Modern Portfolio Theory (MPT), a hypothesis put forth by Harry Markowitz in his paper "Portfolio Selection," is an investment theory based on the idea that risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward. It is one of the most important and influential economic theories dealing with finance and investment.

1. The Indotraders
An Investment fund
Submitted by
Debiprasad Dash-16202161

2. Sectors wise contribution to GDP
2%7%
9%
15%
2%
6%
8%
51%
Sectors contribution to India GDP
Pharma Sector Auto mobile sector Real Estate
Oil & Gas FMCG Banking
IT Others
3%5%
19%
27%5%
41%
Sectors contribution to USA GDP
Aerospace&Defence.xlsx Electronics
FMCG Pharma
Telecome Others

3. 23.3%
39.8%
20.0%
34.1%
43.9%
18.4%
44.58%
17.08%
136%
112%
2.4% 5.6%
23.4%
30.3%
9.3%
21.3%
10.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
Auto
mobile
sector
Eicher
Motors
Ashok
Leyland
Real
Estate
industry
Siemens Adani
Ports
Oil &
Gas
industry
ONGC FMCG
industry
HUL Banking
sector
PNB IT sector Infosys Pharma
Sector
Lupin Cadila
Health
INDUSTRY vs. COMPANY PERFORMANCE IND(ROE)

4. 33.8%
35.6%
7.4%
41.4%
35.1%
59.9%
41.2%
56.3%
33.9% 34.2% 35.1%
28.3%
7.9%
3.6%
7.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
INDUSTRY vs. COMPANY PERFORMANCE US(ROE)

5. Security market line
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
-1 -0.5 0 0.5 1 1.5 2
ExpectedReturn
Beta
SML(India)
SML Stocks
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
-1 -0.5 0 0.5 1 1.5 2ExpectedReturn
Beta
SML (US)

6. Efficient frontier(2003-17)
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%
Return
Risk
both market India market US market tangent
PortfolioReturnPortfolioRisk
Both 2.79% 4.11%
India 3.22% 6.11%
US 2.08% 6.61%

7. Before crisis (2003-07)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
2003-07
both India US Tangent
PortfolioReturnPortfolioRisk
Both 3.22% 2.80%
India 5.91% 7.27%
Us 3.22% 7.89%

8. After Crisis(2007-17)
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%
2007-17
Both India US Tangent
Portfolio Return Portfolio Risk
Both 2.57% 3.84%
India 3.27% 5.75%
Us 1.80% 6.34%

9. Explanation for the results
• From the efficient frontier it can be seen that diversification of portfolio in both
Indian and US market is to be adopted.
• Indian economy is an emerging and growing economy and hence since these
industries contribute the most to the GDP, investing in those industries with the
stocks of those companies who have an average better than industry average is a
good idea.
• After 2008 crisis the US economy has suffered a lot and investing in the US
industries alone is not sufficient to earn greater returns with lower risks
although capital is not a huge problem,
• Also the US economy has saturated and the growth is slow in comparison to the
Indian economy where in most sectors 100% FDI is involved.
• Hence portfolio diversification in both the economies would generate better
returns with optimum risk.

10. Implications of this research
• From the efficient frontier it is seen that since the investment in both
markets provide a much higher return than the individual Indian and US
market returns for a particular risk, the efficient frontier for both the
markets is chosen implying to invest in both markets

11. How can Industry Practitioners utilize the project work
• The efficient frontier gives an idea about various risks and returns for those
risks and helps the investor in deciding to invest and diversify the portfolio in
which all markets to minimize risks and generate an optimum return.
• The tangent joining the risk free rate and efficient frontier shows that below
the tangent point the investor could invest money of the people and above
the tangent point shows the investor invests by burrowing money from the
government.
• The risk free rate point in the efficient frontier means the minimum return
that the investor is bound to get under no risks.

12. Conclusion
• Diversified Portfolio with unrelated stocks in combined market reduces correlation and
the risk of the investment.
• Expected return is maximized for a given level of risk
• We will be investing in both the market after the crisis scenario In the following stocks
with different levels of weights.
Lupin Cadila EicherMotorsLarsen&Toubro:L&TIndiaONGC HUL PNB Apple Pepsi AmgenInc.(A
Return 2.43% 3.14% 4.78% 2.10% 1.18% 1.91% 3.74% 2.33% 0.55% 1.04%
Weights 4% 25% 16% 5% 1% 16% 1% 18% 1% 14%