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