Security Analysis and Portfolio
Management
Dr. S R Patil Director, 11.09.2020
Security Analysis and Portfolio Management
• Subject Code : C23
• Contact Hours : 60
• Work Load : 4 Hours per week
• Credit Points : 4
• Objectives : Provide exposure towards
Stock Market, its working and
investment strategies.
• Text Book : Punithvathy Pandian
• Reference Book : Shalini Talwar, Prasanna Chandra
Dr. S R Patil Director, 11.09.2020
Security Analysis & Portfolio Management..
Module – I
Investment
– Introduction to Investment
– Significance & Dimensions of investment
– Types of Investment
Dr. S R Patil Director, 11.09.2020
Investment
• Employment of funds with the aim of
achieving additional income or growth in
value
• Quality of investment is ‘waiting for a reward’
• Long term commitment
• Monetary commitment resulting in a sacrifice
of his immediate benefits for a better future
return.
Dr. S R Patil Director, 11.09.2020
Dr. S R Patil Director, 11.09.2020
Dr. S R Patil Director, 11.09.2020
Dr. S R Patil Director, 11.09.2020
Financial and Economic Meaning of Investment
• Allocation of monetary resources to assets
expected to yield gain over a period. These
assets range from safe investment to risky
investments – financial investments
• In economic sense – the net additions to the
economy’s capital stock
Dr. S R Patil Director, 11.09.2020
Distinction between investment and speculation
Investment Speculation
Time LT – time framework ST planning holding assets even for
Horizon beyond 12 months one day with the objective
Risk It has limited risk There are high profits and gains
Return Consistent and moderate High returns though risk of loss is high
over a long period
Use of Own funds through Own and borrowed funds
funds savings
Decisions Safety, liquidity Market behavior information
profitability and stability judgments on movements in the stock
considerations and market.
performance of
companies
Dr. S R Patil Director, 11.09.2020
Real Assets & Financial Assets
• Land, building, furniture, machinery –
• Shares, Debentures, Bonds, Derivatives, FDs, Bills,
Loans
Dr. S R Patil Director, 11.09.2020
Importance of Investment
• Longer life expectancy - balance investment –
retirement plan etc.
• Taxation –
• Interest rates
• Inflation
• Income
Dr. S R Patil Director, 11.09.2020
Investment objectives
• Safety
• Rate of Return
• Growth
• Liquidity
• Protection from inflation
Dr. S R Patil Director, 11.09.2020
Features of investment Avenues
Particulars Risk Returns Capital Apprcn Liquidity Tax Benefit
Equity High low High high high
Debentures Low High Very low Very low Nil
Bank Low Low Nil High Nil
Deposits
PPF Nil Nil Low Low Moderate
Life Nil Nil Low Low Moderate
Insurance
Real estate Medium Low High in LT Moderate Changes
according to rules
Gold Silver Low Nil High in LT Moderate Nil
Dr. S R Patil Director, 11.09.2020
Dr. S R Patil Director, 11.09.2020
Investment Process - Stages
1.Investment policy – financial planning, objectives, investible wealth,
potential assets, asset categories
2. Investment Analysis – securities available for investment
3. Valuation of Securities –
4. Portfolio Construction -
Dr. S R Patil Director, 11.09.2020
Investment and Gambling
• Gambling is a process of betting on some event or
activity with an uncertain outcome with the
objective of earning additional money. It is not
investment activity (horse race, cricket etc.)
• Gambling involves artificial risk whereas
investment or speculation carries commercial risk.
• Financial analyses can’t reduce the risk in
gambling
Dr. S R Patil Director, 11.09.2020
Investment constraints
• Knowledge about investment avenues
• Liquidity
• Knowledge about firms issuing securities
• Knowledge about the product of the company
issuing securities
• Time horizon
• Tax status
• Legal and regulatory factors
• Other constraints
Dr. S R Patil Director, 11.09.2020
Investment Analysis & Security Analysis
• Investment analysis forecasts firms stock prices
and its stream of future dividends based on
which we compute the present value of these
future cash flows (intrinsic value).
• If current market price is lower than the
intrinsic value – buy the stocks vice versa..
• Security Analysis focuses on risk and return
estimation. - Sharpe index, Markowitz,
fundamental analysis etc.
Dr. S R Patil Director, 11.09.2020
True / False
1. Investments are Concerned with risk and return
2. Investments involve long term commitments
3. Speculations brings about stable return for LT period of time
4. Speculation is considered with review and analysis and
investment with capital gain
5. Investment are based on portfolio construction valuation
identification and analysis
6. The variable investment consist of cash bonds and savings
certificates
7. The investment objective is high risk and high return
8. Arbitrage is a long term investment
9. The commodity investment is through savings bank
10.Indirect securities consist of mutual fund and life insurance
securities. Dr. S R Patil Director, 11.09.2020
Class Work / Home Work
• List of Stock Market in world / India
• Major Indices in world / India
Dr. S R Patil Director, 11.09.2020
