fundamental and technical analysis of steel sector in india

8/2/2019 Fundamental and Technical Analysis of Steel Sector in India

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MUTUAL FUND VALUATION AND ACCOUNTING

1. INDUSTRY PROFILE

The Indian broking industry is one of the oldest

trading industries that have been around even before

the establishment of the BSE in 1875. Despite

passing through number of changes in the post

liberalization period, the industry has found its way

onwards sustainable growth. With the purpose of gaining a deeper understanding about

the role of the Indian stock broking industry in the countrys economy, we present in this

section some of the industry insights gleaned from analysis of data received through

primary research.

For the broking industry, we started with an initial database of over 1,800 broking

firms that were contacted, from which 464 responses

were received. The list was further short listed based on

the number of terminals and the top 210 were selected

for profiling. 394 responses, that provided more than

85% of the information sought have been included for

this analysis presented here as insights. All the data for

the study was collected through responses received

directly from the broking firms. The insights have been

arrived at through an analysis on various parameters, pertinent to the equity broking

industry, such as region, terminal, market, branches, sub brokers, products and growth

areas.

EAST POINT COLLEGE OF HIGHER EDUCATION Page 1


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Some key characteristics of the sample 394 firms are:

On the basis of geographical concentration, the West region has the maximumrepresentation of 52%. Around 24% firms are located in the North, 13% in the

South and 10% in the East

3% firms started broking operations before 1950, 65% between 1950-1995 and

32% post 1995.

On the basis of terminals, 40% are located at Mumbai, 12% in Delhi, 8% in

Ahmadabad, 7% in Kolkata, 4% in Chennai and 29% are from other cities

From this study, we find that almost 36% firms trade in cash and derivatives and

27% are into cash markets alone. Around 20% trade in cash, derivatives and

commodities

In the cash market, around 34% firms trade at NSE, 14% at BSE and 52% trade

at both exchanges. In the derivative segment, 48% trade at NSE, 7% at BSE and

45% at both, whereas in the debt market, 31% trade at NSE, 26% at BSE and

43% at both exchanges

Majority of branches are located in the North, i.e. around 40%. West has 31%,

24% are located in South and 5% in East

In terms of sub-brokers, around 55% are located in the South, 29% in West, 11%

in North and 4% in East

Trading, IPOs and Mutual Funds are the top three products offered with 90%

firms offering trading, 67% IPOs and 53% firms offering mutual fund transactions

In terms of various areas of growth, 84% firms have expressed interest in

expanding their institutional clients, 66% firms intend to increase FII clients and

43% are interested in setting up JV in India and abroad

In terms of IT penetration, 62% firms have provided their website and around

94% firms have email facility



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2. COMPANY PROFILE

2.1. BACKGROUND AND INCEPTION OF THE COMPANY

India Infoline was originally incorporated by

Mr. Nirmal Jain (Chairman and Managing

Director) on October 18, 1995 as Probity

Research and Services Private Limited at Mumbai

under the Companies Act, 1956 with Registration

No. 11 93797. India Infoline commenced

operations as an independent provider of

information, analysis and research covering Indian

businesses, financial markets and economy, to institutional customers. India Infoline

became a public limited company on April 28, 2000 and the name of the Company was

changed to Probity Research and Services Limited. The name of the Company was

changed to India Infoline.com Limited on May 23, 2000 and later to India Infoline

Limited on March 23, 2001.

In 1999, India Infoline.com identified the potential of the Internet to cater to a

mass retail segment and transformed our business model from providing information

services to institutional customers to retail customers. Hence India Infoline launched

Internet portal, www.indiainfoline.com in May 1999 and started providing news and

market information, independent research, interviews with business leaders and other

specialized features.

In May 2000, the name of India Infoline was changed to India Infoline.com

Limited to reflect the transformation of our business. Over a period of time, India

Infoline.com has emerged as one of the leading business and financial information

services provider in India.



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In the year2000, India Infoline leveraged its position as a provider of financial

information and analysis by diversifying into transactional services, primarily for online

trading in shares and securities and online as well as offline distribution of personal

financial products, like mutual funds and RBI Bonds. These activities were carried on by

our wholly owned subsidiaries.

India Infoline broking services were launched under the brand name of

5paisa.com through our subsidiary. India Infoline Securities Private Limited and

www.5paisa.com, the e-broking portal was launched for online trading in July 2000. It

combined competitive brokerage rates and research, supported by Internet technology

besides investment advice from an experienced team of research analysts. India

Infoline also offer real time stock quotes, market news and price charts with multiple

tools for technical analysis.

Milestones

1995

Incorporated as an equity research and consulting firm with a client base that includedleading FIIs, banks, consulting firms and corporates.

1999

Restructured the business model to embrace the internet; launched

archives.indiainfoline.com mobilized capital from reputed private equity investors.

2000

Commenced the distribution of personal financial products; launched online equity

trading; entered life insurance distribution as a corporate agent. Acknowledged by

Forbes as Best of the Web and ...must read for investors.

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2004

Acquired commodities broking license launched Portfolio Management Service.

2005

Listed on the Indian stock markets.

2006

Acquired membership of DGCX launched investment banking services.

2007

Launched a proprietary trading platform; inducted an institutional equities team; formed

a Singapore subsidiary raised over USD 300 million in the group, launched consumer

finance business under the Money line brand.

2008

Launched wealth management services under the IIFL Wealth brand set up India

Infoline Private Equity fund, received the Insurance broking license from IRDA,

received the venture capital license, received in principle approval to sponsor a mutual

fund, received Best broker- India award from Finance Asia, Most Improved

Brokerage- India award from Asia money.

2009

Received registration for a housing finance company from the National Housing Bank;

received Fastest growing Equity Broking House - Large firms in India by Dun &

Bradstreet.

2010

IIFL Securities Pvt. Ltd. (Singapore), received in-prnciple approval from the Singapore

Stock Exchange, IIFL Securities Ceylon (Pvt.) Ltd. (Srilanka), received in-principle

approval for membership of the Colombo Stock Exhange for Stock broking.



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2.2. NATURE OF THE BUSINESS CARRIED

India Infoline Limited is listed on both the leading stock exchanges in India, viz.

the stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also

a member of both the exchanges. It combined competitive brokerage rates and

research, supported by Internet technology besides investment advice from an

experienced team of research analysts. India Infoline also offer real time stock quotes,

market news and price charts with multiple tools for technical analysis.

The India Infoline group, comprising the holding company. India Infoline Ltd

and its wholly subsidiaries, straddle the entire financial services space with offerings

ranging from Equity research, Equities and Derivatives trading, Commodities trading,Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits, Govt. of

India bonds and other small savings instruments to loan products and Investment

banking. India Infoline also owns and manages the websiteswww.indiainfoline.com and

www.5paisa.com. The company has a network of 976 business locations (branches and

sub-brokers) spread across 365 cities and towns. It has more than 800,000 customers.

2.3. VISION, MISSION AND QUALITY POLICY

VISION STATEMENT:

India Infoline vision is to be the most respected company

in the financial services space.

MISSION STATEMENT:

To become a full-fledged financial services

Company known for its quality of advice, personalized service and cutting-

edge technology.

QUALITY POLICY:

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


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To become a full-fledged financial services Company

known for its quality of advice, personalized service and cutting-edge

technology.

2.4. PRODUCTS/SERVICE PROFILE

The survey also revealed that in the past couple of years, apart from trading, the

firms have started offering various investment related value added services. The

sustained growth of the economy in the past couple of years has resulted in broking

firms offering many diversified services related to IPOs, mutual funds, company

research etc. However, the core trading activity is still the predominant form of

business, forming 90% of the firms in the sample. 67% firms are engaged in offering

IPO related services. The broking industry seems to have capitalized on the growth of

the mutual fund industry, which was pegged at 40% in 2006. More than 50% of the

sample broking houses deal in mutual fund investment services. The average growth in

assets under management in the last two years is almost 48%. Company research is

another lucrative area where the broking firms offer their services; more than 33% of

the firms are engaged in providing company research services. Additionally, a host of

other value added services such as fundamental and technical analysis, investment

banking, arbitrage etc are offered by the firms at different levels.


Equities

Life

InsuranceCommodities

Mutual

Funds

Online Media &

Content

Other IncomeFinancing & Investing


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OVERVIEW OF PRODUCTS AND SERVICES

Equities: India Infoline provided the prospect of researched investing to

its clients, which was hitherto restricted only to the institutions. Research for the

retail investors did not exist prior to India Infoline leveraged technology to bring

the convenience of trading to the investors location of preference (residence or

office) through computerized access. India Infoline made it possible for clients to

view transaction costs and ledger updates in real time.

PMS (Portfolio Management Services): It is a product wherein an

equity investment portfolio is created to suit the investment objectives of a client.

India Infoline invests customer resources into stocks from different sectors,

depending on customer risk-return profile. This service is particularly advisable

for investors who cannot afford to give time or dont have that expertise for day-

to-day management of their equity portfolio.

Research: Sound investment decisions depend up on reliable

fundamental data and stock selection techniques. India Infoline Equity Research

is proud of its reputation. Equity investment professionals routinely use their

research and models as integral tools in their network.

Commodities: India Infoline extension into commodities trading

reconciles its strategic intent to emerge as a one stop solutions financial

intermediary. Its experience in securities broking has empowered it with requisite

skills and technologies. Increased offering: The Companies commodities

business provides a contra-cyclical alternative to equities broking. The Company

was among the first to offer the facility of commodities trading in Indias young



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commodities market (the MCX commenced operations only in 2003). Average

monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs

20.02 billion. The commodities market has several products with different and

non-correlated cycles. On the whole, the business is fairly insulated against

cyclical gyrations in the business.

INSURANCE: An entry to this segment helped complete the clients

product basket; concurrently, it graduated the company into a one stop retail

financial solutions provider. To ensure maximum reach to customers across

India, they have employed a multi pronged approach and reach out to customers

via their Network, Direct and Affiliate channels. The Companies entry into the

insurance sector de-risked the Company from a predominant dependence on

broking and equity-linked revenues. The annuity based income generated from

insurance intermediation result in solid core revenues across the tenure of the

policy.

MOTGAGES: During the year under review, India Infoline acquired a 75%

stake in Mind tree Consultancy Services to mark its foray into the business of

mortgages and other loan products distribution. The business is still in the

investing phase and at the time of the acquisition was present only in the cities of

Mumbai and Pune. The Company brings on board expertise in the loans

business coupled with existing relationships across a number of principles in the

mortgage and personal loans businesses. Indiainfoline now has plans to roll the

business out across its pan-Indian network to provide it with a truly national scale

in operations.

MUTUAL FUNDS: India Infoline offers customer a host of mutual fund

choices under one roof, backed by in-depth research and advice from research

house and tools configured as investor friendly.



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WEALTH MANAGEMENT SERVICE: Imagine a financial firm with the

heart and soul of a two-person organization. A world-leading wealth

management company that sits down with customer to understand their needs

and goals. They offer customer a dedicated group for giving them the most

personal attention at every level.



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NEWSLETTERS: The Daily Market Strategy is the morning dose on the

health of the markets. Five intra-day ideas, unless the markets are really choppy

coupled with a brief on the global markets and any other cues, which could

impact the market. Occasionally an investment idea from the research team and

a crisp round up of the previous day's top stories. That's not all. As a subscriber

to the Daily Market Strategy, the customer even gets research reports of India

Infoline research team on a priority basis.

2.5. AREA OF OPERATION- GLOBAL/ NATIONAL/ REGIONAL

GLOBAL: China, Brazil, Dubai, Russia, Singapore, UK, USA

NATIONAL: Delhi, Andra Pradesh, Karnataka, Assam, Gujarat, Tamil

Nadu

REGIONAL: Bangalore head office:

#31/9, Krimson Square, 2nd floor, Hosur Main Road, Bangalore 560068.

The India Infoline group, comprising the holding company, India

Infoline Limited and its wholly-owned subsidiaries, straddle the entire

financial services space with offerings ranging from Equity research,

Equities and derivatives trading, Commodities trading, Portfolio

Management Services, Mutual Funds, Life Insurance, Fixed deposits, GOI

bonds and other small savings instruments to loan products and

Investment banking. India Infoline also owns and manages the websites

www.indiainfoline.com and www.5paisa.com The company has a network



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of 976 business locations (branches and sub-brokers) spread across 365

cities and towns. It has more than 800,000 customers.



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2.6. OWNERSHIP PATTERN:

Promoters Share

Institutional Investors Share (if any)

Foreign institutional investor Share (if any)

Share of retail investor (if any)

Governments Share (if any)

Others

Share Holding Pattern

Particulars No. of Shares(Mn)

% Holdings

Total Promoter Holdings 91.36 31.3

Total Govt Holding (Promoter + Non Promoter) 0.00 0.0

Total Domestic Institutions (Banks/ FI + MF / UTI) 34.00 11.7

Total Foreign Holdings (FII+NRI holdings) 104.49 35.8

Total Non Promoter Corporate Holdings 10.06 3.5

Total Public & Others (Individuals + HUF + Clearingmembers)

51.88 17.8

Total 291.79 100

Our promoters and promoter group together holds 33.75% of post issue

Equity shares. As a result of their shareholding they will have the ability to influence

most matters, which require the approval of our shareholders. In addition the collectivelyhave the ability to block any special resolution by shareholders.



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2.7. COMPETITORS INFORMATION:

KOTAK SECURITIES

Kotak Mahindra is one of India's leading banking and financial services

organizations, offering a wide range of financial services that encompass

every sphere of life. The group has a net worth of over Rs. 100.6 billion and

has a distribution network of branches, franchisees, representative offices and

satellite offices across cities and towns in India, and offices in New York,

London, San Francisco, Dubai, Mauritius and Singapore servicing around 8

million customer accounts.Kotak Securities has been awarded as the best

broker in India by Finance Asia for 2010 and 2009.

KARVY

KARVY is a premier integrated financial services provider, and ranked

among the top five in the country in all its business segments, services over 16

million individual investors in various capacities, and provides investor services

to over 300 corporate, comprising the who is who of Corporate India. Karvy

has a professional management team and ranks among the best in

technology, operations and research of various industrial segments.

ICICI DIRECT

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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HDFC SECURITY

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

India bulls Securities Limited was incorporated as GPF Securities

Private Limited on June 9, 1995. The name of the company was changed to

Orbis Securities Private Limited on December 15, 1995 to change the profile of

the company and subsequently due to the conversion of the company into a

public limited company; the name was further changed to Orbis Securities

Limited on January 5, 2004. The name of the company was again changed toIndia bulls Securities Limited on February 16, 2004 so as to capitalize on the

brand image of the term India bulls in the company name. 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.

http://www.sebi.com/http://www.nseindia.com/http://www.bseindia.com/http://www.sebi.com/http://www.nseindia.com/http://www.bseindia.com/


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Results on the Basis of charges:

There are the two type of the transaction:-

1. Intra-day based

2. Delivery based

Comment: - According to the survey HDFC securities charge maximum brokerage as

compare to others whereas India Infoline Ltd. charges only 0.20 paisa on maximum

investment.



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2.8. INFRASTRUCTURAL FACILITIES:

Our main offices are located approximately 4,000square feet of office space

located in Mumbai, India. India Infoline braches collectively occupy an additional 10,000

square feet of office space located throughout India. The company has a network of 976

business locations (branches and sub-brokers) spread across 365 cities and towns. It

has more than 800,000 customers.

The Table below shows the changes in the Registered Office of the Company since

Incorporation:

Previous Address New Address Date of Change Reason for

Change

#280-C, Agarwal

Market, Vile

Pane(East),

Mumbai-400057

#1, Snehdeep,

Gokhale Road, Vile

Parle(East),

Mumbai- 400057

August 6, 1999Requirement of

More Floor Space

#1, Snehdeep,

Gokhale Road, Vile

Parle(East),

Mumbai- 400057

#24, 1st floor, Nirlon

Complex,

Off Western

Express Highway,

Goregaon(E),

Mumbai-400063

Jan 15, 2001Requirement of

More Floor Space



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2.9. ACHIEVEMENTS/ AWARDS

Incorporated on October 18, 1995 as Probity Research & Services.

Launched Internet portal www.indiainfoline.com in May 1999.

Commenced distribution of personal financial products like Mutual Funds and

RBI Bonds in April 2000.

Launched online trading in shares and securities branded as www.5paisa.com in

July 2000.

Standard life insurance agency business in December 2000 as a Corporate

Agent of ICICI Prudential Life Insurance.

Became depository participants of NSDL in September 2001.

Launched stock messaging service in May 2003.

Acquired commodities broking license in March 2004.

Launched portfolio management services in August 2004.

Listed on NSE and BSE on May 17, 2005.

Acquired NBFC license in May 2005.

Acquired 75% stake holding in Money tree Consultancy Services, which is a

distribution of Mortgages and other Loan products, in October 2005.

Acquired 100% equity of Marchmont Capital Advisors Pvt. Ltd. in December

2005 through which we have ventured in to Merchant Banking.

DSP Merrill Lynch Capital subscribed to convertible bonds aggregating Rs. 80

crores in December 2005.

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Bennett Coleman & Co Ltd. (BCCL) invested Rs. 20 crores in India Infoline by

way of preferential allotment in December 2005.

Became a depository participant of CDSL in June 2006.

Merger of India Infoline Securities Private Limited with India Infoline in January

2007.

Entered into an alliance with Bank of Baroda for Baroda e-trading in February

2007.

CLSA Institutional equities team joined us in 2007.

Formed Singapore subsidiary IIFL (Asia) Pvt. Ltd. in 2007.

Mr. Arun K. Purvar joined as independent director in March 2008.

Received Best Broker of India award by Finance Asia in June 2008.

Received Venture Capital license from SEBI in September 2008.

Received in-principle approval from SEBI for sponsoring Mutual Funds in

November 2008.

Received Insurance broking license from IRDA in December 2008.

Received registration for Housing Finance Company from NHB in February 2009.

Entered into a strategic agreement with Interactive Brokers, LLC (USA) to

provide our client direct market access to over 80 global exchanges in 18

countries in July 2009.



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2.10. WORK FLOW MODEL (End to End)

The process to examining how work creates or adds value to the ongoingprocess in a business.

(Discuss the work flow from acquiring raw materials for the production to sellingfinished product to the consumer. Each step should be explained with a flowchart).


Commoditie

Equities

Mutual

Insurance

Information andadvice

Execution

and Service

CUSTOMERSINDIA

INFOLINE LIMITED

DEMAT ACCOUNT

EQUITIES DERIVATIVES COMMODITIES

DEPOSITORY

PARTICIPANTS

CUSTOMERS PLACING ORDERS

BSE

NSE

CONFIRMATION

BUY/SELL SHARES Dr. or Cr.

TRADING

ACCOUNT OF

CUSTOMERS


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2.11. FUTURE GROWTH AND PROSPECTUS

The asset base will continue to grow at an annual rate of about 30 to 35%

over the next few years as investors shift their assets from banks and other traditional

avenues. Some of the older public and private sector players will either close shop or be

taken over. Out of ten public sector players five will sell out, close down or with stronger

players in three to four years. In private sector this trend has already started with two

mergers and one takeover. Here too some of them will down their shutters in the near

future to come.

But this does not mean there is no room for other players. The market will

witness a flurry of new players entering the arena. There will be a large number of offers

from various asset management companies in the time to come. Some big names like

Fidelity, Principal and Old Mutual etc. are looking at Indian market seriously. One

important reason for it is that most major players already have presence here and

hence these big names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this would

enable it to hedge risk and this in turn would be reflected in its Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes totrade in derivatives. Importantly, many market players have called on the regulator to

initiate the process immediately, so that the mutual funds can implement the changes

that are required to trade in Derivatives.

Reforms have marked the entry of many of the global insurance measures into

the Indian market in the form of joint ventures with Indian companies. Some of the key

names are: AIG, New York Life, Alliance, Prudential, Standard Life, Sun Life Canada

and Old Mutual. The entry of new player has rejuvenated and monopoly player LIC,which has responded to the competition in an admirable fashion by launching new

product and improving service standard.

The ability to successfully implement our growth strategy and expansion plan.



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The ability to respond to technological changes.

Changes in laws and regulations relating to the industry in which we operate.

Changes in political and social condition in India.

The ability to successful launches the new products.



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3. MCKINSEY'S 7S framework

McKinseys 7S Model

Mckinsey's 7S framework of the 7 S's the first three that is strategy, Structure

and System are considered as the 'Hard S's' and the remaining four i.e. Staff, Style,

Skills and Subordinate goals are considered as 'Soft S' s since they are less tangible

and more cultural in nature.

1. Structure: Flow Structure

A company's structure affects its strategic planning and its ability to change.

A company's structure may have a customer or geographical focus. It contains the



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salient features of the organizational chart and interconnections within the

organization.


S. Sriram,

Head- Technology

R.Venkataraman

Executive DirectorHarshad Apte,

Head -Marketing

Kalpesh Shah

Head-Risk/Compliance

Anil Mascarenhas

Head-News

Sandeep Vig Arora

VP-PMS & Institutional Sales

Komal Parikh

Company Secretary

Upendra JaiswalHead -Accounts

Sanjay Nayak

Head-Back Office Depository service

Toral Munshi

VP- Research

Nirmal Jain Chairman & managing

Seshadri Bharathan

Head-Distribution & Insurance

Dharmesh Pandya

Head Commodities

Mukesh Singh

VP- Broking


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SOUTH INDIA'S ORGANIZATION STRUCTURE:


Andhra Pradesh

Manager

Karnataka Head

KeralaKarnataka Tamilnadu Manager

Divisional Manager,Bangalore

Rest of KarnatakaManager

Territory Manager

Branch Manager

Front Office Executive

Assistant Manager

Back Office Executive

K. Sridhar

South India Manager


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2. Skill: Interpersonal Skill

The skill is closely related to staff are the distinctive abilities and talents that a

company possesses. Skills may range from ability of a staff to speak Spanish to an

understanding of the statistics to computer literacy etc.

Their management team has hands on experience in financial services,

especially targeted at retail sales and relationship management. They have a strong

technical team comprising of qualified engineers and trained personnel. The in

house team has been responsible for developing several MIS software and

requirements. They believe that they have put in place a working environment that

brings out their people's entrepreneurial energy.

3. Style : Organizational Culture

The Culture or Style is the aggregate of behaviors, thoughts, beliefs and symbols

that is conveyed to the people throughout an organization over time. Since it is very

hard to change a company's ingrained culture, it is important to bear in mind when

developing a new strategy.

They have developed a team of Customer Relationship Managers across

India to handle key customer accounts. These people are experienced in financial

services and have undergone in-house training. This allows them to offer unbiased

advice on not only equities but also on other investment products like mutual funds

ensure that the customer has a single point contact with us.

4. Strategy : Business strategy

Strategy refers to those actions that a company plans in response to or inanticipation of changes in its external environment, its customers and its

competitors. It is a plan or course of action leading to the allocations of an

organization's finite resources to reach identified goals.



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Our business plan is to become the leading investment advisor and

intermediary for financial services in India. The key driver is to increase our

customer base in all our products, give them a platform of choice to transact and

support them with quality research. The elements of our strategy include: One

Stop Shop from advice to transactions.

We have emerged as one of India's leading financial information Internet

portal in India. We distribute mutual funds and life insurance products through our

branches as well as directly through our sales team.

These factors allow us to provide our customers with an integrated online

as well as offline solution to fulfill all their financial information and transaction

needs. We believe that our ability to offer multiple products across broking to

insurance to mutual funds to commodities to small savings differentiates us from

our competition. This also offers significant cross selling opportunities which will

help in improving margins as incremental revenue will entail lower customer

acquisition and promotion costs.

Multi channel delivery model

We intend providing a single convenient and reliable platform from which

our users can obtain information, trade online or purchase offline a wide range of

personal financial products. Our branches have been opened in cities after a

detailed study of demographics and investment patterns in different cities.

Expand our retail network

We have a retail branch network of 976 branches at 365 locations across

India to provide an alternative channel for our customers to transact with us and to

support our online services. It has more than 8,00,000 customers.

These branches allow our customers the opportunity to purchase personal

financial products and trade at such branches with the assistance of our staff. We

propose to set up additional 25 branches in 14 cities across India to have a

network of 1000 branches strengthen our geographic reach.



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Leverage our content advantage for value added offerings

We believe that the key to successful investment is research. We have

invested considerable resource in building our research domain skills. Our top

management has hands on experience in equity research. We will continue to

expand the breadth and depth of research and content on Indian business and

finance.

This research advantage will enable us to acquire customers in high value

added product offerings especially PMS.

Continuous investments in technology platform

We have leveraged the power for technology to offer an integrated platform

to the customer to transact. We will continue to invest in such technologies that

could enhance customer experience while interacting with us. We have facilitated

integrated trading and depositary accounts for the customer, payment gateways

with multiple banks, online Internet enabled back office and MIS. We believe that

our technology investments will be key driver in scaling of the business.

Acquisition and Takeover

We strongly believe that to become a market leader in the investment

advisory and intermediation space, we have to expand our business. In our

endeavor to do so and as per our business strategy we may pursue inorganic

growth.



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5. System: Open System

The procedures both formal and informal, by which an organization operates

and gathers information constitutes the system of the company. This model is

concerned with the systems that allocate the control money and materials as well as

gather information.

They manage the risk associated with their broking operations through use of

internally developed credit algorithms implemented through fully automated risk

management software and selective direct monitoring of certain operating

parameters. Their automated risk management procedures rely primarily on

internally developed risk management system and system provided by their

vendors. They have developed a team of customer Relationship Managers across

India to handle key customer account. These people are experienced in financial

services and have undergone in-house training. This allows them to offer unbiased

advice on not only equities but also on other investment products like mutual funds

and insurance. Apart from advice, they are trained to customer queries as they

ensure that the customer has a single point contact with us.

They intend providing a single convenient and reliable platform from which

their can obtain information, trade online or purchase offline a wide range of

personal financial products. Their branches have been opened in cities after a

detailed study of demographics and investment patterns. Their offline network today

increased by 45.9% to Rs 13,947 crore from the level of Rs 9,559 crore. account for

trading in the NSE cash market as on December 2009 and The average monthly

derivative trading in terms of value, on the NSE has increased by 86.6% to Rs

72,618 crore in December 2009 from Rs 38,906 crore recorded in January 2009.



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6. Staff: Knowledge s taff

Staff means the human resource systems which include appraisal, training,

wages and the intangibles such as employee motivation, morale and attitude. With

a motivation workforce companies are able to adapt well and compete.

Their Human Resource Policy on the philosophy of Owner Mindset. They

believe that the key to their continued growth lied in unleashing the entrepreneurial

energy of their employees. They encourage all employees to behave more as

owners of their departments rather than employees. Their people are highly driven

and work towards increasing India Info lines brand and market share across

product lines.

They have developed extensive in-house training modules. In addition,

various Asset Companies and ICICI PRUDENTIAL LIFE INSURANCE COMPANY

LIMITED train their staff. They lay emphasis on on the job training where an

experienced and senior person mentors a junior executive.

In addition to salary, their employees get performance-based incentives on

a quarterly basis. They have also implemented an employee stock option plan. India

Infoline Ltd has informed BSE that the Compensation/ Remuneration Committee of

the Board at its meeting on December 10, granted 10,45,000 Employee Stock

Options to the identified employees under the ESOP Scheme, 2008 of the company

through circular resolution.

As on December 31, 2009 the total employee strength of the company and

their subsidiaries was 15,600.



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7. Shared Values:

Vision:

To be the most respected financial services company in India.

Mission:

One stop shop for all financial requirements.

India Infoline believes in building an entrepreneurial workforce and wants to

inculcate the essentials of an entrepreneur in all team members.

5 essentials of an entrepreneur are: Energy, Execution, Efforts, Ethics, and

Excellence



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4. SWOT ANALYSIS

STRENGTHS

Original Research

Integrated Technology Platform

One Stop Shop

Pan- India Distribution Network

India Infoline and 5paisa.com have developed into Brands

WEAKNESSES

Lack of Banking arm to complete the bank broker-depository chain

Insignificant presence in institutional segment

OPPORTUNITIES

Changing demographics with higher disposable income and

increasingly complex financial instruments will drive demand for

investment advisory services

Rapid penetration of internet and computers means that technology

enabled financial services will gain market share

THREATS

Economic Slowdown



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Volatile movement in indices and events like May 17, 2004

Stock Markets falls will have a cascading effect on our mutual fund

mobilization

Increase/decrease in interest rates can affect our debt/income fund

mobilizations

Future changes in personal taxation rules can impact insurance

sales

Increasing competition from large and particularly foreign players.

ANALYSIS OF FINANCIAL STATEMENT

Balance Sheetas at March 31, 2010

As at 31.03.2010 As at 31.03.2009

SOURCES OF

FUNDS

Shareholders'

funds

Share Capital 570,429,550 566,800,000

Share Application

Money4,021,350

Reserves and

Surplus

15,474,528,88

4

14,766,666,18

4

Equity Share

Warrants

16,048,979,78

4113,700,000

15,447,166,18

4

Minority Interest 182,150,290 3,124,594,226

Loan Funds

Secured Loans 3,621,096,151 17,044,854

Unsecured Loans 11,555,829,409

15,176,925,560

501,031,242 518,076,096

Total 31,408,055,634 19,089,836,506

APPLICATION OF

FUNDS

Goodwill(On

Consolidation) 1,388,970 1,388,970



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Fixed Assets

(Including

Intangibles)

Gross Block 5,029,023,414 3,509,285,055

Less : Accumulated

depreciation and

amortization

(997,809,442) (728,867,502)

Net Block 4,031,213,972 2,780,417,553

Capital Work-In-

Progress340,870,546 4,372,084,518 71,118,197 2,851,535,750

Investments 4,819,628,047 3,149,730,892

Deferred Tax Assets 157,650,915 119,662,342

Less: Deferred Tax

Liabilities(771,568) 156,879,347 (401,340) 119,261,002

Current Assets,Loans and

Advances

Sundry Debtors 6,097,719,596 1,141,660,097

Cash and Bank

Balances8,056,914,669 6,269,219,758

Stock on Hand 692,388,323 1,337,237,279

Loans and

Advances

23,129,632,33

7

13,617,942,88

4

37,976,654,92

5

22,366,060,01

8Less: Current

Liabilities &

Provisions

Current Liabilities 12,881,965,85

67,429,958,258

Provisions 3,036,614,317 1,968,310,424

15,918,580,17

39,398,268,682

Net Current Assets 22,058,074,75

2

12,967,791,33

6

Miscellaneous

Expenditure (to the

extent not written

off)

- 128,556

Total 31,408,055,634 19,089,836,506



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Key Ratios

Years Mar-10 Mar-09

Debt-Equity Ratio = Total Liabilities / Total Capital 0.2 0.1

Current Ratio = Current Assets / Current Liabilities 1.0 1.1

P/E Ratio = Price per Share / Earnings per Share 23.7 18.0

Dividend Yield = Dividend per Share / Current Share Price 2.6 4.8



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5. LEARNING EXPERIENCE

The following are the areas where I have got the experience like:

Marketing: Its me who has got the experience in India Infoline about marketing

that how to sell Equities, Commodities and Insurance policies.

Human Resource Management: Its me who has learnt that how employees are

recruited for various departments.

Finance: Its me who learnt about shareholders, insurance, loan and credit

facilities.

Research and Development: They have introduced performance appraisal

system and payment of incentives for development of employees.



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CHAPTER-1

INTRODUCTION

PORFOLIO CONSTRUCTION ON MARKOWITZ MODEL

Portfolio is a combination of securities such as stocks, bonds and money

market instruments. The process of blending together the broad asset classes so as to

obtain optimum return with minimum risk is called Portfolio Construction.

Diversification of investments helps to spread risk over many assets. A diversification of

securities gives the assurance of obtaining the anticipated return o the portfolio. In a

diversified portfolio, some securities may not perform as expected, but others may

exceed the expectation and making the actual return of the portfolio reasonably close to

the anticipated one. Keeping a portfolio of single security may lead to a greater

likelihood of the actual return somewhat different from that of the expected return.

Hence, it is a common practice to diversify securities in the portfolio.

APPROACHES IN PORTFOLIO CONSTRUCTION

Commonly, there are two approaches in the construction of the portfolio of

securities viz. traditional approach and Markowitz efficient frontier approach. In the

traditional approach, investors needs in terms of income and capital appreciation are

evaluated and appropriate securities are selected to meet the needs of the investor. The

common practice in the traditional approach is to evaluate the entire financial plan of the

individual. In the modern approach, portfolios are constructed to maximize the expected

return for a given level of risk. It views portfolio construction in terms of the expected

return and the risk associated with obtaining the expected return.



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1. TRADITIONAL APPROACH

The traditional approach basically deals with two major decisions. They are:

a) Determining the objectives of the portfolio.

b) Selection of securities to be included in the portfolio.

Normally, this is carried out in four to six steps. Before formulating the objectives,

the constraints of the investor should be analyzed. Within the given frame work of

constraints, objectives are formulated. Then based on the objectives, securities are

selected. After that, the risk and return of the securities should be studied. The

investor has to assess the major risk categories that he or she is trying to minimize.

Compromise on risk and non-risk factors has to be carried out. Finally relative

portfolio weights are assigned to securities like bonds, stocks and debentures and

then diversification is carried out.



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STEPS IN TRADITIONAL APPROACH


Analysis of Constraints

Determination of Objectives

Selection of Portfolio

Bond and Common stock Bond Common stock

Assessment of risk and return

Diversification


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1. Analysis of constraints:

The constraints normally discussed are: income needs, liquidity, time

horizon, safety, tax considerations and the temperament.

Income needs: The income needs depend on the need for income in

constant rupees and current rupees. At the same time inflation may erode

the purchasing power, the investor may like to offset the effect of the

inflation and so, needs income in constant rupees.

Liquidity: Liquidity need of the investment is highly individualistic of the

investor. If the investor prefers to have high liquidity, then funds should be

invested in high quality short term debt maturity issues such as money

market funds, commercial papers and shares that are widely traded.

Safety of the principal: Another serious constraint to be considered by the

investor is the safety of the principal value at the time of liquidation.

Investing in bonds and debentures is safer than investing in the stocks.

Even among the stocks, the money should be invested in regularly traded

companies of longstanding. Investing money in the unregistered finance

companies may not provide adequate safety.

Time Horizon: Time horizon is the investment-planning period of the

individuals. This varies from individual to individual. Individuals risk and

return preferences are often described in terms of his life cycle. The

stages of life cycle determine the nature of investment.

Tax consideration: Investors in the income tax paying group consider the

tax concession s they could get from their investments. For all practical

purpose, they would like to reduce the taxes.

Temperament: The temperament of the investor himself poses a

constraint in framing his investment objectives. Some investors are risk

lovers or takers who would like to take up higher risk even for low returns.



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While some investors are risk averse, who may not be willing to undertake

higher level of risk even for higher level of return?

2. Determination of Objectives:

Portfolios have the common objective of financing present and future

present and future expenditures from a large pool of assets. The return that the

investor requires and the degree of risk he is willing to take depend upon the

constraints. The objectives of portfolio range from income to capital appreciation.

The common objectives are stated below:

Current income

Growth in income

Capital appreciation

Preservation of capital

The investor in general would like to achieve all the four objectives; nobody wouldlike to lose his investment. But, it is not possible to achieve all the four objectives

simultaneously. If the investor aims at capital appreciation, he should include risky

securities where there is an equal likelihood of losing the capital. Thus, there is a

conflict among the objectives.

3. Selection of Portfolio:

The selection of the portfolio depends on the various objectives of the

investor. The selection of portfolio under different objectives is dealt

subsequently.

Objectives and asset mix: If the main objective is getting adequate amount

of current income, 60% of the investment is made on Debts and 40% on



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equities. The proportions of investments on debt and equity differ

according to the individuals preferences. Money is invested in short term

debt and fixed income securities.

Growth of income and asset mix: here the investor requires a certain

percentage of growth in the income received from his investment. The

investors portfolio may consist of 60 to 100 percent equities and 0 to 40

percent debt instrument. The debt portion of the portfolio may consist of

concession regarding tax exemption.

Capital appreciation and asset mix: Capital appreciation means that the

value of the original investment increases over the years. Investment in

real estates like land and house may provide a faster rate of capital

appreciation but they lack liquidity. In the capital market, the values of the

shares are much higher than their original issue prices.

Safety of principal and asset mix: usually, the risk averse investors are

very particular about the stability of principal. According to the life cycle

theory, people in the third stage of life also give more importance to the

safety of the principal. All the investors have this objective in their mind.

No one likes to lose his money invested in different assets. But, the

degree may differ.

4. Risk and return analysis:

The traditional approach to portfolio building has some basic

assumptions. First, the individual prefers larger to smaller returns from securities. To

achieve this goal, the investor has to take more risk. The ability to achieve higherreturns is dependent upon his ability to judge risk and his ability to take specific

risks. The investor analyses the varying degrees of risk and constructs the portfolio.

At first, he establishes the minimum income that he must have to avoid hardships

under most adverse economic condition and the he decides risk of loss of income

that can be tolerated. The investor makes a series of compromises on risk and non-



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risk factors like taxation and marketability after he has assessed the major risk

categories which he is trying to minimize.

5. Diversification:

Once the asset mix is determined and the risk and returns are

analyzed, the final step is the diversification of portfolio. Financial risk can be minimized

by commitments to top quality bonds, but these securities offer poor resistance to

inflation. Stocks provide better inflation protection than bonds but are more vulnerable to

financial risks. Good quality convertibles may balance the financial risk and purchasing

power risk. According to the investors need for income and risk tolerance level portfolio

is diversified. In the bond portfolio, the investor has to strike a balance between the

short term and long term bonds. Short term fixed income securities offer more risk to

income and long term fixed income securities offer more risk to principal.

2. MODERN APPROACH

The traditional approach is a comprehensive financial plan for the individual. It

takes into account the individual needs such as housing, life insurance and pension

plans. But these types of financial planning approaches are not done in the Markowitz

approach. Markowitz gives more attention to the process of selecting the portfolio. His

planning can be applied more in the selection of common stocks portfolio than the bond

portfolio. The stocks are not selected on the basis of need for income or appreciation.

But the selection is based on the risk and return analysis. Return includes the market

return and dividend. The investor needs return and it may be either in the form of

market return or dividend. They are assumed to the indifferent towards the form ofreturn.

In the modern approach, the final step is asset allocation process that is to

choose the portfolio that meets the requirement of the investor. The risk taker i.e., who

are willing to accept a higher probability of risk for getting the expected return would



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choose high risk portfolio. Investor with lower tolerance for risk would choose low level

risk portfolio. The risk neutral investor would choose the medium level risk portfolio.

PORTFOLIO-MARKOWITZ MODEL

Harry Markowitz opened new vistas to modern portfolio selection by publishing

an article in the journal of finance in March 1952. His publication indicated the

importance of correlation among the different stocks returns in the construction of a

stock portfolio. Markowitz also showed that for a given level of expected return in a

group of securities, one security dominates the other. To find out this, the knowledge of

the correlation coefficients between all possible securities combinations is required.

THE MARKOWITZ MODEL

Most people agree that holding two stocks is less risky than holding one stock.

For example, holding stocks from textile, banking and electronic companies is better

than investing all the money on the textile companys stock. But building up the optimal

portfolio is very difficult. Markowitz provides an answer to it with the help of risk and

return relationship.

ASSUMPTIONS

i. The individual investor estimates risk on the basis of variability of returns.

ii. Investors decision is solely based on the expected return and variance of returns

only.

iii. For a given level of risk, investor prefers higher return to lower return. Likewise,

for a given level of return investor prefers lower risk than higher risk.

CONCEPT



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In developing his model, Markowitz had given up the single stock portfolio and

introduced diversification. The single security portfolio would be preferable if the

investor is perfectly certain that his expectation of highest return would turn out to be

real. In the world of uncertainty, most of the risk averse investors would like to join

Markowitz rather than keeping a single stock, because diversification reduces the risk.

CHAPTER-2

RESEARCH DESIGN

2.1 TITLE OF THE STUDY:

CONSTRUCTION OF A PORTFOLIO USING FIVE STOCKS (2009-11) BY

EMPLOYMENT OF MARKOWITZ MODEL.

2.2 STATEMENT OF THE PROBLEM

Portfolios are the advantage of reduction of risk and also of returns. This was

found out by Prof. Harry Markowitz a Nobel winner. The best beneficial effects ofportfolio will be felt when stock returns are negatively correlated and when

diversification is across different 15 industries.

In this project risk reduction diversification effect is examined by selecting 5

Stocks of selected Companies-



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1. Tata Steel

2. Bajaj Auto Finance

3. Ultra tech Cement

4. Tata Chemicals

5. Taj GVK

Belonging into different Sectors namely-

1. Steel

2. Automobiles

3. Cement

4. Chemicals

5. Hotels

Over a period of 25 months by employing the Financial Markowitz Model.

2.3 RESEARCH METHODOLOGY

This Consisted of the following Steps:

a) Random sampling of 5 companies in 5 different sectors.

b) Conversion of the Closing Prices of 5 different companies into Returns.

c) Determine Average Returns, Standard Deviation of the Returns, Variance of the

Returns and the co-variance between each pair of the Co.s.

d) Assumption of equal distribution of wealth and differential distribution in

subsequent stages.



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e) Quantification of the average returns of the portfolio and Risk of the Portfolio with

each distribution of wealth.

2.4 SCOPE OF THE STUDY

Scope of the study is to examine, is there any advantage in combining Securities

in different proportion and effect of such combination on portfolio output namely

Standard Deviation of the portfolio(Risk) and Returns of the portfolio(weighted average

returns).

This will be of great help to any investor in highlighting that instead of a focused

investment, a diversified investment is always better.

2.5 OBJECTIVES OF THE STUDY

Specific Objectives for the study are:-

a) Selection of Co.s (Tata Steel, Bajaj Auto Finance, Ultra tech cement, Tata

Chemicals, Taj GVK) and Industries (Steel, Auto, Cement, Chemicals, Hotels).

b) Selection of the study Period (2009-11).

c) Identification of returns of each Co., Variability of returns of each Co., Variability

of returns when 2 Co.s are taken together (, cov).

d) Identification of portfolio output when wealth is distributed among these Co.s.

e) Final Conclusions.

2.6 LIMITATIONS

a) As per original Markowitz Studies a Maximum of 50 different Industries are

required for proper Diversification but due to Constraints of time period and data

availability the Researcher has selected 5 Co.s belonging to different Industries.

b) A Monthly data base is employed fro analysis whereas the accuracy may be

improved with Weekly data base is employed.



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c) A sampling Scale of 3% was considered sufficient.

d) Sharpes Single Index Model is not attempted.

e) This research is only for academic interest.

2.7 METHODOLOGICAL ASSUMPTION

a) The Industries selected are assumed to represent Indian Economy.

b) Companies selected in each Industry are assumed to represent the industry in

full.

c) A Monthly Database is considered sufficient for this purpose.

2.8 EXPECTED CONTRIBUTION

Specific Monetary Contribution from a Study of this nature cannot be done

however qualitatively this study is enlightening an ordinary Investor regarding the

benefits of Diversification.

2.9 SAMPLING PLAN

Assuming 300days were Active Trading days for each Co. there were 900 trading

days out of which Systematic Sampling as resulted in Selection of 25 trading days. This

means:-



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a) Selection of Companies from different Sectors of the economy.

b) Recording of Closing Prices of Equity Shares of the Co. on a monthly basis.

c) Sampling Methodology is Systematic Sampling- every 30th day was selected.

d) Sampling Scale is 25/900 = approximately 3%.

2.10 FIELDWORKS AND RESEARCH

This analysis is extremely an In-house research activity did not involve in any

field work in the form of Customer introduce, recording or Visual observation. Similarly

No research Instrument such as questionnaire or Interview Scheduled recordings of any

help were employed at any stage.

2.11 TOOLS OF DATA COLLECTION

No Specific data collections Instrument such as Voice recorder or Photographic

device or Questionnaire or Interview Schedules were employed at any stage.

2.12 DEFINITION OF CONCEPTS

a) Arithmetic average returns () =

Where, x = Periodical Returns in %



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n = No. of Readings

b) Standard Deviation()=

This is described as the square root of the differences or deviations of

mean from individual values.

c) Covariance of Two Combination:

Covariance reflects the degree to which the returns of the two securities

vary or change together. A positive Covariance means that the returns of the two

securities move in the same directions whereas a negative covariance implies

that the returns of the two securities move in the opposite direction. The

covariance between the returns of any two securities 1 and 2 is calculated as

follows:

Cov12=

d) Rate of Return

The rate of return on an asset for a given period (usually a period of one

year) is defined as follows:

Return= Where, P1= Price at the end of the year

P0= Price at the beginning of the year



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e) Portfolio Risk()

Combination of two securities reduces the risk factor if less degree of

positive correlation between them. The portfolio risk is nil if the securities are

related negatively. This indicates that the risk can be eliminated if the securities

are perfectively negatively correlated. The standard deviation of the portfolio is

sensitive to 1) the proportions of funds devoted to each stock 2) the standard

deviation of each security 3) Co-variance between two stocks.

The change in portfolio proportions can change the portfolio risk.

= W121

2+W222

2+ W323

2+2W1W2 1 212+2W1W3 1 313+2W2W3 2 323



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CHAPTER-3

ANALYSIS OF DATA

TABLE-1:Closing Prices of 5 different Sectors

MONTHLY STEEL(A) AUTO(B) CEMENT( C) CHEMICALS(D) HOTEL (E)

Jan-09 184.60 474.75 395.95 153.15 45.15

Feb-09 172.80 535.05 470.10 124.10 42.65

Mar-09 205.90 618.45 551.35 141.55 47.65

Apr-09 238.10 641.65 570.20 171.55 56.25

May-09 405.35 1034.25 717.80 216.35 93.30

Jun-09 390.65 1003.05 689.60 217.35 76.75

Jul-09 462.35 1221.75 799.00 254.15 123.15

Aug-09 424.25 1215.70 761.80 248.20 119.95Sep-09 509.45 1494.75 799.60 281.35 128.95

Oct-09 471.55 1388.15 767.95 262.85 118.35

Nov-09 579.20 1570.45 836.65 281.15 152.80

Dec-09 614.80 1754.80 914.20 321.85 147.10

Jan-10 569.10 1747.70 930.00 296.85 144.15

Feb-10 574.35 1817.65 1040.05 288.00 153.05

Mar-10 632.05 2014.80 1154.85 328.15 157.70

Apr-10 618.85 2093.35 972.75 353.85 167.35

May-10 500.70 2209.35 921.75 321.55 154.00

Jun-10 485.65 2487.60 879.30 334.30 165.10

Jul-10 537.00 2688.00 863.90 336.80 160.00

Aug-10 522.70 2731.75 902.50 395.40 161.00

Sep-10 651.85 1469.90 1062.60 399.60 157.55

Oct-10 589.40 1510.95 1099.90 390.45 153.05

Nov-10 584.80 1576.60 1137.60 354.85 133.55

Dec-10 680.40 1541.00 1084.25 393.90 133.05

Jan-11 639.70 1245.95 1002.80 350.85 112.85



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TABLE-2:Conversion of Closing Prices into % returns using Formula

MONTHSINDEX RETURNS

A B C D E

Jan-09 0 0 0 0 0

Feb-09 -6.39 12.70 18.73 -18.97 -5.54

Mar-09 19.16 15.59 17.28 14.06 11.72

Apr-09 15.64 3.75 3.42 21.19 18.05

May-09 70.24 61.19 25.89 26.11 65.87

Jun-09 -3.63 -3.02 -3.93 0.46 -17.74Jul-09 18.35 21.80 15.86 16.93 60.46

Aug-09 -8.24 -0.50 -4.66 -2.34 -2.60

Sep-09 20.08 22.95 4.96 13.36 7.50

Oct-09 -7.44 -7.13 -3.96 -6.58 -8.22

Nov-09 22.83 13.13 8.95 6.96 29.11

Dec-09 6.15 11.74 9.27 14.48 -3.73

Jan-10 -7.43 -0.40 1.73 -7.77 -2.01

Feb-10 0.92 4.00 11.83 -2.98 6.17

Mar-10 10.05 10.85 11.04 13.94 3.04

Apr-10 -2.09 3.90 -15.77 7.83 6.12

May-10 -19.09 5.54 -5.24 -9.13 -7.98

Jun-10 -3.01 12.59 -4.61 3.97 7.21

Jul-10 10.57 8.06 -1.75 0.75 -3.09

Aug-10 -2.66 1.63 4.47 17.40 0.63

Sep-10 24.71 -46.19 17.74 1.06 -2.14

Oct-10 -9.58 2.79 3.51 -2.29 -2.86

Nov-10 -0.78 4.34 3.43 -9.12 -12.74

Dec-10 16.35 -2.26 -4.69 11.00 -0.37

Jan-11 -5.98 -19.15 -7.51 -10.93 -15.18

AVERAGE RETURNS = 6.35 = 5.52 = 4.24 = 3.98 = 5.27


Return= Average Returns () =


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TABLE-3: Calculation of Standard Deviation A & B

MONTH A B

Jan-09 0 -6.35 40.31 0 -5.52 30.43

Feb-09 -6.39 -12.74 162.34 12.70 7.18 51.62

Mar-09 19.16 12.81 164.00 15.59 10.07 101.42

Apr-09 15.64 9.29 86.30 3.75 -1.77 3.12

May-09 70.24 63.89 4082.53 61.19 55.67 3099.09

Jun-09 -3.63 -9.98 99.51 -3.02 -8.53 72.82

Jul-09 18.35 12.01 144.12 21.80 16.29 265.26

Aug-09 -8.24 -14.59 212.85 -0.50 -6.01 36.14Sep-09 20.08 13.73 188.61 22.95 17.44 304.06

Oct-09 -7.44 -13.79 190.12 -7.13 -12.65 159.98

Nov-09 22.83 16.48 271.59 13.13 7.62 58.00

Dec-09 6.15 -0.20 0.04 11.74 6.22 38.71

Jan-10 -7.43 -13.78 189.95 -0.40 -5.92 35.06

Feb-10 0.92 -5.43 29.45 4.00 -1.51 2.29

Mar-10 10.05 3.70 13.67 10.85 5.33 28.41

Apr-10 -2.09 -8.44 71.19 3.90 -1.62 2.62

May-10 -19.09 -25.44 647.23 5.54 0.02 0.00

Jun-10 -3.01 -9.35 87.51 12.59 7.08 50.09

Jul-10 10.57 4.22 17.85 8.06 2.54 6.45

Aug-10 -2.66 -9.01 81.21 1.63 -3.89 15.12

Sep-10 24.71 18.36 337.06 -46.19 -51.71 2673.78

Oct-10 -9.58 -15.93 253.74 2.79 -2.72 7.42

Nov-10 -0.78 -7.13 50.83 4.34 -1.17 1.37

Dec-10 16.35 10.00 99.97 -2.26 -7.77 60.44

Jan-11 -5.98 -12.33 152.05 -19.15 -24.66 608.27

= 6.35 =7674.03 = 5.52 = 7711.98

= 17.88 = 17.93


Standard Deviation ()= n = 25months


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TABL E-4: Calculation of Standard Deviation C & D

MONTH C 2 D 2

Jan-09 0 -4.24 17.97 0 -3.98 15.81

Feb-09 18.73 14.49 209.89 -18.97 -22.94 526.46

Mar-09 17.28 13.04 170.15 14.06 10.08 101.70

Apr-09 3.42 -0.82 0.67 21.19 17.22 296.44

May-09 25.89 21.65 468.55 26.11 22.14 490.11

Jun-09 -3.93 -8.17 66.72 0.46 -3.51 12.35

Jul-09 15.86 11.62 135.13 16.93 12.95 167.83

Aug-09 -4.66 -8.90 79.13 -2.34 -6.32 39.91

Sep-09 4.96 0.72 0.52 13.36 9.38 87.98

Oct-09 -3.96 -8.20 67.20 -6.58 -10.55 111.34

Nov-09 8.95 4.71 22.15 6.96 2.99 8.91

Dec-09 9.27 5.03 25.30 14.48 10.50 110.25

Jan-10 1.73 -2.51 6.31 -7.77 -11.74 137.92

Feb-10 11.83 7.59 57.67 -2.98 -6.96 48.41

Mar-10 11.04 6.80 46.22 13.94 9.96 99.29

Apr-10 -15.77 -20.01 400.31 7.83 3.86 14.86

May-10 -5.24 -9.48 89.92 -9.13 -13.10 171.73

Jun-10 -4.61 -8.84 78.23 3.97 -0.01 0.00

Jul-10 -1.75 -5.99 35.89 0.75 -3.23 10.42

Aug-10 4.47 0.23 0.05 17.40 13.42 180.17

Sep-10 17.74 13.50 182.25 1.06 -2.91 8.49

Oct-10 3.51 -0.73 0.53 -2.29 -6.27 39.27

Nov-10 3.43 -0.81 0.66 -9.12 -13.09 171.46

Dec-10 -4.69 -8.93 79.73 11.00 7.03 49.40

Jan-11 -7.51 -11.75 138.10 -10.93 -14.91 222.18

= 4.24 2 =2379.26 =3.98 2= 3122.69

= 9.96 = 11.41



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TABLE-5: Calculation of Standard Deviation e

MONTH E 2

Jan-09 0 -5.27 27.74

Feb-09 -5.54 -10.80 116.73

Mar-09 11.72 6.46 41.68

Apr-09 18.05 12.78 163.36

May-09 65.87 60.60 3672.31

Jun-09 -17.74 -23.01 529.26

Jul-09 60.46 55.19 3045.82

Aug-09 -2.60 -7.87 61.87

Sep-09 7.50 2.24 5.00

Oct-09 -8.22 -13.49 181.91

Nov-09 29.11 23.84 568.42

Dec-09 -3.73 -9.00 80.95

Jan-10 -2.01 -7.27 52.89

Feb-10 6.17 0.91 0.82

Mar-10 3.04 -2.23 4.97

Apr-10 6.12 0.85 0.73

May-10 -7.98 -13.24 175.41

Jun-10 7.21 1.94 3.77

Jul-10 -3.09 -8.36 69.82

Aug-10 0.63 -4.64 21.55

Sep-10 -2.14 -7.41 54.91

Oct-10 -2.86 -8.12 65.99

Nov-10 -12.74 -18.01 324.29

Dec-10 -0.37 -5.64 31.83

Jan-11 -15.18 -20.45 418.18

= 5.27 2 = 9720.19

= 20.12



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TABLE-6: Calculation of Covariance between AB & AC

MONTH

Jan-09 -6.35 -5.52 35.05 -4.24 26.92

Feb-09 -12.74 7.18 -91.51 14.49 -184.60

Mar-09 12.81 10.07 128.91 13.04 167.02

Apr-09 9.29 -1.77 -16.43 -0.82 -7.63

May-09 63.89 55.67 3556.70 21.65 1383.02

Jun-09 -9.98 -8.54 85.17 -8.17 81.49Jul-09 12.00 16.28 195.47 11.62 139.54

Aug-09 -14.59 -6.02 87.76 -8.90 129.79

Sep-09 13.73 17.43 239.41 0.72 9.91

Oct-09 -13.79 -12.65 174.46 -8.20 113.05

Nov-09 16.48 7.61 125.45 4.71 77.55

Dec-09 -0.20 6.22 -1.27 5.03 -1.02

Jan-10 -13.78 -5.92 81.66 -2.51 34.62

Feb-10 -5.43 -1.52 8.24 7.59 -41.21

Mar-10 3.70 5.33 19.69 6.80 25.13

Apr-10 -8.44 -1.62 13.68 -20.01 168.84

May-10 -25.44 0.02 -0.54 -9.48 241.26Jun-10 -9.36 7.07 -66.18 -8.85 82.76

Jul-10 4.22 2.54 10.71 -5.99 -25.30

Aug-10 -9.01 -3.89 35.08 0.23 -2.06

Sep-10 18.36 -51.71 -949.34 13.50 247.83

Oct-10 -15.93 -2.73 43.45 -0.73 11.63

Nov-10 -7.13 -1.18 8.38 -0.81 5.79

Dec-10 10.00 -7.78 -77.76 -8.93 -89.27

Jan-11 -12.33 -24.67 304.18 -11.75 144.92

COVARIANCE AB = 164.60 AC = 114.17


Cov12=


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TABLE-7: Calculation of Covariance between AD & AE

MONTH

Jan-09 -6.35 -3.98 25.27 -5.27 33.46

Feb-09 -12.74 -22.95 292.41 -10.81 137.71

Mar-09 12.81 10.08 129.09 6.45 82.64

Apr-09 9.29 17.21 159.89 12.78 118.69

May-09 63.89 22.13 1414.27 60.60 3871.74

Jun-09 -9.98 -3.52 35.10 -23.01 229.54

Jul-09 12.00 12.95 155.47 55.19 662.45

Aug-09 -14.59 -6.32 92.23 -7.87 114.80

Sep-0913.73 9.38 128.76 2.23 30.67

Oct-09 -13.79 -10.56 145.55 -13.49 186.02

Nov-09 16.48 2.98 49.14 23.84 392.84

Dec-09 -0.20 10.50 -2.14 -9.00 1.83

Jan-10 -13.78 -11.75 161.92 -7.28 100.28

Feb-10 -5.43 -6.96 37.78 0.90 -4.91

Mar-10 3.70 9.96 36.82 -2.23 -8.25

Apr-10 -8.44 3.85 -32.50 0.85 -7.17

May-10 -25.44 -13.11 333.50 -13.25 337.04

Jun-10 -9.36 -0.01 0.14 1.94 -18.13

Jul-10 4.22 -3.23 -13.65 -8.36 -35.30

Aug-10 -9.01 13.42 -120.95 -4.65 41.87

Sep-10 18.36 -2.92 -53.57 -7.41 -136.09

Oct-10 -15.93 -6.27 99.88 -8.13 129.45

Nov-10 -7.13 -13.10 93.39 -18.01 128.43

Dec-10 10.00 7.02 70.23 -5.64 -56.43

Jan-11 -12.33 -14.91 183.86 -20.45 252.21

COVARIANCE AD= 142.58 AE = 274.39



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TABLE-8: Calculation of Covariance between BC & BD

MONTH

Jan-09 -5.52 -4.24 23.40 -3.98 21.97

Feb-09 7.18 14.49 104.04 -22.95 -164.80

Mar-09 10.07 13.04 131.31 10.08 101.49

Apr-09 -1.77 -0.82 1.45 17.21 -30.45

May-09 55.67 21.65 1204.93 22.13 1232.16

Jun-09 -8.54 -8.17 69.73 -3.52 30.03

Jul-09 16.28 11.62 189.28 12.95 210.89

Aug-09 -6.02 -8.90 53.51 -6.32 38.02

Sep-09 17.43 0.72 12.59 9.38 163.46

Oct-09 -12.65 -8.20 103.72 -10.56 133.54Nov-09 7.61 4.71 35.82 2.98 22.70

Dec-09 6.22 5.03 31.27 10.50 65.27

Jan-10 -5.92 -2.51 14.88 -11.75 69.60

Feb-10 -1.52 7.59 -11.52 -6.96 10.56

Mar-10 5.33 6.80 36.21 9.96 53.06

Apr-10 -1.62 -20.01 32.44 3.85 -6.25

May-10 0.02 -9.48 -0.20 -13.11 -0.28

Jun-10 7.07 -8.85 -62.57 -0.01 -0.10

Jul-102.54 -5.99 -15.19 -3.23 -8.20

Aug-10 -3.89 0.23 -0.89 13.42 -52.23

Sep-10 -51.71 13.50 -698.09 -2.92 150.88

Oct-10 -2.73 -0.73 1.99 -6.27 17.10

Nov-10 -1.18 -0.81 0.95 -13.10 15.39

Dec-10 -7.78 -8.93 69.46 7.02 -54.64

Jan-11 -24.67 -11.75 289.89 -14.91 367.76

COVARIANCE BC = 67.43 BD = 99.46



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TABLE-9: Calculation of Covariance between BE & CE

MONTH

Jan-09 -5.52 -5.27 29.09 -4.24 23.40

Feb-09 7.18 -10.81 -77.61 14.49 104.04

Mar-09 10.07 6.45 64.97 13.04 131.31

Apr-09 -1.77 12.78 -22.60 -0.82 1.45

May-09 55.67 60.60 3373.17 21.65 1204.93

Jun-09 -8.54 -23.01 196.42 -8.17 69.73

Jul-09 16.28 55.19 898.62 11.62 189.28

Aug-09 -6.02 -7.87 47.33 -8.90 53.51

Sep-0917.43 2.23 38.93 0.72 12.59

Oct-09 -12.65 -13.49 170.67 -8.20 103.72

Nov-09 7.61 23.84 181.47 4.71 35.82

Dec-09 6.22 -9.00 -55.97 5.03 31.27

Jan-10 -5.92 -7.28 43.10 -2.51 14.88

Feb-10 -1.52 0.90 -1.37 7.59 -11.52

Mar-10 5.33 -2.23 -11.89 6.80 36.21

Apr-10 -1.62 0.85 -1.38 -20.01 32.44

May-10 0.02 -13.25 -0.28 -9.48 -0.20

Jun-10 7.07 1.94 13.71 -8.85 -62.57

Jul-10 2.54 -8.36 -21.20 -5.99 -15.19

Aug-10 -3.89 -4.65 18.08 0.23 -0.89

Sep-10 -51.71 -7.41 383.33 13.50 -698.09

Oct-10 -2.73 -8.13 22.16 -0.73 1.99

Nov-10 -1.18 -18.01 21.16 -0.81 0.95

Dec-10 -7.78 -5.64 43.90 -8.93 69.46

Jan-11 -24.67 -20.45 504.49 -11.75 289.89

COVARIANCE BE = 244.10 CE = 67.43



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TABLE-10: Calculation of Covariance between CD & DE

MONTH

Jan-09 -4.24 -3.98 16.88 -5.27 22.34

Feb-09 14.49 -22.95 -332.46 -10.81 -156.56

Mar-09 13.04 10.08 131.50 6.45 84.17

Apr-09 -0.82 17.21 -14.13 12.78 -10.49

May-09 21.65 22.13 479.12 60.60 1311.65

Jun-09 -8.17 -3.52 28.74 -23.01 187.95

Jul-09 11.62 12.95 150.55 55.19 641.50

Aug-09 -8.90 -6.32 56.23 -7.87 70.00

Sep-09 0.72 9.38 6.77 2.23 1.61

Oct-09 -8.20 -10.56 86.54 -13.49 110.60

Nov-09 4.71 2.98 14.03 23.84 112.18

Dec-09 5.03 10.50 52.79 -9.00 -45.26

Jan-10 -2.51 -11.75 29.51 -7.28 18.27

Feb-10 7.59 -6.96 -52.86 0.90 6.87

Mar-10 6.80 9.96 67.71 -2.23 -15.17

Apr-10 -20.01 3.85 -77.07 0.85 -16.99

May-10 -9.48 -13.11 124.30 -13.25 125.62

Jun-10 -8.85 -0.01 0.13 1.94 -17.14

Jul-10 -5.99 -3.23 19.37 -8.36 50.08

Aug-10 0.23 13.42 3.06 -4.65 -1.06

Sep-10 13.50 -2.92 -39.39 -7.41 -100.07

Oct-10 -0.73 -6.27 4.58 -8.13 5.93

Nov-10 -0.81 -13.10 10.64 -18.01 14.63

Dec-10 -8.93 7.02 -62.73 -5.64 50.40

Jan-11 -11.75 -14.91 175.21 -20.45 240.36

COVARIANCE CD = 36.63 DE = 112.14



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TABLE-11: Summary Table Returns and Standard Deviation

PORTFOLIO RETURNS() (%)

STANDARD DEVIATION

() (%)

A 6.35 7674.03 319.75 17.88

B 5.52 7711.98 321.33 17.93

C 4.42 2379.26 99.14 9.96

D 3.98 3122.69 130.11 11.41

E 5.27 9720.19 405.01 20.12



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TABLE-12: Summary Table of Covariance

COMBINATIONS COVARIANCE () (%)

AB164.60AC 114.17

AD 142.39

AE 271.39

BC 67.43

BD 99.46

BE 244.10

CD 36.63

CE 67.43

DE 112.14



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GRAPH-1: Showing Monthly prices of Tata Steel (01/01/2009 to

31/01/2011)

SL NO MONTH STEEL(A) SL NO MONTH STEEL(A) SL NO MONTH STEEL(A)

1 Jan-09 184.60 11 Nov-09 579.20 21 Sep-10 651.85

2 Feb-09 172.80 12 Dec-09 614.80 22 Oct-10 589.40

3 Mar-09 205.90 13 Jan-10 569.10 23 Nov-10 584.80

4 Apr-09 238.10 14 Feb-10 574.35 24 Dec-10 680.40

5 May-09 405.35 15 Mar-10 632.05 25 Jan-11 639.70

6 Jun-09 390.65 16 Apr-10 618.85

7 Jul-09 462.35 17 May-10 500.70

8 Aug-09 424.25 18 Jun-10 485.65

9 Sep-09 509.45 19 Jul-10 537.00

10 Oct-09 471.55 20 Aug-10 522.70

INTERPRETATION: The price of the TATA STEEL in the month of Jan-09 was Rs. 184.60 and

at the end of Jan-11 was Rs. 639.70. Within this period, the price was reduced to Rs.172.89

(Feb-09) and also increased to the extent of Rs. 680.40 (Dec-10).



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GRAPH-2: Showing Monthly prices of BAJAJ AUTO FINANCE

(01/01/2009 to 31/01/2011)

SL NO MONTH AUTO(B) SL NO MONTH AUTO(B) SL NO MONTH AUTO(B)1 Jan-09 474.75 11 Nov-09 1570.45 21 Sep-10 1469.90

2 Feb-09 535.05 12 Dec-09 1754.80 22 Oct-10 1510.95

3 Mar-09 618.45 13 Jan-10 1747.70 23 Nov-10 1576.60

4 Apr-09 641.65 14 Feb-10 1817.65 24 Dec-10 1541.00

5 May-09 1034.25 15 Mar-10 2014.80 25 Jan-11 1245.95

6 Jun-09 1003.05 16 Apr-10 2093.35

7 Jul-09 1221.75 17 May-10 2209.35

8 Aug-09 1215.70 18 Jun-10 2487.60

9 Sep-09 1494.75 19 Jul-10 2688.00

10 Oct-09 1388.15 20 Aug-10 2731.75

INTERPRETATION: The price of the BAJAJ AUTO FINANCE in the month of Jan-09 was Rs.

474.75 and at the end of Jan-11 was Rs. 1245.95. Within this period, there was no reduction in

the price and the price has been increased to the extent of Rs. 2731.75 (Aug-10).


8/2/2019 Fundamental and Technical Analysis

fundamental and technical analysis of steel sector in india

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