PROJECT REPORT on “A STUDY ON PORTFOLIO MANAGEMENT” BY SYED SUHAIB 1NZ18MBA84 Submitted to DEPARTMENT OF MANAGEMENT STUDIES NEW HORIZON COLLEGE OF ENGINEERING, OUTER RING ROAD, MARATHALLI, BENGALURU In partial fulfilment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION Under the guidance of Dr. A.R. Sainath Senior Professor 2018 - 2020 “ CERTIFICATE This is to certify that Syed Suhaib bearing USN 1NZ18MBA84, is a Bonafede student of Master of Business Administration course of the Institute 2018-20, autonomous program, affiliated to Visvesvaraya Technological University, Belgaum. Project report on “A study on Portfolio Management” is prepared by him under the guidance of Dr. A.R. Sainath, in partial fulfilment of requirements for the award of the degree of Master of Business Administration of Visvesvaraya Technological University, Belgaum Karnataka. Signature of Internal Guide Signature of HOD Principal Name of the Examiners with affiliation Signature with date 1. External Examiner 2. Internal Examiner DECLARATION I, Syed Suhaib, hereby declare that the project report on “A study on Portfolio Management” with reference to “Deal Money” prepared by me under the guidance of Dr. Sainath, faculty of M.B.A Department, New Horizon College of Engineering. I also declare that this project report is towards the partial fulfilment of the university regulations for the award of the degree of Master of Business Administration by Visvesvaraya Technological University, Belgaum. I have undergone an industry project for a period of Eight weeks. I further declare that this report is based on the original study undertaken by me and has not been submitted for the award of a degree/diploma from any other University / Institution. Signature of Student Place: Date: ACKNOWLEDGEMENT The successful completion of the project would not have been possible without the guidance and support of many people. I express my sincere gratitude to Mr. Kumar, Sr. HR Manager, Deal Money, Bengaluru, for allowing to do my project at Deal Money. I thank the staff of Deal Money, Bengaluru for their support and guidance and helping me in completion of the report. I am thankful to my internal guide Dr. Sainath, for his constant support and inspiration throughout the project and invaluable suggestions, guidance and also for providing valuable information. Finally, I express my gratitude towards my parents and family for their continuous support during the study. SYED SUHAIB 1NZ18MBA84 CHAPTER SCHEME: The study has been divided into five chapters and the details of which are as follows: Chapter 1: Introduction, meaning, how to buy commodities, types of commodities, steps for investing in commodities, ways of investment in commodities and how to buy commodities. Chapter2: Research Design It tells about the title of the study, statement of the problem, objective of the study, limitations, methodology, sources of data, plan of analysis and reference period. Chapter 3: Company Profile It gives complete details of the company like inception, type, nature, business operations, products and services offered, competitors and future prospects of the business. Chapter 4: Data Analysis and Interpretation CHAPTER: 1 INTRODUCTION INTRODUCTION Portfolio Management A portfolio is a combination of investment avenues. An investor usually maintains a portfolio. The aim of managing a portfolio is to diversify and reduce risk and take full advantage of return. Portfolio analysis considers the determination of future risk and return in holding various blend of individuals securities. Portfolio expected return is a weighted average of expected return of individual securities but portfolio variance, in short contrast, can be something less than a weighted average security variance. A portfolio is a combination of investment avenues. An investor usually maintains a portfolio. The aim of managing a portfolio is to diversify and reduce risk and take full advantage of return, which is also otherwise known as ‘not placing all your eggs in a single basket’. Portfolio Management is the process, practices and specific activities to perform continuously and consistent evaluation, prioritization, budgeting, and to conclude selection of investments that provide the greatest value and influence to the strategic notice of the investor. Through portfolio management, the investor can explicitly assess the tradeoffs among hostile investment opportunities in terms of their benefit, costs, and risks. The portfolio of few High Network Individual (HNI) has been evaluated and on the basis of that various investment options open for these customers through the securities has been suggested. Each customer has a limit of risk he she can undertake. This has also been observed into and under the limitations, which are the best options available has been advised. 1.1 RISK Risk is a concept that denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or future event. In everyday usage, risk is often used synonymously with the probability of a known loss. Risk is uncertainty of the income/capital appreciation or loss of the both. The total risk of an individual security comprises two components, the market related risk called Systematic Risk also known as undiversifiable risk and the unique risk of that particular security called Unsystematic Risk or diversifiable risk. 1.2 TYPES OF RISK Modern portfolio theory looks at risk of a different perspective. It divides Total risk as follows, Total Risk=Unique Risk=Market Risk. Relationship between diversification and Risk Risk of a security represents that portion of its total risk which stems from firm- specific factors like the development of a new product, a labour strike, or the emergence of a new competitor. Events of this nature primarily affect the specific firm and not all firms in general. Hence, the unique risk of a stock can be washed away by combining it with other stocks. In a diversified portfolio, unique risks of different stocks tend to cancel each other – a favourable development in one firm may offset an adverse happening in another and vice versa. Hence, unique is also referred to as diversifiable risk or unsystematic risk. The Market Risk of a security represents that portion of its risk which is attributable to economy-wide factors like the growth rate of GDP, the level of government spending, money supply, interest rate structure, and inflation rate. Since these factors affect all firms to a greater or lesser degree, investors cannot avoid the risk arising from them, however diversified their portfolios may be. Hence, it is also referred to as systematic risk (as it affects all securities) or non-diversifiable risk. 1.3 INVESTMENT Investment may be defined as an activity that commits funds in any financial form in the present with an expectation of receiving additional return in the future. The expectations bring with it a probability that the quantum of return may vary from a minimum to a maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk. Investment is an activity that is undertaken by those who have savings. Savings can be defined as the excess of income over expenditure. An investor earns/expects to earn additional monetary value from the mode of investment that could be in the form of financial assets. The three important characteristics of any financial assets are: Return – the potential return possible from an asset Risk – the variability in returns of the asset from the chances of its value going down/up. Liquidity – the ease with which an asset can be converted into cash. Investors tend to look at t these three characteristics while deciding on their individual preference [pattern of investments. Each financial asset will have a certain level of each of these characteristics. 1.4 INVESTMENT ALTERNATIVES: An investor has wide range of investment avenues such as: Non – Marketable Financial Assets A good portion of financial assets is represented by non – marketable Financial Assets. They can be classified into various categories such as: ➢ Bank deposits, ➢ Post office deposits, ➢ Company deposits and ➢ Provident fund deposits. Equity Shares Equity shares represent ownership capital. An equity shareholder has an ownership stake in the company i.e. he / she has a residual interest in income and wealth. Equity shares are classified into broad categories by stock market analysts such as: ➢ Blue chip Shares, ➢ Growth Shares, ➢ Income Shares, ➢ Cyclical Shares and ➢ Speculative-shares. Bonds Bonds or Debentures represent long-term debt instruments. The issuer of a bond promises to pay a stipulated stream of cash flow. Bonds may be classified into the following categories such as: ➢ Government Securities, ➢ Savings Bonds, ➢ Government Agency Securities, ➢ PSU Bonds, ➢ Debentures of Private Sector Companies and ➢ Preference Shares. Money Market Instruments Debt Instruments which have a maturity of less than one year at the time of issue are called money market instruments. The important money market instruments are: ➢ Treasury bills, ➢ Commercial paper and ➢ Certificate of deposit. Mutual Fund Schemes Instead of directly buying equity shares and / or fixed income instruments we can participate in various schemes of mutual funds which, in turn, invest in equity shares and fixed income securities. There are three broad types of mutual fund schemes such as: ➢ Equity Schemes