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PREFACE
The Analysis of Portfolio Analysis of Banking Sector briefly explains the importance of
Portfolio Analysis of Banking Sector in the investment decisions. The introduction of
Portfolio Analysis of Banking Sector
Will gives details about definition of portfolio management, obectives of Portfolio
Analysis of Banking Sector and advantages and disadvantages of portfolio management.
!o" the Portfolio Analysis of Banking Sector introduced in #ndia and its role in #ndia$s
finance sector and it$s importance "as explained in introduction. The various investment
opportunities "hich are available to the investor in market are briefly introduced in the
analysis of portfolio management. Analysis gives the support to take decisions in theconstruction process of portfolio management.
The investment process exhibits ho" the process should be and the re%uired information
for invest in various investments. The analysis gives the data about the calculation of
various hypothesis like risk, return and variance in constructing a portfolio. The portfolio
construction sho"s ho" to choose optimum portfolio
&
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INTRODUCTION:
#nvesting in securities such as shares, debentures and bonds is profitable as "ell as
exciting. #t is indeed re"arding, but involves a great deal of risk and calls for scientific
kno"ledge as "ell as artistic skill. #n such investments, both rational as "ell as emotional
responses are involved. #nvesting in financial securities is no" considered to be one of
the best avenues for investing one$s savings "hile it is ackno"ledged to be one of the
most risky avenues of investment.
#t is rare to find investors investing their entire savings in a single security. #nstead, they
tend to invest in a group of securities. Such a group of securities is called a portfolio.
'reation of a portfolio helps to reduce risk "ithout sacrificing returns. Portfolio Analysis
of Banking Sector deals "ith the analysis of individual securities as "ell as "ith the
theories and practice of optimally combining securities into portfolios. An investor "ho
understands the fundamental principles and analytical aspects of Portfolio Analysis of Banking Sector has a better chance of success.
(
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NEED FOR THE STUDY
#t is The study of analysis of portfolio management. The analysis of Portfolio Analysis of
Banking Sector provides the information to investor ho" to invest the savings in
various securities and the "ay ho" to get maximum returns from the securities andho" to decrease the risk "hich lies in securities.
The technical approach to investment is essentially a reflection of the idea that prices
move in trends, "hich are determined by the changing attitudes of investors to"ard a
variety of economic, monetary, political, and psychological forces. The art of
analysis of Portfolio Analysis of Banking Sector is to identify trend changes at an
early stage and to maintain an investment posture until the "eight of the evidence
indicates that the trend has reversed.
)
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OBJECTIVES OF THE STUDY
&. To understand the portfolio selection process
(. To study the frontier techni%ue in the portfolio selection
). To study the process of generation of investible securities in portfolio
*. To understand the process of calculating risk of selected securities in portfolio
*
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SCOPE OF THE PROJECT
The proect provides the information regarding the Portfolio Analysis of Banking
Sector that is ho" to analy+e the portfolio, ho" to construct the portfolio and the factors
"hich influence "hile constructing a portfolio. Analysis of Portfolio Analysis of Banking
Sector "ill helps to the investor in getting good returns and decreases the risk. The
proect analysis considers the mission of the company and "ealth maximi+ation concept
of the investor .
LIMITATIONS:
The data is collected from the primary and secondary sources and there is subected to
slight variation than "hat the study includes in reality.
!ence accuracy and correctness can be measured only to the extent of "hat the sample
group has furnished.
This study has been conducted purely to understand Portfolio Analysis of Banking Sector
for investor
'onstruction of portfolio is restricted to t"o companies based on mark"it+
model. -ery fe" and randomly selected scriptscompanies are analy+ed.
/ata collection "as strictly confined to secondary source. 0o primary data is
associated "ith the proect.
/etailed study of the topic "as not possible due to limited si+e of the proect
1
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There "as constraint "ith regard to the time allocation for the research study i.e.
for a period of t"o months.
METHODOLOGY OF THE STUDY
The data collection of the study consists of t"o kinds of data
1. Primary s!r"#s $ %a&a:
Which is first hand in nature, can be collected through.
. 2eeting "ith concerned peoples.
. Personal observation.
'. M#&(%s $ "))#"&i* $ &(# %a&a..secondary data Which is already exists
.
. 3inancial management text books .
. Printed materials.
. 4ournals 5 maga+ines.
. 0e"s papers.
. Text books. . World "ide "ebs.
6
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INDUSTRY PROFILE
Bombay Stock 7xchange 8imited is the oldest stock exchange in Asia "ith a rich
heritage. Popularly kno"n as 9BS79, it "as established as 9The 0ative Share 5 Stock
Brokers Association9 in &:;1. BS7 has played a pioneering role in the #ndian Securities
2arket < one of the oldest in the "orld. 2uch before actual legislations "ere enacted,
BS7 had formulated comprehensive set of =ules and =egulations for the #ndian 'apital
2arkets. #t also laid do"n best practices adopted by the #ndian 'apital 2arkets after
#ndia gained its #ndependence.
-ision
97merge as the premier #ndian stock exchange by establishing global benchmarks9
BS7 is the first stock exchange in the country to obtain permanent recognition in
&>16 from the ?overnment of #ndia under the Securities 'ontracts @=egulation Act,
&>16.The 7xchanges pivotal and pre
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The launch of S70S7D in &>:6 "as later follo"ed up in 4anuary &>:> by introduction of
BS7 0ational #ndex @Base &>:)
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3irst in #ndia to launch GSI version of BS7 Sensex
3irst in #ndia to launch 7xchange 7nabled #nternet Trading Platform
3irst in #ndia to obtain #SF certification for Surveillance, 'learing 5 Settlement
BS7 Fn
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securities, #ndia index services and products ltd @##S8 provides indices and index
services "ith a consulting and licensing agreement "ith Standard 5 Poor$s @S5P, and #T
ltd forms the technology strength that 0S7 "orks on.
Today, 0S7 is one of the largest exchanges in the "orld and still forging ahead. At 0S7,
"e are constantly "orking to"ards creating a more transparent, vibrant and innovativecapital market.
&C
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COMPANY PROFILE
&&
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Thus, Portfolio Analysis of Banking Sector is all about strengths, "eaknesses,
opportunities and threats in the choice of debt vs. e%uity, domestic vs. international,
gro"th vs. safety and numerous other trade
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NEED FOR PORTFOLIO MANAGEMENT:
The Portfolio Analysis of Banking Sector deals "ith the process of selection securities
from the number of opportunities available "ith different expected returns and carrying
different levels of risk and the selection of securities is made "ith a vie" to provide the
investors the maximum yield for a given level of risk or ensure minimum risk for a levelof return.
Portfolio Analysis of Banking Sector is a process encompassing many activities of
investment in assets and securities. #t is a dynamics and flexible concept and involves
regular and systematic analysis, udgment and actions. The obectives of this service are
to help the unkno"n investors "ith the expertise of professionals in investment Portfolio
2anagement. #t involves construction of a portfolio based upon the investor$s obectives,
constrains, preferences for risk and return and liability. The portfolio is revie"ed and
adusted from time to time "ith the market conditions. The evaluation of portfolio is to be
done in terms of targets set for risk and return. The changes in portfolio are to be effected
to meet the changing conditions.
Portfolio 'onstruction refers to the allocation of surplus funds in hand among a variety of
financial assets open for investment. Portfolio theory concerns itself "ith the principles
governing such allocation. The modern vie" of investment is oriented to"ards the
assembly of proper combinations held together "ill give beneficial result if they are
grouped in a manner to secure higher return after taking into consideration the risk
element.
The modern theory is the vie" that by diversification, risk can be reduced. The investor
can make diversification either by having a large number of shares of companies in
different regions, in different industries or those producing different types of product
&)
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lines. 2odern theory believes in the perspectives of combination of securities under
constraints of risk and return.
ELEMENTS:
Portfolio Analysis of Banking Sector is an on
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Pr"#ss $ +r&$)i ma*a,#m#*&:
The Portfolio Program and Asset Management Program both follo" a disciplined
process to establish and monitor an optimal investment mix. This six
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1. IDENTIFY GOALS AND OBJECTIVES:
When "ill you need the money from your investmentsK What are you saving your
money forK With the assistance of financial advisor, the n!estment Profile
#estionnaire "ill guide through a series of %uestions to help identify the goals and
obectives for the investments.
'. DETERMINE OPTIMAL INVESTMENT MI-:
Fnce the n!estment Profile #estionnaire is completed, investor$s optimal
investment mix or asset allocation "ill be determined. An asset allocation represents
the mix of investments @cash, fixed income and e%uities that match individual risk
and return needs. This step represents one of the most important decisions in your
portfolio construction, as asset allocation has been found to be the maor determinant
of long
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The customi+ed portfolio is created using an allocation of select L32 3unds.
7ach L32 3und is designed to satisfy the re%uirements of a specific asset class, and
is selected in the necessary proportion to match the optimal investment mix.
0 MONITOR PROGRESS
Building an optimal investment mix is only part of the process. #t is e%ually important
to maintain the optimal mix "hen varying market conditions cause investment mix to
drift a"ay from its target. To ensure that mix of asset classes stays in line "ith
investor$s uni%ue needs, the portfolio "ill be monitored and rebalanced back to the
optimal investment mix
. REASSESS NEEDS AND GOALS
4ust as markets shift, so do the goals and obectives of investors. With the flexibility
of the Portfolio Program and Asset Management Program, "hen the investor$s needs
or other life circumstances change, the portfolio has the flexibility to accommodatesuch changes.
RIS2:
=isk refers to the probability that the return and therefore the value of an asset or security
may have alternative outcomes. =isk is the uncertainty @today surrounding the eventual
outcome of an event "hich "ill occur in the future. =isk is uncertainty of the
incomecapital appreciation or loss of both. All investments are risky. The higher the risk
taken, the higher is the return. But proper management of risk involves the right choice of
investments "hose risks are compensation.
RETURN:
=eturn
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7ach security in a portfolio contributes returns in the proportion of its investment in
security. Thus the portfolio of expected returns, from each of the securities "ith "eights
representing the proportionate share of security in the total investments.
RIS2 3 RETURN RELATIONSHIP:
The riskreturn relationship is a fundamental concept in not only financial analysis, but in
every aspect of life. #f decisions are to lead to benefit maximi+ation, it is necessary that
individualsinstitutions consider the combined influence on expected @future return or
benefit as "ell as on riskcost. The re%uirement that expected returnbenefit be
commensurate "ith riskcost is kno"n as the 9riskreturn trade
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2. Gn
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There "as a time "hen Portfolio Analysis of Banking Sector "as an elite practice beyond
the reach of ordinary people, in #ndia. The scenario has changed drastically. Portfolio
Analysis of Banking Sector is no" a familiar term and is "idely practiced in #ndia. The
theories and concepts relating to Portfolio Analysis of Banking Sector no" find their
"ay to the frontpages of financial ne"s papers and the cover pages of investment ournals
in #ndia.
#n the beginning of nineties #ndia embarked on a programme of economic liberali+ation
and globali+ation. This reform has made the #ndian capital markets active. The #ndian
stock markets are steadily moving to"ards higher efficiency, "ith rapid computeri+ation,
increasing market transparency, "ith rapid computeri+ation, increasing market
transparency , better infrastructure, better customer service, closer integration and higher
volumes. The markets are dominated by large institutional investors "ith their diversified
portfolios.
Professional portfolio management, backed by competent research, began to be practiced
by mutual funds, investment consultants and big brokers. The securities exchange board of
#ndia, the stock market regulatory body in #ndia, is supervising the "hole process "ith a
vie" to making Portfolio Analysis of Banking Sector a responsible professional service
to be rendered by experts in the field.
With the advent of computers the "hole process of Portfolio Analysis of Banking Sector
has become %uite easy. The computer can absorb large amount of data, perform the
computations accurately and %uickly give out the results in any desired form.Portfolios
no" include not only domestic securities but also foreign securities. /iversification has
become international. #n this context, financial investment cannot be conceived of "ith
out portfolio management. Another significant development in the field of investment
management is the introduction of derivative securities such as options and futures. The
trading in derivative securities, their valuation, etc. have broadened the scope of
investment management.
ANALYSIS OF PORTFOLIO MANAGEMENT:
(&
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A*a)ysis $ Pr&$)i ma*a,#m#*&:
Analysis of Portfolio management9 is nothing but management of portfolio of an
investor. The obective is to analyse all the products available in details for an investor .
Analysis of Portfolio Analysis of Banking Sector includes analysis of various productsavailable to the investor like mutual funds, insurance, fixed deposits, saving bank account
and other Portfolio Analysis of Banking Sector services.
I 8 MUTUAL FUNDS:
INTRODUCTION
#nvestments goals vary from person to person. While somebody "ants security, othersmight give more "eightage to returns alone. Somebody else might "ant to plan for his
childs education "hile somebody might be saving for the proverbial rainy day or even life
after retirement. With obectives defying any range , it is obvious that the products re%uired
"ill vary as "ell.
#ndian 2utual 3unds industry offers a plethora of schemes and serves broadly all tupe of
investors. The range of products includes e%uity funds, debt, li%uid, gilt and balanced
funds. There are also funds meant exclusively for young and old, small and large investors.2oreover, the setup of a legal structure, "hich has enough teeth to safeguard investors
intersts, ensures that the investors are not cheated out of their hard earned money. All in
all, benefits provided by them cut across the boundaries of investor category and thus
create for them, a universal appeal.
#nvestors of all categories could choose to invest on their o"n in multiple options but opt
for 2utual 3unds for the sole reason that all benefits come in a package.The 2utual 3und
industry is having its hands full to cater to various needs of the investors by coming up "ith
ne" plans, schemes and options "ith respect to rate of returns, dividend fre%uency and
li%uidity.
((
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2utual 3und is a mechanism for pooling the resources by issuing units to the investors and
investing funds in securities in accordance "ith obectives as disclosed in offer document.
#nvestments in securities are spread among a "ide cross
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2utual 3und investments are not totally risk free. #n fact, investing in 2utual 3unds
contains the same risk as investing in the markets, the only difference being that due to
professional management of funds the controllable risks are substantially reduced. A very
important risk involved in 2utual 3und investments is the market risk. When the market is
in doldrums, most of the e%uity funds "ill also experience a do"n turnoverN the company
specific risks are largely eliminated due to professional fund management.
. TYPES OF MUTUAL FUNDS:
There are many types of mutual funds available to the investor.
O+#*5#*%#% M!&!a) F!*%s:
An open
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7xchange
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!edge funds in the Gnited States are pooled investment funds "ith loose S7' regulation
and should not be confused "ith mutual funds. Some hedge fund managers are re%uired to
register "ith S7' as investment advisers under the #nvestment Advisers Act. The Act does
not re%uire an adviser to follo" or avoid any particular investment strategies, nor does it
re%uire or prohibit specific investments. !edge funds typically charge a management fee of
&O or more, plus a 9performance fee9 of (CO of the hedge fundsprofits. There may be a
9lock
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N* 3 Ta9 #9#m+& $!*%s:
7xcept e%uity mutual fund schemes are tax
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#nsurance has its basic characteristics they are
P)i*, $ )ss#s:
#t refers to the spread of loss of many one to many, in order to substitute actual loss "ith
average loss. Thus pooling techni%ue involves sharing of losses and also prediction of future losses.
Fr&!i&!s Lss#s:
#t pays fortuitous or accidental losses. #nsurance covers unforeseen and unexpected or
accidental losses, "hich have been grouped under fortuitous losses and are unintentional
and occur due to a chance factor.
Tra*s$#r $ Ris4:
#nsurance essentially involves transfer of risk from insured to the insurer. Since an insurer
is in a better financial position then individual insureds, he indemnifies the insured for
losses due to premature death, poor health, disability, theft or loss of property etc.
I*%#m*i$i"a&i*:
#ndemnification means restoring the insured to his financial position prior to suffering aloss.
(>
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CLASSIFICATION OF INSURANCE BUSSINESS:
The insurance business "as nationali+ed in &>16. #nsurance business may be classified
broadly in t"o categories
Li$# i*s!ra*"# 7!ssi*#s:
life insurance business9 means the business of effecting contracts of insurance upon
human life, including any contract "hereby the payment of money is assured on death
@except death by accident only or the happening of any 8ife #nsurance 'orporation of
#ndia "as established under 8ife #nsurance 'orporation Act,&>16 to carry on 8ife #nsurance
Business. Accordingly, the 8ife #nsurance business "as conducted only by the 8ife
#nsurance 'orporation of #ndia. But no" the 8ife #nsurance 'orporation Act,&>16 has been
amended and private companies are also allo"ed to carry on 8ife #nsurance Business.
Gnder 8ife #nsurance contracts, the insurance company, in consideration of some regular
payment called premium guarantees to pay to the policy holder, or nominee, on reaching a
certain age or his death, "hichever is earlier, a certain sum of money called policy amount.
G#*#ra) i*s!ra*"# 7!si*#ss:
?eneral #nsurance covers all types of insurances except life insurance, such as fire
insurance, marine insurance, accident insurance etc. A common characteristic of all types
of general insurance is that a policy covers one year. The premium paid by the policy
holder provides protection to him for one year commencing "ith the date of payment of
premium. #f there is no damage or loss during the year, there is no claim and, of course, the
premium paid is not refunded.
)C
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THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT=
1>>>:
An Act to provide for the establishment of an Authority to protect the interests of holders of
insurance policies, to regulate, promote and ensure orderly gro"th of the insurance industry
and for matters connected there"ith or incidental there to and f urther to amend the Act,&>):, the 8ife #nsurance 'orporation Act, &>16 and the ?eneral #nsurance
Business@0ationalisation Act, &>;(..
@& This Act may be called the #nsurance =egulatory and /evelopment Authority Act,
&>>>.
@( #t extends to the "hole of #ndia.
@) #t shall come into force on such date as the 'entral ?overnment may, by notification in
the Ffficial ?a+ette, appoint Provided that different dates may be appointed for different
provisions of this Act and any reference in any such provision to the commencement of this
Act shall be construed as a reference to the coming into force of that provision.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
Es&a7)is(m#*& a*% i*"r+ra&i* $ A!&(ri&y.5
@& With effect from such date as the 'entral ?overnment may, by notification, appoint,
there shall be established, for the purposes of this Act, an Authority to be called 9the
#nsurance =egulatory and /evelopment Authority9.
@( The Authority shall be a body corporate by the name aforesaid having perpetual
succession and a common seal "ith po"er, subect to the provisions of this Act, to ac%uire,
hold and dispose of property, both movable and immovable, and to contract and shall, by
the said name, sue or be sued.
@) The head office of the Authority shall be at such place as the 'entral ?overnment may
decide from time to time.
)&
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@* The Authority may establish offices at other places in #ndia.
Cm+si&i* $ A!&(ri&y:
The Authority shall consist of the follo"ing members, namely<
@a a 'hairpersonN
@b not more than five "hole
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III8 Sa;i*,s Ba*4 A""!*&
A Saving Bank account @SB account is meant to promote the habit of saving among
thepeople. #t also facilitates safekeeping of money. #n this scheme fund is allo"ed to be
"ithdra"n "henever re%uired, "ithout any condition. !ence a savings account is a safe,
convenient and affordable "ay to save your money. Bank deposits are fairly safe because
banks are subect to control of the =eserve Bank of #ndia "ith regard to several policy and
operational parameters. Bank also pays you a minimal interest for keeping your money
"ith them.
F#a&!r#s:
The minimum amount to open an account in a nationali+ed bank is =s &CC. #f che%ue books
are also issued, the minimum balance of =s 1CC has to be maintained. !o"ever in some
private or foreign bank the minimum balance is =s 1CC or more and can be up =s. &C,CCC.
Fne che%ue book is issued to a customer at a time.
A Savings account can be opened either individually or ointly "ith another individual. #n a
oint account only the sign of one account holder is needed to "rite a che%ue. But at the
time of closing an account, the sign of the both the account holders are needed.
R#&!r*:
The interest rate of savings bank account in #ndia varies bet"een (.1O and *O. #n Savings
Bank account, bank follo"s the simple interest method. The rate of interest may change
from time to time according to the rules of =eserve Bank of #ndia. Fne can "ithdra"
hisher money by submitting a che%ue in the bank and details of the account, i.e the 2oney
deposited, "ithdra"n along "ith the dates and the balance, is recorded in a passbook.
A%;a*&a,#s:
#ts much safer to keep your money at a bank than to keep a large amount of cash in your
home. Bank deposits are fairly safe because banks are subect to control of the =eserve
Bank of #ndia "ith regard to several policy and operational parameters. The federal
))
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?overnment insures your money. Saving Bank account does not have any fixed period for
deposit. The depositor can takemoney from his account by "riting a che%ue to somebody
else or submitting a che%ue directly. 0o" most of the banks offer various facilities such as
AT2 card, credit card etc. Through debitAT2 card one can take money from any of the
AT2 centres of the particular bank "hich "ill be open (* hours a day. Through credit card
one can avail shopping facilities from any shop "hich accept the credit card. And many of
the banks also give internet banking facility through "ith one do the transactions like
"ithdra"als, deposits, statement of account etc
H6 & +#*
Savings Bank Account can be opened in the name of an individual or in oint names of the
depositors by filling up the appropriate forms. A minor "ho have completed ten years of
age can also open and operate the account. At the time of opening an account one must
submit the documents like photocopy of passport or 7lectoral card, Postal identification
cards as address proof and t"o passport si+e photos.
2ost banks also re%uire an introduction for opening an SB account. The introduction may
be obtained either from an existing account holder or from a respectable citi+en, "ell
kno"n to the bank, "ho should normally call on the bank and sign in the column specially
provided for the purpose of introduction in the account opening form.
)*
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IV 8 Fi9#% D#+si&
A fixed deposit is meant for those investors "ho "ant to deposit a lump sum of money for
a fixed periodN say for a minimum period of &1 days to five years and above, thereby
earning a higher rate of interest in return. #nvestor gets a lump sum @principal R interest at
the maturity of the deposit. Bank fixed deposits are one of the most common savings
scheme open to an average investor. 3ixed deposits also give a higher rate of interest than a
savings bank account.
The facilities vary from bank to bank. Some of the facilities offered by banks are
overdraft @loan facility on the amount deposited, premature "ithdra"al before maturity
period @"hich involves a loss of interest etc. Bank deposits are fairly safer because banks
are subect to control of the =eserve Bank of #ndia.
F#a&!r#s:
Bank deposits are fairly safe because banks are subect to control of the =eserve Bank of
#ndia @=B# "ith regard to several policy and operational parameters. The banks are free to
offer varying interests in fixed deposits of different maturities. #nterest is compounded once
a %uarter, leading to a some"hat higher effective rate. The minimum deposit amount
varies "ith each bank. #t can range from as lo" as =s. &CC to an unlimited amount "ith
some banks. /eposits can be made in multiples of =s. &CC. Before opening a 3/ account,
try to check the rates of interest for different banks for different periods. #t is advisable to
keep the amount in five or ten small deposits instead of making one big deposit. #n case of
any premature "ithdra"al of partial amount, then only one or t"o deposit need be
prematurely encashed. The loss sustained in interest "ill, thus, be less than if one big
deposit "ere to be encashed. 'heck deposit receipts carefully to see that all particulars have
been properly and accurately filled in. The thing to consider before investing in an 3/ is
the rate of interest and the inflation rate. A high inflation rate can simply chip a"ay your
real returns.
)1
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R#&!r*s:
The rate of interest for Bank 3ixed /eposits varies bet"een * and && per cent, depending
on the maturity period @duration of the 3/ and the amount invested. #nterest rate also
varies bet"een each bank. A Bank 3/ does not provide regular interest income, but a lump<
sum amount on its maturity. Some banks have facility to pay interest every %uarter or everymonth, but the interest paid may be at a discounted rate in case of monthly nterest. The
#nterest payable on 3ixed /eposit can also be transferred to Savings Bank or 'urrent
Account of the customer. The deposit period can vary from &1, )C or *1 days to ), 6
months, & year, &.1 years to &C years.
A%;a*&a,#s
Bank deposits are the safest investment after Post office savings because all bank deposits
are insured under the /eposit #nsurance 5 'redit ?uarantee Scheme of #ndia. #t is possible
to get a loans up to;1< >CO of the deposit amount from banks against fixed deposit
/uration #nterest rate @O per annum
&1
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receipts. The interest charged "ill be (O more than the rate of interest earned by the
deposit. With effect from A.. &>>:>, investment on bank deposits, along "ith other
specified incomes, is exempt from income tax up to a limit of =s.&(, CCC< under Section
:C8. Also, from A.. &>>)*, bank deposits are totally exempt from "ealth tax. The &>>1
3inance Bill Proposals introduced tax deduction at source @T/S on fixed deposits on
interest incomes of =s.1CCC< and above per annum.
H6 & a++)y
Fne can get a bank 3/ at any bank, be it nationalised, private, or foreign. ou have to open
a 3/ account "ith the bank, and make the deposit. !o"ever, some banks insist that you
maintain a savings account "ith them to operate a 3/. When a depositor opens an 3/
account "ith a bank, a deposit receipt or an account statement is issued to him, "hich can
be updated from time to time, depending on the duration of the 3/ and the fre%uency of the
interest calculation. 'heck deposit receipts carefully to see that all particulars have been
properly and accurately filled in.
);
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Da&a A*a)ysis
Fi9#% %#+si& ras i* +!7)i" a*% +ri;a s#"&r 7a*4s
P!7)i" S#"&r Ba*4s
):
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Fixed Deposit Rates in Public Sector Banks
Bank Name15-29
Days
30-45
Days
46-60
Days
61-90
Days
91-120
Days
120-179
Days
180-270
Days
271-364
Days
1-2Years
2-3Years
3-5Years
Up to5
Years
Wite!!e"t!rom
#$$aa%a&Bank
5.00 5.50 6.50 6.50 7.00 7.00 8.00 8.00 9.50 10.00 10.50 11.00 1-4-99
#n&ra Bank 5.50 5.50 7.00 7.00 8.00 8.00 9.50 9.50 10.00 10.50 11.00 11.00 1-4-99
Bank o!Baro&a
5.00 5.00 6.00 6.00 6.00 6.00 7.00 7.00 8.00 9.51 10.50 10.50 5-4-99
Bank o! 'n&ia 5.00 5.00 5.50 6.50 6.50 6.50 7.00 7.00 8.00 9.50 10.00 10.00 21-7-99
(anara Bank 5.00 5.00 6.00 6.00 6.50 6.50 7.50 7.50 9.00 9.50 10.00 10.00 16-8-99
(entra$ Bank 5.00 6.00 6.50 6.50 7.00 7.00 8.50 8.50 9.50 9.50 10.50 10.50 12-3-99
Dena Bank 6.00 6.00 6.25 6.25 6.75 6.75 7.75 7.75 9.00 10.00 10.50 10.50 9-8-99
'n&ian Bank 5.00 5.00 7.00 7.00 8.00 8.00 8.50 8.50 10.00 10.50 11.00 11.00 17-5-99
'n&ian)*erseasBank
5.00 5.00 6.00 6.00 7.50 7.50 8.00 8.00 9.50 10.00 10.50 10.50 1-4-99
)rienta$ Bank 5.00 5.00 6.50 6.50 7.00 7.00 8.00 8.00 9.50 10.00 10.5 10.5 1-4-99
+,na% /in&
Bank
6.00 6.00 6.50 6.50 7.00 7.00 8.00 8.00 9.50 10.00 10.5 10.5 18-5-99
/tate Bank o!
y&era%a& 5.00 5.00 6.50 6.50 7.00 7.00 8.00 8.00 9.50 9.50 10.50 10.50 15-3-99
/tate Bank o! 'n&ia
5.00 5.00 5.50 5.50 5.50 5.50 7.00 7.00 9.00 9.50 10.50 10.50 15-3-99
/tate Bank o! ysore
5.00 5.00 5.50 5.50 5.50 5.50 7.00 7.00 9.00 9.50 10.50 10.50 5-3-99
/.B. 5.00 6.00 6.50 7.00 8.00 8.00 8.00 8.00 9.00 10.00 10.50 10.50 -
/yn&i"ateBank
5.00 5.50 7.00 7.00 7.25 7.25 8.00 8.00 10.00 10.50 11.25 11.25 15-3-99
U.B.' 5.00 5.00 6.00 6.50 7.00 7.00 8.00 8.00 9.00 10.00 10.5 10.5 1-4-99
Nort a$a%arrameenBank
5.00 7.00 8.00 8.00 10.00 10.00 10.00 10.00 10.50 11.00 11.00 12.00 1-12-99
iaya Bank 5.00 6.00 7.00 7.00 8.00 8.00 9.00 9.00 9.50 10.50 11.00 11.00 8-3-99
Private Sector Banks
Fixed Deposit Rates in Private Sector Banks
Name o! teBank
15-29
30-45
46-60
61-90
91-120
120-179
180-270
271-364
1 -2Years
2 - 3Years
3 - 5Years
Up to5
Wite!!e"ti*e
)>
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&ays Days Days Days Days Days Days Days Years !rom
Bank o! a&,ra 5.50 6.50 6.50 7.50 8.50 8.50 9.50 9.50 10.00 10.50 11.00 11.00 16-8-99
(ent,rion Bank 6.50 8.00 8.25 8.50 9.25 9.25 10.25 10.25 10.50 11.25 11.25 11.25 24-6-99
(ity Union Bank 5.00 6.00 7.00 8.00 9.00 9.00 10.00 10.00 10.50 10.50 10.00 10.00 1-6-99
$o%a$ r,st'n&ia
6.50 8.00 8.00 8.00 9.25 9.25 10.00 10.00 - - 11.25 11.50 18-8-99
.D..( Bank 5.00 8.00 8.00 8.00 9.00 9.00 10.00 10.00 10.00 10.00 10.00 - 10-4-99
'.(.'.(.' Bank 5.00 6.00 7.00 7.00 8.00 8.00 10.00 10.00 10.50 10.50 10.50 10.50 1-8-99
'.D.B.'. 5.00 8.00 8.00 8.00 9.00 9.00 9.50 9.50 - - 10.50 - 21-8-99
'n&,s'n& Bank 5.50 8.00 8.00 8.00 9.00 9.00 10.00 10.00 - 11.25 11.25 11.25 2-8-99
or& risnaBank
5.50 5.50 8.00 8.00 8.00 8.00 9.50 9.50 11.25 11.25 11.25 11.25 1-5-99
ami$na&,er"anti$e Bank
6.00 6.00 7.50 7.50 9.50 9.50 10.50 10.50 11.00 11.00 11.50 11.50 7-5-99
(ato$i" /yrianBank
6.00 6.00 8.00 8.00 8.50 8.50 9.00 9.00 10.00 10.50 11.00 11.00 19-4-99
Dana $aksmiBank
7.00 7.00 8.00 8.00 9.00 9.00 9.50 9.50 10.50 11.00 11.50 11.50 1-9-99
e&era$ Bank 5.00 5.00 7.00 7.00 7.50 7.50 8.00 8.00 9.50 10.00 10.75 10.75 1-9-99
. . Bank 5.50 5.50 7.00 7.00 9.25 9.25 10.00 10.00 10.25 10.50 11.00 11.00 15-12-
99/o,t 'n&ianBank
5.00 5.00 7.00 7.00 7.50 7.50 8.50 8.50 9.50 10.25 10.75 10.75 15-9-99
Ne&,na&iBank
6.00 6.00 8.00 8.00 9.00 9.00 10.00 10.00 10.50 11.50 11.50 11.50 1-4-99
ysya Bank 5.75 5.75 7.25 7.25 8.25 8.50 9.00 9.00 10.50 10.75 11.00 11.00 2-8-99
imes Bank 6.00 8.00 8.00 8.00 9.00 9.00 10.00 10.00 10.5 10.5 10.5 - 16-8-99
U..'. Bank 5.50 8.00 8.00 8.00 9.00 9.00 - - - - 11.5 11.5 1-5-99
V 8 Pr&$)i A*a)ysis $ Ba*4i*, S#"&r S#r;i"#s
Portfolio Analysis of Banking Sector Services @P2S has t"o ne" offerings, the ?ro"th
Scheme and the Arbitrage Scheme, aimed at investors "ith lo" to moderate risk appetite
*C
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seeking to maximise returns on investments in this challenging economic environment.
/edicated "ealth managers "ill help the investors to carefully understand their financial
goals and advise them "ith the right product mix. #t has robust Portfolio Analysis of
Banking Sector soft"are that enables the entire construction, monitoring and risk
management processes. #t relieves investors from all the administrative hassles by using
proactive reporting measures.
P2S is fast gaining eminence as an investment avenue of choice for !igh 0et"orth
#nvestors. While offering a range of speciali+ed investment strategies to capitali+e on
opportunities in the market, Wealths P2S combines competent fund management,
dedicated research and state of art technology, thereby ensuring a re"arding experience for
all clients. #t "ill ensure that investors "ith uni%ue needs, varying risk appetite and
focussed financial goals can maximise returns on investments and also get multiple
conveniences and benefits even in todays challenging financial environment.9
Wealth P2S offers several benefits to investors. We professionally manage e%uity
investments "ith an aim to deliver consistent return "hile having a prudent eye on risk. We
have a "ell
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The Arbitrage Scheme is formulated to generate consistent reurns on a regular basis under
lo" risk environment to outperform the fixed income bearing financial instruments by
reasonably good margin. The scheme is recommended for investors "ith very lo"
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to use a combination of 9top
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C(ara"ris&i"s $ I*;#s&m#*&
The entrepreneur has to "eigh the alternative investment process in accordance "ith his
preferences to achieve his business goal. The principal characteristics of investment are
i. Ris4:
=isk is inherent in any investment. This risk may relate to loss of capital, delay in
repayment of capital, non payment of interest, or variability of returns.
ii. R#&!r*:
All investments are characteri+ed by the expectation of a return. #n fact, investments are
made "ith the primary obective of deriving a return. The return may be received in the
form of yield plus capital appreciation.
iii. Sa$#&y:
the safety of an investment implies the certainty of return of capital "ith out loss of
money or time. Safety is another feature "hich an investor desires for his investments.i;. Li!i%i&y:
an investment "hich is easily saleable or marketable "ith out loss of money and "ith out
loss of time is said to process li%uidity.
I*;#s&m#*& Pr$i)# $ a* E*&r#+r#*#!r
The investment process of an entrepreneur is multi
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U&i)i&y $ I*;#s&m#*&
#nvestments play a vital role in the overall economic development. #n fact, the %uantum
of investment decides the process and direction of gro"th. #n case of manufacturing
enterprises investment determines its performance.
Broadly, the utility of investment is directed to"ards development, profit, Po"er, "ealth,
capital generation and social good.
INVESTMENT PROCESS
We follo" a bottom
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Hfactors that affect the overall economy and the company$s sector, as "ell as currency
risks, interest rate changes, etc.
Gltimately the investment decision rests "ith the portfolio manager. When the elements
of this holistic approach are in place, the analysts float their stock recommendations to
portfolio manager and he take the final call.
The investment process is generally described in four stages. These stages are
&. #nvestment policy,
(. #nvestment analysis,
). -aluation of securities, and
*. Portfolio construction.
Portfolio construction re
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• Allocation of "ealth to asset categories.
II. I*;#s&m#*& Va)!a&i*
• -aluation of stocks
• -aluation of /ebentures and bonds
• -aluation of other assets
III. I*;#s&m#*& A*a)ysis
IV. Pr&$)i C*s&r!"&i*/etermination of diversification level 'onsideration of investment timing Selection of
investment assets Allocation of ingestible "ealth to investment assets 7valuation of
portfolio for feedback.
Pr&$)i C*s&r!"&i*
#n todays financial marketplace, a "ell
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"ords, your portfolio should meet your future needs for capital and give you peace of
mind. #nvestors can construct portfolios aligned to their goals and investment strategies
by follo"ing a systematic approach. !ere "e go over some essential steps for taking such
an approach.
S+ 1: %#rmi*i*, &(# A++r+ria Ass#& A))"a&i*
Ascertaining the individual financial situation and investment goals is the first task in
constructing a portfolio. #mportant items to consider are age, ho" much time you have to
gro" your investments, as "ell as amount of capital to invest and future capital needs. A
single college graduate ust beginning his or her career and a 11
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!ere are t"o examples one suitable for a conservative investor and another for the
moderately aggressive investor.
The main goal of a conservative portfolio is to protect its value. The allocation sho"n
above "ould yield current income from the bonds, and "ould also provide some long<
term capital gro"th potential from the investment in high
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But you can further break do"n the different asset classes into subclasses, "hich also
have different risks and potential returns. 3or example, an investor might divide the
e%uity portion bet"een different sectors and market caps, and bet"een domestic and
foreign stock. The bond portion might be allocated bet"een those that are short term and
long term, government versus corporate debt and so forth.
S+ : R#ass#ssi*, Pr&$)i @#i,(&i*,s
Fnce you have an established portfolio, you need to analy+e and rebalance it periodically
because market movements may cause your initial "eightings to change. To assess your
portfolios actual asset allocation, %uantitatively categori+e the investments and determine
their values proportion to the "hole.
The other factors that are likely to change over time are your current financial situation,future needs and risk tolerance. #f these things change, you may need to adust your
portfolio accordingly. #f your risk tolerance has dropped, you may need to reduce the
amount of e%uities held. Fr perhaps youre no" ready to take on greater risk and your
asset allocation re%uires that a small proportion of your assets be held in riskier small
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implications of readusting your portfolio. Perhaps your investment in gro"th stocks has
appreciated strongly over the past year, but if you "ere to sell all of your e%uity positions
to rebalance your portfolio, you may incur significant capital gains taxes. #n this case, it
might be more beneficial to simply not contribute any ne" funds to that asset class in the
future "hile continuing to contribute to other asset classes. This "ill reduce your gro"th
stocks "eighting in your portfolio over time "ithout incurring capital gains taxes.
At the same time, al"ays consider the outlook of your securities. #f you suspect that those
same over "eighted gro"th stocks are ominously ready to fall, you may "ant to sell in
spite of the tax implications. Analyst opinions and research reports can be useful tools to
help gauge the outlook for your holdings. And tax
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The expected return on a portfolio is the "eighted average of the returns of individual
assets, "here each assets "eight is determined by its "eight in the portfolio.
T(# $rm!)a is:
Where
7E is stands for expected
= pE =eturn on the portfolio
WaE Weight of asset n "here n may stand for asset a, bUetc.
= aE =eturn on asset n "here n may stand for asset a, bUetc
78 S&a*%ar% %#;ia&i*:
The portfolio standard deviation @V p measure the risk associated "ith the expected return
of the portfolio.
T(# $rm!)a is
The term r ab represents the correlation bet"een the returns of investments a and b. The
correlation coefficient, r, "ill al"ays reduce the portfolio standard deviation as long as it
is less than R&.CC.
Company nameExpected return (%)
Standard deviation (%)
CEMENT
GACLLNT
19.0363.69
6.916.1!
1(
E R +8 @a- E R a8 @a- E R a8
+ 6a' ' 6a' ' '6a67ra7 a 78
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"#$M$CE&T'C$
RANBAXYCIPLA
9.0!*.!
+.*!!.+3
TEEC,M
MTNLBHARTI ARTL
13.-11!.1*
1-.9-1!6.1
$N/'N
ING VYSYAICICI
1!.+6+9.+3
6*.!3*.*3
'.T.
WIPROSATYAM
13.6*16.*!
3+.-6+0.+1
I& s(6s &(# "a)"!)a&i* $ Pr&$)i R#&!r*s a*% Ris4s $Cm+a*i#s:
RIS2:
=isk refers to the probability that the return and therefore the value of an asset or security
may have alternative outcomes. =isk is uncertainty of the incomecapital appreciation or
loss of both. All investments are risky. The higher the risk taken, the higher is the return.
1)
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RETURN:
=eturn
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I& s(6s &(# "a)"!)a&i* $ "rr#)a&i* "#$$i"i#*& 7#&6##* &(#"m+a*i#s:
Correlation coefficient:
The correlation coefficient is obtained by dividing the covariance by the product of the
standard deviation of the t"o securities. To facilitate comparison covariance can be
standardi+ed.
I& s(6s &(# "a)"!)a&i* $ A;#ra,# r#&!r* $ "m+a*i#s:
Company name Correation coe44icient (r)
CEMENT
GACLLNT
0.66
"#$M$CE&T'C$
RANBAXYCIPLA
0.6
TEEC,M
MTNLBHARTI ARTL 0.9
$N/'N
ING VYSYAICICI
0.+
'.T.
WIPROSATYAM
0.1-
11
r AB Co! AB" VAVB
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&5$$T $M&5$ CEMENT T ($C ):
7ear
,penin8
are price("0)
Coin8
are price("1) ("1"0)
("1"0):"0;100
#$$%$'$ '().$$ *$*.+, '*%.+, +,.#-
#$'$$'' *$(.'$ )$'.,, %,.), *'.'+
#$''$'# )$,.$$ -%.($ &*#,.)$ &+$.*,
#$'#$'* +$.$$ ')'.*$ ('.*$ -(.(*
#$'*$') ')).+$ ''%.*, ,.), &'-.,+
TOTAL RETURN >0.10
A!erae ret/rn %,.',", '%.$*
LARSEN AND TOUBRO (LNT):
7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ #'*.-$ ,#-.*, *'*.(, ')(.--
#$'$$'' ,*$.$$ %+#.$$ ),#.$$ +,.#+
#$''$'# %++.-$ '+)).#$ +,,.,$ +(.,*
#$'#$'* '+),.$$ '))#.%, &)$#.$, '.-%
#$'*$') ')$$.$$ '-$*.#$ *$*.#$ #'.((
TOTAL RETURN1.0
A!erae ret/rn *'+.),", (*.(%
RANBAXY LABORATORIES:
16
$vera8e return < = :N
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7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ ,%-.+$ '$%+.#$ ,$$.)$ +*.-'
#$'$$'' ''$$.'$ '#,'.)$ ','.*$ '*.-,
#$''$'# '#,#.$$ *(#.*, &++%.(, &-'.$(#$'#$'* *().)$ *%'.+, #-.), -.,*
#$'*$') *%*.$$ *)%.', &)*.+, ''.'(
TOTAL RETURN0.>
A!erae ret/rn ),.$%", %.$#
CIPLA:
7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ %$).$$ '*'-.#, )'*.#, ),.-'
#$'$$'' '**%.$$ *'-.#, &'$#'.-, &-(.*'
#$''$'# *#$.$$ ))*.)$ '#*.)$ *+.,(
#$'#$'* )),.$$ #,$.-$ &'%).*$ &)*.((
#$'*$') #,*.)$ #*%.*$ &').'$ &,.,(
TOTAL RETURN51.'
A!erae ret/rn &)'.#(", &+.#,
MTNL:
1;
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7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ %,.', '*-.-$ )#.,, )).-#
#$'$$'' '*%.'$ ',).%$ ',.+$ ''.*(
#$''$'# ',(.$$ ')).#$ ''.+$ -.,(#$'#$'* '),.#$ ')#.+, .*, &'.(#
#$'*$') ')*.$$ ',#.*, %.*, (.,)
TOTAL RETURN.0
A!erae ret/rn (+.,(", '*.-'
BHARTI ARTL:
7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ #*.,$ '$,.'$ +'.($ *)-.#*
#$'$$'' '$(.#, #',.($ '$%.*, '$#.%#
#$''$'# #'+.%$ *),.-$ '#(.+$ ,-.%*
#$'#$'* *)+.%$ (#+.+, #-%.%, +$.#)
#$'*$') (*,.$$ +(#.+$ ##-.+$ *,.+-
TOTAL RETURN '.1>
A!erae ret/rn (#).'%", '#,.'+
ING VYSYA:
1:
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7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)
("1"0):"0;100
#$$%$'$ #,#.$, ,)%.$$ #%(.%, ''-.+'
#$'$$'' ,($.$$ ,+,.-, #,.-, ).($
#$''$'# ,+,.$$ '(#.#, &)##.-, &-#.#(
#$'#$'* '().,$ ',-.), &-.$, &).#%
#$'*$') ',%.$$ '+,.', #(.', '(.),
TOTAL RETURN'.1
A!erae ret/rn (#.*'", '#.)(
ICICI:
7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ ')'.-$ #%,.-$ ',).$$ '$+.(+
#$'$$'' #%%.-$ *-$.-, -'.$, #*.-'
#$''$'# *-).+, ,+).-$ #$%.+, ,,.%+#$'#$'* ,+(.#, +%$.)$ *$).', ,'.++
#$'*$') ++%.$$ %,$.#, ('.#, (.+%
TOTAL RETURN'K.1
A!erae ret/rn #)-.')", )%.)*
WIPRO:
1>
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7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)
("1"0):"0;100
#$$%$'$ '()).)$ '-*-.($ %*.# ,.(-
#$'$$'' '-)).)$ -)+.$$ &%%(.)$ &,-.'#
#$''$'# -,*.$$ )(*.), +%.,, &*+.),
#$'#$'* )().$$ ($).,, ')$.,, *$.#%
#$'*$') ($-.%$ ,,).*, &,*.,, &+.+'
TOTAL RETURN5.'
A!erae ret/rn &(+.)#", &'*.(+
SATYAM COMP:
7ear
,penin8are price
("0)
Coin8are price
("1) ("1"0)("1"0):"0;100
#$$%$'$ #+$.'$ *(-.*, +-.#, *'.',
#$'$$'' *-$.$$ )$%.%$ *%.%$ '$.-+
#$''$'# )'#.$$ -*-.+$ *#,.+$ -%.$+
#$'#$'* -)$.-$ )+*.%, ,(.-, &*).((
#$'*$') )+(.$$ )-).%, &''.$, .#-
TOTAL RETURN.
A!erae ret/rn +).$+", '(.+#
CALC0LATION O1 STAN2AR2 23VIATION:
6C
Standard /eviation E -ariance
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GUJARAT AMBUJA CEMENT LTD:
7ear eturn ()$v8. eturn
(> )d<
(>)d!
#$$%$'$ +,.#- '%.$* ((.#) )*+-.-)
#$'$$'' *'.'+ '%.$* '#.', ')-.(#
#$''$'# &+$.*, '%.$* &('.*# *-($.')
#$'#$'* -(.(* '%.$* ,-.($ **'-.-(
#$'*$') &'-.,+ '%.$* &*(.(( '*)*.%( T,T$
=d!
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RANBAXY LABORATORIES:
7ear eturn ()$v8. eturn
(> )d<
(>)!
#$$%$'$ +*.-' %.$# -).(% ,,-+.($
#$'$$'' '*.-, %.$# ).-* ##.*-
#$''$'# &-'.$( %.$# +$.$+ ()'#.+'
#$'#$'* -.,* %.$# &'.)% #.##
#$'*$') ''.'( %.$# #.') ).,+
T,T$
=d!
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7ear eturn ()$v8. eturn
(> )d<
(>)d!
#$$%$'$ )).-# '*.-# *' %('
#$'$$'' ''.*( '*.-# .*( ,.,-
#$''$'# -.,( '*.-# &(.'( *-.%,#$'#$'* &'.(# '*.-# &',.*) #*,.*#
#$'*$') (.,) '*.-# &-.'+ ,'.,,
T,T$
=d!
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(> ) (>)
#$$%$'$ ''-.+' '#.)( '$,.*, ''$%+.(#
#$'$$'' ).($ '#.)( &-.+( ('.-+
#$''$'# &-#.#( '#.)( &+).-# -'--.)+
#$'#$'* &).#% '#.)( &'(.-, #+$.,(#$'*$') '(.), '#.)( *.%% ',.%#
T,T$
=d!
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7ear eturn ()$v8. eturn
(> )d<
(>)d!
#$$%$'$ ,.(- &'*.(+ '%.*, *-).)#
#$'$$'' &,-.'# &'*.(+ &)*.)) '++-.$*
#$''$'# &*+.), &'*.(+ ).-- ('*.,,
#$'#$'* *$.#% &'*.(+ )*.%- '%**.*(#$'*$') &+.+' &'*.(+ &).+- #*.-#
T,T$
=d! )d<
(>)d!
#$$%$'$ *'.', '(.+# ').** #$,.,,
#$'$$'' '$.-+ '(.+# &(.$) *(.)+
#$''$'# -%.$+ '(.+# (#.#( *+-(.*'
#$'#$'* &*).(( '(.+# ,'.)+ #$,$.'%#$'*$') .#- '(.+# '%.$% *().)*
T,T$
=d!
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GACL& LNT:
7E$ev. ,4 $C(dx)
ev. ,4 NT(dy)
"roduct o4 dev.(dx)(dy)
#$$%$'$ ((.#) +*.$+ ,,$*.#'%#
#$'$$'' '#.', #'.,% #(#.*'+,
#$''$'# &('.*# ##.+) &')$$.,)++
#$'#$'* ,-.( &+,.)+ &)%#*.()+
#$'*$') &*(.(( &)#.$* ',)$.+'%+
T,T$
=dx. dy <9*!.160-
COVa8 '"4,&'74%+#.'($-7 #),.,)
'orrelation of coefficient #),.,)"4,(.%'74(,.'#7 $.$((
I*r+r#&a&i*:
The prime obective of this combination is to reduce risk of portfolio. 8east preference is
given to the portfolio returns. As per the calculations ?A'8, bears a proportion of C.1;
"hereas 80T bears a proportion of C.*). The standard deviations of the companies are
16.>& for ?A'8 and 61.&( for 80T.
This combination yields a return of a return of ):.()): and a risk of **.()
respectively.
RANBAXY & CIPLA:
7E$ ev. ,4 $C
ev. ,4 NT(dy)
"roduct o4 dev.(dx)(dy)
66
Correation o4 coe44icient < C,?a@ : Aa; A@
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(dx)
#$$%$'$ -).(% ,*.%( )$*$.#-#)
#$'$$'' ).-* &(+.$( &*#'.%#*+
#$''$'# +$.$+ )(.+' *-)+.,))+
#$'#$'* &'.)% &*,.)' ,#.-($%
#$'*$') #.') #.(% &,.-,((
T,T$
=dx. dy <-03.*9--
COVa8 '"4,&'74-,$*.+%--7 '+-,.%-
Correlation of coefficient '+-,.%-"4,).+#74,#.)*7 $.(,
I*r+r#&a&i*:
As per the calculations =A0BAD, bears a proportion of C.** "hereas '#P8A bears a
proportion of C.16. The standard deviations of the companies are 1*.:( for =A0BAD
and 1(.*) for '#P8A.
This combination yields a return of a return of
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$C(dx)
(dy)(dx)(dy)
#$$%$'$ *' ###.$, (++*.,,
#$'$$'' .*( #.$( ,#.$('(
#$''$'# &($'( &(-.#, )').#(
#$'#$'* &',.*) &)).%) (+%.*-%(#$'*$') &-.'+ &+-.,% (#+.+%(#
T,T$
=dx. dy <*66*.1+-+
COVa8 '"4,&'74+((+.')-)7 #'(-.$)
'orrelation of coefficient #'(-.$)"4'-.%-74'#(.,'7
I*r+r#&a&i*:The proportion of investment for 2T08 is ; and &(6.1& respectively.
This combination yields a return of (1).>> and a risk of (1(.*1. hence investor
should invest his maor proportion in B!A=T# A=T8 in order to minimi+e risk.
ING VYSYA & ICICI:
7E$ev. ,4 $C(dx)
ev. ,4 NT(dy)
"roduct o4 dev.(dx)(dy)
#$$%$'$ '$,.*, ,%.#, (#)'.%+-,
#$'$$'' &-.+( ,.-# #$#.',%#
#$''$'# &+).-# (.,, &,,).%'(
#$'#$'* &'(.-, #.), &)'.$*-,
#$'*$') *.%% &)#.,) &'(%.-*)(
T,T$
=dx. dy <6-*.+*6
COVa8 '"4,&'74,(-+.),+(7 ')'%.('
Correlation of coefficient ')'%.('"4(+.#,74*+.+*7 $.,)
6:
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'nterpretationB
#n this situation optimum "eights of #0? -SA and #'#'# are C.C) and C.>;
respectively. The portfolio risk is ):.:&, "hich is lesser than the individual risks of t"o
companies. !ence, it is recommended to invest the maor proportion of the funds in
#'#'#, in order to reduce the portfolio risk.
WIPRO & SATYAM:
7E$ev. ,4 $C(dx)
ev. ,4 NT(dy)
"roduct o4 dev.(dx)(dy)
#$$%$'$ '%.*, ').** #--.#+,,
#$'$$'' &)*.)) &(.$) #(#.**-(
#$''$'# ).-- (#.#( &',)#.'+$#
#$'#$'* )*.%- ,'.)+ ##(*.,-,(
#$'*$') &).+- '%.$% &%#.%(+*
T,T$
=dx. dy <116*.0*0!
COVa8 '"4,&'74''(+.$+$#7 #**.(#
Correlation of coefficient #**.(#"4*).-(74)$.)'7 $.'-
I*r+r#&a&i*:
The proportion of investments for W#P=F is C.1> and for SATA2 it is C.*&. The
standard deviations of the companies are )*.;6 and *C.*& respectively.
This combination yields a return of
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2eri!in t9e ini/ ri;< =ortfolio> t9e follo?in for/la i; /;e6:
W9ere>
Xa i; t9e =ro=ortion of ;ec/rit@ A
X8 i; t9e =ro=ortion of ;ec/rit@ B
a ;tan6ar6 6e!iation of ;ec/rit@ A
8 ;tan6ar6 6e!iation of ;ec/rit@ B
ra8 correlation co&efficient 8et?een AB
GACL& LNT:
4(,.'#7#& $.$((4,(.%'7 4(,.'#7 Xa
4,(.%'7# 4(,.'#7# 4$.$((7 4,(.%'7 4(,.'#7
$.,-
X8 '& Xa
'& $.,-
$.)*
RANBAXY& CIPLA:
;C
Wa E @ σ b( < rab @σa @Vb
@σa( R @σ b( H (rab @σa @σ b
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4,#.)*7#- $.(,4,).+#7 4,#.)*7
Xa
4,).+#7# 4,#.)*7# 4$.(,7 4,).+#7 4,#.)*7
$.))
X8 '&Xa
'&$.)) $.,(
MTNL& BHARTI ARTL:
4'#(.,'7# D $.%, 4'-.%-7 4'#(.,'7
Xa
4'-.%-7# 4'#(.,'7# D #4$.%,7 4'-.%-7 4'#(.,'7
&'.', X8 ' D Xa
'& 4&'.',7
#.',
ING VYSYA & ICICI:
4*+.+*7# D $.,)4(+.#,7 4*+.+*7
Xa
4(+.#,7# 4*+.+*7# D # 4$.,)7 4(+.#,7 4*+.+*7
$.$*
X8 ' D Xa
' D $.$*
$.%-
WIPRO & SATYAM:
;&
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4)$.)'7# D $.'-4*).-(7 4)$.)'7
Xa
4*).-(7# 4)$.)'7# D # 4$.'-7 4*).-(7 4)$.)'7
$.,%
X8 ' D X8
' D $.,%
$.)'
CALCULATION OF PORTFOLIO RISK:
or to ecuritieB
T"o securities portfolio is a portfolio "hich consists t"o securities. #n t"o securities portfolio the investment takes place in companies securities.
Where,
VP E portfolio risk
Da E proportion of investment in security A
Db E proportion of investment in security B
= &( E correlation co
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Fr &(r## s#"!ri&i#s:
Three securities portfolio consists of three securities or "hich invests in three securities.
T(# $))6i*, $rm!)a is !s#% $r s&a*%ar% %#;ia&i*:
GACL& LNT:
= E4$.,-7# ;4,(.%'7# 4$.)*7# ;4(,.'#7# #4$.,-74$.)*74$.$((74,(.%'74(,.'#7
E'%,(.#,%'),
)).#*
RANBAXY& CIPLA:
= E4$.))7# ;4,).+#7# 4$.,(7# ;4,#.)*7# #4$.))74$.,(74$.(,74,).+#74,#.)*7
E#*().,*-*)+
)+.(*
MTNL& BHARTI ARTL:
= E4&'.',7# ;4'-.%-7#4#.',7#;4'#(.,'7##4&'.',74#.',74$.%,74'-.%-74'#(.,'7
E(*-#%.*(,%*
;)
= E44a7#4Xa7#487#4X87# 4c7#4Xc7# #4Xa74X874ra874a7487
#4Xa74Xc74rac74a74c7 #4X874Xc74r8c74874c77
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#,#.),
ING VYSYA & ICICI:
= E4$.$*7# ;4(+.#,7# 4$.%-7# ;4*+.+*7# #4$.$*74$.%-74$.,)74(+.#,74*+.+*7
E',$(.')$+)%
*+.+'
WIPRO & SATYAM:
= E4$.,%7# ;4*).-(7# 4$.)'7# ;4)$.)'7# #4$.,%74$.)'74$.'-74*).-(74)$.)'7
E+'$.(#**+*,
#+.)-
CALCULATION OF PORTFOLIO RETURN:
R= W'R' W#R# 4for t?o ;ec/ritie;7
R= W'R' W#R# W*R* 4for t9ree ;ec/ritie;7
;*
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W9ere>
W'> W#> W* are t9e ?ei9t; of t9e ;ec/ritie;
R'> R#> R* are t9e 3F=ecte6 ret/rn;
GACL& LNT:
R= 4$.,-74'%.$*7 4$.)*74(*.(%7
*+.#**+
RANBAXY& CIPLA:
R= 4$.))74%.$#7 4$.,(74&+.#,7
&$.(,'#
MTNL& BHARTI ARTL:
R= 4&'.',74'*.'-7 4#.',74'#,.'+7
#,*.%%
ING VYSYA & ICICI:
R= 4$.$*74'#.)(7 4$.%-74)%.)*7
)+.*#$%
WIPRO & SATYAM:
R= 4$.,%74&'*.(+7 4$.)'74'(.+#7
& '.'-,
SUGGESTIONS:
;1
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Select your investments on economic grounds.
Public kno"ledge is no advantage.
Buy stock "ith a disparity and discrepancy bet"een the situation of the firm < and
the expectations and appraisal of the public @'ontrarian approach vs. 'onsensus
approach.
Buy stocks in companies "ith potential for surprises.
Take advantage of volatility before reaching a ne" e%uilibrium.
8isten to rumors and tips, check for yourself.
/on$t put your trust in only one investment. #t is like putting all the eggs in one
basket . This "ill help lesson the risk in the long term.
The investor must select the right advisory body "hich is has sound kno"ledge
about the product "hich they are offering.
Professionali+ed advisory is the most important feature to the investors.
Professionali+ed research, analysis "hich "ill be helpful for reducing any kind of
risk to overcome.
CONCLUSIONS:
;6
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When "e form the optimum of t"o securities by using minimum variance e%uation, then
the return of the portfolio may decrease in order to reduce the portfolio risk.
The combination of securities "ill lead to increase the returns for that "e have to follo"
appropriate techni%ues and al"ays the combination of securities should decrease the risk.
BIBLIOGRAPHY
;;
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oo2 re4erredB
Security analysis and Portfolio Analysis of Banking Sector < -.A. Avadhani
Security analysis and Portfolio Analysis of Banking Sector < 3ischer 5 4ordan
#nvestment decisions < -.J. Bhalla
Security analysis 5 Portfolio Analysis of Banking Sector < =obbins
Portfolio Analysis of Banking Sector H S.Jevin
@#7sis:
""".geoit.com
""".investopedia.com
""".capitalmarket.com
""".icicidirect.com
""".bse.com
""".nse.com
;:
http://www.geojit.com/http://www.investopedia.com/http://www.capitalmarket.com/http://www.icicidirect.com/http://www.bse.com/http://www.nse.com/http://www.geojit.com/http://www.investopedia.com/http://www.capitalmarket.com/http://www.icicidirect.com/http://www.bse.com/http://www.nse.com/
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