CALCULATION OF AVERAGE RETURN OF COMPANIES:



CHAPTER-I INTRODUCTIONThe.Risk.Management.to.Business.Success:Risk management is an important part of planning for businesses. The process of risk management is designed to reduce or eliminate the risk of certain kinds of events happening..or..having..an..impact..on..the..business.Definition.of.Risk.Management:Risk management is a process for identifying, assessing, and prioritizing risks of different kinds. Once the risks are identified, the risk manager will create a plan to minimize or eliminate the impact of negative events. A variety of strategies is available, depending on the type of risk and the type of business. There are a number of risk management standards, including those developed by the Project Management Institute, the International Organization for Standardization (ISO), the National Institute..of..Science..and..Technology,.and..actuarial..societies.Types.of.Risk:There are many different types of risk that risk management plans can mitigate. Common risks include things like accidents in the workplace or fires, tornadoes, earthquakes, and other natural disasters. It can also include legal risks like fraud, theft, and sexual harassment lawsuits. Risks can also relate to business practices, uncertainty in financial markets, failures in projects, credit risks, or the security and storage..of..data..and..records.Goals.of.Risk.Management:the idea behind using risk management practices is to protect businesses from being vulnerable. Many business risk management plans may focus on keeping the company viable and reducing financial risks. However, risk management is also designed to protect the employees, customers, and general public from negative events like fires or acts of terrorism that may affect them. Risk management practices are also about preserving the physical facilities, data, records, and physical assets a company owns or uses.Process for Identifying and Managing Risk:While a variety of different strategies can mitigate or eliminate risk, the process for identifying and managing the risk is fairly standard and consists of five basic steps. First, threats or risks are identified. Second, the vulnerability of key assets like information to the identified threats is assessed. Next, the risk manager must determine the expected consequences of specific threats to assets. The last two steps in the process are to figure out ways to reduce risks and then prioritize the risk management procedures based on their..importance. Strategies.for.Managing.Risk:There are as many different types of strategies for managing risk as there are types of risks. These break down into four main categories. Risk can be managed by accepting the consequences of a risk and budgeting for it. Another strategy is to transfer the risk to another party by insuring against a particular, like fire or a slip-and-fall accident. Closing down a particular high-risk area of a business can avoid risk. Finally, the manager can reduce the risk’s negative effects, for instance, by installing sprinklers for fires or instituting..a..back-up..plan..for..data.Having a risk management plan is an important part of maintaining a successful and responsible company. Every company should have one. It will help to protect people as well as physical and financial assets.NEED & IMPORTANCE OF STUDY:Portfolio management or investment helps investors in effective and efficient management of their investment to achieve this goal. The rapid growth of capital markets in India has opened up new investment avenues for investors. The stock markets have become attractive investment options for the common man. But the need is to be able to effectively and efficiently manage investments in order to keep maximum returns with minimum risk.Hence this study on RISK MANAGEMENT” to examine the role process and merits of effective investment management and decision.SCOPE OF STUDY:This study covers the Markowitz model. The study covers the calculation of correlations between the different securities in order to find out at what percentage funds should be invested among the companies in the portfolio. Also the study includes the calculation of individual Standard Deviation of securities and ends at the calculation of weights of individual securities involved in the portfolio. These percentages help in allocating the funds available for investment based on risky portfolios.OBJECTIVES:More points to be addedTo study the investment decision process.To analysis the risk return characteristics of sample scripts.Ascertain Risk Management.To construct an effective portfolio which offers the maximum return for minimum riskMETHODOLOGY:Primary sourceInformation gathered from interacting with employees in the organization. And the data from the textbooks and other magazines.Secondary sourceDaily prices of scripts from news papers SCOPE:Duration Period 2 monthsSample size : 5 yearsTo ascertain risk, return and weights.LIMITATION:More points to be addedOnly two samples have been selected for constructing a portfolio.Share prices of scripts of 5 years period was taken.CHAPTER-IIINDUSTRY PROFILE&COMPANY PROFILEEVOLUTION:Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century.By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850.The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60.In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 2 50. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dallas Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as “The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.Other leading cities in stock market operations:Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock Exchange Association".In the beginning of the twentieth century, the industrial revolution was on the way in India with the Swedes Movement; and with the inauguration of the Tata Iron and Steel Company Limited in 1907, an important stage in industrial advancement under Indian enterprise was reached.Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies generally enjoyed phenomenal prosperity, due to the First World War.In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100 members. However, when boom faded, the number of members stood reduced from 100 to 3, by 1923, and so it went out of existence.In 1935, the stock market activity improved, especially in South India where there was a rapid increase in the number of textile mills and many plantation companies were floated. In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited).Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Punjab Stock Exchange Limited, which was incorporated in 1936.Indian Stock Exchanges - An Umbrella Growth:The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump. But, in 1943, the situation changed radically, when India was fully mobilized as a supply base. On account of the restrictive controls on cotton, bullion, seeds and other commodities, those dealing in them found in the stock market as the only outlet for their activities. They were anxious to join the trade and their number was swelled by numerous others. Many new associations were constituted for the purpose and Stock Exchanges in all parts of the country were floated. The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi Stock Exchange Association Limited.Post-independence Scenario:Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange was closed during partition of the country and later migrated to Delhi and merged with Delhi Stock Exchange.Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963. Most of the other exchanges languished till 1957 when they applied to the Central Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established exchanges, were recognized under the Act. Some of the members of the other Associations were required to be admitted by the recognized stock exchanges on a concessional basis, but acting on the principle of unitary control, all these pseudo stock exchanges were refused recognition by the Government of India and they thereupon ceased to function. Thus, during early sixties there were eight recognized stock exchanges in India (mentioned above). The number virtually remained unchanged, for nearly two decades. During eighties, however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock Exchange Limited (1984), Karana Stock Exchange Limited (at Mangalore, 1985), Magadha Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock exchanges in India excluding the Over the Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). The Table given below portrays the overall growth pattern of Indian stock markets since independence. It is quite evident from the Table that Indian stock markets have not only grown just in number of exchanges, but also in number of listed companies and in capital of listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and this was due to the favoring government policies towards security market industry.Trading Pattern of the Indian Stock Market:Trading in Indian stock exchanges are limited to listed securities of public limited companies. They are broadly divided into two categories, namely, specified securities (forward list) and non-specified securities (cash list). Equity shares of dividend paying, growth-oriented companies with a paid-up capital of at least Rs.50 million and a market capitalization of at least Rs.100 million and having more than 20,000 shareholders are, normally, put in the specified group and the balance in non-specified group.Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery transactions "for delivery and payment within the time or on the date stipulated when entering into the contract which shall not be more than 14 days following the date of the contract" : and (b) forward transactions "delivery and payment can be extended by further period of 14 days each so that the overall period does not exceed 90 days from the date of the contract". The latter is permitted only in the case of specified shares. The brokers who carry over the out standings, pay carry over charges (can tango or backwardation) which are usually determined by the rates of interest prevailing.A member broker in an Indian stock exchange can act as an agent, buy and sell securities for his clients on a commission basis and also can act as a trader or dealer as a principal, buy and sell securities on his own account and risk, in contrast with the practice prevailing on New York and London Stock Exchanges, where a member can act as a jobber or a broker only.The nature of trading on Indian Stock Exchanges are that of age old conventional style of face-to-face trading with bids and offers being made by open outcry. However, there is a great amount of effort to modernize the Indian stock exchanges in the very recent times.Over The Counter Exchange of India (OTCEI):The traditional trading mechanism prevailed in the Indian stock markets gave way to many functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long settlement periods and benami transactions, which affected the small investors to a great extent. To provide improved services to investors, the country's first ring less, scrip less, electronic stock exchange - OTCEI - was created in 1992 by country's premier financial institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation and its subsidiaries and Can Bank Financial Services.Trading at OTCEI is done over the centers spread across the country. Securities traded on the OTCEI are classified into: Listed Securities - The shares and debentures of the companies listed on the OTC can be bought or sold at any OTC counter all over the country and they should not be listed anywhere elsePermitted Securities - Certain shares and debentures listed on other exchanges and units of mutual funds are allowed to be tradedInitiated debentures - Any equity holding at least one lakh debentures of particular scrip can offer them for trading on the OTC.OTC has a unique feature of trading compared to other traditional exchanges. That is, certificates of listed securities and initiated debentures are not traded at OTC. The original certificate will be safely with the custodian. But, a counter receipt is generated out at the counter which substitutes the share certificate and is used for all transactions.In the case of permitted securities, the system is similar to a traditional stock exchange. The difference is that the delivery and payment procedure will be completed within 14 pared to the traditional Exchanges, OTC Exchange network has the following advantages: OTCEI has widely dispersed trading mechanism across the country which provides greater liquidity and lesser risk of intermediary charges.Greater transparency and accuracy of prices is obtained due to the screen-based scrip less trading.Since the exact price of the transaction is shown on the computer screen, the investor gets to know the exact price at which s/he is trading.Faster settlement and transfer process compared to other exchanges.In the case of an OTC issue (new issue), the allotment procedure is completed in a month and trading commences after a month of the issue closure, whereas it takes a longer period for the same with respect to other exchanges.Thus, with the superior trading mechanism coupled with information transparency investors are gradually becoming aware of the manifold advantages of the OTCEI.National Stock Exchange (NSE): With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pertain Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others.Trading at NSE can be classified under two broad categories: (a) Wholesale debt market and (b) Capital market. Wholesale debt market operations are similar to money market operations - institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc.There are two kinds of players in NSE: (a) Trading members and (b) Participants. Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility.Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows: NSE brings an integrated stock market trading network across the nation.Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities.Delays in communication, late payments and the malpractice’s prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.Unless stock markets provide professionalized service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major sources of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system. Preamble:Often, in the economic literature we find the terms ‘development’ and ‘growth’ are used interchangeably. However, there is a difference. Economic growth refers to the sustained increase in per capita or total income, while the term economic development implies sustained structural change, including all the complex effects of economic growth. In other words, growth is associated with free enterprise, where as development requires some sort of control and regulation of the forces affecting development. Thus, economic development is a process and growth is a phenomenon.Economic planning is very critical for a nation, especially a developing country like India to take the country in the path of economic development to attain economic growth.Why Economic Planning for India?One of the major objective of planning in India is to increase the rate of economic development, implying that increasing the rate of capital formation by raising the levels of income, saving and investment. However, increasing the rate of capital formation in India is beset with a number of difficulties. People are poverty ridden. Their capacity to save is extremely low due to low levels of income and high propensity to consume. There for, the rate of investment is low which leads to capital deficiency and low productivity. Low productivity means low income and the vicious circle continues. Thus, to break this vicious economic circle, planning is inevitable for India.The market mechanism works imperfectly in developing nations due to the ignorance and unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is very vital. In India, a large portion of the economy is non-monetized; the product, factors of production, money and capital markets is not organized properly. Thus the prevailing price mechanism fails to bring about adjustments between aggregate demand and supply of goods and services. Thus, to improve the economy, market imperfections has to be removed; available resources has to be mobilized and utilized efficiently; and structural rigidities has to be overcome. These can be attained only through planning.In India, capital is scarce; and unemployment and disguised unemployment is prevalent. Thus, where capital was being scarce and labour being abundant, providing useful employment opportunities to an increasing labour force is a difficult exercise. Only a centralized planning model can solve this macro problem of India.Further, in a country like India where agricultural dependence is very high, one cannot ignore this segment in the process of economic development. Therefore, an economic development model has to consider a balanced approach to link both agriculture and industry and lead for a paralleled growth. Not to mention, both agriculture and industry cannot develop without adequate infrastructural facilities which only the state can provide and this is possible only through a well carved out planning strategy. The government’s role in providing infrastructure is unavoidable due to the fact that the role of private sector in infrastructural development of India is very minimal since these infrastructure projects are considered as unprofitable by the private sector.Further, India is a clear case of income disparity. Thus, it is the duty of the state to reduce the prevailing income inequalities. This is possible only through planning.Planning History of India:The development of planning in India began prior to the first Five Year Plan of independent India, long before independence even. The idea of central directions of resources to overcome persistent poverty gradually, because one of the main policies advocated by nationalists early in the century. The Congress Party worked out a program for economic advancement during the 1920’s, and 1930’s and by the 1938 they formed a National Planning Committee under the chairmanship of future Prime Minister Nehru. The Committee had little time to do anything but prepare programs and reports before the Second World War which put an end to it. But it was already more than an academic exercise remote from administration. Provisional government had been elected in 1938, and the Congress Party leaders held positions of responsibility. After the war, the Interim government of the pre-independence years appointed an Advisory Planning Board. The Board produced a number of somewhat disconnected Plans itself. But, more important in the long run, it recommended the appointment of a Planning Commission.The Planning Commission did not start work properly until 1950. During the first three years of independent India, the state and economy scarcely had a stable structure at all, while millions of refugees crossed the newly established borders of India and Pakistan, and while ex-princely states (over 500 of them) were being merged into India or Pakistan. The Planning Commission as it now exists was not set up until the new India had adopted its Constitution in January 1950.Objectives of Indian Planning:The Planning Commission was set up the following Directive principles: To make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nation’s requirement.To formulate a plan for the most effective and balanced use of the country’s resources.Having determined the priorities, to define the stages in which the plan should be carried out, and propose the allocation of resources for the completion of each stage.To indicate the factors which are tending to retard economic development, and determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the Plan.To determine the nature of the machinery this will be necessary for securing the successful implementation of each stage of Plan in all its aspects.To appraise from time to time the progress achieved in the execution of each stage of the Plan and recommend the adjustments of policy and measures that such appraisals may show to be necessary.To make such interim or auxiliary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it or on a consideration of the prevailing economic conditions, current policies, measures and development programs; or on an examination of such specific problems as may be referred to it for advice by Central or State Governments.The long-term general objectives of Indian Planning are as follows: Increasing National IncomeReducing inequalities in the distribution of income and wealthElimination of povertyProviding additional employment; and Alleviating bottlenecks in the areas of: agricultural production, manufacturing capacity for producer’s goods and balance of payments.Economic growth, as the primary objective has remained in focus in all Five Year Plans. Approximately, economic growth has been targeted at a rate of five per cent per annum. High priority to economic growth in Indian Plans looks very much justified in view of long period of stagnation during the British ruleCOMPANY PROFILEICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank, India’s second largest commercial bank & a well-known and trusted name in the financial services in India, & Prudential Plc, one of the United Kingdom’s largest players in the financial services sectors.In a span of over 18 years since inception and just over 13 years of the Joint Venture, the company has forged a position of preeminence as one of the largest Asset Management Company’s in the country, contributing significantly towards the growth of the Indian mutual fund industry.The company manages significant Mutual Fund Assets under Management (AUM), in addition to our Portfolio Management Services (PMS) and International Advisory Mandates for clients across international markets in asset classes like Debt, Equity and Real Estate with primary focus on risk adjusted returns.As an Asset Management Company, we have over 18 years of experience and are currently managing a comprehensive range of schemes of more than 46 Mutual fund schemes and a wide range of PMS Products for our investors spread across the country. We service this investor base with our own branch network of around 168 branches and a distribution reach of over 42,000 channel partners.ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,556 branches and 7,440 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).Corporate ProfileICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77 billion) as on December 31, 2009. Board MembersMr. K. V. Klamath, ChairmanMr. Sridhar IyengarMr. Homi R. KhusrokhanMr. Lakshmi N. MittalMr. Narendra Murkumbi Dr. Anup K. PujariMr. Anupam Puri Mr. M.S. Ramachandran Mr. M.K. Sharma Mr. V. SridharProf. Marti G. SubrahmanyamMr. V. Perm WatsaMs. Chanda D. Kootchar, Managing Director & CEOMr. Sandeep Bakhshi, Deputy Managing DirectorMr. N. S. Kennan, Executive Director & CFOMr. K. Ramkumar,Executive DirectorMr. Son joy Chatterjee,Executive DirectorMr. K. V. Klamath is a mechanical engineer and did his management studies from the Indian Institute of Management, Ahmadabad. He joined ICICI in 1971 and worked in the areas of project finance, leasing, resources and corporate planning. In 1988, he joined the Asian Development Bank and spent several years in south-east Asia before returning to ICICI as its Managing Director & CEO in 1996. He became Managing Director & CEO of ICICI Bank in 2002 following the merger of ICICI with ICICI Bank. Under his leadership, the ICICI Group transformed itself into a diversified, technology-driven financial services group that has leadership positions across banking, insurance and asset management in India, and an international presence. He retired as Managing Director & CEO in April 2009, and took up the position of non-executive Chairman of ICICI Bank effective May 1, 2009. He was the President of the Confederation of Indian Industry (CII) for 2008-09. He was awarded the Padma Bhushan by the President of India in May 2008. He was conferred the Lifetime Achievement Awards at the Financial Express Best Bank Awards 2008 and the NDTV Profit Business Leadership Awards 2008; was named 'Businessman of the Year' by Forbes Asia and The Economic Times' 'Business Leader of the Year' in 2007; Business Standard's "Banker of the Year" and CNBC-TV18's "Outstanding Business Leader of the Year" in 2006; Business India's "Businessman of the Year" in 2005; and CNBC's "Asian Business Leader of the Year" in 2001. He has been conferred with an honorary PhD by the Banaras Hindu University. He is a member of the Board of the Institute of International Finance, a Director on the Board of Infosys Technologies and a member of the Board of Governors of the Indian Institute of Management, Ahmadabad.Products:Insurance Solutions for Individuals:ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its products can be enhanced with up to 4 riders, to create a customized solution for each policyholder.Savings & Wealth Creation Solutions: ICICI Pru Life Stage Wealth II is a unit linked insurance plan that offers multiple choices to decide how your savings would be invested based on your risk appetite. UIN - 105L118V02 ICICI Pru Lifetime Premier is a comprehensive savings plan that offers you a choice of portfolio strategies for your savings and at the same time secures you against uncertainties of life. UIN - 105L112V02 ICICI Pru Pinnacle Super is a unit linked insurance plan that gives you the advantage of varying exposure to equities with downside protection, so that your investments are protected in financially volatile times. UIN - 105L121V03 ICICI Pru Elite Life is a unit linked insurance plan that offers you multiple choices on how to invest your savings along with an insurance cover.UIN - 105L125V02 ICICI Pru Elite Wealth is a unit linked insurance plan that offers you the greatest value for your hard earned savings. Also, you get rewarded with Loyalty Additions from the sixth year onwards to maximize the return on your investments. UIN - 105L126V02 ICICI Pru assures Single Premium a conventional non-participating single premium product that provides you Guaranteed Maturity Benefit and also offers a life cover to take care of your loved ones in your absence.UIN - 105N123V01 ICICI Pru Guaranteed Savings Insurance Plan is a limited pay endowment product that allows you to enjoy the benefits of a long term savings plan ensuring that you and your family are free of any financial worries. UIN - 105N114V02 ICICI Pru Future Secure is a participating endowment life insurance plan that helps you save for specific goals in the future, while providing protection for your family from financial distress in case of your untimely demise. Thus the dual benefit of savings and protection it helps you ensure a secure future for your loved ones. UIN - 105N117V01 ICICI Pru Whole Life provides you with a unique double advantage of savings and protection that not only allows you to meet your goals but also seeks to ensure that your dear ones will continue to live their lives in comfort without financial worries in case of unforeseen eventuality. UIN - 105N116V01 ICICI Pru Save 'n' Protect are plan for those who want to accumulate funds on a regular basis while enjoying insurance protection. UIN - 105N004V02 ICICI Pru Cashbook is a single policy that combines the triple benefit of protection, savings & periodic liquidity. UIN - 105N005V02Protection Solutions: ICICI Pru care is a term insurance plan that you can buy online at your convenience at their home in a simple manner. UIN - 105N122V01 ICICI Pru Pure Protect is a flexible and affordable term product, with which you can ensure your life and provide total security for your family in case of an unfortunate event. UIN - 105N084V01 ICICI Pru Lifeguard is a protection plan, which offers life cover at low cost. It is available in 2 options –level term assurance with return of premium & single premium. UIN - 105N006V02Child Plans: ICICI Pru Smart Kid Regular Premium is an endowment regular premium life insurance plan which comes with a unique Payer Waiver Benefit (PWB). This benefit ensures that in case of death of the parent, the company pays all future premiums on behalf of the parent. This means that the child gets money at important stages of his/her student life and education never suffers due to lack of funds.UIN No - 105N014V02 ICICI Pru Smart Kid Premier is a ULIP plan which ensures your child’s education continues even if you are not around. In this Plan you need to invest premiums regularly over a period of time and the returns that you get will depend on the performance of the underlying fund performance. UIN - 105L120V01Retirement Solutions: ICICI Pru Immediate Annuity is a single premium annuity product that guarantees income for life at the time of retirement. It offers the benefit of 5 payout options. UIN - 105N009V06Health Solutions : ICICI Pru Hospital Care II is a family floater plan covering your spouse and children. This fixed benefit hospitalisation and surgical plan complements your existing coverage by offering payouts over and above any health plan you have, thus availing best possible medical treatment, without having to bother about the cost of the treatment or quality of care. UIN - 105N108V01 ICICI Pru Crisis Cover is a product that will provide long-term coverage against 35 critical illnesses, total and permanent disability, and death. UIN - 105N072V01 ICICI Pru Health Saver is a whole of life comprehensive health insurance policy which provides a hospitalisation cover for you and your family and reimburses all other medical expenses not covered in the hospitalisation benefit by building a health fund for you and your family. UIN - 105L087V01Group Insurance Solutions:ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees. Group Gratuity Plan: ICICI Prudential Life's group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner and also avail of tax benefits as applicable to approved gratuity funds. Group Leave encashment Plan: ICICI Prudential Life’s Group offers a market linked and traditional leave encashment plan designed to aid the employer to build a fund to meet their future leave encashment liability. The contributions made will be invested as per the chosen investment plans and will be available for payment of the benefit when it falls due. Additionally, the product also provides for term cover for all the employees covered under the policy. UIN - 105L079V01 Group Term Insurance Plan: ICICI Prudential Life's flexible group term is a one-year renewable life insurance policy that enables you to provide every member of your team with an affordable life cover. Group Term in lieu of EDLI Scheme: ICICI Prudential's Group Insurance Scheme in lieu of EDLI has been certified by the Employee Provident Fund Organization (EPFO) as a superior product that provides greater insurance benefits than the cover offered by EPFO. Credit Assure with Credit Assure, we offer an innovative and affordable term life insurance plan that covers loans against the unfortunate event of death, with complete convenience in application. The scheme is simple and hassle-free. In other words, peace of mind guaranteed.Flexible Rider Options:ICICI Prudential Life offers flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer. Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the rider sum assured under the policy. If an accident results in total and permanent disability, 10% of rider sum assured will be paid each year, from the end of the 1st year after the disability date for the remainder of the base policy term or 10 years, whichever is lesser. Critical illness benefit: Critical Illness Benefit Rider provides protection against 9 critical illnesses to the policyholder when attached to the basic plan. Income Benefit Rider: In case of death of the life assured during the term of the policy, 10% of the rider sum assured is paid annually to the beneficiary, on each policy anniversary till maturity of the rider. Income Benefit rider is available with Smart Kid Child Plans. Premiums paid under this rider are eligible for tax benefits under Section 80C. Waiver of Premium Rider (WOP): On total and permanent disability due to an accident, all future premiums for both the base policy and rider(s) will be waived till the end of the term of the rider or death of the life assured, if earlier. Waiver of Premium Rider on Critical Illness Rider: This rider waives all your future premiums of your base policy on occurrence of specified 20 Critical Illnesses. This ensures that your policy benefits continue as planned.Awards:ICICI Prudential Life Insurance has been pronounced winner in the 2nd Excellence Awards and Recognition for Shared Services, 2012. We won the award in the category - Shared Services in India - Insurance Domain.?These awards have been instituted by All India Management Association (AIMA) & Delhi Management Association (DMA), in collaboration with R-value Consulting as knowledge partners, to honour, recognize & promote transformative strategies for shared services.Ms. Chanda Kocher, Managing Director & CEO was awarded the "CNBC Asia India Business Leader of the Year Award". She also received the "CNBC Asia's CSR Award 2011"For the third year in a row ICICI Bank has won The Asset Triple A Country Awards for Best Domestic Bank in IndiaICICI Bank won the Most Admired Knowledge Enterprises (MAKE) India 2009 Award. ICICI Bank won the first place in "Maximizing Enterprise Intellectual Capital" category, October 28, 2009 Ms Chanda Kocher, MD and CEO was awarded with the Indian Business Women Leadership Award at NDTV Profit Business Leadership Awards, October 26, 2009.ICICI Bank received two awards in CNBC Ahwaz Consumer Awards; one for the most preferred auto loan and the other for most preferred credit Card, on September 30, 2009Ms. Chanda Kocher, Managing Director & CEO ranked in the top 20 of the World's 100 Most Powerful Women list compiled by Forbes, August 2009Financial Express at its FE India's Best Banks Awards, honoured Mr. K.V. Kamath, Chairman with the Lifetime Achievement Award , July 25, 2009ICICI Bank won Asset Triple a Investment Awards for the Best Derivative House, India. In addition ICICI Bank were Highly commended , Local Currency Structured product, India for 1.5 year ADR GDR linked Range Accrual Note., July 2009 ICICI bank won in three categories at World finance Banking awards on June 16, 2009 Best NRI Services bankExcellence in Private Banking, APAC RegionExcellence in Remittance Business, APAC Region ICICI Bank Mobile Banking was adjudged "Best Bank Award for Initiatives in Mobile Payments and Banking" by IDRBT, on May 18, 2009 in Hyderabad.ICICI Bank's b2 branch free banking was adjudged "Best E-Banking Project Implementation Award 2008" by The Asian Banker, on May 11, 2009 at the China World Hotel in Beijing.ICICI Bank bags the "Best bank in SME financing (Private Sector)" at the Dun & Bradstreet Banking awards 2009.ICICI Bank NRI services wins the "Excellence in Business Model Innovation Award" in the eighth Asian Banker Excellence in Retail Financial Services Awards Programme.ICICI Bank's Rural Micro Banking and Agri-Business Group win WOW Event & Experiential Marketing Award in two categories - "Rural Marketing programme of the year" and "Small Budget on Ground Promotion of the Year". These awards were given for Cattle Loan 'Kamdhenu Campaign' and "Talkies on the move campaign' respectively.ICICI Bank's Germany Branch has been certified by "Sifting Warren test". ICICI Bank is ranked 2nd amongst 57 savings products across 19 banks ICICI Bank Germany won the yearly banking test of the investor magazine ???euro in the "call money “category.The ICICI Bank was awarded the runner's up position in Gartner Business Intelligence and Excellence Award for Asia Pacific for its Business Intelligence functions.ICICI Bank's Organisational Excellence Group was recently awarded ISO 9001:2008 certification by TUV Nord. The scope of certification comprised processes around consulting and capability building on methods of quality & improvements. ICICI Bank has been awarded the following titles under The Asset Triple A Country Awards for 2009: Best Transaction Bank in India Best Trade Finance Bank in India Best Cash Management Bank in India Best Domestic Custodian in India ICICI Bank has bagged the Best Cash Management Bank in India award for the second year in a row. The other awards have been bagged for the third year in a row. ICICI Bank Canada received the prestigious Canadian Helen Keller Award at the Canadian Helen Keller Centre's Fifth Annual Luncheon in Toronto. The award was given to ICICI Bank its long-standing support to this unique training centre for people who are deaf-blind.ICICI Foundation for Inclusive Growth (ICICI Foundation) was founded by the ICICI Group in early 2008 to give focus to its efforts to promote inclusive growth amongst low-income Indian households. We believe our fundamental challenge is to create a “just” society – one where everyone has equal opportunity to develop and grow. Towards this end, ICICI Foundation is committed to making India’s economic growth more inclusive, allowing every individual to participate in and benefit from the growth process. We hold a set of core beliefs and values that defines our pathway towards inclusive growth and guides our five strategic partnerships.Vision:our vision is a world free of poverty in which every individual has the freedom and power to create and sustain a just society in which to live.Mission:Our mission is to create and support strong independent organisations which work towards empowering the poor to participate in and benefit from the Indian growth process.As a key partner in India's economic growth for more than five decades, the ICICI Group endeavours to promote growth in all sectors of the nation’s economy. To give focus to its efforts to promote inclusive growth amongst low-income Indian households, the ICICI Group founded ICICI Foundation for Inclusive Growth in January 2010. The foundations of ICICI Group’s approach towards human and social development were established with the Social Initiatives Group (SIG), a non-profit resource group within ICICI Bank, in 2000.ICICI Foundation for Inclusive Growth (ICICI Foundation) has been set up as public charitable trusts registered at Chennai vide registration of the Trust Deed with the Sub-Registrar’s Office at Chennai on January 04, 2010. The application for registration of the Foundation under section 12AA of the Income tax Act, 1961 (“the Act”) was filed on February 7, 2008 and the application under section 80G of the Act was filed on February 14, 2008. Subsequently, ICICI Foundation was registered as a “PUBLIC CHARITABLE TRUST” under Section 12AA of the Act with effect from February 7, 2008. Further, ICICI Foundation received approval under Section 80G (5) (VI) of the Act on March 19, 2008. This approval is valid in respect of donation received by ICICI Foundation from February 14, 2008 to March 31, 2009. Accordingly, ICICI Bank and Group Companies will be eligible to get a deduction under section 80G on donations made during this period. ICICI Foundation has also obtained its Permanent Account Number (PAN) and Tax deduction Account Number (TAN).Funds Flow 2010-2011: ICICI Foundation received Rs.617.80 million from the following sources as grants:(January 4, 2008 to March 31, 2011) (spanning two financial years)Source (January 4, 2008 – March 31, 2011)Amount (Rs.millions)ICICI Bank500.00ICICI Prudential Life Insurance67.72ICICI Lombard General Insurance17.12ICICI Securities14.98ICICI Securities PD6.99ICICI Home Finance1.99ICICI Venture9.00Total617.80ICICI Foundation also incurred total expenses of Rs.1.25 million during this period and had a fund balance of Rs.61.55 million as on March 31, 2011.Disbursements (January 4, 2008 to March 31, 2011)Grant Beneficiaries (January 4, 2010 – March 31, 2011)Amount (Rs.millions)ICICI Foundation Programmes?ICICI Centre for Child Health and Nutrition150.00IFMR Finance Foundation 200.00Environmentally Sustainable Finance20.00CSO Partners50.00CARE (Policy Unit)5.00Strategy and Advisory Group20.00ICICI Group Corporate Social Responsibility Programmes?Read to Lead25.00MITRA (ICICI Fellows Programme)55.00CARE (Disaster Management Unit)5.00Rang De25.00Total555.00 Grant Beneficiaries for 2010-2011: ICICI Foundation ProgrammersICICI Centre for Child Health and Nutrition (ICCHN) The grant of Rs.150.00 million was provided to ICCHN by way of corpus support and for pursuing various projects consistent with its mission.IFMR Finance Foundation (IFF)The grant of Rs.200.00 million was provided to IFMR Finance Foundation by way of corpus support and for pursuing various projects consistent with its mission.Environmentally Sustainable Finance (ESF)The grant of Rs.20.00 million was provided to ESF for their collaboration work with Rural Energy Network Enterprise (RENE) on sustainable energy and environment projects benefiting remote rural end users. The proposed projects will promote developing tools and driving innovation to scale rural energy access for remote rural users. CSO Partners:the grant of Rs.50.00 million was provided to CSO Partners by way of corpus support and for pursuing various projects consistent with its mission.CARE (Policy Unit):A grant of Rs.5.00 million was provided to CARE, an Indian NGO that is closely affiliated with CARE (USA), to create a policy unit in Delhi. Learning from CARE’s work in India and world-wide as well as from the work of ICICI Foundation and its partners, the unit will serve as a platform to engage the government and policymakers in an effort to bring about required policy changes in areas such as maternal and child health.Strategy and Advisory Group (SAG):Charitable foundations in India and world-wide struggle to fully develop the strategy formulation, knowledge management and impact assessment dimensions of their work. A grant of Rs.20.00 million was provided to Strategy and Advisory Group (SAG), a team at Centre for Development Finance that provides strategic advisory services to clients in the development sector, to develop these functions and to offer their expertise to foundations in general, including ICICI Foundation.ICICI Group Corporate Social Responsibility Programmers:Read to lead is an initiative of ICICI Bank to facilitate elementary education for disadvantaged children in the age group of 6-13 years. An amount of Rs.25.00 million has thus far been disbursed to 100,000 children through 30 NGOs. The balance amount of Rs.75.00 million is planned to be disbursed during the period 2009-2010. MITRA (ICICI Fellows Programme)MITRA is an affiliate of CSO Partners that is focused on addressing the challenge of human resources for civil society organisations (CSOs). In partnership with CSO Partners and MITRA, ICICI Foundation proposes to launch an ICICI Fellows Programme. An amount of Rs.55.00 million has been disbursed to MITRA for developing and launching the programme over the period 2009-2010.CARE (Disaster Management Unit) a grant of Rs.5.00 million has been given to CARE in India to enable it to prepare for any future disasters that may strike and respond immediately with the required relief efforts.Rang De (Micro Enterprise Development) Rang De, an affiliate of CSO Partners, has partnered with ICICI Venture to roll out funds for micro enterprise development in rural and semi-urban locations. The amount of Rs.25.00 million that has been disbursed to them will support micro enterprises to the extent of Rs.15.00 million and the balance amount of Rs.10.00 million will go towards meeting their expenses to build the platform.CHAPTER-IIILITERATURE REVIEW Review of literature is not up to the mark. Changes are required. More related information should to be included.A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities (such as banknotes, bonds and debentures) and equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security is called the issuer. A country's regulatory structure determines what qualifies as a security. For example, private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions.Securities may be represented by a certificate or, more typically, "non-certificated", that is in electronic or "book entry" only form. Certificates may be bearer, meaning they entitle the holder to rights under the security merely by holding the security, or registered, meaning they entitle the holder to rights only if he or she appears on a security register maintained by the issuer or an intermediary. They include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that are negotiable and fungible. Corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments those are negotiable and fungibleRISK RETURN ANALYSIS: All investment has some risk. Investment in shares of companies has its own risk or uncertainty; these risks arise out of variability of yields and uncertainty of appreciation or depreciation of share prices, losses of liquidity etcThe risk over time can be represented by the variance of the returns. While the return over time is capital appreciation plus payout, divided by the purchase price of the share. Normally, the higher the risk that the investor takes, the higher is the return. There is, however, a risk less return on capital of about 12% which is the bank, rate charged by the R.B.I or long term, yielded on government securities at around 13% to 14%. This risk less return refers to lack of variability of return and no uncertainty in the repayment or capital. But other risks such as loss of liquidity due to parting with money etc., may however remain, but are rewarded by the total return on the capital. Risk-return is subject to variation and the objectives of the portfolio manager are to reduce that variability and thus reduce the risk by choosing an appropriate portfolio. Traditional approach advocates that one security holds the better, it is according to the modern approach diversification should not be quantity that should be related to the quality of scripts which leads to quality of portfolio.Experience has shown that beyond the certain securities by adding more securities expensive.RISK MANAGEMENT DEFINITIONS TO BE INCLUDEDRisk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. Several risk management standards have been developed including the Project Management Institute, the National Institute of Science and Technology, actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.The strategies to manage risk typically include transferring the risk to another party, avoiding the risk, reducing the negative effect or probability of the risk, or even accepting some or all of the potential or actual consequences of a particular risk.Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk, whether the confidence in estimates and decisions seem to increase. Introduction:This section provides an introduction to the principles of risk management. The vocabulary of risk management is defined in ISO Guide 73, "Risk management. Vocabulary."In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss (or impact) and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. In practice the process of assessing overall risk can be difficult, and balancing resources used to mitigate between risks with a high probability of occurrence but lower loss versus a risk with high loss but lower probability of occurrence can often be mishandled.Intangible risk management identifies a new type of a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. For example, when deficient knowledge is applied to a situation, a knowledge risk materializes. Relationship risk appears when ineffective collaboration occurs. Process-engagement risk may be an issue when ineffective operational procedures are applied. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identification and reduction of risks that reduce productivity.Risk management also faces difficulties in allocating resources. This is the idea of opportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management minimizes spending (or manpower or other resources) and also minimizes the negative effects of risks.Method:For the most part, these methods consist of the following elements, performed, more or less, in the following order.identify, characterize, and assess threatsassess the vulnerability of critical assets to specific threatsdetermine the risk (i.e. the expected consequences of specific types of attacks on specific assets)identify ways to reduce those risksprioritize risk reduction measures based on a strategyPrinciples of risk management:The International Organization for Standardization (ISO) identifies the following principles of risk management: Risk management should:create value - resources expended to mitigate risk should generally exceed the consequence of inaction, or (as in value engineering), the gain should exceed the painbe an integral part of organizational processesbe part of decision makingexplicitly address uncertainty and assumptionsbe systematic and structuredbe based on the best available informationbe tailor abletake into account human factorsbe transparent and inclusivebe dynamic, iterative and responsive to changebe capable of continual improvement and enhancementbe continually or periodically re-assessedProcess:According to the standard ISO 31000 "Risk management -- Principles and guidelines on implementation," the process of risk management consists of several steps as follows:Establishing the context:Establishing the context involves:Identification of risk in a selected domain of interestPlanning the remainder of the process.Mapping out the following: the social scope of risk managementthe identity and objectives of stakeholdersThe basis upon which risks will be evaluated, constraints.Defining a framework for the activity and an agenda for identification.Developing an analysis of risks involved in the process.Mitigation or Solution of risks using available technological, human and organizational resources.Identification:After establishing the context, the next step in the process of managing risk is to identify potential risks. Risks are about events that, when triggered, cause problems. Hence, risk identification can start with the source of problems, or with the problem itself.Source analysis Risk sources may be internal or external to the system that is the target of risk management.Examples of risk sources are: stakeholders of a project, employees of a company or the weather over an airport.Problem analysis Risks are related to identified threats. For example: the threat of losing money, the threat of abuse of confidential information or the threat of accidents and casualties. The threats may exist with various entities, most important with shareholders, customers and legislative bodies such as the government.When either source or problem is known, the events that a source may trigger or the events that can lead to a problem can be investigated. For example: stakeholders withdrawing during a project may endanger funding of the project; confidential information may be stolen by employees even within a closed network; lightning striking an aircraft during takeoff may make all people on board immediate casualties.The chosen method of identifying risks may depend on culture, industry practice and compliance. The identification methods are formed by templates or the development of templates for identifying source, problem or event. Common risk identification methods are:Objectives-based risk identification Organizations and project teams have objectives. Any event that may endanger achieving an objective partly or completely is identified as risk.Scenario-based risk identification in scenario analysis different scenarios are created. The scenarios may be the alternative ways to achieve an objective, or an analysis of the interaction of forces in, for example, a market or battle. Any event that triggers an undesired scenario alternative is identified as risk - see Futures Studies for methodology used by Futurists.Taxonomy-based risk identification the taxonomy in taxonomy-based risk identification is a breakdown of possible risk sources. Based on the taxonomy and knowledge of best practices, a questionnaire is compiled. The answers to the questions reveal risks. Common-risk checking in several industries, lists with known risks is available. Each risk in the list can be checked for application to a particular situation.Risk charting this method combines the above approaches by listing resources at risk, threats to those resources, modifying factors which may increase or decrease the risk and consequences it is wished to avoid. Creating a matrix under these headings enables a variety of approaches. One can begin with resources and consider the threats they are exposed to and the consequences of each. Alternatively one can start with the threats and examine which resources they would affect, or one can begin with the consequences and determine which combination of threats and resources would be involved to bring them about.Assessment:Once risks have been identified, they must then be assessed as to their potential severity of impact (generally a negative impact, such as damage or loss) and to the probability of occurrence. These quantities can be either simple to measure, in the case of the value of a lost building, or impossible to know for sure in the case of the probability of an unlikely event occurring. Therefore, in the assessment process it is critical to make the best educated decisions in order to properly prioritize the implementation of the risk management plan.Even a short-term positive improvement can have long-term negative impacts. Take the "turnpike" example. A highway is widened to allow more traffic. More traffic capacity leads to greater development in the areas surrounding the improved traffic capacity. Over time, traffic thereby increases to fill available capacity. Turnpikes thereby need to be expanded in a seemingly endless cycles. There are many other engineering examples where expanded capacity (to do any function) is soon filled by increased demand. Since expansion comes at a cost, the resulting growth could become unsustainable without forecasting and management.The fundamental difficulty in risk assessment is determining the rate of occurrence since statistical information is not available on all kinds of past incidents. Furthermore, evaluating the severity of the consequences (impact) is often quite difficult for intangible assets. Asset valuation is another question that needs to be addressed. Thus, best educated opinions and available statistics are the primary sources of information. Nevertheless, risk assessment should produce such information for the management of the organization that the primary risks are easy to understand and that the risk management decisions may be prioritized. Thus, there have been several theories and attempts to quantify risks. Numerous different risk formulae exist, but perhaps the most widely accepted formula for risk quantification is:Rate (or probability) of occurrence multiplied by the impact of the event equals risk magnitudeComposite Risk Index:The above formula can also be re-written in terms of a Composite Risk Index, as follows:Composite Risk Index = Impact of Risk event x Probability of OccurrenceThe impact of the risk event is commonly assessed on a scale of 1 to 5, where 1 and 5 represent the minimum and maximum possible impact of an occurrence of a risk (usually in terms of financial losses). However, the 1 to 5 scale can be arbitrary and need not be on a linear scale.The probability of occurrence is likewise commonly assessed on a scale from 1 to 5, where 1 represents a very low probability of the risk event actually occurring while 5 represents a very high probability of occurrence. This axis may be expressed in either mathematical terms (event occurs once a year, once in ten years, once in 100 years etc.) or may be expressed in "plain English" - event has occurred here very often; event has been known to occur here; event has been known to occur in the industry etc.). Again, the 1 to 5 scale can be arbitrary or non-linear depending on decisions by subject-matter experts.The Composite Index thus can take values ranging (typically) from 1 through 25, and this range is usually arbitrarily divided into three sub-ranges. The overall risk assessment is then Low, Medium or high, depending on the sub-range containing the calculated value of the Composite Index. For instance, the three sub-ranges could be defined as 1 to 8, 9 to 16 and 17 to 25.Note that the probability of risk occurrence is difficult to estimate, since the past data on frequencies are not readily available, as mentioned above. After all, probability does not imply certainty.Likewise, the impact of the risk is not easy to estimate since it is often difficult to estimate the potential loss in the event of risk occurrence.Further, both the above factors can change in magnitude depending on the adequacy of risk avoidance and prevention measures taken and due to changes in the external business environment. Hence it is absolutely necessary to periodically re-assess risks and intensify/relax mitigation measures, or as necessary. Changes in procedures, technology, schedules, budgets, market conditions, political environment, or other factors typically require re-assessment of risks.Risk Options:Risk mitigation measures are usually formulated according to one or more of the following major risk options, which are:Design a new business process with adequate built-in risk control and containment measures from the start.Periodically re-assess risks that are accepted in ongoing processes as a normal feature of business operations and modify mitigation measures.Transfer risks to an external agency (e.g. an insurance company)Avoid risks altogether (e.g. by closing down a particular high-risk business area)Later research has shown that the financial benefits of risk management are less dependent on the formula used but are more dependent on the frequency and how risk assessment is performed.In business it is imperative to be able to present the findings of risk assessments in financial, market, or schedule terms. Robert Courtney Jr. (IBM, 1970) proposed a formula for presenting risks in financial terms. The Courtney formula was accepted as the official risk analysis method for the US governmental agencies. The formula proposes calculation of ALE (annualized loss expectancy) and compares the expected loss value to the security control implementation costs (cost-benefit analysis).Potential risk treatments:Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories: Avoidance (eliminate, withdraw from or not become involved)Reduction (optimize - mitigate)Sharing (transfer - outsource or insure)Retention (accept and budget)Ideal use of these strategies may not be possible. Some of them may involve trade-offs that are not acceptable to the organization or person making the risk management decisions. Another source, from the US Department of Defense (see link), Defense Acquisition University, calls these categories ACAT, for Avoid, Control, Accept, or Transfer. This use of the ACAT acronym is reminiscent of another ACAT (for Acquisition Category) used in US Defense industry procurements, in which Risk Management figures prominently in decision making and planning.Risk avoidance:This includes not performing an activity that could carry risk. An example would be not buying a property or business in order to not take on the legal liability that comes with it. Another would be not flying in order not to take the risk that the airplane were to be hijacked. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed. Not entering a business to avoid the risk of loss also avoids the possibility of earning profits.Hazard Prevention:Hazard prevention refers to the prevention of risks in an emergency. The first and most effective stage of hazard prevention is the elimination of hazards. If this takes too long, is too costly, or is otherwise impractical, the second stage is mitigation.Risk reduction:Risk reduction or "optimization" involves reducing the severity of the loss or the likelihood of the loss from occurring. For example, sprinklers are designed to put out a fire to reduce the risk of loss by fire. This method may cause a greater loss by water damage and therefore may not be suitable. Hal on fire suppression systems may mitigate that risk, but the cost may be prohibitive as a strategy.Acknowledging that risks can be positive or negative, optimizing risks means finding a balance between negative risk and the benefit of the operation or activity; and between risk reduction and effort applied. By an offshore drilling contractor effectively applying HSE Management in its organization, it can optimize risk to achieve levels of residual risk that are tolerable.Modern software development methodologies reduce risk by developing and delivering software incrementally. Early methodologies suffered from the fact that they only delivered software in the final phase of development; any problems encountered in earlier phases meant costly rework and often jeopardized the whole project. By developing in iterations, software projects can limit effort wasted to a single iteration.Outsourcing could be an example of risk reduction if the outsourcer can demonstrate higher capability at managing or reducing risks. For example, a company may outsource only its software development, the manufacturing of hard goods, or customer support needs to another company, while handling the business management itself. This way, the company can concentrate more on business development without having to worry as much about the manufacturing process, managing the development team, or finding a physical location for a call center.Risk sharing:Briefly defined as "sharing with another party the burden of loss or the benefit of gain, from a risk, and the measures to reduce a risk."The term of 'risk transfer' is often used in place of risk sharing in the mistaken belief that you can transfer a risk to a third party through insurance or outsourcing. In practice if the insurance company or contractor go bankrupt or end up in court, the original risk is likely to still revert to the first party. As such in the terminology of practitioners and scholars alike, the purchase of an insurance contract is often described as a "transfer of risk." However, technically speaking, the buyer of the contract generally retains legal responsibility for the losses "transferred", meaning that insurance may be described more accurately as a post-event compensatory mechanism. For example, a personal injuries insurance policy does not transfer the risk of a car accident to the insurance company. The risk still lays with the policy holder namely the person who has been in the accident. The insurance policy simply provides that if an accident (the event) occurs involving the policy holder then some compensation may be payable to the policy holder that is commensurate to the suffering/damage.Some ways of managing risk fall into multiple categories. Risk retention pools are technically retaining the risk for the group, but spreading it over the whole group involves transfer among individual members of the group. This is different from traditional insurance, in that no premium is exchanged between members of the group up front, but instead losses are assessed to all members of the group.Risk retention:Involves accepting the loss, or benefit of gain, from a risk when it occurs. True self insurance falls in this category. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible. War is an example since most property and risks are not insured against war, so the loss attributed by war is retained by the insured. Also any amount of potential loss (risk) over the amount insured is retained risk. This may also be acceptable if the chance of a very large loss is small or if the cost to insure for greater coverage amounts is so great it would hinder the goals of the organization too much.Create a Risk Management Plan:Select appropriate controls or countermeasures to measure each risk. Risk mitigation needs to be approved by the appropriate level of management. For instance, a risk concerning the image of the organization should have top management decision behind it whereas IT management would have the authority to decide on computer virus risks.The risk management plan should propose applicable and effective security controls for managing the risks. For example, an observed high risk of computer viruses could be mitigated by acquiring and implementing antivirus software. A good risk management plan should contain a schedule for control implementation and responsible persons for those actions.According to ISO/IEC 27001, the stage immediately after completion of the risk assessment phase consists of preparing a Risk Treatment Plan, which should document the decisions about how each of the identified risks should be handled. Mitigation of risks often means selection of security controls, which should be documented in a Statement of Applicability, which identifies which particular control objectives and controls from the standard have been selected, and why.Implementation:Implementation follows all of the planned methods for mitigating the effect of the risks. Purchase insurance policies for the risks that have been decided to be transferred to an insurer, avoid all risks that can be avoided without sacrificing the entity's goals, reduce others, and retain the rest.Review and evaluation of the plan:Initial risk management plans will never be perfect. Practice, experience, and actual loss results will necessitate changes in the plan and contribute information to allow possible different decisions to be made in dealing with the risks being faced.Risk analysis results and management plans should be updated periodically. There are two primary reasons for this:to evaluate whether the previously selected security controls are still applicable and effective, andTo evaluate the possible risk level changes in the business environment. For example, information risks are a good example of rapidly changing business environment.Limitations:If risks are improperly assessed and prioritized, time can be wasted in dealing with risk of losses that are not likely to occur. Spending too much time assessing and managing unlikely risks can divert resources that could be used more profitably. Unlikely events do occur but if the risk is unlikely enough to occur it may be better to simply retain the risk and deal with the result if the loss does in fact occur. Qualitative risk assessment is subjective and lacks consistency. The primary justification for a formal risk assessment process is legal and bureaucratic.Prioritizing the risk management processes too highly could keep an organization from ever completing a project or even getting started. This is especially true if other work is suspended until the risk management process is considered complete.It is also important to keep in mind the distinction between risk and uncertainty. Risk can be measured by impacts x probability.Areas of risk management:As applied to corporate finance, risk management is the technique for measuring, monitoring and controlling the financial or operational risk on a firm's balance sheet. See value at risk.The Basel II framework breaks risks into market risk (price risk), credit risk and operational risk and also specifies methods for calculating capital requirements for each of these components.Enterprise risk management:In enterprise risk management, a risk is defined as a possible event or circumstance that can have negative influences on the enterprise in question. Its impact can be on the very existence, the resources (human and capital), the products and services, or the customers of the enterprise, as well as external impacts on society, markets, or the environment. In a financial institution, enterprise risk management is normally thought of as the combination of credit risk, interest rate risk or asset liability management, market risk, and operational risk.In the more general case, every probable risk can have a pre-formulated plan to deal with its possible consequences (to ensure contingency if the risk becomes a liability).From the information above and the average cost per employee over time, or cost accrual ratio, a project manager can estimate:The cost associated with the risk if it arises, estimated by multiplying employee costs per unit time by the estimated time lost (cost impact, C where C = cost accrual ratio * S).the probable increase in time associated with a risk (schedule variance due to risk, Rs where Rs = P * S): Sorting on this value puts the highest risks to the schedule first. This is intended to cause the greatest risks to the project to be attempted first so that risk is minimized as quickly as possible.These are slightly misleading as schedule variances with a large P and small S and vice versa are not equivalent. (The risk of the RMS Titanic sinking vs. the passengers' meals being served at slightly the wrong time).the probable increase in cost associated with a risk (cost variance due to risk, Rc where Rc = P*C = P*CAR*S = P*S*CAR) Sorting on this value puts the highest risks to the budget first.See concerns about schedule variance as this is a function of it, as illustrated in the equation above.Risk in a project or process can be due either to Special Cause Variation or Common Cause Variation and requires appropriate treatment. That is to re-iterate the concern about external cases not being equivalent in the list immediately above.Risk management activities as applied to project management:In project management, risk management includes the following activities:Planning how risk will be managed in the particular project. Plans should include risk management tasks, responsibilities, activities and budget.Assigning a risk officer - a team member other than a project manager who is responsible for foreseeing potential project problems. Typical characteristic of risk officer is a healthy skepticism.Maintaining live project risk database. Each risk should have the following attributes: opening date, title, short description, probability and importance. Optionally a risk may have an assigned person responsible for its resolution and a date by which the risk must be resolved.Creating anonymous risk reporting channel. Each team member should have the possibility to report risks that he/she foresees in the project.Preparing mitigation plans for risks that are chosen to be mitigated. The purpose of the mitigation plan is to describe how this particular risk will be handled – what, when, by who and how will it be done to avoid it or minimize consequences if it becomes a liability.Summarizing planned and faced risks, effectiveness of mitigation activities, and effort spent for the risk management.Risk management for mega projects:Megaprojects (sometimes also called "major programs") are extremely large-scale investment projects, typically costing more than US$1 billion per project. Megaprojects include bridges, tunnels, highways, railways, airports, seaports, power plants, dams, wastewater projects, coastal flood protection schemes, oil and natural gas extraction projects, public buildings, information technology systems, aerospace projects, and defense systems. Megaprojects have been shown to be particularly risky in terms of finance, safety, and social and environmental impacts. Risk management is therefore particularly pertinent for megaprojects and special methods and special education have been developed for such risk management. Risk management of Information Technology:Information technology is increasingly pervasive in modern life in every sector. IT risk is a risk related to information technology. This is a relatively new term due to an increasing awareness that information security is simply one facet of a multitude of risks that are relevant to IT and the real world processes it supports.A number of methodologies have been developed to deal with this kind of risk.ISACA's Risk IT framework ties IT risk to Enterprise risk management.Risk management techniques in petroleum and natural gas:For the offshore oil and gas industry, operational risk management is regulated by the safety case regime in many countries. Hazard identification and risk assessment tools and techniques are described in the international standard ISO 17776:2000, and organizations such as the IADC (International Association of Drilling Contractors) publish guidelines for HSE Case development which are based on the ISO standard. Further, diagrammatic representations of hazardous events are often expected by governmental regulators as part of risk management in safety case submissions; these are known as bow-tie diagrams. The technique is also used by organizations and regulators in mining, aviation, health, defense, industrial and finance. Risk management and business continuity:Risk management is simply a practice of systematically selecting cost effective approaches for minimizing the effect of threat realization to the organization. All risks can never be fully avoided or mitigated simply because of financial and practical limitations. Therefore all organizations have to accept some level of residual risks.Whereas risk management tends to be preemptive, business continuity planning (BCP) was invented to deal with the consequences of realized residual risks. The necessity to have BCP in place arises because even very unlikely events will occur if given enough time. Risk management and BCP are often mistakenly seen as rivals or overlapping practices. In fact these processes are so tightly tied together that such separation seems artificial. For example, the risk management process creates important inputs for the BCP (assets, impact assessments, cost estimates etc.). Risk management also proposes applicable controls for the observed risks. Therefore, risk management covers several areas that are vital for the BCP process. However, the BCP process goes beyond risk management's preemptive approach and assumes that the disaster will happen at some point.Risk communication:Risk communication is a complex cross-disciplinary academic field. Problems for risk communicators involve how to reach the intended audience, to make the risk comprehensible and relatable to other risks, how to pay appropriate respect to the audience's values related to the risk, how to predict the audience's response to the communication, etc. A main goal of risk communication is to improve collective and individual decision making. Risk communication is somewhat related to crisis communication.Seven cardinal rules for the practice of risk communication:Accept and involve the public/other consumers as legitimate partners (e.g. stakeholders).Plan carefully and evaluate your efforts with a focus on your strengths, weaknesses, opportunities, and threats (SWOT).Listen to the stakeholder’s specific concerns.Be honest, frank, and open.Coordinate and collaborate with other credible sources.Meet the needs of the media.Speak clearly and with compassion.Financial risk management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc. Similar to general risk management, financial risk management requires identifying its sources, measuring it, and plans to address them.Financial risk management can be qualitative and quantitative. As a specialization of risk management, financial risk management focuses on when and how to hedge using financial instruments to manage costly exposures to risk.In the banking sector worldwide, the Basel Accords are generally adopted by internationally active banks for tracking, reporting and exposing operational, credit and market risks.When to use financial risk management:Finance theory (i.e., financial economics) prescribes that a firm should take on a project when it increases shareholder value. Finance theory also shows that firm managers cannot create value for shareholders, also called its investors, by taking on projects that shareholders could do for themselves at the same cost.When applied to financial risk management, this implies that firm managers should not hedge risks that investors can hedge for themselves at the same cost. This notion was captured by the hedging irrelevance proposition: In a perfect market, the firm cannot create value by hedging a risk when the price of bearing that risk within the firm is the same as the price of bearing it outside of the firm. In practice, financial markets are not likely to be perfect markets.This suggests that firm managers likely have many opportunities to create value for shareholders using financial risk management. The trick is to determine which risks are cheaper for the firm to manage than the shareholders. A general rule of thumb, however, is that market risks that result in unique risks for the firm are the best candidates for financial risk management.The concepts of financial risk management change dramatically in the international realm. Multinational Corporations are faced with many different obstacles in overcoming these challenges. There has been some research on the risks firms must consider when operating in many countries, such as the three kinds of foreign exchange exposure for various future time horizons: transactions exposure, accounting exposure, and economic exposure. Megaprojects (sometimes also called "major programs") have been shown to be particularly risky in terms of finance. Financial risk management is therefore particularly pertinent for megaprojects and special methods have been developed for such risk management.Implementation of study: For implementing the study,8 security’s or scripts constituting the Sensex market are selected of one month closing share movement price data from Economic Times and financial express on Jan 2012. In order to know how the risk of the stock or script, we use the formula, which is given below: ------------Standard deviation = √ variance N _Variance = (1/n-1) ∑(R-R) ^2 t =1Where (R-R) ^2=square of difference between sample and mean. n=number of sample observed.After that, we need to compare the stocks or scripts of two companies with each other by using the formula or correlation co-efficient as given below. N _ _Co-variance (COVAB) = 1/n∑ (RA-RA) (RB-RB) t =1 (COV AB) Correlation-Coefficient (P AB) = --------------------- (Std. A) (Std. B) Where (RA-RA) (RB-RB) = Combined deviations of A&B(Std. A) (Std B) =standard deviation of A&BCOVAB= covariance between A&B n =number of observation The next step would be the construction of the optimal portfolio on the basis of what percentage of investment should be invested when two securities and stocks are combined i.e. calculation of two assets portfolio weight by using minimum variance equation which is given below.FORMULA (Std. b) ^2 – pab (Std. a) (Std. b) Xa =------------------- ---------------------------------- (Std. a) ^2 + (std. b) ^2 –2pab (Std. a) (Std. b) Where Std. b= standard deviation of bStd. a = standard deviation of aPab= correlation co-efficient between A&B The next step is final step to calculate the portfolio risk (combined risk), that shows how much is the risk is reduced by combining two stocks or scripts by using this formula: ___________________________________ σp= √ X1^2σ1^2+X2^2σ2^2+2(X1)(X2)(X12)σ1σ Where X1=proportion of investment in security 1. X2=proportion of investment in security 2. Σ 1= standard deviation of security 1. Σ 2= standard deviation of security 2. X12=correlation co-efficient between security 1&2. Σ p=portfolio riskCHAPTER-IVDATA ANALYSES AND INTERPRETATION Analysis of which company is undertaken?From where the data was collected.CALCULATION OF AVERAGE RETURN OF COMPANIES: _ Average Return (R) = (R)/N (P0) = Opening price of the share (P1) = Closing price of the share D = DividendWIPRO:Year(P0)(P1)D(P1-P0)D+(P1-P0)/ P0*1002007-20081,233.451361.2029127.7512.712008-20091,361.202,0125650.848.162009-201020121900.755-111.25-15.842010-20111900.751900.458-0.31.382011-20121900.45425.30--1475.15-0.776?TOTAL RETURN45.634Average Return = 45.63/5 = 9.12DR REDDY’S LABORATORIES LTD:Year (P0) (P1)D(P1-P0)D+(P1-P0)/ P0*1002007-2008916.30974.35558.26.892008-2009974.35739.15523.52-23.632009-2010739.151,421.405682.2592.982010-20111,421.401456.553.7535.152.742011-20121456.55591.25.75-865.3-59.4?TOTAL RETURN19.58Average Return = 19.58/5 = 3.916ACC:Year (P0) (P1)D(P1-P0)D+(P1-P0)/ P0*1002007-2008138.50254.654116.1586.712008-2009254.65360.557105.944.342009-2010360.55782.208421.61119.192010-2011782.20735.2525-46.95-2.82011-2012735.23826.10290.8512.63??TOTAL RETURN?258.07Average Return = 258.07/5 =51.614HERO AUTOMOBILES LIMITED:Year(P0) (P1)D(P1-P0)D+(P1-P0)/ P0*1002007-2008188.20490.6020302.40171.32008-2009490.60548.002057.4015.772009-2010548.00890.4520342.4566.142010-2011890.45688.7517-20.17-20.742011-2012688.759.51.451.451.958?TOTAL RETURN234.428Average Return = 234.428/5 = 46.885 DIAGRAMATIC PRESENTATIONCOMPANYRETURNWIPRO9.12DR.REDDY3.916ACC51.614HERO46.885 RETURN Interpretation is needed for all graphs and figuresCALCULATION OF STANDARD DEVIATION:Standard Deviation = Variance __Variance=1/n (R-R)2 WIPRO:YearReturn (R)Avg. Return (R)(R-R)(R-R)22007-200812.719.123.5912.88812008-200948.169.1239.041524.1222009-2010-15.849.12-24.96623.00162010-20111.389.12-7.7459.90762011-2012-0.7769.12-9.89697.93082??TOTAL2317.85 _Variance = 1/n (R-R)2 = 1/5 (2317.85) = 463.57Standard Deviation = Variance = 463.57 =21.53 DR. REDDY’S: YearReturn (R)Avg. Return (R)(R-R)(R-R)22007-20086.8946.882.988.88042008-2009-23.6346.88-27.54758.45162009-201092.9846.8889.077933.4652010-20112.7446.88-1.171.36892011-2012-59.446.88-63.314008.156?TOTAL12710.32Variance = 1/n-1 (R-R)2 = 1/5 (12710.32) = 2542.06Standard Deviation = Variance = 2542.06= 50.14ACC:YearReturn (R)Avg. Return (R)(R-R)(R-R)22007-200886.7151.6135.11232.012008-200944.3451.61-7.2752.85292009-2010119.1951.6167.584567.0562010-2011-2.851.61-54.412960.4482011-201212.6351.61-38.981519.44??TOTAL10331.81Variance = 1/n-1 (R-R)2 = 1/5 (10331.81) = 2066.36Standard Deviation = Variance = 2066.36 = 45.45 HERO:YearReturn (R)Avg. Return (R)(R-R)(R-R)22007-2008171.332.59138.7119,240.52008-200915.7732.59-16.82284.12009-201066.1432.5933.571,126.2732010-2011-20.7432.59-53.332,844.12011-20121.95832.59-31-960.8??TOTAL29,592.4Variance = 1/n-1 (R-R)2 = 1/5 (29,592.4) = 4,232.1Standard Deviation = Variance = 4,232.1 = 70.23DIAGRAMATIC PRESENTATIONCOMPANYRISKWIPRO22.86DR.REDDY46.66ACC47.963HERO70.23 RISKCALCULATION OF CORRELATION: Covariance (COV ab) = 1/n (RA-RA)(RB-RB) Correlation Coefficient = COV ab/?a*??bWIPRO WITH OTHER COMPANIESii) WIPRO (RA)&DR.REDDY (RB)YEAR(RA-RA)(RB-RB)(RA-RA) (RB-RB)2007-20088.116.2250.442008-200943.56-24.3 -1,058.52009-2010-10.4492.31 -963.72010-2011-4.1952.07-8.692011-2012-4.678-60.07281.01??TOTAL-1,180.3Covariance (COV ab) = 1/5 (-1,180.3) = -196.72 Correlation Coefficient = COV ab/?a*?b?a = 22.86; ?b = 46.66 = -196.72/(22.86)(46.66) = -0.184iii. WIPRO (RA) & ACC (RB)YEAR(RA-RA)(RB-RB)(RA-RA) (RB-RB)2007-2008-32.01-50.71,622.912008-20098.1144.67362.32009-201043.562.32101.182010-2011-10.4477.17-805.72011-2012-4.195-44.82188.02??TOTAL1,606.11Covariance (COV ab) = 1/5(1,606.11) = 267.69Correlation Coefficient = COV ab/?a*??b?a = 22.86; ?b = 47.27 = 267.69/(22.86)(47.27) = .0247v. WIPRO (RA) & HERO (RB)YEAR(RA-RA)(RB-RB)(RA-RA) (RB-RB)2007-20088.11138.711,124.92008-200943.56-16.82-732.682009-2010-10.4433.57-358.482010-2011-2.42-59.44143.82011-2012-4.68-31145.1??TOTAL 2,697Covariance (COV ab) = 1/6 (2,697) = 449.7Correlation Coefficient = COV ab/?a*?b??a = 22.86; ?b = 70.23= 2,697/(22.86)(70.23) = 0.283. Correlation between DR REDDY & Other Companies:i. DR REDDY(RA) &ACC(RB)YEAR(RA-RA)(RB-RB)(RA-RA) (RB-RB)2007-20086.22 44.67277.852008-2009-24.312.32-56.3992009-201092.3177.177,123.562010-20112.07-44.82-92.782011-2012-60.07-29.371,764.26??TOTAL9,838.84Covariance (COV ab) = 1/6 (9,838.84) =1,639.81Correlation Coefficient = COV ab/?a*??b?a = 46.66; ?b = 47.27= 1,639.81/(46.66)(47.27) = 0.743iii. DR REDDY (RA) &HERO (RB)YEAR(RA-RA)(RB-RB)(RA-RA) (RB-RB)2007-20086.22138.71862.722008-2009-24.3-16.82408.732009-201092.3133.573,098.852010-20112.07-53.33-110.3932011-2012-60.07-311,862.2??TOTAL7,284.66Covariance (COV ab) = 1/6 (7,284.66) = 1,214.109Correlation Coefficient = COV ab/?a*??b?a = 46.66; ?b = 70.23= 1,214.109/(46.66)(70.23) = 0.3704. Correlation With ACC & Other Companies ACC(RA) & HERO (RB)YEAR(RA-RA)(RB-RB)(RA-RA) (RB-RB)2007-200844.67138.71 6,196.182008-20092032-16.82-39.0222009-201077.1733.572,590.592010-2011-44.82-53.332,390.2512011-2012-29.37-31910.5?TOTAL15,682.15How the calculation is doneCovariance (COV ab) = 1/6 (15,682.15) = 2,613.7Correlation Coefficient = COV ab/?a*??b?a = 47.27; ?b =70.23=2,613.7/(47.27)(70.23) = 0.787CALCULATION OF PORTFOLIO WEIGHTS:FORMULA: Wa = ?b [?b-(nab*?a)] ?a2 + ?b2 - 2nab*?a*?bWb = 1 – Wa WEIGHTS OF WIPRO & OTHER COMPANIES:WIPRO & DR. REDDY?a = 22.86?b = 46.66Nab = -0.184WA = 46.66 [46.66-(-0.184*?????)] ???????2 + ???????2 – 2(-0.184)*???????*???????WA = 2,373.42 3,092.2615WA =0.77Wb = 1 – Wa Wb = 1- 0.77 = 0.23WIPRO (a) & ACC (b)?a = 22.86?b = 47.27Nab = 0.247WA = 47.27 [?????- (0.25*?????)] ???????2 + ???????2 – 2(0.5)*???????*???????WA = 1,964.82 1,767.66WA =1.11Wb = 1 – Wa Wb = 1- 1.11 = -0.11WIPRO(a) & HERO(b)?a = 22.86?b = 70.23Nab = 0.28WA = 70.23 [70.23-(0.28*22.86)] ???????2 + ???????2 – 2(0.28)*???????*???????WA = 4,482.88 4,555.77WA =0.98Wb = 1 – Wa Wb = 1-0.98 = 0.02WEIGHTS OF DRREDDY & OTHER COMPANIES: DRREDDY (a) & ACC (b)?a = 46.7?b = 47.7Nab = 0.74WA = 47.7 [47.7- (0.74*46.7)] ??????2 + ??????2 – 2(0.74)*??????*?????? WA = 602.6 1,149.01WA =0.52Wb = 1 – Wa Wb = 1- 0.52 = 0.48DRREDDY (a) & HERO(b)?a = 46.67?b = 70.23Nab = 0.37WA = 70.23 [70.23-(0.37*46.67)] ???????2 + ???????2 – 2(0.37)*???????*???????WA = 3,722.2 2,506.9WA =1.48Wb = 1 – Wa Wb = 1-1.48 = -0.48WEIGHTS OF ACC & OTHER COMPANIESACC (a) & HERO(b)?a = 47.3?b = 70.23Nab = 0.79WA = 70.23 [70.23- (0.79*47.3)] ??????2 + ???????2 – 2(0.79)*??????*???????WA = 2,308.5 1,921.43WA = 1.20Wb = 1 – Wa Wb = 1- 1.20 = -0.20 CALCULATION OF PORTFOLIO RISK: RP= (?a*Wa)2 + (?b*Wb)2 + 2*?a*?b*Wa*Wb*nabCALCULATION OF PORTFOLIO RISK OF WIPRO & OTHER COMPANIES:WIPRO (a) & DR.REDDY (b):?a = 22.86?b = 46.66Wa = 0.78Wb = 0.23Nab = -0184RP = (22.86*0.78.)2+(46.66*0.23) 2??(22.86)(46.66)(0.78(0.23)(-0.184)?? 355.6 18.86%WIPRO (a) &ACC (b):?a = 22.86?b = 47.27Wa = 1.11Wb = -0.11Nab = 0.25RP = (22.86*1.11) 2+(47.27*-0.11) 2+2(22.86)(47.27)(1.11)(-0.11)(0.25)?? 551.2 23.5%WIPRO (a) & HERO (b):?a = 22.86?b = 70.23Wa= 0.98Wb=0.02Nab = 028RP = (22.86*0.98)2(70.23*0.02)2+2(22.86)(70.23)(0.98)(0.02)(0.28)?? 525 = 22.85%CALCULATION OF PORTFOLIO RISK OF DR REDDY & OTHER COMPANIESDRREDDY (a) & ACC (b):?a = 46.7?b = 47.3Wa=0.52Wb= 0.48Nab = 0.74RP = (46.7*0.52)2+(47.3*0.48)2+2(46.7)??????*??????*(0.48)*(0.74)?? 1,922.80 = 43.85%DRREDDY (a) & HERO HONDA (b):?a = 46.67?b = 70.23Wa = 1.48Wb= -0.48Nab = 0.37RP = (46.67*1.48)2+(70.23*-0.48)2+2(46.67)???????*??????*(-048)*(0.37)?? 234.89 = 15.33%CALCULATION OF PORTFOLIO RISK OF ACC & OTHER COMPANIESACC (a) &HERO (b):?a = 47.3?b = 70.23Wa= 1.20Wb = -0.20Nab = 0.79RP = (47.3*1.20)2+ (70.23*-0.20)2+2(47.3)????????*??????*(-0.20)*(0.79)?? 1,764.84 = 42%CALCULATION OF PORTFOLIO RETURN:Rp= (RA*WA) + (RB*WB)Where Rp = portfolio return RA= return of AWA= weight of A RB= return of BWB= weight of BCALCULATION OF PORTFOLIO RETURN OF WIPRO & OTHER COMPANIES:WIPRO (a) & DR.REDDY (b):RA= 4.6WA=0.77RB=0.67WB=0.23Rp = (4.6*0.77) + (0.67*0.23)Rp = (3.542 + 0.1541)Rp = 3.6961%WIPRO (a) &ACC (b):RA= 4.6WA=1.11RB= 42.02WB=-0.11Rp = (4.6*1.11) + (42.02*-0.11)Rp = (5.106+4.622)Rp = 0.484WIPRO (a) & HERO (b):RA= 4.6WA=0.98RB= 32.498WB=0.02Rp = (4.6*0.9) + (32.498*0.02)Rp = (4.508 + 0.6499)Rp = 5.16%CALCULATION OF PORTFOLIO RETURN OF DR REDDY & OTHER COMPANIESDRREDDY (a) & ACC (b): RA= 0.67WA=0.52RB=42.02WB=0.48Rp = (0.67*0.52) + (42.02*0.48)Rp = (.3487+20.139)Rp = 20.5%DRREDDY (a) & HERO (b):RA= 0.67WA=1.48RB=32.498WB=-0.48Rp (0.67*1.48) + (32.498*-0.48)Rp (0.9916-15.599)Rp -14.60%CALCULATION OF PORTFOLIO RETURN OF ACC & OTHER COMPANIESACC(a) &HERO (b): RA= 42.02WA=1.20 RB=32.498WB=-0.20Rp = (42.02*1.20) + (32.498*-0.20)Rp = (50.424-6.499)Rp = 43.92% DISPLAY OF ALL CALCULATED VALUESCOMBINATIONCORRELATIONCOVARIANCEPORTFOLIO RETURNPORTFOLIO RISKWIPRO & DR.REDDY-0.184-196.723.718.9WIPRO & ACC0.247267.690.4923.5WIPRO &HERO0.28449.75.022.9DR.REDDY & ACC.74341639.820.543.9DR.REDDY & BHEL0.79693047.7-21.722.9DR REDDY&HERO0.7051,124.1095-14.615.3ACC&BHEL0.9173,558.6521.0763.8ACC & HERO0.78732,613.743.942Interpretations The analytical part of the study for the 6 years period reveals the following interpretations, Wipro with acc:Portfolio weights for wipro and ACC are (1.11) and (-0.11) respectively. This indicates that the investors who are interested to take more risk they can invest in this combination, and also can get high returns. Dr reddy & hero:In this combination as per the calculation & the study of portfolio weights of dr reddy and hero are (1.48) and (-0.48) respectively. Here the standard deviation of Dr reddy &hero are (46.66) and (70.23) respectively. Returns are (0.67) is for Dr reddy (32.43) is for hero. In this, position invest in hero is high risk as well as high returns also up to (32.43) when compared to DR reddy.Dr reddy&acc:The portfolio of weights of the both (0.52) is Dr reddy (.048) is for acc. The standard deviation of Dr reddy is (46.66) and (47.27) for acc. The returns of DR reddy is (0.67) and (42.02) is acc. According to this combination investor can invest acc; this is more risk as well as more returns can get up to (42.02). If investor wants less risk he has to invest in acc.Dr reddy is a low risk as well as low returns also.Acc&hero:According to this combination of the portfolio weights are (1.20) in acc and (-0.20) is hero. The standard deviation of acc is less than hero 47.27>70.23. If the investor wants to take low risk, acc is the better option. And the return point of view hero is providing more returns that of acc. According to this combination if the investor wants to get returns then he has to take the more risk. This is the good combination for investors for investing in the acc & hero. For more profits. “Greater Portfolio Return with less Risk is always is an attractive combination” for the Investors.SUMMARY & CONCLUSIONSUMMARY:The investors who are risk averse can invest their funds in the portfolio combination of,ACC,HERO AND WIPRO proportion. The investors who are slightly risk averse are suggested to invest in WIPRO, DR. REDDY, ACC as the combination is slightly low risk when compared with other companies.The analysis regarding the compaines ACC, HERO has howed a wise investment in public and in private sector with an increasing trend where as corporate sector has recorded a decreasing trends income which denotes an increasing trend throught out the study period. CHAPTER-VFINDINGS SUGGESSIONSCONCLUSIONS BIBLIOGRAPHYCONCLUSIONS:More information should be provided The analytical part of study for the 5 years reveals the following as for as:As far as the average return of the company is concerned ACC, , HERO is high with an average return of 48.41%. WIPRO, DR.REDDY is getting low returns. HERO securities are performing at medium returns.As far as the correlation is concerned the securities DR.REDDY are high correlated with minimum portfolio risk. The investor who is risk averse will have to invest in this combination which gives good return with low risk.RECOMMENDATIONS:Numbering to be givenAs the average return of securities, ACC, HERO and are HIGH, it is suggested that investors who show interest in these securities taking risk into consideration.As the risk of the securities ACC, HERO and BHEL are risky securities it suggested that the investors should be careful while investing in these securities.The investors who require minimum return with low risk should invest in WIPRO & DR.REDDY.It is recommended that the investors who require high risk with high return should invest in ITC and HERO.The investors are benefited by investing in selected scripts of Industries.BIBILOGRAPHY:1. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT-donald.E.Fisher, Ronald.J.Jordan 2. INVESTMENTS -William .F.Sharpe, gordon,J Alexander and Jeffery.V.Baily 3. PORTFOLIOMANAGEMENT -Strong R.AWEB REFERENCES:http;//http;//http;//http;// ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download