Teaching and Learning Plan

(PGPBA)

INVESTMENT MANAGEMENT
Batch 2010 12 Phase 3

Module Background Information This module describes techniques, vehicles, and strategies for planning, implementing and overseeing the optimal allocation of the funds of an investor or an institution in the changing investment environment. The module is taught by lectures, group discussions, practical exercises and students have the opportunity to apply the frameworks. The module is assessed by internal assignments and a 2 hour closed-book examination at the end of phase 3. Aims of the Module The aims of the module are to provide the background and the foundation for a strong and comprehensive understanding of investment management and a little background of portfolio management. It further explains how to implement investment goals in light of risk-return tradeoffs. It basically provides a firm foundation for learning by describing the basic concepts of investment, speculation, gambling and the time value of money. Learning Outcomes At the end of the module the student will be able to: Explain the concepts of investment, speculation and gambling Discuss the organizational structure of the stock markets in India, regulatory framework, stock markets and financial development in India Examine critically the recent reforms introduced in the capital market in the context of integration of world financial markets Analyze the alternative investment outlets and highlight various types of securities that are available to meet the needs of the investor Understand the foundation of bond, equity, derivatives, FOREX and real estate markets Present security analysis and discuss the Indian stock market forecasting, the independence of stock market, and the role market exercises in the investment decision making Understand the basic foundation of fundamental and technical analysis Understand the foundation of portfolio management

Teaching Methodology A variety of teaching approaches will be used including:

Formal lectures to introduce key theories and frameworks Tutorial exercises in the form of group discussions, stock market analysis, understanding and interpretation of balance sheet, and technical analysis The application of frameworks to real organizations through case studies Support material will be provided during the class sessions or prior to the session whichever is required. Independent learning which the student identifies by pursuing areas of interest or by providing deeper or broader knowledge of the subject area, through a range of learning activities that might include reading, reflection, personal research, etc.

Outline teaching schedule

Topic 1 Investment: Objectives and Risks Key Areas Differences between investment, speculation and gambling Features of an investment program Risks of investment, Success and Failures in investments Core Text: Bhalla, V.K. (2007) Investment Management, Security Analysis and Portfolio Management, 13th edition, S.Chand & Company Limited, New Delhi. Chapter 1. Group Discussion Questions: 1. Investment is well grounded and carefully planned speculation. In the light of the above statement, explain and differentiate between investment and speculation. How do they differ from gambling? 2. Should an investor play a winners game or a losers game while buying securities? 3. Why do individuals invest? What factors contribute to the rate of return that investors require on an investment? Topic 2 Indian Stock Market Key Areas Structure or Primary Market, Secondary Market Listing of securities Market indexes Core Text Chapters 2, 3 and 7. Group Discussion Questions:

1. The stock exchange is the pulse of the economy. Debate. 2. How do operations on a stock exchange affect the economic life of a nation? Is it necessary to control the stock exchange? 3. Write an essay on the functions of the New Issue Market and importance thereof in the context of industrial finance. 4. Returns on various security indexes are often used to judge the performance of an actively managed portfolio. What potential problems do you see in such comparisons? 5. The most important index in financial market is the stock index, which uses a set of stock that are representation of the whole market, or a specified sector, to measure the change in the overall behavior of the market or sector over a period of time. Do you agree? Topic 3 Market Participants Key Areas Brokers Investment companies Security credit ratings Core Text Chapters 5, 6, and 8. Group Discussion Questions: 1. ABC Brokers specializes in underwriting new issues by small firms. On a recent offering of SS enterprises, the terms were as follows: Price to public Rs 10 per share Number of shares . 30,00,000 Proceed to SS firm Rs. 2.9 Crore The out-of-pocket expenses incurred by ABC Brokers in the design of distribution of the issue were Rs.3, 00,000. What profit or loss would ABC Brokers incur if the issue were sold to the public at an average price of a. Rs. 10 per share, b. Rs. 12 per share, c. Rs. 8 per share? 2. What role does the stockbroker play in the overall investment process? Describe the types of services offered by brokerage firms, and discuss the criteria tot selecting a suitable stock broker. 3. Why may the small investor prefer mutual funds to other investments? Discuss the RBI and SEBI guidelines for mutual fund authorization? 4. A mutual fund has 200 share of XYZ Co. currently trading at Rs. 14, and 200 shares of ABC Co., currently trading at Rs.140. The fund has issued 100 shares. What is the NAV of the fund? If investors expect the price of the XYZ Co.s shares to increase to Rs. 18 and price of ABC Co to decline Rs.110 by the end of the year, what the expected NAV at the end of the year? What is the maximum that the price of ABC Co can decline to maintain the NAV as estimated in the first question. Topic 4 Alternative Investment Strategies Key Areas Bond Market Equity Market Commodity Market Derivative Markets

Government Securities Real estate investment Money market

Core Text Chapters 10, 12, 15, 17 and 18. Group Discussion Questions: By considering the alternative investment strategies, how would you prepare an investment plan for Rs.10,00,000. In your investment plan, you will require to consider the following investment characteristics, such as Risks, Return, Time Period (let us say 1 yr, 3 yrs, 5 yrs) Liquidity and Tax. Topic 5 Security Analysis Key Areas Fundamental Analysis Technical Analysis Core Text Chapters 19 and 20. Group Discussion Question: 1. As a holder of ABC Company equity shares, you are given a right to subscribe to the new issue of equity that is being sold to raise capital to expand plant facilities. The announcement of the offering was made on August 1 for owners of record August 31. The rights expire September 15. Subscription price for the new stock was set at Rs. 45 per share. Each equity shareholder is allowed to buy one new equity share at the subscription price for each eight shares of equity owned. The market price on August 7 was Rs. 54. What was the theoretical value of rights on August 7? If nothing disturbed the price, what would be the value of the right on September 1? What value would the rights have on September 16? Would we expect the market price and theoretical price to be the same in this case? Why or why not? 2. A technical analyst explains that the stock market acts like a barometer rather than a thermometer. Debate 3. Critically examine the Elliot Wave Principle (EWP) on stock market prediction. 4. Most of the technical indicators make sense when examined individually but when one examines many technical indicators simultaneously, the interpretation of their collective meaning is often contradictory and confusing. Comment. Topic 6 Portfolio Management Key Areas Introduction to Portfolio Management Portfolio Selection Models Portfolio Investment Process Portfolio Performance Evaluation

Notes:

You are expected to: Attend all lectures and group discussions. Those who are failed to maintain 90% attendance will face adverse impact to appear for the exam Read the appropriate parts of the core text before each lecture Read the case studies and make notes before each case analysis and presentation Recommended Reading list for Module Core Text: Bhalla, V.K. (2007) Investment Management, Security Analysis and Portfolio Management, 13th edition, S.Chand & Company Limited, New Delhi Supporting Texts: Bhalla V.K. (2002), Management of Financial Services, Anmol Publications Pvt Ltd. Bolten Steven E. (1972) Security Analysis and Portfolio Management: An Analytical Approach to Investments, NY Holt. Gupta S.N. (1981) Bonds and Guarantees, New Delhi Benjamin, Dodd, Techniques. David, L. (2000) Security Analysis: Principles and

Frank J Fabozzi and Dessa T. Current Topics in Investment Management Pub Harper and Row Publishers, New York Jack Clark Francis, Management of Investments McGraw Hill Publishers ICFAI University, (2002) Portfolio Structuring, Hyderabad Samir K Barua, Varma J.R and Raghunathan, V. Portfolio Management, Tata McGraw Hill William F Sharpe, Gordon J Alexander and Jeffrey V Bailey, (2002), Investments Prentice Hall.