Journal of Science and Technology (JST)

Volume 2, Issue 5, Sep - October 2017, PP 54-63

www.jst.org.in ISSN: 2456 - 5660

Study On Portfolio Management And Investment Decision

K.Rasagna 1, A.Latha2
1
(MBA Department,MallaReddyEngeneeringColleg (A), Maisammaguda, Dullapally,Ranga Reddy Hyderabad.)
2
(MBA Department,MallaReddyEngeneeringColleg (A), Maisammaguda, Dullapally,Ranga Reddy Hyderabad.)

Abstract : Portfolio management is a process encompassing many activities of investment is assets and
securities. it is a dynamic and flexible concept and involves regular and systematic analysis, judgment, and
action. a combination of securities held together will give a beneficial result if they grouped in a manner to
secure higher returns after taking into consideration the risk elements. The main objective of the portfolio
management is to help the investors to make wise choice between alternative investment without a post trading
shares, any portfolio management must specify the objectives like maximum returns, optimum returns, capital
appreciation, safety etc,. in the same prospectus.This service renders optimum returns to the investors by proper
selection and continuous shifting of portfolio from one scheme to another scheme of from one plan to another
plan within the same scheme.five different companies are chosen for the study. WIPRO, ITC, DR.REDDY, ACC,
BHEL. the companies chosen for the study are some of the top performers in the securities market.the study
gives the returns offered by the companies of various securities are compared and conclusions are brought out
which produces large and better portfolio combinations for the investors. It is evident from this analysis that
'BHEL ' and ' DR.REDDYS' are providing good returns when compared to other companies.

Keywords - Portfolio management; financial data; investment; securities; returns.

I. INTRODUCTION

A portfolio is a collection of assets. The assets may be physical or financial like Shares, Bonds, Debentures,
Preference Shares, etc. The individual investor or a fund manager would not like to put all his money in the
shares of one company that would amount to great risk. He would therefore, follow the age old maxim that one
should not put all the eggs into one basket. By doing so, he can achieve objective to maximize portfolio return
and at the same time minimizing the portfolio risk by diversification. Portfolio management is the management
of various financial assets which comprise the portfolio. Portfolio management is a decision – support system
that is designed with a view to meet the multi-faced needs of investors.According to Securities and Exchange
Board of India Portfolio Manager is defined as: ―Portfolio means the total holdings of securities belonging to any
person‖.

REVIEW OF LITERATURE:
Werner F. M. De Bondt, Richard Thale (2004), Research in experimental psychology suggests that, in
violation of Bayes' rule, most people tend to ―overreact‖ to unexpected and dramatic news events. This study of
market efficiency investigates whether such behavior affects stock prices. The empirical evidence, based on
CRSP monthly return data, is consistent with the overreaction hypothesis. Substantial weak form market
inefficiencies are discovered. The results also shed new light on the January returns earned by prior ―winners‖
and ―losers.‖ Portfolios of losers experience exceptionally large January returns as late as five years after
portfolio formation

Vikas Agarwal, Narayan Y. Naik Georgia Narayan Y. Naik. Narayan ( 2004)

This article characterizes the systematic risk exposures of hedge funds using buy-and-hold and option-based
strategies. Our results show that a large number of equity-oriented hedge fund strategies exhibit payoffs
resembling a short position in a put option on the market index and therefore bear significant left-tail risk, risk
that is ignored by the commonly used mean-variance framework. Using a mean-conditional value-at-risk
framework, we demonstrate the extent to which the mean-variance framework underestimates the tail risk.
Finally, working with the systematic risk exposures of hedge funds, we show that their recent performance
appears significantly better than their long-run performance. Robert G. Cooper, Scott J.
Edgett (2014),portfolio Management in New Product Development: Lessons from the Leaders—Journal of
Research _Technology Management, Vol.2, No.52 pp.37-A study of portfolio management practices in industry

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reveals three goals: maximizing the value of the portfolio, achieving the right balance and mix of projects, and
linking the portfolio to the business's strategy. This first of two articles provides examples of portfolio methods
used to achieve the first two goals. Maximizing the portfolio's value is achieved by means of various financial
models, including the Expected Commercial Value method and the Productivity Index, which are outlined and
critiqued. Scoring models are also used to maximize the value of the portfolio. Achieving a balanced portfolio is
quite a different issue, involving the use of bubble diagrams and other visual Catherine P. Killen, Robert A.
Hunt, Elko J. Kleinschmidt 2008 project portfolio management for product innovation Journal
of quality of reliable management , Vol.35, No.3 pp.327-342.The purpose of this paper is to create a
benchmark and identify best practices for Project Portfolio Management (PPM) for both tangible
product‐based and service product‐based development project portfolios.

Design/methodology/approach

– A questionnaire was developed to gather data to comp are the PPM methods used PPM performance,
PPM challenges, and resulting new product success measures in 60 Australian organizations in a
diverse range of service and manufacturing industries. Rogério Tadeu de Oliveira Lacerda The main
aim of this paper is to present a framework to create a better understanding of the context and aid the
portfolio management process. The paper seeks to present a case to illustrate the proposed
methodology, identifying and measuring the success parameters for a project in a portfolio.

Design/methodology/approach

– The research method is a qualitative and quantitative mixture and it is presented as a study case. The
primary data were obtained using semi‐structured interviews with decision makers. Bibliographic
research is used in order to construct the theoretical framework and the intervention instrument adopted
is the multi-criteria decision aiding methodology – constructivist (MCDA‐C).

OBJECTIVES OF THE STUDY:

 To study the investment pattern and its related risks & returns.

 To see whether the portfolio risk is less than individual risk on whose basis the portfolios
are constituted.
 To see whether the selected portfolios is yielding a satisfactory and constant return to the
investor.
 To understand, analyze and select the best portfolio

RESEARCH METHODOLOGY:
The data which is used for the study is purely from secondary source, books, journals, articles, newspapers. The
monthly closing prices have been collected from the official website of National stock exchange for a period of
3 years from 2011-2016. Tools which are used for the analysis is risk, the average, standard deviation, mean,
through risk return analysis of Markowitz model.
Sample size I have taken 6 companies from different sectors.
HYPOTHESIS:
Hypothesis refers to the assumption which is made about the sample before reading the final result. It gives
the direction for the whole project of the research. In our study, the hypotheses
Which have been adopted given below:
H0: There is a relationship between risk and return.H0:There is a relationship between
standard deviation and correlation coefficient.
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DATA ANALYSIS AND INTERPREATION PORTFOLIO ANALYSIS

RANKING OF STANDARD DEVIATION AND MEAN:

Interpretation: From the above analysis the standard deviation of wipro is 0.052,ACC is 0.059, ITC is 0.155,
DR.REDDYS is 0.080,BHEL is 0.12. therefore the above analysis is observed that ACC is 1 st in rank,
DR.REDDYS is 2nd in rank, WIPRO IS 3rd in rank, ITC is 4th in rank, BHEL is 5th.

CALCULATION OF PORTFOLIO WEIGHTS:

COMBINATION OF ACC &WIPRO:

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COMBINATION OF DR.REDDYS & BHEL:

COMBINATION OF ITC & WIPRO:

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CALCULATION OF PORTFOLIO RISK:

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CALCULATION OF PORTFOLIO RETURN:

Rp=(RA*WA) + (RB*WB)

Where Rp = portfolio return

RA= return of A WA= weight of A

RB= return of B WB= weight of B

CALCULATION OF PORTFOLIO RETURN

ACC (a) & WIPRO (b):

RA= 0.059185395

WA=0.86

RB= 0.052794507

WB=0.135

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Rp = (0.0591*0.86) + (0.0527*0.135)

Rp = (0.050826+ 0.0071145)

Rp = 5.79%

DR.REDDYS (a) & BHEL(b):

RA= 0.080689928

WA=0.78

RB= 0.124784675

WB=0.91

Rp = (0.0806*0.78) + (0.1247*0.91)

Rp = (0.062868 + 0.113477)

Rp = 17.63%

ITC (a) & WIPRO(b):

RA= 0.155383138

WA=0.122

RB= 0.052794507

WB=0.87

Rp = (0.1553*0.122) + (0.0527*0.87)

Rp = (0.0189466 + 0.045849)

Rp = 6.47%

CORRELATION OF COMPANIES:

PORTFOLIOS CORELATION(P) RANK

ACC &WIPRO 0.175 2
BHEL&DR.REDDY 0.167 3
ITC&WIPRO 0.273 1

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INTERPRETATION: From the above analysis the combination of portfolio return is 17.63 for DR.REDDYS
which gives 1st rank with 0.138 risk,5.79 for ACC &WIPRO which gives 2 nd rank with 0.107 risk,6.47 for
ITC&WIPRO which gives 3rd rank with 0.088 risk .risk and return ranks are same for the companies.

PORTFOLIO RETURNS:

PORTFOLIOS return RP RANK

ACC &WIPRO 5.79 3
BHEL&DR.REDDY 17.63 1
ITC&WIPRO 6.47 2

INTERPRETATION: From the above analysis the combination of portfolio return is 17.63 for DR.REDDYS
which gives 1st rank ,5.79 for ACC &WIPRO which gives 2 nd rank ,6.47 for ITC&WIPRO which gives 3rd rank .

PORTFOLIO RISK:

PORTFOLIOS RISK SP RANK

ACC &WIPRO 0.088 3

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BHEL&DR.REDDY 0.138 1
ITC&WIPRO 0.107 2

INTERPRETATION:

From the above analysis the combination of portfolio risk is 0.138 for DR.REDDYS which
gives 1st rank ,0.088 for ACC &WIPRO which gives 2nd rank ,0.107 for ITC&WIPRO which
gives 3rd rank .

FINDINGS:

1. The standard deviation for ACC is 0.059 and for wipro is 0.052. when compared to both the risk is
almost same,hence the risk is same when invested in either of the security.
2. The combination of ACC & WIPRO gives the proportion of investment is 0.86 and 0.13 for ACC &
WIPRO, based on the standard deviation.
3. The combination of BHEL &DR.REDDY’S gives the proportion of investment is 0.78 and 0.91 for
BHEL & WIPRO, based on standard deviation.
4. The correlation coefficient for ITC & WIPRO combination is 0.2727 and least combination correlation
coeffient is 0.167 for BHEL & DR.REDDYS.
5. The highest portfolio return of combination BHEL & DR.REDDYS is 17.63 and the least portfolio
return is ACC & WIPRO as 5.79. by this it is clear that the return from portfolios are high if investor is
investing in BHEL & DR.REDDYS.
6. The highest portfolio risk of combination BHEL & DR.REDDYS is 0.138 and the least portfolio risk is
ACC & WIPRO as 0.088.

SUGGESTIONS:

1. Investor would be able to achieve when the returns of share and debentures resultant portfolio would be
known as diversified portfolio.
2. Thus portfolio construction would addresses itself to three major via. Selectivity , timings and
diversification.
3. Incase portfolio management negatively correlated assets are most profitable.
4. Investor may invest their money for long run, as both the combinations are almost suitable portfolios.
5. A rational investor would constantly examine his chosen portfolio both for average return and risk.

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CONCUSION:
In case of perfectly correlated securities or stocks , the risk can be reduced to a minimum point. In case of
negatively correlative securities the risk can be reduced to a zero. (which is company’s risk) but the market risk
prevails the same for security or stock in the portfolio.In case of perfect positive co-relation securities or stock,
the risk can be reduced to a minimum level, were as in the case of negative correlated securities the risk can be
reduced to zero, which is company risk but the market risk prevails the same for the security or stock in
portfolio.Positive correlation means both the securities are moving in the same direction i.e., either upward or
downward. Whereas negative correlation means, the securities are moving in opposite direction, which is more
portfolio.

REFERENCES :
1. Werner F. M. De Bondt, Richard Thale (2004), Does the Stock Market Overreact?. The Journal of
Finance, Vol. 40, No. 3.
2. Vikas Agarwal, Narayan Y. Naik Georgia Narayan Y. Naik. Narayan ( 2004)
3. Robert G. Cooper, Scott J. Edgett (2014), Portfolio Management in New Product Development:
Lessons from the Leaders—Journal of Research _Technology Management, Vol.2, No.52 pp.37
4. Catherine P. Killen, Robert A. Hunt, Elko J. Kleinschmidt 2008

ROGÉRIO TADEU DE OLIVEIRA LACERDA, LEONARDO ENSSLIN, SANDRA ROLIM ENSSLIN, A PERFORMANCE
MEASUREMENT FRAMEWORK IN PORTFOLIO MANAGEMENT. JOURNALS OF MANAGEMENT HISTORY VOL 22, NO
2011 54, PP

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