OBJECTIVE :
i. To understand the basic principles of valuation of securities and to grasp the fundamental logic behind theories of portfolio management.
ii. To appreciate the relatability of theory and practice in security analysis and portfolio management.

1. Investment Environment :

i. New Issue Market : Definition, Functions and methods of flotation offer through prospectus. Offer of sale, private placement, rights issue, conversion, problems and issues of NIM. Role of intermediaries, Merchant Bankers, underwriters and Managers. Merchant Banking Concept, functions and expertise required; regulations pertaining to merchant bankers & capital issues.

ii. Stock Exchange : Secondary market and stock exchanges, evolution, functions and regulation of stock exchanges in India. An understanding of operations - trading and settlement procedures and listing norms; Problems facing Indian stock exchanges - Patel Committee; Role of SEBI; OTC Exchange and National Stock Exchange. Stock indices composition, calculation and limitations.

2. The Investment process : Investment defined. Nature of investment decisions. Investment Vs. Speculation. Role of a speculator. The investment decision process. Source of investment information. Risk and Return concepts and parameters.

3. Analysis of Fixed income securities : Types and Characteristics. Innovations in fixed income securities. Pricing of Bonds. Capitalisation of income methods. Return on bonds. Coupon Rate, Current yield and yield to maturity. Structure of interest rates. Bond Theorems; interest rate risk - duration as a measure of interest rate risk, Duration Theorems, modified duration. Bond convexity. Immunisation.

4. Valuation of equity shares : Characteristics, Equity risk and return a historical perspective. Equity Valuation - Capitalisation of dividends, earning and cash flows under zero growth, constant growth and multiple growth conditions; P/E approach; Fundamental approach - market analysis, Industry analysis and company analysis. Technical analysis - types of charts, Dow's theory, price indicators, volume indicators, credit balance theory, confidence indicators, moving averages, relative strength; Efficient market hypothesis - allocational, operational and informational efficiency; Weak, semi strong and strong forms of efficiency; Assumptions, anomalies and arguments against EMH.

5. Portfolio Theory : Markowitz model - Ex-post Vs. Ex-ante calculations. Inputs for the model. Portfolio return. Portfolio Risk. Risk behaviour Minimum variance portfolio. Determining efficient portfolios. Selecting an optimal portfolio - graphic method and quadrating programming, complexities involved in the selection, single index model; using the model to estimate the inputs, using the model for portfolio analysis. Estimating portfolio return and risk. Multi index methods.

6. Capital Market Theory : Assumptions, introducing a risk free asset combining risk free and risky assets, lending possibilities, borrowing possibilities, the market portfolio, the separation theorem, the new efficient frontier. The capital market line - two sources of risk, the expected risk return relationship. Over and under valued securities. Estimating the security market line, the accuracy of Beta estimates, Tests of CAPM.

7. Arbitrage Pricing Theory : The law of one price. Return generating process. Equilibrium risk return relations. A synthesis of APT and the CAPM.

8. Measuring Portfolio performance : Frame work for evaluating portfolio performance. Mutual funds : Genesis, Typology, Schemes, regulatory frame work and performance - resource mobilised. Types of schemes launched, size of investments, serving the customers cause of Indian mutual funds. Specification of investment objectives and constraints; Asset allocation; Portfolio strategy - active and passive; Portfolio monitoring and revision. Measures of portfolio performance - Reward to Variability and reward-to volatility measures. Differential risk - Jensen's measure - Fama's decomposition approach.

9. International Diversification : The risk of Foreign Securities - Return from internationally diversified portfolios. The effect of exchange rate risk. The performance of internationally diversified portfolios.

Suggested Readings :
1. Fisher & Jordon : Security Analysis and Portfolio Management, PHI.
2. Francis J.C. & Taylor, R.W : Investments, Schaum's Outline Series : McGraw Hill, New York, 1993.
3. Sharpe W.F. Alexander G.J., Bailey : Investments, PHI.
4. Strong R.A. : Portfolio Management Handbook. Jaico Pub., Bombay.
5. Sadhak, H. : 1997, Mutual Funds in India, Response Books, SAGE Publications, New Delhi.