A REPORT ON

“PORTFOLIO MANAGEMENT”

(M-207) Seminar on Contemporary Issues in Management

Submitted to

Rajasthan Technical University, Kota

In Partial fulfillment of the requirement for the award of the degree of

Master of Business Administration (2009-11)

Supervised by: Submitted by:

Dr. Amit Sharma Ms. Harsha Hemnani

Lecturer MBA II SEM

FACULTY OF MANAGEMENT STUDIES

GOVT. ENGINEERING COLLEGE, AJMER

1
 GOVT. ENGINEERING COLLEGE, AJMER
(An Autonomous Institution of Govt. of Rajasthan)

Barliya Chouraha, National Highway - 8, Ajmer – 305025

Tel. (145) 2671800 Fax (145) 2671801 Website: www.ecajmer.ac.in

CERTIFICATE

This is to certify that Seminar Report entitled “Portfolio Management”

submitted by Ms. Harsha Hemnani of MBA Semester - II in partial fulfillment

of the requirement for the award of Master of Business Administration has

been completed under my supervision.

To the best of my knowledge and belief, this study is the original work of the

candidate and has been completed by her own efforts. I am satisfied with

the work and recommend for its acceptance.

I wish her success in her future endeavors.

(Dr. Amit Sharma)

Lecturer,

Faculty of Management Studies

2
 Acknowledgement

On the eve of completion and submission of project I

would like to express my deep sense of gratitude to our
Management Institute and Rajasthan Technical University
for providing me Platform of management studies.
I am immensely thankful to my guide Dr. Amit Sharma
(Lecturer, MBA Department) for providing me great
insight into the project and for sparing his valuable time
with me. Without his co-operation it was impossible to
reach up to this stage. I am also thankful to Faculty
members for their moral support during the project.
At last, my sincere regards to my parents and friends who
have directly or indirectly helped me in the project.
Without their inspiration and support I would not have
been where I am.

3
 EXECUTIVE SUMMARY

Portfolio management in common refers to the

selection of securities and their continuous shifting in
the portfolio to optimize returns to suit the objectives
of an investor. In India, as well as in a number of
western countries, portfolio management service has
assumed the role of a specialized service now a days
and a number of professional merchant bankers
compete aggressively to provide the best to high net
worth clients, who have little time to manage their
investments. The idea is catching on with the boom in
the capital market and an increasing number of people
are inclined to make profits out of their hard-earned
savings. Portfolio management service is one of the
merchant banking activities recognized by Securities
and Exchange Board of India (SEBI).

4
Topics Page
No.
• Acknowledgement 03
• Executive Summary 04
• Objectives of the study 05
Chapter – I
• Introduction of Portfolio Management
• Scope of Portfolio Management 06-11
• Objective of Portfolio Management
• Basic Principles of Portfolio Management

Chapter – II
• Activities –
- Saving 12-15
- Investment

Chapter – III
• Significance of Investment
• Objective of Investment 16-18
• Function of Investment

Chapter – IV
• Process 19-22
• Investment Alternatives
Chapter – V

• Risk & Return

• Involved 23-36
• Investment Decision

• Theories & Techniques

• Highlights 37
• Conclusion 38

5
 39
• Bibliography

PORTFOLIO
MANAGEMENT

Chapter - I

INTRODUCTION

Portfolio Management is a study of different kinds of

investments and how they can be selected and combined
to bring about a good return to an investor. There is a
wide variety of securities which are available. An investor
has to choose his investments carefully to suit his risk
profile. Investments decision can be made wisely after
understanding the investment environment. It discusses
the basic concepts of investment and distinguishes it
from speculation, gambling, and also provides its
meaning and significance in the Indian Financial System.

6
When a single security is analyzed it is called security
analysis. If securities are combined to blend together and
give maximum returns it is called Portfolio Management.

SCOPE OF THE SUBJECT

Portfolio Management covers the investment

environment. It is the study of different kind of
investment alternatives like company shares, debentures,
bonds, hybrid securities, post office schemes, mutual
fund investments, insurance schemes, provident fund and
real estate.

The scope of the study extends to knowledge of the

functioning of capital markets, financial institutions,
banks, financial services, and market regulators. It is
focused on investments for a long-term period of time.
The study of this subject extends to the different financial
markets especially the new issue market and the stock
market.

7
Portfolio management provides techniques for evaluation
of the different investment through discounting and
compounding techniques and calculation of yields.

Every return on investments is surrounded by risks, which

are both systematic and non-systematic in nature.
Therefore, a study of risk provides a solution for making
good investments.

The techniques of portfolio management are analyzed to

help in making the investments. In this perspective the
scope of this subject extends to the contributions of Harry
Markowitz and William Sharpe, which have offered
theories to an understanding of the subject.

Finally, the approach to these techniques is made

through the different approaches of investments such as
fundamental analysis, technical analysis, and efficient
market theories. To summarize the scope of this subject
consists of the following:

 Analysis of a single security and combination of

securities to form a portfolio.

8
  Systematic and non-systematic risks influencing
investment decisions.

 A study of the new issue market and stock market

and trading practices.

 Features of different securities and their valuation

techniques.

 The role of the market regulators.

 Theories and approaches to portfolio management.

OBJECTIVES OF PORTFOLIO
MANAGEMENT

 Keep the security, safety of Principal sum intact both in

terms of money as well as its purchasing power.
 Stability of the flow of income so as to facilitate
planning more accurately and systematically the re-
investment or consumption of income.
 To attain capital growth by re-investing in growth
securities or through purchase of growth securities.
 Marketability of the security which is essential for
providing flexibility to investment portfolio.

9
 Liquidity i.e. nearness to money which is desirable for
the investor so as to take advantage of attractive
opportunities upcoming in the market.
 Diversification: The basic objective of building a
portfolio is to reduce the risk of loss of capital and
income by investing in various types of securities and
over a wide range of industries.
 Favorable tax status: The effective yield an investor
gets from his investment depends on tax to which it is
subject. By minimizing the tax burden, yield can be
effectively improved.

BASIC PRINCIPLES OF PORTFOLIO

MANAGEMENT

There are two basic principles for effective portfolio

management which are given below:-

1) Effective investment planning for the investment in

securities by considering the following factors –

a) Fiscal, financial and monetary policies of the

Govt. of India and the Reserve Bank of India.

10
 b) Industrial and economic environment and its
impact on industry.

c) Prospect in terms of prospective technological

changes, competition in the market, capacity
utilization with industry and demand prospects
etc

2) Constant review of investment: It requires to review

the investment in securities and to continue the selling
and purchasing of investment in more profitable manner.
For this purpose they have to carry the following
analysis:-

a) To assess the quality of the management of the

companies in which investment has been made
or proposed to be made.

b) To assess the financial and trend analysis of

companies balance sheet and profit & loss
Accounts to identify the optimum capital
structure and better performance for the
purpose of withholding the investment from poor
companies.

c) To analysis the security market and its trend in

continuous basis to arrive at a conclusion as to
whether the securities already in possession
11
 should be disinvested and new securities are
purchased. If so the timing for investment or dis-
investment is also revealed.

Chapter – II

ACTIVITIES IN PORTFOLIO
MANAGEMENT

There are three major activities involved in an efficient

portfolio management which are as follows:-

1) Identification of assets or securities, allocation of

investment and also
identifying the classes of assets for the purpose of
investment.
2) They have to decide the major weights, proportion of
different assets in the portfolio by taking in to
consideration the related risk factors.

12
3) Finally they select the security within the asset classes
as identify.

The above activities are directed to achieve the sole

purpose to maximize return and minimize risk in the
investment even if there are unlimited risks in the
market.

SAVINGS AND INVESTMENTS

Savings are a part of personal earnings. These earnings

are used for making investments for future use. This has
derived great importance as the use of savings in the
investment of financial assets in capital markets help to
bring about development in an economy. It brings about
additions to the resources of a country. In a sense if there
were no savings there would be no investments.
Therefore, savings encourage investments through
financial intermediation and flow of funds in the capital
markets. Savings are used from income surplus to income
deficit units.

13
Savings are the excess of income over expenditure.
Savings are usually from the household sector. The
corporate sector and Government sector borrow, as their
investments are higher than their savings.

Individuals save by abstaining from current consumption

needs for reasons of precaution for contingencies and for
increasing their wealth. Savings could be with the
objective of earning interest income or an additional
monthly income, which would be available in those years
when a person becomes old and is unable to work. All
savers may not be able to invest well.

INVESTMENT

It is a commitment of a person’s funds to derive future

income in the form of interests, dividends, rent,
premiums, pension benefits, or the appreciation of the
value of their principal capital. To the financial investor, it
is not important whether money is invested for a
productive use or for the purchase of secondhand
instruments such as existing shares and stocks listed on
the stock exchanges. Most investments are considered to
be transfers of financial assets from one person to
another. Investments have a return but there can be no
14
return without risk. Hence investments have to be
analyzed according to their risk and return. Investments
can be explained in the following manner:

 It is a commitment of funds with the expectation of a

return in future.

 Every investment requires to be analyzed within the

framework of risk and return.

 When a single investment security is analyzed it is

called security analysis. But when securities are
combined to give a maximum return it is called
portfolio analysis.
 Investment brings about either appreciation or
reduction in the value of capital invested.

 When any investment appreciates there is gain and if

due to market process of risk due to mismatch of
demand and supply, it reduces, there is loss.
 All investors employ their funds with the aim of
additional income or growth in value, which is the
price of ‘waiting’ or a reward for not spending money
for current consumption.

15
 Investments require to be analyzed to find out their
quality and benefits because once the funds have
been invested the force of risk and return begin to
operate.

 In the financial sense of investment differs from its

use in the economic sense. To the economist,
‘investment’ means the net additions to the
economy’s capital stock. To the financial investor,
investment is a transfer of financial asset from one
person to another either directly or through
institutions.

 Investment also differs from speculation. Investment

is a long-term analysis whereas speculation is like
gambling for short-term gains.

Chapter – III

SIGNIFICANCE OF INVESTMENTS
16
 Investments are useful in context of present-day
conditions. Some factors that have made investment
decisions increasingly important are:-
 Longer life expectancy or planning for retirement:
Increase in the working population, proper planning
for life span and longevity have ensured the need for
balanced investments leading to regularity of
income.
 Increasing rates of taxation: Taxation is one of crucial
factors in any country, which introduces an element
of compulsion in a person’s savings.
 High interest rates: The investor has to include in his
portfolio several kinds of investments. Stability of
interest is as important as receiving a high rate of
interest.
 High rate of inflation: The investor will try and search
an outlet, which will give him a high rate of return in
the form of interest to cover any decrease due to
inflation.
 Larger incomes: The employment opportunities gave
rise to both male and female working force. More
incomes and more avenues of investments have led
to the ability and willingness of working people to
save and invest their funds.

OBJECTIVES OF INVESTMENT

17
 A good rate of return in the future.

 Reducing risk to get a good return.

 Liquidity in time of emergencies.

 Safety of funds by selecting the right avenues of

investments.

 A hedge against inflation.

FUNCTIONS OF INVESTMENT

 Growth in an economy.
 Increase in the income level of people.
 Movement from savings surplus units to saving
deficit units.

18
  Shift of funds from less productive sources o
productive channels through the financial system.

The role of financial system is to promote savings and

investments through financial intermediaries and
promote and expand new issues through the new issue
market. The stock markets being part of the financial
system are expected to facilitate purchase and sale of
securities.

Chapter – IV

PROCESS OF INVESTMENT

I. Investment Policy:
 Determination of investible wealth
 Determination of portfolio objectives
 Identification of potential investments assets
19
  Consideration of attributes of investment assets
 Allocation of wealth to asset categories

II. Investment Analysis:

A. Equity Stock Analysis
 Economic analysis
 Screening of industries
 Analysis of industries
 Fundamental Analysis of stocks and Ratio
Analysis of Earnings per share, intrinsic
value of share.

B. Debentures and Bond Analysis

 Analysis of yield structure
 Bond maturity
 Quantitative Analysis of Debentures and
Bonds
C. Other Asset Analysis
 Qualitative analysis
 Quantitative analysis

III. Investment Valuation:

 Valuation of Bonds
20
  Valuation of Equity Shares
 Valuation of Other Assets

IV. Portfolio Construction:

 Selection of investment assets
 Determination of diversification level
 Consideration of investment timing
 Allocation of investible wealth to investment
assets
 Evaluation of portfolio for feedback

INVESTMENT ALTERNATIVES

A. Direct Investment Alternatives

(i) Fixed Principal Investments

a. Cash
b. Savings Account
c. Savings Certificate
d. Government Bonds
e. Corporate Bonds and Debentures
21
 (ii) Variable Principle Securities
a. Equity Shares
b. Convertible Debentures

(iii)Non-Security Investments
a. Real Estate
b. Mortgages
c. Commodities
d. Business Ventures
e. Art, Antiques, other Valuables

B. Indirect Investment Alternatives

i. Pension fund
ii. Provident Fund
iii. Insurance
iv. Investment companies
v. Unit Trust of India
22
 vi. Mutual Funds

Chapter – V

RISK AND RETURN

‘Risk’ can be defined as a situation where the possible

consequences of the decision that is to be taken or
known. ‘Uncertainty’ is generally defined to apply to
situations where the probabilities cannot be estimated.
Risk and uncertainty are an integral part of an investment
decision. Risk and return are inseparable. To ignore risk
and only expect return is an outdated approach to
investments. The investments process must be
considered in terms of both aspects-risk and return.
Return is a precise statistical term; it is not a simple
expectation of investor’s return but is measurable also.
Risk is not a precise statistical term but we use statistical
terms to quantify it. The investor should keep the risk
associated with the return proportional as risk is directly
correlated with return. It is generally believed that higher
the risk, the greater the reward but seeking excessive
risk does not ensure excessive return. At a given level of
return, each security has a different degree of risk. The

23
entire process of estimating return and risk for individual
securities is called ‘Security Analysis’.

RISKS INVOLVED

Risk is composed of the demands that bring in variations

in return of income. The main forces contributing to risk
are price and interest. Risk is also influenced by external
and internal considerations.
External risks are uncontrollable and broadly affect
investments. These external risks are called systematic
risk.
Risk due to internal environment of a firm or those
affecting a particular industry are referred to as
unsystematic risk.

A. Systematic Risk- It is non-diversifiable and is

associated with the securities market as well as
the economic, sociological, political and legal
considerations of the prices of all securities in the
economy. The effect of these factors is to put
pressure on all securities in such a way that the
prices of all stocks will move in the same
direction. For example, during a boom period

24
 prices of all securities will rise and indicate that
the economy is moving towards prosperity.

Systematic Risk involve in the market during operation:-

I. Market Risk: It referred to as stock variability due

to changes in investor’s attitudes and expectations.
The investor’s reaction towards tangible and
intangible events is the chief cause affecting ‘market
risk’. The first set, that is the tangible events, has a
‘real’ basis but the intangible events are based on a
‘psychological’ basis or reaction to expectation or
realities.
Market risks cannot be eliminated while financial
risks can be reduced. Through diversification also,
market risk can be reduced but not eliminated
because prices of all stocks move together and any
equity stock investor will be faced by the risk o9of a
downwards market and decline in security prices.

25
II. Interest rate risk: This arises due to variability in
the interest rates from time to time. A changes in the
interest rates establishes an inverse relationship in
the price of the security i.e. price of securities trends
to move inversely with change in rate of interest.
Long term securities shows greater variability in
compare to short term securities by this risk.

III. Purchasing power risk: It is also known as inflation

risk and the inflation affects the purchasing power
adversely. Inflation rates vary over time and changes
unexpectedly causing erosion in the value of real
return and expected return. Thus purchasing power
risk is more in inflationary conditions especially in
respect of bond and fixed income securities. It is not
desirable to invest in such securities during
inflationary situations. Purchasing power risk is
however less in flexible income securities like equity
shares or common stock where rise in dividend
income off-sets increase in the rate of inflation and
provides advantage of capital gain.

B. Unsystematic Risk- It is unique to a firm or

industry. It does not affect an average investor.
Unsystematic risk is caused by factors like labor
26
 strike, irregular disorganized management
policies and consumer preferences. These factors
are independent of the price mechanism
operating in the securities market. The problems
of both systematic and unsystematic risk are
inherent in industries dealing with basic raw
materials as well as in consumer goods
industries.

Unsystematic Risk involve in the market:-

I. Business risk: Business risk arises from sale and

purchase of securities affected by business cycles,
technological changes etc. Business cycles affect all
types of securities viz. there is cheerful movement in
boom due to bullish trend in stock price where as
bearish trend in depression brings down fall in the
prices of all types of securities. Therefore securities
bearing flexible income affected more than the fixed
rated securities during depression due to decline in
their market price.

II. Financial Risk: This arises due to changes in the

capital structure of the company. It is also known as
leveraged risk and expressed in the terms of debt-

27
 equity ratio. Excess of debt over equity in the capital
structure of a company indicates that the company
is highly geared even if the per capital earnings
(EPS) of such company may be more. Because highly
dependence on borrowings exposes to the risk of
winding up for its inability to honor its commitments
towards lenders and creditors. So the investors
should be aware of this risk and portfolio manager
should also be very careful.

INVESTMENT DECISION

By a certain sum of funds, the investment decision

basically depends upon the following factors:-

I. Objectives of investment portfolio: This is a crucial

point which a Finance Manager must consider. There can
be many objectives of making an investment. The
manager of a provident fund portfolio has to look for
security and may be satisfied with none too high a return,
where as an aggressive investment company is willing to
take high risk in order to have high capital appreciation.

28
II. Selection of investment: Having defined the
objectives of the investment, the next decision is to
decide the kind of investment to be selected. The
decision what to buy has to be seen in the context of the
following:-

a. There is a wide variety of investments available

in market i.e. Equity shares, preference share,
debentures, convertible bond, Govt. securities
and bond, capital units etc. Out of these what
types of securities to be purchased.

b. The proportion of investment in fixed interest

dividend securities and variable dividend bearing
securities: The fixed one ensures a definite
return and thus a lower risk but the return is
usually not as higher as that from the variable
dividend bearing shares.

c. If the investment is decided in shares or

debentures, then the industries showed a
potential in growth should be taken in first line.
Industry-wise-analysis is important since various
industries are not at the same level from the
investment point of view. It is important to
recognize that at a particular point of time, a
particular industry may have a better growth
potential than other industries. For example,
29
 there was a time when jute industry was in great
favor because of its growth potential and high
profitability, the industry is no longer at this
point of time as a growth oriented industry.

d. Once industries with high growth potential have

been identified, the next step is to select the
particular companies, in whose shares or
securities investments are to be made.

To identify the industries, which have a

high growth potential the following
techniques/approaches may be taken in
to consideration:-

1) Statistical analysis of past performance: A

statistical analysis of the immediate past
performance of the share price indices of various
industries and changes there in related to the
general price index of shares of all industries should
be made. The Reserve Bank of India index numbers
of security prices published every month in its
bulletin may be taken to represent the behavior of
share prices of various industries in the last few
years. The related changes in the price index of each
30
 industry as compare with the changes in the average
price index of the shares of all industries would show
those industries which are having a higher growth
potential in the past few years. It may be noted that
an Industry may not remaining a growth Industry for
all the time. So we have to make an assessment of
the various Industries keeping in view the present
potentiality also to finalize the list of Industries in
which we will try to spread our investment.

2) Assessing the intrinsic value of an

Industry/Company:-

After identifying the Industry, we have to assess the

various factors which influence the value of a particular
share. Those factors generally relate to the strengths and
weaknesses of the company under consideration,
Characteristics of the industry within which the company
fails and the national and international economic scene.
The major objective of the analysis is to determine the
relative quality and the quantity of the security. It is also
to be seen that the security is good at current market
prices. This approach is known as intrinsic value
approach.
Industry analysis can help to assess the nature of
demand of a particular product, Cost structure of the
31
industry and other economic and Govt. constraints on the
same. An appraisal of the particular industries prospect is
essential and the basic profitability of any company is
depends upon the economic prospect of the industry to
which it belongs. The following factors are important in
this regards:-

a. Demand and Supply pattern for the industries

products and its growth potential: The management
expert identify fives stages in the life of an industry.
These are “Introduction, development, rapid growth,
maturity and decline”. If an industry has already reached
the maturity or decline stage, its future demand potential
is not likely to be high.

b. Profitability: It is a vital consideration for the

investors as profit is the measures of performance and a
source of earning for him. So the cost structure of the
industry as related to its sale price is an important
consideration. The other point to be considered is the
ratio analysis, especially return on investment, gross
profit and net profit ratio of the existing companies in the
industry.

c. Particular characteristics of the industry: Each

industry has its own characteristics, which must be
studied in depth in order to understand their impact on
the working of the industry. Because the industry having
a fast changing technology become obsolete at a faster
rate. Similarly, many industries are characterized by high

32
rate of profits and losses in alternate years. Such
fluctuations in earnings must be carefully examined.

d. Labor management relations in the industry: The

state of labor-management relationship in the particular
industry also has a great deal of influence on the future
profitability of the industry. So it is vital to see that the
industry under analysis has been maintaining a cordial
relationship between labor and management.

e. Company Analysis: To select a company for

investment a number of qualitative factors have to be
seen to visualize the performance of the company in
future by analyzing its past performance such as :-

1. Size and ranking: In this regard the net capital

employed, the net profits, the return on investment and
the sales volume of the company under consideration
may be compared with similar data of other company in
the same industry group to assess the risk associated
with the company.

2. Growth record: Three growth indicators may be looked

in to i.e. Price earnings ratio, Percentage growth rate of
earnings per annum and Percentage growth rate of net
block of the company in the past few years should be
examined.

3. Financial analysis: By the help of Financial analysis we

33
can understand the financial solvency and liquidity, the
efficiency, the profitability and the financial and operating
leverage of the company in which the fund are used.

4. Pattern of existing stock holding: This analysis would

show the stake of various parties associate with the
company. An interesting case in this regard is that of the
Punjab National Bank in which the L.I.C. and other
financial institutions had substantial holdings. When the
bank was nationalized, the residual company proposed a
scheme whereby those shareholders, who wish to opt
out, could receive a certain amount as compensation in
cash. It was only at the instant and bargaining strength of
institutional investors that the compensation offered to
the shareholders, who wish to opt out of the company,
was raised considerably.

5. Marketability of the shares: Mere listing of a share on

the stock exchange does not automatically mean that the
share can be sold and purchase. There may be inactive
shares with no transaction for long period. So we have to
examine the speculative interest of such scrip, extent of
public holding and the particular stock exchange where it
is traded.
Fundamental analysis thus is basically an examination of
the economics and financial aspects of a company with
the aim of estimating future earnings and dividend
prospect. So after having analyzed of all the relevant
information we have to decide whether we should buy or
sell the securities.

34
III. Timing of Purchases: The timing of dealings in the
securities, specially shares is of crucial importance,
because after correctly identifying the companies one
may lose
money if the timing is bad due to wide fluctuation in the
price of shares of that companies.
The decision regarding timing of purchases is particularly
difficult because of certain psychological factors. It is
obvious that if a person wishes to make any gains, he
should buy cheap and sell dear, i.e. buy when the share
are selling at a low price and sell when they are at a
higher price. But in practical it is a difficult task. When the
prices are rising in the market i.e. there is bull phase,
everybody joins in buying without any delay because
every day the prices touch a new high. Later when the
bear face starts, prices tumble down everyday and
everybody starts counting the losses. The ordinary
investor regretted such situation by thinking why he did
not sell his shares in previous day and ultimately sell at a
lower price. This kind of investment decision is entirely
devoid of any sense of timing.

35
 THEORIES AND TECHNIQUES

There are various theories and techniques to deal with

the portfolio management, some of their concept are
discussed shortly here under:-

Dow Jones theory: According to this theory of Charles

H. Dow, purchase should be made when bull trend started
i.e. when price of the share are on the rise and sells them
when they are on the fall i.e. at the time when bearish
trend started.

Random walk theory: Basically stock prices can never

be predicted because they are not a result of any
underlying factors but are mere statistical ups and
downs. This hypothesis is known as Random walk
hypothesis. In the Layman’s language it may be said that
prices on the stock exchange behave exactly the way a
drunk would behave while walking in a blind lane, i.e. up
and down, with an unsteady way going in any direction
he likes, bending on the side once and on the other side
the second time.

36
Capital Assets Pricing Model (CAPM): CAPM provides
a conceptual framework for evaluating any investment
decision. It is used to estimate the expected return of any
portfolio with the following formula:

E(Rp) = Rf+Bp(E(Rm)-Rf)
Where,
E(Rp) = Expected return of the portfolio
Rf = Risk free rate of return
Bp = Beta portfolio i.e. market sensitivity index
E(Rm)= Expected return on market portfolio
(E(Rm)-Rf)= Market risk premium

HIGHLIGHTS

37
The above model of portfolio management can be used
effectively to:-

 Estimate the required rate of return to investors on

company’s common stock.

 Evaluate risky investment projects involving real

Assets.

 Explain why the use of borrowed fund increases the

risk and increases the rate of return.

 Reduce the risk of the firm by diversifying its project

portfolio.

Moving Average: It refers to the mean of the closing

price which changes constantly and moves ahead in time,
there by encompasses the most recent days and deletes
the old one.

CONCLUSION
38
From the above discussion it is clear that portfolio
functioning is based on market risk, so one can get the
help from the professional portfolio manager or the
Merchant banker if required before investment. Because
applicability of practical knowledge through technical
analysis can help an investor to reduce the risk. In other
words Security prices are determined by money manager
and home managers, students and strikers, doctors and
dog catchers, lawyers and landscapers, the wealthy and
the wanting. This breadth of market participants
guarantees an element of unpredictability and
excitement. If we were all totally logical and could
separate our emotions from our investment decisions
then, the determination of price based on future earnings
would work magnificently. And since we would all have
the same completely logical expectations, price would
only change when quarterly reports or relevant news was
released.

BIBLIOGRAPHY

39
• Wikipedia.com

• Book on Portfolio Management by Ms. Preeti

Singh

• The website for data & report in various issues

and method’s
http://www.scribd.com/

• The website for data & report with

presentation in various issues and method’s
http://www.authorstream.com.

40