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ABSTRACT

The topic is taken for the study is A STUDY ON COMPARATIVE ANALYSIS

OF PERFORMANCE OF EQUITY SHARES IN SELECTED SECTORS OF NIFTY

WITH REFERENCE TO INDIA INFOLINE. The information in order to analyze the data

is taken from the current year.

The ways in which the analysis can help in Investing in financial securities is now

considered to be one of the best avenues for investing once saving while it is acknowledged to

be one of the most risky avenues of investment. It is rare to find investors investing their entire

savings in single securities.

The objective of the study is to observe the rate of fluctuations of selected scrips in

selected sectors. To determine the share price movement of the selected scrips in selected

sectors. To find out the risk and return of the sample scrips in various sectors and to find out

suitable sector in Nifty to make investment.

This study is used on analytical in nature. The data needed for the present study have

been collected through the secondary data. The tools used for the study is Beta, Systematic &

Unsystematic risk, Standard deviation, Sharpes optimal portfolio model.

The expected outcomes of the Study is mainly focusing on suitable sector in Nifty tomake investment.

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OBJECTIVES OF THE STUDY

To Study on the comparative performance analysis of equity shares in selected sectors of

S&P CNX Nifty.

To observe the rate of fluctuations of selected scrips in selected sectors.

To determine the share price movement of the selected scrips in selected sectors.

To find out the risk and return of the sample scrips in various sectors.

To find out suitable sector in Nifty to make investment.

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SCOPE OF THE STUDY

The study covers all the information related to the Equity fund and it also covers the

investor risk in the investment in various securities in selected sectors.

Identification of the investors objectives, constraints and preferences.

Strategies are to be developed and implemented in tune with investment policy

formulated.

To reduce the future risk in advance.

To earn maximum profit in the securities.

Review and monitoring the performance of the equity shares in selected securities.

Finally the evaluation of the equity shares.

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INTRODUCTION

ABOUT THE STUDY

Equity shares or ordinary shares are those shares which are not preference shares. Dividend onthese shares is paid after the fixed rate of dividend has been paid on preference shares. The rateof dividend on equity shares is not fixed and depends upon the profits available and the intentionof the board. In case of winding up of the available and the intention of the board. In case ofwinding up of the company, equity capital can be paid back only after every other claimincluding the claim of preference shareholders has been settled. The most outstanding feature ofequity capital is that its holders control the affairs of the company and have an unlimited interestin the company's profits and assets. They enjoy voting right on all matters relating to the businessof the company. They may earn dividend at a higher rate and have the risk of getting nothing. the

importance of issuing ordinary shares is that no organization for profit can exist without equityshare capital. This is also known as risk capital.

Meaning:Equity shares are those shares which are ordinary in the course of company's business.They are also called as ordinary shares. Theseshare holdersdo not enjoy preference regardingpayment ofdividendand repayment of capital. Equity shareholders are paid dividend out of theprofits made by a company. Higher the profits, higher will be the dividend and lower the profits,lower will be the dividend.

Features of Equity Shares:

(1) Owned capital: Equity share capital is owned capital because it is the money of theshareholders who are actually the owners of the company.

(2)Fixed value or nominal value: Every share has fixed value or a nominal value. For example,the price of a share is Rs. 10/- which indicates a fixed value or a nominal value.

(3) Distinctive number: Every share is given a distinct number just like a roll number for thepurpose of identification.

(4) Attached rights: A share gives its owner the right to receive dividend, the right to vote, the

right to attend meetings, the right to inspect the books of accounts.

(5) Return on shares: Every shareholder is entitled to a return on shares which is known asdividend. Dividend depends on the profits made by a company. Higher the profits, higher will bethe dividend and vice versa.

(6) Transfer of shares: Equity shares are easily transferable, that is if a person buys shares of aparticular company and he does not want them, he can sell them to any one, thereby transferring

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the shares in the name of that person.

(7) Benefit of right issue: When a company makes fresh issue of shares, the equity shareholdersare given certain rights in the company. The company has to offer the new shares first to theequity shareholders in the proportion to their existingshare holding. In case they do not take up

the shares offered to them, the same can be issue to others. Thus, equity shareholders get thebenefits of the right issue.

(8) Benefit of Bonus shares: Joint stock companies which make huge profits, issue bonus sharesto their ordinary shareholders out of the accumulated profits. These shares are issued free of costin proportion to the number of existing equity share holding. In case they do not take up theshares offered to them, the same can be issued to others. Thus, equity shareholders get thebenefits of the right issue.

(9) Irredeemable: Equity shares are always irredeemable. This means equity capital is notreturnable during the life time of a company.

(10)Capital appreciation: The nominal or par value of equity shares is fixed but the marketvalue fluctuates. The market value mainly depends upon profitability and prosperity of thecompany. High rate of dividend is paid with high rate of profit, theshareholders capitalisappreciated through an appreciation in the market value of shares. (i.e. higher the rate ofdividend, higher the market value of the shares.)

Types of Equity Shares:

An equity share, commonly referred to as ordinary share also represents the form of fractionalownership in which a shareholder, as a fractional owner, undertakes the maximumentrepreneurial risk associated with a business venture.

The holders of such shares are members of the company and have voting rights. A company mayissue such shares with differential rights as to voting, payment of dividend, etc.

The various kinds of equity shares are as follows

Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio tothose already held.

Bonus Shares: Shares issued by the companies to their shareholders free of cost bycapitalization of accumulated reserves from the profits earned in the earlier years.

Preferred Stock/ Preference shares: Owners of these kind of shares are entitled to a fixeddividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid inrespect of equity share.

They also enjoy priority over the equity shareholders in payment of surplus. But in the event ofliquidation, their claims rank below the claims of the companys creditors, bondholders /

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debenture holders.

Cumulative Preference Shares. A type of preference shares on which dividend accumulates ifremains unpaid. All arrears of preference dividend have to be paid out before paying dividend onequity shares.

Cumulative Convertible Preference Shares: A type of preference shares where the dividendpayable on the same accumulates, if not paid. After a specified date, these shares will beconverted into equity capital of the company.

Participating Preference Share: The right of certain preference shareholders to participate inprofits after a specified fixed dividend contracted for is paid. Participation right is linked with thequantum of dividend paid on the equity shares over and above a particular specified level.

OTHERTypes of Equity shares:The Equity share is a common name, some of the types of equity shares are

Blue Chip Shares Income Shares Growth shares Cyclical Shares Defensive shares Speculative shares

Advantages of equity shares:

Advantages of company: The advantages of issuing equity shares may be summarized asbelow:

I. Long-tern and Permanent Capital: It is a good source of long-term finance. A company isnot required to pay-back the equity capital during its life-time and so, it is a permanent sources ofcapital.

II. No Fixed Burden: Unlike preference shares, equity shares suppose no fixed burden on thecompany's resources, because the dividend on these shares are subject to availability of profitsand the intention of the board of directors. They may not get the dividend even when companyhas profits. Thus they provide a cushion of safety against unfavorable development

III. Credit worthiness: Issuance of equity share capital creates no change on the assets of thecompany. A company can raise further finance on the security of its fixed assets.

IV. Risk Capital: Equity capital is said to be the risk capital. A company can trade on equity inbad periods on the risk of equity capital.

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V. Dividend Policy: A company may follow an elastic and rational dividend policy and maycreate huge reserves for its developmental programmes.

Advantages to Investors: Investors or equity shareholders may enjoy the following

advantages:

I. More Income: Equity shareholders are the residual claimant of the profits after meeting all thefixed commitments. The company may add to the profits by trading on equity. Thus equitycapital may get dividend at high in boom period.

II. Right to Participate in the Control and Management: Equity shareholders have votingrights and elect competent persons as directors to control and manage the affairs of the company.

III. Capital profits: The market value of equity shares fluctuates directly with the profits of thecompany and their real value based on the net worth of the assets of the company. anappreciation in the net worth of the company's assets will increase the market value of equity

shares. It brings capital appreciation in their investments.

IV. An Attraction of Persons having Limited Income: Equity shares are mostly of lowerdenomination and persons of limited recourses can purchase these shares.

V. Other Advantages: It appeals most to the speculators. Their prices in security market aremore fluctuating.

Disadvantages of equity shares:

Disadvantages to company: Equity shares have the following disadvantages to the

company:

I.Dilution in control: Each sale of equity shares dilutes the voting power of the existing equityshareholders and extends the voting or controlling power to the new shareholders. Equity sharesare transferable and may bring about centralization of power in few hands. Certain groups ofequity shareholders may manipulate control and management of company by controlling themajority holdings which may be detrimental to the interest of the company.

II. Trading on equity not possible: If equity shares alone are issued, the company cannot tradeon equity.

III. Over-capitalization: Excessive issue of equity shares may result in over-capitalization.Dividend per share is low in that condition which adversely affects the psychology of theinvestors. It is difficult to cure.

IV. No flexibility in capital structure: Equity shares cannot be paid back during the lifetime ofthe company. This characteristic creates inflexibility in capital structure of the company.

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V. High cost: It costs more to finance with equity shares than with other securities as the sellingcosts and underwriting commission are paid at a higher rate on the issue of these shares.

VI. Speculation: Equity shares of good companies are subject to hectic speculation in the stockmarket. Their prices fluctuate frequently which are not in the interest of the company.

Disadvantages to investors: Equity shares have the following disadvantages to the

investors:

I.Uncertain and Irregular Income: The dividend on equity shares is subject to availability ofprofits and intention of the Board of Directors and hence the income is quite irregular anduncertain. They may get no dividend even three are sufficient profits.

II. Capital loss During Depression Period: During recession or depression periods, the profitsof the company come down and consequently the rate of dividend also comes down. Due to lowrate of dividend and certain other factors the market value of equity shares goes down resulting

in a capital loss to the investors.

III. Loss on Liquidation: In case, the company goes into liquidation, equity shareholders are theworst suffers. They are paid in the last only if any surplus is available after every other claimincluding the claim of preference shareholders is settled. It is evident from the advantages anddisadvantages of equity share capital discussed above that the issue of equity share capital is amust for a company, yet it should not solely depend on it. In order to make its capital structureflexible, it should raise funds from other sources also.

INDUSTRY PROFILE

STOCK EXCHANGE:

Stock Exchange, organized market for buying and selling financial instruments known as

securities, which include stocks, bonds, options, and futures. Most stock exchanges have specific

locations where the trades are completed. For the stock of a company to be traded at these

exchanges, it must be listed, and to be listed, the company must satisfy certain requirements. But

not all stocks are bought and sold at a specific site. Such stocks are referred to as unlisted. Manyof these stocks are traded over the counterthat is, by telephone or by computer.

The stock exchange or secondary market is a highly organized market for the purchase

and sale of second hand quoted of listed securities. The securities contracts (Regulation) Act

1956 defines a stock exchange as an association, organization or not, established for the purpose

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Different Stock Exchanges in India

(a) National Stock Exchange (NSE) of India

Integrated in November 1992, the National Stock Exchange of India (NSE) was initially a

tariff forfeiting association. In 1993, the exchange was certified under Securities Contracts(Regulation) Act, 1956 and in June 1994 it started its business functioning in theWholesale Debt Market (WDM). The Equities division of NSE began its operations in1994 while in 2000 the corporation incorporated its Derivatives division.

Some NSE Figures and Facts

The equities division of NSE covers around 300 Indian cities, while its derivates sectioncovers 305 cities.

The number of securities accessible for buying and selling in NSE exchange in itsequities and derivates section are 1,383 and 3,143 respectively.

The total amount of Settlement warranty fund in NSE equities division and derivatessection are Rs 2,085.25 crores and Rs 6,018.30 crores respectively. The daily turnover of NSE equities division is Rs 10,336.52 crores, for derivates segment

is Rs 32,809.96 crores and for Whole sale debt division is Rs 13,911.57 crores. NSE uses satellite communication expertise to strengthen contribution from around 400

Indian cities. The exchange administers around rs 1 million of buying and selling on daily basis. It is one of the biggest VSAT incorporated stock exchange across the world. Currently more than 8,500 customers are doing online exchange business on NSE

application.

NSE Corporate Office

National Stock Exchange of India Ltd.Exchange PlazaPlot no. C/1, G BlockBandra-Kurla ComplexBandra (E)Mumbai - 400 051IndiaE-mail: cc_nse@nse.co.in

(b) Bombay Stock Exchange (BSE) of India

The oldest stock market in Asia, BSE stands for Bombay Stock Exchange and was initiallyknown as "The Native Share & Stock Brokers Association." Incorporated in the 1875, BSEbecame the first exchange in India to be certified by the administration. It attained a permanentauthorization from the Indian government in 1956 under Securities Contracts (Regulation) Act,1956.

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Over the year, the exchange company has played an essential part in the expansion of Indianinvestment market. At present the association is functioning as corporatised body integratedunder the stipulations of the Companies Act, 1956.

Some BSE Figures and Facts

BSE exchange was the first in India to launch Equity Derivatives, Free Float Index, USDadaptation of BSE Sensex and Exchange facilitated Internet buying and selling policy

BSE exchange was the first in India to acquire the ISO authorization for supervision,clearance & Settlement

BSE exchange was the first in India to have launched private service for economictraining

Its On-Line Trading System has been felicitated by the internationally renowned standardof Information Security Management System.

BSE Corporate Office

Bombay Stock Exchange LimitedPhiroze jeejeebhoy towersDalal Street,Mumbai- 400001,IndiaWebsite: www.bseindia.com

(c) Regional Stock Exchanges (RSE) of India

The Regional Stock Exchanges in India started spreading its business operation from 1894. The

first RSE to start its functioning in India was Ahmedabad Stock Exchange (ASE) followed byCalcutta Stock Exchange (CSE) in 1908.

The stock exchange in India witnessed a flourishing phase in 1980s with the incorporation ofmany exchanges under it. In early 60s, it has only few certifies RSEs under it namely HyderabadStock Exchange, Indore Stock Exchange, Madras Stock Exchange, Calcutta Stock Exchange andDelhi Stock Exchange. The recent to join the list was Meerut Stock Exchange and CoimbatoreStock Exchange.

Catalog of Regional Stock Exchanges in India

Ahmedabad Stock Exchange Bangalore Stock Exchange Bhubaneswar Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange

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Hyderabad Stock Exchange Jaipur Stock Exchange Ludhiana Stock Exchange Madhya Pradesh Stock Exchange Madras Stock Exchange

Magadh Stock Exchange Mangalore Stock Exchange Meerut Stock Exchange OTC Exchange Of India Pune Stock Exchange Saurashtra Kutch Stock Exchange Uttar Pradesh Stock Exchange Vadodara Stock Exchange

COMPANY PROFILE

About IIFL

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd(NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in theIndian financial services space. IIFL offers advice and execution platform for the entire range offinancial services covering products ranging from Equities and derivatives, Commodities,Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking,GoI bonds and other small savings instruments. IIFL recently received an in-principle approval

for Securities Trading and Clearing memberships from Singapore Exchange (SGX) paving theway for IIFL to become the first Indian brokerage to get a membership of the SGX. IIFL alsoreceived membership of the Colombo Stock Exchange becoming the first foreign broker to enterSri Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is one of Indiasleading online destinations for personal finance, stock markets, economy and business.

IIFL has been awarded the Best Broker, India by Finance Asia and the Most improvedbrokerage, India in the Asia Money polls. India Infoline was also adjudged as Fastest Growing

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Equity Broking House - Large firms by Dun & Bradstreet. A forerunner in the field of equityresearch, IIFLs research is acknowledged by none other than Forbes as Best of the Web anda must read for investors in Asia. Our research is available not just over the Internet but alsoon international wire services like Bloomberg, Thomson First Call and Internet Securities whereit is amongst one of the most read Indian brokers.

A network of over 2,500 business locations spread over more than 500 cities and townsacross India facilitates the smooth acquisition and servicing of a large customer base. All ouroffices are connected with the corporate office in Mumbai with cutting edge networkingtechnology. The group caters to a customer base of about a million customers, over a variety ofmediums viz. online, over the phone and at our branches.

Management Team

NAME DESIGNATIONNIRMAL JAIN CHAIRMAN

R.VENKATRAMAN MANAGING DIRECTOR

KRANTI SINHA INDEPENDENT DIRECTOR

ARUN K. PURVAR INDEPENDENT DIRECTOR

NILESH VIKAMSEV INDEPENDENT DIRECTOR

History & Milestones

1995

Commenced operations as an Equity Research firm

1997

Launched research products of leading Indian companies, key sectors and the economyClient included leading FIIs, banks and companies.

1999

Launchedwww.indiainfoline.com2000

Launched online trading through www.5paisa.comStarted distribution of life insurance andmutual fund

2003

Launched proprietary trading platform Trader Terminal for retail customers

http://www.indiainfoline.com/http://www.indiainfoline.com/http://www.5paisa.com/http://www.5paisa.com/http://www.indiainfoline.com/http://www.5paisa.com/

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2004

Acquired commodities broking licenseLaunched Portfolio Management Service

2005

Maiden IPO and listed on NSE, BSE

2006

Acquired membership of DGCXCommenced the lending business

2007

Commenced institutional equities business under IIFLFormed Singapore subsidiary, IIFL (Asia) Pte Ltd

2008

Launched IIFL WealthTransitioned to insurance broking model

2009

Acquired registration for Housing FinanceSEBI in-principle approval for Mutual FundObtained Venture Capital license

2010

Received in-principle approval for membership of the Singapore Stock ExchangeReceived membership of the Colombo Stock Exchange

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Corporate Governance

IIFL (India Infoline) is committed to placing the Investor First, by continuously strivingto increase the efficiency of the operations as well as the systems and processes for use ofcorporate resources in such a way so as to maximize the value to the stakeholders. The Groupaims at achieving not only the highest possible standards of legal and regulatory compliances,but also of effective management.

Audit Committee

Terms of reference & Composition, Name of members and Chairman: The Auditcommittee comprises Mr Nilesh Vikamsey (Chairman), Mr Sat Pal Khattar, Mr Kranti Sinha,three of whom are independent Directors. The Managing Director, the Executive Director along

with the Statutory and Internal Auditors are invitees to the Meeting. The Terms of reference ofthis committee are as under: - To investigate into any matter that may be prescribed under theprovisions of Section 292A of The Companies Act, 1956 - Recommendation and removal ofExternal Auditor and fixation of the Audit Fees. - Reviewing with the management the financialstatements before submission of the same to the Board. - Overseeing of Companys financialreporting process and disclosure of its financial information. - Reviewing the Adequacy of theInternal Audit Function.

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Compensation/ Remuneration Committee

Terms of reference & Composition, Name of members and Chairman: The Compensation /Remuneration Committee comprises Mr Kranti Sinha (Chairman), Mr Nilesh Vikamsey and Mr.Sat Pal Khattar all of whom are independent Directors. The Terms of reference of this committee

are as under: - To fix suitable remuneration package of all the Executive Directors and NonExecutive Directors, Senior Employees and officers i.e. Salary, perquisites, bonuses, stockoptions, pensions etc. - Determination of the fixed component and performance linked incentivesalongwith the performance criteria to all employees of the company - Service Contracts, NoticePeriod, Severance Fees of Directors and employees. - Stock Option details: whether to be issuedat discount as well as the period over which to be accrued and over which exercisable. - Toconduct discussions with the HR department and form suitable remuneration policies.

Share Transfer and Investor Grievance Committee

Details of the Members, Compliance Officer, No of Complaints received and pending and

pending transfers as on close of the financial year. The committee functions under theChairmanship of Mr Kranti Sinha, a Non-executive independent Director. The other Members ofthe committee are Mr. Nirmal Jain and Mr. R Venkataraman. Ms Sunil Lotke, CompanySecretary is the Compliance Officer of the Company.

IIFL CSR Initiatives

In line with our vision to be the most respected company in the financial services space,

we recognize the importance of contributing to and sustaining social transformation. With

this end in mind, we have setup the IIFL foundation, which will work for the support andupliftment of the underprivileged sections of society.

The IIFL Foundation focuses on specific areas of need such as healthcare and education, thefoundation will screen and select institutions and developmental agencies which are working inthese domains and will provide necessary aid to improve the lives of the underprivileged andhelp them in achieving their potential.

Some of the activities undertaken by the IIFL Foundation:

Barsana eye campThe IIFL Foundation sponsored an eye and dental camp held in February, 2010 with the supportof expert doctors and surgeons from the Bhaktivedanta Hospital in Barsana near Mathura. Whileover 2,600 people underwent eye tests and over 800 were selected for free eye surgery, a total ofover 1,800 dental procedures like extraction, scaling and filling, among others, were performed.Team IIFL provided its whole-hearted support to this noble cause and will continue to do so inthe future.

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Pandharpur medical camp

The IIFL Foundation sponsored the Pandharpur medical camp which was held by theBhaktivedanta Hospital in July 2010 at Pandharpur. Free medical treatment was given at 4 campsites, to approximately 49,815 pilgrims who had come to Pandharpur during Ashadi Ekadashi.The pilgrims were treated for fever, injuries, fractures, gastroenteritis, myalagia, headache,

epilepsy, malaria, respiratory infections etc, during the camp.

Blood donation drive

IIFL regularly organizes blood donation drives via camps at its various locations across India.Over 800 employees have participated in these camps.

PRODUCT AND SERVICES :-

Overview

We are a one-stop financial services shop, most respected for quality of its advice,

personalized service and cutting-edge technology.

Equities

IIFL is a member of BSE and NSE registered with NSDL and CDSL as a depositoryparticipant and provides broking services in the cash, derivatives and currency segments, onlineand offline. IIFL is a dominant player in the retail as well as institutional segments of the market.It recently became the first Indian broker to get a membership of the Colombo Stock Exchangeand is also the first Indian broker to have received an in-principle approval for membership of

the Singapore Stock Exchange. IIFLs Trader Terminal, its proprietary trading platform, iswidely acknowledged as one of the best available for retail investors. Investors opt for IIFLgiven its unique combination of superior Service, cutting-edge proprietary Technology, Advicepowered by world-acclaimed research and its unparalleled Reach owing to its over 2500 businesslocations across over 500 cities in India.

IIFL received the BQ1 broker grading (highest grading) from CRISIL. The assignedgrading reflects an effective external interface, robust systems framework and strong riskmanagement. The grading also reflects IIFLs healthy regulatory compliance track record andadequate credit risk profile.

IIFLs analyst team won Zee Business Indias best market analysts awards 2009 forbeing the best in the Oil and Gas and Commodities sectors and a finalist in the Banking and ITsectors.

IIFL has rapidly emerged as one of the premier institutional equities houses in India witha team of over 25 research analysts, a full-fledged sales and trading team coupled with anexperienced investment banking team.

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The Institutional equities business conducted a very successful Enterprising India globalinvestors conference in Mumbai in March 2010, which was attended by funds with aggregateAUM over US$5 trillion and CEOs and other executives representing corporates with acombined market capitalization of over US$500 billion. The Discover Sri Lanka globalinvestors conference, held in Colombo in July 2010, was attended by more than 50 leading

global and major local investors and 25 Sri Lankan corporates, along with senior Governmentofficials.

Commodities

IIFL offers commodities trading to its customers vide its membership of the MCX and theNCDEX. Our domain knowledge and data based on in depth research of complex paradigms ofcommodity kinetics, offers our customers a unique insight into behavioral patterns of these

markets. Our customers are ideally positioned to make informed investment decisions with ahigh probability of success.

Credit and finance

IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage loans,margin funding, loans against shares) comprise 94% of the loan book. The Company hasdiscontinued its unsecured products. It has robust credit processes and collections mechanismresulting in overall NPAs of less than 1%. The Company has deployed proprietary loan-processing software to enable stringent credit checks while ensuring fast application processing.Recently the company has also launched Loans against Gold.

Insurance

IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life Insurance Co.Ltds corporate agent. Later, it became an Insurance broker in October 2008 in line with itsstrategy to have an open architecture model. The Company now distributes products of majorinsurance companies through its subsidiary India Infoline Insurance Brokers Ltd. Customers canchoose from a wide bouquet of products from several insurance companies including Max NewYork Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz Life, Birla Sunlife, LifeInsurance Corporation, Kotak Life Insurance and others.

Wealth Management Service

IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and corporateclients under the IIFL Private Wealth brand. IIFL Private Wealth is managed by a qualifiedteam of MBAs from IIMs and premier institutes with relevant industry experience. The team

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advises clients across asset classes like sovereign and quasi-sovereign debt, corporate andcollateralised debt, direct equity, ETFs and mutual funds, third party PMS, derivative strategies,real estate and private equity. It has developed innovative products structured on the fixedincome side.

It also has tied up with Interactive Brokers LLC to strengthen its execution platform and provideinvestors with a global investment platform.

Investment Banking

IIFLs investment banking division was launched in 2006. The business leverages upon itsstrength of research and placement capabilities of the institutional and retail sales teams. Ourexperienced investment banking team possesses the skill-set to manage all kinds of investmentbanking transactions. Our close interaction with investors as well as corporates helps usunderstand and offer tailor-made solutions to fulfill requirements.

The Company possesses strong placement capabilities across institutional, HNI and retailinvestors. This makes it possible for the team to place large issues with marquee investors.

In FY10, the team advised and managed more than 10 transactions including four IPOs and fourQualified Institutions Placements

Research MethodologyResearch methodology is a way to find out the solution to the problem. The research is

carries out using scientific methods which is elaborated in next part.

Research design

A research design is the arrangement of condition for collection and analysis of data in a

manner, which may result in an economy in procedure. It stands for advance planning for

collection of the relevant data and the techniques to be used in analysis, keeping in view the

objectives of the research and availability of time. The research used here for the study is

exploratory research. Exploratory research is quite informal, it relays on the secondary data. The

results are usually used for making decision themselves.

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Sampling Size

Among Nifty-50, 31 companies past 1 year (JAN 2011 DEC 2011) financial

performance are taken based on 7 different sectors.

Data source

Secondary data

Statistical Tools & measures:

Beta

Systematic & Unsystematic risk

Standard deviation

Sharpes single index model

Measures of Systematic & Unsystematic Risk

Any rational investor, before investing his or her investable wealth in the stock, analysis

the risk associated with the particular stock. The actual return he receives from a stock may vary

from his expected in terms of return. The down side risk may be caused by several factors, either

common to all stocks or specific to a particular stock. Investor in general would like to analyze

the risk factor and a thorough knowledge of the risk helps him to plan his portfolio in such a

manner so as minimize the risk associated with the investment.

Therefore, we can see there is some degree of risk involved in financial assets in the sense

that there is always a chance that the expected return from the asset will not materialize. It is

important to find out more about the risks involved in financial assets in greater details. Theserisks, by their nature, can be divided into two main categories; namely, systematic risk and

unsystematic risk.

Systematic Risk

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Systematic risks affect almost all assets in the economy at least to some degree while

unsystematic risks usually affect a small number of assets. When we discuss the principle of

diversification at the bottom part of this article, you can see that highly diversified portfolios will

tend to have almost no unsystematic risk. Systematic Risks are general market conditions that

affect large number of assets (or companies), each to a greater or lesser extent and are sometimes

called market risks. Uncertainties about general economic conditions such as GNP, interest rates,

exchange rates, inflation or unemployment levels are some of the examples of systematic risks.

Let us assume that there is an unanticipated increase in inflation which would affect cost of

supplies, wages, and the value of the raw materials and affect the prices of the finished products

leading to a fall in the real purchasing power of the individuals. Forces such as these, which all

companies are susceptible, are the essence of systematic risks. You might wonder whether it is

possible to avoid systematic risk. The answer is no because these types of risks affect the whole

economy and which would adversely affect the values of the financial assets irrespective of the

different types of assets in the portfolio.

Systematic Risk = i2 i2

i2 = beta

i

2

= variance of index

Unsystematic Risk

Unsystematic Risks is the risk that a borrower or an issuer of securities (such as bonds) will

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default on the obligations to repay the principal and/or interest payments. This type of risk

affects a single asset or a small group of assets and they are unique to individual companies or

assets. The various types of unsystematic risks can be subdivided into several categories

depending on the root causes. Business Risk is where the revenues of the company are

insufficient to cover the fixed cost of the operations.

Business Risk is where the revenues of the company are insufficient to cover the fixed

cost of the operations.

Financial Risk occurs when the revenues are insufficient to cover fixed charges such asinterest rate payments on debt. High- geared companies (companies that are more

reliance on borrowed funds than equity) are more exposed to this type of risk.

Management Risk is where the managers of the company are unable to manage the

business at a profit may be due to inexperience or incompetences or where there is

evidence of organized fraud by the management.

Finally, there is Collateral Risk, which refers to the inadequacy of the claims (security) that

a lender may have on a borrower. In the case of a company going into liquidation, an ordinary

shareholder faces a much higher Collateral Risk than a secured creditor. We can see from the

above points that unsystematic risk does not depend on economic activities and therefore it can

be reduced and essentially eliminated by applying a diversification strategy. This means, if you

have a number of assets in your portfolio, and as long as the unsystematic risk associated with

these assets are not correlated (not moving in the same direction), the positive and negative

events should largely cancel out each other.

Unsystematic Risk = Total variance of security return Systematic Risk

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Systematic Risk vs. Unsystematic Risk

Systematic Risk

Systematic risk is the general ebb and flow of the market as a whole - or the tendency for

all stocks to increase or decrease in value at the same time with a certain degree of positive

correlation. For example, Black Monday on October 19th, 1987 was a Systematic event in that

almost all stocks fell in value on that single day. Macro-economic events and stimuli can be

expected to have broad systematic effects on capital markets - positive or negative - on an on-

going basis such as interest rate levels, political events, war, etc. It is important to note that

systematic risk cannot be diversified away. In other words, you could have a portfolio that is

diversified with 1000 different stocks from a given market and there will always be a base level

of return variance (shown as the asymptote in the figure below).

Non-Systematic Risk

Non-Systematic risk is the element of price risk than can be largely eliminated through

sufficient diversification within a particular asset class. The best way to describe it is to build an

analogy. Let us assume you owned one stock - if that company went

Bankrupt you will have lost 100% of your portfolio. If you owned one hundred stocks, and one

company went bankrupt you would have lost 1% of your portfolio. Conversely, what if that one

company doubled in value? You either doubled your money or only gained 1% if you held 1

stock or 100, respectively. Non-Systematic risk is the individual business risk associated with

the underlying stock - if this company goes bankrupt - this is a non-systematic risk event and

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