PORTFOLIO MANAGEMENT: A CASE STUDY OF ICICI PRUDENTIAL AMC

PORTFOLIO MANAGEMENT: A CASE STUDY OF ICICI PRUDENTIAL AMC

Gaurav Singh

ABSTRACT

Purpose

Effective portfolio management is vital to successful product innovation. Portfolio management is about making strategic choices—which markets, products, and technologies our business will invest in. It is about resource allocation—how you will spend your scarce engineering, R&D, and marketing resources. It focuses on project selection—on which new product or development projects you choose from the many opportunities you face. And it deals with balance—having the right balance between numbers of projects you do and the resources or capabilities you have available [1]. This research paper delves into the fundamental principles, methodologies, and instruments used in portfolio management, specifically examining strategic asset allocation, diversification, risk and return balancing, and performance assessment metrics including the Sharpe Ratio, Beta, and Alpha. This study examines how professional fund managers use case-based analysis to create and adjust investment portfolios that match investor needs and market trends, focusing on ICICI Prudential's mutual fund schemes. This study delves deeper into the comparative effectiveness of direct and regular plans, the influence of behavioral biases on investment choices, and the impact of regulatory policies on portfolio approaches.

Design

The research design used in this study is causal research, a quantitative approach characterized by a pre-determined and systematic methodology. The primary aim is to investigate the cause-and-effect link between portfolio management methods and the degree of risk linked to mutual funds. The study is conducted in a process consisting of three primary phases. The initial stage requires collecting pertinent data from company records, online financial tools such as Ticker Tape, and data on Net Asset Values (NAVs) and several risk metrics. The second stage involves gathering information from secondary sources, which include published reports, academic journals, and industry databases. The study also utilizes an exploratory research approach, encompassing a review of existing literature and observational and analytical methods to gain a more comprehensive understanding of portfolio risk in mutual fund investments.

Findings

The research uncovered that several ICICI Prudential mutual fund programmes, including the ICICI Prudential Banking and Financial Services Fund, the ICICI Prudential Midcap Fund, and the ICICI Prudential Infrastructure Fund, are typified by high levels of risk. This observation is consistent with a key investment principle, which holds that increased risk is typically linked with the possibility of greater returns. Those investing in these funds may encounter increased price fluctuations, but they could potentially achieve higher earnings over the long term if market conditions are favourable.

Studies of the Sharpe Ratio reveal that most of ICICI Prudential's equity-based mutual funds provide a substantial risk premium to investors. Funds with a high Sharpe Ratio are delivering returns significantly exceeding the risk-free rate, factoring in the level of risk undertaken. The study also employed Beta as a measure of volatility, indicating how responsive a fund's returns are to fluctuations in the overall market. This metric enables investors to grasp the amount of systematic risk they face while investing in a specific mutual fund.

Relevance

Effective portfolio management is key to optimizing resource allocation and minimizing risk in the investment environment. Investors choose, arrange, and track a combination of investments suited to their individual risk levels, financial outlook, and objectives. As financial markets have become increasingly complex and investment choices have expanded, skilled portfolio management is now a necessity for both personal and organisational investors. Through techniques like asset allocation, diversification, and regular rebalancing, portfolio management aims to achieve the highest possible returns while limiting exposure to potential risks. This investment strategy ensures that portfolio allocations are consistent with market trends, current economic conditions, and individual financial goals. Portfolio management in mutual funds and professional asset management allows fund managers to offer steady results and maximize returns for investors.

Achieving long-term financial stability and informed investment decisions in a dynamic market depends heavily on the effective practice of portfolio management.