72
σ 2= 39.38
P AB = -0.3244
2
(39.38) −(−03244)(55.72)(39.38)
Xa =
(55.72)2+(39.38)2−2(−0.3244)(55.72)(39.38)
1550.78+ 711.81
=
3104.72+ 1550.78+1423.62
2262.59
=
6079.12
= 0.3722
Xb = 1 - Xa
= 1 – 0.3722
= 0.6278
70
PORTFOLIO WEIGHT OF IDBI AND HDFC:
σ 1 = 39.38
σ 2 = 56.33
P AB = -0.6870
2
(56.33) −(−0.6870)(39.38)(56.33)
Xa =
(39.38)2 +(56.33)2−2(−0.6870)(39.38)(56.33)
3173.07+ 1523.95
=
1550.78+3173.07+3047.90
4697.02
=
7771.75
= 0.6044
Xb = 1 - Xa
= 1 – 0.6044
= 0.3956
PORTFOLIO WEIGHT OFKOTAK AND AXIS:

σ 1 = 62.80
σ 2 = 55.72
P AB = 0.7175
2
(55.72) −(0.7175)(62.80)(55.72)
Xa =
(62.80)2 +(55.72)2−2(0.7175)(62.80)(55.72)
3014.72−2510.69
=
3943.84+3014.72−5021.38
504.03
=
1937.18
= 0.2602
Xb = 1 - Xa
= 1 – 0.2602
= 0.7398
71
TABLE: 4.18 – CALCULATION OF PORTFOLIO RISK AND
PORTFOLIO RETURN
COMBINATIONO
PORTFOLIO PORTFOLO
F TWO COMPANY Xa COMPANY Xb
RETURN RISK
COMPANIES
Rp (σp)
HDFC&KOTAK 0.7106 0.2894 -8.9249 46.15
KOTAK& IDBI 0.4496 0.5504 4.4639 59.24
IDBI&AXIS 0.4922 0.5078 30.4229 56.02
AXIS&HDFC 0.3722 0.6278 11.3175 45.75
IDBI&HDFC 0.6044 0.3956 -1.8948 46.08
KOTAK&AXIS 0.2602 0.7398 34.8098 57.56
100
80
60
COMPANY Xb PORTFOLO RISK
(σp)
COMPANY Xb PORTFOLIO
40 RETURN Rp
COMPANY Xb
COMPANY Xa
20
-20
72
PORTFOLIO RETURN FORMULA:
Rp = (Ra)(Xa)+(Rb)(Xb)
HDFC&KOTAK:
Rp = (-10.78) (0.7106) + (-4.37) (0.2894)
= -8.9249
KOTAK AND IDBI:
Rp = (-4.37) (0.4496) + (11.68) (0.5504)
= 4.4639
IDBI&AXIS:
Rp = (11.68) (0.4922) + (48.59) (0.5078)
= 30.4229
AXIS&HDFC:
Rp = (48.59) (0.3722) + (-10.78) (0.6278)
= 11.3175
IDBI & HDFC:
Rp = (-10.78) (0.6044) + (11.68) (0.3956)
= -1.8948
KOTAK &AXIS:
Rp = (-4.37) (0.2602) + (48.59) (0.7398)

= 34.8098
73
PORTFOLIO RISK FORMULA:
σp == √( X ¿¿ a) (σ ) +(X ¿ ¿ b) (σ ) +2( X ¿¿ a)(X ¿ ¿ b)σ

2
1
2 2
2
2
1 σ 2¿ ¿ ¿ ¿
HDFC&KOTAK:
σp = √ ( 0.7106 ) 2 2 2 2
( 39.38 ) + ( 0.2894 ) ( 62.80 ) +2 ( 0.7106 )( 0.2894 ) (39.38 )( 62.80 )
= √ ( 0.5049 ) ( 1550.78 ) + ( 0.0837 )( 3943.84 ) +(1017.16)
= √ 782.99+330.09+1017.16
= √ 2130.24
= 46.15
KOTAK &IDBI:
σp = √ ( 0.4496 ) (62.80) +( 0.5504 ) (56.33) +2(0.4496)(0.5504)(62.80)(55.63)

2 2 2 2
= √ ( 0.2023 ) ( 3943.84 )+ ( 0.3029 )( 3173.07 ) +1750.79

= √ 797.05+961.12+1750.79
= √ 3508.96
= 59.24
IDBI&AXIS:
σp = √ ( 0.4922 ) (56.33) + ( 0.5078 ) (55.72) +2(0.4922)(0.5078)(56.33)(55.72)

2 2 2 2
= √ ( 0.2423 ) ( 3173.07 ) + ( 0.2579 )( 3104.72 ) +1568.97

= √ 768.83+800.71+1568.97
= √ 3138.51
= 56.02
74
AXIS&HDFC:
σp = √ ( 0.3722 ) (55.72) +( 0.6278 ) (39.38) +2(0.3722)(0.6278)( 57.22)(39.38)

2 2 2 2
= √ ( 0.1385 ) ( 3104.72 ) + ( 0.3941 ) ( 1550.78 ) +1052.05

= √ 430.00+ 611.16+1052.05
= √ 2093.21
= 45.75
IDBI AND HDFC:
σp = √ ( 0.6044 ) (39.38) +( 0.3956 ) (56.33) +2(0.6044)(0.3956)(39.38)(56.33)

2 2 2 2
= √ ( 0.3652 ) ( 1550.78 ) + ( 0.1565 ) ( 3173.07 ) +1060.78

= √ 566.34+ 496..58+ 1060.78
= √ 2123.7
= 46.08
KOTAK &AXIS:
σp = √ ( 0.2602 ) (62.80) + ( 0.7398 ) (55.72) +2 (0.2602)(0.7398)(62.80)(55.72)

2 2 2 2
= √ ( 0.0677 ) ( 3943.84 )+ ( 0.5473 ) ( 3104.72 )+ 1347.17

= √ 267.00+1699.21+1347.17
= √ 3313.38
= 57.56
.
75
PORTFOLIO RETURN
COMPANIES RETURNS
HDFC&KOTAK -8.92
KOTAK&IDBI 4.46
IDBI&AXIS 30.42
AXIS&HDFC 11.31
IDBI&HDFC -1.89
KOTAK&AXIS 34.8
PORTFOLIO RETURN
40
34.8
30.42
30
20
11.31
RETURN
10
4.46
0
RETURNS
-1.89
-10
-8.92
-20
COMPANIES
HDFC&KOTAK KOTAK&IDBI IDBI&AXIS AXIS&HDFC IDBI&HDFC KOTAK&AXIS
INTERPRETATION-
The above graph shows the portfolio returns of selected Banks i.e. HDFC BANK , KOTAK
BANK, IDBI BANK and AXIS BANK. It shows that Kotak and Axis bank has the highest
return(34.8%) when compare to the remaining banks and HDFC and Kotak bank has the least
return (-8.92%).
76
PORTFOLIO RISK
COMPANIES RISK
HDFC&KOTAK 46.15
KOTAK&IDBI 59.24
IDBI&AXIS 56.02
AXIS&HDFC 45.75
IDBI&HDFC 46.08
KOTAK&AXIS 57.56
PORTFOLIO RISK
70
59.24 57.56
60 56.02
50 46.15 45.75 46.08
40
RISK
30
20
10
0
COMPANIES
HDFC&KOTAK KOTAK&IDBI IDBI&AXIS AXIS&HDFC IDBI&HDFC KOTAK&AXIS
INTERPRETATION-
The above graph shows the portfolio risk of selected Banks i.e. HDFC BANK , KOTAK
BANK, IDBI BANK and AXIS BANK. It shows that Kotak and IDBI bank has the highest
risk(59.24%) when compare to the remaining banks and Axis and HDFC bank has the least
risk (45.75%).
77
PORTFOLIO RISK AND RETURN
COMPANIES RETURNS RISK
HDFC&KOTAK -8.92 46.15
KOTAK&IDBI 4.46 59.24
IDBI&AXIS 30.42 56.02
AXIS&HDFC 11.31 45.75
IDBI&HDFC -1.89 46.08
KOTAK&AXIS 34.8 57.56
PORTFOLIO RISK AND RETURN

70
59.24 57.56
60 56.02
50 46.15 45.75 46.08
40
RISK AND RETURN
34.8
30.42
30
20
11.31
10 4.46
0
HDFC&KOTAK KOTAK&IDBI IDBI&AXIS AXIS&HDFC IDBI&HDFC
-1.89 KOTAK&AXIS
-10
-8.92
-20
COMPANIES
RETURNS RISK
78
CHAPTER-V
FINDINGS, SUGGESTIONS AND
CONCLUSIONS
79
FINDINGS
 After analyzing the data from the period 2019 to 2023 in HDFC. The dividend is
decreased up to three years and started rising further. The return of HDFC is
fluctuating in every year. So, investing in long term can give normal profits and in
short term is riskier.
 After analyzing the data from the period 2019 to 2023 in KOTAK. The dividend is
decreased for two years and started rising then after started decreasing further. The
return of KOTAK is fluctuating in every year. So, investing in long term as well as in
short term is riskier.
 After analyzing the data from the period 2019 to 2023 in IDBI. The dividend is
decreasing. The return of IDBI is fluctuating in every year. But mostly the returns are
in positive so, investing in long term as well as in short term can give profits.
 After analyzing the data from the period 2019 to 2023 in AXIS. The dividend is
increasing. The return of AXIS is fluctuating in every year. But the returns all are in
positive So, investing in long term as well as in short term can give profits.
 On seeing the above graph, we can see that the average return of AXIS is much more
than all other companies & also the returns of AXIS are all positive in all the 5 years.
The average Return of HDFC is most negative when compared with other companies.
The average return of HDFC is positive and HDFC is negative.
 It shows that Kotak and IDBI bank has the highest risk(59.24%) when compare to the
remaining banks and Axis and HDFC bank has the least risk (45.75%).
 It shows that Kotak and IDBI bank has the highest risk(59.24%) when compare to the
remaining banks and Axis and HDFC bank has the least risk (45.75%).
80
SUGGESTIONS
Investor would be able to achieve when the returns of shares and debentures resultant
portfolio would be known as diversified portfolio. Thus, portfolio construction would address
itself to three majors via. Selectivity, timing and diversification.
In case of portfolio management, negatively correlated assets are most profitable.
Correlation with KOTAK is mostly negatively correlated which means the combination with
KOTAK portfolios are at good position to gain in future. So, on comparing the negative
correlated of KOTAK, the best portfolio among these isKOTAK AND AXIS. On investing in
this portfolio can be in a good position to make profits in future.
Investors may invest their money for long run, as both the combinations are most
suitable portfolios. A rational investor would constantly examine his chosen portfolio both
for average return and risk.
81
LIMITATIONS
1. In this study the number of funds considered is only two funds of HDFC and they are
dividend fund and growth fund.
2. The data collected for a period of Five year i.e2019-2023
3. In this study the statistical tools used are risk, return, average, variance, correlation.
4. In this study specific data is collected.
82
CONCLUSION
In case of perfectly correlated securities or stocks, the risk can be reduced to a
minimum point.
In case of negatively correlative securities the risk can be reduced to a zero. (Which is
company’s risk) but the market risk prevails the same for the security or stock in the
portfolio. So, investing in negative correlated securities or stocks can give more profits and
zero losses.
83
BIBILOGRAPHY
Book References:
1. Brinson, G.P., Randolph Hood, L., and Beebower, G.L. (1986) "Determinants of
portfolio performance,” Financial Analysts Journal, July/August, 42:4,39–44.
2. Cremers, J.-H. Kritzman, M. and Page, S. (2005) “Optimal hedge fund allocations:
Do higher moments matter?” Journal of Portfolio Management Spring 2005, 31:3,
70–81.
3. Grinold, R.C. and Kahn, R.N. (1999), Active Portfolio Management: A Quantitative
Approach for Producing Superior Returns and Controlling Risk, 2nd edn. New York:
McGraw‐Hill.
4. Gupta, P. (2014) “Specifying and managing tail risk in multi‐asset portfolios – A
summary,” CFA Institute Research Foundation Year in Review 2013, March 2014,
pp. 55–59.
5. Markowitz, H. (1952) "Portfolio Selection," Journal of Finance, March 1952, 77–91.
6. McFall, L.R. (2003) “Asymmetric returns and optimal hedge fund portfolios,” Journal
of Alternative Investments 6, Fall, 9.21
7. Merton, R.C. (1969) "Lifetime portfolio selection under certainty: the continuous-
time case,” Review of Economics and Statistics 51, 247–257.
Web References:
 www.nseindia.com
 www.moneycontrol.com
 www.kotak.com
 www.HDFC.com
 www.hdfc.com
 www.axis.com
84

Portfolio Management

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Portfolio Management

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A

Under the guidance of

time minimizing the portfolio risk by diversification.

portfolio. Portfolio Construction is a decision–support system that is designed with a view to

achieve the desired investment objectives.

Functions of Portfolio Construction

also optimize returns with the associated degree of risk 3?

 To make timely buying and selling of securities.

 To maximize the after-tax return by investing in various tax saving investment

unless he does nothing else.

Importance of Portfolio Construction

Emergence of institutional investing on behalf of individuals. A number of financial

part of household savings is being directed towards financial assets.

changing because of frequent changes in government‘s industrial and fiscal policies,

economic uncertainty and instability.

 Greater use of computers for processing mass of data.

techniques) in the investment decision–making.

increased competition and greater scrutiny by investor.

1.4 SCOPE OF THE STUDY

Data Collection Methods

Project limitations and methodology of the study.

CHAPTER - 2 REVIEW OF LITERATURE

brief explanation of the topic.

CHAPTER - 3 - INDUSTRY PROFILE & COMPANY PROFILE

Introduction Of Industry Profile And Company Profile vision, mission

CHAPTER - 4 - DATA ANALYSIS AND INTERPRETATION

CHAPTER - 5 – SUMMARY AND CONCLUSION

study during the period.

The Effect of Combining Two Securities:

Inter- Active Risk through Covariance:

Capital Asset Pricing Model (CAPM):

Need for Evaluation of Portfolio:

Portfolio analysis Using CAPM

Figure: 2.1 Corporate Securities

Equity Preference Bonds Warrants Derivatives

mportance of Portfolio analysis

Discretionary Portfolio analysis Service (DPMS):

Non-Discretionary Portfolio analysis Service (NDPMS):

Criteria for Portfolio Decisions

Qualities of Portfolio Manager

Stage in the Life Cycle:

Attitude towards Risk:

Individual‘s Financial Objectives:

Risk and Expected Return:

Interest Rate Risk:

Purchasing Power Risk:

I).Internal Business Risk:

II). External Business Risk:

HDFC Securities Limited is a financial services intermediary and a subsidiary of HDFC

Products and Services

2018-2019 1952.00 748.80 29.00 -60.15

2019-2020 755.00 463.35 5.00 -37.97

2020-2021 462.00 605.90 5.00 32.23

2021-2022 603.00 525.65 8.00 -11.50

2022-2023 521.54 635.68 8.50 23.51

AVERAGE RETURN 858.708

2020-2021 320.00 448 3.50 41.09

2020-2021 1368.00 362.75 16.50 -72.28

60% Return (R)

2019-2020 1135.05 1151.20 25.00 3.62

2020-2021 1169.00 2001.17 25.00 73.32

2021-2022 2021.00 2620.17 40.00 31.76

2022-2023 2648.65 2627.90 40.00 0.73