keshava final

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Effect of diversifying portfolio risk in stock market

INTRODUCTION:

Though the first stock exchange in India was established over a

hundred years ago, investment in equity started becoming popular in India

only in the late 1970s because of the forced dilution of the foreign equity

holdings in well- managed multinational companies. The eighties saw a steady

growth of the equities cult with increasing larger number of companies

tapping the stock market to meet their resources needed. The liberalization

process and opening up of the Indian economy, which began in the eighties,

picked up speed with the presentation of the union budget in July 1991. The

budgets ever since have confirmed the Governments resolve to integrate

the Indian economy with the world economy , despite temporary disruptions

in the environment now and then .What is more important is that the returns

in the Indian stock markets, even in dollar terms , have been at par with the

best in the world in the last 10 years, boosting the confidence of the

international investors . There is little doubt that we all are into a new era of

the economic growth and prosperity, where financial securities would be thebest avenue for investing our savings.

We know, however that investing in stocks and shares is at best a

high risk proposition. Many of us have been raised on the belief that investing

in shares is different from gambling and is therefore something to be shunned.

There is a little doubt that stock markets can be treacherous. The history of

stock markets the world over is replete with booms and busts; of overnightmillionaires and instant paupers. The Indian stock market has been no

different.

VIVEKANANDA DEGREE COLLEGE, BANGALORE

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Is investing in shares therefore chasing a chimera?

The Indian stock markets are being rapidly professionalized. The

entry of young, first generation brokers and several banks sponsored mutual

funds is transforming the competitive structure of the market. The anticipated

entry of Private Indian and foreign companies mutual funds would accentuate

the competition further. These developments imply that individual investors

would have to play against increasingly more sophisticated players in the

market.

1.1 INVEST IN WHAT YOU KNOW

Investors often behave in a typically restless and fickle manner,

never satisfied with what they have- always looking for the next hot stock.

This outlook is usually translated into cumbersome portfolios with an

unmanageably large number of scrip. Most of us believe that diversification is

good since it reduce risk. Isnt that what we have always been taught?

The efforts of various financial scholars who studied all this stuff in

the fifties, sixties and seventies, showed that after a point there is no further

risk reduction gained by adding more assets, but instead transaction and

other costs increase. The Ideal number of investments recommended by

different experts ranges between twelve and twenty, without getting into the

merits of these arguments and their methodologies for measuring risk, the key

points Is that most of the researcher came to the conclusion that beyond a

limit, there is no further gain in diversification.


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At the same time, the risk reduction implies the selection of

investments whose performances are not correlated. If all investments are in

the steel industry, then there is no real diversification, since all the stocks will

be highly correlated i.e. likely to move in the same direction at the time.

Hence we tend to spread our stocks across industries. Even here certain

industries could be closely linked. For example, the white goods and

automobile segments which are both dependent on consumer spending may

have similar boom bust cycles, which will in turn have a significant

correlation with the fortunes of companies making steel flats. Hence, a further

diversification of investment spread across these segment is unlikely to help in

reducing risk.

Keeping track of a vast number of scripts can be nightmarish,

especially in the Indian context. For an investor whose business is not stocks,

even reading all the balance sheets is a laborious chore not to mention

keeping abreast of half yearly results, company announcements, industry

outlooks, etc. as a result we are sometime unaware of bad news, or find outtoo late. The larger number of companies we invest in the higher the chances

of being out of touch with their performances.

It all goes back to the psychology of individual. Any investor will be

far more prudent with an investment that is worth 10-15% of their assets than

one, which accounts for mere 1%. The chances are that they will evaluate

their options more critically, thereby improving their hit rate.


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1.2 INDIA: THE PROMISE OF GROWTH:

The economy of the India is 4th

largest in the world as measured byPurchasing Power Priority (PPP). When measured in USD exchange rate

terms, it is the 10th largest in the world, with a GDP of US $1.0 trillion (2007).

India is the second fastest growing major economy in the world, with a GDP

growth rate of 9.2%at the end of second quarter of 2008-09. However, Indias

huge population results in a per capita income of $3400 at PPP and $820 at

nominal. The World Bank classifies India as a low income economy.

The economy diverse and encompasses agricultural, handicrafts,

textile, manufacturing and a multitude of services. Although two-third of

Indian workforce still earns their livelihood directly or indirectly through

agriculture, services are a growing sector playing an increasingly important

role of Indias economy. The advent of digital age and the large number

young and educated populace fluent in English, is gradually transforming

India as a important back office destination for global companies for

outsourcing of their customer services and technical support. India is a major

exporter of highly skilled workers in software and financial services and

software engineering. Other sectors like manufacturing; Pharmaceutical,

biotechnology, nanotechnology, telecommunication, shipbuilding and

aviations are showing strong potential with higher growth rates.

India followed a socialist inspired approaches for most of its independent

history, with strict Government control over provide sector participation,

Foreign Trade and Foreign Direct Investment (FDI). However, since the early

1990s, India has gradually opened up its market through economic reforms


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by reducing Government control on Foreign Trade and Foreign Direct

Investment (FDI). The privatization of publicly owned industries and the

opening of certain sectors to private and Foreign interests as proceeded slowly

amid political debate.

The India forces a burgeoning population and the challenge of

reducing economic and social inequality. Poverty remains a serious problem,

although it has declined significantly since independence, mainly due to

Green Revolution and economic reforms.

SELECTED ECONOMIC INDICATORS:

India remained relatively unscathed from the 1997-98 Asian

Financial Sector crises and has maintained a healthy growth rate of over

5%despite recession in major world economics over the past 2 years. This

demonstrates the size, strength and resilience of the Indian economy. Were it

not for the resilience of China and India, the world would have been in deep

recession in 2008.

The sectoral composition of GDP reflects a transition. While the

agricultural and industrial sectors have continued to grow, the services sector

has grown at a significantly higher pace it currently contributes nearly half

of the Indias GDP.

On the external front, cumulative foreign investment inflows have

been US$ 50 billion since 1991.This includes over US$28 billion of foreign

direct investment (FDI) and about US$22.6 billion in portfolio investment.


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Licensing has been removed from all but six sectors .The Indian

government is determined to remove any remaining road blocks, real or

perceived .India has one of the most transparent and liberal FDI regimes

among the emerging developing economics .The union government has been

continuously opening up new sectors to foreign investment , while enhancing

FDI limits in others. The year 2002 saw the opening up of the defense, print

media, housing and real estate and urban mass transportation sectors.

SECTORAL OVERVIEW

AGRICULTURE:

Two thirds of Indias population lives in rural areas. Agriculture in

India is one of the most prominent sectors in its economy .Agriculture and

allied sectors like forestry; logging and fishing accounted for 19.9% of the

GDP in 2005 and employed 62% of the countrys population .It accounts for

8.56% of Indias exports. About 43% of Indias geographical area is used for

agricultural activity. Despite a steady decline of its share in the GDP,

agriculture is still the largest economic sector and plays a significant role in

the overall socio- economic development of India.

The performance of the agricultural sector has continuously been

improving (over many decades), helping the country achieve a surplus in food

grains production. This has been facilitated through new agricultural

techniques and tools acquired by Indian farmers, mechanization, use of high

yielding varieties of seeds, increasing use of fertilizers and irrigation

facilities , on going operational research in the countrys numerous

agricultural universities and colleges ,etc. With liberalization of trade in


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agricultural commodities, India enjoys a competitive advantage in a number

of agricultural and processed food products exports.

Agriculture accounts for 62 per cent of total employment

MANUFACTURING

India has moved from an agrarian to a manufacturing and services

led economy. The manufacturing sector accounted for 19.3% of the total

GDP. The country has built a diversified industrial base comprising

traditional handicrafts, small, medium and large manufacturing companies and

high technology oriented products. The industrial output has grown to

approx US$ 65 billion.

The country has emerged as an important global manufacturing hub-

many multinational corporations (MNCs) like Pepsi, General Electric (GE),

General Motors(GM), Ford , Suzuki, Hyundai, Gillette, LG etc. Have

followed Indias economic liberation process from close quarters and set up

successful operations in the country in recent years. They have been able to

leverage cost advantages while adhering to global manufacturing facilities.

Companies in the manufacturing sector have consolidated around

their area of core competence by tying up with foreign companies to acquire

new technologies, management expertise and access to foreign markets. The

cost benefits associated with manufacturing in India, have positioned India as

a preferred destination for manufacturing and sourcing for global markets.


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SERVICES

The services sector currently accounts for almost half of the

countrys GDP. Expanding at a rate of 8-10% per annum, services are the

fastest growing sector in the Indian economy. In fact, the growth in Indias

GDP, despite the global slowdown, is attributed largely to its strong

performance. Indias exports of services have been growing at close to 20%

per annum, increasing their share in world exports to 1.5%, compared to the

dismal share of merchandise exports at only 0.8%. The service sector accounts

for 60.7% of the total GDP.

Availability of highly skilled workers has encouraged many

international companies to carry out their research and development activities

in India. IT, biotech, tourism, health, financial services and education hold the

promise of sustainable high growth. To give a perspective:

The Indian IT industry has grown from US$ 0.8 billion in 1994-95 to US$

10.1 billion in 2001-02. Domestic software has grown at 46% while

software exports have grown at 62% over the last 5 years.

The last decade has seen the Indian entertainment industry grow

exponentially. The key drivers for this have been technology and the

governments recognition of the importance of the sector. The industry is

expected to grow at a compound annual growth rate (CAGR) of 27%.

Revenues are increased from US$ 3 billion in 2002 to US$ 10 billion in

2005.


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Information Technology Enabled Services (ITES) with elements like call

centers; back office processing, content development and medical

transcription is the key to rapid growth. The sector has an employment

potential of 1.1 million by 2008.

Infrastructures

The infrastructure sector in India, traditionally reserved for the

government, is progressively being opened up for private sector participation.

According to the India infrastructure report (IIR), currently 5.5% of the GDP

is invested in the infrastructure sector. This needs to be increased to 7% in the

next three years and gradually to 8%, by which time the annual investment in

infrastructure facilities is going to treble or rise even more, from the current

level of RS. 6000 Billion.

PORTS

The country has a 7500 km long coastline dotted with numerous

major and minor ports. The areas that have been identified for participation

and investment by the private sector include leasing out existing assets of the

ports, construction of additional assets such as container terminals, cargo

berths, handling equipment, repair facility, captive power plants and captive

facilities for port based industries. Foreign investment up to 100 per cent

equity participation is permitted in ports through the automatic route for

construction and maintenance of ports and harbors.


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A number of private companies have already set up port facilities n

the country. Two Greenfield ports that are Pipavav and Mundra in Gujarat

have been set up through private participation and these have been able to

compete with existing major ports. Many multinational and domestic players

have taken over existing port has been taken over by an Australian port major.

ROADS

India has the first largest road network in the world, spanning 3.38

million kilometers. Most of the private investment in thus sector has

traditional been through the build-operate-transfer schemes. However, now

many new projects are being bid out on toll collection mechanism.

Currently the National Highways Authority of India (NHAI) is

implemented the Development Project (NHDP) is largest ever highway

development project to be undertaken in the country. The project involves

widening of over 13000 km of highways in the country. The investment for

this project is estimated at USS 13.2 billion at 1999 prices, the project has

been broken up into a large number of smaller segments, many of which have

been commissioned. Currently work has been completed on 1976 kilometers

and another 5222 kilometers of length is under construction.

AIRPORTS

There are 449 airports/airstrips in the country. Among these, the

Airports Authority of India (AAI) owns and manages 5 international airports,


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87 domestic airports and 28 civil enclaves at Defense Airfields and provides

air traffic services over the entire Indian airspace and adjoining oceans areas.

In 1998-99, these airports/civil enclaves handled 4.20 lakh aircraft

movements involving 24.17 million domestic and 12.83 million international

passengers and 221 thousand metric tones of domestic cargo and 468

thousand metric tones of international cargo. 51 percent of traffic was handled

at the international airports at Mumbai and Delhi. Presently various airlines

are operating through 61 airports. The remaining is lying unutilized at best

handling occasional aircrafts operations.

POWER

Power sector, hitherto, had been funded mainly through budgetary

support and external borrowings. But given the budgetary support limitation

due to growing demands from other sectors, particularly social sector and the

severe borrowing constraints, a new financing strategy was enunciated in

1991 allowing private enterprise a larger role in the power sector.

Presently, restructuring and regulatory reforms include bringing

about reforms in the State Electricity Boards (SEBs) through establishment of

the State Electricity Regulatory Commissions. Reforms are progressing

steadily in the sector and privatizations of SEBs have already begun. The

government is a one-time settlement of dues of SEBs. In effect, a large

amount of liquidity will be injected in the sector.


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The ministry of power has also formulated a blue print to provide

reliable, affordable and quality power to all users in the country i.e. power on

demand by 2012. This requires huge increase in generation capacity, up

gradation of existing generation facility and also the transmission and

distribution network.

TELECOMMUNICATION:

Indias telecommunication network ranks among the top ten countries

in the world and one of the largest telecom network in Asia. One of the largest

worlds largest and fastest growing telecom markets, the country has aninvestment potential estimated at US$69 billion by 2010.

Despite a strong base of a billion people, the countrys teledensity per

hundred population has grown from 7.08 in march 2004 to 8.95 in ,march

2005 and to a level of 12.74 in march 2006 and estimated to grow 15% by

2010. The government had allowed private participation in cellular services in

1992.the sector witnessed partial de-regulation between 1994 and 1999. The

government announced the new telecom policy (NTP) in 1999 to further de-

regulate sector with respect to services like basic, international long distance


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(ILD),national long distance (NLD) and wireless in local loop(WLL)among

others.

FINANCIAL SECTOR

The far-reaching changes in the Indian economy since liberalization

in the early 1990s have had a deep impact on the Indian financial sector. The

financial sector has gone through a complex and sometimes painful process of

restructuring, capitalizing on new opportunities as well as responding to new

challenges. During the last decade, there has been a broadening and deepening

of financial markets. Several new instruments and products have been

introduced .existing sectors have been opened to new private players. This

has given a strong impetus to the development and modernization of the

financial sector. New player have adopted international best practices and

modern technology to offer a more sophisticated range of financial services

to corporate and retail customers. This process has clearly improved the range

of financial service providers available to Indian customers.

The entry of new players has led to even existing players upgrading

their products offerings and distribution channels. This continued to be

witnessed in 2002-03 across key sectors like commercial banking and

insurance, where private players achieved significant success.

These changes have taken place against a wider systemic backdrop

of easing of controls on interest rates and their realignment with market rates ,

gradual reduction in resource pre-emption by the government, relaxation of

stipulation on concessional lending and removal of access to concessional


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resources for financial institutions. Over the past few years, he sector has also

witnessed substantial progress in regulation and supervision.

Financial intermediaries have gradually moved to internationally

norms for income recognition, asset classification and provisioning and capital

adequacy. This process continued in 2002-03, with RBI announcing

guidelines for risk based supervision and consolidated supervision. While

maintaining its soft interest rate stance, RBI cautioned banks against taking

large interest rate risks, and advocated a move towards a floating rate interest

rate structure. The past decade was also an eventful one for the Indian capital

markets.

DISINVESTMENT

The government over the past decade has been increasingly

redefining its role from being a provider of goods and services to that of a

policy maker and facilitator. Towards this objective, the government has been

consistently divesting its stake in various public sector undertakings (PSUs).

Between 1991 and 2003, the government divestment process had

yielded US$6.3 billion to the national exchequer.

1.3.CURRENT SCENARIO OF THE INDIAN ECONOMY


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The second half of 2003 saw an upsurge in optimism with a bountiful

monsoon emerging after 3 years of deficient rainfall. Expectations rose and

consumer confidence soared on the assumption that the economy would now

capitalize on its intrinsic strengths .GDP is now expected to grow .there is

again renewed optimism that it can reach its recognized potential of more than

8% pa if the second phase of reforms is carried out in a time bound manner

over the next few years.

Amidst this upbeat mood, the flip side has to be kept in mind. In the

Indian Economic survey tabled in parliament at the end of February 2003, the

Finance Ministry had stated that fiscal consolidation has to be given a priority

so that funding to the private sector is not crowed out. The Economic Survey

called for a cut in untargeted subsidies and encouraging public investment in

physical and social infrastructure .it has also recommended streamlining the

tax system to shore up revenues .The areas earmarked for rationalization of

subsidies are food, fertilizers, liquefied petroleum gas (LPG) and kerosene.

The savings rate in the country has overtaken the rate of investment

in 2001-02 for the first time since 1975.savings are 24% of the GDP while

domestic investment is 23.7% as of a year ago. This confirms the widely held

view that investments have been subdued for the past few years.

During the past year or so the rupee has been strengthening against

the US$. In July 2002 the rupee traded at 48.67% to the dollar .In February

2004 it is trading at 45.30.

The external debt situation has improved significantly in recent years

and the external debt-GDP ratio decreased from 28.7% at end of March 1991

to 21% currently.


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And India now aims at emerging as an economic superpower in the

coming decades.


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RESEARCH DESIGN

EFFECT OF DIVERSIFYING PORTFOLIO RISK IN

STOCK MARKET .is a study that was conducted for 20 stocks listed in the

national stock Exchange. It covers a period of 1 year from a 1 st April 2008 to

31st march 2009. The stocks represent a wide cross section of industries and

most of them have been part of the NIFTY although some have been

dropped from the NIFTY during its periodic reconstitution .the current Nifty

was not chosen because many of the stocks currently constituting them have

not been traded for the previous years.

The basis of portfolio analysis is that the portfolios, which are the

combinations of individual securities, do not take the characteristics of their

individual components .portfolio analysis considers the determination of

future risk and return in holding various types / categories of securities.

The aim of the paper is to analyze the securities in a portfolio and to

help an investor to reduce risk through proper diversification.

While on the topic of return we should also consider the subject of

risk-both portfolio risk and the individual risk of the security.

Diversification can help to reduce portfolio risk by eliminating un-

systematic risk for which investors are not rewarded .investors are rewarded

for taking market risk. Because diversification averages the returns of the

assets within the portfolio, it attenuates the potential highs (and lows).

Diversification among companies, industries and asset classes affords the

investor the greatest protection against business risk, financial risk and

volatility.


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Finally, in a large portfolio of common stocks, the unsystematic risk

associated with one stock typically has no impact on the unsystematic risk

associated with any other stock; this conclusion is derived from the definition

of an unsystematic risk. Consequently, the portion of the return on a stock,

which arises from the unsystematic risk, would tend to offset the portion,

which arises from the unsystematic risk for another stock in the portfolio .in a

portfolio of thirty or more stocks, it would be reasonable to expect that the

effects of unsystematic risk on various stocks would offset each other, thereby

eliminating the risk arising from this source.

Analytical and quantitative method is used for the research study.

Information is secondary in nature was collected through various secondary

sources. The data has been collected from the published records of the

companies , various trade journals, news papers like economic times,

business standards etc .magazines like business world, business standards,

business today and various text books on investment, portfolio management

etc.


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Title of the study:

A Study on EFFECT OF DIVERSIFYING PORTFOLIO RISK IN

STOCK MARKET.

Statement of the Problem:

Intelligent investing is about how effectively an investor is able to

balance risk and return. The basis of portfolio analysis is that portfolios, which

are the combinations of individual securities, do not take the characteristics of

their individual components. The principle of diversification involves

investigating portfolio of securities to ensure that losses in some will offset by

gain in others, thereby reducing the risk on return. The study focuses on the

effect of diversifying the risk of portfolio.

In general, the problem is if the number of securities in a portfolio

increases, say up to 20, will diversification reduce the unsystematic risk measured by standard deviation, and with any further diversification will it

result only in marginal reduction of portfolio risk.

NEED FOR STUDY

The need for the study is to analyze the securities in a portfolio and

to help an investor to reduce risk through proper diversification.


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Objectives of the study:

To understand the diversification of risk

To examine. whether diversification of stocks in a portfolio reduces

the un systematic risk

To examine the effect of diversification beyond a certain limit.

To offer suggestions based on study.

SCOPE OF THE RESEARCH

The scope of this research would include dissemination of

information relating to diversification of stocks in a portfolio and contributing

to a better understanding the context, resources, structure, systems, process,

and reforms of this diversification to the investors.

METHODOLOGY

The methodology followed in literature survey and preparation of

subtracts as under:

By visiting various libraries and with reference given in various

articles in magazines, literature survey was undertaken. Bibliography list from

the book was prepared with consulting of project guide the area and topic was

selected. The relevant articles was studied from various publications and

abstract was prepared for the purpose.


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After discussing with guide about the literature survey the topic of

study was finally given a clear cut shape with the specific objectives

methodology to be followed both for collection and analysis of the data.

RESEARCH TYPE

Since the evaluation of the data has to be conducted on the

information collected from the secondary sources the type of research carried

out will be the analytical in nature .Since the data will be expressed in terms

of quantity/numbers Quantitative research will be used.

SAMPLING PLAN

SAMPLING TECHNIQUE: The sampling technique used was non

probabilistic judgment sampling.

SAMPLE UNIT : The sample units are the closing share prices of Indian

companies that are included in the National Stock Exchanges broad based

index- NIFTY.

SAMPLE SIZE: 20 companies closing share prices.

SOURCES OF DATA

Preparation of project report pre supposes a good knowledge of the

subject and the topic, which is selected for a detailed analysis. This requires

and extensive survey of literatures available in the form of

News papers/ Magazines

Books/published articles

Trade journals


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Company records

In house publications of institutions

Data released by national statistical organization.

RESEARCH TOOLS USED FOR THE ANALYSIS

For all the variables the collected data was arranged in a tabular

form. Relevant statistical tools were used for analyzing the obtained data.

The inferences were drawn using the analysis.

Mean

Standard deviation

Variance

Covariance

LIMITATION OF THE RESEARCH

One of the limitations of the research is the time span of period

selected & time available for the study.

Research Scope limitations results in using a limited number of

companies.

The conclusions are based on the area & the number of companies

selected.


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Skewness of the study.

LAYOUT OF THE CHAPTER

CHAPTER 1 INTRODUCTION

CHAPTER 2 RESEARCH DESIGN

CHAPTER 3 PROFILES OF THE COMPANIES

CHAPTER 4 ANALYSIS & INTERPRETATION OF DATA

CHAPTER 5 SUMMARIES OF FINDINGS, CONCLUSIONS &

RECOMMENDATIONS


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ANALYSIS OF THE COMPANIES USED IN THE RESEARCH

The portfolios of securities are based on the companies from the NSE

NIFTY index. A brief introduction of the National Stock Exchange is given

below

THE NSE ORGANISATION

The National Stock Exchange of India Limited has genesis in the

report of the High Powered Study Group on Establishment of New Stock

Exchanges, which recommended promotion of a National Stock Exchange by

financial institutions to provide access to investors from all across the country

on an equal footing. Based on the recommendations NSE was promoted by

leading Financial Institutions at the behest of the Government of India and

was incorporated in November 1992 as tax-paying company.

On its recognition as a stock exchange under the securities contracts

(Regulation) Act, 1956 in April 1993, NSE commenced operations in the

wholesale Debt market (WDM) segment in June 1994. The Capital Market

(Equities) segment commenced operations in November 1994 and operations

in Derivatives segments commended in June 2000.


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S & P CNX NIFTY

S & P CNX Nifty is a well diversified 50 stock index accounting

for 23 sectors of the economy. It is used for a variety of purposes such as

benchmarking fund portfolios, index based derivatives and index funds.

S & P CNX Nifty is owned and managed by India Index Services

and Products Ltd. (IISL) which is a joint venture between NSE and CRISIL.

IISL is Indias first specialized company focused upon the index as a core

product. IISL have a consulting and licensing agreement with Standard &

Poors (S&P) who are world leaders in index services.

The total traded value of all Nifty stocks is approximately 70% of the

traded value of all stocks on the NSE.

Nifty stocks represent about 59% of the total market capitalization.

Impact cost of the S& P CNX Nifty for portfolio size of Rs. 5 million is

0.10%.

S & P CNX Nifty is professionally maintained and is ideal for derivatives

trading.


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TABLE 1

CONSTITUENT COMPANIES LIST OF NSE NIFTY as on MAY 2009

Company Name Industry Symbol

Asia Brown Boveri

Ltd.

Electrical Equipment ABB

Associated Cement

Companies Ltd.

Cement & Cement

Products

ACC

Bajaj Auto Ltd. Automobiles 2 and

3 Wheelers

BAJAJ AUTO

Bharati Tele

Ventures Ltd.

Telecommunication

Services

BHARTIARTL

Bharat Petroleum

Corporation Ltd.

Refineries BPCL

Cipla Ltd. Pharmaceuticals CIPLA

Dabur India Ltd. Personal Care DABUR

Dr. Reddys

Laboratories Ltd.

Pharmaceuticals DRREDDY

GAIL (INDIA)

LIMITED

Gas GAIL

Glaxosmithkline

Pharmaceuticals

India Ltd.

Pharmaceuticals GLAXO

Grasim Industries

Ltd.

Cement & Cement

Products

GRASIM

Gujarat Ambuja

Cements Ltd.

Cement & Cement

Products

GUJAMBCEM

HCL Technologies

Ltd.

Computers

Software

HCLTECH

Housing Finance Housing HDFC


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Development

Finance Corporation

Ltd.

HDFC Bank Ltd. Banks HDFC BANK Hero Honda Motors

Ltd.

Automobiles 2 and

Wheelers

HERO HONDA

Hindalco Industries

Ltd

Aluminum HINDALCO

Hindustan Lever Ltd. Diversified HINDLEVER

Hindustan Petroleum

Corporation Ltd.

Refineries HINDPETRO

ICICI BankingCorporation Ltd.

Banks ICICI BANK

Infosys Technologies

Ltd.

Computers

Software

INFOSYSTCH

Indian

Petrochemicals

Corporation Ltd.

Petrochemicals IPCL

ITC Ltd. Cigarettes ITC

Reliance Petroleum Refineries RPL

Larsen & Turbo Engineering LT

Maruti Udyog Ltd. Automobile 4

Wheelers

MARUTI

Mahindra &

Mahindra Ltd.

Automobile 4

Wheelers

M & M

Mahanagar

Telephone Nigam

Ltd.

Telecommunication

Services

MTNL

National Aluminum

Company Ltd.

Aluminium NATIONALUM

Oil & Natural Gas

Corporation Ltd.

Oil Exploration ONGC


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STERLITE

Industries Ltd.

Metals STER

Punjab & National

Bank

Banks PNB

Ranbaxy

Laboratories Ltd

Pharmaceuticals RANBAXY

Reliance Energy Ltd. Power REL

Reliance Industries

Ltd.

Refineries RELIANCE

Steel Authority of

India Ltd.

Steel & Steel

Products

SAIL

Satyam ComputerServices

Computers Software

SATYAMCOMP

State Bank of India Banks SBIN

SIEMENS Electricals

Equipments

SIEMENS

Sun Pharmaceutical

Industries Ltd.

Pharmaceuticals SUNPHARMA

Suzlon Energy Electrical Equipment SUZLON

Tata power Co. Ltd. Power TATAPOWER Reliance

Communication

Telecommunication RCOM

Tata Engineering &

Locomotive Co.

Automobile 4

Wheelers

TATA MOTORS

Tata Consultancy

Service

Computer Service TCS

Tata Iron and Steel

Company Ltd.

Steel & Steel

Products

TATASTEEL

Videsh Sanchar

Nigam ltd.

Telecommunication

Service

VSNL

Wipro Ltd. Computers

Software

WIPRO


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TABLE 2

CONSTITUENT COMPANIES LIST OF 20 SELECTED NSE NIFTY as

on MAY 2009

S.NO SYMBOL COMPANIES

1 A ACC

2 B ABB

3 C INFOSYS4 D HEROHONDA

5 E BRITANNIA

6 F MARUTI

7 G HDFC BANK

8 H ITC

9 IHIDUSTAN

LEVER

10 J BHEL

11 K TATAPOWER

12 L VSNL

13 M BAJAJ AUTO

14 N ONGC

15 O RANBAXY

16 P RELIANCE


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17 Q TATASTEEL

18 R M & M

19 S WIPRO

20 T TCS

A BRIEF INTRODUCTION TO THE COMPANIES ARE GIVEN

BELOW

ASSOCIATED CEMENT COMPANIES LTD. (ACC)

(Cement & Cement Product industry)

Associated Cement Companies (ACC) one of the leading cement

producers in India came into existence consequent to the amalgamation of tencement companies in 1936. Manufacturing and marketing of cement, ready

mix concrete, refractorys and refractory products are the main business of

ACC. Further the company is also into consultancy and engineering service.

ACCS manufacturing base consist 14 cement plants spread well all over

India. The total cement capacity of ACC stands at 161.47 lakh tones at March

31, 2008.

In Jan. 1999, the company came out with rights issue to fund its capex

projects involving modernization/ expansion of existing plants and creation of

new capacity at Wadi. The company meets around 83% of its power

requirements from its captive power plants. The captive power plant at Jamul

and Kymore with an capacity of 25 MW each was commissioned in Nov,

1999. The 15 MW captive power plants stake in favor of Gujrat Ambuja

Group. Notably, Gujrath Ambuja group is the most efficient and aggressive

cement group in India. The disinvestment was done in phases at Rs. 370 per

share.


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ACChas completed the modernization and expansion of the Chanda

and Madukkarai cement plants for increasing their capacities to around 1

MTPA each. These plants started production from 1 September 2000 and 1

October 2000 respectively. The company has completed divestment of its

stake in Float glass India Ltd. (13% stake in 2001-02) International Ferrites

Ltd. (35% stake in 2002-03) and Bridgestone ACC India Ltd. (19% stake in

2002 03). Further it has also sold its stake (500,000 Equity shares) in Tata

Industries In 2001-02. The company is making all efforts to hive off the ACC

Nihon Casting, a 100% subsidiary of ACC manufacturing alloy steel casting

but has not met success yet. At the same time of existing from non-core

businesses the company has not failed to invest in core activities it has

acquired 76.01% stake in Eternit Everest from Etex Group in Feb 2002.

ASEA BROWN BOVERI LTD. (ABB) Electrical Equipment Industry

ABB Ltd. Is a global provider of power and automation technologies

that enable utility and industry customers to improve performance while

lowering environmental impact? Effective January 1, 2008, in order to

streamline its structure and improve operational performance, the company

put into place two divisions: Power Technologies and Automation

Technologies. The Power Technologies division serves electric, gas and

water utilities, as well as industrial and commercial customers, with a range of

products, systems and services for power transmissions, distribution and

power plant automation. The automation Technologies division provides

products, systems, software and services for the automation and optimization

of industrial and commercial processers. Key technologies include


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measurement and control, instrumentation, process analysis, drives and

motors, power electronics, robots and low-voltage products.

For the six months ended 6/30/09, revenues rose 1% to $9.27 billion.

Net income from continuing operation totaled $ 207 million, vs. a loss of $14

million. Revenues reflect increased power products orders. Net income

benefited from higher margin services business.

Market Cap (Intraday): 11.96B

The net profit of the company increased by 45% to Rs. 540mm in

F12/00 as compared to Rs. 372mm in the previous year. The companys

future prospects are closely linked to investments in the power and industrial

sectors. ABB is planning to sell mass market products like low voltage

switches, fuses and circuit breakers and wiring accessories.

INFOSYS Computer Software Industry

Infosys Technologies Limited is an information technology (IT)

Services Company founded in Pune, India in 1981 by N.R. Narayan Murthy

and six of his colleagues. In 1983, Infosys moved its headquarters to

Bangalore, the capital of Karnataka. It operates nine development centers in

India and has over 30 offices worldwide. Annual revenues for fiscal year

2009 exceeded US $3.1 billion with a market capitalization of over US$30

billion. With over 72,000 employees worldwide, Infosys is one of Indias

largest companies.

Infosys Technologies Ltd (Infosys) was incorporated on July 2, 1987

as a private ltd company. It became public limited company on June 1992 and


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subsequently the name was also changed Infosys Technologies Ltd... Infosys

is one of Indias leading information technologies (IT) services companies. It

is mainly engaged custom software development, maintenance, re-engineering

services, e-commerce and internet consulting as well as dedicated offshore

software development center for certain clients, of space under construction.

The total employee strength up to March 2009 was 72000, as against 9831 on

March 2001. Infosys Technologies came out with an IPO in Feb. 1993.

In 2008 Infosys acquired the 25% stake Citibank had in its BPO

offshoot Progeon, making it a wholly owned subsidiary of Infosys and

changed the name to Infosys BPO Ltd. An investment of Rs. 9,500 ( 100

shares at an issue price of Rs 95) in the initial public offering of Infosys in

1993 ( Rs. 9,500 was approximately $300 according to the 1993 exchange

rate) would now be worth Rs. 29,440.000 ($665,235 according to the 2009

exchange rate) after adjusting for stock splits and bonuses. This is a 3000-

fold increase in rupee terms over a 14 year period (1993 2009 ) and does

not include the dividends that the company has paid out.

In 2001 02 the company has signed up 116 new clients and had a

total client base of 293 at the end of the year. The companys product

FINACLE, is an integrated core banking solution that is centralized, multi

currency and multi language enabled, functionally rich, and addresses both

retail and corporate banking requirements. The product is having a market

share of over 60% among the Indian banks. FINACLE was ranked among thetop 3 best selling retail banking systems in the world by IBS. The companys

banking business Unit has consolidated its position in African market, and has

also expanded in the Middle East.


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It is also planning to foray into Business Process Management and a

separate company is being formed. The company also plans to focus

aggressively on mobile commerce (M commerce) in the next few years.

Recently the GOI has raised the investment limit in an Indian Company for

FII from 49% to the maximum level approved under the FDI and the

maximum limit for the software industry as approved by FDI is 100% at

present, the company is in the plan of increasing the limit of such investment

to 100%.

HERO HONDA Automobile Industry

Hero Honda Motorcycles is the Worlds biggest manufacturer of

motorcycles (by quantity). Hero Honda is a 50: 50 Joint venture that began in

1984 between the Hero group of India and Honda from Japan. It has been the

worlds biggest manufacturer of 2 wheeler motorized vehicles since 2001,

when it produced 1.3 million motorbikes in a single year. Hero Hondas

Splendor is the worlds largest selling motorcycle. Its 2 plants are in

Dharuhera and Gurgaon, both in Haryana, India. It specializes in dual use

motorcycles that are low powered but very fuel efficient.

India has the largest number of two wheelers in the world with 41.6

million vehicles. India has a mix of 30 percent automobiles and 70 percent

two wheelers in the country. India was the second largest two wheeler

manufacturer in the world starting in the 1950s with the birth of Automobile

Products of India (API) that manufactured scooters.

The business growth of Hero Honda has been phenomenal

throughout its early days. The Munjal family started a modest busies of


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bicycle components. Hero Group expanded so big that by 2002 they had sold

86 million bicycles producing 16000 bicycles a day.

The hero group also took a venture in other segments like exports,

financial services, information technology, which includes customer response

services and software development. Further expansion is expected in the

areas of Insurance and Telecommunication.

The Hero Groups phenomenal growth is the result of constant

innovations, a close watch on costs and the dynamic leadership of the Group

Chairman, characterized by a culture of entrepreneurship, of right attitudes

and building stronger relationships with investors, partners, vendors and

dealers and customers.

BRITANNIA INDUSTRIES LTD. Food and Food Processing Industry

Food major Britannia Industries (BIL), is one of the leading

producers of biscuits and other bakery products. Group Danone is one of the

leading players in bakery products business. The association with Groupe

Danone has been a good technological support to BIL. The company is

jointly controlled by Groupe Danone of France, which is holding 22% stake.

Britannia enjoys a prominent position in the industry. Over the last couple of

years, it has trimmed down. The company rationalized its products portfolio

by reducing the products from 35 to around 25. In October 1999, the

company has issued bonus shares in the ratio of 1: 2. Britannia is the market

leader in the 1.2 million tone Indian biscuits industry with a 60% share. It


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mainly caters to the premium segment. With the launch of Tiger brand, it has

taken a plunge in the low end category, taking competition head on with

Parle which is the leader in this segment. The company has also diversified

with dairy and bakery products to enter the butter, cheese and ghee markets.

Britannia has built on enviable retail distribution network which services

400,000 retail outlets in 2200 towns with the help of 2,500 distributors. The

company is aggressively expanding its network with a bias towards the rural

market.

In Dec. 2000, Britannia dropped its plans to enter the mineral water

segment. The mineral water segment in India is growing at around 50%

annually and is dominated by Bisleri and Bailey. BIL has acquired the trade

mark KWALITY, the Chef Device and several other trademarks owned by

Kwality Biscuits of Bangalore for a consideration of Rs 30 crore. It has also

agreed in principle to acquire 49% equity of Kwality Biscuits. The

transaction is expected to be completed during the current financial year.

The company has agreed to acquire 49% equity of snako Bisc (P) Ltd.

Along with the trademark NUTRINE in respect of Bakery Product etc. and

several other trademarks along with copyrights and designs. In March 2002,

the Company entered into a joint venture with the Fonterra Cooperative

Group, New Zealand. BIL will be transferring its existing dairy business to

the new joint venture.

MARUTI UDYOG Ltd

Maruti Udyog Ltd. Is one of Indias leading automobile

manufacturers and the market leader in the car segment, both in terms of

volume of vehicles sold and revenue earned? Until recently, 18.28% of the


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company was owned by the government, and 54.2% by Suzuki of Japan. The

Indian government held an initial public offering of 25% of the company in

June of 2003. As of May 10, 2009 govt. of India sold its complete share to

other financial institutions. With this, govt. of India no longer has any stake

in Maruti Udyog.

Maruti Udyog Limited (MUL) was established in February 1981,

though the actual production commenced in 1983. Through 2004, Maruti has

produced over 5 million vehicles. Marutis are sold in India and various

several other counties, depending upon export orders. Cars similar to Marutis

(but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and

other South Asian countries.

The company annually exports more than 30,000 cars and has an

extremely large domestic market in India selling over five hundred thousand

cars annually. Maruti 800, till 2004, was the Indias largest selling compact

car ever since it was launched in 1983. More than a million units of this car

have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.

Due to the large number of Maruti 800s sold in the Indian market,

the term Maruti is commonly used to refer to this compact car model.

HOUSING DEVELOPMENT FINANCE CORPOATION LTD (HDFC)

HDFC Bank one amongst the first of the new generation, tech-savvy

commercial banks of India, was set up in August 1994 after the Reserve Bank

of India allowed setting up the Banks in the private sector. The Bank was

promoted by the Housing Development Finance Corporation Limited, a


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premier housing finance company (Set up in 1977) of India. Net profit for the

year ended March 31, 2009 is Rs 1,141.5 crore (Rs11.41 billion) compared to

Rs. 870.8 crore (8.7 billion) last year. 2008 results press release

Incorporated in Oct, 1977 as public limited company Housing

Development Finance Corporation (HDFC) was promoted by the Industrial

Credit and Investment Corporation of India with initial equity reservation for

the International Finance Corporation (Washington) and his Royal Highness,

the Aga Khan. The corporation provides housing loans to individuals,

corporate and developers. It is also a co coordinator of the coalition of

housing finance institutions in Asia and the Pacific, a public and private sector

partnership project, funded by the United nations Development Program me

(UNDP). The company which has been working closely with National

Housing Bank to frame appropriate foreclosure norms so that securitization of

housing debt is possible.

Currently (2009), HDFC Bank has over 600 branches located in

over 300 cities of India, and all branches of the bank are linked on an online

real time basis. The bank offers many innovative products & services to

individuals, corporate, trust governments, partnerships, financial institutions,

mutual funds and insurance companies. The bank also has over 1600 ATMs.

In the next few months the number of branches and ATMs should go up

subsequently.

ITC LTD Cigarettes Industry

ITC Ltd. A leading FMCG Cigarette major is one of the most

valuable companies of India. Even though ITC is renowned for its cigarette

business it also has business interest in Hotels; Paperboards, Paper&


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packaging; agri exports and some other FMCG products like branded

packaged food, safety matches, Incense Sticks and Greeting Cards etc. Being

the pioneer of 1910, it has diversified its brands across products categories.

Its successful luxury filter brands of its parent company Benson & Hedges and

555. ITC was incorporated on August 24, 1910 under the name of Imperial

Tobacco company of India Limited.

The Company celebrated its 16th birthday on August 24, 1926, by

purchasing the plot of land situated at 37, chowringhee, Kolkata, for the sum

of Rs. 310,000 This decision of the company was historic in more ways than

one. It was to mark the beginning of a long and eventful journey into Indias

future. The companys headquarters building, Virginia House, which came

up on that plot of land two years later, would go on to become one of

Kolkatas most venerated landmarks.

The Companys ownership progressively Indianised, and the name

of the Company was changed to I.T.C Limited in 1974. Currently British

American Tobacco Company (UK) controls 31.7% equity stake in ITC.

Though the first six decades of the Companys existence were primarily

devoted to the growth and consolidation of the Cigarettes and Leaf tobacco

business, the seventies witnessed the beginnings of a corporate transformation

that would usher in momentous changes in the life of the company.

The companys technology, productivity, quality and manufacturing

processes are comparable to the best in the world. The company has recently

forayed into lifestyle retailing business with its launch of Wills range of

casual and formal wear products. It has also spun off its Information

Technology business into a wholly owned subsidiary to more aggressively


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pursue emerging opportunities. ITC is one of the largest exporters of Indian

agri commodities.

At Canada, Tikaria and Madhukkarai were commissioned during

the year 2002 03. In 2000, Tata group has exited from the company by

divesting their 14% equity.

HINDUSTAN LEVER LTD (HLL) Diversified Industry

Three subsidiaries, Vanaspati Manufacturing company (HVM),

Lever Brothers India Limited (LBIL), United Traders Limited (UTL) merged

to form Hindustan Lever Ltd. (HLL) 1958 Hindustan Lever Research Centre

started functioning.

HLL has achieved market leadership in soaps and detergents as well

as hair and skin care products and is the second largest manufacturer of dentalcare products. HLL is also market leader in tea, processed coffee, ice cream

and frozen desserts, tomato based products, jams and quashes.

HLL has over 36,000 employees, and has created 2 lakh indirect

jobs. Its operations are spread across 70 locations in India. There are over 50

factories, of which 28 are in backward areas. The operations involve 2000

suppliers and associates and 7000 stockiest and agent. In addition to gaining

leadership in Indian market, HLL has emerged as a major exporter. Its is a

Super Star Trading House, an honor that only seven Indian companies enjoy.

With a portfolio of soaps, detergents, tea, tomato bases products, cosmetic,


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agri products, leather products and marine products, HLLs exports turnover

in the year 2000 was Rs 1800 crores.

International Best foods (IBF) are amalgamated with the company.

As per the scheme of amalgamation two equity shares of HLL is allotted for

every three equity shares of IBF. The company has signed an agreement with

ICI India, a subsidiary of ICI plc, UK, for sale of Nickel Catalyst business and

Adhesives business, a sub unit of specialty chemicals Divisions of the

companys Chemicals and Agri operations for a consideration of Rs. 21 crore

and Rs 9 crores respectively. The company has expanded the installed

capacity of Soaps during the year 2002-03 by 5822 tonnes taking the total

capacity to 219416 tonnes. Expansion has also went on during 2002-03 in

respect of personal products by 13961 (total capacity 87920 tonnes ) tonnes,

Glycerine by 666 tonnes ( total capacity 6655 tonnes ) and Fatty acids by 4167

tonnes ( total capacity 48333 tonnes).

BHEL BHARAT HEAVY ELECTRICALS LTD.

BHEL is the largest engineering and manufacturing enterprise in

India in the energy related /infrastructure sector, today. BHEL was

established more than 40 years ago, ushering in the indigenous Heavy

Electrical Equipment industry in India a dream that has been more than

realized with a well recognized track record of performance. The company

has been earning profits continuously since 1971 72 and playing dividends

since 1976 77.


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BHEL manufactures over 180 products under 30 major product

groups and caters to core sectors of the Indian Economy Viz., Power

Generation & Transmission, Industry, Transportation, Telecommunication,

Renewable Energy, etc. The wide network of BHELs 14 manufacturing

divisions, four power sector regional centers, over 100 project sites, eight

service centers and 18 regional offices, enables the company to promptly

serve its customers and provide them with suitable products, systems and

services efficiently and at competitive prices. The high level of quality &

reliability of its products is due to the emphasis on design, engineering and

manufacturing to international standards by acquiring and adapting some of

the best technologies from leading companies in the world, together with

technologies developed in its own R & D centers.

BHEL has acquired certifications to Quality Management Systems

(ISO 9001), Environmental Management Systems (ISO 14001) and

Occupational health & Safety Management Systems (OHSAS 18001) and is

also well on its journey towards Total Quality Management.

BHELs operations are organized around three business sectors,

namely power, industry including transmission, Transportation,

Telecommunication & Renewable Energy and Overseas Business. This

enables BHEL to have a strong customer orientation, to be sensitive to his

needs and respond quickly to the changes in the market.

The greatest strength of BHEL is its highly skilled and committed

42,600 employees. Every employee is given an equal opportunity to develop

himself and grow in his career. Continuous training and retraining, career

planning, a positive work culture and participative style of management all


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companys client base consists of around 280 large customers connected with

a load of 500 mw.

TEC have Hydel plants at Bhira, Bhivpuri and Khopoli, and thermal

power plant at Trombay. The Total capacity is 1778mw. A combination of

hydel and thermal enables TEC to charge lower tariff to clients, since the

variables cost of generating hydel power is only a small fraction of the cost of

thermal. TEC have highly depreciated old plants and hence it is investing in

modernization. It incurs low T & D loses due to few customers and lower risk

of theft and pilferage among HT users. In FY 2000, the companys T & D

losses stood at 2.17% which is lowest in the country.

The CAGR of the company for the past ten years stands at 14% with

most of plants of the company almost fully utilized; the incremental revenues

are coming from R & M. The company is also aggressive on adding

additional capacities in and out of Mumbai. However, lower off take by

BSES after the commissioning of the Dahanu plant has also led to a marginal

decline in sales volumes.

VIDESH SANCHAR NIGHAM LIMITED (VSNL)

Videsh Sanchar Nigma Ltd is a global Indian Telecommunications

Company. VSNL is a provider of international wholesale voice services, and

a wholesale voice over Internet protocol provider. VSNL was Indias sole

telecom carrier for international calls unit 2002. While domestic calls are

carried by Mahanagar Telephone Nigam Limited (MTNL) Bharat Sanchar

Nigam Limited (BSNL) and private companies, international calls were routed

through VSNL. It also provided bandwidth for Internet service providers.


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In 2002 the Indian Government privatized VSNL. The Tata Group

group acquired a controlling stake in VSNL and the government holds a

minority stake. The Indian government owns approximately 26 percent of

VSNLs equity and the Tata Group about 45 percent. The balance is held

between various overseas equity holders, including ADR holders, Indian,

institutions and the Indian public.

The company offers its products and services under the brand name

Tata Indicom in India. The company stock is now traded on the Bombay

Stock Exchange and also trades in the United States as an American

Depository Receipt (ADR) under the ticker symbol VSL. Revenues for the

financial year 2006 stood at approximately US $1.03 billion.

Videsh Sanchar Nigam Ltd. (VSNL) is no longer the sole provider of

international log distance services in India. The lucrative monopoly once

provided about 90% of the companys sales. VSNL is the countrys leading

ISP, although its share of that market is decreasing, too. VSNL hopes to enter

the domestic long distance phone market, and it is building up its network

infrastructure. Before opening the international long distance market to

competition, the government of India sold a 25% stake in VSNl, with

management control, to the Tata conglomerate in 2002. VSNL is buying a

stake in fixed line operator Tata Teleservices. The government still owns

about 26% of VSNL; a unit of the Tata Group owns 46%.

BAJAJ AUTO LTD

Bajaj Auto is a major Indian automobile manufacturer. It is Indias

largest and the worlds 4the largest two and three wheeler maker. It is based

in Pune, Maharashtra, with plants in Waluj near Aurangabad, Akurdi and


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Chakan, near Pune. Bajaj Auto makes and exports motor scooters,

motorcycles and the auto rickshaw. It is widely believed that Bajaj is headed

for a de merger into 2 separate companies; Bajaj Auto and Bajaj Finance. It

is expected that sum of the parts created, will be worth more than the current

whole, as was the case in the de merger of Reliance Industries.

Bajaj Auto came into existence on November 29, 1945 as M/s

Bachraj Trading Corporation Private Limited. It started off by selling

imported two and three wheelers in India. In 1959, it obtained license from

the Government of India to manufacture tow and three wheelers and it went

public in 1960. In 1970, it rolled out its 100,000 vehicle. In 1977, it managed

to produce and sell 1000,000 vehicles in single financial year. In 1985, it

started producing at Waluj in Aurangabad. In 1986, it managed to produce

and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its

ten millionth vehicles and produced and sold 1 million vehicles in a year.

The company over the last decade has successfully changed its image

from a scooter manufacturer to a two wheeler manufacturer, product range

ranging from scooter to scooter to Motorcycle. Its real growth in numbers has

come in the last 4 years after successful introduction of a few models in the

motorcycle segment.

The company is headed by Rahul Bajaj who is worth more than US $

1.5 billion

OIL AND NATURAL GAS CORPORATION LIMITED


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Oil and Natural Gas Corporation Limited (ONGC) (incorporated on

June 23, 1993) is a public sector petroleum company based in Dehradun,

India. It is a Fortune Global 500 company, and contributes 77% of Indias

crude oil production and 81% of Indias natural gas production. It is the

highest profit making corporation in India. It was set up as commission on

August 14, 1956. Indian government holds 74.14% equity stake in this

company.

ONGC is engaged in exploration and production activities. It is

involved in exploring and exploiting hydrocarbons in 26 sedimentary basins

of India. It produces about 30% of Indias crude oil. It owns and operates

more than 11,000 kilometers of pipelines in India. Until recently (march

2009) it was the largest company in terms of market cap in India.

RANBAXY LABORATORIES LTD Pharmaceuticals industry

Incorporated in Jun61 as a private limited company, Ranbaxy

Laboratories (RLL) manufactures and markets pharmaceutical dosage forms

(for human health care), animal health care products, bulk drugs and

intermediates, diagnostics, laboratory chemicals and reagents. It is the largest

exporter of bulk drugs and pharmaceutical dosage forms in India. For several

years, it has consistently been winning export awards, the last one being the

top Trishul award form CHEMEXCIL in Nov 92.RILL has three successful

overseas joint ventures in Nigeria, Malaysia and Thailand. A joint venture

incorporated in India with Eli Lilly a leading original research company in

pharmaceuticals was began its operations.


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Fortune Global 500 company and is the largest private sector company in

India.

Backward vertical integration has been the cornerstone of the

evolution and growth of Reliance. Starting with textiles in the late seventies,

Reliance pursued a strategy of backward vertical integration in polyester,

fibre intermediates, plastics, petrochemicals, petroleum refining and oil and

gas exploration and production - to be fully integrated along the materials and

energy value chain.

The Groups activities span exploration and production of oil and

gas, petroleum refining and marketing petrochemicals (polyester, fibre,

intermediates, plastics and chemicals), textiles and retail. Reliance enjoy

global leadership in its businesses, being the largest polyester yarn and fibre

producer in the world and among the top five to ten producers in the world in

major petrochemical products.

The Group exports products in excess of USD 7 billion to more than

100 countries in the world. There are more than 25000 employees on the rolls

of Group companies. Major Group Companies are Reliance Industries Limited

(including main subsidiaries Reliance Petroleum Limited and Reliance Retail

Limited), Indian Petrochemicals Corporation limited and Reliance Industrial

Infrastructure Limited

Tata Iron and Steel Company Limited

Tata Steel, Formerly known as TISCO (Tata Iron and Steel Company

Limited) is a steel company based in Jamshedpur, India.


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Its main plant is located in Jamshedpur, Jharkhand, though with its

recent acquisitions, the company has become a multinational with operations

in various countries. The registered office of Tata Steel is in Mumbai. In the

year 2000, the company was recognized as the worlds lowest-cost producer

of steel. The company was also recognized as the worlds best steel producer

by World Steel Dynamics in 2005. The company is listed on BSE NSE.

Tata Steel annually produces 9 million tones of steel. Its turnover in

fiscal year 2007-08 was Rs. 17,144 crores (consolidated turnover was 22,518

crores).

The companys operating profit (PBT) in the same year was Rs. 5932

crores while its PAT was Rs. 3734.62 crores; it produced a record-breaking

5.0 million tones of salable steel in its Jamshedpur works that year.

Tata steel rapidly expanding its production capacity and plans to

produce 100 MTPA (million tones of steel per annum) by 2015. It acquired

Singapores NatSteel in August 2004, which added 2 million tones to its

installed annual capacity. Tata augmented its steel making capacity in

Jamshedpur by 1 MTPA in September 2005. In February 2005, Tata Steel

acquired the steel-making operations of Singapores NatSteel Ltd., winning

access to its operations in seven countries, including two steel processing

plants in China and capacity addition of 2.0 MTPA. In the same year it

acquired Thailands Millennium Steel PCL that also had a capacity of 1.7

million tones p.a. In March 2008, it acquired two steel making units in

Vietnam through its subsidiary NatSteel Asia, thereby inching forward to take

4th spot in world steel companies ranking.


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Mahindra and Mahindra Limited

Tech Mahindra Ltd. (tech M) formerly known as a Mahindra British

Telecom (MBT) is a joint venture between Mahindra and Mahindra Limited

(M&M) and British Telecommunications Plc (BT), UK with M&M holding

57% and BT holding 43% of equity. Tech Mahindra has its headquarters at

Pune, India. Tech Mahindra commenced operations as a Software Services

company in 1988 and focuses on providing services to the global telecom

industry. Today it is the leading telecom solution provider in India. Tech

Mahindra Limited (formerly known a Mahindra-British Telecom Limited) is

the global leader in providing end-to-end IT services and solutions to the

Telecom industry. Over 18000 professionals services clients across various

telecom segments, from multiple offshore development centers across 7 cities

in India and UK and 13 sales offices across Americas, Europe and Asia-

Pacific.

Having serviced premium telecom companies worldwide, for nearly

two decades, Tech Mahindra combines deep domain expertise in OSS

(Operations Support Systems) and BSS (Business Support Systems) Systems,

Intellectual leadership and a global workforce advantage to provide services to

leading players in the telecom ecosystem. Tech Mahindra provides a wide

variety of services ranging from IT strategy and consulting to system

integration, design, application development, implementation, maintenance

and product engineering. Through a rich Telecom heritage, Tech Mahindra


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has built long-term sustainable relationships with telecom customers through

delivery of IT services that help them achieve significant ROI and the greatest

competitive advantage in the telecom marketplace.

Committed to quality, Tech Mahindra adds value to client businesses

through well-established methodologies, tools and techniques backed by its

stringent quality processes. Tech Mahindra is ISO 9001:2000 certified and is

also assessed at SEI-CMMi Level 5 and SEI-PCMMi Level 5. Tech Mahindra

is also BS7799 Certified.

Majority owned by Mahindra & Mahindra, Indias fifth largest

commercial group, in partnership with BT Plc (BT), Europes second largest

telecom service provider, Tech Mahindra has grown rapidly to becom the 8th

largest software exporter in India (Nasscom 2005).

WIPRO COMPUER Software Industry

Wipro commenced operations as an agro based industry and is now

a diversified, integrated company in information technology, Finance,

Insurance, Banking Manufacturing, Healthcare, Retail, Utilities, Telecom,

Datacom.

Wipro Technologies is an IT service company established in 1980 in

India. It is a subsidiary Wipro Limited (incorporated 1946, in operation since

1945). It is headquartered in Bangalore. It is the third largest IT service

company in India. It has 68000 employees as of Apr 2009, inclusive of its

BPO arm which it acquired in 2002.


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Wipro Technologies has over 300 customers across USA, Europe

and Japan including 50 of the Fortune 500 companies. Some of its customers

are Boeing, Cisco, Ericsson, IBM, Microsoft, Prudential, Seagate, Sony, Sun

Microsystems and Toshiba.sss It is listed on the New York Stock Exchange

and it is part of its TMT (Technology media telecom) index.

With revenue in the excess of US $ 3 billion, Wipro is one of India

major information technology companies. Wipro has dedicated development

centres and offices across India, Europe, North America and Asia Pacific.

Wipro is providing services of IT & IS consulting for E business

Transformation, electric Commerce, Web Enabling, ERP, Data Warehousing

and Customer Relationship Management. It has entered into a financial joint

venture with Bickman Instrumental, US; to form Wipro began to manufacture

bio-analytical instruments in India. Wipro Lighting is a major diversification

of Wipro, manufacturing and marketing lighting products for households and

the commercial and industrial markets.

Wipro has set up an overseas design centre, Odyssey 21 for

undertaking projects and product developments in advanced technologies for

overseas clients. Five of Wipros manufacturing and development facilities

secured the ISO 9001 certification during 1994-95. Wipro Info Tech and

Wipro systems were amalgamated with Wipro in Apr. 94. Wipro Info Tech

spun off its peripherals services division in to new legal entity, Wipro e

peripherals Sep 2000. In Feb, 2001, Wipro became the first software

technology and Services Company in India to be certified for ISO 14001

certification for complying with three major software development and

technology centers in Bangalore. The company has strong software


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engineering processes & also achieved ISO 9000 certification. Wipro is the

first software company to get SEI Level 5 & also implemented Six Sigma

TQM practices of software projects and support functions.

The Company also has reached an agreement to purchase the equity

interest in Netkracker Limited held by venture capital funds of ICICI group

for a total consideration of Rs 30 million. Consequent to the purchase of

equity interest, Netkracker becomes a subsidiary of the company. The Fluid

Power business and Netkracker will be combined and renamed as Wipro Fluid

Power Limited.

TATA CONSULTANCY SERVICE LIMITED

Tata consultancy Services Limited (TCS Limited) is an Indian

information technology, consulting, services and business process

outsourcing organization which commenced operations in 1968. As of 2008.

It is Asias largest IT services firm with annualized revenues of over US $ 4

billion and has the largest number of employees among all the Indian IT

companies with strength of over 95,000 for fiscal year 2005 06, it posted a

net profit of Rs. 3,709 crore.

TCS is part of one of Asias largest conglomerates and most

respected groups, the Tata Group, which has interest in areas such as energy,

telecommunication, financial services, chemicals, engineering and materials.

TCS has proved its ability to compete with global giants like IBM

and Accenture by being a joint contractor in the ABN Amro deal, one of the

biggest outsourcing deals in Europe worth 1.8bn ($ 2.2bn). Through this deal

TCS has caught the attention of top InfoTech companies of the world.


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TCS is trying hard to move up the value chain by expanding services

offerings, deepening domain expertise, adding new vertical segments, and

broadening its client base. TCS finds it challenging to differentiate with other

Indians IT companies as well who are largely alike in service offerings,

pricing, workforce quality, skill set, execution delivery, and client servicing.

As the size and complexity of the projects increase, TCS will be required to

take more risks. For the larger deals it will have to compete with the top

global players.


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ANALYSIS AND INTERPRETATION FOR DATA

Intelligent investing is about how effectively investors are able to

balance their risk and return. Since risk is commensurate with return,

achieving investment goal would mean earning the maximum possible

investment income (return) within the level of risk acceptable to them.

The finance theory does offer a free lunch: the reduction in risk that

obtainable through diversification. An investor who spreads the wealth

among many investments can reduce the volatility of the portfolio, provided

only that the underlying investments are imperfectly correlated.

Diversification is a lunch that has not only remained free, but has grown

more lavish over the years. While many investors may wish to take active

positions on the basis of their own opinions and information, all investors

should carefully consider the extra risk that is involved in small concentrated

portfolios.

4.1 PORTFOLIO THEORY

HENRY MARKOWITZ laid the foundation to the portfolio theory in

1951. He began with a simple observation that since almost all investors

invest in several securities rather than just one, there must one some benefit

from investing in a portfolio of several securities. Defining the variability of

return as an appropriate measure of risk of a portfolio, he provided

justification for diversification of investment. He showed that in general,

investing in several securities would reduce the variability of returns and

hence the riskiness of a portfolio.


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4.2.1 ALTERNATIVE MEASURE OF RISK

One of the best known measures of risk is the variance or standard

deviation of expected return. It is a statistical measure of the dispersion of

returns around the expected value whereby a larger variance or standard

deviation indicate greater dispersion

Although there are numerous potential measures of risk, we will use the

variance or standard deviation of return because

The measure is somewhat intuitive

It is a correct and widely recognized measure

It is used in most of the theoretical asset pricing models.

4.2.2 PORTFOLIO RISK

Just as the individual investment is measured by the variance of itsreturn, the risk of the portfolio too is measured by the variance of its return.

4.3 DEFINITION OF RETURN

The rate of return on an investment for a period (say one year) is defined as

follows

Rate of Return = annual income + (ending price beginning price)

Beginning price


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4.4.1 THE IMPACT OF DIVERSIFICATION

Diversification reduces the unsystematic risk. As is explained in

portfolio theory, one can reduce risk by adding stocks in a portfolio. If the

rates of return of individual securities are not perfectly positively correlated,

diversification results in risk reduction. Empirical studies have shown that

high benefits of diversification are obtained by forming a portfolio of 10-15

securities thereafter gains of diversification are negligible.

As explained earlier, each individual stock price movement is a

combination of stock related events and events affecting overall economy, or

market. With diversification, events relating to individual stocks tend to

cancel each other and one is left with only events common to the entire

economy. Hence the risk captured in index is systematic risk of market risk.

4.4.2 DIVERSIFICATION IN STOCKS

Diversification offers investors a way to reduce risk. It is possible to

have a diversified portfolio of

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