Venu 42 Report

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Introduction

1.1 Introduction to the Study

A portfolio is a collection of assets. The assets may be physical or financial like Shares, Bonds,

Debentures, Preference Shares, etc. The individual investor or a fund manager would not like

to put all his money in the shares of one company that would amount to great risk. He would

therefore, follow the age old maxim that one should not put all the eggs into one basket. By

doing so, he can achieve objective to maximize portfolio return and at the same time

minimizing the portfolio risk by diversification. Portfolio management is the management of

various financial assets which comprise the portfolio. Portfolio management is a decision –

support system that is designed with a view to meet the multi-faced needs of investors. The

portfolio is also built up of the wealth or income of the investor over a period of time with a

view to suit is return or risk preference to that of the port folio that he holds. The portfolio

analysis is thus an analysis is thus an analysis of risk –return characteristics of individual

securities in the portfolio and changes that may take place in combination with other securities

due interaction among them and impact of each on others. Portfolio analysis includes portfolio

construction, selection of securities revision of portfolio evaluation and monitoring of the

performance of the portfolio. All these are part of the portfolio management. The traditional

portfolio theory aims at the selection of such securities that would fit in will with the asset

preferences, needs and choices of the investors. Thus, retired executive invests in fixed income

securities for a regular and fixed return. A business executive or a young aggressive investor on

the other hand invests in and rowing companies and in risky ventures. The modern portfolio

theory postulates that maximization of returns and minimization of risk will yield optional

returns and the choice and attitudes of investors are only a starting point for investment

decisions and that vigorous risk returns analysis is necessary for optimization of returns.

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1.2 Need of the Study

Portfolio management has emerged as a separate academic discipline in India. Portfolio theory

that deals with the rational investment decision-making process has now become an integral

part of financial literature. Investing in securities such as shares, debentures & bonds is

profitable well as exciting. It is indeed rewarding but involves a great deal of risk & need

artistic skill. Investing in financial securities is now considered to be one of the most risky

avenues of investment. It is rare to find investors investing their entire savings in a single

security. Instead, they tend to invest in a group of securities. Such group of securities is called

as Portfolio. Creation of portfolio helps to reduce risk without sacrificing returns. Portfolio

management deals with the analysis of individual securities as well as with the theory &

practice of optimally combining securities into portfolios. The modern theory is of the view

that by diversification, risk can be reduced. The investor can make diversification either by

having a large number of shares of companies in different regions, in different industries or

those producing different types of product lines. Modern theory believes in the perspective of

combinations of securities under constraints of risk and return.

1.3 Scope of the Study

The Scope of the Study is confined to Portfolio Management at HDFC Securities Ltd. This

study covers the Markowitz Model and individual Standard Deviation of ICICI Income funds,

KOTAK Income funds, TATA income funds for six month periods from July-2013 to

December-2013.

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1.4 Objectives of the Study

 To study and analyze portfolio management of ICICI, KOTAK AND TATA Income Funds

at HDFC Securities Ltd.

 To identify best combination of funds that maximizes profit and minimizes risk.

1.5 Sources of Data

The data collection methods are purely secondary.

 Company Website

 BSE and NSE Data Base

1.6 Limitations of the Study

 Data collection was strictly confined to secondary source. No primary data is associated

with the project.

 Detailed study of the topic was not possible due to limited time period.

 Only mutual funds of selected company’s were used to construct the portfolio.

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Industry Profile

Stock Broking Industry

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years

ago. The earliest records of security dealings in India are meager and obscure. The East India

Company was the dominant institution in those days and business in its loan securities used to

be transacted towards the close of the eighteenth century.By 1830's business on corporate

stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list

was broader in 1839, there were only half a dozen brokers recognized by banks and merchants

during 1840 and 1850.The 1850's witnessed a rapid development of commercial enterprise and

brokerage business attracted many men into the field and by 1860 the number of brokers

increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of Europe

was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about

200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began

(for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found

a place in a street (now appropriately called as Dalal Street) where they would conveniently

assemble and transact business. In 1887, they formally established in Bombay, the "Native

Share and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange

"). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in

1899. Thus, the Stock Exchange at Bombay was consolidated.

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Other Leading Cities in Stock Market Operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After

1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were

floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers

formed "The Ahmadabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to

Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After

the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was

followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and

1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange

Association"In the beginning of the twentieth century, the industrial revolution was on the way

in India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel

Company Limited in 1907, an important stage in industrial advancement under Indian

enterprise was reached.Indian cotton and jute textiles, steel, sugar, paper and flour mills and all

companies generally enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functioning

in its midst, under the name and style of "The Madras Stock Exchange" with 100 members.

However, when boom faded, the number of members stood reduced from 100 to 3, by 1923,

and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a rapid

increase in the number of textile mills and many plantation companies were floated. In 1937, a

stock exchange was once again organized in Madras - Madras Stock Exchange Association

(Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited).Lahore

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Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Punjab

Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a

slump. But, in 1943, the situation changed radically, when India was fully mobilized as a

supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities, those

dealing in them found in the stock market as the only outlet for their activities. They were

anxious to join the trade and their number was swelled by numerous others. Many new

associations were constituted for the purpose and Stock Exchanges in all parts of the country

were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)

and Hyderabad Stock Exchange Limited (1944) were incorporated.In Delhi two stock

exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi Stocks and

Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi

Stock Exchnage Association Limited.

Post-Independence Scenario

Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange was

closed during partition of the country and later migrated to Delhi and merged with Delhi Stock

Exchange.Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central Government

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for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta,

Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established exchanges, were

recognized under the Act. Some of the members of the other Associations were required to be

admitted by the recognized stock exchanges on a concessional basis, but acting on the principle

of unitary control, all these pseudo stock exchanges were refused recognition by the

Government of India and they thereupon ceased to function. Thus, during early sixties there

were eight recognized stock exchanges in India (mentioned above). The number virtually

remained unchanged, for nearly two decades. During eighties, however, many stock exchanges

were established: Cochin Stock Exchange (1980), Uttar Pradesh Stock Exchange Association

Limited (at Kanpur, 1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock

Exchange Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock

Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986),

Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association Limited

(1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange

Limited (at Baroda, 1990) and recently established exchanges - Coimbatore and Meerut. Thus,

at present, there are totally twenty one recognized stock exchanges in India excluding the Over

The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India

Limited (NSEIL).

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited companies.

They are broadly divided into two categories, namely, specified securities (forward list) and

non-specified securities (cash list). Equity shares of dividend paying, growth-oriented

companies with a paid-up capital of atleast Rs.50 million and a market capitalization of atleast

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Rs.100 million and having more than 20,000 shareholders are, normally, put in the specified

group and the balance in non-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery

transactions "for delivery and payment within the time or on the date stipulated when entering

into the contract which shall not be more than 14 days following the date of the contract" : and

(b) forward transactions "delivery and payment can be extended by further period of 14 days

each so that the overall period does not exceed 90 days from the date of the contract". The latter

is permitted only in the case of specified shares. The brokers who carry over the outstandings

pay carry over charges (cantango or backwardation) which are usually determined by the rates

of interest prevailing.A member broker in an Indian stock exchange can act as an agent, buy

and sell securities for his clients on a commission basis and also can act as a trader or dealer as

a principal, buy and sell securities on his own account and risk, in contrast with the practice

prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a

broker only.The nature of trading on Indian Stock Exchanges are that of age old conventional

style of face-to-face trading with bids and offers being made by open outcry. However, there is

a great amount of effort to modernize the Indian stock exchanges in the very recent times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many

functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long

settlement periods and benami transactions, which affected the small investors to a great extent.

To provide improved services to investors, the country's first ringless, scripless, electronic stock

exchange - OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust

of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank

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of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance

Corporation and its subsidiaries and CanBank Financial Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded on the

OTCEI are classified into:

 Listed Securities - The shares and debentures of the companies listed on the OTC can be

bought or sold at any OTC counter all over the country and they should not be listed

anywhere else

 Permitted Securities - Certain shares and debentures listed on other exchanges and units

of mutual funds are allowed to be traded

 Initiated debentures - Any equity holding atleast one lakh debentures of a particular

scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,

certificates of listed securities and initiated debentures are not traded at OTC. The original

certificate will be safely with the custodian. But, a counter receipt is generated out at the

counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange. The

difference is that the delivery and payment procedure will be completed within 14 days.

Compared to the traditional Exchanges, OTC Exchange network has the following advantages:

 OTCEI has widely dispersed trading mechanism across the country which provides

greater liquidity and lesser risk of intermediary charges.

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 Greater transparency and accuracy of prices is obtained due to the screen-based

scripless trading.

 Since the exact price of the transaction is shown on the computer screen, the investor

gets to know the exact price at which s/he is trading.

 Faster settlement and transfer process compared to other exchanges.

 In the case of an OTC issue (new issue), the allotment procedure is completed in a

month and trading commences after a month of the issue closure, whereas it takes a

longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors are

gradually becoming aware of the manifold advantages of the OTCEI.

National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock

market trading system on par with the international standards. On the basis of the

recommendations of high powered Pherwani Committee, the National Stock Exchange was

incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and

Investment Corporation of India, Industrial Finance Corporation of India, all Insurance

Corporations, selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

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Wholesale debt market operations are similar to money market operations - institutions and

corporate bodies enter into high value transactions in financial instruments such as government

securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit,

etc.0.

There are two kinds of players in NSE

(a) Trading Members (b) Participants

Recognized members of NSE are called trading members who trade on behalf of themselves

and their clients. Participants include trading members and large players like banks who take

direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism which

adopts the principle of an order-driven market. Trading members can stay at their offices and

execute the trading, since they are linked through a communication network. The prices at

which the buyer and seller are willing to transact will appear on the screen. When the prices

match the transaction will be completed and a confirmation slip will be printed at the office of

the trading member.

Advantages of NSE

NSE brings an integrated stock market trading network across the nation.Investors can trade at

the same price from anywhere in the country since inter-market operations are streamlined

coupled with the countrywide access to the securities.Delays in communication, late payments

and the malpractice’s prevailing in the traditional trading mechanism can be done away with

greater operational efficiency and informational transparency in the stock market operations,

with the support of total computerized network.

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Bombay Stock Exchange (BSE)

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd. and

established as "The Native Share and Stock Brokers' Association") is one of Asia’s fastest stock

exchanges, with a speed of 200 microseconds and one of India’s leading exchange groups. BSE

is a corporatized and demutualised entity, with a broad shareholder-base that includes two

leading global exchanges, Deutsche Bourse and Singapore Exchange, as strategic partners. BSE

provides an efficient and transparent market for trading in equity, debt instruments, derivatives,

and mutual funds. It also has a platform for trading in equities of small-and-medium enterprises

(SME). Over the past 139 years, BSE has facilitated the growth of the Indian corporate sector

by providing an efficient capital-raising platform.

More than 5000 companies are listed on BSE, making it the world's top exchange in terms of

listed members. The companies listed on BSE Ltd. command a total market capitalization of

USD 1.51 Trillion as of May 2014.[1] It is also one of the world’s leading exchanges (3rd

largest in March 2014) for Index options trading (Source: World Federation of Exchanges).

BSE also provides a host of other services to capital market participants, including risk

management, clearing, settlement, market data services, and education. It has a global reach

with customers around the world and a nation-wide presence. BSE systems and processes are

designed to safeguard market integrity, drive the growth of the Indian capital market, and

stimulate innovation and competition across all market segments. BSE is the first exchange in

India and the second in the world to obtain an ISO 9001:2000 certification and the Information

Security Management System Standard BS 7799-2-2002 certification for its On-Line trading

System (BOLT). It operates one of the most respected capital market educational institutes in

the country (the BSE Institute Ltd.). BSE also provides depository services through its Central

Depository Services Ltd. (CDSL) arm.

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BSE’s popular equity index - the S&P BSE SENSEX (Formerly SENSEX) - is India's most

widely tracked stock market benchmark index. It is traded internationally on the EUREX as

well as leading exchanges of the BRCS nations (Brazil, Russia, China and South Africa). On

Tuesday, 19 February 2013 BSE has entered into Strategic Partnership with S&P DOW JONES

INDICES and the SENSEX has been renamed as "S&P BSE SENSEX".

Company Profile

HDFC Securities Ltd

HDFC Securities Ltd is a leading stock broking companies in India and a subsidiary of HDFC

Bank- a renowned private sector bank. As a stock broking company, it has completed 10 years

of operation serving a diverse customer base of retail and institutional investors. It has a proven

pedigree in the financial services industry with a rating of A1 +1

The following points are the advantages at HDFC Securities Ltd.

It gives priority to one’s financial needs and interests. It simplifies investing and provides 360-

degree view on financial planning that suit future goals and needs.

HDFC Securities Ltd offers a suite of products and services across various asset classes such as

equity, gold, debt and real estate. Be it stocks, derivatives, mutual fund, fixed deposits, NCDs,

insurance, bonds, currency derivatives or PMS, It has a product that suits each investment

needs.

One can trade with us via online, mobile, telephone at any of its branches. These multiple

platforms make one’s trading experience highly convenient and hassle-free. One can even place

an order for IPO / NCD applications though trading account online or through its 24 Hour

Customer Care Number. Similarly, there is no need to issue cheque or delivery instructions.
Through its 4-in-1 Advantage account, one can seamlessly move funds and securities within

savings, demat and trading account.


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The web portal is based on Web 2.0 technology and its state-of-the art technology enables

seamless trading experience on both the exchanges BSE and NSE.Its mobile trading application

is compatible to all smart phones such as Blackberry, Android, Windows, Java and Iphone.
Once one activates mobile trading on smart phone, one can place order in Equities &

Derivatives and get Stock Quotes on the move.

HDFC Securities Ltd offers the right news and views that impacts money. It empowers its

clients with accurate and unbiased research so that they can make an informed investment

decision

Just investing money is not enough. The investor has to monitor his portfolio to ensure that

money works hard to build a robust financial portfolio. Its portfolio tracker can be used to

monitor entire financial portfolio, which encompasses various asset classes. One can also make

a watch list of stocks and enroll for SMS alerts.

Branches
HDFC Securities Ltd caters investment needs through its 190 plus branches. Its 24-Hour

Customer Care Services facility also offers services in 7 regional languages to get investment

and service related queries

Theoretical Review

Portfolio Management

A portfolio is a collection of securities. Since it is rarely desirable to invest the entire funds of

an individual or an institution in a single security, it is essential that every security be viewed in

the portfolio context. Thus it seems logical that the expected return of each of the security

contained in the portfolio.

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Portfolio analysis considers the determination of future risk and return in holding various

blends of the individual securities. Portfolio expected return is a weighted average of the

expected return of individual securities but portfolio variances, in short contrast, can be

something less than a weighted average of security variance. As a result an investor can

sometimes reduce portfolio risk by adding security with greater individual risk than any other

security in the portfolio. This is because risk depends greatly on the co-variance among returns

of individual security. Portfolio which is combination of securities may or may not take an

aggregate characteristic of their part.

Since portfolios expected return is a weighted average of the expected return of its securities,

the contribution of each security to the portfolio’s expected returns depends on its expected

returns and its proportionate share of the initial portfolio’s market value. It follows that an

investor who simply wants the greatest possible expected return should hold one security; the

one’ which is considered to have a greatest, expected return. Very few investors do this, and

very few investments advisors would counsel such an extreme policy. Instead, investors should

diversify, meaning that their portfolio should include more than one security.

Objectives of Portfolio Management

The objectives of investments/portfolio management is to maximize yield and to minimize risk

Need for Portfolio Management


Portfolio management is a process encompassing many activities of investment in assets and

securities. It is a dynamic and flexible concept and involves regular and systematic analysis,

judgments and actions. The objective of this service is to help the unknown investors with the

expertise of professionals in investment portfolio management. It involves construction of a of

a portfolio bases upon the investors objectives, constraints, preferences for risk and return and

tax ability. The portfolio is reviewed and adjusted from time to time in tune with the market

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conditions. The evaluation of portfolio is to be done in terms of targets set for a risk and return.

The changes in the portfolio are to be effected to meet the changing conditions.
Portfolio construction refers to the allocation of surplus funds in hand among a variety of

financial assets open for investments.


Portfolio theory concerns itself with the principles governing such allocations. The modern

view of investments is oriented more towards the assembly of proper combinations of

individual securities to form investment portfolios. a combination of securities held together

will give a beneficial result if they are grouped in a manner to secure higher return after taking

into consideration the risk elements. The modern theory is of the view that by diversifications,

risk can be reduced. The investor can make diversification either by having a large number of

shares of companies in different region, in different industries or those producing different

type’s products lines. Modern theory believes in the perspective of combination of securities

under constraints of risk and return.

Elements of Portfolio Management

 Identification of the investor’s objectives, constraints and preferences.


 Strategies are to be developed and implemented in tune with investments policy

formulated.
 Review and monitoring of the performance of the portfolio.

Process of Portfolio Management

This six-stage process of portfolio management are given in below

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1. Identify Goals and Objectives

2. Determination of Optimal Investment Mix

3. Create a Customized Investment Policy Statement

4. Select Investments

5. Monitor Progress

6. Reassess Needs and Goals

Risk and Return Analysis


The two main components to be studied while construction of a portfolio is

1. Risk of a portfolio

2. Returns on a portfolio

Risk

Existence of volatility in the occurrence of an expected incident is called risk. Higher the

unpredictability greater is the degree of risk. The risk any or may not involve money. In

investment management, risk involving pecuniary matter has importance; the financial sense of

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risk can be explained as the volatility of expected future incomes or outcomes. Risk may give a

positive or a negative result. If unimagined incident is a positive one, then people have a

pleasant surprise. To be able to take negative risk with the same spirit is difficult but not

impossible, if proper risk management techniques are followed.

Types of Risk

Systematic Risk

The systematic risk affects the entire market often we read in the news paper that the stock

market is in the bear hug or in the bull grip. This indicates that the entire market is moving in a

particular direction either downward or upward. The economic conditions, political situations

and the sociological changes affect the security market. The recession in the economy affects

the profit prospects of the industry and the stock market. The systematic risk is further divided

into three types they are as follows:

A. Market risk
Market risk can be defined as that portion of total variability of return caused by the alternative

forces of bull and bear markets. The forces that affect the stock market are tangible and

intangible events are real events such as earthquake, war, and political uncertainty.
B. Interest Rate Risk
Interest rate risk is the variation in the single period rates of return caused by the fluctuations in

the market interest rate. Most commonly interest rate risk affects the price of bonds, debentures

and stocks. The fluctuations on the interest rates are caused by the changes in the government

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policy and the changes that occur in the interest rate of the treasury bills and government

bonds.

C. Purchasing Power Risk

Variations in the returns are caused also by the loss of purchasing power of currency. Inflation

is a reason behind the loss of purchasing power. The level of inflation proceeds faster than the

increase in capital value. Purchasing power risk is the probable loss in the purchasing power of

the returns to be received.

Unsystematic Risk

As already mentioned, unsystematic risk is unique and peculiar to a firm or an industry.

Unsystematic risk stem from managerial inefficiency, ethnological change in the production

process, availability of raw material, changes in the consumer preference, and labor problems.

The nature and the 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.

Business Risk

Business risk is that position 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 the growth and stability of the earnings. The variation in the expected operating income

indicates the business risk. Business risk can be divided into internal business risk and external

business risk as below.

Internal Business Risk

This risk is associated with the optional efficiency of the firm. The following are the few:

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 Fluctuations in the sales

 Research and development

 Personal development

 Fixed cost

 Single product

External Business Risk

This risk is the result of the operating conditions imposed on the firm by circumstances beyond

its control. The external environment in which it operated exerts some pressure on the firm.

 Social and regularity factors


 Political risk
 Business cycle

Financial Risk
This risk relates to the method of financing, adopted by the company, high leverage lending to

larger debt servicing problems or short term liquidity problems due to bad debts, delayed

receivables and fall in current assets or rise in current liabilities. These problems could no

doubt be solved, but they may lead to fluctuations in the earnings, profits and dividends to

shareholders. Sometimes, if the company runs into losses or reduced profits, these may lead to

fall in returns to investors or negative returns. Proper financial planning and other financial

adjustments can be used to correct this risk and as such it is controllable.

Credit or Default Risk

The borrower or issuer of securities may become insolvent or may default, or delay the

payments due, such as interest installments or principle repayments. The borrower’s credit

rating might have fallen suddenly and he became default prone and in its extreme from it may

lead to insolvency or bankruptcies. In such cases, the investor may get no return or negative

returns. An investment in a healthy company’s share might turn out to be a waste paper, if

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within a short span, by the deliberate mistakes of management or acts of god, the company

became sick and its share price tumbled below its face price.

Risk an A Portfolio

Risk on a portfolio is different from the risk on individual securities. This risk is related in the

variability of the returns from zero to infinity. The expected return depends on the probability

of the returns and their weighted contribution to the risk of the portfolio. There are two

measures of the risk in this context one is the absolute deviation and the other standard

deviation.

Return of Portfolio

Each security in a portfolio contributes returns in the proportion of its investment in security.

Thus, the portfolio expected return is the weighted average of the expected returns, from each

of the securities, with weights representing the proportionate share of the security in the total

investment. Why an investor does have so many securities in his portfolio the answer to this

question lie in the investor’s perception of risk attached to the investment, his objectives of

income, safety, appreciation, liquidity and hedge against the loss of value of money etc.

This pattern of investment in different asset categories security categories types of instrument

etc. Would all be described under the caption of diversification which aims at the reduction or

even elimination of unsystematic or company related risks and achieve the specific objectives

of the investor.

Portfolio management service helps investor to make a wise choice among alternative

investments without any post training hassles. This service renders optimum returns to the

investors by a proper selection by continuous shifting of portfolio from one scheme to other

scheme or from one brand to the other brand within the same scheme. Any portfolio manager

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must specify the maximum return, optimum returns and risk, capital appreciation, safety etc in

their offer.

From the return angle securities can be classified into two types

 Fixed income securities

 Variable income securities

Fixed income securities

 Debt – partly convertible and non convertible debt with tradable warrant.

 Preference shares

 Government securities and bonds

 Other debt instruments.

Variable income securities

 Equity shares

 Money market securities like treasury bills, commercial papers etc.

Portfolio manager have to decide upon the mix of securities on basis of contract with the client

and objective of the portfolio. Portfolio managers in the Indian context, has been brokers (big

brokers) who on the basis of their experience, market trend, insider trading personal contact and

speculations are the one who used to manage funds or portfolios.

Risk and return analysis in portfolio management

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The traditional approach to portfolio building has some basic assumptions. First, the individual

prefers larger to smaller returns from securities. To achieve this goal, the investor has to take

more risk. The ability to achieve higher returns is dependent upon his ability to judge risk and

his ability to take specific risks. The risks are namely interest rate risk, purchasing power risk,

financial risk and marketing risk. The investor analysis the varying degrees of risk and

constructs his portfolio. At first, he established the minimum income that he must have to avoid

hardship under most adverse economic condition and then he decides risk of loss of income

that can be tolerated. The investor makes a series of compromises on risk and non- risk factors

like taxation and marketability after he has assessed the major risk categories, which he is

trying minimize.

Alpha

Alpha is the difference between the horizontal axis and line’s interaction with y axis. It

measures the unsystematic risk of the company. If alpha is a positive return, then that scrip will

have higher returns. If alpha = 0 then the regression line goes through the origin and its return

simply depends on beta times the market returns.

Beta

Beta describes the relationship between the stocks return and the market index returns. This can

be positive and negative. It is the percentage change in the price of the stock regressed or

related to the percentage change in the market index. If beta is 1, a one- percentage change in

market index will lead to one percentage change in price of the stock. If beta is 0, stock price is

unrelated to the market index and if the market goes up by a+1%, the stock price will fall by

1% beta measures the systematic market related risk, which cannot be eliminated by

23
diversification. If the portfolio is efficient, beta measures the systematic risk effectively. On the

other hand alpha measures the unsystematic risk, which can be reduced by efficient

diversification.

Measurement of Risk

The driving force of systematic and unsystematic risk causes the variation in returns of

securities. Efforts have to be made by researchers, expert’s analysts, theorists and academicians

in the field of investment to develop methods for measuring risk in assessing the returns on

investments.

Total Risk

The total risk of the investment comprises of diversifiable risk and non diversifiable risk, and

this relation can be computed by summing up diversifiable risk and non-diversifiable risk.

Diversifiable Risk

Any risk that can be diversified is referred to as diversifiable risk. This risk can be totally

eliminated through diversification of securities. Diversification of securities means combining a

large variety of assets into a portfolio. The precise measure of risk of a single asset is its

contribution to the market portfolio of assets, which is its co-variance with market portfolio.

This measure does not need any additional cost in terms of money but requires a little

prudence. It is un- diversifiable risk of individual asset that is more difficult to tackle.

Traditional Method of Quantifying Risk

Assigning of the risk premium is one of the traditional methods. The fundamental tenet in the

financial management is to trade off between risk and return. The return from holding equity

securities is derived from the dividend steam and price changes. One of the methods of

quantifying risk and calculating expected rate of return would be to express the required rate as

R = I + p + b + f + m +o, where

r = required rate of return

24
I = real interest rate (risk free rate)

P = purchasing power risk allowance

b = business risk allowance

f = financial risk allowance

m = market risk allowance

o = allowances for other risk

Modern Method of Quantifying Risk

Quantification of risk is necessary to ensure uniform interpretation and comparison of

alternative investment opportunities. The pre-requisite for an objective evaluation and

comparative analysis of various investment alternatives is a rational method for quantifying risk

and return.

Probability distribution of returns is very helpful in identifying expected returns and risk. The

spread of dispersion of the probability distribution can also be measured by degree of variation

from the expected return.

Deviation = outcome – expected return

Outcomes on the investments do not have equal probability occurrence hence it requires

weights for each difference by its probability.

Probability x (outcome – expected return)

For the purpose of computing variance, deviations are to be squared before multiplying with

probabilities.

Probability x (outcome – expected returns)2

Techniques of portfolio management: as of now the under noted techniques of portfolio

management are in vogue in our country

1. Equity Portfolio

25
Equity portfolio is influenced by internal and external factors.

Internal factors affect inner working of the company. The company’s growth plans are analyzed

with respect to balance sheet and profit & loss accounts of the company. External factors are

changes in government policies, trade cycles, political stability etc.

2. Equity Analysis

Under this method future value of shares of a company is determined. It can be done by ratios

of earnings per shares and price earnings ratio.

EPS = Profit After Tax/ Number of equity shares

P/E ratio = Market Price per Share/EPS

One can estimate the trend of earnings by analyzing EPS which reflects the trend of earnings,

quality of earnings, dividend policy and quality of management. Further price earnings ratio

indicates the confidence of market about company’s future.

Selection of portfolio

Certain assumptions were made in the traditional approach for portfolio selection, which are

discussed below

 Investors prefer large to smaller returns from securities and take more risk.

 Ability to achieve higher returns depends upon investor’s judgment of risk.

 Spreading money among many securities can reduce risk.

An investor can select the best portfolio to meet his requirements from the efficient frontier, by

following the theory propounded by Markowitz. Selection process is based on the satisfaction

level that can be achieved from various investment avenues.

Portfolio revision

Having constructed the optimal portfolio, the investor has to constantly monitor the portfolio to

ensure that it continues to be optimal. As the economy and financial markets are dynamic, the

26
changes take place almost daily. The investor now has to revise his portfolio. The revision leads

to purchase of new securities and sale of some of the existing securities from the portfolio.

Need for revision

 Availability of additional funds for investment

 Availability of new investment avenues

 Change in the risk tolerance

 Change in the time horizon

 Change in the investment goals

 Change in the liquidity needs

 Change in the taxes

Portfolio Evaluation

Portfolio managers and investors who manage their own portfolios continuously monitor and

review the performance of the portfolio. The evaluation of each portfolio, followed by revision

and reconstruction are all steps in the portfolio management.

The ability to diversify with a view to reduce and even eliminate all unsystematic risk and

expertise in managing the systematic risk related to the market by use of appropriate risk

measures, namely, betas. Selection of proper securities is thus the first requirement.

Methods of Evaluation

Sharpe Index Model

It depends on total risk rate of the portfolio. Return of the security compare with risk free rate

of return, the excess return of security is treated as premium or reward to the investor. The risk

of the premium is calculated by comparing portfolio risk rate. While calculating return on

security any one of the previous methods is used. If there is no premium Sharpe index shows

negative value (-). In such a case portfolio is not treated as efficient portfolio.

27
Sharpe’s ratio (sp) = rp – RF / σp, where,

Sp = Sharpe index performance model


Rp = return of portfolio
RF = risk free rate of return
Σp = portfolio standard deviation
This method is also called “reward to variability” method. When more than one portfolio is

evaluated highest index is treated as first rank. That portfolio can be treated as better portfolio

compared to other portfolios. Ranks are prepared on the basis of descending order.

Treynors Index Model

It is another method to measure the portfolio performance. Where systematic risk rate is used to

compare the unsystematic risk rate. Systematic risk rate is measured by beta. It is also called

“reward to systematic risk”.

Treynors ratio (tp) = Rp – RF / σp, where,

Tp = treynors portfolio performance model


Rp= return of portfolio
rf= risk free rate of return
σp= portfolio standard deviation.
If the beta portfolio is not given market beta is considered for calculation of the performance

index. Highest value of the index portfolio is accepted.

Jansen’s index model

it is different method compared to the previous methods. It depends on return of security which

is calculated by using capm. The actual security returns is less than the expected return of capm

the difference is treated as negative (-) then the portfolio is treated as inefficient portfolio.

jp=rp-[rf+ σp (rm-rf)], where:

jp = Jansen’s index performance model

Rp= return of portfolio

rf= risk free rate of return

28
Σp= portfolio standard deviation

Rm= return on market

This method is also called “reward to variability “method. When more than one portfolio is

evaluated highest index is treated as better portfolio compared to other portfolios. Ranks are

prepared on the basis of descending order.

Portfolio analysis

Portfolios which are the combinations of securities may or may not take the aggregate

characteristics of their individual parts. Portfolio analysis considers the determination of future

risk and return in holding various blends of individual securities. An investor can sometimes

reduce portfolio risk by adding another security with greater individual risk than any other

security in the portfolio. This seemingly curious result occurs because risk depends greatly on

the covariance among returns of individual securities. An investor can reduce expected risk

level of a given portfolio of assets if he makes a proper diversification of portfolios.

There are two main approaches for analysis of portfolio

 Traditional approach.

 Modern approach.

Traditional Portfolio Approach

The traditional approach basically deals with two major decisions. Traditional security analysis

recognizes the key importance of risk and return to the investor. Most traditional methods

recognize return as some dividend receipt and price appreciation over a forward period. But the

return for individual securities is not always over the same common holding period, nor are the

rates of return necessarily time adjusted. An analysis may well estimate future earnings and a

p/e ratio to derive future price. He will surely estimate the dividend.

29
In any case, given an estimate of return, the analyst is likely to think of and express risk as the

probable downsize rice expectation ( either by itself or relative to upside appreciation

possibilities).each security ends up with some rough measures of likely return and potential

downside risk for the future.

Portfolios or combinations of securities are thought of as helping to spread risk over many

securities may specify only broadly or nebulously. Auto stocks are, for examples, recognized as

risk interrelated with fire stocks, utility stocks display defensive price movement relative to the

market and cyclical stocks like steel, and so on. This is not to say that traditional portfolio

analysis is unsuccessful. It is to say that much of it might be more objectively specified in

explicit terms. They are determining the objectives of the portfolio and Selection of securities

to be included in the portfolio.

Normally this is carried out in four to six steps. Before formulating the objectives, the

constraints of the investor should be analyzed. Within the given frame work of constraints,

objectives are formulated. Then based on the objectives securities are selected. After that risk

and return of the securities should be studied. The investor has to assess the major risk

categories that he or she is trying to minimize. Compromise of risk and non-risk factors has to

be carried out. Finally relative portfolio weights are assigned to securities like bonds, stocks

and debentures and the diversification is carried out.

Modern Portfolio Approach

The traditional approach is a comprehensive financial plan for the individual needs such as

housing, life insurance and pension plans. But these types of financial planning approaches are

not done in the Markowitz approach.

Markowitz gives more attention to the process of selecting the portfolio. His planning can be

applied more in the selection of common stocks portfolio than the bond portfolio. The stocks

are not selected on the basis of need for income or capital appreciation. But the selection is

30
based on the risk and return analysis, return includes market return and dividend. The investor

needs return and it may be either in the form of market return or dividend.

The investor is assumed to have the objectives of maximizing the expected return and

minimizing the risk. Further, it is assumed that investors would take up risk in a situation when

adequately rewarded for it. This implies that individuals would prefer the portfolio of highest

expected return for a given level of risk. In the modern approach the final step is asset

allocation process that is to choose the portfolio that meets the requirement of the investor.

Portfolio Construction

Portfolio is combination of securities such as stocks, bonds and money market instruments. The

process of blending together the broad assets classes so as to obtain optimum return with

minimum risk is called portfolio construction.

Minimization of Risks

The company specific risks (unsystematic risks) can be reduced by diversifying into a few

companies belonging to various industry groups, asset group or different types of instruments

like equity shares, bonds, debentures etc. Thus, asset classes are bank deposits, company

deposits, gold, silver, land, real estate, equity shares etc. Industry group like tea, sugar paper,

cement, steel, electricity etc. Each of them has different risk – return characteristics and

investments are to be made, based on individual’s risk preference. The second category of risk

(systematic risk) is managed by the use of beta of different company shares.

Approaches in Portfolio Construction

Commonly there are two approaches in the construction of the portfolio of securities

 Traditional approach

 Markowitz efficient frontier approach.

31
In the traditional approach, investors needs in terms of income and capital appreciation are

evaluated and then appropriate securities are selected to, meet the needs of investors. The

common practice in the traditional approach is to evaluate the entire financial plan of the

individuals. In the modern approach, portfolios are constructed to maximize the expected return

for a given level of risk. It view portfolio construction in terms of the expected return and the

risk associated with obtaining the expected return.

Efficient Portfolio

To construct an efficient portfolio, we have to conceptualize various combinations of

investments in a basket and designate them as portfolio one to ‘n’. Then the expected returns

from these portfolios are to be worked out and then portfolios are to be estimated by measuring

the standard deviation of different portfolio returns. To reduce the risk, investors have to

diversify into a number of securities whose risk – return profiles vary.

A single asset or a portfolio of assets is considered to be “efficient” if no other asset offers

higher expected return with the same risk or lower risk with the same expected return. A

portfolio is said to be efficient when it is expected to yield the highest returns for the level of

risk accepted or, alternatively, the smallest portfolio risk or a specified level of expected return.

Main features of efficient set of port folio

 The investor determines a set of efficient portfolios from a universe

of ‘n’ securities and an efficient set of portfolio is the subset of ‘n’ security universe.

 The investor selects the particular efficient that provides him with

most suitable combination of risk and return.

Modern portfolio approach

Markowitz model

Harry m.markowitz has credited and introduced the new concept of risk measurement and their

application to the selection of portfolios. He started with the idea of investors and their desire to

32
maximize expected return with the least risk.markowitz model is a theoretical frame work 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. His framework lead to the concept of efficient portfolios, which are expected

to yield the highest return for, given a level of risk or lowest risk for a given level of return.

Risk and return two aspects of investment considered by investors. The expected return may

vary depending on the assumptions. Risk index is measured by the variance or the distribution

around the mean its range etc, and traditionally the choice of securities depends on lower

variability where as Markowitz emphasizes on the need for maximization of returns through a

combination of securities whose total variability is lower.

The risk of each security is different from that of other and by proper combination of securities,

called diversification, one can form a portfolio where in that of the other offsets the risk of one

partly or fully. In other words, the variability of each security and covariance for his or her

returns reflected through their inter-relationship should be taken into account. Thus, expected

returns and the covariance of the returns of the securities with in the portfolio are to be

considered for the choice of a portfolio. A set of efficient portfolios can be generated by using

the above process of combining various securities whose combined risk is lowest for a given

level of return for the same amount of investment, that the investor is capable of the theory of

Markowitz, as stated above is based on the number of assumptions.

Assumptions of Markowitz Theory

The analytical frame work of Markowitz model is based on several assumptions regarding the

behavior of investor as below.

 The investor invests his money for a particular length of time known as holding period.
At the end of holding period, he will sell the investments.

33
 Then he spends the proceeds on either for consumption purpose or for reinvestment
purpose or sum of both. The approach therefore holds good for a single period holding.

 The market efficient in the sense that, all investors are well informed of all the facts
about the stock market.

 All investors are risk averse. Investors study how the security returns are co-related to
each other and combine the assets in an ideal way so that they give maximum returns
with the lowest risk. He would choose the best one based on the relative magnitude of
these two parameters.

 The investors base their decisions on the price-earnings ratio. Standard deviation of the
rate of return, which is been offered on the investment, is one of the important criteria
considered by the investors for choosing different securities.

Markowitz Diversification

Markowitz postulated that diversification should not only aim at reducing the risk of a security

by reducing its variability of standard deviation, but by reducing the co-variance or interactive

risk of two or more securities in a portfolio. By combining the different securities it is

theoretically possible to have a range of risk varying from zero to infinity. Markowitz theory of

portfolio diversification attaches importance to standard deviation, to reduce it to zero, if

possible, covariance to have as much as possible negative interactive effect among the

securities with in the portfolio and coefficient of correlation to have -1 (negative) so that the

overall risk of portfolio as whole is nil or negligible than the securities have to be combined in

the manner that standard deviation is zero.

Efficient Frontier

As for Markowitz model minimum variance portfolio is used for determination of proportion of

investment in first security and second security. It means a portfolio consists of two securities

only. When different portfolios and their expected return and standard deviation risk rates are

given for determination of best portfolio, efficient frontier is used.

34
Efficient frontier is graphical representation on the base of the optimum point this is to identify

the portfolio which may give better returns at low risk. At that point the investor can choose

portfolio. On the basis of these holding period of portfolio can be determined.

On “x” axis risk rate of portfolio (s.d of p), and on “y” axis return on portfolios are to be

shown. Calculate return on portfolio and standard deviation of portfolio for various

combinations of weights of two securities. Various returns are shown in the graphical and

identify the optimum point.

Calculation of Expected Rate of Return

 Calculate the proportion of each security’s proportion in the total investment.

 It gives the weight for each component of securities.

 Multiply the funds invested in the each component with the weights.

 It gives the initial wealth or initial market values.

Equation: rp = w1r1+w2r2+w3r3+…………..+wnrn

Where rp = expected return on portfolio

w1, w2, w3, w4… = proportional weight invested

r1, r2, r3, r4… = expected returns on securities

The rate of return on portfolio is always weighted average of the securities in the portfolio.

35
Estimation of Portfolio Risk

A useful measure of risk should take into account both the probability of various possible bad

outcomes and their associated magnitudes. Instead of measuring the probability of a number of

different possible outcomes and ideal measure of risk would estimate the extent to which the

actual outcome is likely to diverge from the expected outcome. Two measures are used for this

purpose:

 Average absolute deviation

 Standard deviation

In order to estimate the total risk of a portfolio of assets, several estimations are needed:

1. The predicted return on the portfolio is simply a weighted average of the predicted returns

on the securities, using the proportionate values as weights.

2. The risk of the portfolio depends not only on the risk of its securities considered in isolation,

but also on the extent to which they are affected similarly by underlying events.

3. The deviation of each securities return from its expected value is determined and the product

of the two obtained.

4. The variance in a weighted average of such products, using the probabilities of the events as

weight.

Effect of Combining Two Securities

It is believed that spreading the portfolio in two securities is less risky than concentrating in

only one security. If two stocks, which have negative correlation, were chosen on a portfolio

risk could be completely reduced due to the gain in the whole offset the loss on the other. The

36
effect of two securities, one more risky and other less risky, on one another can also be studied.

Markowitz theory is also applicable in the case of multiple securities.

Corner Portfolios

A number of portfolios on the efficient frontier are corner portfolios, it may be either new

security or security or securities dropped from previous efficient portfolios. By swapping one

security with other the portfolio expected return could be increased with no change in its risk.

Dominance Principle

It has been developed to understand risk return trade off conceptually. It states that efficient

frontier always assumes that investors prefer return and dislike risk.

Criticism on Markowitz Theory

The Markowitz model is confronted with several criticisms on both theoretical and practical

point of view.

 Very tedious I and in variably required a computer to effect numerous calculations.

 Another criticism related to this theory is rational investor can avert risk.

 Most of the works stimulated by Markowitz uses short term volatility to determine whether

the expected rate of return from a security should be assigned high or a low expected

variance, but if an investor has limited liquidity constraints, and is truly a long term holder,

and then price volatility per share does not really pose a risk. Rather in this case, the

question concern is one ultimate price realization and not interim volatility.

 Another apparent hindrance is that practicing investment managers found it difficult to

understand the conceptual mathematics

 Involved in calculating the various measure of risk and return. There was a general criticism

that an academic approach to portfolio management is essentially unsound.

 Security analysts are not comfortable in calculating covariance among securities while

assessing the possible ranges of error in their expectations.


37
Capital Assets Pricing Model (CAPM)

Under CAPM model the changes in prices of capital assets in stock exchanges can be measured

by using the relationship between security return and the market return. So it is an economic

model describes how the securities are priced in the market place. By using CAPM model the

return of security can be calculated by comparing return of security with market place. The

difference of returns of security and market can be treated as highest return and the risk premium

of the investor is identified. It is the difference between the return of security and risk free rate of

return. So Risk premium = return on security – risk free rate of return

Assumptions

The CAPM model depends on the following assumptions, which are to be considered while

calculating rate of return.

 The investors are basically average risk assumers and diversification

is needed to reduce the risk factor. All investors want to maximize the return by assuming

expected return of each security.

 All investors assume increase of net wealth of the security. All

investors can borrow or lend an unlimited amount of fund at risk free rate of interest. There

are no transaction costs and no taxes at the time of transfer of security.

 All investors have identical estimation of risk and return of all

securities. All the securities are divisible and tradable in capital market.

 Systematic risk factor can be calculated and it is assumed perfectly by

the investor.Capital market information must be available to all the investors.

Beta

Beta described the relationship between the stock return and the market index returns. This can

be positive and negative. It is the percentage change is the price of his stock regressed (or

related) to the percentage changes in market index. If beta is 1, a one- percentage changes in

38
market index will lead to one percentage change in price of the stock. If beta is 0, stock price is

un related to the market index if the market goes up by a +1%, the stock price will fall by 1%

beta measures the systematic market related risk , which cannot be eliminated by

diversification. If the portfolio is efficient, beta measures the systematic risk effectively.

Evaluation process

1. Risk is the variance of expected return of portfolio.

2. Two types of risk are assumed they are

o Systematic risk

o Unsystematic risk

3. Systematic risk is calculated by the investor by comparison of security return with market

return.

Co - variance of security and market


b=
Variance of market

Higher value of beta indicates higher systematic risk and vice versa. When number of securities

is hold by an investor, composite beta or portfolio can be calculated by the use of weights of

security and individual beta.

4. Risk free rate of return is identified on the basis of the market conditions. The following two

methods are used for calculation of return of security or portfolio.

Capital Market Line

Under CAPM model capital market line determined the relationship between risk and return of

efficient portfolio. When the risk rates of market and portfolio risk are given, expected return

on security or portfolio can be calculated by using the following formula.

Erp = t + σp (rpm – t) σm, where:

Erp = expected return of portfolio

39
T = risk free rate of return

Σp = portfolio of standard deviation

Rpm = return of portfolio and market

Σm = risk rate of the market.

Security Market Line

Identifies the relationship of return on security and risk free rate of return. Beta is used to

identify the systematic risk of the premium. The following equation is used for expected return.

Erp = t + β (rm – t)

Rm = return of market

t = risk free rate

Limitations of CAPM

In practical purpose CAPM can’t be applied due to the following limitations.

 The calculation of beta factor is not possible in certain situations due to more assets are

traded in the market.

 The assumption of unlimited borrowings at risk free rate is not certain. For every

individual investor borrowing facilities are restricted.

 The wealth of the shareholder or investor is assessed by using security return. But it is not

only the factor for calculation of wealth of the investor.

 For every transfer of security transition cost is required on every return tax must be paid

Data Analysis & Interpretation

40
Returns, Variance and Standard Deviation of ICICI Income Funds for July-2013

SN Date NAV Returns(X) 2 SD


1 1-July-13 140
2 3-July-13 147.29 5.20 4.76 22.68
3 4-July-13 148.07 0.53 0.53 0.28
4 5-July-13 147.74 -0.22 0.20 0.04
5 6-July-13 147.40 -0.23 0.19 0.04
6 8-July-13 145.68 -1.17 -0.74 0.55
7 10-July-13 144.72 -0.66 -0.23 0.05
8 11-July-13 143.58 -0.78 -0.36 0.13
9 12-July-13 146.01 1.69 2.12 4.48
10 13-July-13 148.87 1.96 2.38 5.69
11 15-July-13 150.55 1.12 1.55 2.40
12 17-July-13 151.02 0.32 0.74 0.55
13 18-July-13 152.25 0.82 1.24 1.54
14 19-July-13 152.74 0.32 0.75 0.56
15 20-July-13 151.61 -0.74 -0.32 0.10
16 22-July-13 151.86 0.17 0.59 0.35
17 24-July-13 150.67 -0.78 -0.36 0.13
18 25-July-13 151.30 0.42 0.85 0.72
19 29-July-13 152.60 0.85 1.28 1.64
20 31-july-13 151.95 -0.43 0.00 0.00
Mean 0.44 Variance 2.21 1.49
(Table1.1)
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF ICICI GROTH FUND FOR THE
MONTH OF JULY-2013

6.00

4.00

2.00

0.00
1 3 5 7 9 11 13 15 17 19
-2.00

Graph 1.1
Interpretation

The above graph represents the returns of ICICI Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.44 with price
Variation of 2.21and risk factor being 1.49. Thus it can be said that risk is very high when
compared to returns.

41
Returns, Variance and Standard Deviation of ICICI Income Funds for August-2013

SN Date NAV Returns(X) 2 SD


1 1-Aug-13 152.42 0.31 0.69 0.47
2 2-Aug-13 153.66 0.82 1.20 1.43
3 3-Aug-13 154.57 0.59 0.97 0.93
4 6-Aug-13 154.47 -0.06 0.31 0.10
5 7-Aug-13 155.35 0.57 0.95 0.89
6 8-Aug-13 154.96 -0.25 0.13 0.02
7 9-Aug-13 153.79 -0.76 -0.38 0.14
8 10-Aug-13 150.46 -2.17 -1.79 3.20
9 13-Aug-13 149.50 -0.64 -0.26 0.07
10 14-Aug-13 149.33 -0.11 0.27 0.07
11 17-Aug-13 153.19 2.58 2.96 8.75
12 21-Aug-13 153.28 0.06 0.44 0.19
13 22-Aug-13 151.62 -1.08 -0.71 0.50
14 23-Aug-13 150.85 -0.51 -0.13 0.02
15 26-Aug-13 148.96 -1.25 -0.87 0.76
16 27-Aug-13 145.58 -2.27 -1.89 3.59
17 28-Aug-13 145.88 0.21 0.58 0.34
18 29-Aug-13 145.43 -0.31 0.07 0.00
19 31-Aug-13 141.23 -2.89 -2.51 6.32
Mean -0.38 Variance 1.46 1.21
Table 1.2
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF ICICI INCOME FUND FOR THE
MONTH OF AUG-2013

3.00
2.00
1.00
0.00
Series1
-1.00 1 3 5 7 9 11 13 15 17 19

-2.00
-3.00
-4.00

Graph1.2
Interpretation

The above graph represents the returns of ICICI Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is -0.38 with price
variation of 1.46 and risk factor being. Thus it can be said that risk is very high when compared
to returns.

42
Returns, Variance and Standard Deviation of ICICI Income Funds for Sep-2013

SN Date NAV Returns(X) 2 SD


1 3-Sep-13 143.68 1.73 1.75 3.08
2 4-Sep-13 140.53 -2.19 -2.17 4.72
3 5-Sep-13 134.74 -4.12 -4.10 16.81
4 6-Sep-13 136.86 1.58 1.60 2.55
5 7-Sep-13 135.17 -1.24 -1.22 1.48
6 9-Sep-13 138.69 2.60 2.62 6.89
7 10-Sep-13 138.03 -0.47 -0.45 0.21
8 11-Sep-13 139.39 0.99 1.01 1.02
9 12-Sep-13 140.46 0.77 0.79 0.62
10 13-Sep-13 136.75 -2.64 -2.62 6.88
11 14-Sep-13 137.87 0.82 0.84 0.71
12 17-Sep-13 136.66 -0.88 -0.86 0.74
13 18-Sep-13 138.28 1.19 1.21 1.46
14 20-Sep-13 139.42 0.82 0.84 0.71
15 21-Sep-13 141.30 1.35 1.38 1.89
16 24-Sep-13 144.22 2.06 2.08 4.34
17 25-Sep-13 144.18 -0.03 -0.01 0.00
18 26-Sep-13 142.96 -0.85 -0.83 0.68
19 28-Sep-13 140.26 -1.89 -1.87 3.48
Mean -0.02 Variance 3.07 1.75
Table 1.3
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS OF


ICICI INCOME FOR THE MONTH OF SEP-2013

3.00
2.00
1.00
0.00
-1.00 1 3 5 7 9 11 13 15 17 19 Series1
-2.00
-3.00
-4.00
-5.00

Graph 1.3
Interpretation

The above graph represents the returns of ICICI Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is -0.02 with price
variation of 3.07 and risk factor being 1.75 Thus it can be said that risk is very high when
compared to returns.

43
Returns, Variance and Standard Deviation of ICICI Income Funds for Oct-2013

SN Date NAV Returns(X) 2 SD


1 2-Oct-13 136.75 -2.50 -2.87 8.25
2 3-Oct-13 137.88 0.83 0.46 0.21
3 4-Oct-13 140.01 1.54 1.17 1.38
4 5-Oct-13 141.04 0.74 0.37 0.14
5 8-Oct-13 144.22 2.25 1.88 3.54
6 10-Oct-13 144.48 0.18 -0.19 0.04
7 11-Oct-13 144.62 0.10 -0.26 0.07
8 12-Oct-13 143.40 -0.85 -1.22 1.48
9 15-Oct-13 146.36 2.07 1.70 2.89
10 16-Oct-13 149.17 1.92 1.55 2.41
11 17-Oct-13 148.13 -0.70 -1.07 1.13
12 18-Oct-13 148.28 0.10 -0.26 0.07
13 19-Oct-13 147.67 -0.41 -0.78 0.61
14 22-Oct-13 149.70 1.37 1.00 1.00
15 23-Oct-13 149.69 -0.01 -0.38 0.14
16 24-Oct-13 151.08 0.93 0.57 0.32
17 25-Oct-13 151.56 0.31 -0.05 0.00
18 26-Oct-13 151.76 0.13 -0.23 0.05
19 29-Oct-13 150.19 -1.03 -1.40 1.96
Mean 0.37 Variance 1.35 1.16
Table 1.4
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF ICICI INCOME FOR THE
MONTH OF OCT-2013

3.00

2.00

1.00

0.00 Series1
1 3 5 7 9 11 13 15 17 19
-1.00

-2.00

-3.00

Graph 1.4
Interpretation

The above graph represents the returns of ICICI Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.37 with price
variation of 1.35 and risk factor being 1.16. Thus it can be said that risk is very high when
compared to returns.

44
Returns, Variance and Standard Deviation of ICICI Income Funds for Nov-2013

S N Date NAV Returns(X) 2 SD


1 1-Nov-13 153.17 1.98 1.64 2.69
2 2-Nov-13 151.52 -1.07 -1.42 2.01
3 5-Nov-13 151.31 -0.14 -0.48 0.23
4 6-Nov-13 150.17 -0.75 -1.10 1.20
5 8-Nov-13 150.14 -0.02 -0.37 0.13
6 9-Nov-13 149.40 -0.49 -0.83 0.69
7 12-Nov-13 149.98 0.39 0.05 0.00
8 13-Nov-13 152.09 1.40 1.06 1.12
9 15-Nov-13 152.67 0.39 0.04 0.00
10 16-Nov-13 154.31 1.07 0.73 0.53
11 19-Nov-13 155.09 0.50 0.16 0.03
12 20-Nov-13 154.67 -0.27 -0.61 0.38
13 21-Nov-13 156.18 0.98 0.64 0.41
14 22-Nov-13 156.70 0.33 -0.01 0.00
15 23-Nov-13 156.26 -0.28 -0.62 0.39
16 26-Nov-13 155.37 -0.57 -0.91 0.84
17 27-Nov-13 156.35 0.63 0.29 0.08
18 29-Nov-13 158.64 1.47 1.12 1.26
19 30-Nov-13 160.17 0.96 0.62 0.39
Mean 0.34 Variance 0.65 0.81
Table 1.5
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS

MONTH OF NOV-2013

2.50
2.00
1.50
1.00
0.50 Series1
0.00
-0.50 1 3 5 7 9 11 13 15 17 19
-1.00
-1.50

Graph 1.5

Interpretation

The above graph represents the returns of ICICI Income Fund. It shows that there is continuous
rise and fall In Net Asset Value. If we see the table the monthly mean is 0.34 with price
variation of 0.65 and risk factor being 0.81. Thus it can be said that risk is very high when
compared to returns.

45
Returns, Variance and Standard Deviation of ICICI Income Funds for Dec-2013

SN Date NAV Returns(X) 2 SD


1 3-Dec-13 161.90 1.08 0.97 0.94
2 4-Dec-13 160.88 -0.63 -0.74 0.55
3 5-Dec-13 161.66 0.48 0.36 0.13
4 6-Dec-13 159.35 -1.43 -1.54 2.37
5 7-Dec-13 158.50 -0.53 -0.65 0.42
6 10-Dec-13 157.93 -0.36 -0.48 0.23
7 11-Dec-13 158.85 0.59 0.47 0.22
8 12-Dec-13 158.75 -0.07 -0.18 0.03
9 13-Dec-13 157.55 -0.76 -0.87 0.76
10 14-Dec-13 159.78 1.42 1.30 1.69
11 17-Dec-13 159.94 0.10 -0.02 0.00
12 18-Dec-13 159.06 -0.55 -0.66 0.44
13 19-Dec-13 160.97 1.20 1.08 1.17
14 20-Dec-13 162.68 1.06 0.95 0.90
15 21-Dec-13 163.95 0.78 0.67 0.44
16 24-Dec-13 163.00 -0.58 -0.69 0.48
17 26-Dec-13 163.48 0.29 0.18 0.03
18 28-Dec-13 164.29 0.50 0.38 0.15
19 31-Dec-13 163.61 -0.42 -0.53 0.28
Mean 0.11 Variance 0.59 0.77
Table 1.6
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF ICICI INCOME FUND FOR THE
MONTH OF DEC-2013

2.00
1.50
1.00
0.50
0.00 Series1
-0.50 1 3 5 7 9 11 13 15 17 19
-1.00
-1.50
-2.00

Graph 1.6
Interpretation

The above graph represents the returns of ICICI Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.11 with price
variation of 0.59 and risk factor being 0.77 thus it can be said that risk is very high when
compared to returns.

46
Returns, Variance and Standard Deviation of KOTAK Income Funds for July-13

SN Date NAV Returns(X) 2 SD


1 2-July-13 27.3
2 3-July-13 27.52 0.81 0.72 0.52
3 4-July-13 27.76 0.87 0.79 0.62
4 5-July-13 27.82 0.22 0.13 0.02
5 6-July-13 27.72 -0.36 -0.45 0.20
6 9-July-13 27.4 -1.15 -1.24 1.54
7 10-July-13 27.22 -0.66 -0.74 0.55
8 11-July-13 26.7 -1.91 -2.00 3.99
9 12-July-13 27.23 1.99 1.90 3.61
10 13-July-13 27.75 1.91 1.82 3.33
11 16-July-13 27.9 0.54 0.45 0.21
12 17-July-13 28.03 0.47 0.38 0.14
13 18-July-13 28.14 0.39 0.31 0.09
14 19-July-13 28.26 0.43 0.34 0.12
15 20-July-13 28.03 -0.81 -0.90 0.81
16 23-July-13 28.00 -0.11 -0.19 0.04
17 24-July-13 27.42 -2.07 -2.16 4.65
18 25-July-13 27.55 0.47 0.39 0.15
19 29-July-13 27.79 0.87 0.79 0.62
20 31-july-13 27.72 -0.25 -0.34 0.11
Mean 0.09 Variance 1.12 1.06
Table 1.7
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF KOTAK INCOME FUND FOR THE
MONTH OF JULY-2013

2.50
2.00
1.50
1.00
0.50
0.00 Series1
-0.50 1 3 5 7 9 11 13 15 17 19
-1.00
-1.50
-2.00
-2.50

Graph1.7

Interpretation

The above graph represents the returns of KOTAK Income Fund. It shows that there is
continuous rise and fall in Net Asset Value. If we see the table the monthly mean is 0.09 with
Price variation of 1.12 and risk factor being 1.06 Thus it can be said that risk is very high when
compared to returns.
Returns, Variance and Standard Deviation of KOTAK Income Funds for Aug-2013

47
SN Date NAV Returns(X) 2 SD
1 1-Aug-13 27.5 -0.79 -0.26 0.07
2 2-Aug-13 27.7 0.73 1.27 1.60
3 3-Aug-13 27.86 0.58 1.12 1.24
4 6-Aug-13 27.86 0.00 0.54 0.29
5 7-Aug-13 28.06 0.72 1.26 1.58
6 8-Aug-13 27.98 -0.29 0.25 0.06
7 9-Aug-13 27.49 -1.75 -1.21 1.47
8 10-Aug-13 26.31 -4.29 -3.75 14.10
9 13-Aug-13 26.11 -0.76 -0.22 0.05
10 14-Aug-13 26.04 -0.27 0.27 0.07
11 17-Aug-13 26.77 2.80 3.34 11.16
12 21-Aug-13 26.9 0.49 1.02 1.05
13 22-Aug-13 26.67 -0.86 -0.32 0.10
14 23-Aug-13 26.79 0.45 0.99 0.98
15 26-Aug-13 26.43 -1.34 -0.81 0.65
16 27-Aug-13 25.75 -2.57 -2.03 4.14
17 28-Aug-13 25.79 0.16 0.69 0.48
18 29-Aug-13 25.81 0.08 0.62 0.38
19 31-Aug-13 24.96 -3.29 -2.76 7.59
Mean -0.54 Variance 2.48 1.57

Table 1.8
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF KOTAK INCOME FUND FOR THE
MONTH OF AUG-2013

4.00
3.00
2.00
1.00
0.00
Series1
-1.00 1 3 5 7 9 11 13 15 17 19
-2.00
-3.00
-4.00
-5.00

Graph 1.8
Interpretation

The above graph represents the returns of KOTAK Income Fund. It shows that there is
continuous rise and fall in Net Asset Value. If we see the table the monthly mean is -0.54 with
price variation of 2.48 and risk factor being 1.57. Thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of KOTAK Income Funds for Sep-2013

48
SN Date NAV Returns(X) 2
SD
1 3-Sep-13 25.06 0.40 0.42 0.18
2 4-Sep-13 24.49 -2.27 -2.25 5.07
3 5-Sep-13 23.29 -4.90 -4.88 23.78
4 6-Sep-13 23.73 1.89 1.91 3.66
5 7-Sep-13 23.35 -1.60 -1.58 2.49
6 9-Sep-13 24.17 3.51 3.53 12.49
7 10-Sep-13 23.97 -0.83 -0.80 0.65
8 11-Sep-13 24.27 1.25 1.27 1.62
9 12-Sep-13 24.67 1.65 1.67 2.79
10 13-Sep-13 24.05 -2.51 -2.49 6.20
11 14-Sep-13 24.23 0.75 0.77 0.60
12 17-Sep-13 24.05 -0.74 -0.72 0.52
13 18-Sep-13 24.36 1.29 1.31 1.72
14 20-Sep-13 24.64 1.15 1.17 1.37
15 21-Sep-13 24.85 0.85 0.88 0.77
16 24-Sep-13 25.41 2.25 2.28 5.18
17 25-Sep-13 25.44 0.12 0.14 0.02
18 26-Sep-13 25.19 -0.98 -0.96 0.92
19 28-Sep-13 24.76 -1.71 -1.68 2.84
Mean -0.02 Variance 3.84 1.96
Table 1.9
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAT REPRESENTATION OF RETURNS


OF KOTAK INCOME FOND FOR THE
MONTH OF SEP-2013

4.00

2.00

0.00
1 3 5 7 9 11 13 15 17 19 Series1
-2.00

-4.00

-6.00

Graph 1.9

Interpretation

The above graph represents the returns of KOTAK Income Fund. It shows that there is
continuous rise and fall in Net Asset Value. If we see the table the monthly mean is -0.02 with
price variation of 3.84 and risk factor being 1.96 Thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of KOTAK Income Funds for Oct-2013

49
SN Date NAV Returns(X) 2 SD
1 2-Oct-13 24.07 -2.79 -3.26 10.64
2 3-Oct-13 24.26 0.79 0.31 0.10
3 4-Oct-13 24.39 0.54 0.06 0.00
4 5-Oct-13 24.65 1.07 0.59 0.35
5 8-Oct-13 25.29 2.60 2.12 4.50
6 10-Oct-13 25.41 0.47 0.00 0.00
7 11-Oct-13 25.43 0.08 -0.40 0.16
8 12-Oct-13 25.3 -0.51 -0.99 0.97
9 15-Oct-13 26.01 2.81 2.33 5.44
10 16-Oct-13 26.55 2.08 1.60 2.56
11 17-Oct-13 26.23 -1.21 -1.68 2.82
12 18-Oct-13 26.24 0.04 -0.44 0.19
13 19-Oct-13 26.33 0.34 -0.13 0.02
14 22-Oct-13 26.91 2.20 1.73 2.99
15 23-Oct-13 26.89 -0.07 -0.55 0.30
16 24-Oct-13 27.43 2.01 1.53 2.35
17 25-Oct-13 27.59 0.58 0.11 0.01
18 26-Oct-13 27.55 -0.14 -0.62 0.38
19 29-Oct-13 27.04 -1.85 -2.33 5.41
Mean 0.47 Variance 2.06 1.44
Table 1.10
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF KOTAK INCOME FOND FOR THE
MONTH OF OCT-2013

4.00
3.00
2.00
1.00
0.00 Series1
-1.00 1 3 5 7 9 11 13 15 17 19
-2.00
-3.00
-4.00

Graph 1.10

Interpretation

The above graph represents the returns of KOTAK Income Fund. It shows that there is
continuous rise and fall in Net Asset Value. If we see the table the monthly mean is 0.47 with
price variation of 2.06 and risk factor being 1.44 Thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of KOTAK Income Funds for Nov-2013

50
SN Date NAV Returns(X) 2 SD
1 1-Nov-13 27.59 2.03 1.55 2.41
2 2-Nov-13 27.35 -0.87 -1.35 1.82
3 5-Nov-13 27.19 -0.59 -1.07 1.13
4 6-Nov-13 26.99 -0.74 -1.22 1.48
5 8-Nov-13 27.26 1.00 0.52 0.27
6 9-Nov-13 27.15 -0.40 -0.88 0.78
7 12-Nov-13 27.33 0.66 0.18 0.03
8 13-Nov-13 27.77 1.61 1.13 1.28
9 15-Nov-13 27.9 0.47 -0.01 0.00
10 16-Nov-13 28.59 2.47 1.99 3.97
11 19-Nov-13 28.94 1.22 0.74 0.55
12 20-Nov-13 28.94 0.00 -0.48 0.23
13 21-Nov-13 29.24 1.04 0.56 0.31
14 22-Nov-13 29.36 0.41 -0.07 0.00
15 23-Nov-13 29.07 -0.99 -1.47 2.16
16 26-Nov-13 28.83 -0.83 -1.31 1.71
17 27-Nov-13 29.04 0.73 0.25 0.06
18 29-Nov-13 29.38 1.17 0.69 0.48
19 30-Nov-13 29.59 0.71 0.23 0.05
Mean 0.48 Variance 0.99 0.99
Table 1.11
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


GOF KOTAK INCOME FOND FOR THE
MONTH OF NOV-2013

3.00
2.50
2.00
1.50
1.00
Series1
0.50
0.00
-0.50 1 3 5 7 9 11 13 15 17 19
-1.00
-1.50

Graph 1.11

Interpretation
The above graph represents the returns of KOTAK Income Fund. It shows that there is
continuous rise and fall in Net Asset Value. If we see the table the monthly mean is 0.48 with
Price variation of 0.99 and risk factor being 0.99 thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of KOTAK Income Funds for Dec-2013

51
SN Date NAV Returns(X) 2 SD
1 3-Dec-13 29.7 0.37 0.24 0.06
2 4-Dec-13 29.49 -0.71 -0.84 0.71
3 5-Dec-13 29.62 0.44 0.31 0.09
4 6-Dec-13 28.87 -2.53 -2.67 7.11
5 7-Dec-13 28.62 -0.87 -1.00 1.00
6 10-Dec-13 28.35 -0.94 -1.08 1.16
7 11-Dec-13 28.42 0.25 0.11 0.01
8 12-Dec-13 28.19 -0.81 -0.94 0.89
9 13-Dec-13 28.08 -0.39 -0.52 0.28
10 14-Dec-13 28.71 2.24 2.11 4.45
11 17-Dec-13 28.75 0.14 0.00 0.00
12 18-Dec-13 28.67 -0.28 -0.41 0.17
13 19-Dec-13 29.18 1.78 1.64 2.70
14 20-Dec-13 29.69 1.75 1.61 2.60
15 21-Dec-13 30.04 1.18 1.04 1.09
16 24-Dec-13 30.12 0.27 0.13 0.02
17 26-Dec-13 30.21 0.30 0.16 0.03
18 28-Dec-13 30.4 0.63 0.49 0.24
19 31-Dec-13 30.32 -0.26 -0.40 0.16
Mean 0.13 Variance 1.20 1.09
Table 1.12
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETUNS OF


KOTAK INCOME FOR THE MONTH
OF DEC-2013

3.00

2.00

1.00

0.00 Series1
1 3 5 7 9 11 13 15 17 19
-1.00

-2.00

-3.00

Graph 1.12

Interpretation
The above graph represents the returns of KOTAK Income Fund. It shows that there is
continuous rise and fall in Net Asset Value. If we see the table the monthly mean is 0.13 with
price variation of 1.20 and risk factor being 1.09 Thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of TATA Income Funds for July-2013

SN Date NAV Returns(X) 2 SD

52
1 2-July-13 11.1 0.91 0.75 0.57
2 3-July-13 11.22 1.08 0.93 0.86
3 4-July-13 11.19 -0.27 -0.42 0.18
4 5-July-13 11.13 -0.54 -0.69 0.48
5 6-July-13 11.03 -0.90 -1.05 1.11
6 9-July-13 10.91 -1.09 -1.24 1.54
7 10-July-13 10.81 -0.92 -1.07 1.15
8 11-July-13 10.92 1.02 0.86 0.75
9 12-July-13 11.05 1.19 1.04 1.07
10 13-July-13 11.12 0.63 0.48 0.23
11 16-July-13 11.15 0.27 0.12 0.01
12 17-July-13 11.23 0.72 0.56 0.32
13 18-July-13 11.33 0.89 0.74 0.54
14 19-July-13 11.28 -0.44 -0.60 0.35
15 20-July-13 11.33 0.44 0.29 0.08
16 23-July-13 11.17 -1.41 -1.57 2.45
17 24-July-13 11.24 0.63 0.47 0.22
18 25-July-13 11.32 0.71 0.56 0.31
19 29-July-13 11.32 0.00 -0.15 0.02
Mean 0.15 Variance 0.64 0.80
Table 1.13

Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF TATA INCOME FUND FOR THE
MONTH OF July-2013

1.50
1.00
0.50
0.00
Series1
-0.50 1 3 5 7 9 11 13 15 17 19

-1.00
-1.50
-2.00

Graph 1.13
Interpretation

The above graph represents the returns of TATA Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.15 with price
variation of 0.64 and risk factor being 0.80 thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of TATA Income Funds for Aug-2013

SN Date NAV Returns(X) 2 SD

53
1 1-Aug-13 11.32 0.00 0.48 0.23
2 2-Aug-13 11.47 1.33 1.80 3.26
3 3-Aug-13 11.49 0.17 0.65 0.43
4 6-Aug-13 11.44 -0.44 0.04 0.00
5 7-Aug-13 11.53 0.79 1.27 1.60
6 8-Aug-13 11.51 -0.17 0.31 0.09
7 9-Aug-13 11.28 -2.00 -1.52 2.31
8 10-Aug-13 10.87 -3.63 -3.16 9.96
9 13-Aug-13 10.82 -0.46 0.02 0.00
10 14-Aug-13 10.83 0.09 0.57 0.33
11 17-Aug-13 11.1 2.49 2.97 8.83
12 21-Aug-13 11.12 0.18 0.66 0.43
13 22-Aug-13 11.06 -0.54 -0.06 0.00
14 23-Aug-13 11 -0.54 -0.06 0.00
15 26-Aug-13 10.91 -0.82 -0.34 0.11
16 27-Aug-13 10.7 -1.92 -1.45 2.09
17 28-Aug-13 10.77 0.65 1.13 1.28
18 29-Aug-13 10.74 -0.28 0.20 0.04
19 31-Aug-13 10.31 -4.00 -3.52 12.42
Mean -0.48 Variance 2.29 1.51
Table 1.14
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF TATA INCOME FUND FOR THE
MONTH OF AUG-2013

3.00
2.00
1.00
0.00
-1.00 1 3 5 7 9 11 13 15 17 19 Series1
-2.00
-3.00
-4.00
-5.00

Graph 1.14
Interpretation

The above graph represents the returns of TATA Income Fund. It shows that there is continuous

rise and fall in Net Asset Value. If we see the table the monthly mean is -0.48 with price

variation of 2.29 and risk factor being 1.51 thus it can be said that risk is very high when

compared to returns.

Returns, Variance and Standard Deviation of TATA Income Funds for Sep-2013

SN Date NAV Returns(X) 2 SD


1 3-Sep-13 10.44 1.26 1.26 1.60
2 4-Sep-13 10.34 -0.96 -0.95 0.91

54
3 5-Sep-13 9.94 -3.87 -3.86 14.93
4 6-Sep-13 9.98 0.40 0.41 0.17
5 7-Sep-13 9.84 -1.40 -1.40 1.96
6 9-Sep-13 10.1 2.64 2.65 7.00
7 10-Sep-13 10.06 -0.40 -0.39 0.15
8 11-Sep-13 10.07 0.10 0.10 0.01
9 12-Sep-13 10.19 1.19 1.20 1.43
10 13-Sep-13 9.99 -1.96 -1.96 3.84
11 14-Sep-13 10.02 0.30 0.30 0.09
12 17-Sep-13 9.91 -1.10 -1.09 1.20
13 18-Sep-13 10.02 1.11 1.11 1.24
14 20-Sep-13 10.12 1.00 1.00 1.00
15 21-Sep-12 10.21 0.89 0.89 0.80
16 24-Sep-13 10.4 1.86 1.86 3.48
17 25-Sep-13 10.49 0.87 0.87 0.76
18 26-Sep-13 10.43 -0.57 -0.57 0.32
19 28-Sep-13 10.28 -1.44 -1.43 2.06
Mean 0.00 Variance 2.26 1.50
Table 1.15
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF TATA INCOME FUND FOR THE
MONTH OF SEP-2013

3.00
2.00
1.00
0.00
-1.00 1 3 5 7 9 11 13 15 17 19 Series1
-2.00
-3.00
-4.00
-5.00

Graph 1.15
Interpretation
The above graph represents the returns of TATA Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.00 with price
variation of 2.26 and risk factor being 1.50 thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of TATA Income Funds for Oct-2013

SN Date NAV Returns(X) 2 SD


1 2-Oct-13 9.98 -2.92 -3.23 10.45
2 3-Oct-13 10.05 0.70 0.39 0.15
3 4-Oct-13 10.09 0.40 0.08 0.01

55
4 5-Oct-13 10.18 0.89 0.58 0.33
5 8-Oct-13 10.4 2.16 1.85 3.41
6 10-Oct-13 10.48 0.77 0.45 0.21
7 11-Oct-13 10.56 0.76 0.45 0.20
8 12-Oct-13 10.54 -0.19 -0.50 0.25
9 15-Oct-13 10.72 1.71 1.39 1.94
10 16-Oct-13 10.83 1.03 0.71 0.51
11 17-Oct-13 10.79 -0.37 -0.68 0.47
12 18-Oct-13 10.79 0.00 -0.31 0.10
13 19-Oct-13 10.81 0.19 -0.13 0.02
14 22-Oct-13 10.88 0.65 0.33 0.11
15 23-Oct-13 10.85 -0.28 -0.59 0.35
16 24-Oct-13 11.00 1.38 1.07 1.14
17 25-Oct-13 11.09 0.82 0.50 0.25
18 26-Oct-13 11.01 -0.72 -1.04 1.07
19 29-Oct-13 10.9 -1.00 -1.31 1.73
Mean 0.31 Variance 1.19 1.09
Table 1.16

Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF TATA INCOME FUND FOR THE
MONTH OF OCT-2013

3.00
2.00
1.00
0.00
Series1
-1.00 1 3 5 7 9 11 13 15 17 19

-2.00
-3.00
-4.00

Graph 1.16
Interpretation

The above graph represents the returns of TATA Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.31 with price
variation of 1.19 and risk factor being 1.09 thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of TATA Income Funds for Nov-2013

SN Date NAV Returns(X) 2 SD


1 1-Nov-13 11.21 2.84 2.30 5.28
2 2-Nov-13 11.32 0.98 0.44 0.19
3 5-Nov-13 11.27 -0.44 -0.99 0.97

56
4 6-Nov-13 11.18 -0.80 -1.34 1.81
5 8-Nov-13 11.26 0.72 0.17 0.03
6 9-Nov-13 11.34 0.71 0.16 0.03
7 12-Nov-13 11.41 0.62 0.07 0.01
8 13-Nov-13 11.56 1.31 0.77 0.59
9 15-Nov-13 11.53 -0.26 -0.81 0.65
10 16-Nov-13 11.68 1.30 0.76 0.57
11 19-Nov-13 11.75 0.60 0.05 0.00
12 20-Nov-13 11.76 0.09 -0.46 0.21
13 21-Nov-13 11.86 0.85 0.30 0.09
14 22-Nov-13 11.92 0.51 -0.04 0.00
15 23-Nov-13 11.91 -0.08 -0.63 0.40
16 26-Nov-13 11.84 -0.59 -1.13 1.28
17 27-Nov-13 11.9 0.51 -0.04 0.00
18 29-Nov-13 12 0.84 0.29 0.09
19 30-Nov-13 12.08 0.67 0.12 0.01
Mean 0.55 Variance 0.64 0.80
Table 1.17
Source: The data is collected from the annual reports of the HDFC Securities Ltd

.
GRAPHICAL REPRESENTATION OF RETURNS
OF TATA INCOME FUND FOR THE
MONTH OF NOV-2013

3.50
3.00
2.50
2.00
1.50
Series1
1.00
0.50
0.00
-0.50 1 3 5 7 9 11 13 15 17 19
-1.00

Graph1.17
Interpretation

The above graph represents the returns of TATA Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.55 with price
variation of 0.64 and risk factor being 0.80 thus it can be said that risk is very high when
compared to returns.

Returns, Variance and Standard Deviation of TATA Income Funds for Dec-2013

SN Date NAV Returns(X) 2 SD


1 3-Dec-13 12.2 0.99 0.92 0.84
2 4-Dec-13 12.08 -0.98 -1.06 1.12
3 5-Dec-13 12.09 0.08 0.01 0.00
4 6-Dec-13 11.98 -0.91 -0.99 0.97

57
5 7-Dec-13 11.97 -0.08 -0.16 0.03
6 10-Dec-13 11.87 -0.84 -0.91 0.83
7 11-Dec-13 11.85 -0.17 -0.24 0.06
8 12-Dec-13 11.73 -1.01 -1.09 1.19
9 13-Dec-13 11.65 -0.68 -0.76 0.58
10 14-Dec-13 11.82 1.46 1.38 1.91
11 17-Dec-13 11.9 0.68 0.60 0.36
12 18-Dec-13 11.84 -0.50 -0.58 0.34
13 19-Dec-13 11.95 0.93 0.85 0.73
14 20-Dec-13 12.11 1.34 1.26 1.59
15 21-Dec-13 12.17 0.50 0.42 0.18
16 24-Dec-13 12.19 0.16 0.09 0.01
17 26-Dec-13 12.23 0.33 0.25 0.06
18 28-Dec-13 12.23 0.00 -0.08 0.01
19 31-Dec-13 12.25 0.16 0.09 0.01
Mean 0.08 Variance 0.57 0.75
Table 1.18
Source: The data is collected from the Data base of the HDFC Securities Ltd

GRAPHICAL REPRESENTATION OF RETURNS


OF TATA INCOME FUND FOR THE
MONTH OF DEC-2013

2.00
1.50
1.00
0.50
Series1
0.00
-0.50 1 3 5 7 9 11 13 15 17

-1.00
-1.50

Graph 1.18
Interpretation

The above graph represents the returns of TATA Income Fund. It shows that there is continuous
rise and fall in Net Asset Value. If we see the table the monthly mean is 0.08 with price
variation of 0.57 and risk factor being 0.75 thus it can be said that risk is very high when
compared to returns.

Correlation of Returns between KOTAK Income Fund and TATA Income Fund
from July – 13 to December – 13

Month KOT(X) TATA(Y) X=(X-MEAN) Y=Y(-MEAN) X*Y X2 Y2


JUL 0.09 0.15 -0.01 0.05 0.00 0.00 0.00
AUG -0.54 -0.48 -0.64 -0.58 0.37 0.41 0.34
SEP -0.02 0.00 -0.13 -0.11 0.01 0.02 0.01
OCT 0.47 0.31 0.37 0.21 0.08 0.14 0.05

58
NOV 0.48 0.55 0.38 0.44 0.17 0.14 0.20
DEC 0.13 0.08 0.03 -0.02 0.00 0.00 0.00
Mean 0.10 0.10 ∑X=0.00 ∑Y=0.00 ∑XY=0.63 ∑X2=0.71 ∑Y2=0.59
Table 1.19

CORRELATION
∑XY 0.63
2 2
∑X ∑Y 0.42 0.65
CORRELATION( r ) 0.97

Graphical Representation of KOTAK Income Fund and TATA Income Fund

CORRELATION OF RETURNS BETWEEN KOTAK


TATAFROM JULY-13 TO DEC-13

0.60
0.40
0.20
KOT(x)
0.00
TATA(y)
-0.20 1 2 3 4 5 6
-0.40
-0.60

Graph 1.19

Interpretation

The above graph represents the correlation between KOTAK Income Fund and TATA Income

Fund. It reveals that there exists a positive correlation between both the companies in the half

of the year. Here the correlation lies below 1 which indicates a good correlation, thus we can

say that both the companies are going according to market conditions.

Correlation of Returns between KOTAK Income Fund & ICICI Income Fund
from July – 13 to December – 13

KOTAK ICICI X=(X-MEAN) Y=(Y-MEAN) X*Y X2 Y2


JUL 0.09 0.44 -0.02 0.30 0.00 0.00 0.09
AUG -0.54 -0.38 -0.64 -0.52 0.33 0.41 0.27
SEP -0.02 -0.02 -0.13 -0.17 0.02 0.02 0.03
OCT 0.47 0.37 0.37 0.22 0.08 0.14 0.05

59
NOV 0.48 0.34 0.38 0.20 0.07 0.14 0.04
DEC 0.13 0.11 0.03 -0.03 0.00 0.00 0.00
MEAN 0.10 0.14 ∑X=0.00 ∑Y=0.00 ∑XY=0.51 ∑X2=0.71 ∑Y2=0.48
Table 1.20

CORRELATION

∑XY 0.51

∑X 2∑Y2 0.34 0.58

CORRELATION( r ) 0.87

Graphical Representation of KOTAK Income Fund and ICICI Income Fund

CORRELTION OF RETURNS BETWEEN KOTAK & ICICI


FOR THE PERIOD OF JULY-13 TO DEC-13

0.60
0.40
0.20
Series1
0.00
Series2
-0.20 1 2 3 4 5 6
-0.40
-0.60

Graph 1.20
Interpretation

The above graph represents the correlation between KOTAK Income Fund and ICICI Income

Fun. It reveals that there exists a positive correlation between both the companies in the half of

the year. Here the correlation lies below 1 which indicates a good correlation, thus we can say

that both the companies are going according to market conditions.

Correlation of Returns between ICICI Income Fund& TATA Income Fund from
July – 13 to December – 13

Month ICICI TATA X=(X-MEAN) Y=(Y-MEAN) X*Y X2 Y2


JUL 0.44 0.15 0.30 0.05 0.02 0.09 0.00
AUG -0.38 -0.48 -0.52 -0.58 0.30 0.27 0.34
SEP -0.02 0.00 -0.17 -0.11 0.02 0.03 0.01

60
OCT 0.37 0.31 0.22 0.21 0.05 0.05 0.05
NOV 0.34 0.55 0.20 0.44 0.09 0.04 0.20
DEC 0.11 0.08 -0.03 -0.02 0.00 0.00 0.00
MEAN 0.14 0.10 ∑X=0 ∑Y=0 ∑XY=0.47 ∑X2=0.48 ∑Y2=0.59
Table 1.21

CORRELATION

∑XY 0.47

∑X2∑Y2 0.28 0.53

CORRELATION( r ) 0.89

Graphical Representation of ICICI Income Fund and TATA Income Fund

CORRELTION OF RETURNS BETWEEN ICICI & TATA


FOR THE PERIOD OF JULY -13 TO DEC -13

1.00
0.50
Series1
0.00
Series2
-0.50 1 2 3 4 5 6

-1.00

Graph 1.21

Interpretation

The above graph represents the correlation between ICICI Income Fund and TATA Income

Fund. It reveals that there exists a positive correlation between both the companies in the first

of the year. Here the correlation lies below 1 which indicates a good correlation, thus we can

say that both the companies are going according to market conditions.

Findings

 The Correlation between ICICI Income Fund and KOTAK Income Fund

61
It reveals that there exists a positive correlation between both the companies in the half

of the year. Here the correlation is 0.87 which indicates that both the companies are

going in same direction according to market conditions.

 The correlation between KOTAK Income Fund and TATA Income Fund

It reveals that there exists a positive correlation between both the companies in the half

of the year. Here the correlation is 0.97 which indicates that both the companies behave

in the same way according to market conditions

 The correlation between ICICI Income Fund and TATA Income Fund

It reveals that there exists a positive correlation between both the companies in the half

of the year. Here the correlation is 0.89 which indicates that both the companies are

going according to market conditions.

Suggestions

 Investor has to know the security returns are co-related to each other.

 Investor should construct a portfolio in which securities are negatively correlated

62
 The investor has to maintain a portfolio of diversified sector stocks rather than investing

in a single sector of different stocks.

 If the market is not doing well, investor should not panic, rather wait for sometimes

 In order to enjoy more returns, Investor should invest in more risky securities

 A risk-averse investor should invest in less risky securities and enjoy normal returns.

Conclusion

In this project work it is seen how the securities can be constructed as a portfolio .By using

Markowitz theory a portfolio is constructed and the returns and risks are calculated. The entire

63
project work is done to identify the best portfolio and it is found the results are satisfactory.

However it is very important for an investor to identify the risk associated with the returns of

various securities. The investor should construct a portfolio where stocks are negatively

correlated. The investor should select stocks from different sectors rather than investing all

amounts in one type of stocks.

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