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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
PERFORMANCE OF PORTFOLIOS IN PCS SECURITIES LTD
* Dr. K. Madhusudhana Rao1
Portfolio management has become one of the hot topics in
industry over the last three to
five years. Unfortunately, however, the brand of portfolio
management being studied and
promoted these days is not really true portfolio management. An
almost fanatical absorption with
new product development and product innovation has driven
companies, academics and
consultants to focus so exclusively on the new product area as
to almost totally ignore other
phases of product and portfolio life cycles. Clearly it is
important to be efficient, effective and
innovative in new product1 development, but overemphasizing this
area has driven wrong
behaviors in disciplines which are critical to good, sound
business management and one of these
key disciplines is portfolio management.
Over the past few years, portfolio management has focused almost
exclusively on
creation of new productsto the detriment of other portions of
the product life cycle. The
author argues that product development professionals should take
a more holistic view of
portfolio management in order to get the best results. This
paper attempts to explain the
performance of the shares in the market in relation to the Risk
Return.
Key Words: Portfolio, Risk, Return, Speculation, Products.
Introduction: An investor considering investment in securities
is faced with the problem
of choosing from among a large number of securities. His choice
depends upon the risk and
return characteristics of individual securities. He would
attempt to choose the most desirable
securities and like to allocate his funds over this group of
securities .Again he is faced with the
problem of deciding with securities to hold and how much to
invest in each. The investor faces
an infinite number of possible portfolios or groups of
securities.
The risk and the return characteristics of portfolios differ
from those of individual
securities combining to form a portfolio the investor tries to
choose the optimal portfolio taking
into consideration the risk return characteristics of all
possible portfolios.
1 Dr. K. Madhusudhana Rao Associate Professor, K L University,
Green Fields, Vaddeswaram,Guntur (Dt), Andhra Prasesh.
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
As the economic and financial environment keeps changing the
risk return
characteristics of individual securities as well as portfolio
also change. This calls for periodic
review and revision of investment portfolios of investors. An
investor invests his funds in a
portfolio expecting to get a good return consistent with the
risk that has to bear .The return
realised from the portfolio has to be measured and the
performance of the portfolio has to be
evaluated.
It is evident that rational investor investment activity
involves creation of an investment
portfolio .Portfolio management comprises all the processes
involved in the creation and the
maintenance of an investment portfolio .It deals specifically
with security analysis, portfolio
analysis, portfolio selection, portfolio revision and portfolio
evaluation .it also makes use of
analytical techniques of analysis and conceptual theories
regarding rational allocation of funds.
Portfolio management is a complex process which tries to make
investment activity more
rewarding and less risky.
Portfolio Management is a technique used to help manage your
assets/investments. As
directed by a request originating from the Deputy under
Secretary of Defence, HQ AMC has
been tasked to use this method to obtain data and visibility so
the Army can better manage its
Automated Information Technology (AIT) investments. More
specifically, we are developing a
portfolio of all Army Logistics AIT investments.
Portfolio Managements a tool for managers, an enabler for better
management. By
identifying all Log AIT systems and then amassing key
information about each system, one can
then determine if there are multiple systems performing the same
function. And by adding
metrics, one can also readily determine the extent that a new
system, or a new feature to an
existing system, will benefit the War-fighter.
At the end of the June 1989, there were 18 recognized stock
exchanges in India. Among
the 18 stock exchanges, the first organized stock exchange set
up at Bombay in 1857 is
distinguished not only by its size but also it has been
recognized permanently, while the
recognition for other markets is renewed every 5 years. Stock
markets are organized either as
voluntary, non-profit making associations (Bombay, Ahmadabad,
Indore) or public limited
companies (Calcutta, Delhi, Bangalore) or company limited by
guarantee (Madras, Hyderabad).
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
In India, the growth of stock exchanges has been linked to the
growth of corporate sector.
Though a number of stock exchanges were set up before
independence but, there was no All
India legislation to regulate theyre working. Every stock
exchange followed its own methods of
working. To rectify this situation, the SECURITY CONTRACTS
(REGULATIONS) ACT was
passed in 1956.
In 1965, 22 separate provincial stock exchanges were merged into
3 regional stock
exchanges and in 1973 these, in turn, were combined to form the
National Stock Exchange
(NSE) under the title of the stock exchange that has trading
floors in many former provincial
center. At present, there are 26 Stock exchanges in our country.
The over-the counter exchange
of India began its operations in 1992. Since 1995, trading in
securities is screen based (on-line).
LITERATURE REVIEW
Crina O. Tarasi, Ruth N. Bolton, Michael D. Hutt, & Beth A.
Walker, 2011 stated that the
1. Optimal composition of the customer portfolio that
outperformed, in terms of variability, both
the client companys current strategy and a profit maximization
portfolio, as demonstrated by
back- and forward-testing .
2. By using a diversified, efficient portfolio, companies could
reduce the vulnerability and
volatility of cash flow from the customer portfolio, better
insulating the firm during downturns in
the economy without sacrificing performance in the long run.
3. Demonstration of how managers can use customer beta and the
customer reward ratio to
evaluate specific individual customers and to make corresponding
adjustments in the customer
portfolio.
According toRajna Gibson Brandon and Songtao Wang, 2013
1. This study only focuses on equity hedge funds, the effect of
liquidity risk is weaker for some
non-equity (e.g., fixed income arbitrage and managed futures)
hedge funds.
2. This may be attributed to the fact that these hedge funds do
not respond with a liquidity risk
factor constructed with equity data.
3. In the future, it would be worth exploring whether similar
liquidity risk factors that are
constructed with non-equity securities price and trading volume
data can help us explain the
performance of these broader sets of hedge funds.
As per Michael M. Menke, 2013
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
1. Analysing results was to verify that we had constructed a
valid set of best practices. They
began with a very strong set of practices, most of which had
been identified and validated in
earlier comprehensive R&D PPM benchmarking studies.
2. On these measures, respondents were remarkably consistent: 7
of the 50 practices were
considered relevant by all respondents, and another 6 by all but
one. All but two were considered
relevant by 80 percent of participants or more.
3. Each participating company has received a number of
recommendations customized to its
specific situation and driven by how it compares to the group as
a whole and to top performers.4.
Many of those participants have made significant changes to
their PPM processes and practices
as a result of what they learned from this benchmarking.
Francois Delcourt and Mikael Petitjean, 2011pointed out that
This study is mainly based on Sampling and Resampling Based
Techniques.
By using
1. Immediate Return Portfolio
2. Maximum Return Portfolio
Portfolio resampling offers an intuitive way to deal with
sampling error in portfolio
optimization.
Resampling addresses estimation risk with simulations. These
simulated return and risk
measures help to quantify the effect on the optimization process
of uncertainty inherent in
the investment world.
Resampling technique is more useful in finding the returns which
are immediate and maximum
in order to choose the investment and compare it with the
Markowitz meanvariance portfolio
construction technique by assessing the performance of three
representative portfolios, i.e. the
Global Minimum Variance (GMV) portfolio, the Intermediate Return
(I) portfolio and the
Maximum Return (M) portfolio. We show that resampling leads to
more stable and more
diversified portfolios. However, the out-of-sample analysis
shows that resampling does not
systematically increase (decrease) the risk adjusted performance
(turnover) of the portfolios
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
Utpal Bhattacharya and Neal Galpin, 2011stated that
1. They compute the cross-sectional variance of turnover every
month for every country for
which we have data, for as long as we have the data. We plot
this metric over time for 46
countries. They arrive at 2 primary findings, as well as a
number of smaller findings.
2. The first significant finding is that on average, value
weighting is less popular in emerging
markets than in developed markets. Of the sample of 46
countries, in the 19952007 period,
value weighting is least popular in Pakistan, Brazil, and India,
and is the most popular in Ireland,
the U.K., and the U.S.
3. The second significant finding is that on average, value
weighting is becoming more popular
all over the world. Of the 46 countries under investigation, we
record that for 35 countries, the
popularity of value weighting increased between 1995 and
2007.
They did three things in this paper
They first developed a theory-based metric to proxy for the
popularity of value weighting in a
subset of stocks then use our metric to document that although
value weighting is less popular in
emerging markets than in developed markets, its popularity is
increasing almost everywhere.
Finally, they use the superior U.S. data to explore why value
weighting is becoming more
popular in the U.S.
OBJECTIVES OF THE STUDY
1. To study the large cap stocks trading and trends in secondary
market.
2. To provide basic idea of different stock market investment
instruments to investor.
3. To compare the risk and returns of selected stocks in NSE
nifty index and
generating a high performing combination of stocks
4. To provide knowledge to investor about various type of risk
associated with
various investment instruments.
5. To design an optimal portfolio basing on the risk and return
calculations and
evaluating its performance
6. To construct the best portfolio for higher yield
7. To minimize the risk which occurred in stock market?
SCOPE OF THE STUDY
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
In the secondary market so many investment avenues are
available, but this study covers
only to portfolio analysis.
This study covers the numerical data which is related to returns
and risk. There is no
scope of various external and internal conditions.
This study is dedicated to selected scripts, of large cap to
create an investor
profitable portfolio.
As risk and return are calculated alternatively they are also
studied by changing the
combination.
METHODOLOGY OF THE STUDY
Research methodology is a way to systematically solve the
research problem. It may
be understood as a science of studying how research is done
scientifically. Here the
researchers study various steps that are generally adopted by a
researcher in studying his
research problem along with the logic behind them. A Research
methodology defines what
the activity of research is, how to measure progress.
SOURCES OF DATA
Data collection is an actively in marketing research. The design
of the data collection method is
the spine of research design. The sources of data are classified
in to two types.
PRIMARY DATA
The primary data is fresh data collected directly from the
field. for
portfolio preparation, needs various prices of large cap
securities. Such prices are collected from
historical data of www.nseindia.com.And after deriving such
prices, for evaluating risk return
trade off; formulas are taken from Securities Analysis and
Portfolio Management-Fischer Jordan.
And therefore consist of original information gathered for the
specific purpose.
SECONDARY DATA
The secondary data is the data, which the investigator borrows
from other who have
collected it for various other purposes. Therefore it may not
entirely be reliable. It is less
expensive and involves less time and labour than the collection
of primary data.
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
THE SOURCES OF COLLECTING SECONDARY DATA
Reports and publication of Government department and
international bodies.
Publication of books company records, brochures, catalogues and
other documents.
Data related by statistical organization.
Information for the study is also collected from secondary data
which include NSE,
notices, journals manuals magazines and the latest information
is sought the web &trading
terminals.
STATISTICAL TOOLS
The following are the statistical tools used in the study.
1. Average rate of return
2. Standard Deviation
3. Beta
4. Coefficient of correlation
5. Alpha
6. Portfolio return under single index mode
7. Portfolio risk under single index model
Average rate of return
. Average rate of return is the average of all the possible
returns .here the
possible returns are denoted by X and the numbers of months are
denoted by n so we get the
average rate of return by dividing possible rate of return by
number of months.
FINDINGS
There are maximum returns of NIFTY are in month of September and
minimum returns
of NIFTY are in month of January. So, the index is volatile.
O It is observed that beta value is < 1for the following
securities i.e.., ACC Ltd,
TCS, Kingfisher, TATA Motors, Cipla, ITC, Zee Entertainment,
TATA Steel and
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
GAIL so these securities are called as defensive securities, and
it indicates
average risk.
Here the beta value is >1for the following security i.e..,
HDFC so this security called
as aggressive security, and it indicates above average risk.
o The detailed information about the 10 stocks return and the
risk associated with
the stocks during the period ofJanuary 1st 2013 to December 31st
2013.So the
stocks ACC LTD, TATA Motors, ZEE, GAIL and ITC are reasonably
doing well
during this period. So these stocks are chosen for the
construction of the portfolio.
o By the performance evaluation of selected securities, we can
take the samples
toestimate the risk and returns of the stock.
o By considering returns and risk trade off the selected
securities are TATA
MOTORS, ACC Ltd, ZEE ENTERTAINMENT, ITC, and GAIL.
o Among selected securities TATA MOTORS earns high returns
(i.e.89.63) in the
period of January 1st2013 to December 31st2013.
o In these 10 stocks the HDFC BANK has more volatile in nature,
with the value of
beta (i.e.3.79), it indicates systematic risk.
o Investment in the secondary market is so sensitive, so the
investment is risky.
SUGGESTIONS
Investors can also analyze the shareholding pattern of different
companies. The experts in stock
market speak that if FIIs and MFs hold high percentage in total
companies shareholding,
company has good potential for growth. Because FIIs and MFs have
good research techniques to
observe the companys financial performance and thats why theyre
willing to invest for
companies for particular companies.
While preparing the portfolio, the investors should consider
large cap companies also, if they are
providing good returns.
The investor can avoid risk by diversified portfolio in such a
way that it consists the whole
market behavior i.e. it should have qualities of large cap,
midcap, as well as small cap
companies.
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
During the period of January 1st 2013 to December 31st 2013.So
the stocks ACC LTD,
TATA Motors, ZEE, GAIL, and ITC are reasonably doing well during
this period. So
these stocks are chosen for the construction of the portfolio
and investor can easily invest
in those securities.
The investor can analyze the financial performance of the
company before making the
investment.
Investors need to have high level of empowerment and access to
financial advice, so that
they can take appropriate decisions.
Conclusion
As per the problem statement, investment in large cap companies
are safe and more
reward oriented. With the help of the given project I got
in-depth knowledge about the
working of portfolio management.
I got an insight as how to invest in portfolio and which scheme
provides better return as
compared to others.
Portfolios can be constructed according to the traditional
approach or modern approach.
In the traditional approach the investors need for current
income and income in constant
rupees are analyzed liquidity, safety, time horizon of the
investment, tax consideration
and temperament of the individual investors are the other
constraints to frame the
objectives
The general objectives of the portfolio are current income,
constant income, capital
appreciation and preservation of capital.
According to the objectives the portfolio whether it is a bond
portfolio or a stock
portfolio or combination of both of bond and stock is to be
decided. After that, the equity
component of the portfolio is chosen. The traditional approach
takes the entire financial
plan of the individual investor.
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
In the modern approach, Markowitz model is used. More importance
is given to the risk
and return analysis.
If selected securities are performing as per target prices,
investor should include those
securities in their portfolio also.
BIBLIOGRAPHY
Articles & Journals:
Balancing Risk and Return in a Customer Portfolio
Crina O. Tarasi, Ruth N. Bolton, Michael D. Hutt, & Beth A.
Walker
Journal of Marketing Vol. 1 75 (May 2011)
Liquidity Risk, Return Predictability, and Hedge Funds
Performance: An Empirical Study
Rajna Gibson Brandon and Songtao Wang
Journal of financial and quantitative analysis Vol. 48, No. 1,
Feb. 2013
Making R&D Portfolio Management More Effective.
Michael M. Menke
SeptemberOctober 2013
To what extent is resampling useful in Portfolio Management.
Francois Delcourt and Mikael Petitjean
October 2011
The Global Rise of the Value-Weighted Portfolio.
Utpal Bhattacharya and Neal Galpin
Journal of financial and quantitative analysis Vol. 46, No. 3,
June. 2011.
Books
Securities Analysis and Portfolio Management, sixth edition,
- Donald E Fisher, Ronald J. Jordan,
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd
Portfolio management 571-572,
Risk-Return and risk return of portfolio formula 582-584,
Invest management
- V.K.Bhalla, SultanChand & Company limited, New Delhi
Web Sites
http://www.nseindia.com
http://www.yahoo finance nifty.com.
http://www.sebi.com
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South Asian Journal of Multidisciplinary Studies (SAJMS)
ISSN:2349-7858 (Volume 2 Issue 1 )
Published By:Universal Multidisciplinary Research Institute Pvt
Ltd