Banyan Investment-Creating an Optimal Portfolio for a Client
| Case Code: FINC186 Case Length: 13 Pages Period: 2019-2020 Pub Date: 2022 Teaching Note: Available |
Price: Rs.300 Organization: Banyan Investment Private Limited Industry: Financial Services Countries: India Themes: Risk and Return, Optimal Portfolio, Portfolio Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Banyan Investment got a new client
In early 2019, Banyan Investment had researched one of its oldest clients under Rishabh’s supervision. However, all the analysis and research had gone wrong when the Nifty 50 fell by almost 6% within a month to go from 11,788.85 points in June 2019 to 11,118 points in July 2019. This fall eroded the client’s complete corpus. As a result, Banyan Investment lost one of its oldest clients. At the very next quarterly review meeting, Reddy took serious objection to Rishabh’s risk-return trade-off analysis..
Setting Parameters
After two hours, Rishabh, James, and Rachna were sitting in Rishabh’s cabin, trying to set the different parameters required for risk and return trade-off. “Ok. Let’s put together what we had done in these three hours,” said Rishabh. “This time we would look into at least 5 years’ monthly returns of stock with reference to the market to set risk number”, replied James. “Fine, but what about the minimum level of required return?” asked Rishabh. “Our old golden technique – risk-free rate plus beta times market risk premium”, replied Rachna. “We will use 5-year Indian government bond yield as a risk-free rate which was around 5.578 % as on March 31, 2020”, said Rishabh and then asked..
Exhibits
Exhibit I: Value of US$ 1.00 Invested in Stocks, Bonds and Bills 1901–2000
Exhibit II : US Treasury Bills Returns
Exhibit III : Email from Prospective Client
Exhibit IV: Diagrammatical Representation of Efficient Frontier and Security Market Line
Exhibit V: Adjusted Closing Values of Nifty 50 and Adjusted Closing Prices of Various Stocks Selected by the Client
Exhibit VI: Adjusted Closing Prices of Six Stocks Selected by the Team of Banyan Investment
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