portfolio mgnt- karvy by ashark256



A portfolio is a collection of investments held by an institution or a private individual. In
building up an investment portfolio a financial institution will typically conduct its own
investment analysis, whilst a private individual may make use of the services of a
financial advisor or a financial institution which offers portfolio management services.
Holding a portfolio is part of an investment and risk-limiting strategy called
diversification. By owning several assets, certain types of risk (in particular specific risk)
can be reduced. The assets in the portfolio could include stocks, bonds, options,
warrants, gold certificates, real estate, futures contracts, production facilities, or any
other item that is expected to retain its value.

        Portfolio management involves deciding what assets to include in the portfolio,
given the goals of the portfolio owner and changing economic conditions. Selection
involves deciding what assets to purchase, how many to purchase, when to purchase
them, and what assets to divest. These decisions always involve some sort of
performance measurement, most typically expected return on the portfolio, and the risk
associated with this return (i.e. the standard deviation of the return). Typically the
expected returns from portfolios, comprised of different asset bundles are compared.

The unique goals and circumstances of the investor must also be considered. Some
investors are more risk averse than others. Mutual funds have developed particular
techniques to optimize their portfolio holdings.

    Thus, portfolio management is all about strengths, weaknesses, opportunities and
    threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety
    and numerous other trade-offs encountered in the attempt to maximize return at a
    given appetite for risk.
    Aspects of Portfolio Management:
    Basically portfolio management involves
         A proper investment decision making of what to buy & sell
         Proper money management in terms of investment in a basket of assets so as
            to satisfy the asset preferences of investors.
         Reduce the risk and increase returns.

The basic objective of Portfolio Management is to maximize yield and minimize risk.
The other ancillary objectives are as per needs of investors, namely:
    Regular income or stable return
    Appreciation of capital
    Marketability and liquidity
    Safety of investment
    Minimizing of tax liability.

The Portfolio Management deals with the process of selection securities from the number
of opportunities available with different expected returns and carrying different levels of
risk and the selection of securities is made with a view to provide the investors the
maximum yield for a given level of risk or ensure minimum risk for a level of return.

Portfolio Management is a process encompassing many activities of investment in assets
and securities. It is a dynamics and flexible concept and involves regular and systematic
analysis, judgment and actions. The objectives of this service are to help the unknown
investors with the expertise of professionals in investment Portfolio Management. It
involves construction of a portfolio based upon the investor’s objectives, constrains,
preferences for risk and return and liability. The portfolio is reviewed and adjusted from
time to time with 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 Construction refers to the allocation of surplus funds in hand among a variety
of financial assets open for investment. Portfolio theory concerns itself with the
principles governing such allocation. The modern view of investment is oriented towards
the assembly of proper combinations held together will give beneficial result if they are
grouped in a manner to secure higher return after taking into consideration the risk
The modern theory is the view 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
lines. Modern theory believes in the perspectives of combination of securities under
constraints of risk and return.

       This study covers the Markowitz model. The study covers the calculation of
correlations between the different securities in order to find out at what percentage funds
should be invested among the companies in the portfolio. Also the study includes the
calculation of individual Standard Deviation of securities and ends at the calculation of
weights of individual securities involved in the portfolio. These percentages help in
allocating the funds available for investment based on risky portfolios.

                            OBJECTIVE OF STUDY
      How to analyze securities
      How portfolio management is done
      A study to find the returns, variance, & standard deviation of dividend and
       growth fund.
      Based on the returns I tried to correlate these two funds, to know whether there
       exist positive or negative correlations.
      To study the investment pattern and its related risks & return
      To help the investors to choose wisely between alternative investment
      To understand, analyze and select the best portfolio

                                  RESEARCH METHODOLOGY
Arithmetic average or mean:
               The arithmetic average measures the central tendency. The purpose of
computing an average value for a set of observations is to obtain a single value, which is
representative of all the items. The main objective of averaging is to arrive at a single
value which is a representative of the characteristics of the entire mass of data and
arithmetic average or mean of a series(usually denoted by x) is the value obtained by
dividing the sum of the values of various items in a series (sigma x) divided by the
number of items (N) constituting the series.

Thus, if X1,X2……………..Xn are the given N observations. Then
       X= X1+X2+……….Xn
       Current price-previous price *100
             Previous price
               The concept of standard deviation was first suggested by Karl Pearson in
1983.it may be defined as the positive square root of the arithmetic mean of the squares
of deviations of the given observations from their arithmetic mean In short S.D may be
defined as “Root Mean Square Deviation from Mean”

       It is by far the most important and widely used measure of studying dispersions.
       For a set of N observations X1,X2……..Xn with mean X,
       Deviations from Mean: (X1-X),(X2-X),….(Xn-X)
       Mean-square deviations from Mean:
               = 1/N (X1-X)2+(X2-X)2+……….+(Xn-X)2
               =1/N sigma(X-X)2
       Root-mean-square deviation from mean,i.e.

       The square of standard deviation is known as Variance.
       Variance is the square root of the standard deviation:
               Variance = (S.D) 2
               Where, (S.D) is standard deviation
       Correlation is a statistical technique, which measures and analyses the degree or
extent to which two or more variables fluctuate with reference to one another.
Correlation thus denotes the inter-dependence amongst variables. The degrees are
expressed by a coefficient, which ranges between –1 and +1. The direction of change is
indicated by (+) or (-) signs. The former refers to a sympathetic movement in a same
direction and the later in the opposite direction.
       Karl Pearson’s method of calculating coefficient (r) is based on covariance of the
concerned variables. It was devised by Karl Pearson a great British Biometrician.
       This measure known as Pearsonian correlation coefficient between two variables
(series) X and Y usually denoted by ‘r’ is a numerical measure of linear relationship and
is defined as the ratio of the covariance between X and Y (written as Cov(X,Y) to the
product of standard deviation of X and Y

       r = Cov (X,Y)
             SD of X,Y
       =     Σ xy/N                    = ΣXY
               SD of X,Y                 N
Where x =X-X, y=Y-Y

Σxy = sum of the product of deviations in X and Y series calculated with reference to
their arithmetic means.

 X = standard deviation of the series X.
 Y = standard deviation of the series Y.


1. In this study the number of funds considered is only two funds of KARVY and
   they are dividend fund and growth fund.
2. The data collected for a period of one year i.e., from December 2010 to January
3. In this study the statistical tools used are risk, return, average, variance,
4. In this study specific data is collected.


Karvy Consultants Limited was started in the year 1981, with the vision and enterprise of
a small group of practicing Chartered Accountants. Initially it was started with
consulting and financial accounting automation, and carved inroads into the field of
registry and share accounting by 1985. Since then, it has utilized its experience and
superlative expertise to go from strength to strength…to better its services, to provide
new ones, to innovate, diversify and in the process, evolved as one of India’s premier
integrated financial service enterprise.
     Today, Karvy has access to millions of Indian shareholders, besides companies,
banks, financial institutions and regulatory agencies. Over the past one and half decades,
Karvy has evolved as a veritable link between industry, finance and people. In January
1998, Karvy became the first Depository Participant in Andhra Pradesh. An ISO 9002
company, Karvy's commitment to quality and retail reach has made it an integrated
financial services company.

An Overview:
KARVY, is a premier integrated financial services provider, and ranked among the top
five in the country in all its business segments, services over 16 million individual
investors in various capacities, and provides investor services to over 300 corporates,
comprising the who is who of Corporate India. KARVY covers the entire spectrum of
financial services such as Stock broking, Depository Participants, Distribution of
financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,
Commodities Broking, Personal Finance Advisory Services, Merchant Banking &
Corporate Finance, placement of equity, IPOs, among others. Karvy has a professional
management team and ranks among the best in technology, operations and research of
various industrial segments.
Today, Karvy service over 6 lakhs customer accounts spread across over 250
cities/towns in India and serves more than 75 million shareholders across 7000 corporate
clients and makes its presence felt in over 12 countries across 5 continents. All of Karvy
services are also backed by strong quality aspects, which have helped Karvy to be
certified as an ISO 9002 company by DNV.


    Among the top 5 stock brokers in India (4% of NSE volumes)
    India's No. 1 Registrar & Securities Transfer Agents
    Among the top 3 Depository Participants
    Largest Network of Branches & Business Associates
    ISO 9001:2000 certified operations by DNV
    Among top 10 Investment bankers
    Largest Distributor of Financial Products
    Adjudged as one of the top 50 IT uses in India by MIS Asia
    Full Fledged IT driven operations
    First ISO-9002 Certified Registrars in India
    Ranked as “The Most Admired Registrar” by MARG
    Largest mobilize of funds as per PRIME DATABASE
    First depository participant from Andhra Pradesh.
    Handled over 500 public issues as Registrars.
    Handling the Reliance account, which accounts for nearly 10 million account

Range of services:
      Stock broking services
      Distribution of Financial Products (investments & loan products)
      Depository Participant services
      IT enabled services
      Personal finance Advisory Services
      Private Client Group
      Debt market services
      Insurance & merchant banking
      Mutual Fund Services
      Corporate Shareholder Services
      Other global services

Besides these, they also offer special portfolio analysis packages that provide daily
technical advice on scrips for successful portfolio management and provide customized
advisory services to help customers make the right financial moves that are specifically
suited to their portfolio. They are continually engaged in designing the right investment
portfolio for each customer according to individual needs and budget considerations.

Karvy Consultants limited deals in Registrar and Investment Services. Karvy is one of
the early entrants registered as Depository Participant with NSDL (National Securities
Depository Limited), the first Depository in the country and then with CDSL (Central
Depository Services Limited).

Karvy stock broking is a member of National Stock Exchange (NSE), The Bombay
Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE). The services
provided are multi dimensional and multi-focused in their scope: to analyze the latest
stock market trends and to take a close looks at the various investment options and
products available in the market. Besides this, they also offer special portfolio analysis

       The paradigm shift from pure selling to knowledge based selling drives the
business today. The monthly magazine, Finapolis, provides up-dated market information
on market trends, investment options, opinions etc. Thus empowering the investor to
base every financial move on rational thought and prudent analysis and embark on the
path to wealth creation.

Karvy is recognized as a leading merchant banker in the country, Karvy is registered

with SEBI as a Category I merchant banker. This reputation was built by capitalizing on
opportunities in corporate consolidations, mergers and acquisitions and corporate

   Karvy has a tie up with the world’s largest transfer agent, the leading Australian
company, Computer share Limited. It has attained a position of immense strength as a
provider of across-the-board transfer agency services to AMCs, Distributors and
Investors. Besides providing the entire back office processing, it also provides the link
between various Mutual Funds and the investor.

   Karvy global services limited covers Banking, Financial and Insurance Services
(BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and Utility and
Healthcare sectors.

   Karvy comtrade limited trades in all goods and products of agricultural and mineral
origin that include lucrative commodities like gold and silver and popular items like oil,
pulses and cotton through a well-systematized trading platform.

   Karvy Insurance Broking Pvt. Ltd. provides both life and non-life insurance products
to retail individuals, high net-worth clients and corporates. With Indian markets seeing a
sea change, both in terms of investment pattern and attitude of investors, insurance is no
more seen as only a tax saving product but also as an investment product.

    Karvy Inc. is located in New York to provide various financial products and
information on Indian equities to potential foreign institutional investors (FIIs) in the
region. This entity would extensively facilitate various businesses of Karvy viz., stock
broking (Indian equities), research and investment by QIBs in Indian markets for both
secondary and primary offerings.

.Quality Policy:
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial
services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives

As per the Quality Policy, Karvy will:

    Build in-house processes that will ensure transparent and harmonious
       relationships with its clients and investors to provide high quality of services.
    Establish a partner relationship with its investor service agents and vendors that
       will help in keeping up its commitments to the customers.
    Provide high quality of work life for all its employees and equip them with
       adequate knowledge & skills so as to respond to customer's needs.
    Continue to uphold the values of honesty & integrity and strive to establish
       unparalleled standards in business ethics.
    Use state-of-the art information technology in developing new and innovative
       financial products and services to meet the changing needs of investors and
    Strive to be a reliable source of value-added financial products and services and
       constantly guide the individuals and institutions in making a judicious choice of

Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers
and regulatory authorities) proud and satisfied



  Specification and qualification of investor objectives, constraints, and preferences
    in the form of an investment policy statement.

  Determination and qualification of capital market expectations for the economy,
    market sectors, industries and individual securities.

  Allocation of assets and determination of appropriate portfolio strategies for each
    asset class and selection of individual securities.

  Performance measurement and evaluation to ensure attainment of investor

  Monitoring portfolio factors and responding to changes in investor objectives,
    constrains and / or capital market expectations.

  Rebalancing the portfolio when necessary by repeating the asset allocation,
    portfolio strategy and security selection.

  In portfolio management emphasis is put on identifying the collective importance
    of all investor’s holdings. The emphasis shifts from individual assets selection to
    a more balanced emphasis on diversification and risk-return interrelationships of
    individual assets within the portfolio. Individual securities are important only to
    the extent they affect the aggregate portfolio. In short, all decisions should focus
    on the impact which the decision will have on the aggregate portfolio of all the
    assets held.

  Portfolio strategy should be molded to the unique needs and characteristics of the
    portfolio‘s owner.

 Diversification across securities will reduce a portfolio‘s risk. If the risk and
    return are lower than the desired level, leverages (borrowing) can be used to
    achieve the desired level.
 Larger portfolio returns come only with larger portfolio risk. The most important
    decision to make is the amount of risk which is acceptable.
 The risk associated with a security type depends on when the investment will be
    liquidated. Risk is reduced by selecting securities with a payoff close to when the
    portfolio is to be liquidated.
 Competition for abnormal returns is extensive, so one has to be careful in
    evaluating the risk and return from securities. Imbalances do not last long and
    one has to act fast to profit from exceptional opportunities.

   Provides user interfaces that allow for the extraction of data based on user
    defined parameters.
   Provides a comprehensive set of tools to perform portfolio and risk evaluation
    against parameters set within the risk framework.
   Provides a set of tools to optimise portfolio value and risk position by:
   Considering various legs of different contracts to create an optimal trading
   The calculation of residual purchase requirements.
   Performs analysis that provides the relevant information to create hedge and trade
   Performs analysis on current and potential trades.
   Evaluates the best mix of contracts on offer from counterparties to minimise the
    overall purchase cost and maximize profits.
   Creates and maintains trading and hedge strategies by:
   Allocating trades to contracts and books.
   Maintaining trades against contracts and books.
   Reviewing trades against existing trading strategy.
   Maintains an audit trail of decisions taken and query resolution.
   Produces accurate and timely reports

Portfolio Management

To sustain long-term growth, companies manage a number of products and candidates at
different stages of maturity. However, different product profiles and the therapeutic areas
they serve have disparate commercial opportunities.

Our portfolio prioritization, pipeline analysis, category franchise strategy, and
technology licensing assessments provide a systematic means of optimizing development
programs and product opportunities. We outline and quantify the areas of greatest
opportunity for your organization and recommend actionable strategies that establish or
expand your position in target markets.

Key portfolio management questions that we address:

       Which technologies and product candidates have the greatest potential
        commercial value?
       How can we broaden and deepen our therapy penetration?
       What actions can we take to maximize return on investment for individual
        candidates and discoveries?
       Which proprietary rights do we buy, co-market, license, or sell?
       How do we balance short and long term product needs to maximize therapeutic
        franchise value?

We detail the value of discoveries in clinical phases, candidates in the pipeline, and
products on the market. These individual and therapeutic category evaluations enable
executives to make strategic investment, licensing and prioritization decisions to realize
their portfolio's full potential.

Portfolio Management
you can now receive the same portfolio management services as many institutional
investors-whether it is a separately managed account or a mutual fund wrap portfolio.

Some benefits of managed portfolios include:
Providing access to top-tier investment management professionals
Tailored portfolios to meet specific investment needs
Ownership of individual securities
Ease of pre-designed mutual fund portfolios
Every investor is unique, and investment advisory services provide you with
professional investment advice and a personalized investment strategy. Whether you're
seeking a tailored, professionally managed portfolio, or the convenience and simplicity
of a diversified mutual fund wrap program, your investment choice should focus on
meeting your financial goals. During this process, you should consider current and future
growth objectives, income needs, time horizon and risk tolerance. These considerations
form the blueprint for developing a portfolio management strategy. The process involves,
but is not limited to, the following important stages.

         Set investment objectives
         Develop an asset allocation strategy
         Evaluate/Select investment vehicle
         Portfolio review -- Ongoing portfolio monitoring

Portfolio Management Maturity

Summarizes five levels of project portfolio management maturity .each level represents
the adoption of an increasingly comprehensive and effective subset of related solutions
discussed in the previous parts of this 6-part paper for addressing the reasons that
organizations choose the wrong projects. Understanding organizational maturity with
regard to project portfolio management is useful. It facilitates identifying performance
gaps, indicates reasonable performance targets, and suggests an achievable path for

The fact that five maturity levels have been identified is not meant to suggest that all
organizations ought to strive for top-level performance. Each organization needs to
determine what level of performance is reasonable at the current time based on business
needs, resources available for engineering change, and organizational ability to accept
change. Experience shows that achieving high levels of performance typically takes
several years. It is difficult to leap-frog several steps at once. Making progress is what

                       Five levels of project portfolio management.

The detailed definitions of the levels, provided below, are not precise. Real organizations
will tend to be more advanced with regard to some characteristics and less advanced
relative to others. For most organizations, though, it is easy to pick one of the levels as
characterizing the current maturity of project portfolio management performance.

Level 1: Foundation

Level 1 organizes work into discrete projects and tracks costs at the project level.

      Project decisions are made project-by-project without adherence to formal project
       selection criteria.
      The portfolio concept may be recognized, but portfolio data are not centrally
       managed and/or not regularly refreshed.
      Roles and responsibilities have not been defined or are generic, and no value-
       creation framework has been established.
      Only rarely are business case analyses conducted for projects, and the quality is
       often poor.
      Project proposals reference business benefits generally, but estimates are nearly
       always qualitative rather than quantitative.

      There is little or no formal balancing between the supply and demand for project
       resources, and there is little if any coordination of resources across projects,
       which often results in resource conflicts.
      Over-commitment of resources is common.
      There may be a growing recognition that risks need to be managed, but there is
       little real management of risk.

Level 1 organization is not yet benefiting from project portfolio management, but they
are motivated to address the relevant problems and have the minimum foundation in
place to begin building project portfolio management capability. At this level,
organizations should focus on establishing consistent, repeatable processes for project
scheduling, resource assignment, time tracking, and general project oversight and

Level 2: Basics

Level 2 replaces project-by-project decision making with the goal of identifying the best
collection of projects to be conducted within the resources available. At a minimum this
requires aggregating project data into a central database, assigning responsibilities for
project portfolio management, and force-ranking projects.

      Redundant projects are identified and eliminated or merged.
      Business cases are conducted for larger projects, although quality may be
      Individual departments may be establishing structures to oversee and coordinate
       their projects.
      There is some degree of options analysis (i.e., different versions of the project
       will be considered).
      Project selection criteria are explicitly defined, but the link to value creation is
      Planning is mostly activity scheduling with limited performance forecasting.
      There are attempts to quantify some non-financial benefits, but estimates are
       mostly "guestimates" generated without the aid of standard techniques.
      Overlap and double counting of benefits between projects is common.
      Ongoing projects are still rarely terminated based on poor performance.

      The PPM tools being used may have good data display and management
       capabilities, but project prioritization algorithms may be simplistic and the results
       potentially misleading to decision makers.
      Portfolio data has an established refresh cycle or is regularly accessed and
       updated. Resource requirements at the portfolio level are recognized but not
       systematically managed.
      Knowledge sharing is local and ad hoc.
      Risk analysis may be conducted early in projects but is not maintained as a
       continual management process. Uncertainties in project schedule, cost and
       benefits are not quantified.
      Schedule and cost overruns are still common, and the risks of project failure
       remain large.

Level 2 organizations are beginning to implement project portfolio management, but
most of the opportunity has not yet been realized. The focus should be on formalizing the
framework for evaluating and prioritizing projects and on implementing tools and
processes for supporting project budgeting, risk and issues tracking, requirements
tracking, and resource management.

Level 3: Value Management

Level 3, the most difficult step for most organizations, requires metrics, models, and
tools for quantifying the value to be derived from projects. Although project
interdependencies and portfolio risks may not be fully and rigorously addressed, analysis
allows projects to be ranked based on "bang-for-the-buck," often producing a good
approximation of the value-maximizing project portfolio.

      The principles of portfolio management are widely understood and accepted.
      The project portfolio has a well-defined perimeter, with clear demarcation and
       understanding of what it contains and does not contain.
      Portfolio management processes are centrally defined and well documented, as
       are roles and responsibility for governance and delivery.
      Portfolio management can demonstrate that its role in scrutinizing projects has
       resulted in some initiatives being stopped or reshaped to increase portfolio value.

      Executives are engaged, provide tradeoff weights for the value model, and
       provide active and informed support.
      Plans are developed to a consistent standard and are outcome- or value-based.
      Effective estimation techniques are being used within planning and a range of
       project alternatives are routinely considered.
      Data quality assurance processes are in place and independent reviews are
      There is a common, consistent practice for project approval and monitoring.
      Project dependencies are identified, tracked, and managed.
      Decisions are made with the aid of a tool based on a defensible logic for
       computing project value that generates the efficient frontier.
      Portfolio data are kept up-to-date and audit trails are maintained.
      Costs, expenditures and forecasts are monitored at the portfolio level in
       accordance with established guidelines and procedures.
      Interfaces with financial and other related functions within the organization have
       been defined.
      A process is in place for validating the realization of project benefits.
      There is a defined risk analysis and management process, with efforts appropriate
       to risk significance, although some sources of risk are not quantified in terms of
       probability and consequence.

Level 3 organizations demonstrate a commitment to proactive, standardized project and
project portfolio management. They are achieving significant return from their
investment, although more value is available.

Level 4: Optimization

Level 4 is characterized by mature processes, superior analytics, and quantitatively
managed behavior.

      Tools for optimizing the project portfolio correctly and fully account for project
       risks and interdependencies.
      The business processes of value creation have been modeled and measurement
       data is collected to validate and refine the model.

      The model is the basis for the logic for estimating project value, prioritizing
       projects, making project funding and resource allocation decisions, and
       optimizing the project portfolio.
      The organization's tolerance for risk is known, and used to guide decisions that
       determine the balance of risk and benefit across the portfolio.
      There is clear accountability and ownership of risks.
      External risks are monitored and evaluated as part of the investment management
       process and common risks across the whole portfolio (which may not be visible
       to individual projects) are quantified and in support of portfolio optimization.
      Senior executives are committed, engaged, and proactively seek out innovative
       ways to increase value.
      There is likely to be an established training program to develop the skills and
       knowledge of individuals so that they can more readily perform their designated
      An extensive range of communications channels and techniques are used for
       collaboration and stakeholder management.
      High-level reports on key aspects of portfolio are regularly delivered to
       executives and the information is used to inform strategic decision making.
      There is trend reporting on progress, actual and projected cost, value, and level of
      Assessments of stakeholder confidence are collected and used for process
      Portfolio data is current and extensively referenced for better decision making.

Level 4 organizations are using quantitative analysis and measurements to obtain
efficient predictable and controllable project and project portfolio management. They are
obtaining the bulk of the value available from practicing project portfolio management.

Level 5: Core Competency

Level 5 occurs when the organization has made project portfolio management a core
competency, uses best-practice analytic tools, and has put processes in place for
continuous learning and improvement.

      Portfolio management processes are proven and project decisions, including
       project funding levels and timing, are routinely made based the value
       maximization value.
      Processes are continually refined to take into account increasing knowledge,
       changing business needs, and external factors.
      Portfolio management drives the planning, development, and allocation of
       projects to optimize the efficient use of resources in achieving the strategic
       objectives of the organization.
      High levels of competence are embedded in all portfolio management roles, and
       portfolio management skills are seen as important for career advancement.
      Portfolio gate reviews are used to proactively assess and manage portfolio value
       and risk.
      Portfolio management informs future capacity demands, capability requirements
       are recognized, and resource levels are strategically managed.
      Information is highly valued, and the organization's ability to mitigate external
       risks and grasp opportunities is enhanced by identifying innovative ways to
       acquire and better share knowledge.
      Benefits management processes are embedded across the organization, with
       benefits realization explicitly aligned with the value measurement framework.
      The portfolio is actively managed to ensure the long term sustainability of the
      Stakeholder engagement is embedded in the organization's culture, and
       stakeholder management processes have been optimized.
      Risk management underpins decision-making throughout the organization.
      Quantitatively measurable goals for process improvement have been established
       and performance against them tracked.
      The relationship between the portfolio and strategic planning is understood and
      Resource allocations to and from projects are intimately aligned so as the
       maximize value creation.

Level 5 organizations are obtaining maximum possible value from project portfolio
management. By fully institutionalizing project portfolio management into their culture
they free people to become more creative and innovative in achieving business success.

   Building Project Portfolio Management Maturity

   Experience shows that building project portfolio management maturity takes time. As
   suggested by, significant short-term performance gains can be achieved, but making step
   changes requires understanding current weaknesses and the commitment of effort and

   Step changes can be made, but achieving high levels of maturity typically takes years

1. SOUND GENERAL KNOWLEDGE: Portfolio management is an exciting and
   challenging job. He has to work in an extremely uncertain and confliction environment.
   In the stock market every new piece of information affects the value of the securities of
   different industries in a different way. He must be able to judge and predict the effects of
   the information he gets. He must have sharp memory, alertness, fast intuition and self-
   confidence to arrive at quick decisions.

2. ANALYTICAL ABILITY: He must have his own theory to arrive at the instrinsic
   value of the security. An analysis of the security‘s values, company, etc. is s continuous
   job of the portfolio manager. A good analyst makes a good financial consultant. The
   analyst can know the strengths, weaknesses, opportunities of the economy, industry and
   the company.

3. MARKETING SKILLS: He must be good salesman. He has to convince the
   clients about the particular security. He has to compete with the stock brokers in the
   stock market. In this context, the marketing skills help him a lot.

4. EXPERIENCE: In the cyclical behavior of the stock market history is often repeated,
   therefore the experience of the different phases helps to make rational decisions. The
   experience of the different types of securities, clients, market trends, etc., makes a perfect
   professional manager.

          Portfolio decisions for an individual investor are influenced by a wide variety of
   factors. Individuals differ greatly in their circumstances and therefore, a financial
   programme well suited to one individual may be inappropriate for another. Ideally, an
   individual‘s portfolio should be tailor-made to fit one‘s individual needs.
   Investor‘s Characteristics:

          An analysis of an individual‘s investment situation requires a study of personal
   characteristics such as age, health conditions, personal habits, family responsibilities,
   business or professional situation, and tax status, all of which affect the investor‘s
   willingness to assume risk.

   Stage in the Life Cycle:
          One of the most important factors affecting the individual‘s investment objective
   is his stage in the life cycle. A young person may put greater emphasis on growth and
   lesser emphasis on liquidity. He can afford to wait for realization of capital gains as his
   time horizon is large.

   Family responsibilities:
      The investor‘s marital status and his responsibilities towards other members of the
   family can have a large impact on his investment needs and goals.

Investor‘s experience:

          The success of portfolio depends upon the investor‘s knowledge and experience
in financial matters. If an investor has an aptitude for financial affairs, he may wish to be
more aggressive in his investments.

Attitude towards Risk:

    A person‘s psychological make-up and financial position dictate his ability to assume
the risk. Different kinds of securities have different kinds of risks. The higher the risk,
the greater the opportunity for higher gain or loss.

Liquidity Needs:

          Liquidity needs vary considerably among individual investors. Investors with
regular income from other sources may not worry much about instantaneous liquidity,
but individuals who depend heavily upon investment for meeting their general or specific
needs, must plan portfolio to match their liquidity needs. Liquidity can be obtained in
two ways:

1. By allocating an appropriate percentage of the portfolio to bank deposits, and

2. By requiring that bonds and equities purchased be highly marketable.
Tax considerations:

    Since different individuals, depending upon their incomes, are subjected to different
marginal rates of taxes, tax considerations become most important factor in individual‘s
portfolio strategy. There are differing tax treatments for investment in various kinds of

Time Horizon:

    In investment planning, time horizon becomes an important consideration. It is
highly variable from individual to individual. Individuals in their young age have long
time horizon for planning, they can smooth out and absorb the ups and downs of risky

combination. Individuals who are old have smaller time horizon, they generally tend to
avoid volatile portfolios.

Individual‘s Financial Objectives:

    In the initial stages, the primary objective of an individual could be to accumulate
wealth via regular monthly savings and have an investment programmed to achieve long
term capital gains.
Safety of Principal:

    The protection of the rupee value of the investment is of prime importance to most
investors. The original investment can be recovered only if the security can be readily
sold in the market without much loss of value.

Assurance of Income:

    `Different investors have different current income needs. If an individual is
dependent of its investment income for current consumption then income received now
in the form of dividend and interest payments become primary objective.

Investment Risk:

        All investment decisions revolve around the trade-off between risk and return.
All rational investors want a substantial return from their investment. An ability to
understand, measure and properly manage investment risk is fundamental to any
intelligent investor or a speculator. Frequently, the risk associated with security
investment is ignored and only the rewards are emphasized. An investor who does not
fully appreciate the risks in security investments will find it difficult to obtain continuing
positive results.

                       RISK AND EXPECTED RETURN:

       There is a positive relationship between the amount of risk and the amount of
expected return i.e., the greater the risk, the larger the expected return and larger the
chances of substantial loss. One of the most difficult problems for an investor is to
estimate the highest level of risk he is able to assume.

    Risk is measured along the horizontal axis and increases from the left to right.

    Expected rate of return is measured on the vertical axis and rises from bottom to

    The line from 0 to R (f) is called the rate of return or risk less investments
       commonly associated with the yield on government securities.

    The diagonal line form R (f) to E(r) illustrates the concept of expected rate of
       return increasing as level of risk increases.


Risk consists of two components. They are
1. Systematic Risk
2. Un-systematic Risk

1. Systematic Risk:

       Systematic risk is caused by factors external to the particular company and
uncontrollable by the company. The systematic risk affects the market as a whole.
Factors affect the systematic risk are

    economic conditions

    political conditions

    sociological changes

The systematic risk is unavoidable. Systematic risk is further sub-divided into three
types. They are

   a) Market Risk

   b) Interest Rate Risk

   c) Purchasing Power Risk

a). Market Risk

       One would notice that when the stock market surges up, most stocks post higher
price. On the other hand, when the market falls sharply, most common stocks will drop.
It is not uncommon to find stock prices falling from time to time while a company‘s
earnings are rising and vice-versa. The price of stock may fluctuate widely within a short
time even though earnings remain unchanged or relatively stable.

b). Interest Rate Risk:

       Interest rate risk is the risk of loss of principal brought about the changes in the
interest rate paid on new securities currently being issued.

  c). Purchasing Power Risk:

          The typical investor seeks an investment which will give him current income and
  / or capital appreciation in addition to his original investment.

  2. Un-systematic Risk:

      Un-systematic risk is unique and peculiar to a firm or an industry. The nature and
  mode of raising finance and paying back the loans, involve the risk element. Financial
  leverage of the companies that is debt-equity portion of the companies differs from each
  other. All these factors affect the un-systematic risk and contribute a portion in the total
  variability of the return.

   Managerial inefficiently

   Technological change in the production process

   Availability of raw materials

   Changes in the consumer preference

   Labor problems

          The nature and magnitude of the above mentioned factors differ from industry to
  industry and company to company. They have to be analyzed separately for each
  industry and firm. Un-systematic risk can be broadly classified into:
  a) Business Risk
  b) Financial Risk

a. Business Risk:
  Business risk is that portion of the unsystematic risk caused by the operating
  environment of the business. Business risk arises from the inability of a firm to maintain
  its competitive edge and growth or stability of the earnings. The volatility in stock prices
  due to factors intrinsic to the company itself is known as Business risk. Business risk is

  concerned with the difference between revenue and earnings before interest and tax.
  Business risk can be divided into.

  i). Internal Business Risk
         Internal business risk is associated with the operational efficiency of the firm.
  The operational efficiency differs from company to company. The efficiency of
  operation is reflected on the company‘s achievement of its pre-set goals and the
  fulfillment of the promises to its investors.

  ii).External Business Risk
         External business risk is the result of operating conditions imposed on the firm by
  circumstances beyond its control. The external environments in which it operates exert
  some pressure on the firm. The external factors are social and regulatory factors,
  monetary and fiscal policies of the government, business cycle and the general economic
  environment within which a firm or an industry operates.
b. Financial Risk:
  It refers to the variability of the income to the equity capital due to the debt capital.
  Financial risk in a company is associated with the capital structure of the company.
  Capital structure of the company consists of equity funds and borrowed funds.


         Various groups of securities when held together behave in a different manner and
  give interest payments and dividends also, which are different to the analysis of
  individual securities. A combination of securities held together will give a beneficial
  result if they are grouped in a manner to secure higher return after taking into
  consideration the risk element.

         There are two approaches in construction of the portfolio of securities. They are

   Traditional approach

   Modern approach


        Traditional approach was based on the fact that risk could be measured on each
 individual security through the process of finding out the standard deviation and that
 security should be chosen where the deviation was the lowest. Traditional approach
 believes that the market is inefficient and the fundamental analyst can take advantage of
 the situation. Traditional approach is a comprehensive financial plan for the individual.
 It takes into account the individual need such as housing, life insurance and pension
 plans. Traditional approach basically deals with two major decisions. They are

a)      Determining the objectives of the portfolio
b)      Selection of securities to be included in the portfolio

        Modern approach theory was brought out by Markowitz and Sharpe. It is the
 combination of securities to get the most efficient portfolio. Combination of securities
 can be made in many ways. Markowitz developed the theory of diversification through
 scientific reasoning and method. Modern portfolio theory believes in the maximization
 of return through a combination of securities. The modern approach discusses the
 relationship between different securities and then draws inter-relationships of risks
 between them. Markowitz gives more attention to the process of selecting the portfolio.
 It does not deal with the individual needs.

        Markowitz model is a theoretical framework for analysis of risk and return and
 their relationships.   He used statistical analysis for the measurement of risk and
 mathematical programming for selection of assets in a portfolio in an efficient manner.
 Markowitz apporach determines for the investor the efficient set of portfolio through
 three important variables i.e.
  Return
  Standard deviation
  Co-efficient of correlation

       Markowitz model is also called as an “Full Covariance Model“. Through this
model the investor can find out the efficient set of portfolio by finding out the tradeoff
between risk and return, between the limits of zero and infinity. According to this theory,
the effects of one security purchase over the effects of the other security purchase are
taken into consideration and then the results are evaluated. Most people agree that
holding two stocks is less risky than holding one stock. For example, holding stocks
from textile, banking and electronic companies is better than investing all the money on
the textile company‘s stock.
       Markowitz had given up the single stock portfolio and introduced diversification.
The single stock portfolio would be preferable if the investor is perfectly certain that his
expectation of highest return would turn out to be real. In the world of uncertainty, most
of the risk adverse investors would like to join Markowitz rather than keeping a single
stock, because diversification reduces the risk.

    All investors would like to earn the maximum rate of return that they can achieve
       from their investments.

    All investors have the same expected single period investment horizon.

    All investors before making any investments have a common goal. This is the
       avoidance of risk because Investors are risk-averse.

    Investors base their investment decisions on the expected return and standard
       deviation of returns from a possible investment.

    Perfect markets are assumed (e.g. no taxes and no transition costs)

    The investor assumes that greater or larger the return that he achieves on his
       investments, the higher the risk factor surrounds him. On the contrary when risks
       are low the return can also be expected to be low.

    The investor can reduce his risk if he adds investments to his portfolio.

 An investor should be able to get higher return for each level of risk “by
   determining the efficient set of securities“.

 An individual seller or buyer cannot affect the price of a stock. This assumption
   is the basic assumption of the perfectly competitive market.

 Investors make their decisions only on the basis of the expected returns, standard
   deviation and covariance’s of all pairs of securities.

 Investors are assumed to have homogenous expectations during the decision-
   making period

 The investor can lend or borrow any amount of funds at the risk less rate of
   interest. The risk less rate of interest is the rate of interest offered for the treasury
   bills or Government securities.

 Investors are risk-averse, so when given a choice between two otherwise identical
   portfolios, they will choose the one with the lower standard deviation.

 Individual assets are infinitely divisible, meaning that an investor can buy a
   fraction of a share if he or she so desires.

 There is a risk free rate at which an investor may either lend (i.e. invest) money
   or borrow money.

 There is no transaction cost i.e. no cost involved in buying and selling of stocks.

 There is no personal income tax. Hence, the investor is indifferent to the form of
   return either capital gain or dividend.


        It is believed that holding two securities is less risky than by having only one
investment in a person‘s portfolio. When two stocks are taken on a portfolio and if they
have negative correlation then risk can be completely reduced because the gain on one
can offset the loss on the other. This can be shown with the help of following example:


        Covariance of the securities will help in finding out the inter-active risk. When
the covariance will be positive then the rates of return of securities move together either
upwards or downwards. Alternatively it can also be said that the inter-active risk is
positive. Secondly, covariance will be zero on two investments if the rates of return are
        Holding two securities may reduce the portfolio risk too. The portfolio risk can
be calculated with the help of the following formula:


        Markowitz, William Sharpe, John Lintner and Jan Mossin provided the basic
structure of Capital Asset Pricing Model. It is a model of linear general equilibrium
return. In the CAPM theory, the required rate return of an asset is having a linear
relationship with asset‘s beta value i.e. un-diversifiable or systematic risk (i.e. market
related risk) because non market risk can be eliminated by diversification and systematic
risk measured by beta. Therefore, the relationship between an assets return and its
systematic risk can be expressed by the CAPM, which is also called the Security Market
        R =       Rf Xf+ Rm(1- Xf)
        Rp     = Portfolio return
        Xf      =The proportion of funds invested in risk free assets
        1- Xf = The proportion of funds invested in risky assets
        Rf     = Risk free rate of return
        Rm     = Return on risky assets

        Formula can be used to calculate the expected returns for different situations, like
mixing risk less assets with risky assets, investing only in the risky asset and mixing the
borrowing with risky assets.

        According to CAPM, all investors hold only the market portfolio and risk less
securities. The market portfolio is a portfolio comprised of all stocks in the market. Each
asset is held in proportion to its market value to the total value of all risky assets.
        For example, if wipro Industry share represents 15% of all risky assets, then the
market portfolio of the individual investor contains 15% of wipro Industry shares. At
this stage, the investor has the ability to borrow or lend any amount of money at the risk
less rate of interest.

        E.g.: assume that borrowing and lending rate to be 12.5% and the return from the
risky assets to be 20%. There is a tradeoff between the expected return and risk. If an
investor invests in risk free assets and risky assets, his risk may be less than what he
invests in the risky asset alone. But if he borrows to invest in risky assets, his risk would
increase more than he invests his own money in the risky assets. When he borrows to
invest, we call it financial leverage. If he invests 50% in risk free assets and 50% in
risky assets, his expected return of the portfolio would be

Rp= Rf Xf+ Rm(1- Xf)
                    = (12.5 x 0.5) + 20 (1-0.5)
                    = 6.25 + 10
                    = 16.25%

if there is a zero investment in risk free asset and 100% in risky asset, the
return is
                  Rp= Rf Xf+ Rm(1- Xf)
                     = 0 + 20%
                     = 20%

if -0.5 in risk free asset and 1.5 in risky asset, the return is

        Rp= Rf Xf+ Rm(1- Xf)
           = (12.5 x -0.5) + 20 (1.5)
                  = -6.25+ 30
                  = 23.75%


    Average Return (R) = (R)/N
                    (P0) = Opening price of the share
                    (P1) = Closing price of the share
                       D = Dividend

   Year     (P0)         (P1)      D         (P1-P0)     P0*100
2005-2006    1,233.45   1361.20         29     127.75         12.71
2006-2007    1,361.20      2,012         5      650.8         48.16
2007-2008        2012   1900.75          5    -111.25        -15.84
2008-2009     1900.75   1900.45          8       -0.3          1.38
2009-2010     1900.45    425.30          -   -1475.15        -0.776

                 TOTAL RETURN                              45.634

     Average Return = 45.63/5 = 9.12


  Year          (P0)      (P1)          D      (P1-P0)        P0*100
2005-2006        916.30   974.35           5       58.2              6.89
2006-2007        974.35   739.15           5      23.52            -23.63
2007-2008        739.15 1,421.40           5     682.25             92.98
2008-2009      1,421.40 1456.55         3.75      35.15              2.74
2009-2010      1456.55    591.25         .75     -865.3             -59.4

                  TOTAL RETURN                                        19.58
     Average Return = 19.58/5 = 3.916


  Year           (P0)      (P1)          D        (P1-P0)     P0*100
2005-2006         138.50   254.65             4     116.15         86.71
2006-2007         254.65   360.55             7      105.9         44.34
2007-2008         360.55   782.20             8     421.61        119.19
2008-2009         782.20   735.25            25     -46.95           -2.8
2009-2010         735.23   826.10             2      90.85         12.63

                  TOTAL RETURN                                     258.07

       Average Return = 258.07/5 =51.614


  Year          (P0)       (P1)          D        (P1-P0)     P0*100
2005-2006        188.20    490.60          20       302.40          171.3
2006-2007        490.60    548.00          20        57.40          15.77
2007-2008        548.00    890.45          20       342.45          66.14
2008-2009        890.45    688.75          17       -20.17         -20.74
2009-2010        688.75       9.5        1.45         1.45          1.958

                  TOTAL RETURN                                   234.428

       Average Return = 234.428/5 = 46.885


           COMPANY                 RETURN

             WIPRO                  9.12

           DR.REDDY                 3.916

              ACC                  51.614

       HERO MOTOCORP               46.885



   Standard Deviation = Variance
   Variance   =      1/n (R-R)2


               Return      Avg.
    Year        (R)     Return (R)      (R-R)     (R-R)2
  2005-2006       12.71    9.12           3.59     12.8881
  2006-2007       48.16    9.12         39.04     1524.122
  2007-2008      -15.84    9.12         -24.96    623.0016
  2008-2009        1.38    9.12          -7.74     59.9076
  2009-2010      -0.776    9.12         -9.896    97.93082

                     TOTAL                          2317.85
     Variance = 1/n (R-R)2 = 1/5 (2317.85) = 463.57

     Standard Deviation = Variance = 463.57      =21.53


               Return      Avg.
    Year        (R)     Return (R)      (R-R)     (R-R)2
  2005-2006        6.89   46.88           2.98      8.8804
  2006-2007      -23.63   46.88         -27.54    758.4516
  2007-2008       92.98   46.88         89.07     7933.465
  2008-2009        2.74   46.88          -1.17      1.3689
  2009-2010       -59.4   46.88         -63.31    4008.156

                    TOTAL                         12710.32

     Variance = 1/n-1 (R-R)2 = 1/5 (12710.32) = 2542.06

     Standard Deviation = Variance =      2542.06= 50.14


                 Return      Avg.
   Year           (R)     Return (R)      (R-R)      (R-R)2
 2005-2006          86.71   51.61           35.1    1232.01
 2006-2007          44.34   51.61          -7.27    52.8529
 2007-2008        119.19    51.61         67.58     4567.056
 2008-2009           -2.8   51.61         -54.41    2960.448
 2009-2010          12.63   51.61         -38.98    1519.44

                     TOTAL                          10331.81

       Variance = 1/n-1 (R-R)2 = 1/5 (10331.81) = 2066.36

       Standard Deviation = Variance = 2066.36 = 45.45


                Return     Avg.
   Year          (R)    Return (R)       (R-R)      (R-R)2
 2003-2004        171.3      32.59       138.71     19,240.5
 2006-2007        15.77     32.59         -16.82        284.1
 2007-2008        66.14      32.59         33.57   1,126.273
 2008-2009       -20.74      32.59        -53.33      2,844.1
 2009-2010        1.958      32.59           -31       -960.8

                     TOTAL                          29,592.4

       Variance = 1/n-1 (R-R)2 = 1/5 (29,592.4) = 4,232.1

       Standard Deviation = Variance = 4,232.1 = 70.23


              COMPANY                      RISK
                WIPRO                      22.86
              DR.REDDY                     46.66
                 ACC                       47.963
          HERO MOTOCORP                    70.23



Covariance (COV ab) = 1/n (RA-RA)(RB-RB)
Correlation Coefficient = COV ab/ a*


   YEAR        (RA-RA)       (RB-RB)   (RA-RA) (RB-RB)
  2005-2006         8.11          6.22             50.44
  2006-2007        43.56         -24.3          -1,058.5
  2007-2008       -10.44         92.31            -963.7
  2008-2009       -4.195          2.07             -8.69
  2009-2010       -4.678        -60.07            281.01

                TOTAL                               -1,180.3
      Covariance (COV ab) = 1/5 (-1,180.3) = -196.72

               = -196.72/(22.86)(46.66) = -0.184

iii. WIPRO (RA) & ACC (RB)

   YEAR        (RA-RA)       (RB-RB)    (RA-RA) (RB-RB)
  2005-2006       -32.01          -50.7          1,622.91
  2006-2007         8.11          44.67             362.3
  2007-2008        43.56           2.32            101.18
  2008-2009       -10.44          77.17            -805.7
  2009-2010       -4.195         -44.82            188.02

                TOTAL                                1,606.11

      Covariance (COV ab) = 1/5(1,606.11) = 267.69

            = 267.69/(22.86)(47.27) = .0247


   YEAR       (RA-RA)      (RB-RB) (RA-RA) (RB-RB)
  2005-2006        8.11      138.71          1,124.9
  2006-2007       43.56       -16.82         -732.68
  2007-2008      -10.44        33.57         -358.48
  2008-2009       -2.42       -59.44           143.8
  2009-2010       -4.68          -31           145.1

              TOTAL                               2,697

     Covariance (COV ab) = 1/6 (2,697) = 449.7

           = 2,697/(22.86)(70.23) = 0.28

3. Correlation Between DR REDDY & Other Companies


   YEAR       (RA-RA)      (RB-RB) (RA-RA) (RB-RB)
  2005-2006        6.22        44.67          277.85
  2006-2007      -24.31         2.32         -56.399
  2007-2008       92.31        77.17        7,123.56
  2008-2009        2.07       -44.82          -92.78
  2009-2010      -60.07       -29.37        1,764.26

              TOTAL                             9,838.84
     Covariance (COV ab) = 1/6 (9,838.84) =1,639.81

     Correlation Coefficient = COV ab/ a*
              a = 46.66 ; b = 47.27
           = 1,639.81/(46.66)(47.27) = 0.743


   YEAR        (RA-RA)      (RB-RB) (RA-RA) (RB-RB)
  2005-2006         6.22      138.71           862.72
  2006-2007        -24.3       -16.82          408.73
  2007-2008        92.31        33.57        3,098.85
  2008-2009         2.07       -53.33        -110.393
  2009-2010       -60.07          -31         1,862.2

                TOTAL                            7,284.66

      Covariance (COV ab) = 1/6 (7,284.66) = 1,214.109
      Correlation Coefficient = COV ab/ a*
               a = 46.66 ; b = 70.23
            = 1,214.109/(46.66)(70.23) = 0.370

4. Correlation With ACC & Other Companies


      Covariance (COV ab) = 1/6 (15,682.15) = 2,613.7
      Correlation Coefficient = COV ab/ a*
               a = 47.27; b =70.23
            =2,613.7/(47.27)(70.23) = 0.787


FORMULA          :

          Wa =                        -
                        2        2

        Wb = 1 – Wa

  i.    WIPRO & DR. REDDY

          nab = -0.184

          Wa =              46.66 [46.66-(-
                                  2                2
                                                           –   2(-

          Wa =    2,373.42
          Wa = 0.77
          Wb = 1 – Wa
          Wb = 1- 0.77 = 0.23

  ii.   WIPRO (a) & ACC (b)

          nab = 0.247

          Wa =                                 -
                                  2                    2

          Wa =       1,964.82

          Wa =1.11

          Wb = 1 – Wa

          Wb = 1- 1.11 = -0.11

 iii.   WIPRO(a) & HERO MOTOCORP(b)

          nab = 0.28

          Wa =                  70.23 [70.23-(0.28*22.86)]
                                        2                            2

          Wa =    4,482.88

          Wa = 0.98

          Wb = 1 – Wa

          Wb = 1-0.98 = 0.02


          DRREDDY (a) & ACC (b)

          nab = 0.74

          Wa =                     47.7 [47.7- (0.74*46.7)]
                                   2                             2

        Wa =      602.6

          Wa = 0.52
          Wb = 1 – Wa
          Wb = 1- 0.52 = 0.48
        i. DRREDDY (a) & HERO MOTOCORP (b)

          nab = 0.37

          Wa =                      70.23 [70.23-(0.37*46.67)]
                                            2                        2

           Wa =     3,722.2

           Wa = 1.48
           Wb = 1 – Wa
           Wb = 1-1.48 = -0.48


         ACC (a) & HERO MOTOCORP (b)

           nab = 0.79

           Wa =                      70.23 [70.23- (0.79*47.3)]
                                       2                              2

           Wa =       2,308.5

           Wa = 1.20

           Wb = 1 – Wa

           Wb = 1- 1.20 = -0.20


                                 2                                2
    RP     =      (                                                       +


WIPRO (a) & DR.REDDY (b):

Wa = 0.78
Wb = 0.23
nab = -0184

RP    =          (22.86*0.78.)2+(46.66*0.23) 2                              -0.184)

WIPRO (a) &ACC (b):

Wa = 1.11
Wb = -0.11
nab = 0.25

RP     =      (22.86*1.11) 2+(47.27*-0.11) 2+2(22.86)(47.27)(1.11)(-0.11)(0.25)


Wa= 0.98
nab = 028

     RP =         (22.86*0.98)2(70.23*0.02)2+2(22.86)(70.23)(0.98)(0.02)(0.28)

                           = 22.85%


DRREDDY (a) & ACC (b):

Wb= 0.48
nab = 0.74

RP =          (46.7*0.52)2+(47.3*0.48)2

               1,922.80      = 43.85%

       DRREDDY (a) & HERO MOTOCORP (b):

Wa = 1.48
Wb= -0.48
nab = 0.37

RP =                  (46.67*1.48)2+(70.23*-0.48)2      -



Wa= 1.20
Wb = -0.20
nab = 0.79

   RP =                   (47.3*1.20)2+(70.23*-0.20)2   -

                1,764.84 = 42%


                         Rp=(RA*WA) + (RB*WB)

                Where Rp = portfolio return
     RA= return of A                 WA= weight of A
     RB= return of B                 WB= weight of B


WIPRO (a) & DR.REDDY (b):

RA= 4.6       WA=0.77
RB=0.67       WB=0.23
Rp = (4.6*0.77) + (0.67*0.23)
Rp = (3.542 + 0.1541)
Rp = 3.6961%

WIPRO (a) &ACC (b):

RA= 4.6       WA=1.11
RB= 42.02     WB=-0.11
Rp = (4.6*1.11) + (42.02*-0.11)
Rp = (5.106+4.622)
Rp = 0.484


RA= 4.6       WA=0.98
RB= 32.498    WB=0.02
Rp = (4.6*0.9) + (32.498*0.02)
Rp = (4.508 + 0.6499)
Rp = 5.16%


DRREDDY (a) & ACC (b):
RA= 0.67      WA=0.52
RB=42.02      WB=0.48
Rp = (0.67*0.52) + (42.02*0.48)
Rp = (.3487+20.139)
Rp = 20.5%


RA= 0.67      WA=1.48
RB=32.498     WB=-0.48
Rp (0.67*1.48) + (32.498*-0.48)
Rp (0.9916-15.599)
Rp -14.60%


RA= 42.02     WA=1.20
RB=32.498     WB=-0.20
Rp = (42.02*1.20) + (32.498*-0.20)
Rp = (50.424-6.499)
Rp = 43.92%

                                                                PORTFOLIO        PORTFOLIO
  COMBINATION         CORRELATION           COVARIANCE          RETURN           RISK
  DR.REDDY                        -0.184             -196.72               3.7          18.9
  WIPRO & ACC                      0.247               267.69            0.49           23.5
  WIPRO &HERO                        0.28               449.7              5.0          22.9
  ITC & DR.REDDY                     0.89              2736.2             -9.8          26.9
  ITC &ACC                         0.830               2591.4          36.542            50
  ITC &HERO                        0.587             2736.33             25.4           60.6
  DR.REDDY & ACC                   .7434               1639.8            20.5           43.9
  DR REDDY&HERO                    0.705          1,124.1095            -14.6           15.3
  ACC & HERO                      0.7873              2,613.7            43.9            42


       The analytical part of the study for the 6 years period reveals the
following interpretations,
wipro with itc:
         In this combination as per the calculations and the study the wipro bears a
proportion of investment of (0.93)and where as ITC bears a proportion of (0.07)which is
less than compared to wipro. The standard deviation of wipro is (22.86) and (66.04) in
From the return point of view wipro is (4.6) and (20.1) is ITC. From risk point of view
wipro is less risk than, ITC so the investors who are will to face high risk the better
option will be investing in ITC.

Wipro with acc:
         Portfolio weights for wipro and ACC are (1.11)and (-0.11) respectively. This
indicates that the investors who are interested to take more risk they can invest in this
combination, and also can get high returns.

Dr reddy & Hero Motocorp:
         In this combination as per the calculation & the study of portfolio weights of dr
reddy and Hero Motocorp are (1.48) and (-0.48) respectively. Here the standard
deviation of drreddy &Hero Motocorp are (46.66) and (70.23) respectively. Returns are
(0.67) is for dr reddy (32.43) is for Hero Motocorp.In this, position invest in Hero
Motocorp is high risk as well as high returns also up to (32.43) when compared to

Dr reddy&acc:

         The portfolio of weights of the both (0.52)is drreddy (.048) is for acc. The
standard deviation of dr reddy is (46.66) and (47.27) for acc. The returns of drreddy is
(0.67) and (42.02) is acc. According to this combination investor can invest acc, this is
more risk as well as more returns can get up to (42.02). If investor wants less risk he has
to invest in acc.Dr reddy is a low risk as well as low returns also.

Acc&Hero Motocorp:

       According to this combination of the portfolio weights are (1.20) in acc and (-
0.20) is Hero Motocorp. The standard deviation of acc is less than Hero Motocorp
47.27>70.23. if the investor wants to take low risk, acc is the better option. And the
return point of view Hero Motocorp is providing more returns that of acc.

       According to this combination if the investor wants to get returns then he has to
take the more risk. This is the good combination for investors for investing in the
acc&Hero Motocorp. For more profits.

“Greater Portfolio Return with less Risk is always is an attractive
combination” for the Investors.


      The investors who are      risk averse can invest their funds in the
portfolio combination of, ACC, HERO MOTOCORP AND WIPRO
proportion. The investors who are slightly risk averse are suggested to
invest in WIPRO, DR. REDDY, ACC as the combination is slightly low
risk when compared with other companies.

      The analysis regarding the compaines ACC, HERO MOTOCORP
has howed a wise investment in public and in private sector with an
increasing trend where as corporate sector has recorded a decreasing trends
income which denotes an increasing trend throught out the study period.

As far as the average return of the company is concerned ACC, , HERO
MOTOCORP is high with an average return of 48.41%. WIPRO,
DR.REDDY is getting low returns. HERO MOTOCORP securities are
performing at medium returns.

As far as the correlation is concerned the securities DR.REDDY are high
correlated with minimum portfolio risk. The investor who is risk averse will
have to invest in this combination which gives good return with low risk.


  As the average return of securities, ACC, HERO MOTOCORP and
    are HIGH, it is suggested that investors who show interest in these
    securities taking risk into consideration.

  As the risk of the securities ITC, ACC, HERO MOTOCORP and
    BHEL are risky securities it suggested that the investors should be
    careful while investing in these securities.

  The investors who require minimum return with low risk should
    invest in WIPRO & DR.REDDY.

  It is recommended that the investors who require high risk with high
    return should invest in ITC and HERO MOTOCORP.

  The investors are benefited by investing in selected scripts of
  Buy stocks in companies with potential for surprises.
  Take advantage of volatility before reaching a new equilibrium.
  Listen to rumors and tips, check for yourself.
  Don’t put your trust in only one investment. It is like “putting all the
    eggs in one basket “. This will help lesson the risk in the long term.
  The investor must select the right advisory body which is has sound
    knowledge about the product which they are offering.
  Professionalized advisory is the most important feature to the
    investors. Professionalized research, analysis which will be helpful
    for reducing any kind of risk to overcome.


Security Analysis & Portfolio Management - Fishers & Jordon
Financial Management – M.Y. Khan
Financial Management – Prasanna Chandra
News Papers
Times of India
India Today


To top