A Study on Portfolio Management and Investment Decisions-samba

8/13/2019 A Study on Portfolio Management and Investment Decisions-samba

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CONTENTS

Chapter numberTitle Page number

I Introduction to topic

Objectives

Methodology

Need and scope of study

imitations

II iterature surveyIII Industry profile

Company profileI! "ata collection

! "ata analysis

!II #indings

!III Suggestions

!III Conclusion

$NNE%&'E()


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Fund manager*or investment adviserin the &,S,- refers to both a firmthat providesinvestment management services and an individual /ho directs fund managementdecisions,

Asset allocation

The different asset class definitions are /idely debated+ but four common divisions arestoc2s+bonds+ real)estateand commodities,The e.ercise of allocating funds among theseassets *and among individual securities /ithin each asset class- is /hat investmentmanagement firms are paid for, $sset classes e.hibit different mar2et dynamics+ anddifferent interaction effects4 thus+ the allocation of monies among asset classes /ill havea significant effect on the performance of the fund, Some research suggests thatallocation among asset classes has more predictive po/er than the choice of individualholdings in determining portfolio return, $rguably+ the s2ill of a successful investmentmanager resides in constructing the asset allocation+ and separately the individualholdings+ so as to outperform certain benchmar2s *e,g,+ the peer group of competing

funds+ bond and stoc2 indices-,

ON5 TE'M 'ET&'NS(

It is important to loo2 at the evidence on the long)term returns to different assets+ and to

holding period returns *the returns that accrue on average over different lengths ofinvestment-, #or e.ample+ over very long holding periods *eg, 678 years- in mostcountries+ e9uities have generated higher returns than bonds+ and bonds have generatedhigher returns than cash, $ccording to financial theory+ this is because e9uities are ris2ier*more volatile- than bonds /hich are themselves more ris2y than cash,

Diversification

$gainst the bac2ground of the asset allocation+ fund managers consider the degree ofdiversificationthat ma2es sense for a given client *given its ris2 preferences- andconstruct a list of planned holdings accordingly, The list /ill indicate /hat percentage of

the fund should be invested in each particular stoc2 or bond, The theory of portfoliodiversification /as originated by Mar2o/it0 and effective diversification re9uiresmanagement of the correlation bet/een the asset returns and the liability returns+ issuesinternal to the portfolio *individual holdings volatility-+ and cross)correlationsbet/eenthe returns,

Investment styles
http://en.wikipedia.org/wiki/Investment_adviserhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Real-estatehttp://en.wikipedia.org/wiki/Commoditieshttp://en.wikipedia.org/wiki/Commoditieshttp://en.wikipedia.org/wiki/Diversification_(finance)http://en.wikipedia.org/wiki/Diversification_(finance)http://en.wikipedia.org/wiki/Cross-correlationhttp://en.wikipedia.org/wiki/Investment_adviserhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Real-estatehttp://en.wikipedia.org/wiki/Commoditieshttp://en.wikipedia.org/wiki/Diversification_(finance)http://en.wikipedia.org/wiki/Cross-correlation


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There are a range of different stylesof fund management that the institution canimplement, #or e.ample+ gro/th+ value+mar2et neutral+small capitalisation+ inde.ed+ etc,Each of these approaches has its distinctive features+ adherents and+ in any particularfinancial environment+ distinctive ris2 characteristics, #or e.ample+ there is evidence thatgro/th styles *buying rapidly gro/ing earnings- are especially effective /hen the

companies able to generate such gro/th are scarce4 conversely+ /hen such gro/th isplentiful+ then there is evidence that value styles tend to outperform the indicesparticularly successfully,

Performance measurement(

#und performance is the acid test of fund management+ and in the institutional conte.taccurate measurement is a necessity, #or that purpose+ institutions measure theperformance of each fund *and usually for internal purposes components of each fund-under their management+ and performance is also measured by e.ternal firms thatspeciali0e in performance measurement, The leading performance measurement firms

*e,g, #ran2 'ussellin the &S$- compile aggregate industry data+ e,g,+ sho/ing ho/ fundsin general performed against given indices and peer groups over various time periods,

In a typical case *let us say an e9uity fund-+ then the calculation /ould be made *as far asthe client is concerned- every 9uarter and /ould sho/ a percentage change compared/ith the prior 9uarter *e,g,+ 8:,;< total return in &S dollars-, This figure /ould becompared /ith other similar funds managed /ithin the institution *for purposes ofmonitoring internal controls-+ /ith performance data for peer group funds+ and /ithrelevant indices */here available- or tailor)made performance benchmar2s /hereappropriate, The specialist performance measurement firms calculate 9uartile and deciledata and close attention /ould be paid to the *percentile- ran2ing of any fund,

5enerally spea2ing+ it is probably appropriate for an investment firm to persuade itsclients to assess performance over longer periods *e,g,+ = to > years- to smooth out veryshort term fluctuations in performance and the influence of the business cycle, This canbe difficult ho/ever and+ industry /ide+ there is a serious preoccupation /ith short)termnumbers and the effect on the relationship /ith clients *and resultant business ris2s forthe institutions-,

$n enduring problem is /hether to measure before)ta. or after)ta. performance, $fter)ta. measurement represents the benefit to the investor+ but investors3 ta. positions mayvary, ?efore)ta. measurement can be misleading+ especially in regimens that ta. realisedcapital gains *and not unrealised-, It is thus possible that successful active managers*measured before ta.- may produce miserable after)ta. results, One possible solution is toreport the after)ta. position of some standard ta.payer,

'is2 adjusted performance measurement(

Institutions often control huge shareholdings, In most cases they are acting as fiduciaryagents rather than principals *direct o/ners-, The o/ners of shares theoretically have
http://en.wikipedia.org/wiki/Investment_stylehttp://en.wikipedia.org/wiki/Investment_stylehttp://en.wikipedia.org/wiki/Market_neutralhttp://en.wikipedia.org/wiki/Market_neutralhttp://en.wikipedia.org/wiki/Market_neutralhttp://en.wikipedia.org/wiki/Russell_Investment_Grouphttp://en.wikipedia.org/wiki/Investment_stylehttp://en.wikipedia.org/wiki/Market_neutralhttp://en.wikipedia.org/wiki/Russell_Investment_Group


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great po/er to alter the companies they o/n via the voting rights the shares carry and theconse9uent ability to pressure managements+ and if necessary out)vote them at annualand other meetings,

In practice+ the ultimate o/ners of shares often do not e.ercise the po/er they

collectively hold *because the o/ners are many+ each /ith small holdings-4 financialinstitutions *as agents- sometimes do, There is a general belief that shareholders ) in thiscase+ the institutions acting as agents@could and should e.ercise more active influenceover the companies in /hich they hold shares *e,g,+ to hold managers to account+ toensure ?oards effective functioning-, Such action /ould add apressure groupto those*the regulators and the ?oard- overseeing management,

Ao/ever there is the problem of ho/ the institution should e.ercise this po/er, One /ayis for the institution to decide+ the other is for the institution to poll its beneficiaries,$ssuming that the institution polls+ should it then(

*i- !ote the entire holding as directed by the majority of votes castB*ii- Split the vote */here this is allo/ed- according to the proportions of the vote

*iii- 'espect abstainers and only vote the respondents3 holdingsB

The price signals generated by large active managers holding or not holding the stoc2may contribute to management change, #or e.ample+ this is the case /hen a large activemanager sells his position in a company+ leading to *possibly- a decline in the stoc2 price+but more importantly a loss of confidence by the mar2ets in the management of thecompany+ thus precipitating changes in the management team,

Some institutions have been more vocal and active in pursuing such matters4 for instance+some firms believe that there are investment advantages to accumulating substantialminority shareholdings *i,e, 67< or more- and putting pressure onmanagementtoimplement significant changes in the business, In some cases+ institutions /ith minorityholdings /or2 together to force management change, Perhaps more fre9uent is thesustained pressure that large institutions bring to bear on management teams throughpersuasive discourse and P', On the other hand+ some of the largest investment managers@such as ?arclays 5lobal Investors and !anguard@advocate simply o/ning everycompany+ reducing the incentive to influence management teams, $ reason for this laststrategy is that the investment manager prefers a closer+ more open and honestrelationship /ith a company3s management team than /ould e.ist if they e.ercised

control4 allo/ing them to ma2e a better investment decision,The national conte.t in /hich shareholder representation considerations are set isvariable and important, The &S$ is a litigious society and shareholders use thela/as alever to pressure management teams, In apan it is traditional for shareholders to be lo/in the 3pec2ing order+3 /hich often allo/s management and labor to ignore the rights ofthe ultimate o/ners, Dhereas &S firms generally cater to shareholders+ apanesebusinesses generally e.hibit astakeholdermentality+ in /hich they see2 consensus
http://en.wikipedia.org/wiki/Pressure_grouphttp://en.wikipedia.org/wiki/Pressure_grouphttp://en.wikipedia.org/wiki/Managementhttp://en.wikipedia.org/wiki/Managementhttp://en.wikipedia.org/wiki/Lawhttp://en.wikipedia.org/wiki/Lawhttp://en.wikipedia.org/wiki/Pressure_grouphttp://en.wikipedia.org/wiki/Managementhttp://en.wikipedia.org/wiki/Law


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amongst all interested parties *against a bac2ground of strong unionsand labourlegislation-,

O?ECTI!ES
http://en.wikipedia.org/wiki/Trade_unionhttp://en.wikipedia.org/wiki/Trade_unionhttp://en.wikipedia.org/wiki/Legislationhttp://en.wikipedia.org/wiki/Trade_unionhttp://en.wikipedia.org/wiki/Legislation


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O?ECTI!ES(

Primary objectives(

To study ho/ an investment can be managed,

Secondary Objectives(

To study security analysis, To 2no/ ho/ to construct a portfolio, To 2no/ ho/ to evaluate the performances of different portfolios, To 2no/ in /hich investment /e get more returns, Too 2no/ in /hich investment /e have less ris2,


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METAOO5

Methodology(

"ata collection( ) in the present project /or2 the data has been collected from readilyavailable sources i,e, secondary data, i2e /ebsites+ ne/s papers and maga0ines,

The /ebsites visited are///,nseIndia,com///,bseindia,com

"ata analysis( ) the present project /or2 has been analysed using time series analysis/ith graphical presentations,

The formulas applied in the calculations are follo/s('eturns Fclosing price)opening price Gopening priceH677

'is2()
http://www.nse/http://www.bse/http://www.nse/http://www.bse/


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#ormula( F*%)%-Gn

NEE" $N" SCOPE

NEED FOR THE T!D"

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

and securities, It is a dynamic and fle.ible concept and involves regular and systematicanalysis+ judgments and actions, The objective of this service is to help the un2no/n

investors /ith the e.pertise of professionals in investment portfolio management, It

involves construction of a of a portfolio bases upon the investors objectives+ constraints+

preferences for ris2 and return and ta. ability, The portfolio is revie/ed and adjusted

from time to time in tune /ith the mar2et conditions, The evaluation of portfolio is to be

done in terms of targets set for a ris2 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 /ith the principles

governing such allocations, The modern vie/ of investments is oriented more to/ards

the assembly of proper combinations of individual securities to form investment


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portfolios, $ combination of individual securities to form investments portfolios, $

combination of securities held together /ill give a beneficial result if they are grouped in

a manner to secure higher return after ta2ing into consideration the ris2 elements,

#O$E OF THE T!D"

This study covers the Mar2o/it0 model, Aere in+ the study covers the calculation of

correlations bet/een the different securities in order to find out at /hat percentage of

funds should be invested among the companies in the portfolio, $lso the study includes

the calculation of /eights of individual securities involved in the portfolio, These

percentages help in allocation the funds available for investments based on the ris2y

portfolios,

IMIT$TIONS


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%imitations of the study

The study has certain constrains /hich has limited to its scope and objects of the study,

The fulfillment of project to :> days,

#rom ?SE and NSE listing J a very fe/ and randomly selected scripts

are analy0ed,

Construction of portfolio restricted to t/o) assets based in Mar2o/it0

model,

imited industries are only covered in the study,


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IN"&ST' P'O#IE

Evolution

Indian Stoc2 Mar2ets are one of the oldest in $sia, Its history dates bac2 to nearly 77years ago, The earliest records of security dealings in India are meagre and obscure, TheEast India Company /as the dominant institution in those days and business in its loansecurities used to be transacted to/ards the close of the eighteenth century,

?y 6K=73s business on corporate stoc2s and shares in ?an2 and Cotton presses too2 placein ?ombay, Though the trading list /as broader in 6K=L+ there /ere only half a do0enbro2ers recogni0ed by ban2s and merchants during 6K:7 and 6K>7,

The 6K>73s /itnessed a rapid development of commercial enterprise and bro2eragebusiness attracted many men into the field and by 6K;7 the number of bro2ers increasedinto ;7,

In 6K;7);6 the $merican Civil Dar bro2e out and cotton supply from &nited States ofEurope /as stopped4 thus+ the 3Share Mania3 in India begun, The number of bro2ersincreased to about 77 to >7, Ao/ever+ at the end of the $merican Civil Dar+ in 6K;>+ a

disastrous slump began *for e.ample+ ?an2 of ?ombay Share /hich had touched 's K>7could only be sold at 's, K-,

$t the end of the $merican Civil Dar+ the bro2ers /ho thrived out of Civil Dar in 6K:+found a place in a street *no/ appropriately called as "alal Street- /here they /ouldconveniently assemble and transact business, In 6KK+ they formally established in?ombay+ the 1Native Share and Stoc2 ?ro2ers3 $ssociation1 */hich is alternatively2no/n as 1 The Stoc2 E.change 1-, In 6KL>+ the Stoc2 E.change ac9uired a premise in


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the same street and it /as inaugurated in 6KLL, Thus+ the Stoc2 E.change at ?ombay /asconsolidated,

$hmedabad gained importance ne.t to ?ombay /ith respect to cotton te.tile industry,$fter 6KK7+ many mills originated from $hmedabad and rapidly forged ahead, $s ne/

mills /ere floated+ the need for a Stoc2 E.change at $hmedabad /as realised and in6KL: the bro2ers formed 1The $hmedabad Share and Stoc2 ?ro2ers3 $ssociation1,

Dhat the cotton te.tile industry /as to ?ombay and $hmedabad+ the jute industry /as toCalcutta, $lso tea and coal industries /ere the other major industrial groups in Calcutta,$fter the Share Mania in 6K;6);>+ in the 6K73s there /as a sharp boom in jute shares+/hich /as follo/ed by a boom in tea shares in the 6KK73s and 6KL73s4 and a coal boombet/een 6L7: and 6L7K, On une 6L7K+ some leading bro2ers formed 1The CalcuttaStoc2 E.change $ssociation1,

In the beginning of the t/entieth century+ the industrial revolution /as on the /ay in

India /ith the S/adeshi Movement4 and /ith the inauguration of the Tata Iron and SteelCompany imited in 6L7+ an important stage in industrial advancement under Indianenterprise /as reached,

Indian cotton and jute te.tiles+ steel+ sugar+ paper and flour mills and all companiesgenerally enjoyed phenomenal prosperity+ due to the #irst Dorld Dar,

In 6L7+ the then demure city of Madras had the maiden thrill of a stoc2 e.changefunctioning in its midst+ under the name and style of 1The Madras Stoc2 E.change1 /ith677 members, Ao/ever+ /hen boom faded+ the number of members stood reduced from677 to =+ by 6L=+ and so it /ent out of e.istence,

In 6L=>+ the stoc2 mar2et activity improved+ especially in South India /here there /as arapid increase in the number of te.tile mills and many plantation companies /ere floated,In 6L=+ a stoc2 e.change /as once again organi0ed in Madras ) Madras Stoc2 E.change$ssociation *Pvt- imited, *In 6L> the name /as changed to Madras Stoc2 E.changeimited-,

ahore Stoc2 E.change /as formed in 6L=: and it had a brief life, It /as merged /iththe Punjab Stoc2 E.change imited+ /hich /as incorporated in

6L=;,&rowth $attern of the Indian toc' (ar'et


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Sl,No,$s on =6st"ecember

6L:; 6L;6 6L6 6L> 6LK7 6LK> 6LL6 6LL>

6No, ofStoc2 E.changes

K K L 6: 7

No, of

isted Cos,

66> 67= 6>LL 6>> ;> :=:: ;L K>L=

=No, of Stoc2Issues ofisted Cos,

6>7; 666 K=K ==7 =;L ;6: KL; 66K:

:Capital of istedCos, *Cr, 's,-

7 >= 6K6 ;6: =L= L= =7:6 >L>K=

>Mar2et value ofCapital of istedCos, *Cr, 's,-

L6 6L ;> == ;>7 >=7 667L :K66

;Capital peristed Cos, *:G-*a2h 's,-

: ;= 66= 6;K 6> : >6: ;L=

Mar2et !alue ofCapital per istedCos, *a2h 's,-*>G-

K; 67 6; 66 LK >K 67 >>;:

K$ppreciated valueof Capital peristed Cos, *a2 's,-

=>K 67 6:K 6; 67 ;7 =:: K7=

$ost)independence cenario

Most of the e.changes suffered almost a total eclipse during depression, ahoreE.change /as closed during partition of the country and later migrated to "elhi andmerged /ith "elhi Stoc2 E.change,

?angalore Stoc2 E.change imited /as registered in 6L> and recogni0ed in 6L;=,

Most of the other e.changes languished till 6L> /hen they applied to the Central5overnment for recognition under the Securities Contracts *'egulation- $ct+ 6L>;, Only?ombay+ Calcutta+ Madras+ $hmedabad+ "elhi+ Ayderabad and Indore+ the /ellestablished e.changes+ /ere recogni0ed under the $ct, Some of the members of the other$ssociations /ere re9uired to be admitted by the recogni0ed stoc2 e.changes on aconcessional basis+ but acting on the principle of unitary control+ all these pseudo stoc2e.changes /ere refused recognition by the 5overnment of India and they thereuponceased to function,

Thus+ during early si.ties there /ere eight recogni0ed stoc2 e.changes in India*mentioned above-, The number virtually remained unchanged+ for nearly t/o decades,"uring eighties+ ho/ever+ many stoc2 e.changes /ere established( Cochin Stoc2


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E.change *6LK7-+ &ttar Pradesh Stoc2 E.change $ssociation imited *at anpur+ 6LK-+and Pune Stoc2 E.change imited *6LK-+ udhiana Stoc2 E.change $ssociationimited *6LK=-+ 5auhati Stoc2 E.change imited *6LK:-+ anara Stoc2 E.changeimited *at Mangalore+ 6LK>-+ Magadh Stoc2 E.change $ssociation *at Patna+ 6LK;-+aipur Stoc2 E.change imited *6LKL-+ ?hubanes/ar Stoc2 E.change $ssociation

imited *6LKL-+ Saurashtra utch Stoc2 E.change imited *at 'aj2ot+ 6LKL-+ !adodaraStoc2 E.change imited *at ?aroda+ 6LL7- and recently established e.changes )Coimbatore and Meerut, Thus+ at present+ there are totally t/enty one recogni0ed stoc2e.changes in India e.cluding the Over The Counter E.change of India imited *OTCEI-and the National Stoc2 E.change of India imited *NSEI-,

The Table given belo/ portrays the overall gro/th pattern of Indian stoc2 mar2ets sinceindependence, It is 9uite evident from the Table that Indian stoc2 mar2ets have not onlygro/n just in number of e.changes+ but also in number of listed companies and in capitalof listed companies, The remar2able gro/th after 6LK> can be clearly seen from theTable+ and this /as due to the favouring government policies to/ards security mar2et

industry,

AISTO'(

The /or2ing of stoc2 e.changes in India started in 6K>, ?SE is the oldest stoc2mar2et in India, The history of Indian stoc2 trading starts /ith =6K persons ta2ingmembership in Native Share and Stoc2 ?ro2ers $ssociation+ /hich /e no/ 2no/ by thename ?ombay Stoc2 E.change or ?SE in short, In 6L;>+ ?SE got permanent recognition

from the 5overnment of India, National Stoc2 E.change comes second to ?SE in termsof popularity, ?SE and NSE represent themselves as synonyms of Indian stoc2 mar2et,The history of Indian stoc2 mar2et is almost the same as the history of ?SE,

The =7 stoc2 sensitive inde. or Sense. /as first compiled in 6LK;, The Sense. iscompiled based on the performance of the stoc2s of =7 financially sound benchmar2companies, In 6LL7 the ?SE crossed the 6777 mar2 for the first time, It crossed 777+=777 and :777 figures in 6LL, The reason for such huge surge in the stoc2 mar2et /as


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the liberal financial policies announced by the then financial minister "r, Man MohanSingh,

The up)beat mood of the mar2et /as suddenly lost /ith Aarshad Mehta scam, It came topublic 2no/ledge that Mr, Mehta+ also 2no/n as the big)bull of Indian stoc2 mar2et

diverted huge funds from ban2s through fraudulent means, Ae played /ith 7 millionshares of about L7 companies, Millions of small)scale investors became victims to thefraud as the Sense. fell flat shedding >7 points,

To prevent such frauds+ the 5overnment formed The Securities and E.change ?oard ofIndia+ through an $ct in 6LL, SE?I is the statutory body that controls and regulates thefunctioning of stoc2 e.changes+ bro2ers+ sub)bro2ers+ portfolio managers investmentadvisors etc, SE?I oblige several rigid measures to protect the interest of investors, No//ith the inception of online trading and daily settlements the chances for a fraud is nil+says top officials of SE?I,

Sense. crossed the >777 mar2 in 6LLL and the ;777 mar2 in 777, The 777 mar2 /ascrossed in une and the K777 mar2 on September K in 77>, Many foreign institutionalinvestors *#II- are investing in Indian stoc2 mar2ets on a very large scale, The liberaleconomic policies pursued by successive 5overnments attracted foreign institutionalinvestors to a large scale, E.perts no/ believe the sense. can soar past 6:777 mar2before 767,

The unpredictable behavior of the mar2et gave it a tag J a volatile mar2et, The factorsthat affected the mar2et in the past /ere good monsoon+ ?haratiya anatha Partys rise topo/er etc, The result of a cric2et match bet/een India and Pa2istan also affected themovements in Indian stoc2 mar2et, The National "emocratic $lliance led by ?P+ during

77: public elections unsuccessfully tried to ride on the mar2et sentiments to po/er,N"$ /as voted out of po/er and the sense. recorded the biggest fall in a day amidstfears that the Congress)Communist coalition /ould stall economic reforms, ater primeminister Man Mohan Singhs assurance of reforms /ith a human face cast off the fearsand mar2et reacted sharply to touch the highest ever mar2 of K>77,

India+ after &nited States hosts the largest number of listed companies, 5lobal investorsno/ ardently see2 India as their preferred location for investment, Once vie/ed /iths2epticism+ stoc2 mar2et no/ appeals to middle class Indians also, Many Indians/or2ing in foreign countries no/ divert their savings to stoc2s, This recent phenomenonis the result of opening up of online trading and diminished interest rates from ban2s, Thestoc2bro2ers based in India are opening offices in different countries mainly to cater theneeds of Non 'esident Indians, The time factor also /or2s for the N'Is, They can buy orsell stoc2 online after returning from their /or2 places,

The recent incidents that led to gro/ing interest among Indian middle class are the initialpublic offers announced by Tata Consultancy Services+ Maruti &dyog imited+ ON5Cand big names li2e that, 5ood monsoons al/ays raise the mar2et sentiments, $ good


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boo2s,google,comGboo2sBidF.?C0vf#$CUpgF'$6 ,,,

;,

776 "ec =6+ 776 ) ......on the age old carry for/ard trading and introductionof rolling settlement /as a landmar2 development in the historyof Indiastoc'mar2ets, ...On uly + inde. and stoc'options /ere introduced inthe Indiane9uity mar2ets, $ccompanying them /ere a host of othermar'etreforms ...

#romSay Cheese to change ) 'elated /eb pages///,business)standard,comGcommonGstorypage,php ,,,

K,

77= Nov 6+ 77= ) ?esides helping the investors+ the proposal of the e.changeto form Indone.tjointly /ith the #ederation of Indian toc' E.changes+/ould also boost ...it /ould certainly mar2 a beginning of a ne/ chapterin the historyof the Indiansecurities mar'et/hen the proposal isimplemented, ...

#romIndone.t( $ boon for small cap stoc2s ) 'elated /eb pagessify,comGfinanceGe9uityGfullstory,phpBidF6==7;:

67,

77: May 6+ 77: ) ?OM?$+ India@ India3s stoc' mar'ettoo2 thebiggest plunge in its 6L)year historyMonday as investors panic2ed overho/ communist parties /ould influence the policy of the incomingcoalition government of Sonia 5andhi, toc' mar'etregulators halted

trading t/ice during the day and ...#romIndia/s stoc' mar'etplunges )'elated /eb pages///,usatoday,comGmoneyGmar2etsG/orldG77:)7> ,,,

6,

77> $pr 6K+ 77> ) Dhile bulls and bears may be the bu00/ords on the stoc'mar'et*or should /e say+ 0oo-+ these t/o are not the only speciesrampaging around, ...In the historyof Indian stoc'mar2ets+ bulls havenever had it so good, The Street3s least favorite animal is the bear, ...

#romDant to investB no/ your 0oology firstV )'elated /eb pages///,rediff,comGmoneyG77>GaprG6Kguest,htm

6:,

77; May =+ 77; ) $ longer dra/n)out fall /ould have appeared as a bearphase and softened investor interest in /hat remains a very e.citinggro/th mar'et, ast Thursday+ the Sense.shed K;,=K points+ theprevious biggest fall in the historyof Indian stoc'mar2ets /hile it lost
http://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2001,tlh:2001&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=4&ct=timeline-datehttp://www.business-standard.com/common/storypage.php?autono=103450&leftnm=2&subLeft=0&chkFlg=http://www.google.co.in/search?hl=en&tbo=1&q=2001+cheese+haw+hem+maze+scurry+sniff&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=4&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2003,tlh:2003&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=5&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=indonext&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=1http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=indonext&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=1http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=federation%20of%20indian%20stock%20exchanges&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=2http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=federation%20of%20indian%20stock%20exchanges&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=2http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=federation%20of%20indian%20stock%20exchanges&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=2http://sify.com/finance/equity/fullstory.php?id=13306472http://sify.com/finance/equity/fullstory.php?id=13306472http://www.google.co.in/search?hl=en&tbo=1&q=2003+exchange+exchanges+india+stock+indonext+mumbai&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2004,tlh:2004&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=6&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=sonia%20gandhi&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=6&ct=timeline-snippet&cd=1http://www.usatoday.com/money/markets/world/2004-05-17-india-stocks_x.htmhttp://www.usatoday.com/money/markets/world/2004-05-17-india-stocks_x.htmhttp://www.usatoday.com/money/markets/world/2004-05-17-india-stocks_x.htmhttp://www.google.co.in/search?hl=en&tbo=1&q=2004+congress+gandhi+india+party+sonia&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=6&ct=timeline-relatedhttp://www.google.co.in/search?hl=en&tbo=1&q=2004+congress+gandhi+india+party+sonia&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=6&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2005,tlh:2005&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=7&ct=timeline-datehttp://www.rediff.com/money/2005/apr/18guest.htmhttp://www.google.co.in/search?hl=en&tbo=1&q=2005+exchange+market+stock+street&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=7&ct=timeline-relatedhttp://www.google.co.in/search?hl=en&tbo=1&q=2005+exchange+market+stock+street&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=7&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2006,tlh:2006&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=8&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=sensex&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=8&ct=timeline-snippet&cd=1http://void%280%29/http://void%280%29/http://void%280%29/http://void%280%29/http://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2001,tlh:2001&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=4&ct=timeline-datehttp://www.business-standard.com/common/storypage.php?autono=103450&leftnm=2&subLeft=0&chkFlg=http://www.google.co.in/search?hl=en&tbo=1&q=2001+cheese+haw+hem+maze+scurry+sniff&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=4&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2003,tlh:2003&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=5&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=indonext&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=1http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=federation%20of%20indian%20stock%20exchanges&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-snippet&cd=2http://sify.com/finance/equity/fullstory.php?id=13306472http://www.google.co.in/search?hl=en&tbo=1&q=2003+exchange+exchanges+india+stock+indonext+mumbai&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=5&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2004,tlh:2004&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=6&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=sonia%20gandhi&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=6&ct=timeline-snippet&cd=1http://www.usatoday.com/money/markets/world/2004-05-17-india-stocks_x.htmhttp://www.google.co.in/search?hl=en&tbo=1&q=2004+congress+gandhi+india+party+sonia&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=6&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2005,tlh:2005&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=7&ct=timeline-datehttp://www.rediff.com/money/2005/apr/18guest.htmhttp://www.google.co.in/search?hl=en&tbo=1&q=2005+exchange+market+stock+street&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=7&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2006,tlh:2006&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=8&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=sensex&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=8&ct=timeline-snippet&cd=1


19/78

KK,=; points intraday, ...

#rom?iggest crash in stoc' mar'et ) 'elated /eb pages///,hindu,comG77;G7>G=Gstories ,,,

6;,

77K un =7+ 77K ) The /orst ; months in the historyof Indian toc'(ar'et1 by$rum Prabhudesai/as published on 0une 43th1 233+and islisted in India+ stoc' mar'et, #ollo/ comments via the 'SS #eed Q eavea comment Q Trac2bac2 &' Tags( + benchmar2+ ?SE+ #II+ foreign ...

Sho/ more

,,,

In India there are mainly stoc2 e.change /here the stoc2s are traded namely?SE*?ombay Stoc2 E.change-and NSE*National Stoc2 E.change-$part from these e.change there are = other e.change+they are on regional levels,In NSE there are around>777 stoc2s are traded and in ?SE =777 stoc2s are traded,?ut the NI#T inde. is >7 andSENSE% is =7 stoc2s are representing,in these inde. the top performing companies andsector stoc2s are present,Indian investors had seen the &p3s and "o/n3s of the mar2et,67 biggest falls in the Indian stoc2 mar2et history(

0an 2*1 233+( The Sense. sa/ its highest ever loss of 6+:7K points at the end of thesession on Monday, The Sense. recovered to close at 6+;7>,:7 after it tumbled to theday3s lo/ of 6;+L;=,L;+ on high volatility as investors panic2ed follo/ing /ea2 globalcues amid fears of the &S recession,

0an 221 233+( The Sense. sa/ its biggest intra)day fall on Tuesday /hen it hit a lo/ of6>+==+ do/n += points, Ao/ever+ it recovered losses and closed at a loss of K>points at 6;+=7, The Nifty closed at :+KLL at a loss of =67 points, Trading /as suspendedfor one hour at the ?ombay Stoc2 E.change after the benchmar2 Sense. crashed to a lo/of 6>+>;,=7 /ithin minutes of opening+ crossing the circuit limit of 67 per cent,
http://www.hindu.com/2006/05/23/stories/2006052315750100.htmhttp://www.hindu.com/2006/05/23/stories/2006052315750100.htmhttp://www.hindu.com/2006/05/23/stories/2006052315750100.htmhttp://www.google.co.in/search?hl=en&tbo=1&q=2006+india+market+sensex+stock+investors&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=8&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2008,tlh:2008&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=9&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=arun%20prabhudesai&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=9&ct=timeline-snippet&cd=1http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=arun%20prabhudesai&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=9&ct=timeline-snippet&cd=1http://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=arun%20prabhudesai&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=9&ct=timeline-snippet&cd=1http://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&tbs=tl:1&tbo=1&ei=35kWSs3GCYjxkAW_57nyDQ&sa=X&oi=timeline_result&ct=title&resnum=12#%23http://void%280%29/http://www.hindu.com/2006/05/23/stories/2006052315750100.htmhttp://www.google.co.in/search?hl=en&tbo=1&q=2006+india+market+sensex+stock+investors&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=8&ct=timeline-relatedhttp://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&sa=X&tbo=1&tbs=tl:1,tll:2008,tlh:2008&ei=LJwWSsC9O5GC6QPwpoD3DQ&oi=toolbelt_timeline_result&resnum=9&ct=timeline-datehttp://www.google.co.in/search?hl=en&tbo=1&tbs=tl:1&q=arun%20prabhudesai&ei=LJwWSsC9O5GC6QPwpoD3DQ&sa=X&oi=toolbelt_timeline_result&resnum=9&ct=timeline-snippet&cd=1http://www.google.co.in/search?q=history+of+indian+stock+market&hl=en&tbs=tl:1&tbo=1&ei=35kWSs3GCYjxkAW_57nyDQ&sa=X&oi=timeline_result&ct=title&resnum=12#%23


20/78

(ay *+1 2335( The Sense. registered a fall of K; points *;,; per cent- to close at66+=L6+ follo/ing heavy selling by #IIs+ retail investors and a /ea2ness in globalmar2ets, The Nifty crashed by :L;,>7 points *K,7+7K,K7 points,

Decem6er *,1 233,( $ heavy bout of selling in the late noon deals sa/ the inde. plunge

to a lo/ of 6L+6 ) do/n K>; points from the day3s open, The Sense. finally ended /itha huge loss of ;L points *=,K++ do/n 6points,

Octo6er *+1 233,( Profit)ta2ing in noon trades sa/ the inde. pare gains and slip intonegative 0one, The intensity of selling increased to/ards the closing bell+ and the inde.tumbled all the /ay to a lo/ of 6+6 ) do/n 6+:K points from the day3s high, TheSense. finally ended /ith a hefty loss of 6 points *=,K+=>6,

0anuary *+1 233+( &nabated selling in the last one hour of trade sa/ the inde. tumble toa lo/ of 6K+L=7 ) do/n K; points from the day3s high, The Sense. finally ended /ith ahefty loss of ;K points *=,>< *7K points- to >+7>,

Novem6er 2*1 233,( Mirroring /ea2ness in other $sian mar2ets+ the Sense. sa/relentless selling, The inde. tumbled to a lo/ of 6K+>6> ) do/n ;; points from theprevious close, The Sense. finally ended /ith a loss of ;K points at 6K+;7=, The Niftylost 7 points to close at >+>;6,

August *51 233,( The Sense.+ after languishing over >77 points lo/er for most of thetrading sesion+ slipped again to/ards the close to a lo/ of 6:+=:>, The inde. finallyended /ith a hefty loss of ;:= points at 6:+=>K,

April 321 233,( The Sense. opened /ith a huge negative gap of ;7 points at 6+K6follo/ing the 'eserve ?an2 of India decision to hi2e the cash reserve ratio and repo rate,&nabated selling+ mainly in auto and ban2ing stoc2s+ sa/ the inde. drift to lo/er levelsas the day progressed, The inde. tumbled to a lo/ of 6+:; before finally settling /ith ahefty loss of ;6 points *:,>,

August 3*1 233,7The Sense. opened /ith a negative gap of 7 points at 6>+=:: amid/ea2 trends in the global mar2et and slipped deeper into the red, &nabated selling across)the)board sa/ the inde. tumble to a lo/ of 6:+L66, The Sense. finally ended /ith a heftyloss of ;6> points at 6:+L=;,


21/78

C&''ENT SCEN$'IO(

Jun 09, 20088 The Indian E9uity (ar'ets remained su6dued throughout the

wee' with indices losing 6y nearly -: over the wee' ;0une *st wee'.

The wee' started with the important support levels of *5333?@,-3 getting

6reached. As mentioned in our previous e9uity report1 the Indian mar'ets saw

massive sell)off after this development. The indices reached near the ne>t

target support level of @-33. Though mar'ets have fallen sharply there are no

clear indication of 6ottoming out and further downside cannot 6e ruled out.

e feel the ne>t important support level is seen at *@,33?@2+3. But 6efore that

6ig investors li'e person of india origin and overseas citiCen of india can start

investing in small 9uantity in selective stoc's1 they have to really time the

mar'et really well1 and they need to diversify their investments 6etween

mutual funds and stoc's. The support for the wee' is seen near *-*33?@@,-while the resistance for the wee' is seen near *5*33?@+33. In high volatility this

6and can stretch further to *@33?@@33 and *5@33?@+-3.

e advise our clients to invest in indian stoc' mar'ets with caution and with a

long term view with a portfolio diversification view across various financial

products li'e7 stoc's1 mutual funds1 commodities and futures. oints. This is the

third 6iggest loss

iThursday1 (arch 231 233+

#urrent Indian toc' (ar'et cenario vs ! Recession.

Indian Stoc2 Mar2etincluding both NSE)National Stoc2 E.change and the ?SE)?ombayStoc2 E.change have certainly ta2en a tremendous beating in the past fe/ /ee2s, De are

sure most of us here 2ne/ that the correction in the trading curve /as round the corner/hich /ould be healthy+ and the mar2ets /ould bounce bac2 from 6K2 levels /ith the

help ofmutual fund investmentsU buying of Indian stoc2s again, Ao/ever theanticipation /ent /rong+ and the &S recession story along /ith global and Indian
http://nriinvestmentservices.blogspot.com/2008/03/current-indian-stock-market-scenario-vs.htmlhttp://nritradingonline.nriinvestindia.com/http://indianmutualfunds.nriinvestindia.com/http://indianmutualfunds.nriinvestindia.com/http://indianmutualfunds.nriinvestindia.com/http://www.nriinvestindia.com/thanks.htmlhttp://nriinvestmentservices.blogspot.com/2008/03/current-indian-stock-market-scenario-vs.htmlhttp://nritradingonline.nriinvestindia.com/http://indianmutualfunds.nriinvestindia.com/http://www.nriinvestindia.com/thanks.html


22/78

commodityprices have added fuel to the global e9uity mar2et turmoil on a /hole,

"o /e have to /orry our Indian investments in stoc2s U mutual fundsBDhat /ould happen ne.t in thestoc2 mar2ets of IndiaB

Dhether investors should ma2e more investments in IndiaB

ell/e have to reali0e a fact that /e all are NO astrologers here+ rather /e are investorsta2ing calculated ris2s+ and /e should ta2e into account the probability of us being /rongas /ell, Things have gone certainly /orse in the Indian tradingconte.t+ but /e at

NriInvestIndia,comhope that in the coming months the same /ouldn3t be the case,

e at NriInvestIndia.comwould li'e to 6ring a couple of things into picture7

6, #ederal 'eserve *&S head ban2ing institution+ li2e '?I in India- is loo2ing for/ard toma2e more rate cuts *interest rate cuts- in the coming future to ease out the credit crunchthat has evo2ed since this subprime crisis, Its effect /ould ta2e ;)K months to reflect inthe global economies including mar2ets of India( "erivatives Trading Mar2et+ #utures

TradingMar2et+ and Commodities Trading Mar2et of India, This reflection in trading andinvestment sentiment could ta2e some time to happen+ but it /ould be definitely/itnessed /ith an increment in local business+ #II investment in India andN'I

Investment Services in India,&ood news

, Indian SharesGStoc2s mar2etare not performing great in the gone /ee2s+ butinstitutions still have abundant money on the table to invest4 but /ith the coming rate

cuts+ the debt mar2et /ould not loo2 any good to them either *in the &S-,o would they put money into commodities ;mainly7 gold1 oil1 silver


23/78

institutions are loo2ing for some good indicators+ and /hen this happens /e /ould becra/ling bac2 on the curve, &ood news

>, De all believe that the mar2ets are majorly falling due to the &S /orries that arecoming in and not because of the performances e.hibited by the Indian corporates,

Earning results of the company are e.pected to be out in $pril */hen companies declaretheir 9uarterlyGannual performances to the public-, Everyone out here e.pects thesenumbers to be good+ /hich could thus decide the turn of the mar2et sentiments, &ood

News

Important7 Our idea is not to put a very rosy picture in front of you+ but to ease out sometension by highlighting certain macro U micro economic points that are still in our

favour, De 2no/ investors not only /ith us+ but also /ith other bro2ers are loosing theirportfolio strength in terms of capital and valuations, Ao/ever+ 2eeping all the above

notes in mind along /ith strongGstable Indian fundamentals that are still pretty attractive/e advise our clients to stay strong and very importantly increase their time frame from

years to a minimum of 4)@ years now, This is especially for clients /ho have investedheavily in mutual funds+ as mutual funds are supposed to be long term financialinstruments and not short)term trading products, To conclude /e /ould advise clients tostay calm and hold onto the positions /ith a long term perspective *4)@ years now- and

lets ta2e this opportunity to build our portfolios even stronger by adding goodpositions*especially in mining+ commodity+ energy U infrastructure sectors- at lo/ers

prices as /ell,

I am impressed by your rational analysis of the current global scenario.

) 'am2umar+ a > Minute Drapup Subscriber, Sign &p No/,,, it3s #reeV

Today3s Mar2etClic2 on a company name to vie/ itsdetailed stoc2 9uote

$rchivesQMar2etMonitor

Q'SS

BE)43 *41+@ ;)*>:,=7 =,767 :,7K,;7 )=,7: )6,=7 ):,767 ),;;+7:7 billion in77 *in nominal terms-, This implies that even after accounting for inflation+ there /illbe more than a five)fold increase inIndias economy bet/een 77 and 77+ /hich /ill ma2e India the fourth largesteconomy in the /orld after the &nitedStates+ China+ and apan,"uring the last : months+ the Indian stoc2 mar2et+ and in particular the t/o indices@Sense. *Sensitive Inde.- and?SE)677+ have gro/n by appro.imately L7


25/78

attributed partly to the gro/th of the Indian economy and partly to the enormous inflo/of foreign currency in the Indian stoc2mar2et+ particularly by #oreign Institutional Investors *#IIs-, 5iven this bac2drop+Evalueserve+ a global research U analyticsfirm+ recently conducted a study regarding the rise of the Indian stoc2 mar2et, This study

/as 9uite challenging for us becausethe Indian mar2et is rather uni9ue /ith almost no parallels, Nevertheless+ /e compared itto other booms and busts inemerging mar2ets and also used bac2testing and related analysis, Our study resulted inthe follo/ing three scenarios(Ma2ing stoc2 mar2et predictions is al/ays a very ris2y business, Ao/ever+ comparingand contrasting arguments by bullsand bears+ /e have arrived at three li2ely scenarios+ /hich are briefly discussed belo/(#irst Scenario J Stoc2 Mar2et CrashThis scenario is li2ely to occur if+ because of a sudden crisis of confidence *e,g,+ becauseof a sudden collapse of the current

coalition government in India-+ there /as a flight of #II money out of the country,$ccording to Evalueserves models andanalysis+ if &SW 6 billion of #II money /ere to leave /ithin a 9uarter+ the stoc2 mar2et/ould drop by appro.imately =77 getting breached, $smentioned in our previous e9uity report+ the Indian mar2ets sa/ massive sell)off afterthis development, The indices reached near the ne.t target support level of :>77, Thoughmar2ets have fallen sharply there are no clear indication of bottoming out and furtherdo/nside cannot be ruled out, De feel the ne.t important support level is seen at6:77G:K7, ?ut before that big investors li2e person of India origin and overseas citi0enof India can start investing in small 9uantity in selective stoc2s+ they have to really timethe mar2et really /ell+ and they need to diversify their investments bet/een mutual fundsand stoc2s, The support for the /ee2 is seen near 6>677G::> /hile the resistance for the/ee2 is seen near 6;677G:K77, In high volatility this band can stretch further to6:L77G::77 and 6;:77G:K>7,

De advise our clients to invest in Indian stoc2 mar2ets /ith caution and /ith a long termvie/ /ith a portfolio diversification vie/ across various financial products li2e( stoc2s+mutual funds+ commodities and futures,

Source( http(GG///,nriinvestindia,comGNriInvestIndia,com is an emerging N'I+ PIO and OCI focused Investment ?ro2er UMutual fund "istributor Company from India+ offering N'I Services to do Investment inIndia, Our goal is to guide Non 'esident Indians to Trade in Indian Stoc2 Mar2et UInvest in top Mutual #unds of India,

$rticle Source( http(GG///,articlesbase,comGinvesting)articlesGcurrent)indian)stoc2)mar2et)scenario)for)nris)in)nse)bse)trading)::=77,html

$bout the $uthor(Myself $ditya Sharma *Sr,Investment $dvisor-+ and I /or2 for a N'I Investment


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company * ///,NriInvestIndia,com - that helps N'Is+ PIOs and OCIs to invest inIndia3s top mutual funds,

Aere at NriInvestIndia,com /e focus in delivering value service to our N'I clients /henit comes to their investments in the Indian stoc2 mar2ets J NSE U ?SE, Our e9uity U

mutual fund investment advising is structured to suit the investment objectives of the nonresident Indian investor in a long run *including PIOs and OCIs-,

De at NriInvestIndia,com advise our clients to invest across various financial productsvi0( Mutual funds+ '?I bonds+ Portfolio Management Services for N'Is+ Stoc2s UShares+ Trading $ccount+ "mat $ccount+ SIPs J systematic investment plans+ etc+ basedon your ris2)return profile,

Present Scenario

The current conditions of Indian mar2ets have drastically improved, There is absolutetransparency and instant transactions, $ll Indian Stoc2 mar2ets are no/ computeri0edand Internet Trading has become a common phenomenon, Indian stoc2 mar2ets have alsodeveloped a dynamic nature and can change from a bullish temperament to a bearishslide, $ny small bit of information or even a rumour from any part of the country canaffect the mar2et and is a fairly accurate indicator of the prevalent atmosphere in theregion or country, People from across the country and globe get in touch /ith minute/ise readings on the stoc2 mar2et and gain a lot of trading aptitude after daily seeing?SE Stoc2 5ainers *http(GG///,paisa/aisa,comGstoc2sGtop)gainers,asp.- or ?SE top

losers *http(GG///,paisa/aisa,comGstoc2sGtop)loosers,asp.- list /hich does a /orld ofgood to their investment portfolio,

Dhat is Indian Stoc2 Mar2et B

Indian Stoc2 Mar2et contains more then 7 Stoc2 E.changes+ some of /hich are popularnationally as /ell as regionally, The first stoc2 mar2et*http(GG///,paisa/aisa,comGstoc2sG- started in the country /as the ?ombay Stoc2E.change *?SE-, Its the oldest stoc2 mar2et in $sia and /as established as Zthe NativeShare and Stoc2 ?ro2er3s $ssociation[ in the year 6K>,It has around >777 listings and avolume of more than &SW 6 Trillion, The other most popular Stoc2 E.change is theNational Stoc2 E.change *NSE-, Its also the largest Stoc2 E.change in the country andthird in the /orld, These t/o e.changes constitute a major part of the Indian CapitalMar2et,
http://www.paisawaisa.com/stocks/top-gainers.aspxhttp://www.paisawaisa.com/stocks/top-loosers.aspxhttp://www.paisawaisa.com/stocks/http://www.paisawaisa.com/stocks/top-gainers.aspxhttp://www.paisawaisa.com/stocks/top-loosers.aspxhttp://www.paisawaisa.com/stocks/


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The Indian Stoc2 Mar2et is a collection of various regional and national level stoc2e.changes in India, It is platform for the masses of the country to invest their savings andalso as a source of funds for various organi0ations and institutions that feature in businesscategory,

Indian stoc' mar'et

In order to appreciate the emerging role of stoc2 e.changes in India it is apt to start /iththe historical perspective and a comparative picture /ith other stoc2 e.changes in the/orld, The stoc2 e.change is an association of member bro2ers for the purpose offacilitating and regulating trading in securities, It is thus+ a self regulating organi0ation+be it a company or association, $s the securities trading developed in India since 6K>+ it/as a private enterprise of an unregulated nature, The first attempt at regulation /as bySecurities Contracts Control $ct of ?ombay 6L>+ passed by the erst/hile ?ombayPresidency, There /as resistance from the stoc2 e.changes for government control evenat that time, These e.changes had a mushroom gro/th during the /ar time of forties asprivate clubs, There /ere as many as 6 e.changes in 6L:>, $t that time securitiestrading /ere a state subject but /ith the adoption of Indian Constitution in 6L>6+ itbecame a Central subject, It too2 nearly si. years after that to pass the necessary centrallegislation in 6L>; in the form of Securities Contracts *'egulations- $ct,

In the socialistic patter of society adopted by the government for planneddevelopment of the economy in 6L>6+ the role of stoc2 e.change received no significantattention and they /ere left /ith the minimum government regulation under the above$ct and the rules made there under, The traditional emphasis /as on self regulation bythe stoc2 e.changes themselves /ith the result that the government had rarely used thefull range of po/ers besto/ed on them e.cept for one or t/o occasions in /ar time, Sothe history of the gro/th of stoc' mar'etmovement in India /as characteri0ed by threemain features,

6, 'esistance to government control and regulation,, 5ro/th of stoc2 e.changes as private associations /ith a modicum of governmentinterference,

=, Emphasis on self regulation and semi)autonomous nature of these privateorgani0ations, The government and bro2ing community /or2ed in close coordination andoccasions resulting in friction fe/ and far bet/een, The volume of trade and funds raisedfrom the capital mar2et /ere small and the investor interest /as at ebb,

%atest $hase in toc' (ar'ets7It /as only since 6LK> /ith the entry of ban2s and theirsubsidiaries into the stoc2 and capital mar2s+ facilitated by the passage of the ?an2inga/s $mendment $ct 6LK= that the idea of better services in these mar2ets arose, TheSeventh #ive ear Plan 6LK>)L7 contained the first elements of a ne/ economic policyleading to the opening up of the economy+ industrial liberali0ation and a gro/ing role for


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the private sector, These changes necessitated greater attention to the gro/th of capitalmar2et and protection of investors as public interest in these mar2ets began to gro/,

E>isting Regulation7

Indian stoc' mar'etactivity is regulated by a variety of la/s as diverse as Companies$ct of 6L>;+ Indian Contracts $ct+ Stamp $ct+ Negotiable Instruments $ct and SecuritiesContract *'egulation- $ct etc, The first re9uirement of /ell 2nit reforms is to have aconsolidated la/ incorporating all the provisions to regulate investment activity asfinancial Services $ct of 6LK; in &nited ingdom, Management Perspectives( Thegovernment formed The Securities and E.change ?oard of India $ct in 6LL, The SE?Iis the statutory body that controls and regulates the functioning of stoc2 e.changes+bro2ers+ intermediaries+ and portfolio managers investment advisors and obliges severalrigid measures to protect the interest of investors, The era of management by lapses+mismanagement has ostensibly ended and a ne/ concept of management by rules hasstarted, !arious "epartments have been formed /hich perform the functions of listing+

regulation of trading+ provision of settlement and clearance etc basically 2eeping theservices to be rendered to the members and the public in mind, The decisions aresometimes ta2en by the committees appointed by the governing board for specificpurposes, The Operations "epartment observe that daily trading ta2es place+ collect9uotation and ma2e them available to members and public by the evening of every day,The Computer "epartment collects and compiles the corporate data 9uotations of scriptsand turnover of trade+ member)/ise and script)/ise for better investment decisionma2ing, The E"P /or2 of building up the information base on companies for membersand investors to ma2e their investment decisions,

Future Role of E>changes7

The future role of stoc2 e.changes /ill be radically difference from the present+ as theirdevelopmental role /ill be increasing much faster than their regulatory role, Not only thestoc2 e.changes but all the players in the mar2et namely companies+ bro2ers+intermediaries and public /ould have to play a greater role in the functioning of stoc'mar'et, $long /ith increasing self regulation and a stricter enforcement of a code ofconduct on the members+ the stoc2 e.changes /ill have to emerge as public serviceinstitutions catering to increasing demands of investors in the country, isted companieshave also a role in this process to collaborate and e.tend all help for more efficientfunctioning of e.change, To improve the 9uality and efficiency of service+ trained andprofessional category of intermediaries and bro2ers is also necessary, Education+ trainingand research /ould be the hall mar2 of future stoc2 bro2ers and other intermediaries,

#ommunication Technology7

Efficient mar2s re9uire the flo/ of 9uic2 and correct information+ an efficientcommunication system+ a system of fair and just practices and procedures accompaniedby a strict enforcement of a code of conduct on all, $ national mar2et system+ if it is to be


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developed+ /ould vitally depend on the efficient satellite telecommunication system inIndia and a proper lin2age of all stoc2 e.changes,

Information Technology7

Investment to increase the level of e.plicit coordination /ith outside agents havegenerally resulted in increased ris2 to the firm4 firms have traditionally avoided thisincreased ris2 by becoming vertically integrated or by under investing in coordination,Information Technology has the ability to lo/er coordination cost /ithout increasing theassociated transactions ris2+ leading to more outsourcing and less vertically integratedfirms, o/er association specificity of Information Technology investments and a bettermonitoring capability mean that firms can more safely spend in information technology

for inter firm coordination than in customary investments for open coordination such asco)located facilities or speciali0ed human resources4 firms are therefore more li2ely tocoordinate /ith suppliers /ithout re9uiring o/nership to reduce their ris2, This enablesthem to benefit from production economies of large speciali0ed suppliers, Moreover+rapid reduction in the cost of information technology and reduction in the transactionsris2 of e.plicit coordination ma2es possible substantially more use of e.plicitcoordination /ith suppliers,

#onclusion7

$lthough the present stoc' mar'etscenario appears dismal+ it /as due to the transitional

phase+ it /as going through, The policy reforms /ere adhoc and unplanned+ but the trendappears irreversible, The gro/ing strong investor base+ entry of middle class as investorsand public a/areness of the stoc2 and capital mar2ets have made it imperative for thereforms to continue, The offshoot of the economic and financial reforms is the greaterresponsibility thrust on the companies to improve their competitive efficiency andproductivity, The greater role given to the private sector and increasing dependence onthe capital mar2et for both private and public sectors /ould force the companies to provetheir ability through performance and stoc2 e.changes to be better /indo/s andtransparent media of measuring the corporate and industrial performance, The regulatoryframe/or2 of Securities and E.change ?oard of India is increasing and spreading itstentacles in 9uantitative terms instead of confining to 9ualitative aspects+ as in foreign

mar2ets, The ultimate objective of all regulations is maintenance of standards and 9ualityand if that is to be achieved+ deregulation can succeed and all the moves of thegovernment and stoc2 e.changes should be in that direction,

FOR IMMEDIAE RE!EA"E

#R!og $#ress Release%J&ul '() *''+J Ever since mar2ets slid precipitously in anuaryand continued on the do/n/ard turn+ one has been /ondering if the mar2et has fallen
http://www.prlog.org/http://www.prlog.org/http://www.prlog.org/


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enough to see a sustainable trend reversal, $midst around +777 point fall in Sense. fromanuary pea2 till date+ there have been as many as four 6+777)point rallies+ including a 7percent rise from mid)March lo/ to end)$pril high,Thus+ there have been a fe/ bottoms so to spea2+ and bottom hunting so far has been arather unprofitable enterprise /ith many false starts, Continuing the ris2y pursuit even

then+ there are multiple /ays to approach this 9uestion of bottom,#or most of us though+ given the odds of getting pea2s and troughs right+ the best /ay+ ofcourse+ is to evolve an approach that does not effectively depend on searching for topsand bottoms, #rom a fundamental perspective+ trajectory in corporate earnings is the mostsignificant variable that /ill decide the long)term direction of the mar2et,Corporate earnings in India have gro/n at almost t/ice the pace of 5"P in the last fiveyears+ and the mar2et3s e.pectations are that earnings gro/th trend is intact4 only thee.tent of gro/th in the medium)term is made uncertain by recent macro)economicdevelopments, The most important such development is the change in short)term inflatione.pectations in the recent past+ and /hich has resulted in a change in the direction ofinterest rate movement,

To /hat levels inflation could rise and /hen it might start sho/ing declining trend is insome /ay lin2ed to trend in prices of global commodities+ chiefly oil, $s things standtoday+ there are reasons to believe that inflation is li2ely to cool do/n to/ards the last9uarter and may ta2e a little longer to come /ithin the policyma2ers3 tolerance band,De believe that for clarity to emerge on the impact of the macro)economic challenges onaggregate corporate earnings it /ill ta2e another =); months, Some clarity /ill emerge inthe upcoming first 9uarter results+ but for more /e may have to /ait till second 9uarterBsearnings reports to come,Dhile the macroeconomic ne/s flo/ could remain mi.ed in the near future+ one need not/ait for the last of the bad ne/s to come out of the bag+ as in any case one can never becompletely sure+ a priori+ to ma2e an investment,The most important lesson from history one can learn about e9uities is that one shouldnot base ones investment decisions based on prevailing sentiment+ feel good factor orlac2 of it, There is ample evidence in history to sho/ that mar2et bottoms out muchbefore bad ne/s ends+ as mar2ets discount future ne/s into current prices or valuations,Of the many amongst us /ho /ish to time the bottom+ only a fe/ /ill succeed and evenfe/er on a consistent basis+ /hile almost all of us need to save for future and on a regularbasis,So instead of trying to time the bottom+ a better approach /ould be to systematicallyinvest in a combination of assets that gives us the best chance of meeting our financialgoals+ /hich must also include outperforming long)term inflation to protect real value ofsavings as one of the 2ey objectives, #or the reasons discussed above+ this is clearly anopportune time to be buying e9uities for the long)term,

#R!og $#ress Release%J&ul '() *''+J Ever since mar2ets slid precipitously in anuaryand continued on the do/n/ard turn+ one has been /ondering if the mar2et has fallenenough to see a sustainable trend reversal, $midst around +777 point fall in Sense. fromanuary pea2 till date+ there have been as many as four 6+777)point rallies+ including a 7percent rise from mid)March lo/ to end)$pril high,
http://www.prlog.org/http://www.prlog.org/http://www.prlog.org/


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Thus+ there have been a fe/ bottoms so to spea2+ and bottom hunting so far has been arather unprofitable enterprise /ith many false starts, Continuing the ris2y pursuit eventhen+ there are multiple /ays to approach this 9uestion of bottom,#or most of us though+ given the odds of getting pea2s and troughs right+ the best /ay+ ofcourse+ is to evolve an approach that does not effectively depend on searching for tops

and bottoms, #rom a fundamental perspective+ trajectory in corporate earnings is the mostsignificant variable that /ill decide the long)term direction of the mar2et,Corporate earnings in India have gro/n at almost t/ice the pace of 5"P in the last fiveyears+ and the mar2et3s e.pectations are that earnings gro/th trend is intact4 only thee.tent of gro/th in the medium)term is made uncertain by recent macro)economicdevelopments, The most important such development is the change in short)term inflatione.pectations in the recent past+ and /hich has resulted in a change in the direction ofinterest rate movement,To /hat levels inflation could rise and /hen it might start sho/ing declining trend is insome /ay lin2ed to trend in prices of global commodities+ chiefly oil, $s things standtoday+ there are reasons to believe that inflation is li2ely to cool do/n to/ards the last

9uarter and may ta2e a little longer to come /ithin the policyma2ers3 tolerance band,De believe that for clarity to emerge on the impact of the macro)economic challenges onaggregate corporate earnings it /ill ta2e another =); months, Some clarity /ill emerge inthe upcoming first 9uarter results+ but for more /e may have to /ait till second 9uarterBsearnings reports to come,Dhile the macroeconomic ne/s flo/ could remain mi.ed in the near future+ one need not/ait for the last of the bad ne/s to come out of the bag+ as in any case one can never becompletely sure+ a priori+ to ma2e an investment,The most important lesson from history one can learn about e9uities is that one shouldnot base ones investment decisions based on prevailing sentiment+ feel good factor orlac2 of it, There is ample evidence in history to sho/ that mar2et bottoms out muchbefore bad ne/s ends+ as mar2ets discount future ne/s into current prices or valuations,Of the many amongst us /ho /ish to time the bottom+ only a fe/ /ill succeed and evenfe/er on a consistent basis+ /hile almost all of us need to save for future and on a regularbasis,So instead of trying to time the bottom+ a better approach /ould be to systematicallyinvest in a combination of assets that gives us the best chance of meeting our financialgoals+ /hich must also include outperforming long)term inflation to protect real value ofsavings as one of the 2ey objectives, #or the reasons discussed above+ this is clearly anopportune time to be buying e9uities for the long)term,


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COMP$N P'O#IE


35/78

#O($AN" $ROFI%E

Cholamandalam "?S is a pan)Indian+ composite financial services provider, It comprisesthe parent company+ Cholamandalam "?S #inance imited *C"#- and its subsidiaries,

The shares of C"# are listed in the Madras *MSE-+ ?ombay *?SE- and National *NSE-

Stoc2 E.changes,

#HO%A(ANDA%A( DB FINAN#IA% ERGI#E &RO!$

Cholamandalam "?S is a pan)Indian+ composite financial services provider, It

comprises the parent company+ Cholamandalam "?S #inance imited *C"#-+ and its

subsidiaries and associates "?S Cholamandalam "istribution imited+ "?SCholamandalam Securities imited, The shares of C"# are listed in the Madras

*MSE-+ Mumbai *?SE- and National *NSE- Stoc2 E.changes,

#holamandalam DB Finance %imited ;#DF%+ post the joint

venture partnership bet/een the Murugappa 5roup and "?S ?an2 imited+ Singapore+

the Company /as renamed as Cholamandalam "?S #inance imited *C"#-, The

Company that commenced business as an e9uipment financing company has no/

emerged as a comprehensive financial services solution provider that offers vehicle

finance+ business finance+ home e9uity loans+ mutual funds+ stoc2 bro2ing and

distribution of financial products to its customers, The Company operates from over 6:7

branches across India /ith an asset under management of about 's,K>:; Crores, The


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subsidiaries of Cholamandalam "?S include "?S Cholamandalam Securities imited

*"Csec- and "?S Cholamandalam "istribution imited *"C"-,

DB #holamandalam Distri6ution %imited ;D#D%+L7 crores *&S" =,6: billion- Murugappa 5roup

is one of India3s leading business conglomerates, Mar2et leaders in diverse areas of

business including Engineering+ $brasives+ #inance+ 5eneral Insurance+ Cycles+ Sugar+

#arm Inputs+ #ertili0ers+ Plantations+ ?io)products and Nutraceuticals+ its L companies

have manufacturing facilities spread across 6= states in India, The organi0ation fosters

an environment of professionalism and has a /or2force of over =+777 employees, The

5roup has forged strong joint venture alliances /ith leading international companies

li2e "?S ?an2+ Mitsui Sumitomo+ #os2or+ Cargill and 5roupe Chimi9ue Tunisien hasconsolidated its status as one of the fastest gro/ing diversified business houses in India,

DB Ban'

"?S ?an2 td,+ Singapore is a 677< subsidiary of "?S 5roup Aoldings td, *"?S-,
http://www.murugappa.com/http://www.dbs.com/http://www.murugappa.com/http://www.dbs.com/


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"?S is one of the largest financial services groups in $sia /ith operations in 6;

mar2ets, Aead9uartered in Singapore+ "?S3 1$$)1 and 1$a61 credit ratings are among

the highest in the $sia)Pacific region, $s a ban2 that specialises in $sia+ "?S leverages

its deep understanding of the region+ local culture and insights to serve and build lasting

relationships /ith its clients, "?S provides the full range of services in corporate+ SME+

consumer and /holesale ban2ing activities across $sia and the Middle East, The ban2 is

committed to

e.panding its pan) $sia franchise by leveraging its gro/ing presence in mainland

China+ Aong ong and Tai/an to intermediate the increasing trade and investment

flo/s bet/een these mar2ets, i2e/ise+ "?S is focused on e.tending its end)to)end

services to facilitate capital /ithin fast)gro/ing countries in Indonesia and India, "?S

ac2no/ledges the passion+ commitment and can)do spirit in each of its 6>+777 staff+

representing over =7 nationalities, #or more information+ please visit ///,dbs,com,

A al' Down History

O/ing to Murugappa 5roup3s pre)eminent position in the industry and the consumer

e9uity that it had painsta2ingly built+ the hori0on offered opportunities in the financial

sector, To harness this+ the group set up Cholamandalam "?S #inance imited *C"#-

incorporated as Cholamandalam Investment and #inance Company td *CI#C- in

6LK /ith the primary objective of offering asset finance through leasing and hire

purchase to corporates and then to retail customers, It has since evolved itself into a

large+ composite financial services organi0ation, Today+ Cholamandalam "?S offers

stoc2 bro2ing+ mutual fund and investment advisory services through its subsidiaries,

Ever since its inception and all through its gro/th+ the company has 2ept a clear sight ofits values, The basic tenet of these values is a strict adherence to ethics and a

responsibility to all those /ho come /ithin its corporate ambit ) customers+

shareholders+ employees and society,


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Is a visiting faculty at IIM $hmedabad and a fe/ other management institutions,

]

Mr, ! P Mahendra

Non)e.ecutive "irectorIs a graduate in engineering from the &niversity College of Engineering+ ?angalore,Is the Managing "irector of !ST Tillers Tractors imited+ ?angalore and is also on the

boards of several other companies,Aas participated in a number of management programmes in apan,Is a 2een sportsman and is a member of several philanthropic institutions,

Mr, ' ! anoriaNon)e.ecutive "irector

Is an M?$ *Aons- from IM"+ S/it0erland,Is the Chairman and Managing "irector of anoria Chemicals U Industries td, and is

also on the boards of various other companies,#ormer !ice President of #ederation of Indian Chamber of Commerce *#ICCI-+ and has

headed several joint)business councils,Is the managing committee member of PA" Chamber of Commerce U Industry,

Mr, N SrinivasanNon)e.ecutive "irector

Is a member of the Institute of Chartered $ccountants of India and the Institute of

Company Secretaries of India,Aas over > years of e.perience in the areas of Corporate #inance+ egal+ Projects and

5eneral Management,Das the President and Chief operating officer of Thiru $rooran Sugars td,Das the Chief #inancial officer of Carborundum &niversal td, Ae is a director on the

board of Tube Investments of India td, and certain other Murugappa 5roup

companies,


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ITE'$T&'E S&'!E


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INTROD!#TION TO $ORTFO%IO (ANA&E(ENT

$ORTFO%IO

$ 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 vie/ed in the portfolio conte.t, Thus it seems logical that the e.pected return

of each of the security contained in the portfolio,

Portfolio analysis considers the determination of future ris2 and return in holding various

blends of the individual securities, Portfolio e.pected return is a /eighted average of the

e.pected return of individual securities but portfolio variances+ inshort contrast+ can be

something less then a /eighted average of security variance, $s a result an investor can

sometimes reduce portfolio ris2 by adding security /ith greater individual ris2 than any

other security in the portfolio, This is because ris2 depends greatly on the co)variance

among returns of individual security, Portfolio /hich is combination of securities may or

may not ta2e an aggregate characteristic of their part,

Since portfolios e.pected return is a /eighted average of the e.pected return of its

securities+ the contribution of each security to the portfolios e.pected returns depends onits e.pected returns and its proportionate share of the initial portfolios mar2et value, It

follo/s that an investor /ho simply /ants the greatest possible e.pected return should

hold one security4 the one /hich is considered to have a greatest+ e.pected return, !ery

fe/ investors do this+ and very fe/ investments advisors /ould counsel such an e.treme

policy, Instead+ investors should diversify+ meaning that their portfolio should include

more than one security,


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OB0E#TIGE OF $ORTFO%IO (ANA&E(ENT

The objectives of investmentsGportfolio management can be classified as

follo/s

Basic o6ectives

The basic objectives of investmentGportfolio management are

To Ma.imi0e ield+ and

To Minimi0e ris2

econdary o6ectives

The follo/ing are the other ancillary objectives are

'egular return

Stable income

$ppreciation of capital

a- More li9uidity

b- Safety of investments+ and

c- Ta. benefits,


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Need for portfolio management

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

and securities, It is a dynamic and fle.ible concept and involves regular and systematic

analysis+ judgments and actions, The objective of this service is to help the un2no/n

investors /ith the e.pertise of professionals in investment portfolio management, It

involves construction of a of a portfolio bases upon the investors objectives+ constraints+

preferences for ris2 and return and ta. ability, The portfolio is revie/ed and adjusted

from time to time in tune /ith the mar2et conditions, The evaluation of portfolio is to be

done in terms of targets set for a ris2 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 /ith the principles

governing such allocations, The modern vie/ of investments is oriented more to/ards

the assembly of proper combinations of individual securities to form investment

portfolios, $ combination of individual securities to form investments portfolios, $combination of securities held together /ill give a beneficial result if they are grouped in

a manner to secure higher return after ta2ing into consideration the ris2 elements,

The modern theory is of the vie/ that by diversifications+ ris2 can be reduced, The

investor can ma2e diversification either by having a large number of shares of companies

in different region+ in different industries or those producing different types products

lines, Modern theory believes in the perspective of combination of securities under

constraints of ris2 and return,


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#oncept of Ris'

Investment in shares has its o/n ris2 or uncertainty+ /hich arises out of variability of

returns+ yields and uncertainty of appreciation or depreciation of shares prices+

loss of li9uidity etc, this ris2 over time+ is capital appreciation, This ris2 is

measured statistically by the degree of variance or standard deviation of

returns, Normally higher the ris2 that the investor ta2er higher is the return,

Diversification of Ris'7

The process of combining securities in a portfolio is 2no/n as diversification, The aim of

diversification is to reduce total ris2 /ithout sacrificing portfolio, The ris2 in a portfolio

can be reduced by a proper diversification into a number of strips, The efforts to spread

and minimi0es portfolio ris2 ta2es the form of diversification, Most investors prefer to

hold several assets rather than putting all their eggs into one bas2et /ith hope that if one

goes bad+ the other /ill provide some protection from the e.treme loss,

$ORTFO%IO E%E#TION

The determination and selection of a portfolio is a complicated affair as there is a

possibility of infinite number of combinations of various securities that can enter a

portfolio, The securities available to an investor can be combined in any proportion hence

any number of portfolios can be built, Each such portfolio can be described in terms of

return and ris2,

Portfolio construction refers to the allocation of funds among a variety of financial assetsopen for investment, The objectives of the theory is to elaborate the principle in /hich

the ris2 can be minimi0ed+ subject to desired level of return on the portfolio or ma.imi0ed

the return+ subject to constrain of tolerable level of ris2,


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The ris2 of a portfolio comprising of shares $ and ? van be e.pressed using variance as

the measures of ris2,_

Covariance of $? F % $_$ 8% ?_? 8 %$%?r$? _$_ ?

Cov,$? F the variance bet/een the rates of return on shares $ and ?+

Dhere+

r$? F Coefficient of correlation bet/een $ and ? shares

% $ F Proportion invested in shares $

%

? F proportion invested in shares ?

_$ F !ariance of the rate of return on share $,

_? F !ariance of the rate of return on share ?,

The term covariance e.plains the relationship bet/een the movements in the rates

of return from shares $ and ?4 it is derived from the follo/ing formula(

Cov,$? F r$? _$_ ?


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$ortfolio revision

Irrespective of ho/ /ell a portfolio is constructed+ it soon tends to change and hence

needs to be monitored and revised periodically, Portfolio once constructed undergoes

changes in the mar2et prices4 reassessment of companies+ the portfolio ris2 and the

proportion in each asset class /ill change to bring bac2 the portfolio to the targeted level

of beta or ris2 and duration, Overtime several things are li2ely to happen,

This usually involves t/o things(

6- $ortfolio re6alancing,

It involves revie/ing and revising the portfolio compositions, There are three basic

policies /ith respect to portfolio rebalancing,

?y and hold policy+

Constant asset mi.+ and

Portfolio insurance policy,

- $ortfolio upgrading,

Dhile portfolio rebalancing involves shifting from stoc2s to bonds or vice versa+ it calls

for reassessing the ris2 return characteristics of various securities+ selling over priced

securities and buying under priced securities, It may also involve the other changes the

investor may consider necessary to enhance the performance of portfolio,


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$ortfolio evaluation

The performance of the portfolio should be evaluated periodically, The 2ey dimensions

of a portfolio performance evaluation are ris2 and return and the 2ey issue is /hether the

portfolio return is commensurate /ith its ris2 e.posure, Such a revie/ may provide

useful to improve the 9uality of portfolio management process on a continuing basis,

#or evaluating the performance of a portfolio it is necessary to consider both ris2 and

return, The follo/ing are the models for evaluating performance of a portfolio,

Treynor Measure, Sharpe measure,

ensen measure,

Investment Decision

Definition of investment

$ccording to #, $mling ZInvestment may be defined as the purchase by an individual or

institutional investor of a financial or real asset that produces a return proportional to the

ris2 assumed over some future investment period[,

$ccording to ",E, #isher and ',, ordan+ Zinvestment is a commitment of funds made in

the e.pectation of some positive rate of return, If the investment is properly underta2en+

the return /ill be commensurate /ith the ris2 the investor assumes[,

#oncept of investment

Investment /ill be generally be used in its financial sense and as such investment is an

allocation of monetary resources to assets that are e.pected to yield some gain or positive

return over a given period of time, Investment is a commitment of persons funds to drive


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future income in the form of interest+ dividends rent+ premiums+ pension benefits or the

appreciation of the value of his principle capital

$ny Investors /ould li2e to 2no/ the media or range of investment so that he can use his

discretion and save in those investments+ /hich /ill give him both security and stable

return, The ultimate objective of the investor is to derive a variety of investments that

meets his preference for ris2 and e.pected return, The investor /ill select the portfolio+

/hich /ill ma.imi0e his utility, $nother important consideration is the temperament and

psychology of the investor, It is not only the construction of a portfolio that /ill promise

the highest e.pected return+ but it is the satisfaction of the need of the investor,

Many types of investment media or channels for ma2ing investment are available,Securities ranging from ris2 free instrum

A Study on Portfolio Management and Investment Decisions-samba

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