INVESTMENT ANALYSIS AND MANAGEMENT

US1 Indi aDol n Rupee lar Submit

Live rates as of Friday, August 23, 2013

Convert this amount: From this currency:

To this currency:

Click to convert:

1.00 USD US Dollar

64.69 INR Indian Rupee

Chief economic advisor Raghuram G Rajan has been

appointed as the next governor of the Reserve Bank of India .

Rajan will replace D Subbarao, who completes his five-year term on September 4, and will be the 23rd governor of the central bank. As the new RBI chief, Rajan will have a challenging time as he will have to battle the declining rupee, sliding growth and rising retail inflation, amid global economic uncertainty. Rajan was acclaimed for predicting

the 2008 global financial crisis. In 2005, Rajan had delivered

a lecture severely critical of the financial sector and argued that a financial disaster might be looming.

INVESTMENT ANALYSIS AND MANAGEMENT

Why Do Individuals Invest ?

By saving money (instead of spending it), individuals forego consumption today in return for a larger consumption tomorrow.

The final decisions to be made in investments What securities to be held How much should be allocated to each
Estimates are prepared of the risk and return associated with available securities over a forward holding period - Security analysis

Security analysis is the process of analysing the individual security and the market as a whole and estimating the risk and return expected from each of the securities with a view to identifying under valued securities for buying and overvalued securities for selling.

Return-risk estimates must be compared in order to decide how to allocate available funds among these securities on a continuing basis portfolio analysis, selection and management

Portfolio A combination of securities with different risk-return characteristics constitute the portfolio of the investor.

Portfolio management is a process encompassing activities aimed at optimising the investment of ones funds

Securities analysis
Portfolio analysis

Portfolio selection
Portfolio revision

Portfolio evaluation

INVESTMENT - INTRODUCTION

An investment is a commitment of funds made in the expectation of some positive rate of return.

INVESTMENT INTRODUCTION
Contd.

Investment is the process of

sacrificing something now for the prospect of gaining something later.

1.

2.
3.

An investment is the current commitment of the rupees for a period of time in order to derive future payments that will compensate the investor for The time the funds are committed The expected rate of inflation The uncertainty of future payments

MODULE:1

INVESTMENT INTRODUCTION Contd.

ECONOMICS: Investment is the net addition made to the nations capital stock comprising of goods & services used in the production process.

MODULE:1

INVESTMENT INTRODUCTION Contd.

Finance: Investment is the allocation of money to assets that are expected to yield gain over a period of time. -yield returns & capital growth.

MODULE:1

INVESTMENT INTRODUCTION Contd.

Return commensurate with the risk the investor assumes.

ARBITRAGE
Simultaneous purchase and sale

of securitie/ assets in two different markets to take advantage of price differentials

SPECULATION
Speculation involves buying and selling securities in the hope of making profits from potential short term price changes purchase of securities is motivated by greed and a fast buck But, a speculator contributes to the vibrancy of the market due to his frequent trading

 Adds to the markets liquidity and depth and

frequently turning over-changing his portfolio

His presence provides market for securitiesDEPTH

and a wider distribution of ownership of securities --BREADTH

Investment Characteristics
Return

Return = Capital appreciation+Dividend Purchase price Risk Safety Liquidity

Investment Characteristics
Return

Return = Capital appreciation+Dividend Purchase price

 Risk

Inherent in any business May be Loss of capital Delay in repayment of capital Non payment of interest Variability in returns

Depends on Nature of the investment Equity Debentures Maturity period longer the maturity period, higher the risk Credit worthiness of the borrower lower the creditworthiness, higher the risk vice versa Relation with return higher the risk higher would be the return

Investment Objectives
Investors objectives are his investment goals expressed in terms of both risk and returns. The relationship between risk and returns requires that goals not be expressed only on terms of returns.

Investment Objectives
Maximisation of Return A careful analysis of investors risk tolerance should precede any discussion of return objectives. - Capital preservation

- Capital appreciation - Current income Minimisation of Risk probability that the actual returns realised from an investment may vary from the expected return

 Safety
Liquidity

Hedge against inflation

Rate of return to be higher than rate of inflation

INVESTMENT CONSTRAINTS
Constraints reduces the possibility of realizing the investment objectives

INVESTMENT CONSTRAINTS

Liquidity Time horizon Tax considerations Risk Legal and regulatory factors may include limits on the allocation to specific assets, the ability to access certain funds and even prohibitions on certain investments. Unique circumstances may include social concerns and specific family needs.

SPECULATION
Speculation involves buying and selling activities with the expectation of getting profit from the price fluctuations. Taking up risk in the hope of making short term gains.

Investment Vs. speculation

Time horizon
Risk Return / Capital gain Decision Funds

MODULE:1 INVESTMENT PROCESS Contd.

Determining the investment objectives & policy

Undertaking security analysis Constructing a portfolio

Reviewing the portfolio

Evaluating the performance of the portfolio

INVESTMENT PROCESS.. ..Contd.

MODULE:1

1. Determining the investment objective & policy

Investible funds Objectives Knowledge about investment alternatives Knowledge about the stock market

INVESTMENT PROCESS. Contd.

MODULE:1

2. Undertaking security analysis Economic / Market analysis Industry analysis Company analysis
3. Valuation

INVESTMENT PROCESS ..Contd.

MODULE:1

4. Portfolio Construction Addresses major aspects Selectivity Timing Diversification Debt & equity diversification Industry diversification Company diversification Final selection

INVESTMENT PROCESS ..Contd.

MODULE:1

5 . Portfolio Performance Evaluation Appraisal 6 . Portfolio Revision

Security forms of Investment Corporate Bonds / Debentures -Convertible -Non-convertible Public sector Bonds - Taxable - Non Taxable
Preference shares Equity shares - New issue - Right issue

- Bonus issue

Non security forms of Investment National Savings scheme National Saving Certificates Provident funds Corporate Fixed Deposits Insurance Unit Schemes Post Office savings