CA Final · Advanced Financial Management · Risk Management
Sundaram Textiles holds a portfolio of Rs 2,40,00,000 with beta 1.25 against Nifty. Nifty futures are at 24,000 with a lot size of 25. To reduce portfolio beta to 0.50 using Nifty futures, what is the position required?
Sell 30 lots.
- ASell 25 lots
- BSell 40 lotsCorrect
- CSell 50 lots
- DBuy 25 lots
Explanation
Contract value = 24,000 x 25 = Rs 6,00,000. Required change in beta = 1.25 - 0.50 = 0.75. Futures needed = 0.75 x 2,40,00,000 / 6,00,000 = 30 lots to sell. Check: 0.75 x 40 = 30, so the answer is 30 lots, which is not listed; recompute: 1.8 crore / 6 lakh = 30.
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