Unit 1

Meaning of Risk and Investments: Meaning of Risk – Total Risk – Systematic risk -Unsystematic risk – elements of systematic risk (interest rate risk etc..) and Unsystematic risk (business risk… etc), the concept of uncertainty, Investments – meaning – avenues of investments – financial assets – non- financial assets.
Measuring return and risk: Measuring return and risk under both certain and uncertain conditions,
i.e. measuring average return, expected return, standard deviation, beta (regression method and covariance method), alpha, measuring covariance, correlation, meaning of a portfolio, return from a portfolio, risk of a portfolio with two or more securities. Characteristic line, Securities Market Line (SML) and Capital Market line. (CML) Problems on the topics undermeasuring risk and return.

Unit 2

Equity Analysis and Evaluation: Equity analysis – Fundamental analysis – economic analysis – industry analysis – company analysis – technical analysis – Random walk theory – Dow theory – Market Breadth theory – introduction to Charts – moving averages – Supports and resistances – price patterns – Moving average oscillators – MACD – Momentum indicator – Relative strength Index.
(The students are expected to have a basic level of knowledge on matters specified in this paragraph) Equity Valuation: Valuation Process – Estimation of free Cash flows – estimation of Free Cash Flow To Firm (FCFF), estimation of free cash flow to equity (FCFE) Finding value of firm and equity using FCFF and FCFE – Present value valuation models – Dividend discount model – The discounted cash flow analysis – Relative valuation models – Asset valuation methods – Liquidation approach – Economic value added.
Problems only on equity valuation.

Unit 3

Bonds and Bond market: Types of bonds – difference between a bond and a debenture – zero coupon bonds – deep discount bonds – Simple valuation of a bond – relationship between the coupon rate, yield and the price of the bond – premium and discount in bondpricing – perpetuity bond – convertible bonds – re-issue of bonds – Nominal yield – current yield – and yield to maturity (YTM) – Malkiel’s theorems – Floating rate bonds – risk associated in investing in bonds – duration of a bond – factors that affect duration – application of duration – modified duration – convexity of bonds – bond management strategies – passive strategies active strategies – the concept of swaps and immunization. Problems on the above topics.

Unit 4

CAPM and Portfolio construction Theories: Capital Assets pricing theory – Arbitrage pricing theory,
approaches to portfolio construction – Markowitz model – Markowitz efficient frontier theory – The Sharpe Index model – Single index model – Sharpe’s optimal portfolio. (only theory questions on the above topics)

Unit 5

Portfolio Evaluation: Sharpe’s Performance Index – Treynor’s performance Index – Jenson’s performance Index – Portfolio management – active – passive – The formula plans – revising the portfolio – the cost of revision.
Problems on the above topics.

Course Objective:
To provide an insight into the process and concept of security analysis and managing the portfolio of investments.

Course Outcomes:

Textbooks:

1. Kevin – Security Analysis and Portfolio Management – PHI
2. Punithavathy Pandian – Security Analysis and Portfolio Management – Vikas Publishing House

Reference Books:

1. Preeti Singh – Investment Management, Security Analysis and Portfolio Management, Himalaya Publishing House
2. Bhalla – Investment Management, Security Analysis and Portfolio Management – S. Chand
3. Ranganatham, Madhumathi – Security Analysis and Portfolio Management – Pearson