A

PROJECT REPORT
ON

“A STUDY ON PORTFOLIO MANAGEMENT”

SUBMITTED TO
AWADHESH PRATAP SINGH UNIVERSITY, REWA (M.P.)

FOR THE AWARD OF

MASTER OF BUSINESS ADMINISTRATION
MBA (SEMESTER-IV)

SUBMITTED BY:- PROJECT GUIDE

VARSHIKA SINGH PROF. SURENDRA PRATAP

VINDHYA INSTITUTE OF MANAGEMENT & RESEARCH,

SATNA (M.P.)
2022-23
 GUIDE’S CERTIFICATE
This is to certify that VARSHIKA SINGH has satisfactorily completed the Project
work on “A STUDY ON PORTFOLIO MANAGEMENT”
under my guidance for the partial fulfillment of MBA submitted to Awadhesh

Pratap Singh University, Rewa during the academic year 2022-23

To best of my knowledge and belief the matter presented by him is original work

and not copied from any source. Also this report has not been submitted earlier for

the award of any Degree of Awadhesh Pratap Singh University, Rewa.

Place: Satna PROF. SURENDRA PRATAP

Date: / / 2022 (Project Guide)

VINDHYA INSTITUTE OF MANAGEMENT & RESEARCH,

SATNA (M.P.)
2022-23
 DECLARATION

I undersigned, hereby declare that this project report entitled “A STUDY ON

PORTFOLIO MANAGEMENT” prescribed by AWADHESH PRATAP SINGH

UNIVERSITY, REWA during the academic year 2022-23 under the guidance of PROF.

SURENDRA PRATAP is my original work.

The matter presented in this report has not been copied from any source. I

understand that any such copying is liable to be punishable in any way the

university authorities deem to be fit. Also this report has not been submitted earlier

for the award of any Degree or Diploma of Awadhesh Pratap Singh University,

Rewa or any other University.

This work humbly submitted to Awadhesh Pratap Singh University for the

partial fulfillment of Master of Business Administration.

PLACE: SATNA VARSHIKA SINGH

DATE: / / 2018

VINDHYA INSTITUTE OF MANAGEMENT & RESEARCH,

SATNA (M.P.)
2022-23
 ACKNOWLEDGEMENT

Whenever we are standing on most difficult step of the dream of our life, we
often remind about The Great God for His blessings & kind help and he always
helps us in tracking off the problems by some means in our lifetime. I feel great
pleasure to present this project entitled “A STUDY ON PORTFOLIO
MANAGEMENT”
I am very thankful to my mentor Mr. Neeraj Kumar Relationship Manager
of Motilal Oswal Financial Services Limited Indore, forgiving hisd kind support in
my learning skills, I would like to say Thanks to Rashi Sharma, Customer Support
Executive of Motilal Oswal Financial Services Limited for her support.
I am grateful to those people who help me a lot in preparation of this project
report. It is their support and blessings, which has brought me to write this project
report. I have a deep sense of gratitude in my heart for them.
I am very thankful to my project guide PROF. SURENDRA PRATAP for his
wholehearted support and affectionate encouragement without which my
successful project would not have been possible.
Finally, I am very grateful to Mighty God and inspiring parents whose
loving & caring support contributed a major share in completion of my task.

VARSHIKA SINGH

VINDHYA INSTITUTE OF MANAGEMENT & RESEARCH,

SATNA (M.P.)
2022-23
 TABLE OF CONTENTS

S.N. Contents Page No.

1 Introduction of Project

2 Review of Literature

3 Objectives

4 Research Methodology

5 Data Analysis & Interpretation

6 Findings & Suggestions

7 Limitations

8 Conclusion

9 References

Annexure
10
Questionnaire
INTRODUCTION:

Portfolio management can be defined and used in many a ways,

because the basic meaning of the word is “combination of the
various things keeping intact”. So I considered and evaluated this
from the perspective of the investment part in the securities segment.

From the investor point of view this portfolio followed by him is

very important since through this way one can manage the risk of
investing in securities and thereby managing to get good returns from
the investment in diversified securities instead of putting all the
money into one basket. Now a day’s investors are very cautious in
choosing the right portfolio of securities to avoid the risks from the
market forces and economic forces. So this topic is chosen because
in portfolio management one has to follow certain steps in choosing
the right portfolio in order to get good and effective returns by
managing all the risks

This topic covers how a particular portfolio has to be chosen

concerning all the securities individual return and there by arriving at
the overall portfolio return. This also covers the various techniques
of evaluation of the portfolio with regard to all the uncertainties and
gives an edge to select the right one. The purpose of choosing this
topic is to know how the portfolio management has to be done in
arriving at the effective one and at the same time make aware the
investor to choose the securities which they want to put in their
portfolio. This also gives an edge in arriving at the right portfolio in
consideration to different securities rather than one single security.
The project is undertaken for the study of my subject thoroughly
while understanding the different case
This project deals with the different investment decisions made by
different people and focuses on element of risk in detail while
investing in securities. It also explains how portfolio hedges the risk
in investment and giving optimum return to a given amount of risk. It
also gives an in depth analysis of portfolio creation, selection,
revision and evaluation. The report also shows different ways of
analysis of securities, different theories of portfolio management for
effective and efficient portfolio construction. It also gives a brief
analysis of how to evaluate a portfolio.

A portfolio is a collection of investments held by an institution or a

private individual. In building up an investment portfolio a financial
institution will typically conduct its own investment analysis, whilst
a private individual may make use of the services of a financial
advisor or a financial institution which offers portfolio management
services. Holding a portfolio is part of an investment and risk-
limiting strategy called diversification. By owning several assets,
certain types of risk (in particular specific risk) can be reduced. The
assets in the portfolio could include stocks, bonds, options, warrants,
gold certificates, real estate, futures contracts, production facilities,
or any other item that is expected to retain its value.

Portfolio management involves deciding what assets to include in the

portfolio, given the goals of the portfolio owner and changing
economic conditions. Selection involves deciding what assets to
purchase, how many to purchase, when to purchase them, and what
assets to divest. These decisions always involve some sort of
performance measurement, most typically expected return on the
portfolio, and the risk associated with this return (i.e. the standard
deviation of the return). Typically the expected returns from
portfolios, comprised of different asset bundles

The unique goals and circumstances of the investor must also be

considered. Some investors are more risk averse than others. Mutual
funds have developed particular techniques to optimize their
portfolio holdings.
 Thus, portfolio management is all about strengths, weaknesses,
opportunities and threats in the choice of debt vs. equity, domestic
vs. international, growth vs. safety and numerous other trade-offs
encountered in the attempt to maximize return at a given appetite
for risk.

Aspects of Portfolio Management:

Basically portfolio management involves

 A proper investment decision making of what to buy & sell

 Proper money management in terms of investment in a
basket of assets so as to satisfy the asset preferences of
investors.
 Reduce the risk and increase returns.

OBJECTIVES OF PORTFOLIO MANAGEMENT:

 Regular income or stable return

 Appreciation of capital
 Marketability and liquidity
 Safety of investment
 Minimizing of tax liability.

NEED FOR PORTFOLIO MANAGEMENT:

The Portfolio Management deals with the process of selection

securities from the number of opportunities available with different
expected returns and carrying different levels of risk and the
selection of securities is made with a view to provide the investors
the maximum yield for a given level of risk or ensure minimum risk
for a level of return

Portfolio Management is a process encompassing many activities of

investment in assets and securities. It is a dynamics and flexible
concept and involves regular and systematic analysis, judgment and
actions. The objectives of this service are to help the unknown
investors with the expertise of professionals in investment Portfolio
Management. It involves construction of a portfolio based upon the
investor’s objectives, constrains, preferences for risk and return and
liability. The portfolio is reviewed and adjusted from time to time
with the market conditions. The evaluation of portfolio is to be done
in terms of targets set for risk and return. The changes in portfolio
are to be effected to meet the changing conditions.

Portfolio Construction refers to the allocation of surplus funds in

hand among a variety of financial assets open for investment.
Portfolio theory concerns itself with the principles governing such
allocation. The modern view of investment is oriented towards the
assembly of proper combinations held together will give beneficial
result if they are grouped in a manner to secure higher return after
taking into consideration the risk element.

The modern theory is the view that by diversification, risk can be

reduced. The investor can make diversification either by having a
large number of shares of companies in different regions, in different
industries or those producing different types of product lines.
Modern theory believes in the perspectives of combination of
securities under constraints of risk and return.

ELEMENTS:

Portfolio Management is an on-going process involving the

following basic tasks.

 Identification of the investors objective, constrains and

preferences which help formulated the invest policy.
 Strategies are to be developed and implemented in tune with
invest policy formulated. This will help the selection of asset
classes and securities in each class depending upon their risk-
return attributes.
 Review and monitoring of the performance of the portfolio by
continuous overview of the market conditions, company’s
performance and investor’s circumstances.
  Finally, the evaluation of portfolio for the results to compare
with the targets and needed adjustments have to be made in the
portfolio to the emerging conditions and to make up for any
shortfalls in achievements (targets).

Schematic diagram of stages in portfolio management:

Process of portfolio management:

The Portfolio Program and Asset Management Program both follow

a disciplined process to establish and monitor an optimal investment
mix. This six-stage process helps ensure that the investments match
investor’s unique needs, both now and in the future.
IDENTIFY GOALS AND OBJECTIVES:

When will you need the money from your investments? What are
you saving your money for? With the assistance of financial advisor,
the Investment Profile Questionnaire will guide through a series of
questions to help identify the goals and objectives for the
investments.

. DETERMINE OPTIMAL INVESTMENT MIX:

Once the Investment Profile Questionnaire is completed, investor’s

optimal investment mix or asset allocation will be determined. An
asset allocation represents the mix of investments (cash, fixed
income and equities) that match individual risk and return needs.

This step represents one of the most important decisions in your

portfolio

construction, as asset allocation has been found to be the major

determinant of long-term portfolio performance.
CREATE A CUSTOMIZED INVESTMENT POLICY STATEMENT

When the optimal investment mix is determined, the next step is to

formalize our goals and objectives in order to utilize them as a
benchmark to monitor progress and future updates.

SELECT INVESTMENTS

The customized portfolio is created using an allocation of select

QFM Funds. Each QFM Fund is designed to satisfy the requirements
of a specific asset class, and is selected in the necessary proportion to
match the optimal investment mix.

MONITOR PROGRESS

Building an optimal investment mix is only part of the process. It

is equally important to maintain the optimal mix when varying
market conditions cause investment mix to drift away from its
 target. To ensure that mix of asset classes stays in line with
investor’s unique needs, the portfolio will be monitored and
rebalanced back to the optimal investment mix

REASSESS NEEDS AND GOALS

Just as markets shift, so do the goals and objectives of investors.

With the flexibility of the Portfolio Program and Asset
Management Program, when the investor’s needs or other life
circumstances change, the portfolio has the flexibility to
accommodate such changes.

RISK:

Risk refers to the probability that the return and therefore the value
of an asset or security may have alternative outcomes. Risk is the
uncertainty (today) surrounding the eventual outcome of an event
which will occur in the future. Risk is uncertainty of the
income/capital appreciation or loss of both. All investments are
risky. The higher the risk taken, the higher is the return. But proper
management of risk involves the right choice of investments whose
risks are compensation.

RETURN:

Return-yield or return differs from the nature of instruments,

maturity period and the creditor or debtor nature of the instrument
and a host of other factors. The most important factor influencing
return is risk return is measured by taking the price income plus the
price change.

PORTFOLIO RISK:
Risk on portfolio is different from the risk on individual securities.
This risk is reflected by in the variability of the returns from zero to
infinity. The expected return depends on probability of the returns
and their weighted contribution to the risk of the portfolio.

RETURN ON PORTFOLIO:

Each security in a portfolio contributes returns in the proportion of

its investment in security. Thus the portfolio of expected returns,
from each of the securities with weights representing the
proportionate share of security in the total investments.

RISK – RETURN RELATIONSHIP:

The risk/return relationship is a fundamental concept in not only

financial analysis, but in every aspect of life. If decisions are to lead
to benefit maximization, it is necessary that individuals/institutions
consider the combined influence on expected (future) return or
benefit as well as on risk/cost. The requirement that expected
return/benefit be commensurate with risk/cost is known as the
"risk/return trade-off" in finance. All investments have some risks.
An investment in shares of companies has its own risks or
uncertainty. These risks arise out of variability of returns or yields
and uncertainty of appreciation or depreciation of share prices, loss
of liquidity etc. and the overtime can be represented by the variance
of the returns. Normally, higher the risk that the investors take, the
higher is the return.
 PORTFOLIO MANAGEMENT PROCESS:

 Security analysis
 Portfolio analysis

 Selection of securities

 Portfolio revision

 Performance evaluation

SECURITY ANALYSIS

For making proper investment involving both risk and return, the
investor has to make a study of the alternative avenues of investment
their risk and return characteristics and make a proper projection or
expectation of the risk and return of the alternative investments under
consideration. He has to tune the expectations to this preference of
the risk and return for making a proper investment choice. The
process of analyzing the individual securities and the market as a
whole and estimating the risk and return expected from each of the
investments with a view to identifying undervalued securities for
buying and overvalued securities for selling is both an art and a
science that is what called security analysis.

Security:

The security has inclusive of share, scripts, stocks, bonds,

debenture stock or any other marketable securities of a like nature in
or of any debentures of a company or body corporate, the
government and semi government body etc.

Analysis of securities:

Security analysis in both traditional sense and modern sense involves

the projection of future dividend or ensuring the intrinsic value of a
security based on the forecast of earnings or dividend. Security
analysis in traditional sense is essentially on analysis of the
fundamental value of shares and its forecast for the future through
the calculation of its intrinsic worth of the share.
Modern security analysis relies on the fundamental analysis of the
security, leading to its intrinsic worth and also rise-return analysis
depending on the variability of the returns, covariance, safety of
funds and the projection of the future returns. If the security analysis
based on fundamental factors of the company, then the forecast of
the share price has to take into account inevitably the trends and the
scenario in the economy, in the industry to which the company
belongs and finally the strengths and weaknesses of the company
itself.

Approaches to Security Analysis:-

Fundamental analysis
Technical analysis
Efficient market hypothesis

FUNDAMENTAL ANALYSIS:

The intrinsic value of an equity share depends on a multitude of

factors. The earnings of the company, the growth rate and the risk
exposure of the company have a direct bearing on the price of the
share. These factors intern rely on the host of other factors like
economic environment in which they function, the industry they
belong to, and finally company’s own performance. The fundamental
school of though apprised the intrinsic value of share through
 Economic analysis
 Industry analysis
 Company analysis

Economic analysis:

The level of economic activity has an investment in many ways. If

the economy grows rapidly, the industry can also expect to show
rapid growth and vice versa. When the level of economic activity is
low, stock prices are low , and when the economic activity is high,
stock prices are high reflecting the prosperous outlook for sales and
profits of the firms. The analysis of macro economic environment is
essential to understand the behavior of the stock prices. The
commonly analyzed macro economic factors are as follows:

 Gross Domestic product(GDP)

 Savings and investments
 Rate of inflation
 Rates of interest
 Budget
 The tax structure
 Balance of payments
 Monsoon and agriculture
 Infrastructure facilities
 Demographic factors

Industry analysis:

As referred earlier, performance of a company has been found to depend

broadly up to 50% on the external factors of the economy and industry. These
externalities depend on the availability of inputs, like proper labor, water,
power and inter-relations between the economy and industry and the company.
In this context a well-diversified company performs better than a single
product company, because while the demand for some products may be
declining, that for others may be increasing. Similarly, the input prices and cost
factors would vary from product line to product line, leading to different
margins and a diversified company is better bet for the investor.

The industry analysis should take into account the following factors among
others as influencing the performance of the company, whose shares are to be
analyzed. They are as followed:

 Product line
 Raw materials and inputs
 Capacity installed and utilized
 Industry characteristics
 Demand and market
 Government policy with regard to industry
 Labor and other industrial problems
 Management
Company analysis:

vestors should know the company results properly before making the
investment. The selection of investment is depends on optimum results of the
following factors.

Marketing forces:

Manufacturing companies profit depends on marketing activities. If the

marketing activities are favorable than it can be concluded that the company
may have more profit in future years Depending upon the previous year results
fluctuations in sales or growth in sales can be identified. If the sales are
increasing in trend investor may be satisfied.

Accounting Profiles:

Different accounting policies are used by organization for the valuation of

inventories and fixed assets
A. Inventory policy:
Raw materials and their value at the end of the year is calculated by
using FIFO, LIFO, or any other average methods. The particular method is
must be suitable to access the particular raw materials.
B. Fixed Asset Policy:
All the fixed assets are valued at the end of every year to know the real
valu of the business.
Review of Literature:-

Portfolio theory was introduced by Harry Markowitz (1952) with

his paper on “portfolio selection”. Before this work, investors
focused on assessing the risks and benefits of individual securities.
Investment analysis identified securities that offered the most
promising opportunities for gain with the least amount of risk and
then constructed a portfolio from these securities. This approach
resulted in a set of securities that involved, for example, the
pharmaceutical industry or the automotive industry.

Markowitz instead suggested that investors focus on selecting

portfolios based on their over all risk- reward characteristics, rather
than only compiling portfolios from securities that had attractive
risk-reward characteristics. Markowitz noted that if single period
returns for various securities were treated as random variables they
could be assigned expected values, standard deviations and
correlations. This led to the ability to calculate the expected return
and volatility of any portfolio constructed with these securities.

He connected linear programming and investments, noting that the

desired out put is a higher return, while the cost to be minimized is
the volatility of the return. To construct this model, the expected
return of each potential component of the portfolio was required,
along with determination of the expected volatility of each
components return, and the expected correlation of each component
with every other component. To
Determine these returns; Markowitz suggested the use of the
observed values for the past period.

Markowitz’smodel identified the various components that will yield

the best trade-offs between return and volatility for the portfolio.
certain portfolios would optimally balance risk and reward, which
markowitz called an “efficient frontier” of portfolios. The investor
than should select a portfolio that lies on the “efficient frontier”, as
each portfolio would offer the maximum possible expected return for
a given level of risk. This model laid the foundation for the
development of the portfolio theory, although Markowitz
acknowledged that anticipating the future could be as much an art
as Of science.

Tobin (1958) expanded on Markowitz work and added a risk-free

asset to the analysis in order to leverage or de-leverage, as
appropriate portfolios on the “efficient frontier” leading to the super
efficient portfolio and capital market line. With leverage, portfolios
on the capital market line could outperform portfolios on the efficient
frontier. Sharpe (1964) then prepared a capital asset pricing model
that noted that all the investors should hold the market portfolio,
whether leveraged or de- leveraged, with positions on the risk-free
assets.

However even earlier Bernoulli (1738), in an article about the

st.petersburg paradox, stated that risk averse investors should
diversify. Bernoulli explained that goods that are exposed to some
small danger should be divided into several portions rather than
grouping them all together as a single unit. Markowitz (1999) later
noted that the Bernoulli’s work was superseded by that of William
Shakespeare in the merchant of Venice, Act 1, scene no1, in which
Antonio said:

Markowitz at this time pointed though that while diversification

would reduce risk, it still could not eliminate risk. He stated that an
investor should maximize the expected portfolio return, while
minimizing expected variance return. One stock might provide long-
term growth while another might generate short term dividends.
Some stocks should be part of the portfolio in order to insulate it
from wide market fluctuations.

Markowitz’s approach is know common among institutional

portfolio managers to structure their portfolios and measure their
performance and is used to manage the portfolios of ordinary
investors. Its extension has led to increasingly refined theories of the
effects of risks on valuation. The mathematics of portfolio theory are
used extensively in financial risk management as financial portfolio
managers concentrate their efforts on achieving the most optimal
trade-offs between risk and return, taking into account the different
levels of risk tolerance of different investors. The portfolio model
therefore strives to obtain the maximum return with minimum risk.
Portfolio managers thus estimate expected returns, standard
deviations and correlations. The mean is the expected returns of the
each potential project and the variance or the standard deviation
measures the risk associated with the portfolio.

In 1990, Markowitz along with Merton miller, William Sharpe

shared a noble prize for their work on a theory of portfolio selection.
Portfolio theory provides a context to help understand the
interactions of systematic risk and reward. It has helped the Sharpe
how institutional portfolios are managed and fostered the use of
passive investment management techniques.

Many research and theories are explained in the field of Investment

Analysis and Portfolio Management. The research in this field is
done either on Investment Analysis, Portfolio Management or both at
the same time. Literature reviews in these fields are as follows:

Markowitz Approach developed by Markowitz (1952) states that the

investments must be assessed in terms of risk and returns and returns
can be maximized for a given level of risk. It implies that an investor
expects higher returns and lower risk.

Harry Markowitz (1952, 1959 Portfolio Selection) attempted to make

an effort to quantify the risk. A portfolio model and method to obtain
a portfolio model was introduced. This model works on expected rate
of return and expected risk of the portfolio.

William F. Sharpe (1966) introduced Sharpe ratio i.e. Relationship

between risk and return of portfolios.
Arbitrage Pricing Theory (1976) model explains a stock‟s return
based upon fundamental factors.

Baker, Hargrove and Haslem (1977), in their study found that due to
the impact of capital appreciation on investors‟ expectations of total
returns there is positive association between risk and expected return.

Dr. John Lintner‟s (1983) in his paper, “The Potential Role of

Managed Commodity-Financial Futures Accounts (and/or Funds) in
Portfolios of Stocks and Bonds, ” explored how adding managed
futures to institutional portfolios can give substantial diversification
benefits.

Shalit & Yitzhaki (1984) suggested using the Mean-Gini (MG)

method to build optimization models and risk analysis, which is
simple in its practical applications.

Dr. G. P. Jakhotia and Mrs. M.G. Jakhotia (2001) elaborated the

investment management techniques for individual investors in their
book „Finance for one and All‟. It listed five important investment
reasons. They also listed 12 sensitive factors for optional portfolio
investments. They included a model for individual‟s portfolio mix
assessment;
Objectives:-

1. A comparative study on one time investment and systematic

investment in mutual fund.

2. To study the nature of mutual funds and analyze their returns.

3. To evaluate the performance of the portfolio using Sharpe index.

4. To compare the actual performance with one time investment and

systematic investment Plan

5. To find out the return of the one time and systematic investment

plans.

6. Through that analysis to find out the best investment plan from the

comparison statement.

7. To suggest the customers which plan is suitable for their

investment in future.
RESEARCH METHODOLOGY:
The objective of this research is to analyze the top 10 stocks picks in
India amid COVID-19, calculate their risks and return, create an
optimized portfolio using these stocks and understand the effect of
diversification.

The research is based on historic data of last 5years (2 Jan, 2015 – 3

April, 2020). The research includes the first few days of lockdown
period amid COVID-19 also.The research work is based on the
secondary data from the published sources. The data is sourced from
Financial Times, Research papers and a Bloomberg Quint article.
(Secondary data is downloaded from any site like bse/nseetc)

Investment analysis and Portfolio Management concepts and

principles are applied in this Research. We have analyzed the stocks
in the portfolio, calculated the return and risk individual stock as well
as portfolio risk and return, created an optimized portfolio and
studied the effect of diversification on the portfolio in this research.
Data Analysis & Interpretation :-

The top 10 stock picks amid COVID-19 are GAIL, ICICIBANK,

PETRONET, HDFC BANK, HCLTECH, CIPLA, INFY,
HINDUNILVR, ULTRACEMCO, DR REDDY. The historic data of
these stocks of last 5 years is taken as data for the research. Using
this data, we calculated the Expected Return and risk of these
individual stocks.

The research in Investment Analysis and portfolio management

studies that many researches are done in this field. The researches at
micro level have been rarely carried out by scholars in India. There is
lack of research on Actual Investment Analysis and portfolio
management of different investment options. There is also lack of
research on various portfolios that are claimed to give good returns
in Market turmoil conditions with its optimal weight allocation.
There is also lack of research on practical Implementation of various
concepts of Investment analysis and Portfolio Management. The
research on effect of diversification on actual investment options and
optimal no of stocks with good returns to be invested in is also rare.
Also there is lack of research in variety of options available in one
Investment option. There is also less research done on Investment
Analysis and Portfolio Management for COVID-19 as this pandemic
has started affecting people since December as per WHO reports
internationally
There is rare research paper on Investment Analysis and portfolio
management using simple and easy to understand tool like MS Excel
and how it can be done using various excel functions and tools can
be used in analyzing and creating an optimal portfolio. This research
paper has tried to fill this gap by considering most of these gaps in
our research.
The risk of each stock in the portfolio is calculated by taking
standard deviation of Expected Return.The graph shows that the
riskiest stock is PETRONET and the least risky stock is HDFC .
A portfolio is created using these 10 stocks and equal weight is
allocated to all of these stock such that sum of weights of all these
stocks is equal to 1. The Expected return of the portfolio is then
calculated using portfolio return formula. The Expected Return of
Portfolio is calculated as: E[𝑟𝑝 ] = 𝜔𝑖𝑟𝑖 𝑘 𝑖=1 Where:E[𝑟𝑝
]=ExpectedReturnontheportfolio. 𝑟𝑖= Return on an asset. 𝜔𝑖= Weight
of (or proportion invested in) asset i. We can calculate it by using
SUMPRODUCT function. Annualized Portfolio return is calculated
by using the formula: E[r_p] Annualized = (1+ E[r_p]) ^250 -1
The portfolio risk is further calculated as: 𝜎 2𝑝=var (Ω‟ Σ Ω) Where
Ω= Vector of „weights‟; 𝜎 2𝑝= Variance of portfolio; ∑ = Variance-
Covariance Matrix

The VCV matrix is obtained as follows: =MMULT (TRANSPOSE

(array of return stock-array of

E[r]), array of return stock-array of E[r])/COUNT (no of daily stock

return-1).

Further by taking square root of variance we obtain the daily risk of

the portfolio and it is annualized by multiplying the sd_daily by
square root of 250. From the table above we can see that the risk of
portfolio is less as compared to the risk of individual stocks. Hence

diversification in the same asset type reduces risk to certain extent

To further understand the effect of diversification on risk, 10
different portfolios were created by increasing a single asset in each
portfolio starting from 1Asset Portfolio

From the above graph we can see that the Risk is reducing with
increasing number of assets in the Portfolio. We can also see that for
the 3 Asset Portfolio, the risk has increased as compared to the
2Asset Portfolio, this is because a significantly risky stock (SD ≈
53%) was added to a poorly diversified portfolio. Thus, the reduction
or elimination of firm specific risk causes the total risk of a portfolio
to decrease as the number of stocks increase. To study this effect of
diversification more deeply we further added more assets in the
portfolio, calculated its risk and expected return and observed its
effect on the Portfolio.

5 more stocks one by one were added to the portfolio with equal
weight allocated to each portfolio and observed its effect and at last
made a 15 Asset Portfolio and observed how it affected the risk and
return of the portfolio.

The weight of each portfolio with an addition of one asset in every

new portfolio is obtained by dividing one by total number of assets in
the portfolio. Such portfolio is called equally weighted portfolio and
the sum of weights of all the portfolios must be equal to one. The
variance is obtained by using VCV matrix obtained in the same way
as obtained while calculating Portfolio Risk. The Variance for each
portfolio with increasing number of single stock is obtained by using:
where n is number of assets in the portfolio for which we are
calculating variance. Further by taking Square root of Variance we
obtain the daily Risk of the Portfolio.

after particular number of stocks in the portfolio, the decrease will

become negligible. Hence there should be an optimal number of
Assets in the portfolio. While diversification is imperative, it can be
suboptimal to overdiversify. The optimal number of stocks lies in the
range of 15-20 stocks after which effect of diversification becomes
negligible

To verify this an analysis of Berkshire Hathaway portfolio was also

done and the same was observed in it.
Findings & Suggestions :-

The investor can recognize and analyze the risk and return of the shares
by using this analysis.

 The investor who bears high risk will be getting high returns.
 The investor who is having optimum portfolio will be taking .

optimum returns with minimum risk.

 The investor should include all securities which are under

valued in their portfolio and remove those securities that are
over valued.

 The investor has to maintain the portfolio of diversified

sectors stocks rather than investing in a single sector of
different stocks.

 People who are investing in portfolios mostly depend on the

advice of their friends, relatives, financial advisers.

 People generally invest their savings in fixed deposits,

recurring deposits, and national savings certificates and
government securities as they are less risky and the returns
are guarantied.

 Most of the investor invests in basic necessities. They plan to

invest in insurance (LIC, GIC) and pension fund as these give
guarantied returns and are less risky.

 Most of the investors feel that inviting in stock/capital market

is of high risk there fore they don’t invest in them.
SUGGESTIONS

 Select the investments on the basis of economic grounds.

 Buy stock with a disparity and discrepancy between the situation of the

firm - and the expectations and appraisal of the public.

 Buy stocks in companies with potential for surprises.

 Take advantage of volatility before reaching a new equilibrium.

 Listen to rumors and tips, check for yourself.

 Don’t put trust in only one investment. It is like “putting all the eggs in

one basket “. This will help lesson the risk in the long term.

 The investor must select the right advisory body which is has sound

knowledge about the product which they are offering.

 Professionalized advisory is the most important feature to the

investors. Professionalized research, analysis which will be helpful for

reducing any kind of risk to overcome.

Limitations :-

Portfolio management can be defined and used in many a ways,

because the basic meaning of the word is “combination of the
various things keeping intact”. So I considered and evaluated this
from the perspective of the investment part in the securities segment.

From the investor point of view this portfolio followed by him is

very important since through this way one can manage the risk of
investing in securities and thereby managing to get good returns from
the investment in diversified securities instead of putting all the
money into one basket. Now a day’s investors are very cautious in
choosing the right portfolio of securities to avoid the risks from the
market forces and economic forces. So this topic is chosen because
in portfolio management one has to follow certain steps in choosing
the right portfolio in order to get good and effective returns by
managing all the risks.

This topic covers how a particular portfolio has to be chosen

concerning all the securities individual return and there by arriving at
the overall portfolio return. This also covers the various techniques
of evaluation of the portfolio with regard to all the uncertainties and
gives an edge to select the right one. The purpose of choosing this
topic is to know how the portfolio management has to be done in
arriving at the effective one and at the same time make aware the
investor to choose the securities which they want to put in their
portfolio. This also gives an edge in arriving at the right portfolio in
consideration to different securities rather than one single security.
The project is undertaken for the study of my subject thoroughly
while understanding the different case
Conclusion :-

If Financial Analysis is done in a right manner, we can analyze

Investments rigorously and Manage Portfolios using Excel and
Google Sheets. Investment risk can be quantified and measured by
exploring the powerful relationships between stock prices, returns
and risk. We found that risk can be minimized and return can be
maximized to a certain extent by diversification.

We can find out how much to invest in individual stocks of a

portfolio for desired return and risk. We can also find out, the
maximum return that can be obtained from a portfolio by using the
model used in this research.Investment analysis and Portfolio
Management, helps us identify the way in which we should invest in
stocks with some initial calculations and identify the portfolio which
would help us to gain better returns.

When compared to other portfolios, portfolio C gives the maximum

return with 12 scripts.

The diversification of funds in different company scripts is possible

from the portfolio C compared to others.

Market risk is also less when compared with other portfolios.

If the portfolio management is efficient and investor is risk tolerant

person and investment is the long term perspective than it is better to
invest in the MID–Caps and SMALL-Caps companies securities,
where the growth of the returns are higher than the LARGE-Caps.

If investor is risk tolerant person and short term perspective it is good

to invest in the LARGE-Caps companies securities.

I feel that this year small cap and mid cap companies will be
performing well when compared to the large-cap as we have
observed last year.
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