Analysis of Investment in Stock Market & Portfolio Management Using Instrument Derivatives – Futures - 1 - - 1 - INDUSTRY PROFILE Journey of Indian stock market 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 B.R.C.M. College of Business Administration, Surat
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INDUSTRY PROFILE
Journey of Indian stock market
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
B.R.C.M. College of Business Administration, Surat
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inaugurated in 1899. Thus, the Stock Exchange at Bombay was
consolidated.
Growth Pattern of the Indian Stock Market
Sr.No.
As on 31st
December
1946
1961
1971
1975
1980
1985
1991 1995
1
No. ofStock Exchanges
7 7 8 8 9 14 20 22
2No. of Listed Cos.
1125
1203
1599
1552
2265
4344
6229 8593
3
No. of StockIssues of
Listed Cos.
1506
2111
2838
3230
3697
6174
89671178
4
4
Capital of ListedCos. (Cr. Rs.)
270 753181
2261
4397
3972
33204
15958
3
5
Market value ofCapital of ListedCos. (Cr. Rs.)
971129
2267
5327
3675
025302
110279
478121
6
Capital perListed Cos. (4/2)(Lakh Rs.)
24 63 113 168 175 224 514 693
7 Market Value ofCapital per ListedCos. (Lakh
86 107 167 211 298 582 1770 5564
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Rs.)(5/2)
8
Appreciated value of Capital perListed Cos. (Lakh Rs.)
358 170 148 126 170 260 344 803
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COMPANY PROFILE
Kotak Securities Limited
Kotak Securities Ltd., a subsidiary of Kotak Mahindra Bank Limited,
is one of India’s largest private brokerage and distribution house,
set up in 1994, by Mr. Uday Kotak; it has equity participation from
Goldman Sachs L. I. P. (25%).
Kotak Securities is a corporate member of both the Bombay Stock
Exchange (BSE) and the National Stock Exchange (NSE). Its
operations include stock broking, distribution of various Investment
products – including private and secondary placement of debt and
equity, mutual funds, fixed deposits and the like. Currently Kotak
Securities is one of the largest broking houses in India with offices
in more than fifteen cities. In India as well as a presence in US,
Europe and the Middle East (through our associate companies
Kotak Mahindra U.K. Limited and Kotak Mahindra International
Limited, Kotak Mahindra Inc).
Our core strengths are our expertise in equity research and a wide
retail distribution network. We have an outstanding research
division involved in macro – economic studies, industry and
company specific equity research, with analyst specializing in
particular economic sectors and large cap stocks.
In August 2000, Kotak Securities launched Kotakstreet.com, its e –
broking service for retail investors on the net and currently has over
20,000 registered users.
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Kotak Securities Limited is one of the larger players in distribution of
IPOs - it was ranked number One in 2003-04 as Book Running
Lead Manager in public equity offerings by PRIME Database. It has
also won the Best Equity House Award from Finance Asia - April
2004.
The Company has a full-fledged Research division involved in
macro economic studies, sectoral research and Company specific
equity research combined with a strong and well networked sales
force which helps deliver current and up-to-date market information
and news.
Kotak Securities Limited is also a depository participant with
National Securities Depository Limited (NSDL) and Central
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For the bilk of the investors the most important asset in their
portfolio is a residential house. In addition to a residential house,
the more affluent investors are likely to be interested in the following
types of real estate:
Agricultural land
Semi-urban land
PRECIOUS OBJECTS: -
It is highly valuable in monetary terms but generally they are small
in size. The important precious objects are:
Gold & silver
Precious stones
Art objects
FINANCIAL DERIVATIVES: -
A financial derivative is an instrument whose value is derived from
the value of underlying asset. It may be viewed as a side bet on the
asset. The most import financial derivatives from the point of view of
investors are:
Options
Futures.
B.R.C.M. College of Business Administration, Surat
REAL ESTATE
PRECIOUS OBJECTS
FINANCIAL DERIVATIVES
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RISK – RETURN OF VARIOUS INVESTMENT
AVENUES
Every investment is characterized by return & risk. Investors
intuitively understand the concept of risk. A person making an
investment expects to get some return from the investment in the
future. But, as future is uncertain, so is the future expected return. It
is this uncertainty associated with the returns from an investment
that introduces risk into an investment. Risk arises where there is a
possibility of variation between expectation and realization with
regard to an investment.
Meaning of Risk
Risk & uncertainty are an integrate part of an investment
decision. Technically ‘risk’ can be define as situation where
the possible consequences of the decision that is to be taken
are known. ‘Uncertainty’ is generally defined to apply to
situations where the probabilities cannot be estimated.
However, risk & uncertainty are used interchangeably.
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Types of risks
1. Systematic risk: -
Systematic risk is non diversifiable & is associated with the
securities market as well as the economic, sociological, political, &
legal considerations of prices of all securities in the economy. The
affect of these factors is to put pressure on all securities in such a
way that the prices of all stocks will more in the same direction.
Example: -
During a boom period prices of all securities will rise & indicate that
the economy is moving towards prosperity. Market risk, interest rate
risk & purchasing power risk are grouped under systematic risk.
RISKS
SYSTAMATIC UNSYSTAMATIC
Market Risk Business Risk
Interest Rate Risk Financial Risk
Purchasing power Risk
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1. Systematic Risk
(A) Market risk
Market risk is referred to as stock variability due to changes in
investor’s attitudes & expectations. The investor reaction towards
tangible and intangible events is the chief cause affecting ‘market
risk’.
(B) Interest rate risk
There are four types of movements in prices of stocks in the
markets. These may termed as (1) long term, (2) cyclical (bull and
bear markets), (3) intermediate or within the cycle, and (4) short
term. The prices of all securities rise or fall depending on the
change in interest rates. The longer the maturity period of a security
the higher the yield on an investment & lower the fluctuations in
prices.
(C) Purchasing Power risk
Purchasing power risk is also known as inflation risk. This risk
arises out of change in the prices of goods & services and
technically it covers both inflation and deflation periods. During the
last two decades it has been seen that inflationary pressures have
been continuously affecting the Indian economy. Therefore, in India
purchasing power risk is associated with inflation and rising prices
in the economy.
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2. Unsystematic Risk: -
The importance of unsystematic risk arises out of the uncertainty
surrounding of particular firm or industry due to factors like labour
strike, consumer preferences and management policies. These
uncertainties directly affect the financing and operating enviourment
of the firm. Unsystematic risks can owing to these considerations be
said to complement the systematic risk forces.
(A) Business risk
Every corporate organization has its own objectives and goals and
aims at a particular gross profit & operating income & also accepts
to provide a certain level of dividend income to its shareholders. It
also hopes to plough back some profits. Once it identifies its
operating level of earnings, the degree of variation from this
operating level would measure business risk.
Example:-
If operating income is expected to be 15% in a year, business risk
will be low if the operating income varies between 14% and 16%. If
the operating income were as low as 10% or as high as 18% it
would be said that the business risk is high.
(B) Financial Risk: -
Financial risk in a company is associated with the method through
which it plans its financial structure. If the capital structure of a
company tends to make earning unstable, the company may fail
financially. How a company raises funds to finance its needs and
growth will have an impact on its future earnings and consequently
on the stability of earnings. Debt financing provides a low cost
source of funds to a company, at the same time providing financial
leverage for the common stock holders. As long as the earnings of
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the company are higher than the cost of borrowed funds, the
earning per share of common stock is increased. Unfortunately, a
large amount of debt financing also increases the variability of the
returns of the common stock holder & thus increases their risk. It is
found that variation in returns for shareholders in levered firms
(borrowed funds company) is higher than in unlevered firms. The
variance in returns is the financial risk.
B.R.C.M. College of Business Administration, Surat
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Risk Return Of Various Investment Alternatives
Managem
ent
Decision
Required
Investment
Marke
t
Risk
Busines
s
Risk
Interes
t
Risk
Purchasin
g
Power
Risk
H Growth stock H H L L
H
Speculative
common
stock
H H L L
M Blue chips M M L L
MConvertible
referred stockM M L L
LConvertible
debenturesM M L L
LCorporate
bondsL L H H
LGovernment
bondsL L H H
LShort-term
bondsL L L H
LMoney
market fundsL L L H
O Life insurance L L L H
OCommercial
banksL L L H
O Unit trusts L L L M-H
O Saving a/c L L L H
O Cash L L L H
So, there are so many investment options & the different option
have different benefits & limitations in the sense risk associated
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with it. So it is difficult for them to chose option, which give
maximum return at minimum risk.
PORTFOLIO
Meaning of portfolio:-
Portfolio
A combination of securities with different risk & return
characteristics will constitute the portfolio of the investor. Thus, a
portfolio is the combination of various assets and/or instruments of
investments. The combination may have different features of risk &
return, separate from those of the components. The portfolio is also
built up out of the wealth or income of the investor over a period of
time, with a view to suit his risk and return preference to that of the
portfolio that he holds. The portfolio analysis of the risk and return
characteristics of individual securities in the portfolio and changes
that may take place in combination with other securities due to
interaction among themselves and impact of each one of them on
others.
An investor considering investments 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 is funds over this group of securities.
Again he is faced with the problem of deciding which securities to
hold and how much to invest in each. The investor faces an infinite
number of possible portfolios or groups of securities. The risk and
return characteristics of portfolio differ from those of individual
securities combining to form a portfolio. The investor tries to choose
the optimal portfolio taking in to consideration the risk return
characteristics of all possible portfolios.
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As the economy and the financial environment keep changing the
risk return characteristics of individual securities as well as
portfolios also change. This calls for periodical 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 he has to bear. The return realized from the portfolio has to be
measured and the performance of the portfolio has to be evaluated.
It is evident that rational investment activity involves creation of an
investment portfolio. Portfolio management comprises all the
processes involved in the creation and maintenance of an
investment portfolio. It deals specifically with the security analysis,
portfolio analysis, portfolio selection, portfolio revision and portfolio
evaluation. Portfolio management 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.
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Before designing a portfolio one will have to know the intention of
the investor or the returns that the investor is expecting from his
investment. This will help in adjusting the amount of risk. This
becomes an important point from the point of view of the portfolio
designer because if the investor will be ready to take more risk at
the same time he will also get more returns. This can be more
appropriately understood from the figure drawn below.
R1
Expected ReturnsExpected Returns
R2
Risk less Investment M1 M2
Risk
From the above figure we can see that when the investor is ready
to take risk of M1, he is likely to get expected return of R1, and if
the investor is taking the risk of M2, he will be getting more returns
i.e. R2. So we can conclude that risk and returns are directly
related with each other. As one increases the other will also
increase in same of different proportion and same if one
decreases the other will also decrease.
B.R.C.M. College of Business Administration, Surat
PORTFOLIO DESIGN
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From the above discussion we can conclude that the investors
can be of the following three types:
1. Investors willing to take minimum risk and at the same time
are also expecting minimum returns.
2. Investors willing to take moderate risk and at the same time
are also expecting moderate returns.
3. Investors willing to take maximum risk and at the same time
are also expecting maximum returns.
B.R.C.M. College of Business Administration, Surat
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Your age will help you determine what a
good mix is / portfolio is
Age Portfoliobelow 30 80% in stocks or mutual funds
10% in cash10% in fixed income
30 t0 40 70% in stocks or mutual funds 10% in cash20% in fixed income
40 to 50 60% in stocks or mutual funds 10% in cash 30% in fixed income
50 to 60 50% in stocks or mutual funds10% in cash40% in fixed income
above 60 40% in stocks or mutual funds 10% in cash 50% in fixed income
These aren't hard and fast allocations, just guidelines to get you
thinking about how your portfolio should look. Your risk profile will
give you more equities or more fixed income depending on your
aggressive or conservative bias. However, it's important to always
have some equities in your portfolio (or equity funds) no matter
what your age. If inflation roars back, this will be the portion of your
investments that protects you from the damage, not your fixed
income.
Also, the fixed income of your portfolio should be diversified. If you
buy bonds and debentures directly or if you invest in FDs, then
make sure you have at least five different maturities to spread out
the interest rate risk.
B.R.C.M. College of Business Administration, Surat
PORTFOLIO – AGE RELATIONSHIP
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Diversifying in equities and bonds means more than buying a
number of positions. Each position needs to be scrutinized as to
how it fits into the stocks or bonds that already are in your portfolio,
and how they might be affected by the same event such as higher
interest rates, lower fuel prices, etc. Put your portfolio together like
a puzzle, adding a piece at a time, each one a little different from
the other but achieving a uniform whole once the portfolio is
complete.
Types of portfolio for study:
In portfolio Design, we are considering only two types of portfolio.
They are as follow:
1. Random Portfolio
2. Sector Portfolio
1. Random portfolio
Random portfolio consists of the scripts that are randomly selected
by the investor by its own knowledge and preference of the stocks.
Here there is no analysis is done of the script, they are selected on
the tips and buts received by the investors from the external
sources.
Features of random portfolio
There is no method used for selection of the script in the
portfolio.
Selection is based on the individual criteria for the scripts.
The investment is made for higher return in short term.
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Generally in India most of the portfolio are selected
according to this random methods as no investor himself in
that much analysis of the script.
Advantages of random portfolio
Easier to keep a track on the market as not much time
wasted in the analysis.
This portfolio seems to have perform better in short term as
script are generally which are performing better at that time.
Tips are available every where for the investor to pouch.
It is the experience of the individual that can fetch him good
return.
Disadvantages of random portfolio
There is every chance that you may select a script that has a
very bad background in the market.
Not every time the tips pay off for you. You need to have
strong reason to select that script.
Such portfolios are not able to sustain when there is a crisis
in the market.
There is a very high risk and return involve in such portfolio.
B.R.C.M. College of Business Administration, Surat
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2. Sector specific portfolio
Sector specific portfolio includes securities of those companies
which are in the same business. Sector portfolios are very useful
when there is a particular sector which is doing very good and has a
bright future a head. Sector portfolio has the securities of those
companies that engage in same kind of business.
e.g. In late 1990’s sector that was providing the highest return was
information technology. Investors who have invested their money
in these securities had earned very high return.
Features of sector portfolio
Script form the same group of companies that are in to the
similar type of business.
Maximum exposure to the industry/sector. So any news or
event has the direct effect on the portfolio.
Risk regarding the portfolio increases as it is expose to
sector specific ups and downs.
Useful investment tools for speculator and short-sellers.
It is better suited for the sectors which have been providing
good revenue in the near past.
Advantages of sector portfolio
It is better suited to investors who are willing to take risk.
It provides better short term return then other portfolios.
It is easy to keep a watch on one sector rather than many.
You can have a good command over the things happening.
Limited exposure to other sectors keeps the portfolio safe
from the performance of other sectors in the economy.
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Disadvantages of sector portfolio
It is a highly risky portfolio as risk associated with the sector
directly affects the performance of the portfolio.
These types of portfolios are not suited for long-term investor
as risk taken for the return can be too high.
There is always the possibly many scripts in the sector may not be
giving that much good attractive return as others. They may eat the
profits from other scripts.
B.R.C.M. College of Business Administration, Surat
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Book value is based on historical costs, not current values, but can
provide an important measure of the relative value of a company
over time. Book value can be figured as assets minus liabilities, or
assets minus liabilities and intangible items such as goodwill; either
way, the figure that results is the company's net book value. This is
contrasted with its market capitalization, or total share price value,
which is calculated by multiplying the outstanding shares by their
current market price.
You can also compare a company's market value to its book
value on a per-share basis. Divide book value by the number of
shares outstanding to get book value per share and compare the
result to the current stock price to help determine if the company's
stock is fairly valued. Most stocks trade above book value because
investors believe that the company will grow and the value of its
shares will, too. When book value per share is higher than the
current share price, a company's stock may be undervalued and a
bargain to investors.
In case of our sensex as we can see that it is currently trading at a
P/B ratio of 4.41 this shows the average P/B ratio prevailing in the
market. So any script trading below the P/B of 4.41 can said to be
under valued if we keep the BSE SENSEX as bench mark. But it
would be advisable for an investor to also look at the sector leaders
P/B ratio to know what is the common industry P/B and based on
that he can decide about whether to invest in the company or not.
As such there is no guarantee that low P/B would able to give
better return but this stocks are considered to be undervalued so
one can think that this companies are undervalued so chances of
appreciation are very high in case of low P/B scrip. Such companies
having low P/B ratio can be considered as value stock and one can
thin about investing in those companies.
B.R.C.M. College of Business Administration, Surat
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The P/E ratio as a guide to investment decisions
Earnings per share alone mean absolutely nothing. In order to get a
sense of how expensive or cheap a stock is, you have to look at
earnings relative to the stock price and hence employ the P/E ratio.
The P/E ratio takes the stock price and divides it by the last four
quarters' worth of earnings. If AB ltd is currently trading at Rs. 20 a
share with Rs. 4 of earnings per share (EPS), it would have a P/E of
5. Big increase in earnings is an important factor for share value
appreciation. When a stock's P-E ratio is high, the majority of
investors consider it as pricey or overvalued. Stocks with low P-E's
are typically considered a good value. However, studies done and
past market experience have proved that the higher the P/E, the
better the stock.
First, one can obtain some idea of a reasonable price to pay for the
stock by comparing its present P/E to its past levels of P/E ratio.
One can learn what is a high and what is a low P/E for the individual
company. One can compare the P/E ratio of the company with that
of the market giving a relative measure. One can also use the
average P/E ratio over time to help judge the reasonableness of the
present levels of prices. All this suggests that as an investor one
has to attempt to purchase a stock close to what is judged as a
reasonable P/E ratio based on the comparisons made. One must
also realize that we must pay a higher price for a quality company
with quality management and attractive earnings potential.
In the case if we look at the benchmark of BSE sensex on 1st of
December it is trading at a P/E of 24.49. So if we just keep the
benchmark P/E in mind then we can say that any stock which is
trading bellow the P/E of 24.49 is available cheaply. But for an
investor it is also advisable to look at the industry P/E as it is more
important because just looking at the above position we can see
B.R.C.M. College of Business Administration, Surat
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that SBI is trading at a very low P/E of around 8 but if you see that
in banking sector that to public sector banks the normal industry
P/E is 8 all most all banks are trading around 8 or bellow the P/E of
8.
So always it is advisable to look at what is the P/E of industry in
which we want to invest to get the better idea, because if we take
the example of IT industry there almost you will find companies
around P/E of 30. so if any IT company having of P/E would
considered to be a cheap option for the investor to invest in to. So
the investor should also look at the industry average P/E. The new
investor can know about the industry P/E or any other companies
P/E in any financial magazine or from the internet also if he does
not know how to calculate the P/E or is not having the data
available with them.
The formula for calculating the P/E ratio is
B.R.C.M. College of Business Administration, Surat
P/E = Current Market Price
Earning Per Share
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RANDOM PORTFOLIO
Random portfolio consists of the scripts that are randomly selected
by the investor by its own knowledge and preference of the stocks.
Here there is no analysis is done of the script, they are selected on
the tips and buts received by the investors from the external
sources.
We are considering BETA factor to design our Random Portfolio.
Beta Factor “Beta” indicates the proportion of the yield of a
portfolio to the yield of the entire market (as indicated by some
index). If there is an increase in the yield of the market, the yield of
the individual portfolio may also go up. If the index goes up by 1.5%
and the yield of your portfolio goes up by 0.9%, the beta is 0.9/1.5
i.e 0.6. in other words, beta indicates that for every 1 % increase in
the market yield, the yield of the portfolio goes up by 0.6%. High
beta shares do move higher than the market when the market rises
and the yield of the fund declines more than the yield of the market
when the market falls. In the Indian context a beta of 1.2% is
considered very bullish.
You can be indifferent to market swings if you know your stocks
well. Or you can put your portfolio into neutral or bias for the upside
if you're bullish or a little for the downside if you're bearish. One way
to do that is to have a mix of stocks that have certain betas in your
portfolio. When investors are bullish on the market, they like to have
high beta stocks in their portfolios because if they're right, then their
stocks go up faster than the market in general, and their
performance is better than the market. If investors are bearish on
the market, then they use the low beta or negative beta stocks
because their portfolios will go down less than the market and their
performance will be better than the general market. And if they want
to be neutral, they can then make sure that they have stocks with a
beta of 1 or develop a portfolio that has stocks with betas greater
B.R.C.M. College of Business Administration, Surat
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than 1 and less than 1 so that they have the whole portfolio with an
average beta of 1.
A beta for a stock is derived from historical data. This means it has
no predictive value for the future, but it does show that if the stock
continues to have the same price patterns relative to the market in
general as it has in the past, you've got a way of knowing how your
portfolio will perform in relation to the market. And with a portfolio
with an average beta of 1, you can create your own index fund
since you'll move more or less in tandem with the market.
B.R.C.M. College of Business Administration, Surat
Analysis of Investment in Stock Market & Portfolio Management Using Instrument Derivatives – Futures - 50 -
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Interpretation of BetaInterpretation of BetaWhen When B = 1B = 1 means that the scrip has same volatility as compared means that the scrip has same volatility as compared
to Index. Suitable for moderate investor.to Index. Suitable for moderate investor.
When When B>1B>1 means that scrip is more volatile as compared to market means that scrip is more volatile as compared to market
suitable for aggressive investors.suitable for aggressive investors.
When When B<1B<1 then scrip is less volatile as compared to market and then scrip is less volatile as compared to market and
suitable for defensive investors.suitable for defensive investors.
Beta of scrips plays vital role in scrip selection in PortfolioBeta of scrips plays vital role in scrip selection in Portfolio
management. Portfolio can be created in many ways as sectormanagement. Portfolio can be created in many ways as sector
wise, diversified in various sector, beta wise scrip portfolio.wise, diversified in various sector, beta wise scrip portfolio.
SO BASED ON THIS BETA NOW WE WILL PREPARE THREE
PORTFOLIO TO MATCH THE RISK TAKING CAPACITY OF AN
INVESTOR
THAT IS
AGGRESSIVE MODERATE DEFENSIVE
B.R.C.M. College of Business Administration, Surat
PORTFOLIO
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DEFENSIVE PORTFOLIO
SR NO. SCRIPT
BETA
PRICE ON 2-01-2006 Wi
1 ACC 0.72 530.45 9.68
2 CIPLA 0.78 440.00 10.48
3 DR REDDY 0.69 963.00 9.27
4 GRASIM 0.76 1375.3 10.22
5 HDFC BANK 0.76 713.45 10.22
6 ITC 0.81 140.10 10.89
7 RANBUXY 0.69 444.35 9.27
8HERO HONDA 0.8 846.10 10.75
9 HDFC 0.82 1191.3 11.02
10 GLAXO 0.61 1111.6 8.20
Total Portfolio Beta = Wi * BETA
=6.97 +8.18+6.40+7.76+7.76
+8.82+6.40+8.60+9.04+5.00
= 74.93 ~ 75
B.R.C.M. College of Business Administration, Surat
Total Portfolio Investment = 10,00,000 Rs.
Analysis of Investment in Stock Market & Portfolio Management Using Instrument Derivatives – Futures - 52 -
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RETURN ON INDIVIDUAL SCRIPTS
1ST MONTH
SR NO. SCRIPT
BETA
2-01-2006
31-01-06 RETUR
N IN %1 ACC 0.72 530.45 574.20 8.252 CIPLA 0.78 440.00 442.25 0.513 DR REDDY 0.69 963.00 1121.25 16.434 GRASIM 0.76 1375.30 1454.25 5.745 HDFC BANK 0.76 713.45 762.45 6.876 ITC 0.81 140.10 154.80 10.497 RANBUXY 0.69 444.35 399.40 -10.12
The bellow given chart shows the performance of the script in the
bse for last three months. It shows the volatility of the stock for the
months of November, December and January.
B.R.C.M. College of Business Administration, Surat
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FINANCIAL PERFOMANCE
For the year 02-Mar 03-Mar 04-Mar 05-MarOperating Income 228.2 285.5 394.5 323.8Net Profit 15.68 18.56 32.67 24.92Net Worth 70.52 85.06 110.5 128.1No. of Shares (in crore) 1.42 1.42 1.42 1.42
Adjusted EPS (Rs) 12.13 13.06 23.29 13.73
Book value per Share (Rs)
65.44 75.66 93.55 105.9
Dvdnd per2 2.5 4.5 4.5
Share(Rs)
Net Profit Margin (%) 6.06 5.78 8.24 7.65
Current Ratio 1.97 1.88 1.76 1.55
Lt Debt Equity 0.04 0.03 0.02 0.01
B.R.C.M. College of Business Administration, Surat
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