1 Subject Code : 14MBA FM303 Subject : Investment Management IA Marks : 50 No. of Lecture Hours / Week : 04 Exam Hours : 03 Total Number of Lecture Hours : 56 Exam Marks : 100 Practical Component : 01 Hour / Week Objectives: • To develop a thorough understanding of process of investments. • To familiarize the students with the stock markets in India and abroad. • To provide conceptual insights into the valuation of securities. • To provide insight about the relationship of the risk and return and how risk should be measured to bring about a return according to the expectations of the investors. • To familiarise the students with the fundamental and technical analysis of the diverse investment avenues Module 1: (Theory) (6 Hours) Investment: Attributes, Economic vs. Financial Investment, Investment and speculation, Features of a good investment, Investment Process. Financial Instruments: Money Market Instruments, Capital Market Instruments, Derivatives. Module 2: (Theory) (6 Hours) Securities Market: Primary Market - Factors to be considered to enter the primary market, Modes of raising funds, Secondary Market- Major Players in the secondary market, Functioning of Stock Exchanges, Trading and Settlement Procedures, Leading Stock Exchanges in India. Stock Market Indicators- Types of stock market Indices, Indices of Indian Stock Exchanges. Module 3: (Theory & Problems) (8 Hours) Risk and Return Concepts: Concept of Risk, Types of Risk- Systematic risk, Unsystematic risk, Calculation of Risk and returns. Portfolio Risk and Return: Expected returns of a portfolio, Calculation of Portfolio Risk and Return, Portfolio with 2 assets, Portfolio with more than 2 assets. Module 4: (Theory & Problems) (8 Hours) Valuation of securities: Bond- Bond features, Types of Bonds, Determinants of interest rates, Bond Management Strategies, Bond Valuation, Bond Duration. PREFERENCE Shares- Concept, Features, Yields. Equity shares- Concept, Valuation, Dividend Valuation models. Module 5: (10 Hours). Macro-Economic and Industry Analysis: Fundamental analysis-EIC Frame Work, Global
2 Economy, Domestic Economy, Business Cycles, Industry Analysis. Company AnalysisFinancial Statement Analysis, Ratio Analysis. Technical Analysis – Concept, Theories- Dow Theory, Eliot wave theory. Charts-Types, Trend and Trend Reversal Patterns. Mathematical Indicators – Moving averages, ROC, RSI, and Market Indicators. (Problems in company analysis & Technical analysis) Market Efficiency and Behavioural Finance: Random walk and Efficient Market Hypothesis, Forms of Market Efficiency, Empiricial test for different forms of market efficiency. Behavioural Finance – Interpretation, Biases and critiques. (Theory only) Module 6: (Theory & Problems) (10 Hours) Modern Portfolio Theory: Markowitz Model -Portfolio Selection, Opportunity set, Efficient Frontier. Beta Measurement and Sharpe Single Index Model Capital Asset pricing model: Basic Assumptions, CAPM Equation, Security Market line, Extension of Capital Asset pricing Model - Capital market line, SML VS CML. Arbitrage Pricing Theory: Arbitrage, Equation, Assumption, Equilibrium, APT and CAPM. Module 7: (Theory & Problems) (8 Hours) Portfolio Management: Diversification- Investment objectives, Risk Assessment, Selection of asset mix, Risk, Return and benefits from diversification. Mutual Funds:, Mutual Fund types, Performance of Mutual Funds-NAV. Performance evaluation of Managed Portfolios- Treynor, Sharpe and Jensen Measures Portfolio Management Strategies: Active and Passive Portfolio Management strategy. Portfolio Revision: – Formula Plans-Rupee Cost Averaging (QUESTION PAPER- 50% Problems, 50% Theory) Practical Components: • A Student is expected to trade in stocks. It involves an investment of a virtual amount of Rs.10 lakhs in a diversified portfolio and manage the portfolio. At the end of the Semester the Net worth is to be assessed and marks may be given (to beat an index). • Students should study the functioning of stock exchange. • Students should study of the stock market pages from business press and present their observations • Students can do • Macro Economic Analysis for the Indian economy. • Industry Analysis for Specific Sectors. • Company Analysis for select companies. • Practice Technical Analysis • Students can study the mutual funds schemes available in the market and do their Performance evaluation. RECOMMENDED BOOKS: • Investment Analysis and Portfolio management – Prasanna Chandra, 3/e, TMH, 2010. • Investments – ZviBodie, Kane, Marcus & Mohanty, 8/e, TMH, 2010.
3 • Investment Management – Bhalla V. K, 17/e, S.Chand, 2011. • Security Analysis & Portfolio Management – Fisher and Jordan, 6/e, Pearson, 2011. • Security Analysis & Portfolio Management – Punithavathy Pandian, 2/e, Vikas, 2005. • Investment Management – Preethi Singh, 17/e, Himalaya Publishing House 2010. • Security Analysis & Portfolio Management- Kevin S, PHI, 2011. • Investments: Principles and Concepts – Charles P. Jones, 11/e, Wiley, 2010. • Security Analysis & Portfolio Management – Falguni H. Pandya, Jaico Publishing, 2013. REFERENCE BOOKS: • Fundamentals of Investment – Alexander, Sharpe, Bailey, 3/e, PHI, 2001. • Security Analysis & Portfolio Management – Nagarajan K & Jayabal G , 1st Edition, New Age international, 2011. • Investment – An A to Z Guide, Philip Ryland, 1st Edition, Viva Publishers, 2010. • Guide to Investment Strategy-Peter Stanyer, 2nd Edition, Viva Publishers, 2010. • Security Analysis & Portfolio Management – Sayesh N. Bhat, 1st Edition, Biztantra, 2011. • Security Analysis & Portfolio Management– Dhanesh Khatri, 1st Edition, Macmillan, 2010. • Security Analysis & Portfolio Management – Avadhani V. A, HPH. • Investment Analysis & Portfolio Management– Reilly, 8/e, Cengage Learning.
4 INDEX Module No. Contents Page Number Module 1 Investment 5 Module 2 Securities Market 29 Module 3 Risk and Return Concepts 47 Module 4 Valuation of securities 63 Module 5 Macro-Economic and Industry Analysis 87 Module 6 Modern Portfolio Theory 95 Module 7 Portfolio Management 98