PVT: Steps to Your SuccessPVT: Steps to Your SuccessFundamental skills for achieving workplace successPROFESSIONAL VALUE

TRADER

6 Months Comprehensive – Skill Oriented Course

BatchAugust 2010

BULLS n BEARS SCHOOLH – 13/8, Malviya Nagar, New Delhi – 110 017

Programme Objective

To make a proficient fundamental equity research analyst and to impart knowledge about managing portfolios through portfolio management services.

After completing this course you will be able to:

Understand the dynamics of domestic as well as global equity markets.

Apply various models to value equity through hands-on training on Capital Line database and using easily available analysis software like – MS Excel.

Use equity derivatives for hedging as well as trading purposes.

Enhance returns and measures performance using portfolio management techniques.

Design and manage equity portfolios.

‘The Single-best resource for understanding and participating in Value Investing’

Professional Value Trader

OverviewThis course is designed to meet the growing demand for fundamental equity research analysts and portfolio analysts in the industry. The teaching aids include several practical and simulated situations. The participants will get an excellent exposure of the concepts through hands-on training on Capital Line database and using analysis software like – MS Excel.

This course deals with equity valuation, domestic as well as global equity markets, equity derivatives (stock index futures & options, equity futures & options). Practical examples and applications are illustrated from financing, investing, emerging and position-taking activities. The themes of this course are:

Structure of equity markets and how they function.

Practical demonstration of established equity valuation models.

Key features of equity derivatives including examples and calculations.

Application of portfolio management techniques in equity portfolios.

Design and managing of equity portfolios.

2 sessions a Day for 6 MonthsIn total over 800 hrs of Skill – Oriented Training (Theory, Practical &

Evaluations inclusive) supported by Study Materials, e-Learning Support and Training Aids like LCD Projectors, Capital Line Database, MS Excel

and other Relevant Software.

Course Schedule

REAL TIME ANALYSIS/PROJECT/REPORT

Timing 8:30 am to 18:00 pm

Real Time Training using Capitaline Database

With Industry Appreciation Certification

REGULAR OFFLINE/ONLINE ASSESSMENT THROUGHOUT

CONCEPT

Timing 18:30 am to 19:30 pm

3 Days a Week

Monday, Wednesday, Friday

Equity Markets

•Introduction to the Course

•Rules and Regulations

•Expectations etc.

Getting a Grip on the Market:

REAL TIME ASSIGNMENT: On Equity Advantage

•Order arrival – The bid-ask spread & the liquidity dimension

•Overview of the trading terminal

•Getting started with trading terminal

•Using trading simulation on the academic floor

•Developing the market outlook by viewing the operating terminal

•How should you price your order & handle large orders – price & quantity discovery

•Clearing & Settlement mechanism

•Different market types – their order books & order types

•Key functions

•Order modification, cancellation & matching

•Trade modification & cancellation

•Mock Trading – NEAT/BOLT

Orientation:

The World of Stocks:•Overview, emergence & growth of an Electronic order driven market

•Products, Participants & Functions of the stock market

•Why the stock market is good investment – in the long run

•Recommended ways to invest in the stock markets

•Market for depository receipts

EXERCISE – On NEAT Trading Mechanism:

Learning Outcome

Economic Analysis

Stock Market on a Macro Level:

REAL TIME ASSIGNMENT: On Impact of FII inflows & Crude Oil prices on the Market

•Reflection of economic growth (GDP)

•Impact of changes in Bank interest rate & inflation

•Rupee-Dollar parity

•Foreign exchange reserves

•Effect of crude oil prices on the market

•Impact of international markets – FII inflows

•The China & US factor

•How the budget is made

•Stages Involved in budget preparation

•How to analyze the budget

•How budget impacts shares of various sector

Economic Indicators and their Impact on the Stock Market:

•Economic Indicators – lead, lag & coincidental

•Economic Indicators & their relationship to the economy

•Law of demand & supply

•Assessing the general economic situation both within the country & internationally

•RBI’s monetary & credit policies

EXERCISE – On Union Budget:

Learning Outcome

Industry Analysis

Analyzing Industries:

REAL TIME ASSIGNMENT: On Sector facts, trends & reports – Picking industries for next year

•The industry life-cycle

•Qualitative aspects of industry analysis

•Analysis of competitive conditions

•Market structure of an industry

•Industry structure & competitive strategy

•Michael Porter’s five competitive forces that determine industry profitability

•Threat of new entrants

•Bargaining power of buyers

•Rivalry between existing competitors

•Threat of substitute products or services

•Bargaining power of suppliers

Performance of Industries over time:

•Performance indicators, Government policies

•Aggregate demand & supply position

•Reviewing prevailing conditions within a specific industry and its segments

•Industry-wise classification and identification of profitable segments

•Evaluating future industry prospects

EXERCISE – On Michael Porter 5 force model:

Learning Outcome

Company Analysis – Non-Financial

Analyzing Non-Financial Aspects of a Company:

REAL TIME ASSIGNMENT: On Identifying Suitable Stock Picks of Different Variety

•Qualitative impression of a company

•Applying SWOT analysis

•Sustainable competitive advantage & leadership

•A bewildering variety of equity stocks – Super Stocks, Emerging Blue Chips, Defensive Stocks, Cyclical Stocks, Turnaround Stocks, PSU & MNC Stocks, Some stocks are born great, Some stocks have greatness thrust upon them, Some stocks achieve greatness

•Quality – Price Matrix

•The Life-cycle of a Stock

•Management & Investor Rewards

A Framework for General Analysis of Companies:

•History, Promoters & Management

•Technology, Facilities & Production

•Product range, Marketing, Selling & Distribution

•Industrial relations, Productivity & Personnel

•Environment

EXERCISE – On Suitable Stock Pick:

Learning Outcome

Understanding Financial Statements

Financial Statements:

REAL TIME ASSIGNMENT: On Accounting Information & Understanding Financial Statements of the Stocks Picked in Assignment # 4

•What are financial statements; Importance of financial statements; User of financial statements & how they are used by them

•Presentation of financial statements – Balance sheet or position statement; Profit & loss account or income statement; Statement of retained earnings; Statement of change in financial position

•Interrelation between balance sheet & income statement

•Understanding financial statements and getting a sense of how much the firm’s assets are worth for, how they are financed, and how profitable they are, at least from an accounting stand-point

Accounting and Finance:

•Difference between finance & accounting

•The basic accounting statements

•Informational needs

•Asset measurement & valuation

•Measuring financing mix

•Measuring earnings & profitability

•Measuring risk

EXERCISE – On Accounting Information and Understanding Financial Statement:

Learning Outcome

Analysis of Financial Statements

Ratio Analysis:

REAL TIME ASSIGNMENT: On Inter-firm comparison Analysis of the Stocks Picked & Financial Statements understood in Assignment # 4 & 5 respectively

•Uses of ratios; Classification of ratios – According to the statement upon which they are based, According to function, According to importance

•Profitability ratios – Return on investment; Return on net worth; Return on asset; Gross margin; Net margin; Operating margin

•Activity ratios – Capital turnover; Total asset turnover; Debtors turnover; Creditors turnover

•Financial ratios – Current ratio; Liquid ratio; Debt-equity ratio; Proprietary ratio; Fixed assets ratio; Debt-service ratio; Capital gearing ratio

•Market test ratios – Earnings per share; Price earning ratio; Pay-out ratio;

Types of Financial Statement Analysis:

•According to Nature of the Analyst and the Material used by him

•According to Modus Operandi of Analysis

EXERCISE – On Inter-firm Comparison Analysis:

Methods of Analyzing Financial Statements:

•Comparative Statements

•Common-size Statements

•Trend Ratios

•Ratio Analysis – Advantages & Limitations of Ratio Analysis

•Business ratio analysis using Pyramid of ratios

•Starting with the Management ratio, i.e., (Operation Profit/Operating Asset)

•Building a pyramid of ratios to identify the reasons for a company doing good or bad.

Learning Outcome

Company Analysis – Financial

Fundamental Company Analysis in Practice:

REAL TIME ASSIGNMENT: On E-I-C Framework for Fundamental Analysis – Bottom-up & Top-down Approaches (Appreciation Certificate from Industry)

•Book value per share

•Earnings estimates

•Forecasting the EPS – basic & diluted EPS

•Sales growth – an alternative to earnings

•P/E ratio – Determinants of PE ratio; Why PE ratios changes among companies

•PEG ratio & Other earning multiples – Price to future earnings, Price to earnings before R&D expenses, Enterprise value to EBITDA

Analyzing the Financial Aspects:

•Analyzing the financial aspects like – Earnings per share, Sales profitability, Dividend record, Asset growth etc. of a company to determine whether to buy, sell or hold on to the shares of a particular company

EXERCISE – On How to Pick-up Stocks from Different Sectors:

Understanding the Financial Pages/Papers

•Identifying – A banking stock; A power stock; An aluminum stock; An auto ancillary stock; A cement stock; A domestic & MNC pharmaceutical stock; An engineering stock; An FI stock; An FMCG stock; A hotel stock; A paint stock; A refinery stock; A software stock; A steel stock

Learning Outcome

Financial Mathematics and Statistics

Basic Statistical Measures:

REAL TIME ASSIGNMENT: On Risk & Return Analysis and Risk Profiling

•Measures of Central Tendency

•Standard Deviation, Variance & Co-variance Analysis

•Normal Distribution & Probability Distribution Analysis

•Correlation & Regression Analysis

•Measuring Volatility – Value-at-Risk Analysis

Basic Financial Measures:

•Yield Measures

•Price value of a Basis Point

•Risk & Return Analysis

•Time Value of Money – Future value of a single cash-flow; Present value of a single cash-flow; Future value of an annuity; Present value of an annuity; Present value of a perpetuities; Amortization

EXERCISE – On Financial & Statistical Analysis with MS Excel:

•Spreadsheet basics

•The basic financial statements

•Financial statement analysis tools

•Financial forecasting

•Break-even & leverage analysis

•The time value of money

Learning Outcome

Stock Valuation

Relative Valuation Techniques:

REAL TIME ASSIGNMENT: On Finding the Valuations for the Stock identified through E-I-C framework in Assignment # 7 (Appreciation Certificate from

Industry)

•The PE ratio or earnings multiplier approach

•Price to book value approach

•Price to sales ratio approach

•Economic value added approach

•Which approach to use & some final thoughts on valuation

Discounted Cash-flow Techniques:

•The required rate of return

•The expected cash-flows

•Intrinsic value & market value

•Dividend discount model in practice & Other discounted cash-flow approaches

•Dupont Analysis

EXERCISE – On Stock Valuations with MS Excel:

•How to build the spreadsheet for a two-stage discounted dividend model – What is the firm’s intrinsic value per share?

•How to build the spreadsheet for constructing a Dynamic chart by grouping inputs & output & by adding spinners.

Learning Outcome

Stock Analysis and Strategy

Experiential Learning on:

REAL TIME ASSIGNMENT: On Finding the Technical Targets – Support & Resistance level for the Stock identified through E-I-C framework in Assignment # 7

•The Impact of overall Market on Individual Stock

•The Passive Investment Strategy – Buy-and-Hold

•The Active Investment Strategy – Stock selection, sector rotation & market timing

•The Market Efficiency

Alternative Approaches for Analyzing and Selecting Stocks:•Technical Analysis – Learning price indications for buy & sell; Learning volume indications for buy & sell; Learning resistance & support levels; Identifying overbought & oversold markets; Learning working on momentum & stop loss

•Behavioral Finance Implications – Investor psychology & philosophy for buy & sell

EXERCISE – On Active Investment Strategy with MS Excel:•Identifying an undervalued stock, which has achieved its target in the trailing twelve months

•Identifying the entry & exit points using technical analysis tools, during the trailing twelve months

•Outperforming the passive strategist.

Learning Outcome

Stock and Index Futures

Pricing of Futures:

REAL TIME ASSIGNMENT: On Futures Pricing & Application

•Futures prices models – Overview

•Cost of carry model for perfect & imperfect markets

Stock Index:

•Economic significance of index movement•Index – Types, Construction, Desirable attributes & Hedging effectiveness•Impact cost – a measure of liquidity•Corporate actions & it’s effect on index securities

Futures Market:

•Understanding futures market – Trading, Clearing, Settlement & Margining•How to read the futures data sheet & selecting the right index

Application of Futures:•Futures payoffs

•Trading strategies for – Hedging, Speculating & Arbitrage

EXERCISE – On NSE F&O Trading Mechanism:

•Different contract types – their order books & order types

•Key functions

•Order modification, cancellation & matching

•Trade modification & cancellation

•Mock Trading – NSE F&O

Learning Outcome

Stock and Index Options

Pricing of Options:

REAL TIME ASSIGNMENT: On Options Pricing & Application

•Options pricing models – Overview

•Review of options pricing factors

•Black & Scholes model

What are Options:

Options Market: Application of Options:•Options payoffs

•Trading strategies for – Bullish market, Bearish market, Volatile market & Stable market

EXERCISE – On Futures & Options Arbitrage:

•Over-priced futures – Buy spot, sell futures

•Under-priced futures – Buy futures, sell spot

•Calendar option

•Strike option

•Intra-market

•Conversion

•Box conversion

•Straddle

•Call options & Put options

•Options styles, concepts & terminologies

•Advantages of option trading

•Understanding options market – Trading, Clearing, Settlement & Margining

•How to read the options data sheet & selecting the right contract

Learning Outcome

Important Investment Concepts

Expected Returns and Risk:

REAL TIME ASSIGNMENT: On Measurement of Risk & Returns

•Dealing with uncertainty – Using probability distributions; Calculating expected returns; Calculating risk

•Portfolio return & risk – Portfolio expected returns; Portfolio risk

•Analyzing portfolio risk – Risk reduction – the insurance principle & diversification – diversifiable risk versus non-diversifiable risk

•Calculating portfolio risk – The two security case; the n-security case

The Returns and Risk from Investing:

EXERCISE – On Expected Risk and Return:

•Why stock prices change over time

•Stock return and asset return distributions

•Domestic & international diversification

•Returns – The components of return

•Risk – Sources & types of risk

•Measuring Returns – Total return, Relative return & Inflation-adjusted returns

•Measuring Risk – Standard deviation & risk premiums

•Realized returns & risks from investing

•Measuring co-movements in securities returns

Learning Outcome

Modern Investment Theory

REAL TIME ASSIGNMENT: On Market Efficiency – How well market prices reflect relevant information

Market Efficiency: EXERCISE – On The Capital Asset Pricing Model and The Arbitrage Pricing Theory:•Computing stock betas and evaluating the relationship between expected returns & beta risk

•Conducting empirical study

•The concept of an Efficient Market

•Evidence on Market Efficiency

•Implications of the Efficient Market Hypothesis

•Evidence of Market Anomalies

•Some Conclusions about Market Efficiency

Capital Market Theory:•The Capital Asset Pricing Model – The CAPM’s expected return-beta relationship; The assumptions of the CAPM – Equilibrium in the capital markets

•The Market Portfolio – The importance & composition of the market portfolio; Efficient Portfolio

•The Equilibrium Return-Risk trade-off – The Capital Market Line; The Security Market Line

•Arbitrage Pricing Theory – Using APT in investment decisions

•Some Conclusions about Asset Pricing

Learning Outcome

Portfolio Selection

REAL TIME ASSIGNMENT: On Using Mutual Funds versus Individual Stocks as Portfolio Component

Markowitz Model: EXERCISE – On Portfolio Construction:

•Using Markowitz – Mean-Variance criterion model

•Using Sharpe Optimization Model

•The mean-variance criterion

•Corner portfolios

•Dent in the efficient set

•Dominance principle

•Modifications to the efficient frontier – Short selling, Leveraged portfolios – Risk-free asset; Investing in both the risk-free asset and a risky asset

•Critique

Sharpe Single Index Model:

•Characteristic lines

•Portfolio characteristic lines

•Constructing the optimal portfolio – Ranking from highest to lowest “excess return to beta”, Finding the cut-off point & Allocating resources

Learning Outcome

Portfolio Management

REAL TIME ASSIGNMENT: On Measures of Portfolio Performance

Portfolio Management as a Process:

EXERCISE – On Asset Allocation:

•This exercise will explore asset allocation from the viewpoint of the goals of an individual investors•Evaluating critically popular media claims about the performance of various portfolios, such as Mutual Funds

•Individual investor versus Institutional investor

•Formulating an appropriate investment policy

•Developing investment strategies

•Monitoring market conditions & Investor circumstances

•Making portfolio adjustments as necessary

•Re-balancing the portfolio

Evaluation of Investment Performance:

•Framework for evaluating portfolio performance

•Return & risk considerations

•Risk-Adjusted measures of performance – Sharpe performance measure, Treynor performance measure & Jensen’s differential return measure

•Problems with portfolio measurement

•Other issues in performance evaluation

Learning Outcome

AUDIENCE: Student pursuing their MBA/CA, Investors and existing Professionals – involved or aspiring to make or enhance a career prospects as research analyst in the financial services industry. The participants should be minimum a graduate.

LENGTH: 6 months. Over 800 hrs of Classroom Training plus Real Time Analysis/Project/Report Skill-Oriented Training.

FORMAT: Active involvement through small-group exercises, real-life examples from home and work, games, case studies, role plays and practical skill applications along with theory by using Capital Line Database, MS Excel and Hands-on training on simulated software on NSE/BSE/F&O markets plus e-learning support.

MATERIALS: Facilitators guide, printed study materials, e-learning support, audio and video aids, participants worksheets, Measurement tools as spreadsheets, simulated software and skill imparting aids.

INSTRUCTION: Consortium of investment professionals from within and outside industry from across the country.

CERTIFICATION: Participants will be provided Certificate as “Professional Value Trader” on completing the course with a minimum of 50% score. Plus Appreciation Certificates for Quality Projects and Assignment done during this course.

PROGRAM Specifications