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Risk return trade off
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Risk return trade off

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  • 1. Rising Rupee & Market, Benefit To ADR Holder: An Approach To Risk – Return Trade Off International Diversification of Portfolio, for High Return & Reducing Systematic Risk Citi Bank Depository DR for ABC Investor (India) Ltd. In US Capital Creation of Depository Market Listing on NYSE/ NASDAQ/LSE/LxSE IN ABC INDIA LTD LISTED ON BSE •10 ADRs representing one share each. •BSE rises by 25 % • i.e. 10 shares of ABC ltd. @ Rs. 480 each. •ABC Shares has beta coefficient 1.00 appreciated by 25% • Invested Rs 4800/- Inflow • When US $ 1.00 = Rs 48.00 (US $ 100) • US $ 100 Inflow of Capital •Current market price, Rs 600/- each share Invested US $ 100 Received US $ 150 Collected Rs 6000/- Rupee appreciate to US $ 1.00 = Rs 40/- Net Saving US $ 50 10 shares of ABC India ltd sold for Rs 600/- (net tax & brokerage) Return to ADR Holder Conversion of Rs. 6000.00 US $ 150 1
  • 2. International Diversification of Portfolio, for High Return & Reducing Systematic Risk Growing Economy • Stability of Rupee • Rising Sensex Entry of Capital Inflow • Control in Inflation DR • High GDP Investor • Partial Capital Listing on NYSE/ NASDAQ/LSE/ LxSE SHORT – LISTING BLUE CHIPS COMPANIES • Infosys • UTI Bank • Hindalco • Ranbaxy •Tata Motors EMERGING SECTORS • I.T • Banks • Metal • Pharmaceuticals • Automobile PRIMARY MARKET INTERNAL MARKET Profit & capital out flow Account Convertibility Creation of ADR/GDRS Market • Technology • Good Governance BSE/ NSE EFFICIENT MARKET • On Line Trading • Dematerialization • Foreign Broker • Efficient Pricing • Custodial Services • FIIs presence Two-way discovery of price & arbitrage Value For Investment •Higher share price •Liquidity •Blue chip •Increase in FIIs holdings •Expansion stage of companies SECONDARY MARKET EXTERNAL MARKET Two-way Market Integration: Atop Down & Bottom Up Approach Using the Fungibility Profit Booking on underlying • Accounting Disclosure • Global Perspective High EPS and Dividend Conversion of Dividend amount in US $ Remittance of US $ to Holders 2

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