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8/8/2019 jyoti paryani
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A
PROJECT REPORT
On
Portfolio Management Services
FOR
“INDIA INFOLINE LTD”.
SUBMITTED TO UNIVERSITY OF PUNE
BY
Jyoti Paryani
IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE
MASTERS IN BUSINESS ADMINISTRATION (M.B.A. )
Batch (2009-2010)
K.K.W.I.E.E.R , Nashik
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ACKNOWLEDGEME NT
I hereby take the opportunity to express my gratitude towards those who have made
great contribution in completion of this project work. I feel immense pleasure to
thanks Mr.Amit Thakre , Head of Branch, India Infoline, Pune who very kindly
helped me in providing necessary information and guidance from time to time.
I would specially thank Mr. Kuzema Jinwala (Team Leader) for being my project
guide.
The success of any task lies in the effective input, but this cannot be obtained without
proper guidance of the concern authorities and their co-operation. I would like to
thank Prof.Ajinkya Joshi for guiding me throughout the project. I wish to
acknowledge those many people whose feedback has enable me to satisfactorily
complete my summer training.
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. INDEX
Sr. No. Topic Page No.
1) Executive Summary 4
2) Company Profile 6
3) Objective of Project 21
4) Research Methodology 23
5) Introduction to Investments 27
6) Portfolio Management 31
7) Investment Avenues 44
8) Virtual Portfolio
64
9) Findings 67
10) Suggestions 69
11) Limitations 71
12) Conclusion 74
13) Bibliography 77
14) Annexure 79
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CHAPTER 1:
EXECUTIVE SUMMARY
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Executive summary
As the title suggest the project report has been prepared regarding the growthand development of online trading in India. Online trading was initiated by NSE inIndia and soon after the other exchanges also followed it.
• There was a major boom in yr. 2000 when lots of online trading companies
came with a bang but only few were survived because of lack of computer knowledge
and low internet penetration. There are two types of online trading companies, one is
the banking online trading companies and the other is non-banking trading. A few
examples of banking online trading companies are HDFC securities, ICICI
direct.com, UTI securities etc.
• On the other hand non -banking trading companies are India Infoline ltd.
IL&FS investsmart, Religare securities Angel Broking, Reliance Money etc. A study
was undertaken to determine the growth of various online trading companies in India
in terms of trade done by them through online trading portal and services provided by
them.
• Major findings indicates that out of a survey of 100 respondents it was seen
that most of the investors prefer online trading because of few major factors such as
time saving, convenience, protection through Freudian brokers etc. although during
my research project I’ve seen that most of the respondents feel online trading, a
secure way of investing into stock market still a few of them feel that it’s unsafe and
a bit complicated but they posses information about online trading.
• Today the online trading companies are having cut-throat competition in their
offerings regarding the brokerage ,discounts ,lower margin money and zero balance
accounts. Due to the rising education awareness and use of internet there is a huge
potential for online trading in future and companies must come up with innovative
offerings to capture the untapped market.
•
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CHAPTER 2:
COMPANY & Product PROFILE
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India Infoline Ltd. (IIL) is a financial services holding company engaged in the
brokerage and financial services business. The company provides securities related
products, broking, investment management, insurance, banking and institutional
brokerage products to retail and institutional customers. The company operates in six
business segments including Broking, Credit and Finance, Asset Management,
Wealth Management, Insurance Distribution and Investment Banking through its
operating subsidiaries. IIL provides online services through two Internet portals,
indiainfoline.com and 5paisa.com, which are information resource centers with an
analysis of Indian business, finance, and investments. The company provides its
services through a network of 758 business locations including 607 branches and 151
franchisees in 346 cities in India. The company’s key area of operations includes
India, Singapore, New York and Dubai. The company is headquartered in Mumbai,
India.
The company reported revenues of (Rupee) INR 9,624.40 million during the fiscal
year ended March 2009, a decrease of 5.97% from 2008. The operating profit of the
company was INR 2,194.90 million during the fiscal year 2009, a decrease of 13.49%
from 2008. The net profit of the company was INR 1,448.19 million during the fiscal
year 2009, a decrease of 9.42% from 2008.
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Performance of the company:
1995
Incorporated as an equity research and Consulting firm with a client base that
included leading FIIs, banks, consulting firms and corporate.
1999
Restructured the business model to embrace the internet; launched
www.indiainfoline.com ; Mobilized capital from reputed private equity investors.
2000Commenced the distribution of personal financial products; launched online equity
trading; entered life insurance distribution as a corporate agent. Acknowledged by
Forbes as ‘Best of the Web’ and‘..must read for Investors’.
2004
Acquired commodities broking license; launched Portfolio Management Service.
2005
Listed on the Indian stock Markets.2006
Acquired Membership Of DGCX; launched investment banking Services.
2007
Launched a proprietary trading platform; inducted an institutional equities team;
formed a Singapore subsidiary; raised over USD 300mn in the
group;launchedconsumerfinance business under the ‘Money line’Brand.
2008
Launched wealth management services under the ‘IIFL Wealth’brand; set up India
Info line Private Equity fund; received the Insurance broking license from
IRDA;received the venture capital license; received in principle approval to sponsor a
mutual fund;received ‘Best broker- India’ award from FinanceAsia ; ‘Most Improved
Brokerage- India’ award from Asiamoney.
2009
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Received registration for a housing finance company from the National Housing
Bank; received ‘Fastest growing EquityBrokingHouseLarge firms’ in India by
Dun&Bradstreet.
Performance Highlights in 2008-09
Business Division Business Highlights
Broking
• Market share of equities increase
from 3.4% in 2007-08 to 3.76% in
2008-09.
• Customer base for retail equities
increased 35.8% from .44 mn in
2007-08 to .06 mn in 2008-09.
• Published in-depth and thematic
reports on INCH,politics,ruralindia,infrastructure,self
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commodities, utilities and India
worming.
Wealth and asset Management • Introduce the family office
platform.
• Raised around Rs.1.8 bn in the
largest single day debenture listing
of its kind.
• Establish the infrastructre and
knowledge capital for Office Store
Asset Management Services..
Credit and Finance
• Proactively suspended personal
loans and mortgages business from
September 2008, while the personal
loan business is still suspended, the
mortgages business has been Re-
Started.
• Revenue at Rs.2654.1 mn in 2008-
09 against Rs.1937.5 mn in 2007-
08.
• Registered the Housing FinanceSubsidiary with NHB.
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PRODUCTS
Equity
India Infoline provided the prospect of researched investing to its clients,
which was hitherto restricted only to the institutions. Research for the retail
investor did not exist prior to India Infoline. India Infoline leveraged
technology to bring the convenience of trading to the investor’s location of
preference (residence or office) through computerized access. India Infoline
made it possible for clients to view transaction costs and ledger updates in real
time.
Portfolio management services
Our Portfolio Management Service is a product wherein an equity investment
portfolio is created to suit the investment objectives of a client. We at India Infoline
invest your resources into stocks from different sectors, depending on your risk-return
profile. This service is particularly advisable for investors who cannot afford to givetime or don't have that expertise for day-to-day management of their equity portfolio.
It is all about your money, being managed by the experts, while you continue with
your routine life. Isn't it simple and totally hassle free.
What's more, you can keep track of your dividends / bonus / rights issues with
paperless tracking. So you always know how fast your investment is growing. It
basically means assigning the right job to the right person.
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Salient Features of India Infoline PMS:
• Expert team of Research Analysts• Stock Picking done by the Investment Committee
• Dedicated Relationship Manager
• Technology and Service driven Back-Office
Wealth Management Services
The key to achieving a successful Investment Portfolio is to have a carefully
planned financial strategy based on a thorough understanding of the client's
investment needs and risk appetite. The IIFL Private Wealth Management Team of
financial experts will recommend an appropriate financial strategy to effectively
meet your investment requirements.
Our Financial Advisor will analyze:
• Your cash-flow requirements
• Your risk appetite
• Desired investment horizon
• Long-term goals
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DEMAT SERVICE
Dematerialization and trading in the demat mode is the safer and faster alternative to
the physical existence of securities. Demat as a parallel solution offers freedom from
delays, thefts, forgeries, settlement risks and paper work. This system works through
depository participants (DPs) who offer demat services and the securities are held in
the electronic form for the investor directly by the Depository.
India Infoline Services offers dematerialization services to individual and corporate
investors. They have a team of professionals and the latest technological expertise
dedicated exclusively to our demat department, apart from a national network of
franchisee, making their services quick, convenient and efficient.
At India Infoline , their commitment is to provide a complete demat solution which is
simple, safe and secure.
Here mainly two types of services provided by the company to the
customer for Demat A/C that is (1) Online A/C and (2) Offline A/C.
1. Online Account: Nowadays online A/C is more popular than offline A/C. In
online A/C what company will do, they simply provide terminal to the customer
and customer can do trading himself/herself when he/she wants. The online A/C
will charge 750/- Rs. (*It varies from company to company). In these there 3 types
of facility company will provide to the customer as per the customer’s
requirement.
2. Offline Account: This is the traditional way of buying or selling shares. In
this, customer can place the order via telephone or directly by sitting in the
company. The customers who are busy in their jobs or businesses, they can place the
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order via telephone and the customers who are not that much of busy, they can come
to the office and by sitting there whole day they can place the order.
India Infoline offers trading on a vast platform; National Stock Exchange, Bombay
Stock Exchange. More importantly, they make safe to the maximum possible extent,
by accounting for several risk factors and planning accordingly. They assisted in this
task by their in-depth research, constant feedback and sound advisory facilities. Their
highly skilled research team, comprising of technical analysts as well as fundamental
specialists, secure result oriented information on market trends, market analysis and
market predictions. This crucial information is given as a constant feed back to the
customers, through daily reports delivered along with their updated portfolio. Besides
this they are also offer special portfolio analysis packages that provide daily technical
advice on scrip’s for successful portfolio management and provide customize
advisory services to help customer make the right financial moves that are
specifically suited to their portfolio.
Factors such as their success in the electronics custody business has helped build on
our trading of trust even more. Consequently their retail client base expanded very
fast. To empower the investor further they have made serious efforts to ensure that
their research calls are disseminated systematically to all their stock broking clients
through various delivery channels like e-mail, chat, SMS, phone calls etc.
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MUTUAL FUNDS
India Infoline is glad to announce that customers will now be able to invest in Mutual
Funds through India Infoline. They have started this service for online mutual funds,
and in the near future will be expanding our scope to include a whole lot more.
Applying for a mutual fund through them is open to everybody, regardless of whether
you are a India Infoline India Infoline customer or not. For investing in mutual funds
through India Infoline you have to just download the form from internet, fill it and
submit it in any India Infoline office.
CORNER STONES OF STRAREGY
1) It focuses on retail segment.
2) It builds a strong Pan-India network managed by experienced professionals,
build presence across both metros and Class A/B town.
3) It builds full-service capabilities leveraging the network-offer the entire gamut
of financial services, backed by strong transaction processing and high
volume handling capability.
4) It has established a high degree of customer ownership and top-of-mind recall
in the local markets- ensures steady customer traffic and repeat business.5) It builds a trusted brand; ensure high visibility
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CHAPTER 3:
OBJECTIVE OF THE STUDY
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OBJECTIVE OF THE STUDY
My project on “ Portfolio Management Services ” is meant to study the nature of
different investment instruments available in the market and then finally suggest the
same to the clients in the form of a structured product. I do this by suggesting the
investor as to go for which all investments that can fetch out real good returns to them
in future, as per their risk appetite regarding the investments and their needs. I
suggest them the investments that they can opt for and the one’s which can bring a
huge value addition to their portfolio. Few objectives are given below:
To guide clients to determine the level of investment risk they are willing to
take and then suggest them an appropriate asset allocation.
To study and compare various investment instruments available in the market.
To advise High Net-worth Individuals (HNI’s) on different investment avenues
like mutual funds, insurance, real estate, stock broking etc.
To know the investment pattern of the individuals & hence creating a better
portfolio of investment for these individual clients.
To advise them on tax planning, so as to minimize their tax liability.
To provide the client with an appropriate asset allocation mix based on certain
factors time horizon and risk tolerance.
Understanding consumer behavior towards various investment options
available.
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CHAPTER 4:
METHODOLOGY OF STUDY
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Research can be defined as a systemized effort to gain new knowledge. A
research is carried out by different methodologies which have their own pros and
cons. Research methodology is a way to solve research in study and solving research
problems along with logic behind them are defined through research methodology.
Thus while talking about research methodologies we are not only talking of research
methods but also consider the logic behind the methods. We are in context of our research studies and explain why it is being used a particular method or technique and
why the others are not used. So that research result is capable of being evaluated
either by researcher himself or by others.
RESEARCH METHODOLOGY
Research has its special significance in solving various operational and
planning problems of business and industry. Research methodology is a way to
systematically analyze the research problem.
I have executed the project after prior discussion with our guide and structured in the
following steps:
a. Preparation of a questionnaire
b. The focal point of the designing the questionnaire was to comprehend the
current investment scenario with respect to tax planning part.
c. This questionnaire was primarily aimed to respondents who belong to the
service and business class people
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The questionnaires were discussed through personal interface with the
respondents.
ASSUMPTIONS:
1. It has been assumed that sample of hundred represents the whole population.
2. The information given by the customer is unbiased.
Development of Working Hypothesis
The hypothesis could be developed by discussing with the consulting
department heads and guides about this exploratory research and reach to the
conclusion that the data is to be collected by personal interaction with the clients,
asking them about their investment planning and their need for financial advisory
service from India Infoline.
First of all, are they aware of tax and investment planning or not and then
analyzing the findings to reach to the objectives of research.
Sources of Data:
PRIMARY DATA
This research is solely based on primary research done by means of
questionnaires targeted to respondents who primarily belong to the business and
service sector.
It is very essential in the research process to know the accuracy of the finding’s which
depends on how systematically the study has been carried out so that it can make
sense.
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The data required for the project was about the customers and therefore this data was
a confidential for the company.
SECONDARY DATA
Secondary data is a data that has been collected earlier for some purpose other than
the purpose of the present study. I have collected data by referring book and websites
for carrying out my project.
Also, secondary data can be a useful benchmark against which the findings of
the study can be tested. This study is highly dependent on the secondary data for
various facts and figures.
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CHAPTER 5
INTRODUCTION TO
INVESTMENTS
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INVESTORS DESK
Today an investor is interested in tracking the value of his investments, whether to
invest directly in the market or through some funds which play in the market. This
dynamic change has taken place because of a number of reasons. With globalization
and the growing competition in the investments opportunity available, investor would
have to make guided and have to make rational decisions on whether they get an
acceptable return on the current investments, or if there is needs to switch to another
investments plan.
It is of paramount importance to keep in mind the risk involved in any investment.
Before making any investment plans for any client, firstly we need to know his/her
risk taking ability . “Investments that have the greatest return potential tend to
give the greatest risk potential.”
On the other side of the coin, investments with conservative return are the least risky.
So for successful and stress free investment, a balance between the financial objective
and the ability to tolerate risk is the best. This overall balance can be obtained by
diversifying money across low, medium and high-risk investments so that both short
term and long term goals are met.
MEANING:
The money earn is partly spent and the rest saved for meeting future expenses.
Instead of keeping the savings idle person may like to use savings in order to get
return on it in the future. This is called Investment.
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NEEDS OF INVESTMENT :
One needs to invest:
• To earn return on idle resources.
• To generate a specified sum of money for a specific goal in life
• To make a provision for an uncertain future.
One of the important reasons why one needs to invest wisely is to meet the cost of
Inflation . Inflation is the rate at which the cost of living increases. The cost of
living is simply what it costs to buy the goods and services you need to live.
Inflation causes money to lose value because it will not buy the same amount of a
good or a service in the future as it does now or did in the past. For example, if
there was a 6% inflation rate for the next 20 years, the aim of investments should
be to provide a return above the inflation rate to ensure that the investment does
not decrease in value.
RIGHT TIME FOR INVESTMENT
The sooner one starts investing the better. By investing early investor allow his
investments more time to grow, whereby the concept of compounding increases
income, by accumulating the principal and the interest or dividend earned on it,
year after year. The three golden rules for all investors are:
• To Invest early,
• To Invest regularly,
• To Invest for long term and not short term.
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OPTIONS AVAILABLE FOR INVESTMENT
One may invest in:
• Physical assets like Real Estate, Gold/ Jewellery, Commodities etc.
and/or
• Financial assets such as Fixed Deposits with Banks, Small Saving
Instruments with Post Offices, Insurance/Provident/Pension Fund, Mutual
Fund etc. or Securities market related instruments like Shares, Bonds, and
Debentures etc.
VALUE ADDITION TO THE ORGANIZATION
Through this project I can bring in long term clients for my organization by
offering “Portfolio Management Services” to them.
Through this project I am not only bringing long term clients for my
organization but also creating a word of mouth publicity of my organization
by offering the best services to the clients so that a chain of more consumers is
created through these services.
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CHAPTER 6
INVESTMENTS AVENUES
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VARIOUS AVAENUES FOR INVESTMENT
BONDS
Individuals have surplus funds in the form of savings which they want to invest.
Companies need funds to undertake good projects with high returns. Companies
provide individuals with instruments to invest their savings in.
One such instrument is corporate bonds. Similarly, governments also need funds for
various developmental projects. Further, the government also needs to raise money to
finance the fiscal deficit. They too tap the savings by issuing various kinds of bonds.
Characteristics of a bond:
A bond, whether issued by a government or a corporation, has a specific maturity
date, which can range from a few days to 20-30 years or even more. Based on the
maturity period, bonds are referred to as bills or short-term bonds and long-term
bonds.
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Bonds have a fixed face value, which is the amount to be returned to the investor
upon maturity of the bond. During this period, the investors receive a regular
payment of interest, semi-annually or annually, which is calculated as a certain
percentage of the face value and know as a 'coupon payment.'
A story goes that in the old days, bond certificates used to come with coupons to
claim interest from the issuer of the bond; hence, the name coupon payments.
However, nowadays, with paperless issues of scripts (demat), coupons are no longer
in use, but the name has stuck and the interest payments are still known as coupon
payments.
Issuing a bond :
The government, public sector units and corporate are the dominant issuers in the
bond market. The central government raises funds through the issue of dated
securities (securities with maturity period ranging from two years to 30 years, long-
term) and treasury bills (securities with maturity periods of 91 or 364 days, short-
term).
The central government securities are issued for a minimum amount of Rs 10,000
(face value). Thereafter they are issued in multiples of Rs 10,000. They are issued
through an auction carried out by the Reserve Bank of India.
State governments go about raising money through state development loans. Local
bodies of various states like municipalities also tap the bond market from time to
time. Bonds are also issued by public sector banks and PSUs. Corporate on the other
hands raise funds by issuing commercial paper (short-term) and bonds (long-term).
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Bonds can be issued at par, which means that the price at which one unit of the bond
is being sold is same as the face value. Alternatively, they can be issued at a discount
(less than the face value) or a premium (more than the face value).
For e.g. , a bond with a face value of Rs 100, if issued at Rs 100, is said to be issued
at par. If it is issued at, say, Rs 95, it will be said to have been issued at a discount and
conversely, if issued for, say, Rs 110, at a premium.
Investors:
Banks are the largest investors in the bond market. In the low-interest scenario that prevailed, it made more sense for banks to invest in government bonds than to give
out loans. Mutual funds, in order capitalize on low interest rates, started a good
number of debt funds that mobilized a significant amount of money from the
investors.
Thus, mutual funds emerged as important players in the bond markets. However, in
the recent past with the interest rates on their way up, the performance of debt funds
has not been good and so the presence of mutual funds in the bond market has been
limited.
Foreign institutional investors are also allowed to invest in the bond market, though
within certain limits. Also, regulations mandate provident funds and pension funds to
invest a significant proportion of their funds mobilized in government securities and
PSU bonds.
Hence, they continue to remain large investors in the bond market in India. The same
holds true for charitable institutions, societies and trusts.
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Since January 2002, individuals categorized by RBI as retail investors can participate
in the auction carried out by RBI. They can submit bids through banks or primary
dealers to invest in these securities on a non-competitive basis.
The minimum bid has to be for an amount of Rs 10,000 (and there on in multiples of
Rs 10,000) and a single bid cannot exceed Rs 1 crore (Rs 10 million). Hence,
company X must ensure that the price, at which they are offering their Bond, is
competitive with similar bonds in the market, and should provide similar yield to the
investors.
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MUTUAL FUNDS:
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned
through these investments and the capital appreciations realized are shared by its unit
holders in proportion to the number of units owned by them. Thus a Mutual Fund is
the most suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a mutual fund:
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TYPES OF MUTUAL FUNDS
Mutual Funds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any
number of different funds to help one meets ones specific goals. In general mutual
fund fall under 3 general categories: -
Equity fund invest in shares of common stocks.
Fixed income funds invest in government or corporate securities which offer fixed
ROR
Balanced fund invest in a combination of both stocks and bonds.
Open-Ended Schemes:
These funds are sold at the NAV based prices, generally calculated on every business
day. These schemes have unlimited capitalization, open-ended schemes do not have a
fixed maturity - i.e. there is no cap on the amount you can buy from the fund and the
unit capital can keep growing. These funds are not generally listed on any exchange.
Open-ended funds are bringing in a revival of the mutual fund industry owing to
increased liquidity, transparency and performance in the new open-ended funds
promoted by the private sector and foreign players. Open-ended funds score over
close-ended ones on several counts. Some of these are listed below:
a) Any time exit option : The issuing company directly takes the responsibility of
providing an entry and an exit. This provides ready liquidity to the investors and
avoids reliance on transfer deeds, signature verifications and bad deliveries.
b) Any time entry option : An open-ended fund allows one to enter the fund at
any time and even to invest at regular intervals (a systematic investment plan).
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The open ended funds offered by SCMF Classic Equity Fund, Premier Equity Fund,
Imperial Equity Fund Super Saver income Fund, Dynamic Bond, Cash Fund,
Liquidity manager, Floating Rate Fund, Govt. Securities Fund etc.
Close-Ended Schemes
Schemes that have a stipulated maturity period, limited capitalization and the units
are listed on the stock exchange are called close-ended schemes.
These schemes have historically seen a lot of subscription. This popularity is
estimated to be on account of firstly, public sector MFs having floated a lot of close-
ended income schemes with guaranteed returns and secondly easy liquidity on
account of listing on the stock exchanges. The closed-ended funds managed by
SCMF are Enterprise Equity Fund, Fixed Maturity Plan,
Tri-Star Series etc.
CLASSIFICATION ACCORDING TO INVESTMENT
OBJECTIVESi) Growth Funds:
These funds seek to provide growth of capital with secondary emphasis on dividend.
They invest in shares with a potential for growth and capital appreciation. Because
they invest in well-established companies where the company itself and the industry
in which it operates are thought to have good long-term growth potential, growth
funds provide low current income.
Growth funds generally incur higher risks than income funds in an effort to secure
more pronounced growth. These funds may invest in a broad range of industries or
concentrate on one or more industry sectors. Growth funds are suitable for investors
who can afford to assume the risk of potential loss in value of their investment in the
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hope of achieving substantial and rapid gains. They are not suitable for investors who
must conserve their principal or who must maximize current income.
ii) Growth and Income Funds:
Growth and income funds seek long-term growth of capital as well as current income.
The investment strategies used to reach these goals vary among funds. Some invest in
a dual portfolio consisting of growth stocks and income stocks, or a combination of
growth stocks, stocks paying high dividends, preferred stocks, convertible securities
or fixed-income securities such as corporate bonds and money market instruments.
Others may invest in growth stocks and earn current income by selling covered call
options on their portfolio stocks. Growth and income funds have low to moderate
stability of principal and moderate potential for current income and growth. They are
suitable for investors who can assume some risk to achieve growth of capital but who
also want to maintain a moderate level of current income.
iii) Fixed-Income Funds:
The goal of fixed income funds is to provide current income consistent with the
preservation of capital. These funds invest in corporate bonds or government-backed
mortgage securities that have a fixed rate of return. Within the fixed-income category,
funds vary greatly in their stability of principal and in their dividend yields. High-
yield funds, which seek to maximize yield by investing in lower-rated bonds of
longer maturities, entail less stability of principal than fixed income funds that invest
in higher-rated but lower-yielding securities. Some fixed-income funds seek to
minimize risk by investing exclusively in securities whose timely payment of interest
and principal is backed by the full faith and credit of the Indian Government. Fixed-
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income funds are suitable for investors who want to maximize current income and
who can assume a degree of capital risk in order to do so.
iv) Balanced Funds:
The Balanced fund aims to provide both growth and income. These funds invest in
both shares and fixed income securities in the proportion indicated in their offer
documents. This fund is ideal for investors who are looking for a combination of
income and moderate growth.
v) Money Market Funds/Liquid Funds:
For the cautious investor, these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liquid, virtually
risk-free, short-term debt securities of agencies of the Indian Government, banks and
corporations and Treasury Bills. Because of their short-term investments, money
market mutual funds are able to keep a virtually constant unit price; only the yield
fluctuates. Therefore, they are an attractive alternative to bank accounts. With yields
that are generally competitive with - and usually higher than -- yields on bank savings
account, they offer several advantages. Money can be withdrawn any time without
penalty. Although not insured, money market funds invest only in highly liquid,
short-term, top-rated money market instruments. Money market funds are suitable for
investors who want high stability of principal and current income with immediate
liquidity.
vi) Specialty/Sector Funds:
These funds invest in securities of a specific industry or sector of the economy such
as health care, technology, leisure, utilities or precious metals. The funds enable
investors to diversify holdings among many companies within an industry, a more
conservative approach than investing directly in one particular company. Sector funds
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offer the opportunity for sharp capital gains in cases where the fund's industry is "in
favor" but also entail the risk of capital losses when the industry is out of favor.
While sector funds restrict holdings to a particular industry, other specialty funds
such as index funds give investors a broadly diversified portfolio and attempt to
mirror the performance of various market averages. Index funds generally buy shares
in all the companies composing the BSE Sensex or NSE Nifty or other broad stock
market indices. They are not suitable for investors who must conserve their principal
or maximize current income.
THE RISK RETURNS GRAPHS FOR VARIOUSFUNDS:-
Liquid Funds
Income Funds
Balanced Funds
Equity Funds
Sector Funds
RISKS
R ETUR NS
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The above Graph shows the Risk and Returns generated by different Funds. Liquid
Funds are less Risky and also generate less Returns where as Sector Funds are more
Risky but generate more Returns by the example of above two Funds it is clear that
Risk and Returns are directly proportional to each other. Other Funds like Equity
Funds, Balanced Funds and Income Funds are also gives the same percentage of
Returns as the Risk involved.
COMMODITIES:
Commodity Futures are contracts to buy specific quantity of a particular commodity
at a future date. It is similar to the Index futures and Stock Futures but the underlying
happens to be commodities instead of Stocks and Indices.
Major Commodity Exchanges: The Government of India permitted establishment
of National-level Multi-Commodity exchanges in the year 2002 and accordingly three
exchanges come in picture. They are:
• Multi-Commodity Exchange in India Ltd, Mumbai (MCX).
• National Commodity and Derivative Exchange of India, Mumbai (NCDEX).
• National Multi Commodity Exchange, Ahmadabad (NMCE).
However there are regional commodities exchanges functioning all over the country.
India Infoline Commodities Broking Pvt. Ltd has got membership of both the premier
commodity exchanges i.e. MCX and NCDEX.
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Major commodities traded in most popular Exchanges of the worldare :
Exchange Major Commodities Traded
New York Mercantile Exchange(NYMEX)
Crude Oil, Heating Oil
Chicago Board of Trade(CBOT) Soy Oil, Soy Beans, Corn
London Metals Exchange (LME) Aluminum, Copper, Tin, Lead
Chicago Board Option Exchange(CBOE)
Options on Energy, InterestRate
Tokyo Commodity Exchange (TCE) Silver, Gold, Crude Oil,Rubber
Malaysian Derivatives Exchange(MDEX)
Rubber, Soy Oil, Palm Oil
Commodity Exchange (COMEX) Gold ,Silver, Platinum
RE GULATIONS FOR COMMODITY TRADING:Commodity exchanges are regulated by Forward Market Commission (FMC);
Forward market Commission works under the purview of the ministry of food,
Agriculture and Public Distribution.
Benefits in dealing commodities futures are :
If you are an Investor, commodities futures represent a good form of investment
because of the following reasons.
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• Diversification : The returns from commodities market are free from the
direct influence of the equity and debt market, which means that they are
capable of being used as effective hedging instruments providing better
diversification.
• Less Manipulation : Commodities markets, as they are governed by
international price movements are less prone to rigging or price manipulations
by individuals.
• High Leverage : The margins in the commodity futures market are less
than the F & O section of the Equity market.
Commodity prices are generally less volatile than the stocks and this has been
statistically proven. Therefore it’s relatively safer to trade in commodities.
Also the regulatory authorities ensure through continuous vigil that the commodity
prices are market- driven and free from manipulations.
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Top 10 Commodities are:
CommodityGold
Silver
Guar Seed
Channa
Urad
Crude Oil
Tur
Soya OilMentha Oil
Guar Gum
STOCKS:
MEANING:
In financial markets, stock is the capital raised by a corporation through the issuance
and distribution of shares. A person or organization which holds at least a partial
share of stocks is called a shareholder. The aggregate value of a corporation's issued
shares is its market capitalization.
CAPITAL MARKETSIt consists of two markets which are primary market and secondary market.
a) Primary Market:
Primary markets bring together buyers and sellers - either directly or through
intermediaries - by providing an arena in which sellers’ investment propositions can
be priced, brought to the marketplace, and sold to buyers. In this context, the seller is
called the issuer and the price of what’s sold is called the issue price. It is the initial
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market for any item or service. It also signifies an initial market for a new stock issue.
The jargon also means a firm, trading market held in a security by a trader who
performs the activities of a specialist by being ready to execute orders in that stock.
b) Secondary Markets
Secondary Markets are the stock exchanges and the over-the-counter market.
Securities are first issued as a primary offering to the public. When the securities are
traded from that first holder to another, the issues trade in these secondary markets.
India has 23 stock exchanges that have hubs of financial activities. These stock
exchanges are in following cities: Mumbai, Pune, Ahmadabad, Rajkot, Jaipur, etc.
Stock exchange provides an organized market for transactions in the shares and other
securities. The Bombay Stock Exchange (BSE) and National Stock Exchange
(NSE) together account for nearly 72% of all capital market activity in India.
REAL ESTATE:
Real estate , or immovable property, is a legal term (in some jurisdictions) that
encompasses land along with anything permanently affixed to the land, such as
buildings. Real estate (immovable property) is often considered synonymous with
real property (also sometimes called realty), in contrast with personal property (also
sometimes called chattel or personality). However, for technical purposes, some
people prefer to distinguish real estate, referring to the land and fixtures themselves,
from real property, referring to ownership rights over real estate.
Real estate market is something that is always glowing like the New York City. The
reason being that this market has very rarely seen a downslide. Real estate market in a
common man terms would mean dealing in property which would include purchase
and sale of land and building. It could be both commercial space and residential
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property. Commercial space would mean the property that is purchased or occupied
for business purposes by small to large corporate houses. One undeniable reason why
Indian real estate market has been a boom is due to the increasing number of Multi
National Companies thronging the Indian Land. The want for space is always
increasing with government in India giving additional concessions and recognition to
Corporate engaged in building IT parks and commercial complex. The best thing
about real estate business is tha
SOURCES OF RISK
What makes financial asset risky? It is the various sources of risk. The following are
the sources of risk.
1. Interest rate risk:
The risk which arises due to variability in securities returns resulting from
changes in interest rate. This type affects bonds more directly than common
stocks but affects both.
2. Market risk:
The variability in returns resulting from fluctuations in the overall market i.e. the
aggregate stock market is referred to as market risk. All securities are exposed to
market risk, although it has major impact on common stocks.
3. Inflation risk:
A factor which affects all components of a portfolio is purchasing power risk, or
the chance that the purchasing of the invested dollars will decline with uncertain
inflation the real (inflation-adjusted) returns involves risk even if nominal return
is safe.
4. Business risk:
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The risk of doing business in a particular industry or environment is called
business risk.
5. Financial risk:
Financial risk is associated with the use of debt financing by companies. Financial
risk involves the concept of financial leverage.
6. Liquidity risk:
Liquidity risk is the risk associated with particular secondary market in which a
security trades. The more uncertainty about the time element and the price
concession, the greater the liquidity risks.
7. Exchanges risk:
It refers to the variability in returns due to currency fluctuations.
8. Country risk:
Country risk is also referred to as political risk. With more investors investing
internationally, both directly and indirectly, the economic stability is to be
considered.Every investor is bound to end up with a sure margin of profit though
the amount of profit may vary based on our bargaining skills and the need of the
buyer. People also engage in speculative business by purchasing barren lands in
under developed areas for a very minimal cost and wait for couple of years till all
necessary infrastructure is developed in that locality and then sell the land at a
huge profit. On the other side residential properties are also on the increase. One
main reason behind this being that the Housing Development Corporation of
India is promoting big Residential Buildings and all banks offer credit to
customers for purchase of property, this way majority of the population will end
up owing a property. And icing on the cake is that the value of the property is
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always down to increase and would never decrease as such we would be assured
about our share of profit.
TYPES OF RISK
1) Systematic risk:These are market risks that cannot be diversified away. Interest rates, recessions and
wars are examples of systematic risks.
2) Non systematic risk:
Also known as “specific risk”, this risk is specific to individual stocks and can be
diversified away as you increase the number of stocks in the portfolio. It represents
the component of a stock’s return that not correlated with general market moves.
Total risk = Systematic risk + Non Systematic risk
For minimizing the risk it is necessary to diversify the investments .
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CHAPTER 7
PORTFOLIO MANAGEMENT
SERVICES:
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PORTFOLIO MANAGEMENT SERVICES
Portfolio management services involve activities that help the investors to arrive at
desired investment goals. A portfolio management service is the process of
organizing and managing businesses or the establishment for the purpose of obtaining
maximum profit. Portfolio management services ensure optimum use of people,
money and other resources. In short, it is the art of optimizing assets and raising the
worth of a portfolio. The major component of the decision process is portfolio
management. After securities have been evaluated an appropriate portfolio should be
selected. It involves managing group of assets (i.e. portfolio) as a unit. The basis of
financial planning process is an asset allocation strategy. Asset allocation is the
distribution of assets among different asset classes, such as stocks, bonds, and cash
equivalent instruments.
The relationship between risk and return is one of the essential concepts to
understand when investing and it is unique for every investor, the personal risk
tolerance could be influenced by current world events, investments experiences- even
your inherited views on saving and investing.
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ADVANTAGES OF PORTFOLIO MANGEMENTSERVICES
(1) Individually managed accounts: Provides a flexible format for optimizing
returns through effective fund management.
(2) Customized portfolios : Tailor-made investment strategies to suit individual
requirements.
(3) Individually managed accounts: Provides a flexible format for optimizing
returns through better information support/client servicing regular investments
disclosures make the investor feel comfortable and in control of his money.
(4) Supportive tax structure: Tax changes support rise in equity, there is a cut in
capital gains tax on listed equities:
i. NIL for holdings greater than 12 months
ii. 10%(from 30%) for holdings less than 12 months
(5) SEBI regulated: A regulated industry makes the investor feel comfortable with
the investments techniques adapted to optimize returns.
OBJECTIVE BEHIND OFFERING PORTFOLIOMANAGEMET SERVICES
This is my objective behind offering the portfolio management services to the clients
so that I can offer them:
1. Safety of Fund: The investment should be preserved, not be lost and remain
in the returnable position in cash or kind.
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2. Liquidity: Portfolio must consist if such securities which could be en-cashed
without any difficulty or involvement of time to meet urgent need for funds.
3. Reasonable returns: The investment should earn a reasonable return to
upkeep the declining value of money and must be compatible with the
opportunity cost of money in terms of current income in the form of interest or
dividend.
4. Appreciation in capital: The money invested in portfolio must grow and
result in capital gains.
5. Tax planning: Efficiently portfolio management is concerned with composite
tax planning covering income tax, capital gains tax, wealth tax and gift tax.
6. Minimize risk: Risk avoidance and minimization is very important and are
most important objectives of portfolio management. Portfolio managers must
ensure these objectives by effective investment planning and periodical review
of marketing and economy.
7. Marketability: The investment made in securities should me marketable that
means, the securities must be listed and traded in stock exchange so as to avoid
risk and difficulty in their encashment. Marketability ensures liquidity to the
portfolio.
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TYPES OF PORTFOLIOS
CONSERVATIVE MODEL PORTFOLIOS generally allocate a large percent of
the present portfolio to lower risk securities such as fixed-income and money market
securities.
The main goal with a conservative model portfolio is to protect the principal value of
your portfolio. As such these models are often referred to as “ Capital Preservation
portfolios ”.
Even if they are very conservative and prefer to avoid the stock market entirely, someexposure can help offset inflation. They could invest the equity portion in high
quality blue chip companies, or an index fund, since the goal is not to beta the market.
Fig. 1
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MODERATELY CONSERVATIVE PORTFOLIO is ideal for those who wish to
preserve a large portion of the portfolio’s total value, but are willing to take on a
higher amount of risk to get some inflation protection.
A common strategy within the risk level is called “ current income ”. With this
strategy, you can choose securities that pay a high level of dividends or coupon
payments.
Fig. 2
MODERATELY AGGRESSIVE PORTFOLIOS are often referred as “ balanced
portfolios ” since the asset composition is divided almost equally between fixed-
income securities and equities in order to provide a balance of growth and income.
Since these moderately aggressive portfolios have a higher level of risk than those
conservative portfolios mentioned above, select this strategy only if you have a longer
time horizon (generally more than five years), and have a medium level of risk
tolerance.
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Fig. 3
AGGRESSIVE PORTFOLIOS mainly consist of equities, so these portfolios’ value
tends to fluctuate widely. If you have an aggressive portfolio, your main goal is to
obtain long term growth of the capital. As such the strategy of an aggressive portfolio
is often called a “ capital growth” strategy. To provide some diversifications,
investors with aggressive portfolios usually add some fixed-income securities.
Fig. 4
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VERY AGGRESSIVE PORTFOLIOS consist almost entirely of equities. As such,
with a very aggressive portfolio, your main goal is aggressive capital growth over a
long term horizon. Since these portfolios carry a considerable amount of risk, the
value of the portfolio will vary widely in the short term.
Fig. 5
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RISK APPITITE
Note that the above outline of portfolios and the associated strategies offer only a
loose guideline – Financial advisors modify the above proportions to suit individual
investment needs
Also, the amount of cash and cash equivalents, or money market instruments to be
placed in a portfolio will depend on the amount of liquidity and safety the investor
needs. If they need investments that can be liquidated quickly or they would like to
maintain the current value of your portfolio, they might want to put a larger portion
of their investment portfolio in money market or short-term fixed-income securities.
Those investors who do not have liquidity concerns and have a higher risk tolerance
will have a small portion of their portfolio within these instruments.
As each asset class has varying levels of return for a certain risk, their risk tolerance,
investment objectives, time horizon and available capital will provide the basis for
the asset composition of their portfolio.
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INVESTMENT S TRATEGY INTERRELATIONSHIP
AMONG VARIOUS PHASES OF PORTFOLIO
MANAGEMENT
SPECIFICATION OF INVESTMENT OBJECTIVESAND CONSTRAINT
CHIOCE OF MIX ASSETS
FORMUATION OFPORTFOLIO STRATEGY
SELECTION OF SECURITES
PORTFOLIO EXECUTION
PORTFOLIO REVISION
PORTFOLIO EVALUATION
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INVESTMENT STRATEGY IN PMS
(1) Focus on select/clear stock opportunities: Investor should invest in stocks
where there is a clear earnings visibility.
(2) Relatively concentrated portfolio: A portfolio composition of not more than 25-
30 stocks of what there are compelling opportunities.
(3) Usage of derivatives as a tool : One must have a selective use of derivatives in
various options to enhance returns/portfolio protection.
(4) Flexible cash allocation strategy : We have an efficient allocation among assets
with flexibility to sit on 100% cash.
PRODUCT OFFERINGS IN PMS
Sharekhan has two types of portfolio management products:
PMS Pro Prime: Ideal for investors looking at steady and superior returns
with low to medium risk appetite. This portfolio consists of a blend of quality
blue-chip and growth stocks ensuring a balanced portfolio with relatively
medium risk profile. The portfolio will mostly have large capitalization stocks
based on sectors & themes that have medium to long term growth potential.
Investment are based on 3 tenets:
a) Consistent, Steady and Sustainable Returns.
b) Margin of Safety.
c) Low Volatility.
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PMS Pro Tech: These services are for those who want high risk for high
returns.
Pro-tech uses the knowledge of technical analysis and the power of derivatives
market to identify trading opportunities in the market. The Protech lines of
products are designed around various risk/reward/volatility profiles for different
kinds of investment needs.
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CHAPTER 8:
VIRTUAL PORTFOLIO
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VIRTUAL PORTFOLIO (OF Rs 10 LACS)
TOTAL AMT INVESTED IN SHARES = 642855 (17.09%)AMT INVESTED IN MUTUAL FUND = 210000 (29.06%)INTRADAY = 100000OTHERS = 47145
TOTAL 1000000 (23.08%)
SCRIPTNO. OFSHARES PRICE T.AMT
TARGETPRICE
RETURNS
RIL 75 2554.8 191610 3127 22.39%SBI 100 1573.25 157325 1752.66 11.40%INFOSYS 50 1862.4 91230 2244.6 20.52%ITC 60 213.6 12816 240.51 13.52%
L&T 30 2844.75 85343 3255.11 14.43%RELIANCE INDUS.INFRA 63 1240 78120 1490.73 20.16%GOLDSTONE INFRA 40 58.75 2350 70.06 19.25%DR REDDYS 35 687.45 24061 787.19 15.01% TOTAL 453 642855 17.09%
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M.F NAVINVESTMENT RETURNS
DBS CHOLA MONTHLY INCOME PLAN 17.18 65000 27.60%RELIANCE DIVERSIFIED POWER SECTOR GROWTH63.04 95000 45.78%FRANKLIN TEMPLTON ASSET MGMT GROWTH 30.18 50000 15.43% TOTAL 210000 29.60%
Calculation of Target Price
1. Target Price = New EPS * P.E Ratio
2. New EPS = Last year EPS * Growth
3. Growth = Net Worth Return * Retention Ratio
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FINDINGS
A summer project brings the student face to face with the real corporate world. This
is the time when one learns what the industry practices are and do the practices really
follow what is really taught in the classroom. Further it gives an excellent chance to
the students to apply the concepts in the real world.
Application on tools and techniques in the real world
Summer training provided me a good opportunity to apply the concepts, tools and
techniques in the real business-life situations.
Main Learning’s;
Having worked with India Infoline, I have experienced and realized the importance of
operating the Demat account online; trading the shares online; how market operates,
etc. The main thing I learned is that how a portfolio is managed and how the money
should be invested in different assets.
I learned how to study a portfolio and also came to know the difficulties in preparing
and handling a portfolio.
Interaction with superiors and discussing problems, both project based as well as
others, gave me a chance to learn quite a lot. There are many small things which on
the face of it look small but have great value in the long run. I have learnt a lot and I
am confident and sure that this will help me in my future.
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SUGGESTIONS
• India Infoline’s advertising is done mainly through word of mouth and IPO
releases, which attracts only a fraction of the investors and thereby bringing
down its market capitalization. India Infoline, like the other leading brokerage
firms should indulge in a more aggressive form of advertising in both print
and electronic media if it looks to keep pace with the cut throat competition in
the years to come.
• Organize and make accessible a database of customer information.
• Allocating marketing investment according to customer value.
• The portfolio manager has to very carefully analyze the market and then
invest in different assets.
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LIMITATIONS OF THE STUDY:
The main limitation of my study is from the investor side, as for providing them
the PMS I need to know their past investments in detail which they hesitate to
disclose as they find it hard to trust anyone regarding their investments, so I have
to first built up the trust & then talk about the investments, as the main limitation
is time so it takes me at least few days for this procedure through regular visits &
follow up’s.
Time period undertaken for the project was also one of the limiting factors as
“Portfolio Management” is such a vast subject which involves in-depth study
analysis. As a portfolio has to be diversified keeping in mind the risk appetite of
the investor as well as keeping a track record of his past investments and then
finally analyzing the portfolio & for this the proposed time period was a limiting
factor.
The sample size taken for drawing a conclusion is too small to get an accurate
result & is only small portion of actual population.
Changing the mentality of people for investing through a particular Advisory
Services.
It’s hard to change the typical psychological mindset of the investor, limiting the
options available, although feasible.
Difficult to overcome investors who wants return in less time & at times it’s
difficult to get the documents required for formalities from investors.
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Another very important limitation while doing this project which I came across was
that the investors find it hard to trust the products & services offered by the private
companies even though they are performing much better than the government
companies like LIC v/s Private Players (ICICI, Reliance, Met Life…..)
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CONCLUSION
Just before starting the conclusion, I would like to show the comparisons of the
various investments opportunities concerning their safety, interest rate, liquidity, etc.
through following table:
Where; HI= High,LO= Low,MOD= Moderate.
The reason behind showing this comparison is that when we talk about “Portfolio
Management Services” it all start from firstly making a comparison and then making
a decision about what to invest and where to invest. After going through this report
one can actually see that all the advisory is done once the financial advisor analyses
the actual need of the customers, and this all is done once we know what to offer and
when to offer.
Their is lot of scope of promoting PMS in Pune as in the present scenario Pune has
become one of the most recognized IT destination in India, and in IT firms the
INSTRUMENTS RETURN SAFETY VOLATILITY LIQUIDITY
STOCKS HI LO HI HI / LOBONDS MOD HI MOD MODFIXED DEPOSITS LO HI LO LOMUTUAL FUNDS HI HI MOD HI
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Investors are not well versed with the various investment avenues present in the
market. They always seek for financial help for their “Tax Planning’s” and for good
“Capital Appreciations” as the annual packages offered to them are quite high so they
need to plan accordingly & that is the right time when we come into the picture, with
best of the PMS which we can offer.
There is great opportunity for Mutual Fund companies as there is a rise in number of
people who want to invest in share market but don’t have time and knowledge to do
so, also these people want to take less risk .With booming market and falling interest
rate of bank deposits, people see mutual funds as an attractive financial tool which
provide a high return rate at lower risk as compared to equity market. Young people
these days are particularly more interested in mutual funds because they see mutual
fund as safe bet. Also these people have large disposable incomes and risk taking
capability too. Advertising can also play a major part as it has been seen that people
buy mutual fund looking at the brand name. While offering them the “Portfolio
Management Services” we see that we offer them the best after carrying out the total
analysis on various schemes running in the market we give them what satisfies their
need the most efficiently. As far as the investment sector is considered, a sharp rise in
the no. of woman a/c holders, with almost 21% of its total 6.53 lakh trading a/c held
by woman, the organization have to concentrate on woman segment. According to the
respondents the quality of the service is very important. So the company should
project itself as a brand in the market that gives end user the best quality of service
with handy operations. Also most of the respondents have their personal consultant or
company consultants, India Infoline have to differentiate their services from other
consultant effectively by delivering value added services to its customers. Also
organizations have to concentrate on direct marketing activities. The consultancy
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should develop its long term relationship with the customers. The consultancy must
give much more emphasis on creation of customer who make repurchase.
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BIBLIOGRAPHY:
Books:
Prasana Chandra: P (2004) “Investment analysis & portfoliomanagement”Tata Mc Graw Hill (New Delhi).
Websites:
www.india infoline.com
www.nseindia.com
www.bseindia.com
http://www.amfiindia.com/showhtml.asp?page=mfconcept#B
http://www.moneycontrol.com/bestportfolio/wealth-management-tool/09/58/investments
http://en.wikipedia.org/wiki/Mutual_fund#Types_of_mutual_funds
www.valueresearchonline.com
www.personalfn.com
www.rediffmail.com
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ANNEXURE:
Questionnaire:
Name:Address: City:Pin:Contact address:
Telephone:Date of birth:Sex:Status:Marital Status:Educational Qualifications:
Q.1) WHAT IS YOUR ANNUAL INCOME?
0
5
10
15
2025
30
35
40
45
% OFPOPULATION
>1 1 to 3 3 to 5 5+
INCOME GROUP
DISTRIBUTION OF INCOME
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Maximum number of sample population has income below 1 lakh followed by 1- 3
lakh. Normally people having income below 1 lakh do not invest so our target
population is people having income above 1 lakh.
Q.2) What percentage of your income do you invest?
About 60% of people said that they invest between 10%-60% of their total income in
some or other types of financial tools. A major chunk of people belonging to this
segment are from IT sector who are young, large disposable income and have a little
knowledge about investment and are willing to take risk.
Q.3) IF YOU WANT INVESTS THEN WHICH INSTRUMENTWILL YOU PREFER?
60
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28%
25%13%9%
19%
6%INSURANC
MUTUAL FSHARE
REAL ESTA
PPF
BONDS
As per our research 28 % of people prefer insurance as investmentinstrument. 25 % people prefer mutual funds followed by share market.
Q.4) How you choose a mutual fund?
35
40