SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE . DEPARTMENT OF MANAGEMENT STUDIES.

INTERIM REPORT ON

PORTFOLIO MANAGEMENT

SUBMITTED BY: JEETENDRA.V. SINGH

DATE: 28TH MAY, 2012

SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

TABLE OF CONTENTS

Company overview. Acknowledgement. Introduction. Meaning. Facts about portfolio. Strategy. Bibliography Conclusion

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SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

COMPANY OVERVIEW ADITYA BIRLA FINANCIAL LIMITED

Aditya Birla Finance Ltd. (ABFL), formerly known as Birla Global Finance, is one of India's leading non-banking financial companies (NBFCs) since 1991. The company has obtained credit rating(s) viz. for short term A1+ by ICRA, for long term (ICRA) AA/Stable and for sub debt (ICRA) AA/Stable and (CARE) AA. ABFL offers specialized solutions in areas of Capital Markets, Corporate Finance and Project Finance. It is one of the largest players in security based lending and the pioneer of IPO Financing in India. Aditya Birla Finance is a part of Aditya Birla Financial Services Group.

SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

ACKNOWLEDGEMENT

I would like to express my sincere thanks to MR NIKESH RUPAREL for helping and guiding me in mine project. For providing me the necessary information and details and removing time from his busy schedule. I would like to thank Aditya Birla financials limited for allowing me to work as an intern and providing me an opportunity to interact with workers and employees.

SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

INTRODUCTION OF PORTFOLIO MANAGEMENT: A Portfolio Management refers to the science of analyzing the strengths, weaknesses, opportunities and threats for performing wide range of activities related to the ones portfolio for maximizing the return at a given risk. It helps in making selection of Debt vs. Equity, Growth vs. Safety, and various other tradeoffs. Major tasks involved with Portfolio Management are as follows.

Taking decisions about investment mix and policy Matching investments to objectives Asset allocation for individuals and institution Balancing risk against performance There are basically two types of portfolio management in case of mutual and exchange-traded funds including passive and active.

Passive management involves tracking of the market index or index investing. Active management involves active management of a funds portfolio by manager or team of managers who take research based investment decisions and decisions on individual holdings. Portfolio: In terms of mutual fund industry, a portfolio is built by buying additional bonds, mutual funds, stocks, or other investments. If a person owns more than one security, he has an investment portfolio. The main target of the portfolio owner is to increase value of portfolio by selecting investments that yield good returns.

SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

As per the modern portfolio theory, a diversified portfolio that includes different types or classes of securities; reduces the investment risk. It is because any one of the security may yield strong returns in any economic climate. Facts about Portfolio

There are many investment vehicles in a portfolio. Building a portfolio involves making wide range of decisions regarding buying or selling of stocks, bonds, or other financial instruments. Also, one needs to make decision regarding the quantity and timing of the buy and sell. Portfolio Management is goal-driven and target oriented. There are inherent risks involved in the managing a portfolio. The basics and ideas of Investment Portfolio Management are also applied to portfolio management in other industry sectors. Application Portfolio Management: It involves management of complete group or subset of software applications in a portfolio. These applications are considered as investments as they involve development (or acquisition) costs and maintenance costs. The decisions regarding making investments in modifying the existing application or purchasing new software applications make up an important part of application portfolio management. Product Portfolio Management: The product portfolio management involves grouping of major products that are developed and sold by businesses into (logical) portfolios. These products are organized according to major line-of-business or business segment. The management team actively manages the product portfolios by taking decisions regarding the development of new products, modifying existing products or
SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

discontinues any other products. The addition of new products helps in diversifying the investments and investment risks. Project Portfolio Management: It is also referred as an initiative portfolio management where initiative portfolio involves a defined beginning and end; precise and limited collection of desired results or work products; and management team for executing the initiative and utilizing the resources. A number of initiatives that supports a product, product line or business segment, are grouped into a portfolio by managers.

Diversification of the assets in the portfolio is widely used tool used by financial planners, fund managers and individual investors. The markets are usually very dynamic and it is impossible to predict the exact movement of the indexes. In such conditions, diversified portfolio plays an important role in minimizing the risks and maximizing the profits. Investors should practice disciplined investing along with a diversified portfolio. The diversification of portfolio is a prerequisite to receive good returns from the market in the long run. Due to fluctuations in the market, investors may lose about 80% in the market before reacting to the situation. Thus, Investors can rely on the diversification as a suitable offense for best defense. Generally, a well-diversified portfolio along with an investment horizon for a time period of three to five years can survive major upheavals in the markets. Investing can be rewarding, informative and educational; if one follows the below mentioned steps. Disciplined approach Using diversification Buy-and-hold Dollar-cost-averaging strategies

SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

Spreading out the investments Investors should invest in the equities as they provide great returns, however it is strictly advised to not put all of your money in the investments of one stock or specified sector. It is recommended that investor should create his/her own virtual mutual fund by making investments in few companies that are doing well and trustworthy. It is good to make the investments in the companies you know well or whose goods and services you use. It is a good way of making healthy approach to one sector. Invest in Index or Bond Funds As an investor you should consider adding fixed-income funds or index funds to your portfolio. One of the excellent ways for long-term diversification investment is to invest in securities that track various indexes. Another way of further hedging your portfolio against market uncertainties is to add some fixed-income solutions. Continue Building your portfolio It is important to keep adding investments on a standard regular basis and grow your portfolio. One should avoid investing the Lump-sum amount in volatile or uncertain market conditions. This strategy of investing helps in smoothing out the peaks and valleys produced by volatile market conditions. Thus, as an investor, one should invest money regularly into a specified portfolio of funds/stocks.

Aware of the time to Exit It is mandatory for a smart investor to know when to exit the market. Some of the sound strategies of managing portfolios are dollar-cost averaging, purchasing, and holding. One should not ignore the fact that time to exit the market is very crucial for remaining in tune with market conditions and staying current with the market investments. One should know the current happenings in the companies you have invested in. Be alert regarding your commissions

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In case, you are not a trader, you should comprehend what you are receiving by paying fees to the firms for managing your portfolio. There are some firms that charges monthly fees while others charge transactional fees. One should be aware of the payments you are making and returns you are receiving. Portfolio Management Strategies refer to the approaches that are applied for the efficient portfolio management in order to generate the highest possible returns at lowest possible risks. There are two basic approaches for portfolio management including Active Portfolio Management Strategy and Passive Portfolio Management Strategy. Active Portfolio Management Strategy The Active portfolio management relies on the fact that particular style of analysis or management can generate returns that can beat the market. It involves higher than average costs and it stresses on taking advantage of market inefficiencies. It is implemented by the advices of analysts and managers who analyze and evaluate market for the presence of inefficiencies. The active management approach of the portfolio management involves the following styles of the stock selection. Top-down Approach: In this approach, managers observe the market as a whole and decide about the industries and sectors that are expected to perform well in the ongoing economic cycle. After the decision is made on the sectors, the specific stocks are selected on the basis of companies that are expected to perform well in that particular sector. Bottom-up: In this approach, the market conditions and expected trends are ignored and the evaluations of the companies are based on the strength of their product pipeline, financial statements, or any other criteria. It stresses the fact that strong companies perform well irrespective of the prevailing market or economic conditions. Passive Portfolio Management Strategy

SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

Passive asset management relies on the fact that markets are efficient and it is not possible to beat the market returns regularly over time and best returns are obtained from the low cost investments kept for the long term. The passive management approach of the portfolio management involves the following styles of the stock selection. Efficient market theory: This theory relies on the fact that the information that affects the markets is immediately available and processed by all investors. Thus, such information is always considered in evaluation of the market prices. The portfolio managers who follows this theory, firmly believes that market averages cannot be beaten consistently. Indexing: According to this theory, the index funds are used for taking the advantages of efficient market theory and for creating a portfolio that impersonate a specific index. The index funds can offer benefits over the actively managed funds because they have lower than average expense ratios and transaction costs. Apart from Active and Passive Portfolio Management Strategies, there are three more kinds of portfolios including Patient Portfolio, Aggressive Portfolio and Conservative Portfolio. Patient Portfolio: This type of portfolio involves making investments in wellknown stocks. The investors buy and hold stocks for longer periods. In this portfolio, the majority of the stocks represent companies that have classic growth and those expected to generate higher earnings on a regular basis irrespective of financial conditions. Aggressive Portfolio: This type of portfolio involves making investments in expensive stocks that provide good returns and big rewards along with carrying big risks. This portfolio is a collection of stocks of companies of different sizes that are rapidly growing and expected to generate rapid annual earnings growth over the next few years. Conservative Portfolio: This type of portfolio involves the collection of stocks after carefully observing the market returns, earnings growth and consistent dividend history.

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Activities of Portfolio management Creating a product strategy including products, strategy approach, markets, customers, competitive emphasis, etc Understanding the budget or resources available for balancing the portfolio Assessment of project for investment requirements, risks, profitability and other suitable factors The portfolio management techniques must be used for the proper balance of following goals Risk vs. profitability New products vs Improvements Strategy fit vs Reward Market vs Product line Long-term vs short-term Initially, the Portfolio Management techniques are used for optimizing the financial returns or projects profitability by applying heuristic or mathematical models. However, this approach fails to address the need to balance the portfolio as per the organizations strategy. Later, Scoring techniques came into picture when these are used for weighting and scoring criteria for considering factors such as profitability, risk, investment requirements, and strategic alignment. The drawbacks of these techniques include inability to optimize the mix of projects and over emphasis on financial measures. Mapping techniques are widely used for visualizing a portfolios balance by graphical presentation in the form of a twodimensional (2 D) graph that displays balance between two factors as mentioned below.

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 Marketplace fit vs. product line coverage Risks vs. profitability Financial return vs. probability of success The development of new product needs significant investments and Portfolio Management has become widely used tool for making strategic decisions regarding the product development and the investment of company resources. The revenues are based increasingly on new products that are developed during last one to three years. Therefore, the companys profitability and its continued existence depend on the portfolio decisions.

Strategies for Constructing the Portfolio Quantitative measures like price/earnings ratio (P/E ratios) and PEG ratios Sector investments that are expected to deliver long-term macroeconomic trends Buying stocks of companies that are disliked temporarily Selling at a discount of their intrinsic value Merger arbitrage Short positions Option writing Asset allocation

BIBLIOGRAPHY. www.adityabirla.com.
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SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)

CONCLUSION

With the help of given project I got an in-depth knowledge about the working of portfolio management. Also I got an insight as too how to invest in portfolio management, which scheme provide better return as compared to other and who are the portfolio market.I t c a n b e c o n c l u d e d f r o m t h e p r o j e c t t h a t f u t u r e o f p o r t f o l i o management is bright provide d p r o p e r r e g u l a t i o n s p r e v a i l a n d investors needs are satisfied by providing variety of schemes. The interest of investors is protected by SEBI. Portfolio management is governed by SEBI Act. Due to the benefits available to the individuals in risk etc. Expert professional management, diversified p o r t f o l i o s , t a x benefits etc. young generation (i.e. age group bet. 18-30) is willing to invest in different investment avenues through portfolio manager Through mutual funds which are again m a n a g e d b y p o r t f o l i o ma n a g e r s . On t h e o t h e r h a n d , a g e g r o u p o f 6 0 & a b o v e a r e l e a s t interested in making investment in different avenues through portfolio managers. They believe in investing and managing their portfolio on their own. Ho we v e r , i t c a n b e s a i d t h a t t h e f u t u r e o f p o r t f o l i o m a n a g e me n t i s bright in years to come. T &

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SHAH AND ANCHOR KUTCHHI ENGINEERING COLLEGE (DOMS)