The document discusses a live project on security analysis and portfolio management aimed at studying companies' financial health through stock price movements. It includes objectives, processes, equity valuation, risk assessment, and portfolio evaluation of various stocks like Ambuja Cement, Cipla, Hero Motors, Kotak Mahindra Bank, and Ranbaxy. The project emphasizes maximizing investor returns while minimizing risk through diversification, technical and fundamental analysis, and understanding market conditions.

1. Security Analysis and
Portfolio Management
Presenting By:
Himanshu Jain
913003
International School of Business & Media

2. INTRODUCTION
• Live Project is all about studying the company’s financial health through the
movement of their stock price.
• It discusses various aspects of portfolio management, ranging from analysis,
selection, and revision to evaluation of portfolio, securities market and risk
evaluation.
• This live project helped to understand how the stock prices vary. It also helped to
know and calculate several technical terms.
• Stocks that assigned are:
1. Ambuja Cement (AMBUJACEM)
2. Cipla
3. Hero Motors (HEROMOTOCO)
4. Kotak Mahindra Bank (KOTAKBANK)
5. Ranbaxy

3. OBJECTIVE
• The main objective of this live assignment is to give the optimum returns to
the investor by considering risk and return, portfolio risk, portfolio return and
several other factors which helps to determine where to invest for an investor.

4. PROCESS
UPDATE DAILY
CLOSING
PRICE,OPENING
PRICE,HIGH,LOW,
PREV.CLOSE
Data Analysis of each
through NSE per day
CALCULATE
%CHANGE
Finding the reason for
percentage change for
every change of above
+5 and -5.
PERFORM EQUITY
ANALYSIS
EVALUATION OF
PORTFOLIO(RISK
AND RETURN OF
ALL)
CALCULATE
PORTFOLIO OF B
calculate
correlation,variance,B
of all stocks
ANALYSE THE DATA
WITH THE HELP OF
TECHNICAL
ANALYSIS
ALSO PERFORM
COMPANY ANALYSIS
DECISION TO BE
TAKEN

5. EQUITY VALUATION
• Finding the Intrinsic Value of the Different stocks by finding the Return on
Equity, Dividend, Earning per share, Retention Ratio, Growth, Future
Dividend and Expected Return by taking the Closing Price of the stocks.
• Growth= ROE * Retention Ratio
• Expected Return(Ke), Intrinsic value(Po)
• Po= D1/(Ke-g)

6. AMBUJA CEMENT
Year ROE Divd. EPS Retention Ratio
2008-09 -41% 2.2 9.21 72%
2009-10 67% 2.4 8.00 65%
2010-11 25% 2.6 8.28 63%
2011-12 17% 3.2 8.02 54%
2012-13 1% 3.6 8.43 50%
14% 61%
Growth 0.08
Future Div. 3.901772
Expected Return 0.11
Ke-g 0.03
Expected price 149.07

7. CIPLA
Year ROE Divd. Profit Retained Retained %
2007-08 -2.48% 2 701.43 519.55 74.07
2008-09 -0.11% 2 776.81 594.93 76.59
2009-10 54.60% 2 1081.49 894.24 82.69
2010-11 -5.12% 2.8 960.39 698.86 72.77
2011-12 -4.61% 2 1123.96 937.32 83.39
2012-13 22.84% 2 1507.11 1319.24 87.53
11% 79.51
Growth 0.09
Future Div. 2.17
Expected Return 0.11
Ke-G 0.02
Expected M.P 217.00

8. HERO MOTORS
Year ROE Div. EPS Retention Ratio
2006-07 38.30% 17 43 60.47%
2007-08 35.50% 19 48.5 60.82%
2008-09 37.80% 20 64.2 68.85%
2009-10 61.40% 110 111.8 1.61%
2010-11 65.20% 105 96.5 -8.81%
2011-12 55.40% 45 119.1 62.22%
2012-13 42.30% 60 106.1 43.45%
47.99% 41.23%
Growth 0.1978
Future Div. 71.87
Expected Return 0.24
Ke-g 0.04
Expected Price 1704.78

9. KOTAK MAHINDRA BANK
Year ROE Dividend EPS Retention Ratio
2006-07 68% 0.70 4.33 83.83%
2007-08 36% 0.75 8.53 91.21%
2008-09 -56% 0.75 7.99 90.61%
2009-10 150% 0.85 16.12 94.73%
2010-11 -39% 0.50 11.1 95.50%
2011-12 21% 0.60 14.65 95.90%
2012-13 17% 0.70 18.23 96.16%
28.32% 92.56%
Growth 0.2622
Future Div. 0.884
Expected Return 0.29
Ke-g 0.0278
Expected M.P 31.80

10. RANBAXY
Year ROE Dividend EPS Retention Ratio
2006-07 -20.09% 8.5 9.87 13.88%
2007-08 28.35% 8.5 11.31 24.85%
2008-09 -62.85% 0 -27.29 0%
2009-10 166.33% 0 10.74 100.00%
2010-11 -6.43% 2 23.75 91.58%
2011-12 4.18% 0 -72.42 0%
2012-13 -4.40% 0 -3.85 0%
15.01% 32.90%
Growth 0.0494
Future Div. 0
Expected Return 0.10
Ke-g 0.0506
Expected Price 0

11. BETA
• Beta is a Sensitivity of an individual stock or portfolio’s return to the return
on the market index.
• Beta measures the SENSITIVITY of the stocks responsiveness to the market
factors.
• Beta measures how much a stock would rise or fall if market raises/falls
Beta(B)=Cov.( x, y)/ Var.x

12. Beta of Stocks(13 Jan-07 March)
SI.NO. STOCKS COV. VAR. BETA(B)
1 AMBUJACEM 1.27 0.72 1.76
2 CIPLA 0.42 0.72 0.58
3 HEROMOTOCO 0.37 0.72 0.51
4 KOTAKBANK 1.13 0.72 1.58
5 RANBAXY 1.51 0.72 2.11

13. Beta of Portfolio
SI. No. Stock Price Quantity Beta(B) Value Weightage WiBi
1 Ambujacem 162.00 4999 1.76 ₹ 8,09,838.00 0.16 0.29
2 Cipla 369.20 3000 0.58 ₹ 11,07,600.00 0.22 0.13
3 Heromotoco 1919.15 570 0.51 ₹ 10,93,915.50 0.22 0.11
4 Kotakbank 672.05 1905 1.58 ₹ 12,80,255.25 0.26 0.40
5 Ranbaxy 354.15 2000 2.11 ₹ 7,08,300.00 0.14 0.30
Total ₹ 49,99,908.75 1.23
Portfolio Beta(B) 1.23

14. EXPECTED RETURN
• The amount one would anticipate receiving on an investment that has various
known or expected rates of return.
• The expected return is a tool used to determine whether or not an investment
has a positive or negative average net outcome - it is not a hard and fast figure
of profit or loss.
• E(R)=Avg. of returns from stock
• E(Rp)=Ʃ Wi * E(Ri) Where W is weight of a security in portfolio

15. Expected Return(13 Jan- 07 March)
SI.NO. STOCKS E[R]
1 NIFTY 0.11%
2 AMBUJACEM 0.20%
3 CIPLA -0.13%
4 HEROMOTOCO -0.03%
5 KOTAKBANK -0.01%
6 RANBAXY -0.36%

16. Expected Return of Portfolio
SI.NO. STOCKS
1 AMBUJACEM
2 CIPLA
3 HEROMOTCOP
4 KOTAKBANK
5 RANBAXY
Expected Return of
Portfolio
E(R)(1 &2) 0.04
E(R)(1 &3) 0.09
E(R)(1 &4) 0.10
E(R)(1 &5) -0.08
E(R)(2 &3) -0.08
E(R)(2 &4) -0.07
E(R)(2 &5) -0.24
E(R)(3 &4) -0.02
E(R)(3 &5) -0.20
E(R)(4 &5) -0.18

17. Risk
• Risk refers to the possibility that the actual outcome of an investment will
differ from its expected outcomes.
• Most investors are concerned about the actual outcomes being less then the
expected outcome.
• The wider the range of possible outcomes, the greater the risk.
• Risk for individual stocks
σ=√Ʃ((Ri-E(R))^2)/(n-1)
• Risk for Portfolio(1 & 2)
σp=√((W1*σ1)^2) + ((W2*σ2)^2) + (2*W1*σ1* W2*σ2*ρ)
Where ρ= Correlation cofficent

18. Individual Risk
SI.NO. STOCKS RISK
1 AMBUJACEM 2.11%
2 CIPLA 1.73%
3 HEROMOTCOP 1.23%
4 KOTAKBANK 1.72%
5 RANBAXY 3.91%

19. Portfolio Risk
Co variance Coff. Of Correlation Risk of Portfolio
COV.(1 &2) 0.01 Coff. Of Corr.(1 &2) 31.94 Risk(1 & 2) 7.75%
COV.(1 &3) 0.01 Coff. Of Corr.(1 &3) 25.12 Risk(1 & 3) 5.83%
COV.(1 &4) 0.02 Coff. Of Corr.(1 &4) 51.26 Risk(1 & 4) 9.74%
COV.(1 &5) 0.03 Coff. Of Corr.(1 &5) 42.07 Risk(1 & 5) 13.36%
COV.(2 &3) 0.00 Coff. Of Corr.(2 &3) 20.93 Risk(2 & 3) 4.83%
COV.(2 &4) 0.01 Coff. Of Corr.(2 &4) 23.45 Risk(2 & 4) 6.03%
COV.(2 &5) 0.01 Coff. Of Corr.(2&5) 7.88 Risk(2 & 5) 5.59%
COV.(3 &4) 0.01 Coff. Of Corr.(3 &4) 40.28 Risk(3 & 4) 6.60%
COV.(3 &5) 0.01 Coff. Of Corr.(3 &5) 19.55 Risk(3 & 5) 7.15%
COV.(4 &5) 0.03 Coff. Of Corr.(4 &5) 42.87 Risk(4 & 5) 12.20%
SI.NO. STOCKS
1 AMBUJACEM
2 CIPLA
3 HEROMOTCOP
4 KOTAKBANK
5 RANBAXY

20. Portfolio Evaluation
Three Tools to calculate :
1. Sharpe Ratio= (E(R)-Rf)/σp
2. Treynor Ratio=(E(R)-Rf)/βp
3. Jenson’s Alpha= E(R)-RR

21. Portfolio Evaluation
Sharp Ratio Beta(B) Treynors Ratio Jensens Alpha
-0.29 24.75 -0.09 -1.86
0.45 14.64 0.18 -1.31
0.39 49.92 0.08 -3.06
-1.05 56.22 -0.25 -3.55
-2.85 10.10 -1.36 -1.24
-2.09 14.14 -0.89 -1.43
-5.46 4.40 -6.92 -1.12
-1.17 26.59 -0.29 -2.01
-3.58 13.98 -1.83 -1.56
-2.00 52.32 -0.47 -3.46

22. Technical Analysis
NIFTY

23. AMBUJA CEMENT

24. CIPLA

25. HERO MOTORS

26. KOTAK MAHINDRA BANK

27. RANBAXY

28. Company Analysis
Financial analysis of Ambuja Cement (FOR THE YEAR 2012-13)
1. Return on equity =1 %
2. Book Value per share = 57.24
3. Earnings per share = 8.43
4. Dividend payout ratio = 50 %
5. Dividend per share = 3.60

29. Company Analysis
Growth Performance
• CAGR of sales = (sales for 2008/sales for 2012)1/5 - 1
= (6220/9675)1/5-1
= -0.08
• CAGR of E.P.S = (E.P.S of 2008/E.P.S of 2012)1/5 -1
= (9.21/8.43)1/5-1
= 0.02
• CAGR of dividend = (D.P.S of 2008/ D.P.S of 2012)1/5-1
= (2.2/3.6)1/5-1
= -0.09
Sustainable growth Rate
• SGR = Retention ratio * Return on equity
= 0.50 * 0.01
=0.0050
=0.50%

30. LARNINGS & CONCLUSION
• This live project helped me to understand the following things:
• Different approaches of Evaluation of expected return and risk for each stock.
• Under this project, I got to know about portfolio management including the evaluation of portfolio with the objective
of maximising returns and minimising risk.
• Diversification of investment in order to reduce the risk of loss by not putting all the eggs into one basket.
• Analysis of market condition and forecasting future changes.
• To know how to reduce the risk and get more return in the portfolio.
• Understanding the volatility of the stocks and their returns.
• To know the company credibility in the stock market.
• Calculate of deviation, correlation of the stocks.
• How technical analysis is done.
• Fundamental analysis of a company.
Conclusion:
• Live project had enabled to perform analysis and then to decide the best portfolio for investment to get higher
return