active portfolio management and construction - with an investment strategy
TRANSCRIPT
ACTIVE PORTFOLIO MANAGEMENT AND
PORTFOLIO CONSTRUCTION –
IMPLEMENTING AN INVESTMENT STRATEGY
To know how the investment
made in different securities
minimizes the risk and
maximizes the returns.
To get the knowledge of different
factor that affects the
investment decision of investors
.
To know how different companies
are managing their portfolio i.e.
when and in which sectors they
are investing.
To get the knowledge of
investment decision and asset
allocation
Objective of study
Deals with the construction and maintenance of a collection of investments.
Portfolio Management
A properly constructed portfolio achieves a given level of expected return with the least possible risk
Portfolio managers have a duty to create the best possible collection of investments for each customer’s unique needs and circumstances
Formulate an investment strategy based on the investment policy statementPortfolio managers must understand investor profile & the basic elements of capital market theory
Portfolio Construction
Fundament
al Analysis Fundamental analysis is
all about estimating the
“intrinsic value” of a
security.Conclude that
price(intrinsic) of a
security depends upon
fundamental factor as a
whole are: 1 .Economic Analysis
2 .Industry Analysis
3 .Company Analysis
Sales Rs Cr. Var(%)OP(Rs Cr)Var (%)PBDT Rs Cr.Var (%)NP (Rs)Var(%)Sales Rs. CrVar(%) OP(Rs Cr)Var (%)PBDT Rs Cr.Var (%)NP (Rs)Var(%)Axis Bank 10178.63 12 7542 14 2742.48 24 1842.3 18 38046.38 132 4921.4 10 6231.9 20 6226.6 20ICICI Bank 341.34 19 246.97 20 39.21 15 39.08 15 1266.92 23 911.63 24 151.76 46 151.76 46SBI Bank 42443.27 17 27692 19 4736.7 32 3040.7 -81 54903.72 141 3242.5 151 16174 14 10891 -23M&M 10837.89 5 906.57 -29 920.76 -30 844.09 3 39963.36 -1 4721.2 0 5179.9 4 3712.9 15Tata Moters 8438.88 -23 -638.6 PL -812.9 -999 -751.9 -135 33906.97 -24 -911.2 PL 1584.4 -33 874.38 28Hindalco Inds. 8359.85 21 844.41 31 841.11 17 644.13 34 27573.06 6 2491.9 14 2904.7 24 1745.4 26Tata Steel 12041.92 13 4108.8 24 3697.08 11 2069.3 23 41271.24 81 2816.9 181 1784 19 6505.8 22DLF 432.53 -47 184.57 -65 425.32 46 412.69 110 2385.94 11 1230.7 -11 1003.8 40 910.58 119Reliance Industries 95193 13 8331 6 9568 2 5631 13 90117 83 877 -3 4316 1 20174 2NTPC 20938.08 27 4542.6 -5 4573.9 -10 3093.5 0 71602.63 9 17765 4 18047 -2 10975 -4ONGC 20880.93 -2 9185.9 53 10557.7 46 4889 44 83155.88 0 36647 37 43360 35 22095 5SUN Pharma. Inds. 752.58 2 144.16 112 245.16 96 162.96 176 2658.08 9 416.75 -19 517.21 -28 300.84 -39Lupin 2421.46 53 818.47 228 811.53 228 571.17 330 8777.18 23 2912.3 53 3306.7 75 2324.2 83TCS 16893.91 34 5565 56 6246.38 56 4628.5 54 64672.93 34 21534 51 24460 48 18346 44Infosys 11366 22 3394 29 4196 28 2883 25 44341 21 12533 14 15103 14 10194 13
Quarter Ended March 2014Company Name
TTM ENDED March 2014
31-Mar 16-Jun471.26 10 811.1 200 132.1 1990/764 1460 1772 13.4250.47 10 44.4 6.1 78/38 61 71 11.7746.57 10 1584.3 300 145.9 2834/1453 1918 2579 17.7307.94 5 272.7 280 60.3 1269/742 981 1201 19.9643.72 2 59.5 100 2.7 464/263 398 431 158.7206.46 1 180.6 100 8.5 174/83 142 161 19971.21 10 629.6 100 67 579/195 394 525 7.8356.32 2 93.4 100 5.1 243/120 177 210 41.1
3232.72 10 609.7 95 62.4 1143/765 930 1065 17.18245.46 10 104.1 58 13.3 169/111 120 153 11.54277.74 5 158.8 190 25.8 472/234 319 427 16.5
207.12 1 39.1 0 1.5 653/469 573 644 443.489.69 2 155.6 300 51.8 1022/742 936 972 18.8
195.87 1 224.93 200 93.7 2384/1382 2128 2269 24.2287.12 5 733 1260 177.5 3874/2343 3279 3242 18.3
52 Week High /Low
Price P/E Ratio
Equity Rs. Cr
TTM1403 EPS
Rs.FV Rs B.V Rs Div(%)
It is base on the premises that future stock price can be predicted by studying the historical price movements. The investors who required short term benefits go for technical not fundamental who is for longer prospect.
The difference charts used in technical analysis are as
follows:
Technical Analysis
Line chartBar chartPoint & Figure ChartJapanese Candle stick Chart
Beta and Alpha of Different stocks Stock Name Beta Alpha
BFSIICICI Bank 2.62 -0.021SBI 2.23 -0.02Axis Bank 3.08 -0.023
ENERGYONGC 2.23 -0.02Reliance Industries 1.12 0.008NTPC 1.61 -0.018
AUTOMahindera & Mahindra 0.375 0.019Tata Moters 1.23 0.017
FMCGBritannia Industries 0.73 0.024Dabur 0.36 0.011
PHARMASUN Pharma 0.63 -0.034Lupin Ltd. 0.58 0.024
IT & MEDIATCS -0.538 0.045INFOSYS -0.627 0.038Zee Entertainment 0.818 5E-04METAL & REALTYTata Steel 1.25 0.026Hiindalco 1.07 0.024DLF Ltd. 3.67 -0.048
Motors
Expected Return of stocks on the basis of CAPM Model
Return = Risk Free Rate (Beta*(Market Return – Risk Free Rate
BFSI 9.45%ICICI Bank 3.13%
SBI 2.77%
Axis Bank 3.55%
ENERGY 6.70%ONGC 2.76%
Reliance Industries 1.75%
NTPC 2.19%
AUTO 2.89%Mahindera & Mahindra 1.05%
Tata Moters 1.84%
FMCG 2.42%Britannia Industries 1.38%
Dabur 1.04%
PHARMA 2.05%SUN Pharma 1.29%
Lupin Ltd. 0.76%
IT & MEDIA 1.80%TCS 0.21%
INFOSYS 0.13%
Zee Entertainment 1.46%
METAL & REALTY 7.64%Tata Steel 1.86%
Hiindalco 1.69%
DLF Ltd. 4.09%
Analysis of stocks on the basis of Sharpe single Index pricing Model
Regression StatisticsMultiple R 0.9621547R Square 0.9257417Adjusted R Square 0.918991Standard Error 0.0358496Observations 13
ANOVA Systematic RiskUnsystematic Riskdf SS MS F Significance F 0.11643448 0.00108747
Regression 1 0.176240839 0.1762 137.131675 1.49483E-07Residual 11 0.014137137 0.0013Total 12 0.190377976
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -0.009029 0.010156187 -0.889 0.3930305 -0.03138244 0.0133248 -0.03138244 0.013324795
X Variable 1 2.6241173 0.224085806 11.71 1.4948E-07 2.130907727 3.11732679 2.13090773 3.117326794
SUMMARY OUTPUT of ICICI BANK
Variable 1 sqrt of monthly variznce of stock
Residual / no of observations
Fund Allocation on the basis of
Sharpe Portfolio Optimization
Model
Average Monthly RETURN
Standaard Deviation
Sharp Ratio
AMR/SD
CNX Nifty 1.52% 4.33% 0.35
ICICI BANK 1.52% 11.64% 0.13
SBI 0.89% 11.71% 0.08
Axis Bank 1.59% 15.12% 0.11
ONGC 0.89% 11.71% 0.08
Reliance Industries 2.31% 7.08% 0.33
NTPC 0.15% 11.19% 0.01
TCS 3.34% 7.05% 0.47
INFOSYS 2.43% 7.48% 0.32
Tata Steel 0.35% 14.27% 0.02
Hindalco 3.44% 10.79% 0.32
DLF Ltd. -0.71% 19.05% -0.04
Lupin Ltd. 2.21% 6.62% 0.33
Individual Assets
CNX Nifty ICICI SBI Axis ONGC Reliance
NTPC TCS INFOSYS
Tata Steel
Hindalco
DLF Ltd.
Lupin Ltd.
CNX Nifty 0.001879021 0.004833 0.00414 0.005868 0.00414 0.00205 0.002796 -0.001 -0.00124 0.002401 0.00191 0.006501 0.000155
ICICI BANK 0.004833236 0.013542 0.011587 0.016342 0.011587 0.00514 0.00683 -0.00367 -0.00447 0.008747 0.0062 0.016751 -0.00044
SBI 0.004139867 0.011587 0.013715 0.014496 0.013715 0.005439 0.008931 -0.00534 -0.00661 0.009384 0.0076 0.017666 -0.00184
Axis Bank 0.005868068 0.016342 0.014496 0.022857 0.014496 0.005112 0.008703 -0.00591 -0.0063 0.00899 0.00569 0.02094 0.000981
ONGC 0.004139867 0.011587 0.013715 0.014496 0.013715 0.005439 0.008931 -0.00534 -0.00661 0.009384 0.0076 0.017666 -0.00184Reliance Industries
0.002050216 0.00514 0.005439 0.005112 0.005439 0.005011 0.003768 -0.00036 -0.00183 0.00365 0.00395 0.009133 -0.00085
NTPC 0.002796207 0.00683 0.008931 0.008703 0.008931 0.003768 0.012529 -0.00377 -0.00426 0.008141 0.00704 0.015025 -0.00358
TCS -0.001004467 -0.00367 -0.00534 -0.00591 -0.00534 -0.00036 -0.00377 0.004977 0.0044 -0.00302 -0.00341 -0.00616 0.001456
INFOSYS -0.001235549 -0.00447 -0.00661 -0.0063 -0.00661 -0.00183 -0.00426 0.0044 0.005599 -0.00472 -0.00563 -0.00678 0.002211
Tata Steel 0.002401376 0.008747 0.009384 0.00899 0.009384 0.00365 0.008141 -0.00302 -0.00472 0.020372 0.01111 0.015737 -0.00584
Hindalco 0.001906528 0.006199 0.007598 0.005685 0.007598 0.003949 0.007037 -0.00341 -0.00563 0.011107 0.01165 0.011519 -0.00471
DLF Ltd. 0.006500627 0.016751 0.017666 0.02094 0.017666 0.009133 0.015025 -0.00616 -0.00678 0.015737 0.01152 0.036275 -0.00405
Lupin Ltd. 0.000155159 -0.00044 -0.00184 0.000981 -0.00184 -0.00085 -0.00358 0.001456 0.002211 -0.00584 -0.00471 -0.00405 0.004383
CO- VARIANCE OF ASSETS
Equal Wt.
Max Ret Min St Dev
Max SR
Constraining Variables None atσ<= at µ = NoneValue of Constraint N/A 4.33% 3.44%
CNX Nifty 7.69% -953.53% 75.37% 10.00%
ICICI BANK 7.69% -232.27% -111.16% 10.00%
SBI 7.69% 220.84% 26.62% 5.00%
Axis Bank 7.69% 494.10% 81.95% 10.00%
ONGC 7.69% 218.58% 26.62% 0.00%Reliance Industries
7.69% -9.70% 13.51% 1.00%
NTPC 7.69% -97.43% -29.09% 1.00%
TCS 7.69% 58.18% -16.11% 30.00%
INFOSYS 7.69% 772.79% 109.14% 15.00%
Tata Steel 7.69% -210.28% -16.10% 0.00%
Hindalco 7.69% 325.53% 41.51% 7.69%
DLF Ltd. 7.69% -81.48% -24.04% 5.00%
Lupin Ltd. 7.69% -405.33% -78.21% 5.31%
Σw 100.00% 100.00% 100.00% 100.00%
µ 1.53% 16.17% 3.44% 2.25%
σ 6.71% 4.33% 1.02% 3.94%
µ/σ 22.88% 372.96% 337.96% 56.98%
Portfolio weights
Portfolios
1.Never buy on rumours or market gossip.
2.Before buying a security, it’s better to find out everything one can about the company, its management and competitors, its earning and possibilities for growth .
3 .Find out the reversal, support &resistance of stock
Findings and Recommendation’s
4 .Avoid both fear and greed on the stock market .
5 .Pick up the undervalued shares
6. Timing of purchase and sale is also very important. “buy low and sell high”
7 .Do not put all funds in one or two companies.
8 .Avoid taking undue risks or beyond the capacity of your net worth .
9.Don't buy too many different securities. Better have only a few investments that can be watched.
10 .Study your tax position to known when you sell to greatest advantages .
11 .Always keep a good part of your capital in a cash reserve. Never invest all your funds .
12 .Don't speculate unless it's full-time job
So its time to rethinkIts time to reassessIts time to rebuild
It’s time to be an investor again