POST GRADUATE PROGRAMME IN MANAGEMENT

AY 2021-22 TERM: IV

TITLE OF THE COURSE: INVESTMENT ANALYSIS AND PORTFOLIO

MANAGEMENT
CREDITS: 4 NO. OF SECTIONS: 2

Name of the Faculty Faculty Email Telephone

Block/ Number
Room No.
Gaurav Singh Chauhan J 201 [email protected] 0731-2439592

CONSULTATION TIME FOR STUDENTS

Name of the Faculty Timing
Gaurav Singh Chauhan Wednesdays 4 5 PM

COURSE DESCRIPTION

The course deals with salient features of investment analysis for different asset classes such as debt
and equity along with their investment environment. Portfolio management is given a
comprehensive treatment in major portions of the course. Systematic enquiry into investment
climate, investment vehicles and asset classes are accomplished largely through discussions and
problem solving on relevant aspects. The participants are exposed to real time issues in investment
analysis and portfolio management faced by a typical portfolio manager.

COURSE OBJECTIVES

To familiarize participants with investment climate, products and instruments along with the
market place to transact in such products.
To implement the risk and return consideration of a client through asset allocation.
To undertake a systematic analysis of equity and debt securities as investment vehicles.
To apply the investment process for constructing a desired portfolio.
To review actively pursued strategies for managing portfolios.
To evaluate the performance of a subject portfolio over a period of time.

PEDAGOGY/TEACHING METHOD:

This course will mostly follow class room discussions and problem solving through mini cases. Mini
cases are designed to focus on core concepts consistent with the learning objectives for each session.
Participants will also work on group assignments to get a hands-on experience in active security
analysis, portfolio construction, management and performance evaluation process of a suitable
portfolio.

PRE-REQUISITE FOR COURSE, IF ANY:

The course is structured in a rigorous way to impart essential learning in contemporary portfolio
management. As such the course does not require any specialized training in finance or quantitative
techniques but rely mostly on basic insights from these two domains. Participants willing to invest
time in readings and getting a hands-on experience to model portfolio problems and their
implementation would find the course most suitable. Similarly, those participants looking only for a
cursory treatment of the topic may find the structure quite tedious.

IF DOUBLE SECTION, ATTENDANCE IN SISTER SECTION: ALLOWED

EVALUATION

Individual Component Group Component Weightage

Quizzes 40%
Mid-term examination 30%
End-term examination 30%
Total 100%

* There will be no make-up examination for any component.

ACADEMIC DISHONESTY
IIM Indore believes in Academic honesty. Academic dishonesty or misconduct is cheating that
relates to an academic activity. It is a violation of trust between the Institute and its stakeholders.
Plagiarism, fabrication, deception, cheating and sabotage are examples of unacceptable academic
conduct. Please consult the Programme manual for the section on academic dishonesty.

SCHEDULE OF SESSIONS

Module I : Security Markets and Asset Classes

Module Objective: The module introduces the investment avenues for different asset classes and
their market microstructure. Participants are familiarized with the functioning of these markets and
their nuances to take an informed call while executing portfolio decisions.
 Session 1, 2 Financial Markets and Instruments-An Overview

Objective: Products and instruments; features of equity, debt and derivative markets in India
and abroad; regulatory frameworks.

Reading: 1.An overview of Indian securities market (NSE)

2. Indian Debt Market: A profile (NSE)
3. Debt Instruments: Fundamental Features (NSE)
4. Sources of Return and Traditional Yield Measures (CFA)
5. Mutual Funds (NSE)
6. The Derivatives Market: Products (NSE)
Case: The Trading Execution Dilemma (Estimating execution costs in stock market
trades; impact of taxes on returns on investments.)
Session 3 Functioning of Financial Markets

Objective: Market microstructure; security issuances; listing requirements; functions of

exchanges and depositories; clearing mechanisms; trading platforms; international
markets.
Reading:
1. Market Microstructure (CFA)
2. International Markets (NSE)
Case:
Bond Market Nuances (Computing bond yields and spreads; interpreting
market quotes.)

Module II Investment Analysis

Module Objective: The module deals with the analysis of typical equity and debt securities along
with the discussions on their valuation frameworks.

Session 4, 5 Investment Analysis-Equity

Objective: Risk and return considerations; types of equity based portfolios and their
features.

Reading: 1. Mutual Funds: Products, features and Regulations (NSE)

2. Mutual Fund Regulation (NSE)
3. Exchange traded funds: Gold ETFs (NSE)
4. Private equity and Hedge Funds (CFA)
Session 6, 7

Objective: Types of fixed income based portfolios and their features; effect of taxations
and regulatory requirements.

Reading: 1. Debt Funds (NSE)

2. Liquid Funds and Taxations (NSE)
 Session 8

Objective: Scope for technical analysis market efficiency; Trading Rules and Indicators;
price and volume movements; buy-sell decisions
Reading:
RB- Ch 15.

Case: Charting the Infra Giant: L&T at NSE (Technical charting using moving
averages, indicators and overlays.)
Session 9, 10

Objective: Fixed income portfolio analysis; term structure of interest rates; price sensitivity
of securities; duration and convexity; valuation frameworks.

Reading: 1. Risk in Fixed Income Securities (CFA)

2. Yield measures, Spot Rates and Forward Rates (CFA)

Case: 1. Asymmetric Bond Prices through Interest Rate Cycles (price sensitivity of
fixed income securities.)

2. Pricing the Fixed Ones (introduction to spot rates, nominal and zero
volatility spreads; and embedded securities)

Module III Portfolio Management

Module Objective:
module also deals with the key strategies to generate returns through a portfolio. A manager would
like to generate the desired returns through actively or passively managing the portfolio. The
module subsequently deals with maintenance issues concerned with execution, monitoring and
rebalancing of a portfolio.

Session 11, 12

Objective: Portfolio problem; correlation structure between assets; quantitative equity

portfolio construction.

Reading: 1. The Correlation Structure of Security Returns: The single index model
(EGBG)

Case:
Delineating Efficient Frontier (constructing efficient frontiers for a
hypothetical portfolio by varying correlation structure between assets.)
Session 13

Objective: Passive vs. active management; active portfolio management in nearly

efficient markets; tactical asset allocation.

Reading: 1. Introduction to Active Portfolio Management (CFA)

2 The Lure of Active Management (CFA)
Case:
The Active Portfolio (estimating active risk, tracking error, tracking risk,
information ratio.)
Session 14

Objective: Indexing or benchmarking for equity and bonds; index construction and
biases; core-satellite approach of portfolio construction

Reading: 1. Equity Market Indices (NSE)

2. Bond Market Indices and Benchmarks (NSE)
3. The Role of Equity Portfolio and Semiactive Equity Investing (CFA)

Case:
Indexing the Investment (index construction and establishing passive
exposure to asset classes.)
Session 15 Active

Objective: Investment styles and indices; total active returns; alpha and beta separation;
introducing protection using derivatives.

Reading: 1. Active Equity Investing (CFA)

Case: Generating Excess Returns-The Far-fetched Dream (interpreting style

active returns.)
Session 16

Objective: Trading costs and effective spreads in market orders; execution costs; trading
tactics; need for periodic monitoring.

Reading: 1. The Cost of Trading (CFA)

2. Monitoring (CFA)

Case: Trading Cost: Is it Significant? (calculate execution and trading cost of a

hypothetical portfolio)
 Session 17

Objective: Cost-benefit analysis of rebalancing a portfolio; rebalancing strategies and

portfolio insurance.

Reading: 1. Rebalancing the Portfolio (CFA)

Case: Time to Rebalance (rebalancing tactics to minimize costs of investment

portfolios.)

Module V Performance Evaluation

Module Objective: The module deals with the core idea of compensating portfolio managers for
their performance. It deals with the three components of performance evaluation viz: the
performance measurement, attribution and appraisal.

Session 18, 19

Objective: Time-weighted and money-weighted rates of returns; risk adjusted

performance measures such as alpha, information ratios, Treynor measure,
Sharpe ratio, Sortino measure and M2; Decomposition of portfolio returns
into core components; performance benchmarks; performance appraisal;
Reading: quality control charts; portfolio manager continuation policy.

1. Performance Measurement, Attribution and Appraisal (CFA)

Case:
(measuring performance of
portfolios using risk adjusted measures)

(Identifying net selectivity or

excess returns by managers of mutual funds.)
Session 20

Objective: Understanding performance evaluation of real time portfolios.

Case: Tata Equity PE Fund: Performance Measurement and Attribution. Ivey case
product no: 9B18N025.

Text Book for the course: Please give the details of the book if students need to buy the book
There is no specified text for this course. However, participants may find it useful to refer any or all of
the following texts and reference material. Readings from various sources is compiled for ready
reference and is available with the instructor for reference. These readings are specified for each
session in the course outline.
1. Reilly, F., and Brown, K. (2006). Investment Analysis and Portfolio Management. Eighth Edition,
Cengage Learning (Thomson South-Western), India. (Referred to as RB henceforth)
2. Elton, E., Gruber, M., Brown, S., and Goetzmann, W. (2009). Modern Portfolio Theory and
Investment Analysis. Wiley. (Referred to as EGBG henceforth)
3. NCFM Modules from NSE available at (Referred to as NSE henceforth)
http://www.nse-india.com/education/content/about_ncfm.htm
4. Reading from CFA institute USA. (Referred to as CFA henceforth)
5. Financial Analyst Journal, CFA institute USA.

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