submitted by: supervised by
TRANSCRIPT
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Angel Harmonized Ascend
Fund
“A new Portfolio Product for Angel Broking”
Submitted to
CHITKARA BUSINESS SCHOOL
in partial fulfillment of the requirements for the award of degree of
Master of Business Administration
Submitted by: Supervised by:
Mehak Mehta Mr. Deepak Chaudhary
CUN120550046 (Branch Manager)
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Declaration
I, "________________________________”, hereby declare that the work
presented herein is genuine work done originally by me and has not been
published or submitted elsewhere. Any literature, data or work done by
others and cited in the report has been given due acknowledgement and
listed in the reference section.
_______________________
(Student's Name & Signature)
_______________________
(Roll No.)
Date: __________________
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Acknowledgement
I would like to express my gratitude to all those who gave me the possibility to complete
this project. I want to thank the Department of Chitkara Business School for giving me
the opportunity to do such an interesting and wide topic, i.e., to create a portfolio product
for Angel Broking.
I would like to thank my Branch Manager for being a support throughout my Project
work. Mr. Deepak Chaudhary has always encouraged me to stay focused towards my
project no matter what the conditions are.
I have furthermore to thank my respected Project Guide Dr. Renuka Sharma who gave
and confirmed this permission and encouraged me to go ahead with my Project. She
always guided me in the right direction whenever I asked her for help.
I would also like to thank God for giving me the patience throughout my project and my
parents who supported me and helped me in all ways. Without all, I could not have
successfully completed my project properly in time with adequate data and relevant
substance in it.
Thanking you,
Mehak Mehta
CUN120550046
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Executive Summary This project is about creating a portfolio product that would help Angel Broking. We all
know that stock market is a risky investment alternative for all but it is good if investor
can make money out of it. The regulatory body for the stock market is SEBI who controls
all the activities of the market on daily basis and try to do transaction in a legal way so as
to avoid the scams and to protect the interest of the investors. Now days there are many
Portfolio managers and Fund managers who invest on the behalf of the investors and they
assured them fixed rate of return on their investment in a particular period of time. They
all applied various kinds of model to measure the risk available in the market and the
tools to manage that risk.
There are various kinds of risk which is mainly categorize in two parts
1. Macro level risk 2. Micro level risk
I. Macro level risk :- It consist of Systematic and Unsystematic Risk.
Systematic risk is that which cannot be reduced but Unsystematic risk can be
controlled.
II. Micro Level risk:- It consist of various kinds of risk which are prevailing in
the market like Business risk, Market risk, Liquidity risk, Exchange rate risk,
Financial risk, Currency risk and Country risk
The above are the broad categories of the risk in the market. As we can see from the
recession that the global markets also have their impact on the Indian market because
now a days companies are doing business at global level so the market of one country can
affect the market of other countries also. So we cannot avoid the risk but we can manage
the risk and minimize it. In my project I have done the same thing by applying the
various models or tools which are helpful to manage the risk while doing an investment.
Purpose/Objective of the study:-
The purpose of the study is to give a portfolio product to Angel Broking as per the
needs of the population of Ludhiana region.
Endeavour to create wealth over the medium to longer term through investments
in equities, across market capitalization by focusing solely on the following:-
To measure the risk available in the market, taking into consideration the
Nifty 50 stocks.
To look deep into the fundamentals of the companies as well as the
concerned industry.
To calculate the expected return from the shortlisted stocks as well as from
their concerned industry.
To measure the risk/reward value of investors’ assets class choices
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Research Methodology Used in the Project:-
Type of research project is Descriptive and Exploratory. To make a research project we
need to see that whether there would be scope of this study or not, because if our study is
not having scope then the whole work done will not be effective.
The scope of this study is there in the market because in today scenario everyone looks
for the safe and risk free return but they don’t know how to manage the risk which is
there in the market so by the help of this study and after seeing the relevance, the
Financial managers or the investment companies can take benefit out of it. Because by
this they will come to know about the tools to manage the risk and they will be able to
sell more investment products because by using it they will be able to give safe return to
the investors which will lead to an increase in their goodwill in the market.
Methodology used to making of this project is Descriptive research design. Once we
decide with the type of research design we need also to know about the collection of data.
I have used the secondary method to collect the data from the market. For this purpose
different websites are being search out for the relevant information for making the project
and various research paper and articles were also studied so as to get reference from those
articles.
Once I am done with the data collection and fundamental analysis, I then need to apply
the tools. In my project I have used mainly four tools BETA, CAPITAL ASSET
PRICING MODEL (CAPM), STANDARD DEVIATION and SHARPE INDEX.
Sharpe Index tells us the excess return we can generate from the investment. Beta tells
about the volatility of the risk. CAPM tells us about the Expected return on the stock, and
Sortino ratio tells us that out of the stocks which are giving negative return which will be
the stock that will give positive return in near future.
Thus by applying all these models we come to know that we can also minimize our risk
but for that analysis should be done so as to enjoy the safe return on the investment.
Findings:- After applying all the above models I have come to know the Beta of my
portfolio, expected return that my portfolio will generate. CAPM help us to know that
how much would be expected return on the stock and then we can compare the actual
return with the expected return and invest accordingly. Beta helps us to know the
volatility of risk in the market and then we can do risk return tradeoff so as to invest in
best stock as per our analysis. And Result of Sharpe ratio helps us to compare with the
expected return and then do the Sortino ratio if required.
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Table of Contents
I. Introduction to the corporation
Business carried on by parent company and group companies along with
brief history, promoters & vision
Introduction to the parent firm
Main competitors
Number of employees
Organization Structure
Study of functioning of all the departments of the company
SWOT Analysis
Financial Statement Analysis
Trend Analysis
Strategies adopted
Profitability Analysis
II. Review of Literature
Review of articles
Need of the study
Objectives of the study
III. Research Methodology adopted
IV. Details of actual work undertaken
V. Interpretation & Analysis
VI. Conclusion and Suggestions
Findings of the study
Recommendations of the study
VII. Glossary
VIII. Bibliography
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Chapter-1
Introduction to the
corporation and
company
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Business carried on
by the parent
company
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Angel Broking
Registered Office
G-1, Ackruti Trade Center, Road No -7,
MIDC,
Andheri (E), Mumbai - 400 093.
Tel: (022) 2835 8800 / 3083 7700
Corporate Office
6th Floor, Ackruti Star, Central Road -
MIDC,
Andheri (E), Mumbai - 400 093.
Tel: (022) 3935 7600
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About the company Angel Broking's tryst with excellence in customer relations began in 1987. Today, Angel
has emerged as one of the most respected Stock-Broking and Wealth Management
Companies in India. With its unique retail-focused stock trading business model, Angel is
committed to providing ‘Real Value for Money’ to all its clients.
The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock
Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX &
MCX. Angel is also registered as a Depository Participant with CDSL.
Vision
To provide best value for money to investors through innovative products, trading/investments
strategies, state of the art technology and personalized service.
Motto
To have complete harmony between quality-in-process and continuous improvement to deliver
exceptional service that will delight our Customers and Clients.
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CRM Policy
“A Customer is the most Important Visitor on our premises. He is not dependent on us,
but we are dependent on him. He is not an interruption in our work. He is the purpose of
it. He is not an outsider in our business. He is part of it. We are not doing him a favour by
serving him. He is doing us a favour by giving us an opportunity to do so.”
- Mahatma Gandhi
Business Philosophy
Ethical practices & transparency in all our dealings
Customers interest above our own
Always deliver what we promise
Effective cost management
Quality Assurance Policy
We are committed to providing world-class products and services which exceed
the expectations of our customers, achieved by teamwork and a process of
continuous improvement.
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Evolution of Angel Group
MR DINESH THAKKAR, CHAIRMAN & MANAGING DIRECTOR,
ANGEL GROUP, started this Journey as a SUB-BROKER in 1987 with 3
Employees and 25 Clients.
Dec’97: Incorporation of Angel Broking
July’98: Angel Research Division started
Mar’02: Web-enabled back office software developed
Apr’04: Incorporation of Commodities Broking
Sep’04: Launch of internet trading platform
Oct’05: Awarded prestigious “Major volume driver” award
1997-2003
2004
2005
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Jul’06: PMS function launched
Sep’06: Commences MF and IPO distribution
Oct’06: Awarded “Major volume driver” award
Dec’06: Crossed 2,500 business associates
Oct’07: “Major volume driver” award for third consecutive time
Nov’07: Crossed 1.5 lakh mark in DP account
Dec’07: IFC acquired 12.35% stake in Angel Group
Jan’08: Commences insurance distribution
Feb’08: Ranked 1st by NSE for Registered intermediaries
May’08: Third party distribution business ramped up
Sep’08: Ranked 1st on NSE for largest sub-broker network
Dec’08: “Major volume driver” award for the 4th
consecutive time
Jan’09: Ranked 1st on NCDEX on the basis of turnover
May’09: Awarded the “Best Retail Broking House” and the “Broking House
with Largest Distribution Network” by Dun & Bradstreet
Two Analysts won the ET Starmine Analyst Award
“Major volume driver” award for the 5th
consecutive time
Nov’10: “Major volume driver” award for the 6th
consecutive time
2006
2007
2008
2009
2010
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Mar’11: Awarded the Best Contribution in Investor Education & Category
Enhancement of the Year – Angel Broking Ltd and Broker with Best
Commodity Research of the Year - Angel Commodities Broking Pvt. Ltd by
Bloomberg UTV Financial Leadership Awards 2011
Feb’11 : Angel Analysts won in 3 categories at the ET NOW Starmine
awards
ANGEL LOGO
2011
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Membership
Angel Group Memberships: BSE- Cash and F&O
NSE- Cash and F&O
NCDEX & MCX – Commodities & Currency Futures
Angel has the largest no. of sub-brokers registered on NSE
Angel has the largest volume on BSE
Angel has the highest number of Trading Terminals.
Angel is also registered as a Depository Participant with CDSL.
Retail Centric Focus
Aggressive expansion (locations, products/ offerings & customer base)
Scalable systems and processes Leveraging technology for cost-efficient high-
quality service.
Effective Human Resource Development
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Angel Business
Global Partner
International Finance Corporation (IFC) – A Subsidiary of World Bank has
invested in Angel Broking.
This is the first time that IFC has invested in Equity Broking and Wealth
Management
Core Business
Broking Business
Equity Broking BSE, NSE
Commodity Broking
NCDEX, MCX
Currency Trading
NSE, MCX
E-Broking
Wealth Management and Distribution Business
Life Insurance BSLI
Portfolio management
Mutual Funds
IPO Advisory
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Unique Propositions
A very strong and dedicated Research and Advisory desk.
One of the highest success ratios in both technical and fundamental calls.
An excellent IT infrastructure in place with over 18144 trading terminals and 610
VSATs with a server uptime of 99.9%.
100% Retail centric focus and total commitment towards retail customers.
Some of the best fund managers running our Portfolio Management Services to
enable clients to minimize their risk, enhance return and diversify their portfolios.
Training Programs to upgrade the knowledge base & competency levels of our
employees, channel partners & even our end customers.
Our KYC operations run 24/7 to ensure a TAT of less than 48 hours to generate
client codes.
One of the lowest transaction charges of depository services in the country
A client can use all the three online trading platforms with same login and
password
Conducting Investor’s Camp across various places in the country to increase
awareness of retail segment about capital markets
Our fund managers and analysts have been featuring daily on various business
news channels like
CNBC TV18
ET Now
Zee Business
Bloomberg UTV
NDTV Profit
CNBC Awaaz
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Awards & Recognition
The most trusted retail centric brokerage house with service truly personalized.
Awarded the coveted 'Major Volume Driver' trophy by the BSE for 6 years
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Bloomberg UTV Financial Leadership Awards 2011
Broker with Best Commodity Research of the Year
(Angel Commodities Broking Pvt. Ltd.)
Best Contribution in Investor Education & Category Enhancement of the
Year
(Angel Broking Ltd.)
ET Now|Starmine Analyst Award (2009 | 2011)
2009 ET Now|Starmine Analyst Award in Financial Category, Consumers
Goods and Services Category
2011 ET Now|Starmine Analyst Award in Industry Stock Picker Category
(for Biotechnology & Automobiles) Industry Earning Estimators Category
(Financials)
Zee Business Financial Market Conclave Award 2010 | 2011
2010
Special Contribution
Best Sector Analyst
Best Technical Analyst
2011
Best Sector Analyst
The Dun & Bradstreet Equity Broking Awards 2009
Best Retail Broking House
Broking House with Largest Distribution Network
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Research & Advisory Reports
Market Outlook
Provides price-sensitive information just Before the opening bell and analyzes its
Impact on the Market in terms of:
Key Corporate developments
Policy announcements
Geo-political news and views
Technical Analysis report
Analyzes trading patterns, and a view on the market positions of key stocks/
sectors for the next trading session
Short term (1-5 days) & medium term (10-20 days) view
Tracks individual scrips, the SENSEX & NIFTY and other indices
Derivative analysis report
FII activity in the F&O Segment
Change in open interest
Put-call ratio
Cost of carrying stocks
Index-based derivative products
Weekly Reviews on
Comprehensive market overview pertaining to the week and likely trends going
ahead
FII and Mutual Fund activity for the week
Update on International markets
Analysis of new IPOs hitting the market
Top picks based on in-depth analysis of fundamental & technical factors
Technical Analysis of major indices and scrips as well as future outlook
Short and long-term outlook on scrips and suggested trading strategies
End of the week Derivative Analysis
Commodities’ update on Bullion, Agri & Energy futures for both exchanges
Updated stock view of about 70 prominent stocks
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Angel Products and Services
Portfolio Management Services
Managed by our Prominent Fund Managers who are regularly fetched by TV
media for their views on stocks
Understanding client’s risk & return profile
Offering the right blend of sector and stock exposure
Giving dedicated Investment Advisors
Giving a choice of different schemes to suit every individual investor
preferences
Catering to Individuals, HUFs, Corporate, NRIs, Trusts
Angel Commodities
Personalized services through branches & regional hubs
Trading & Relationship Mgmt. Services in Bullion, Base Metals, Energy &
Agri. futures
Opportunities in hedging & portfolio diversification, speculation & arbitrage
Training & Educational Seminars on Commodities
Angel Currency Futures
Comprehensive coverage on Currencies (‘Rupee’ to ‘Euro’, ‘Dollar Index’ to
‘Yen’).
Reports covering in-depth fundamentals of the currencies.
Latest economic data releases with their likely impact, along with “Technical
levels”
Comprehensive reports on currencies ideally suited for any investor / trader.
Angel Gold
Personalized Investment Advisory
Portfolio Restructuring & Continuous Monitoring
Guidance from Experienced Research Team
Periodic Group Meetings with Investors.
Specialized Products
Margin Funding
Facility to allow clients to take higher exposure
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Instant Liquidity for Clients
Margin is deposited in Cash as well as Collaterals
Enabling Clients grab Earning Opportunity
Pre-Paid Brokerage
Zero Account Opening Charges
Attractive Brokerage Rates
Free DP AMC for 1 year
Assured gifts worth thousands with every account
Easy & Fast Recharge
Free Financial Investment Application with every account
Depository Services
No physical instruction required for the client’s sell obligations
Lowest transaction charges in the country
Acceptance & execution of instruction on fax
A combined monthly ‘Bill-Transaction-Holding cum Ledger’ statement
Efficient pledge mechanism
Value Added Services
NRI Services
NRI Service Desk for personalized Assistance
Dedicated Offline Equity Dealing Desk
Online Equity Trading Platform
NRI Investment Advisory Desk
PAN Card Assistance
Support for Banking – PIS Accounts
Portfolio Management, Mutual Fund, IPO services
M-Connect Service
Market News/Analysis & Expert Views 24X7
Stock Updates & Market Statistics
Real time Equity, F&O, Commodities and MF rates on a single screen
Top 10 Local & Global indices
Back-office Data i.e. Ledger, Open Positions, Holdings, PMS
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SMS Application for clients
Automated SMS at specified Intervals at no additional cost
Example – Trade Confirmation, Weekly Ledger update etc
Request response SMS
Example – DP Holding, Pool Holding, Ledger update etc
Insurance
Products to meet the triple objectives of risk coverage, investment and tax
planning
Assessment of your Insurance needs after proper risk profiling
A wide array of individual life cover plans to meet your Protection, Savings
and Retirement needs
Mutual Funds
Tie- ups with all major AMCs
Dedicated Relationship Manager for Business Partners
Exclusive MF Research Reports by Angel
(Daily/ Weekly/Monthly Mutual Fund Reports)
MF Portfolios as per Investors Financial Goal
Common Gateway for all Mutual Funds related queries
Loans, IPO and Fixed Deposits
Products distributed by Angel include:
Unsecured Loans
Personal/Business Loans/Credit Cards
Secured Loans
Home Loans/ Loan Against Properties
Loan Against Securities / Gold
IPO – Distribution, Advisory and Helpdesk
Fixed Deposits
NHB Term Deposits
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Distribution Model
Short form Full form Details
CSO Central Statistical Organization Mumbai
RO Regional Offices 24
Branches Branches 190
SB Sub-Brokers 10000+
Clients Clients 1900000+
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Business carried on
by the particular
firm
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Angel Broking
Regional Office
SCO 13, Shanghai Towers,
Feroze Gandhi Market,
Ludhiana- 141001
Tel: (0161) 3941394
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Angel Harmony
Direct Connect with Human Resource
Company Profile, Management & Accolades
HR Policies
• Vision, Values, Motto & HR
• Philosophy
• Harmony Introduction
• Compensation & Benefits
• Performance Management System
• Confirmation
• General Administrative Policy
• Leave Policy
• Exit & Separation Policy
Code of Conduct & Ethics
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PRAGATI – What an Idea!
A Platform to submit your creative ideas.
Opportunity to be a part of Process improvements.
Learning & Development
Experience/ Exposure
Rewards & Recognition
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E-broking
Unique Online Trading products customized to suit different Investment / Trading needs
–
Angel Investor
Angel Diet
Angel Trade
Back-Office
Online Client Details includes –
Ledger balances
Cash Deposits with Angel
Securities Holdings
Charges levied/paid in the client’s account
Last auction / close-outs effected
DP Holding for the last 3 transactions
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Advisory
Intraday calls BTST calls Long term calls
Positional calls
Angel Trading
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Main Competitors
Major players in the region are as follows:-
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History of broking firms
Brief history of some broking firms –
The birth of Karvy was on a modest scale in 1981. It began with the vision and
enterprise of a small group of practicing Chartered Accountants who founded the
flagship company, Karvy Consultants Limited.
They started with consulting and financial accounting automation and carved
inroads into the field of registry and share accounting by 1985.
Since then, karvy utilized its experience and superlative expertise to go from
strength to strength, to better their services, to innovate, diversify and in the
process, evolved as one of India’s premier integrated financial service enterprise.
ICICI Web Trade Limited (IWTL) maintains www.icicidirect.com (herein after
referred to as the "Website") whereas IWTL is an affiliate of ICICI Bank Limited
and the Website is owned by ICICI Bank Limited.
IWTL has launched and established an online trading service on the Website.
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India Infoline.com Securities Pvt. Ltd. is a wholly owned subsidiary of India.
Infoline.com Ltd and is the stock broking arm of India Infoline.com.
The subsidiary was formed to comply with regulatory guidelines.
www.5paisa.com is a focused website for online stock market trading.
5paisa.com is a trade name owned by the India Infoline.com group. IILSPL has
applied for trading membership of the BSE under Securities and Exchange Board
of India (Stock Brokers and Sub-Brokers) Rules 1992.
HDFC security is the subsidiary of HDFC (Housing Development Financial
Corporation). www.hdfcsec.com would have an exclusive discretion to decide the
customers who would be entitled to its online investing services.
www.hdfcsec.com also reserves the right to decide on the criteria based on which
customers would be chosen to participate in these services.
The present web site (www.hdfcsec.com) contains features of services that they
offer/propose to offer in due course.
The launch of new services is subject to the clearance of the regulators i.e. SEBI,
NSE and BSE.
Indiabulls Securities Limited was incorporated as GPF Securities Private Limited
on June 9, 1995.
ISL is a corporate member of capital market & derivative segment of The
National Stock Exchange of India Ltd.
At present, ISL accounts for approximately 3% of the total daily turnover of the
Exchange with 32,359 client relationships and 70 branches spread across the
country as of April 30, 2004.
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Competition Analysis
BASE EDELWEISS CD
EQUIRESEARCH
VIKSON
Unique
Selling
Points
(USP’s)
Biggest Research
House – Mumbai
Strong RMS –
Mumbai
Investors like
Rakesh
Jhunjhunwala
NSEL guaranteed
plan
Services
Stamp duty – Least
among all other
firms
Fast services
Terminal
Separate terminal
for Equity
Separate terminal
for Commodity
Separate terminal
for Currency
Separate terminal
for Equity
Separate terminal
for Commodity
Separate terminal
for Currency
Separate terminal for
Equity
Same terminal for
commodity &
currency
Charges Account opening –
Rs.750 (lifetime
validity)
DP charges – NIL
Software – FREE
(Online, Offline &
Mobile)
Minimum
brokerage – Rs.
3000 to Rs. 4000
on the first trading
month of every
Account opening –
Rs.500 (one time
payment)
DP charges –
Rs.396 p.a.
Software – Rs.500
p.m. (Online &
Offline) (No mobile
software)
Minimum
brokerage – Rs.
2500 on the first
trading month of
every client
Account opening –
NIL
DP charges – Rs.260
p.a. (only on Equity)
Software – FREE
(Online & Offline)
(No mobile software)
Minimum brokerage
– Rs. 1000 to Rs.
2000 on the first
trading month of
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client
every client
Limits
EQUITY
Intraday
20x
Delivery
4x
COMMODITY
Intraday 6x
Delivery
1x
CURRENCY
No limits
EQUITY
Intraday
Cash Market 8-10x
F & O 3-4x
Delivery
Cash Market 3-4x
F & O no limits
COMMODITY
Intraday 3x
Carry 2x
CURRENCY
Intraday 2x
Carry 1x
EQUITY
Intraday 10x
Delivery 4x
COMMODITY
Intraday 3x
Carry 1x
CURRENCY
Intra day 2x
Carry 1x
Software
version
They use their own
product both for
Software and Back
Office.
They didn’t
disclose the
products name.
They use ODIN
software
They use ODIN
software
Pay in/
Pay out
Only through
software
All the clearances
through HDFC
Bank are reflected
on the same day.
All the clearances
through other
banks are reflected
on the next day.
Through Software +
Back Office
Pay in/ Pay out are
accepted and paid
through cheques
only.
Through Software +
Back Office
Third party pay out
are also possible.
In Commodity
payout is reflected
on the same day.
In Equity payout is
reflected after 2
days.
35
Number of employees
Ludhiana – Regional Office
Following are the offices under Ludhiana branch –
Chandigarh
Ambala
Amritsar
Jalandhar
Total number of employees in all the branches (including Ludhiana) – 106
Total number of employees in Ludhiana branch – 42
Total – 42 Managerial – 2 Supervisory – 2 Skilled – 38
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Organizational Structure
37
Study of functioning of all departments of the
company
Angel Broking, Ludhiana has following departments:-
Sales department
Dealing department
Operations
Back-Office
Risk Management Services
FUNCTIONING OF SALES DEPARTMENT
Sales department has a team of around 10 Sales Executives and 1 Assistant Unit
Manager.
Sales Executives go to the market, hunt for prospective clients, fixes up a meeting
with the interested clients and explains the company, its products and services.
Unit Manager keeps a track of the whole sales team. Guides them on how to pitch
in to a new client or existing client.
LEAD MANAGEMENT SYSTEM
The Lead Management System (LMS) www.angeltrade.com/lms is designed to help the
Sales Team in:
Organizing and tracking of all leads received by them
Arranging and scheduling appointments and reminders
Maintaining records for all conversations (meetings, telecom, e-mails) with
prospective clients
Capturing & Calculating Productivity & Incentives.
ADD NEW LEADS
The system works on a principle that “No Lead received by any employee should go
unattended”.
That’s why it is obligatory that any lead should be entered in LMS. As soon as a lead is
entered in the system, it goes into the pending leads pool of the Executive.
FOLLOW UP
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All follow-ups done on a prospective client are captured once the data is entered using
this link. This helps the user in checking history of the meetings with a particular lead.
It’s a useful reference tool for the user.
Sales calls: The Funnel Effect
All leads do not get converted to a meeting. Based on the data entered in LMS by
the Sales Executives, it has been found that only 50% of the prospective clients
agree to a meeting. The balance 50% takes the details and drop out.
Active leads are the ones wherein the prospective client has agreed to meet the
Sales Executive. This shows that they are interested to know the details of our
products and services and hence, the chances of conversation are better.
Based on the data entered in LMS by the Sales Executives, it has been found out
that only 20% of the Active Leads are closed.
The balance 80% either drop out or want to take some more time.
All Active Leads are met at least once (75*1 meetings a month). All Closure
cases take an average of three meetings, i.e., two extra meetings (15*2 meetings a
month) totaling 105 meetings per Executive per month, i.e., average of four
meetings per day.
FUNCTIONING OF DEALING DEPARTMENT
Dealing department has a dedicated team of sector specific fundamental research
analysts, technical analysts and commodities advisors.
There are around 15 Investment Advisors (IA’s) with 1 Assistant Manager.
Every Investment Advisor has a large number of clients. If any client wants to
trade online then he has PC and Mobile software. But if a client wants to trade
offline then he can trade at any point of time through these Investment Advisors.
Investment Advisors give the following calls :
Total Leads = 150
Active Leads = 75
Closures
= 15
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Long term fundamental calls
Short term calls
Intraday calls
BTST calls
There is a single terminal for all the three markets i.e., equity, commodity and
currency. It is good because every person can have complete knowledge of every
market and also the clients can have a good relation with their IA or RM because
their account is completely held by a single person.
FUNCTIONING OF OPERATIONS & BACK-OFFICE
There is only one employee in Back-Office. The task of Back Office department
is to have a proper communication system between the Regional Office with it’s
sub offices and also between the Regional Office and the Head Office.
There are two employees in Operations department. They take care of the
following heads :-
Finance/Cash
KYC
Finance department takes into consideration all the requirements while any pay
in/ pay out are made. It keeps into account the requirements of the banks that are
tied up with the Ludhiana Branch.
KYC department takes into consideration all the documentation part of the clients
and all the other details of the client. These details are kept confidential and are
never disclosed to any employee of the firm. The details are only communicated
to the Head Office.
FUNCTIONING OF RMS DEPARTMENT
RMS department helps the clients in avoiding some of the risks like credit risk,
interest rate risk, liquidity risk and re-investment risk on debt investments and
other fixed-income securities.
They use derivative instruments like index futures, stock futures, and options
contracts, warrants, convertible securities, swap agreements or any other
derivative instruments for the purpose of hedging and portfolio balancing, as
permitted under the regulations and guidelines.
RMS department uses Stop loss and other schemes to avoid the risks associated
with trading volumes, liquidity and settlement systems in equity and debt markets.
40
Sources of finance
BROKERAGE – The major source of finance for Angel Broking is the
brokerage on the turnover being generated by:-
B2B clients
B2C clients
B2B clients are being charged as follows:-
Intraday on Equity, Commodity and Currency – 0.03%
Delivery on Equity, Commodity and Currency – 0.30%
B2C clients are being charged as follows:-
Intraday on Equity, Commodity and Currency – 0.01%
Delivery on Equity, Commodity and Currency – 0.10%
PRE-PAID BROKERAGE – Another source of finance is the advance
brokerage. It is the Brokerage that some clients pay in advance so as to save some
of their money.
ANGEL PRODUCTS – Angel Broking earns a lot from its products such as:-
Margin Funding
Angel Gold – Minimum Amount Rs.100000
PMS – Minimum Amount Rs.2500000
LIFE INSURANCE – Angel Broking has a tie up with BSLI (Birla Sun Life
Insurance) for distribution of the following products:-
Dream Solution Common
Dream Endowment
Dream Child
Dream Retirement
Saral Solution
Saral Wealth
Saral Child
Freedom 58
Titanium Plus
Platinum Premier Plus
INITIAL PUBLIC OFFERING (IPO) – Angel Broking is likely to come up
with its IPO in the market in almost a year. IPO will be the major source of
finance for Angel Broking as of now.
41
SWOT Analysis
STRENGTHS
• Experienced player in the market • Broad product range • Wide range of distribution
network • Marketing team is proficient
enough to cover various
segments • Excellent image in the market • Customer Orientation • Efficient and Skilled Manpower • Excellent image in the market • Investment Advice
WEAKNESSES
• Angel still could not meet the
fuller customer satisfaction • There is a stiff competition
from the banks • After sale services • Software problems
OPPORTUNITIES
• Ever increasing market in
investment field • Emerging new technology • Unfilled needs of the customer • Education level
• Untapped market
THREATS
• Price war • Substitute products • Computer literacy in the
prospect investors • New competitors
• Technology based business
42
Financial Statement Analysis of the company
Summarized Financial Statements (as per audited annual reports)
(Amount in Rs. Lac)
Balance Sheet
31-Mar-12
31-Mar-11
31-Mar-10
Sources of funds
Paid up capital
Equity Share Capital
1225.00
1225.00
1225.00
Reserves & Surplus
6305.14
5272.44
4422.27
Secured Loans
16131.75
5256.55
1066.23
Unsecured Loans
1883.36
-
-
Total
25545.25
11753.99
6713.50
Application of funds
Net Fixed Assets
4524.29
5243.53
4025.50
Deferred Tax Assets
154.97
164.44
445.24
Net Current Assets
20865.99
6346.02
2242.76
Total
25545.25
11753.99
6713.50
43
Summarized Financial Statements (as per audited annual reports)
(Amount in Rs. Lac)
Income Statement
31-Mar-12
31-Mar-11
31-Mar-10
Total Income
30633.07
40853.45
39023.46
Total Expenditure
27760.34
38268.39
36037.11
Profit/ (Loss) before
Depreciation
2872.73
2585.06
2986.38
Depreciation
1220.54
1271.53
1129.77
Profit/ (Loss) before taxes
& extraordinary items
1652.19
1313.53
1856.61
Profit/ (Loss) before taxes
but after extraordinary
items
1652.19
1313.53
1856.61
Less: Provision for Tax/
Written back of tax
provision
619.50
463.36
637.66
Profit/ (Loss) after tax
1032.69
850.17
1218.95
44
Trend Analysis
Trend percentage of Balance Sheet
Balance Sheet 31-Mar-10 31-Mar-11 31-Mar-12
Sources of funds
Paid up capital
Equity Share Capital
1225.00 which is
taken as base year =
100
(1225.00/1225.00)
*100 = 100
(1225.00/1225.00)
*100 = 100
Reserves & Surplus
4422.27 which is
taken as base year =
100
(5272.44/4422.27)
*100 = 119.224
(6305.14/4422.27)
*100 = 142.577
Secured Loans
1066.23 which is
taken as base year =
100
(5256.55/1066.23)
*100 = 493.00
(16131.75/1066.23)
*100 = 1512.971
Unsecured Loans
-
-
1883.36
Total
6713.50 which is
taken as base year
= 100
(11753.99/6713.50)
*100 = 175.079
(25545.25/6713.50)
*100 = 380.505
Application of funds
Net Fixed Assets
4025.50 which is
taken as base year =
100
(5243.53/4025.50)
*100 = 130.257
(4524.29/4025.50)
*100 = 112.390
Deferred Tax Assets
445.24 which is
taken as base year =
100
(164.44/445.24)
*100 = 36.932
(154.97/445.24)
*100 = 34.805
Net Current Assets
2242.76 which is
taken as base year =
100
(6346.02/2242.76)
*100 = 282.955
(20865.99/2242.76)
*100 = 930.371
Total
6713.50 which is
taken as base year
= 100
(11753.99/6713.50)
*100 = 175.079
(25545.25/6713.50)
*100 = 380.505
45
Graphical presentation of Trend percentage of Sources of
Funds/Liabilities
Graphical presentation of Trend percentage of Application of
Funds/Assets
0
200
400
600
800
1000
1200
1400
1600
2010 2011 2012
Equity Sh. Cap.
Reserves & Surplus
Secured Loans
Unsecured Loans
Total
0
100
200
300
400
500
600
700
800
900
1000
2010 2011 2012
Net Fixed Assets
Deferred Tax Assets
Net Current Assets
Total
46
Trend percentage of Income Statement
Income Statement 31-Mar-10 31-Mar-11 31-Mar-12
Total Income
39023.46 which is
taken as base year
= 100
(40853.45/39023.46)
*100 = 104.689
(30633.07/39023.46)
*100 = 78.499
Total Expenditure
36037.11 which is
taken as base year
= 100
(38268.39/36037.11)
*100 = 106.191
(27760.34/36037.11)
*100 = 77.032
Profit/ (Loss) before
Depreciation
2986.38 which is
taken as base year
= 100
(2585.06/2986.38)
*100 = 86.561
(2872.73/2986.38)
*100 = 96.194
Depreciation
1129.77 which is
taken as base year
= 100
(1271.53/1129.77)
*100 = 112.547
(1220.54/1129.77)
*100 = 108.034
Profit/ (Loss) before
taxes & extraordinary
items
1856.61which is
taken as base year
= 100
(1313.53/1856.61)
*100 = 70.748
(1652.19/1856.61)
*100 = 88.989
Profit/ (Loss) before
taxes but after
extraordinary items
1856.61which is
taken as base year
= 100
(1313.53/1856.61)
*100 = 70.748
(1652.19/1856.61)
*100 = 88.989
Less: Provision for
Tax/ Written back of
tax provision
637.66 which is
taken as base year
= 100
(463.36/637.66) *100
= 72.665
(619.50/637.66)
*100 = 97.152
Profit/ (Loss) after
tax
1218.95 which is
taken as base
year = 100
(850.17/1218.95)
*100 = 69.746
(1032.69/1218.95)
*100 = 84.719
47
Graphical presentation of Trend percentage of Income Statement
Graphical presentation of Trend percentage of Income Statement
0
20
40
60
80
100
120
2010 2011 2012
Total Income
Total Expenditure
0
20
40
60
80
100
120
2010 2011 2012
Profit before depr.
Depreciation
Profit before taxes
Profit after tax
48
Strategies adopted
Marketing Strategy
Angel Diet and Angel Trade is focused on capturing the significant growth opportunities
in the financial services market and its strategy is driven by the following key principles:-
Client Referral Programs: Client referrals are the most reliable and most cost-effective
source of new clients. We help firms maximize their success by creating process and
tools that make generating client a referrals a natural and systematic part of the practice.
Client Retention Programs: Maintaining and leveraging existing client relationships is
far less expensive and more productive than trying to acquire new clients. We help
organizing develop effective client communication programs that build stronger client
relationships, encourage referrals, and produce incremental business.
New Client Acquisition Programs: A diverse mix of campaigns including events,
public relations, advertising and direct marketing can be an effective means of acquiring
new clients. We help firms create and implement integrated marketing strategies to reach
their goals.
Financial Strategy
Financial Strategy talks about the cost effectiveness in the work that is being done in the
organization.
Targets: Every dealer and sales executive is being given targets so as to reduce the
overall cost for the organization. This helps the company generate business from dealers
and sales executives more effectively.
Plans & Schemes: Angel Broking has some good plans and schemes which though seem
to be inexpensive to the client but actually it is not like that. The schemes and plans are as
such which ultimately generates a lot of profit for the organization.
Marketing
Finance
Human Resource
49
Advances: Angel Broking asks for advance brokerage from the clients. In that way the
company receives the money in advance and saves the risk of any default. Moreover, this
advance money can be easily invested in good projects.
Revenue Sharing: Angel Broking has a concept of Revenue Sharing wherein if a sales
executive or a dealer reaches a particular level in meeting its targets then that particular
person is being given share in the company’s profits. It is strategy to motivate employees
to not just meet monthly targets but also to focus on the Revenue Sharing target.
Moreover, this is also helpful in employee retention.
HR Strategy
HR Strategy talks about the hiring of people and most importantly the grooming and
training of the employees, staff and even the people working at managerial levels in the
organization.
Talent Building Program: The ATP Session is about grooming and making the
employee ready for the next level of responsibility in the Organization. The ATP is
conducted for all the levels i.e., A, B & C in the organization.
PRAGATI: It is a platform wherein employees can submit their creative ideas. It is an
opportunity for employees to be a part of process improvements, learning & development,
experience/ exposure, rewards and recognition.
Training programs for staff members: There is special MDPS to develop talent within
the organization. They provide training in Customer Relationship Management (CRM),
in order to augment the level of customer service beyond the expectations of clients.
Functional training programs for employees at all levels.
Training programs for channel partners: Orientation programs are for franchisees,
sub-brokers, remisers for a better understanding of Angel’s products and services,
Angel’s advantages and Angel’s Unique Selling Points.
Training programs for clients: Training workshops on Technical Analysis, Successful
Day-Trading techniques & Derivative Analysis programs are conducted to make the
client aware about the technicalities of the stock market.
50
Profitability Analysis
Profitability differs from profit in a very important way. Profitability is not measured in
terms of money, but in terms of return on some asset. This means that a profit of $100 has
nothing to do with profitability. Profitability measures how much output you can get from
employing a certain amount of an asset.
Profitability is usually expressed as a ratio, e.g. Percent.
Angel Broking is not a listed company and thus there is very limited information about
the financial details of the company.
Since the “sales data” is missing, I’m unable to measure the profitability ratios.
Thus only few ratios are taken into consideration, which are as follows:-
Total Income has reduced from 40,853.45 lack to 30,633.07 lack in the year
ending 31-03-2012
The percentage reduction in Total Income is
*100 = 25.017%
Total Expenditure has reduced from 38268.39 lack to 27760.34 lack in the year
ending 31-03-2012
The percentage reduction in Total Expenditure is
*100 = 27.458%
Although there is a fall in both the Total Income and Total Expenditure, there is
an increase in the Profit after tax.
Profit after tax has increased from 850.17 lack to 1032.69 lack in the year ending
31-03-2012
The percentage increase in the Profit after tax is
*100 = 21.468%
51
Chapter-2
Review of Literature, Need and
Objectives of the study
52
Review of Literature
1. Popular Portfolio Types (January 26 2013)
1
This article talks about the 5 most popular types of portfolios that investors
should consider before allocating their funds into any of these.
Following types of portfolios are being talked about in this article: -
aggressive, defensive, income, speculative and hybrid.
An aggressive portfolio includes those stocks with high risk/high reward
proposition. Stocks in this category typically have a high beta or sensitivity to
the overall market.
Defensive stocks do not usually carry a high beta, and usually are fairly
isolated from broad market movements. Despite how bad the economy is,
companies that make products essential to everyday life will survive.
An income portfolio focuses on making money through dividends or other
types of distributions to stakeholders. These companies are somewhat like the
safe defensive stocks but should offer higher yields.
A speculative portfolio is the closest to a pure gamble. A speculative
portfolio presents more risk than any others discussed in this article.
Speculative "plays" could be IPOs or stocks that are rumored to be takeover
targets.
Building a hybrid type of portfolio means venturing into other investments,
such as bonds, commodities, real estate and even art. Basically, a hybrid
portfolio would include a mix of stocks and bonds in a relatively fixed
allocation proportions.
2. How To Adjust Your Portfolio In A Bear Or Bull Market
(April 03 2013) 2
1 http://www.investopedia.com/articles/basics/11/5-popular-portfolio-types.asp
2 http://www.investopedia.com/articles/investing/040313/how-adjust-your-portfolio-bear-or-
bull-market.asp
53
While investors shouldn't feel compelled to change their portfolios radically in
reaction to the market's daily moves, small adjustments in the face of a bull or
bear market could be a prudent move.
Investors should turn towards safe havens during a bear market. That could
mean adjusting the percentage of bonds you hold upward.
At the same time focusing on blue chips could also prove to be fruitful.
During a bull run investors should feel confident to take on more risk.
3. Risk and Diversification: Diversifying Your Portfolio (May 06 2013) 3
This article talks about the three main things one should do to ensure an
adequately diversified portfolio:-
Portfolio should be spread among many different investment vehicles such as
cash, stocks, bonds, mutual funds, and perhaps even some real estate.
Picking different investments with different rates of return will ensure that
large gains offset losses in other areas.
The portfolio theory tells us that after 10-12 diversified stocks, you are very
close to optimal diversification. You just need to buy stocks of different sizes
and from various industries.
4. Should You Invest Your Entire Portfolio In Stocks? (February 03 2013) 4
This article talks about the equity-dominated portfolios. It says that in the long
run, equities outperform bonds and cash; therefore, allocating your entire
portfolio to stocks will maximize your returns.
3 http://www.investopedia.com/university/risk/risk4.asp
4 http://www.investopedia.com/articles/stocks/07/100_equities.asp
54
However, the portfolio should be widely diversified across multiple asset
classes: domestic equities, international equities, emerging markets debt and
equities, real assets and even junk bonds.
The more diverse portfolio can be expected to reduce volatility and provide
some protection against inflation and deflation.
5. Simplify Your Portfolio (December 22 2012) 5
This article states that a simple and straightforward approach can be employed
by anyone who wants to establish and maintain an effective long-term
investment strategy.
One just needs to keep few things in mind such as:-
We should not attempt to get rich quick.
We should keep accounts and product selection to a minimum.
We should focus on asset class selection and the overall asset allocation of
your entire portfolio, making sure that your asset class exposure is fully
diversified.
Our approach does not have to be overly complicated, it does not have to be
time consuming, and it does not require a vast array of products or accounts.
In the end, we may actually find that less is more.
6. Achieving Better Returns In Your Portfolio (February 21 2012) 6
Investors can structure portfolios that deliver above global market index
returns by designing a strategic portfolio.
Fundamental theories like asset allocation and the three-factor model can have
a dramatic impact on the way you invest.
Designing a portfolio that favors small and value companies over pure market
risk should deliver higher expected returns over extended periods of time.
5 http://www.investopedia.com/articles/basics/08/simplified-approach.asp
6 http://www.investopedia.com/articles/05/021705.asp
55
7. Make Your Portfolio Safer With Risky Investments (September 04 2011) 7
Many investors look only at the risk of their individual securities, not at the
combined effect on their portfolio. In fact, portfolios can be made safer by
investment strategies that by themselves might be risky, but that in the context
of the portfolio make it safer.
Some of the strategies that are mentioned in this article are hedging strategies,
buying insurance with options, using low-correlation assets, reducing
benchmark or active risk and understanding your real risk.
8. Guard Your Portfolio With Defensive Stocks (September 10 2011) 8
This article provides an overview of defensive stocks and shows how we can
use them to guard our portfolio.
Defensive stocks accommodate greed by offering a higher dividend yield than
can be made in low interest rate environments. They also alleviate fear
because they are not usually as risky as regular stocks and it usually takes a
major catastrophe to derail their business model.
Some of the sectors that would be deemed defensive are foods, beverages &
tobacco products, water, gas and electric utilities, pharmaceuticals and
medical stocks.
7 http://www.investopedia.com/articles/financial-theory/08/reduce-risk.asp
8 http://www.investopedia.com/articles/stocks/07/defensive_stock.asp
56
9. The 2011 Billionaire Investment Portfolio (February 16, 2011) 9
Billionaires created their wealth by focusing on running businesses that they
created or took over from family members.
Investing billionaires became wealthy by putting all of their eggs in one (or
just a few) basket and watching that basket very closely.
This article puts an insight into the portfolios of the top 5 billionaires like
Carlos Slim, Bill Gates, Warren Buffet, Mukesh Ambani and Lakshmi Mittal.
Instead of spreading their investments across different classes or asset
allocations, their diversification has come through adding new businesses and
geographies to operate in, and individual investors can gear their portfolios
with many of the same firms these billionaires own.
10. One Portfolio For Asset Allocation (December 01 2012) 10
This article states that asset allocation takes care of nearly 94% of our
portfolio’s investment profile. The rest is influenced by individual security
selection and market timing.
We need to confirm that we are exposed to all areas of the asset class in order
to minimize unsystematic risk.
9 http://www.investopedia.com/stock-analysis/2011/the-2011-billionaire-investment-portfolio-
tmx-nyt-sks-rsg-ko-mt0216.aspx
10 http://www.investopedia.com/articles/basics/08/allocation-in-one-step.asp
57
Need and Usefulness of the study
Angel Broking: - This study will be useful for Angel Broking, especially to the
Ludhiana Branch where the internship was undertaken. Angel Broking can
suggest the same portfolio to its clients. It would be helpful for the Portfolio
Managers and Stock Brokers as well. The company can either suggest this fund
directly to its clients or can make some changes and then suggest the same.
Investors: - This study will also be useful for the investors who want
good/moderate return on their investment with low risk. Because stocks are
selected on the basis of the fundamental analysis and for the risk parameters I had
considered BETA, CAPM, SHARPE and SORTINO models. These will help us
to evaluate the expected return from each stock in relation to the risk involved
with it. I have also taken into consideration the excess return that we can make
with the investment. Usually investors face huge losses during the time of switch
over, thus SORTINO ratio will be useful.
Students: - This study will also be helpful for the students in understanding the
basic concepts of investing and managing the risk on behalf of the clients by
applying the fundamental analysis and it will help them to learn the fundamentals
and stock selection criteria as well.
Objectives Of the study
Endeavour to create wealth over the medium to longer term through investments in
equities, across market capitalization by focusing solely on the following:-
To measure the risk available in the market, taking into consideration the Nifty 50
stocks.
To look deep into the fundamentals of the companies as well as the concerned
industry.
To calculate the expected return from the shortlisted stocks as well as from their
concerned industry.
To measure the risk/reward value of investors’ assets class choices.
58
Chapter-3
Research Methodology adopted
59
Research Methodology
Research Methodology has many dimensions, it include not only research methods but
also considers the logic behind the methods used in the context of the study and explains
why only a particular method of technique has been used so that research leads to proper
evaluations. Thus in a way it is a written game plan for concluding research therefore in
order to solve research problem it is necessary to design a research methodology for the
problem as the same differ from problem to problem.
Research Design:
The research design is a pattern or an outline of a research project. It is a statement only
the essential of a study that provides the basic guidelines for the details of the project.
The present study being conducted follows a Descriptive Research and the Exploratory
Research. It is a cross section of the situation design of the descriptive studies including
the nature and the analytical method.
Data Collection:
After the research problem has been defined and the research design has been chalked out,
the task of date collection begins. The data collection technique would be Secondary Data
Collection. Secondary data would be collected from the internet and different websites
and newspaper articles. And other research paper would be taken into consideration to
find out the better result from the research paper.
Research Tools and Techniques
Tools and techniques are used for the stock selection and to manage the risk and return on
the portfolio. Major things to be considered are the sector preference for the selection of
the stock because diversification should be into different sectors so as to maximize the
return and taking advantage of whole economy related environment and news. Stock
selection will be based on the Fundamental analysis and Beta for the stock selection.
Capital Asset Pricing Model and Sharpe Ratio will be used vis-à-vis to manage the risk
and selection of stock as well.
Details of tools and techniques
Sectors will be divided into two parts DEFENSIVE and OFFENSIVE. In
defensive bets IT, FMCG, PHARMA& HEATHCARE will be considered. For
the offensive bets BANKING and FINANCE, AUTOMOBILE,
CAPITALGOODS, INFRASTURCTURE AND, METAL, OIL & GAS will be
considered.
60
For the selection of the stock nifty 50 stocks, stocks of large capitalization and
those stocks who had major contribution in their sector and cheap via valuation
will be selected. (All Nifty 50 stocks are shortlisted due to the index preference.)
The first stock selection criteria would be to analyze the industry from a macro
point of view.
After analyzing the industry, sectoral allocation would be analyzed considering
the individual stocks.
Then industry analysis and the company analysis will be done for the final stocks
which are good as per the selection criteria.
In another part I will apply the fundamentals for selecting the specific stocks for
my portfolio.
For the further analysis and to manage the returns and risk involved in the
investment CAPM and SHARPE will be implemented on the stocks.
We know the stock market is a risky investment tool and so as to avoid the wrong
decision of elimination or for the restructuring purpose and for the eliminating of
the stocks which are not giving good returns or are giving negative returns,
SORTINO will be used.
Note:- However we all know that the stock market is always a risky investment tool but the
above analysis part will be used for the stocks and investment decision will be made on
the behalf of above analysis. The investment amount limit will be same as it has been set
by SEBI (Min 25lacs for the portfolio).
The above analysis is made to the best of my knowledge. There will be fee charged by
the fund manager or portfolio manager or by the company who will manage this
investment on the behalf of the client.
61
Chapter-4
Details of actual work undertaken
62
Portfolio Management Services
Definition
Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income,
debt, cash, structured products and other individual securities, managed by a professional
money manager that can potentially be tailored to meet specific investment objectives.
When one invests in PMS, investor owns individual securities unlike a mutual fund
investor, who owns units of the entire fund. One has the freedom and flexibility to tailor
the portfolio to address personal preferences and financial goals.
Although portfolio managers may oversee hundreds of portfolios, individual account may
be unique.
PMS at Angel Broking Ltd:
Portfolio Management Service is a highly customized service offering a range of
investment options best suited in the current market scenario.
Angel offers professional PMS to HNI’s who seek customized solutions to realize their
investment goals.
Angel’s Portfolio Managers are equipped to design an investment portfolio across various
investment avenues like Equities, Fixed Deposits, and Bonds etc. in sync with the client’s
unique needs.
Approach to PMS
Risk Profiling
Research & Asset Allocation
Stock Selection
Review & Rebalancing
Angel, with years of experience and research expertise, offers the best in class Portfolio
Management Services.
63
Benefits at Angel
Investment in companies that have a strong competitive advantage over their
peers.
Well laid-out investment philosophy.
Pro-active management of funds.
Dedicated Relationship Manager.
Quarterly newsletter from fund management team.
Regular Conference Calls & Periodic Meets with Angel Fund Managers.
PMS products:-
1. ANGEL BLUECHIP FUND
The objective of the scheme is to generate capital appreciation in medium to long term
through equity and equity related instruments mainly comprising of large-cap companies.
2. ANGEL GROWTH FUND
The objective of the scheme is to render capital appreciation in medium to long term,
through equity and equity related instruments largely comprising of mid-cap and small-
cap companies.
3. ANGEL GOLD
In a volatile market, it is very difficult for an investor to pick up value stocks which will
give decent returns in the long run.
Angel Gold helps investor’s with professional financial advises and assists investors in
making wise and profitable decisions.
ANGEL HARMONIZED ASCEND FUND Angel Harmonized Ascend Fund is an investment portfolio in some of the
fundamentally strong Nifty 50 stocks.
I have suggested this Fund as a new product for Angel Broking under its
Portfolio Management Services schemes.
64
Angel
Harmonized
Ascend Fund
65
Overview
As market becomes extremely dynamic and there is multiplicity of information and
opinion, it becomes very difficult to take decision at the right time.
Moreover, as your responsibilities and challenges increase, it may be more difficult for
you to find the time to make well informed decisions with regard to your portfolio.
A good investment decision is the right decision taken at the right time, which is why my
focus is on understanding the customers investment needs, their risk profile and the
investment time horizon that client’s normally look for.
Investment Objective
To generate long term capital appreciation from a portfolio that is invested predominantly
in the fundamentally strong equity and equity related instruments.
How to invest in Angel Harmonized Ascend Fund?
The minimum amount you can invest in this fund is Rs 25 lacks.
Your investment can go up beyond that in multiples of Re 1.
You could make the investment either through cheque or stock transfers or a combination
of both.
To invest in this Portfolio you need to-
Sign a KYC & DP-POA agreement
Provide all statutory account opening documents
Payment instrument of investment amount or stock transfer slip
Who can invest?
Individuals
NRIs
Hindu Undivided Families
Association of persons
Companies
Partnership Firms
Societies, and Overseas Trusts (subject to RBI approval)
66
Investment Strategy
Principles of Value and Growth investing followed.
Focus on Capital preservation.
Impetus to low-risk high-return stock, by capturing the complete up moves in the
stock.
Contrarian at times, investing in less known & unpopular businesses having
potential to deliver much superior returns.
A bottom up stock picking is the key to generating alpha. Manager carries out
extensive research to select companies mainly on its individual merits that offer
higher growth potential.
Diversification of portfolio across sectors and businesses in order to avoid
excessive concentration in a single sector or stock.
Disciplined, long term & patient portfolio management approach.
Active Portfolio management, with continuous risk management of the portfolio
along with realigning it with newer opportunities for superior returns.
Profit booking at opportune moments.
Scheme Details
Investment Plan – Balanced Growth
Benchmark – CNX Nifty 50
Minimum Investment – Rs.25 lacks
Fund Manager – Mehak Mehta
Fee Structure & Other Details
Nature of Fees Fees
One Time upfront Fee / Processing Fee Nil
Fixed Management Fees (on Average
Assets under management charged on
quarterly basis)
2% p.a.*
Exit Load Refer Note Below
67
Custodian Fees Nil
Depository Charges As Applicable
Registrar & Transfer Fees Nil
Service Tax, Security Transaction Tax &
Other Statutory levies
As Applicable
Brokerage 0.5% per Transaction
*In the case of redemption (Partial for full) with in the first year, a fixed management fee
of 2% will be levied on the average assets under management for the residual period.
Residual Period =
365 days- Actual number of days for which the investor participated in the respective
scheme.
68
Benchmark – CNX Nifty 50
The CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index
based derivatives and index funds. CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL),
which is a joint venture between NSE and CRISIL. IISL is India's first specialized
company focused upon the index as a core product.
The CNX Nifty Index represents about 68.03% of the free float market capitalization of
the stocks listed on NSE as on March 28, 2013.
The total traded value for the last six months ending March 2013 of all index constituents
is approximately 50.23% of of the traded value of all stocks on the NSE.
Impact cost of the CNX Nifty for a portfolio size of Rs.50 lakhs is 0.06% for the month
March 2013.
CNX Nifty is professionally maintained and is ideal for derivatives trading.
From June 26, 2009, CNX Nifty is computed based on free float methodology.
CNX Nifty Index : April 2013
Industry Percentage (%)
Aluminum 2
Automobiles - 2 & 3 wheelers 4
Automobiles - 4 wheelers 6
Banks 16
Cement & Cement Products 8
Cigarettes 2
Computers - Software 6
Construction 4
Diversification 2
Electrical Equipment 2
Engineering 2
69
Finance - Housing 2
Financial Institution 2
Gas 2
Mining 6
Oil Exploration 4
Paints 2
Pharmaceuticals 10
Power 8
Refineries 4
Steel & Steel Products 4
Telecommunication 2
CNX NIFTY 50 composition Aluminium
Automobiles - 2 & 3 wheelers Automobiles - 4 wheelers Banks
Cement & Cement Products Cigarettes
Computers - Software
Construction
Diversification
Electrical Equipment
Engineering
Finance - Housing
Financial Institution
Gas
Mining
Oil Exploration
Paints
Pharmaceuticals
Power
Refineries
Steel & Steel Products
Telecommunication
70
Chapter-5
Interpretation and Analysis
71
Stocks Selection Criteria
Industry Analysis The first step that I have taken into consideration is the macro level returns. Before
selecting a particular stock in a portfolio one must look deep into the industry which that
particular stock comes under.
Individual Stocks Analysis The second important step is the analysis of Individual stocks wherein I have taken into
account the fundamentals of the Nifty 50 companies.
My focus in this part of the analysis was not just on the stocks of a particular sector but
rather it was also on the optimum diversification of my Portfolio so that in any market
conditions my Portfolio would give good returns only.
Fundamentals of the shortlisted companies The third and the last step for stock selection is the fundamentals of the shortlisted stocks
of major growing sectors.
In fundamentals I have taken into consideration the following things :-
Ownership Pattern
Performance Chart
Price Movement
Business/Businesses of the Company
Industry Analysis
Individual Stocks Analysis
Fundamentals of the shortlisted companies
72
Industry Analysis
The first and foremost thing that one needs to do before selecting any stock for
investment purposes is to look for the growth of the particular industry that the
stock comes under.
In my study I have taken into account Nifty 50 companies. Nifty comprises of 22
sectors at present.
I have studied the basis and most considered sectors for my study. Some of them
are FMCG, Banking, Auto, IT, Pharmaceutical etc which imposes serious impact
on the index Nifty.
Following is a graph showing the last 1 year returns of the most considered
sectoral indices.
-30 -20 -10 0 10 20 30 40 50
CNX FMCG
CNX AUTO
CNX BANK
CNX ENERGY
CNX FINANCE
CNX IT
CNX MEDIA
CNX METAL
CNX PHARMA
CNX PSU BANK
CNX REALTY
1 Year Performance Comparison of Sector Indices
Returns(%)
Returns(%)
73
Following is the Performance of various indices as of end Apr 2013(in %)
Index 1 month 3 month 6 month 1 year
CNX Nifty 4.36 -1.73 5.53 13
CNX IT Index -16.23 -10.77 -0.66 -0.62
CNX Bank Index 10.56 -1.16 11.47 22.23
CNX Realty 7.72 -18.16 3.03 6.42
CNX INFRASTRUCTURE 9.94 -5.16 -2.27 2.82
CNX ENERGY INDEX 5.08 -6.45 1.92 5.75
CNX FMCG INDEX 9.75 10.16 15.78 38.52
CNX MNC INDEX 14.22 4.94 1.31 11.56
CNX PHARMA INDEX 10.03 10.36 15.58 27.05
CNX PSE INDEX 6.16 -5.71 2.33 2.75
CNX PSU BANK 7.89 -11.09 4.72 -0.76
CNX SERVICE SECTOR 2.01 -2.53 7.87 14.33
Interpretation
The maximum growth can be seen in Media Sector but I cannot take this
sector into consideration because there is no company in Nifty 50 which is
covered by this sector.
The next best growth is seen in FMCG sector which will be my top most
priority sector when it comes to stock selection.
Pharmaceutical is another sector which performs well in the market.
Finance and Banking are the other 2 sectors that are performing quite well in
the market.
Information Technology is a sector which is giving negative returns
throughout the year. According, it should be a part of portfolio because it is
negatively correlated with other sectors.
Thus if market conditions wouldn’t be favorable and all the sectors would
start performing negatively then at least IT sector would save us.
The reason behind Media, FMCG and Pharmaceuticals sector performing so
well is that all these three sectors are dealing in things which are either basic
necessities or without which a person cannot do things well.
Thus, these sectors are bound to perform well no matter what the market
conditions are.
74
CNX FMCG
Statistics
QTD YTD 1 Year 5 years Since
Inception
Returns (%) 0.97 0.97 34.74 20.94 17.14
1 Year 5 Years Since Inception
Std. Deviation 0.94 1.27 1.53
Beta (Nifty) 0.54 0.50 0.69
Correlation
(Nifty)
0.47 0.67 0.74
CNX PHARMA
Statistics
QTD YTD 1 Year 5 years Since
Inception
Returns (%) -1.36 -1.36 21.53 15.02 15.68
1 Year 5 Years Since Inception
Std. Deviation 0.71 1.20 1.28
Beta (Nifty) 0.35 0.48 0.55
Correlation
(Nifty)
0.41 0.68 0.68
75
CNX BANK
Statistics
QTD YTD 1 Year 5 years Since
Inception
Returns (%) -8.92 -8.92 14.07 10.05 20.14
1 Year 5 Years Since Inception
Std. Deviation 1.22 2.22 2.06
Beta (Nifty) 1.36 1.18 1.04
Correlation
(Nifty)
0.91 0.90 0.82
CNX FINANCE
Statistics
QTD YTD 1 Year 5 years Since
Inception
Returns (%) -7.53 -7.53 16.92 8.87 18.31
1 Year 5 Years Since Inception
Std. Deviation 1.14 2.18 2.09
Beta (Nifty) 1.28 1.19 1.13
Correlation
(Nifty)
0.92 0.92 0.90
76
CNX IT
Statistics
QTD YTD 1 Year 5 years Since
Inception
Returns (%) 19.82 19.82 11.91 13.07 28.16
1 Year 5 Years Since Inception
Std. Deviation 1.30 1.91 2.49
Beta (Nifty) 0.68 0.84 1.03
Correlation
(Nifty)
0.43 0.74 0.69
CNX AUTO
Statistics
QTD YTD 1 Year 5 years Since
Inception
Returns (%) -12.54 -12.54 3.44 17.30 16.87
1 Year 5 Years Since Inception
Std. Deviation 1.07 1.60 1.63
Beta (Nifty) 0.97 0.76 0.81
Correlation
(Nifty)
0.75 0.81 0.83
77
Individual Stocks Analysis
Stock No.1 – ITC Ltd.
It can be clearly seen in the Chart 1 that the Market Price of ITC is increasing on
continuous basis.
Chart 2 shows that the Market Capitalization is almost stable for last 5-6 years but
its Net Profit and Net Sales are increasing on annual basis.
From the FMCG sector I have shortlisted ITC because it is a fully diversified
product portfolio, which reduces our investment risk.
Although, it’s BETA is comparatively much more than the other FMCG sector
stocks but following 2 reasons makes it a good company to invest in:-
It’s a cash rich company
Its major revenue is from CIGARETTES whose demand is always there.
Moreover, there is no cost involved for promotional purposes.
78
Another most innovative initiative by ITC is its E-chaupal concept.
Last but not the least, it is a fully diversified product portfolio in different sectors
like hotels, FMCG, Cigarettes, Stationary etc.
Thus ITC is the best buy for my portfolio.
Stock No.2 – Sun Pharmaceuticals Industries Ltd.
79
It can be clearly seen in the Chart 1 that the Market Price of Sun Pharma is
increasing on continuous basis.
Chart 2 shows that the Market Capitalization is almost stable since 2009 but the
sales and profits have reduced. The decline in net profit has never created an
impact on the overall performance of the company.
The last Chart shows the shareholding pattern of different investment houses in
the company. The maximum stake is held by the promoters which is a bullish
trend for the company.
General public is having a very less stake in comparison to the promoters’ stake
which seems to be a very supportive point for us.
Sun Pharmaceuticals is the low BETA stock in the pharma sector and it has its
orders books fully filled with orders.
It has a very strong research team which provides them with innovative and good
patents for its products.
Ranbaxy is a highly volatile stock due to its high BETA among Sun Pharma,
Cipla and itself.
Thus Sun Pharmaceuticals Industries Ltd.is a good stock to invest in.
Stock No.3 – CIPLA Ltd.
80
It can be clearly seen in the Chart 1 that the Market Price of CIPLA Ltd. is
increasing on continuous basis.
Chart 2 shows that the Market Capitalization of CIPLA Ltd. is the same since
2009.
The Net Profit and Sales of CIPLA Ltd. is increasing year on year.
CIPLA Ltd. sells very expensive Cancer and Heart disease medicines and which
still has huge demand in the market. Thus its earnings due to these two variants
are the best.
It gives a very good dividend per share and is a well known and trusted brand in
the market.
Ranbaxy is a highly volatile stock due to its high BETA among Sun Pharma,
Cipla and itself.
Thus CIPLA Ltd.is another good stock to invest in Pharmaceutical sector.
Stock No.4 – STATE BANK OF INDIA
81
In Chart 1 it can be clearly seen that the market price of SBI is not increasing but
rather its fluctuating. Thus it is a good bet earning huge profits.
This is going to be an investment which will help the investors earn a lot from
their portfolio.
Chart 2 shows a huge jump in the net profits of SBI from March 2011 to March
2012. This shows that this company has a huge potential to come out with huge
profits even in poor conditions.
The last Chart shows the shareholding pattern of different investment houses in
the company. The maximum stake is held by the promoters which is a bullish
trend for the company.
General public is having a very less stake in comparison to the promoters’ stake
which seems to be a very supportive point for our portfolio.
SBI is a leading public sector bank, having a very good market. Though it has got
a good weight on Nifty index but still it is on the expansion mode.
Another reason is that most of the Government financial transactions are done
through SBI only, thus it plays a crucial role in the decision making for all the
other banks.
82
Stock No.5 – HDFC Bank Ltd.
It can be clearly seen in the Chart 1 that the Market Price of HDFC Bank is
increasing on continuous basis.
Chart 2 shows that the Market Capitalization of HDFC Bank Ltd. is the same
since March 2009. There is a consistent increase in the Net Sales and Net Profit of
the company.
There was a huge rise followed by a huge fall during March 2011-12. Since then
the company is earning stable returns.
Like SBI which is a leading bank in Public Sector, HDFC Bank is a leading bank
in Private Sector.
There is no doubt that HDFC Bank already has a good weight on the index, but
still much more momentum is expected upside due to its aggressive operational
work and efficiency of the service.
83
Axis Bank is also a growing bank in the private sector but I have not considered
the same due to its higher BETA. My portfolio is more towards a balance growth
so I am selecting a bit defensive stock rather than being more aggressive by
selecting Axis Bank.
Stock No.6 – Tata Consultancy Services Ltd.
It can be clearly seen in the Chart 1 that the Market Price of TCS is increasing on
continuous basis.
Chart 2 shows that a very high percentage of shareholding of TCS is with the
promoters of the company.
The maximum stake being with the promoters shows a bullish trend for the
company.
General public is having a very less stake in comparison to the promoters’ stake
which seems to be a very supportive point for our portfolio.
84
TCS has the lowest BETA in comparison to other Nifty 50 stocks of IT sector and
it also has less weight on Nifty index in comparison to Infosys.
TCS has major business operations in India only whereas Infosys has its major
business in exports. Thus TCS is a comparatively safer bet than Infosys.
From returns perspective Infosys has grown to its maximum level and now the
returns are less likely to be expected in near future.
HCL technologies is another giant in IT sector but it has a very high BETA in
comparison to other IT sector stocks
Thus TCS is a better investment option in comparison to HCL and Infosys.
Stock No.7 – Mahindra & Mahindra Ltd.
85
It can be clearly seen in Chart 1 that the Market Price of Mahindra & Mahindra
was consistent till July 2012 but post that period the price has increased
continuously month after month.
Chart 2 shows that the Market Capitalization is stable since March 2009. The Net
Profit and Net Sales has been consistently increasing year on year.
Automobile sector always remain as an attractive point of investment for those
who want aggressive return on their portfolio.
Beta of M&M is less in its industry in comparison to other stocks. No doubt its
weight in Nifty is already high but still if we talk about the marketing strategy and
product preference, it is much better than its competitors.
Most of the Indian market stays in rural areas and M&M has a good hold in the
rural sector, which is a positive point for this company.
In order to compete with the Sedan and SUV segment, M&M has launched
Quanto and XUV500.
M&M has one of the best technologies for SUVs segment and Maruti Suzuki has
a good range of Sedan. It is good for M&M because the taste of Indian customers
is gradually shifting from Sedans to SUVs due to more comfort and space that is
involved in SUVs.
Thus from competition as well as risk point of view it is a worth investing stock.
Stock No.8 – Bajaj Auto Ltd.
86
It can be clearly seen in the Chart 1 that the Market Price of Bajaj Auto is
increasing on continuous basis.
Chart 2 shows that although Net Sales are more or less the same, but Net Profit
has increased due to its innovation and marketing strategies.
Bajaj Auto has its major competition with Hero Motor Corp. BETA of Bajaj Auto
is less than that of Hero Motor Corp. but the weight of Bajaj Auto is
comparatively higher in Nifty index.
Hero Motor Corp. has good management leaders who are leading the company
and the product diversification is comparatively good than other 2 and 3 wheeler
automobiles.
Stock No.9 – GAIL (India) Ltd.
87
It can be clearly seen in Chart 1 that GAIL’s Market Price has continuously
reduced during the last 1 year.
Chart 2 shows that the sales are increasing year on year but still the net profits are
falling down.
BETA and weight of GAIL in Nifty index is comparatively less and in the near
future it is expected that GAIL will outperform in the industry like CAIRN and
ONGC are currently doing.
ONGC and CAIRN are facing tough competition from GAIL due to an increase in
its efficiency of operational process.
GAIL is on the growth stage while ONGC and CAIRN had already grown and
had given sufficient returns to their investors.
Thus GAIL seems to be a good buy for my fund.
Stock No.10 – Tata Steel Ltd.
88
It can be clearly seen in Chart 1 that the Market Price of Tata Steel Ltd. is
continuously falling. And now is a good time to invest in this stock.
Chart 2 shows that the Market Capitalization of Tata Steel Ltd. is stable but the
Net Sales and Net Profit are highly correlated.
Tata Steel is a leading company from investment perspective because it has a
wide range of customers in the industry.
It has a very big client base (corporate client + industry client) that makes a good
hold of this company in the steel market.
The management of this company is very sound and it is a leader in Steel market
for a very long time.
Thus, strong management, good client base and market leader kind of qualities
makes this stock a good buy for my portfolio.
Stock No.11 – Larsen & Turbo Ltd.
89
It can be clearly seen in Chart 1 that the Market Price of Larsen & Turbo fell for
some months but now for last 4-5 months it is giving good returns.
Chart 2 shows that the Market Capitalization of Larsen & Turbo is stable since
March 2009. The Net Profit and Net Sales are highly correlated.
In terms of returns it is a stable company and also it’s a large cap company.
The management and order books of Larsen & Turbo are always filled and they
are duly met.
It is into many diversified businesses like motors, mutual funds and finance etc.
Thus there is huge potential in this company and hence it is being considered in
portfolio for investment purposes.
Stock No.12 – Coal India Ltd.
90
It can be clearly seen in the Chart 1 that the prices of Coal India has been falling
for some months and now it’s is good move to buy this stock.
Chart 2 shows the Net Profit and Net Sales where we can see that the Net Sales
are stable throughout the year but the Net Profit is fluctuating. This is because
coal is demanded at a particular period during a month.
Chart 3 shows the shareholding pattern where the maximum hold is with the
promoters.
The maximum stake with the promoters is the strength of a company and also is
bullish for the company.
Coal India came up with its IPO which had an all time high fund requirement
from general public and still the share were oversubscribed that time.
It is India’s largest coal mining government company
Coal India is one of the most trusted companies in terms of investment.
Thus it will be a good stock for my portfolio.
91
Chapter-6
Findings and Recommendations
92
Findings of the study
Portfolio classification
Minimum Investment Amount – Rs 25,00,000
Benchmark – CNX Nifty 50
Fund Manager – Mehak Mehta
10%
12%
5%
7%
15% 13%
11%
4%
7%
2%
9% 5%
Sectoral Allocation
Cigarettes
Pharmaceuticals
PSU Banks
Private Banks
Computers - Software
Automobiles 4 wheelers
Automobiles 2 & 3 wheelers
Gas
Steel & Steel Products
Engineering
Mining
Cash
93
Portfolio BETA
Valiant investors trade aggressively by investing in high beta (high risk) stocks like realty,
metals etc. But the cautious ones should stick to quality stocks which are fundamentally
strong.
Cautious or long term investors however are cautioned to stay invested in good quality
sectors and selectively book profits.
This is the reason that I have suggested a Balanced Growth Fund to Angel Broking.
It is a fund for cautious investors who don’t want to play aggressively rather who want to
play safe with quality stocks.
Industry Security Name BETA
Cigarettes ITC Ltd. 0.65
Pharmaceuticals Sun Pharmaceuticals 0.49
Pharmaceuticals CIPLA Ltd. 0.54
PSU Banks State Bank of India 1.49
Private Banks HDFC Bank Ltd. 1
Computers – Software TCS Ltd. 0.36
Automobiles – 4 wheelers Mahindra & Mahindra Ltd. 0.89
Automobiles – 2 & 3 wheelers Bajaj Auto Ltd. 0.61
Gas GAIL (India) Ltd. 0.69
Steel & Steel Products Tata Steel Ltd. 1.4
Engineering Larsen & Turbo Ltd. 1.56
Mining Coal India Ltd. 0.54
Portfolio BETA = Average BETA of individual stocks
= 10.22/12
= 0.8516
My portfolio’s BETA is = 0.8516
It means that for every 100% change in CNX Nifty, there will be around
85% change in the fund that I have created.
94
Portfolio CAPM
No matter how much we diversify our investments, it's impossible to get rid of all the risk.
As investors, we deserve a rate of return that compensates us for taking on risk.
The capital asset pricing model (CAPM) helps us to calculate investment risk and what
return on investment we should expect.
Here is the formula:
Risk free rate - Generally, return on government bonds, interest rates on fixed deposits
for one year, 365-day T-Bills, and so on serve as a good proxy for the risk free rate
prevailing in the market.
For the purpose of computation in the present study, risk-free rate was used as one of the
inputs to the capital asset pricing formula. The one-year term deposit rate of the State
Bank of India (SBI) was used as a proxy for the risk-free rate.
The term deposit rate of State Bank of India is 7.50-10%. While the domestic term
deposit rate of SBI for 1 year to less than 2 years in 8.75%.11
Beta of the portfolio - According to CAPM, beta is the only relevant measure of a stock's
risk.
It measures a stock's relativevolatility - that is, it shows how much the price of a
particular stock jumps up and down compared with how much the stock market as a
whole jumps up and down.
If a share price moves exactly in line with the market, then the stock's beta is 1.
Portfolio BETA = Average BETA of individual stocks
= 10.22/12
= 0.8516
11 https://www.sbi.co.in/user.htm?action=viewsection&id=0,16,384,385
95
My portfolio BETA is = 0.8516
Expected Market Return - The market rate of return is the return that an investor expects
from an investment in a market portfolio.
The annualized rate of return of the market over the years can be calculated in several
ways. The following procedure was used in this study.
The daily closing price of CNX NIFTY index from 1st May 2012 to 30th April 2013 was
taken and the logarithmic scale was used to get the daily rate of return.
The average of this value provides the average daily rate of return; multiplying this with
365 yields the average yearly rate of return.
Average daily return – 0.00049959112
The annual average rate of return is – 0.000499591 * 356
= 0.18235
= 18.23%
Risk free rate = 8.75%
Portfolio Beta = 0.8516
Expected Market Return = 18.23%
Portfolio CAPM = 8.75 + 0.8516 (18.23 - 8.75)
= 8.75 + 0.8516*9.48
= 8.75 + 8.073168
= 16.8231 %
My Portfolio’s CAPM = 16.8231%
This shows that by investing in the portfolio that I have created, an investor
can expect a return of 16.8231%.
This is a really good return in comparison to the normal return of 15% (at
the most) that one can expect from Equity Market.
12 http://nseindia.com/products/content/equities/indices/historical_index_data.htm
96
Portfolio Standard Deviation
The Standard Deviation is a measure of how spread out the prices or returns of asset are
on average. It is the most widely used risk indicator in the field of investing and finance.
Standard Deviation is commonly used to measure the confidence in statistical
conclusions regarding certain equity instrument or portfolio of equities.
A large standard deviation usually indicates that the data points are far from the mean and
a small standard deviation indicates that they are clustered closely around the mean.
Industry Security Name Standard Deviation
Cigarettes ITC Ltd. 313
Pharmaceuticals Sun Pharmaceuticals Ltd 2.27
Pharmaceuticals CIPLA Ltd. 1.14
PSU Banks State Bank of India 1.78
Private Banks HDFC Bank Ltd. 1.08
Computers – Software TCS Ltd. 1.79
Automobiles 4 wheelers Mahindra & Mahindra Ltd. 2.53
Automobiles 2 & 3 wheelers Bajaj Auto Ltd. 1.62
Gas GAIL (India) Ltd. 2.64
Steel & Steel Products Tata Steel Ltd. 1.71
Engineering Larsen & Tourbo Ltd. 1.5
Mining Coal India Ltd. 0.54
Portfolio Standard Deviation = Average S.D. of all the securities
= 22.99/12
= 1.91583
My Portfolio’s Standard Deviation is = 1.91583
Thus the Standard Deviation of my portfolio is 1.91583 which seems to be a
good number.
13 http://www.macroaxis.com/invest/technicalIndicator/ITC.BO--Standard_Deviation
97
Portfolio Sharpe Ratio
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment
decisions or a result of excess risk.
This measurement is very useful because although one portfolio or fund can reap higher
returns than its peers, it is only a good investment if those higher returns do not come
with too much additional risk.
The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. A
negative Sharpe ratio indicates that a risk-less asset would perform better than the
security being analyzed.
Expected portfolio return = 16.8231%
Risk free rate = 8.75%
Portfolio Standard Deviation = 1.91583
Portfolio Sharpe Ratio = (16.8231-8.75)/1.91583
= 8.0731/1.91583
= 4.21389
My Portfolio’s Sharpe Ratio = 4.21389
Thus the value of my portfolio is 4.21389 and it shows the excess returns
that the investors can expect for the extra volatility they are exposed to by
holding a riskier asset.
98
Angel Harmonized Ascend Fund “A new Portfolio Product for Angel Broking”
Benchmark – CNX Nifty 50
Minimum Investment Amount – Rs.25,00,000
Fund Manager – Mehak Mehta
Portfolio Beta
0.8516
Portfolio CAPM
16.8231%
Portfolio Standard Deviation
1.91583
Portfolio Sharpe Ratio
4.21389
99
Recommendations of the Study
Following are some of the recommendations of the study that is being carried on the
existing portfolio products of Angel Broking and on the basis of technical and
fundamental analysis giving a new product to Angel Broking, Ludhiana:-
Angel Broking can check out the performance and returns for 2- 3 years of the
portfolio that I have created and only after that I should of using this portfolio.
Angel Harmonized Ascend Fund is a product for all those investors who want
good returns but who are afraid of playing aggressively.
Angel Broking must look for the new product that I have suggested because my
focus was basically to judge the psyche of the people living in Ludhiana.
The maximum population of Ludhiana is into handling of businesses only, either
self made business or family owned business.
People in Ludhiana have a lot of money that they want to invest in stock market
but the only problem that they face is lack of awareness about stock market and
also lack of time.
Ludhiana Branch of Angel Broking should focus more on its portfolio products
instead of the simple demat account opening because of the psyche of the
population living in and near Ludhiana.
Portfolio Management Services according to me are more for such areas where
people have money but they either don’t have awareness or they don’t have time.
100
Glossary
Benchmark The performance of a predetermined set of securities, for comparison
purposes. Such sets may be based on published indexes or may be customized to
suit an investment strategy.
Beta equation (Stocks)
The beta of a stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock
Capital asset pricing model (CAPM) An economic theory that describes the
relationship between risk and
expected return, and serves as a model for the pricing of risky securities. The
CAPM asserts that the only risk that is priced by rational investors is systematic
risk, because that risk cannot be eliminated by diversification.
The CAPM says that the expected return of a security or a portfolio is equal to the
rate on a risk-free security plus a risk premium.
Portfolio A collection of investments, real and/or financial.
Return The change in the value of a portfolio over an evaluation period,
including any distributions made
from the portfolio during that period.
Return on investment (ROI) generally, book income as a proportion of net book
value.
Sharpe ratio A measure of a portfolio's excess return relative to the total
variability of the portfolio.
Standard deviation the square root of the variance. A measure of dispersion of a
set of data from their mean.
101
Bibliography/ References
http://www.angelbroking.com/
www.nseindia.in
www.bseindia.in
www.rbi.ors.in
www.sbi.com
www.investopedia.com
www.investing.com
www.moneycontrol.com
http://investmentperformanceguy.blogspot.in/2012/01/making-sense-of-negative-sharpe-ratios.html
http://www.aaii.com/computerizedinvesting/article/interpreting-the-sharpe-ratio
www.economictimes.com
http://www.money-zine.com/calculators/investment-calculators/capm-calculator/
http://articles.economictimes.indiatimes.com/2013-04-22/news/38736159_1_corporate-bonds-10-year-bonds-yields
http://www.investopedia.com/search/default.aspx?q=expected%20market%20return
http://www.investopedia.com/ask/answers/11/cfa-031511.asp