Harpreet Report..

8/3/2019 Harpreet Report..

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SUMMER TRAINING REPORT

ON

PORTFOLIO MANAGEMENT SERVICES

IN

Summer Training Project Report Submitted Towards ThePartial Fulfillment For Award Of the Degree Of

MASTER OF BUSINESS ADMINISTRATION

SESSION

(2010-2012)

Faculty Guide: Corporate Guide:

Mr. ANKIT SAXENA Mr. Vineet Arora

Submitted By:

HARPREET SINGH MEHTA

G.L.A INSTITUTE OF BUSINESS MANAGEMENT


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GLA (IBM) COLLEGE, MATHURA Page 2

PrefaceShare trading in India is undergoing a transition and consolidation phase witnessed

never before. The competition is likely to become so severe after the entry of many players,

retaining a customer is most difficult practice for any service provider.

Though India has a very big untapped market but the players will not flourish unless

they change the way the customers are being served. Given the awareness level of today

customers every player has to treat with care and make the customer feel that he is the king.

Number of Online Share trader in India has crossed the line. More and more customers are

coming under this umbrella and many of the existing one are changing pavilion. So customer

retention and satisfaction is now more important as it was never before. Players keep coming

with new schemes in order to attract new customers and retain the existing one. This is being

supplemented with increased advertising and brand building efforts. Success of any

organization depends upon its being proactive.

I am very lucky as I got an opportunity to work with SHARE KHAN LTD which is

showing phenomenal growth and success in the Securities.

My topic of study was studying the PORTFOLIO MANAGEMNET SERVICES

share khan ltd. This project is an effort to do a depth study and analysis of various known

and unknown reasons for customer satisfaction and retention. To err is human and I am not

an exception, valuable comments are always welcomed since it will motivate to work with

greater zeal and efficiency in the future.


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ACKNOWLEDGEMENT

Expression of feelings by words makes them less significant when it comes to makestatement ofgratitude

I would like to express word of thanks to all those who have provided me

with sincere advice and information during the course of my training period. It was indeed a

great pleasure for me to work in a very co-operative, enthusiastic and learning atmosphere at

ShareKhan Limited.

I deem it a proud privilege to extend my greatest sense of gratitude to my

guide Mr VINEET ARORA (Sharekhan) for the keen interest, inspiring guidance,

continuous encouragement, valuable suggestions and constructive criticism throughout the

pursuance of this report.

I would also like to extend my regards to my company guides Mr.K.P.Singh

Territory Manager, Share Khan and Mr.Shyam Sundar, Marketing Manager, Share

khan and for helping me and providing me with right direction during the course of my

project. The interaction with him has provided me with the knowledge which will definitely

help me to enrich my career and help me to perform better in future.

I would also like to express my sincere thanks to Prof. ANKIT SAXENA

(Faculty Guide- GLA (IBM) COLLEGE, MATHURA) for his unstinting guidance and

support throughout the project. He has been a great source of motivation to me.

With all the heartiest thanks; I hope my final project report will be a great success and a good

source of learning and information.

HARPREET SINGH MEHTA

MBA 3rd semester


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Declaration

I, HARPREET SINGH MEHTA, hereby declare that the research work presented in this

report entitled PORTFOLIO MANAGEMNET SERVICES IN SHAREKHAN LTD for

the fulfillment of the award of Master in Business Administration (M.B.A.) from

MAHAMAYA TECHNICAL University (M.T.U.), NOIDA is based on my

work during the summer training in AGRA Sharekhan Ltd The project embodies the result

of original work and studies carried out by me and the contents of the project do not form the

basis for the award of any other degree to me or to anybody else.

Date: HARPREET SINGH MEHTA

MBA (3rd semester)


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CHAPTER-1

INTRODUCTION


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OBJECTIVE OF THE PROJECT

Each research study has its own specific purpose. It is like to discover to

Question through the application of scientific procedure. But the main aim of our research to

find out the truth that is hidden and which has not been discovered as yet. Our research study

has two objectives:-

OBJECTIVES

To know the concept of Portfolio Management. To know about the schemes offeredby the different insurance companies, new IPOs,

Mutual Funds.

To know in depth about Insurance, Mutual Funds, Stock, Bonds etc.

To know about the awareness towards stock brokers and share market.

To study about the competitive position of Share khan Ltd in Competitive Market.

To study about the effectiveness & efficiency of Share khan Ltd in relation to itscompetitors

To study about whether people are satisfied with Share khan Services & ManagementSystem or not.

To study about the difficulties faced by persons while Trading in Share khan.

To study about the need of improvement in existing Trading system.


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EXECUTIVE

SUMMARY


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EXECUTIVE SUMMARYInvesting is both Arts and Science. Every Individual has their own specific financial need

and expectation based on their risk taking capabilities, whereas some needs and expectation

are universal. Therefore, we find that the scenario of the Stock Market is changing day by day

hours by hours and minute by minute. The evaluation of financial planning has been

increased through decades, which can be best seen in customers. Now a days investments

have become very important part of income saving.

In order to keep the Investor safe from market fluctuation and make them profitable,

Portfolio Management Services (PMS) is fast gaining Investment Option for the High Net

worth Individual (HNI). There is growing competition between brokerage firms in post

reform India. For investor it is always difficult to decide which brokerage firm to choose.

The research design is analytical in nature. A questionnaire was prepared and

distributed to Investors. The investors profile is based on the results of a questionnaire that

the Investors completed. The Sample consists of 100 investors from various brokers

premises. The target customers were Investors who are trading in the stock market.

In order to identify the effectiveness of Share khan PMS services this Research is carried

throughout the area of Hyderabad. At the time of investing money everyone look for the Risk

factor involve in the Investment option. The Report is prepared on the basis of Research work

done through the different Research Mythology the data is collected from both the source

Primary sources which consist of Questionnaire and secondary data is collected from

different sources such as Company website, Magazine and other sources.

As the PMS services ofShare khan Limited have the best result in its field .It has

given 43.50% return in Trailing stops, 94.30%return in Nifty and 38.10% in Beta

Portfolio which is the result when the Market was not doing well from last one year.

In this project I have shown the details of financial planning as well as wealth management so

as to understand about the customers needs and wants with respect to market and how a

clients portfolio can be designed and what factors a portfolio manager must consider for

designing a portfolio.


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INTRODUCTION TO STUDYThe field of investment traditionally divided into security analysis and

portfolio management. The heart of security analysis is valuation of financial assets. Value in

turn is the function of risk and return. These two concepts are in the study of investment

.Investment can be defined the commitment of funds to one or more assets that will be held

over for some future time period.

In today fast growing world many opportunities are available, so in order to

move with changes and grab the best opportunities in the field of investments a professional

fund manager is necessary.

Therefore, in the present scenario the Portfolio Management Services (PMS) is

fast gaining importance as an investment alternative for the High Net worth Investors.

Portfolio Management Services (PMS) is an investment portfolio in stocks,

fixed income, debt, cash, structured products and other individual securities, managed by a

professional money manager that can potentially be tailored to meet specific investment

objectives.

When you invest in PMS, you own individual securities unlike a mutual fund

investor, who owns units of the entire fund. You have the freedom and flexibility to tailor

your portfolio to address personal preferences and financial goals. Although portfolio

managers may oversee hundreds of portfolio, your account may be unique.

Investment Management Solution in PMS can be provided in the following ways:

i. Discretionaryii. Non Discretionary

iii. Advisory

Discretionary: Under these services, the choice as well as the timings of the investment

decisions rest solely with the Portfolio Manager.


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Non Discretionary: Under these services, the portfolio manager only suggests the

investment ideas. The choice as well as the timings of the investment decisions rest solely

with the Investor.

However the execution of trade is done by the portfolio manager.

Advisory: Under these services, the portfolio manager only suggests the investment ideas.

The choice as well as the execution of the investment decisions rest solely with the Investor.

Rule 2, clause (d) of the SEBI (portfolio managers) Rules, 1993 defines the

term Portfolio as total holding of securities belonging to any person.

As a matter of fact, portfolio is combination of assets the outcomes of which

cannot be defined with certainty new assets could be physical assets, real estates, land,

building, gold etc. or financial assets like stocks, equity, debenture, deposits etc.

Portfolio management refers to managing efficiently the investment in the

securities held by professional for others.

Merchant banker and the portfolio management with a view to ensure maximum

return by such investment with minimum risk of loss of return on the money invested in

securities held by them for their clients. The aim Portfolio management is to achieve the

maximum return from a portfolio, which has been delegated to be managed by manger or

financial institution.

There are lots of organization in the market on the lookout for the people like you

who need their portfolios managed for them .They have trained and skilled talent will work

on your money to make it do more for you.

Therefore, if any investors still insist on managing their own portfolio, then ensure you

build discipline into their investment. Work out their strategy and stand by it.

MYTHS ABOUT PMSThere are two most common myths found about Portfolio Management Services

(PMS) which we found among most of the Investors. They are as follows.


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Myth No. 1: PMS and Mutual Fund are Similar as the investment option

As in the Finance Basket both the PMS and Mutual Fund are used for minimizing risk

and maximize the profit of the Investors. The objectives are similar as in both the product but

they are different from each other in certain aspects. They are as follows.

Management SideIn PMS, its ongoing personalized access to professional money management

services. Whereas, in Mutual fund gives personalize access to money.

CustomizationIn PMS, Portfolio can be tailored to address each investor's specific needs. Whereas

in Mutual Fund Portfolio structured to meet the fund's stated investment objectives.

OwnershipIn PMS, Investors directly own the individual securities in their portfolio, allowing

for tax management flexibility, whereas in Mutual Fund Shareholders own shares of the fund

and cannot influence buy and sell decisions or control their exposure to incurring tax

liabilities.

LiquidityIn PMS, managers may hold cash; they are not required to hold cash to meet

redemptions, whereas, Mutual funds generally hold some cash to meet redemptions.

MinimumsPMS generally gives higher minimum investments than mutual funds. Generally,

minimum ranges from: Rs. 1 Crore + for Equity Options Rs. 5 Crore + for Fixed Income

Options Rs. 20 Laces + for Structured Products, whereas in Mutual Fund Provide ongoing,

personalized access to professional money management services.


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FlexibilityPMS is generally more flexible than mutual funds. The Portfolio Manager may move

to 100% cash if it required. The Portfolio Manager may take his own time in building up the

portfolio. The Portfolio Manager can also manage a portfolio with disproportionate allocation

to select compelling opportunities whereas, in Mutual Fund comparatively less flexible.

Myth No. 2: PMS is more Risk free than other Financial Instrument

In Financial Market Risk factor is common in all the financial products, but yes it is

true that Risk Factor vary from each other due to its nature.All investments involve a certain

amount of risk, including the possible erosion of the principal amount invested, which varies

depending on the security selected. For example, investments in small and mid-sized

companies tend to involve more risk than investments in larger companies.


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INTRODUCTION

TO

STOCK

EXCHANGE


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INTRODUCTION TO STOCK EXCHANGE

The emergence of stock market can be traced back to 1830. In Bombay,

business passed in the shares of banks like the commercial bank, the chartered mercantile

bank, the chartered bank, the oriental bank and the old bank of Bombay and shares of cotton

presses. In Calcutta, Englishman reported the quotations of 4%, 5%, and 6% loans of East

India Company as well as the shares of the bank of Bengal in 1836. This list was a further

broadened in 1839 when the Calcutta newspaper printed the quotations of banks like union

bank and Agra bank. It also quoted the prices of business ventures like the Bengal bonded

warehouse, the Docking Company and the storm tug company.

Between 1840 and 1850, only half a dozen brokers existed for the limited

business. But during the share mania of 1860-65, the number of brokers increased

considerably. By 1860, the number of brokers was about 60 and during the exciting period of

the American Civil war, their number increased to about 200 to 250. The end of American

Civil war brought disillusionment and many

Failures and the brokers decreased in number and prosperity. It was in

those troublesome times between 1868 and 1875 that brokers organized an informal

association and finally as recited in the Indenture constituting the Articles of Association of

the Exchange.

On or about 9th day of July,1875, a few native brokers doing brokerage

business in shares and stocks resolved upon forming in Bombay an association for protecting

the character, status and interest of native share and stock brokers and providing a hall or

building for the use of the Members of such association.

As a meeting held in the broker Hall on the 5th day of February, 1887, it

was resolved to execute a formal deal of association and to constitute the first managing

committee and to appoint the first trustees. Accordingly, the Articles of Association of the

Exchange and the Stock


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Exchange was formally established in Bombay on 3rd day of December, 1887.

The Association is now known as The Stock Exchange.

The entrance fee for new member was Re.1 and there were 318 members on the

list, when the exchange was constituted. The numbers of members increased to 333 in 1896,

362 in 1916and 478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in

1896, Rs.2500 in 1916 and Rs. 48,000 in 1920. At present there are 23 recognized stock

exchanges with about 6000 stockbrokers. Organization structure of stock exchange varies.

14 stock exchanges are organized as public limited companies, 6 as

companies limited by guarantee and 3 are non-profit voluntary organization. Of the total of

23, only 9 stock exchanges have been permanent recognition. Others have to seek recognition

on annual basis.

These exchange do not work of its own, rather, these are run by some

persons and with the help of some persons and institution. All these are down as functionaries

on stock exchange. These are:

i. Stockbrokersii. Sub-broker

iii. Market makersiv. Portfolio consultants etc.

1. Stockbrokers:

Stock brokers are the members of stock exchanges. These are the persons

who buy, sell or deal in securities. A certificate of registration from SEBI is mandatory to act

as a broker. SEBI can impose certain conditions while granting the certificate of registrations.

It is obligatory for the person to abide by the rules, regulations and the buy-law. Stock

brokers are commission broker, floor broker, arbitrageur etc.


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Detail of Registered Brokers

Total no. of registered brokers as on

31.03.09

Total no. of sub-broker as on 31.03.09

9000 24,000

2. Sub-broker:

A sub-broker acts as agent of stock broker. He is not a member of a stock

exchange. He assists the investors in buying, selling or dealing in securities throughstockbroker. The broker and sub-broker should enter into an agreement in which obligations

of both should be specified. Sub-broker must be registered SEBI for a dealing in securities.

For getting registered with SEBI, he must fulfill certain rules and regulation.

3. Market Makers:

Market maker is a designated specialist in the specified securities. They

make both bid and offer at the same time. A market maker has to abide by bye-laws, rulesregulations of the concerned stock exchange. He is exempt from the margin requirements. As

per the listing requirements, a company where the paid-up capital is Rs. 3 Crore but not more

than Rs. 5 core and having a commercial operation for less than 2 years should appoint a

market maker at the time of issue of securities.

4. Portfolio Consultants:

A combination of securities such as stocks, bonds and moneymarket instruments is collectively called as portfolio. Whereas the portfolio consultants are

the persons, firms or companies who advise, direct or undertake the management or

administration of securities or funds on behalf of theirclients.

Traditionally stock trading is done through stock brokers, personally or through

telephones.

As number of people trading in stock market increase enormously in last few years,

some issues like location constrains, busy phone lines, miss communication etc start growing


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in stock broker offices. Information technology (Stock Market Software) helps stock brokers

in solving these problems with Online Stock Trading.

Online Stock Market Trading is an internet based stock trading facility. Investor can

trade shares through a website without any manual intervention from Stock Broker.

There are two different type of trading environments available for online equity

trading.

Installable software based Stock Trading TerminalsThis trading environment requires software to be installed on

investors computer. This software is provided by the stock broker. This software requires

high speed internet connection. These kind of trading terminals are used by high volume

intraday equity traders.

Web (Internet) based trading applicationThis kind of trading environment doesn't require any additional

software installation. They are like other internet websites which investor can access from

around the world through normal internet connection.

Stock exchanges are like market places, where stockbrokers buy and sell

securities for individuals or institutions. As per the SCRA (Securities Contracts Regulation

Act) 1956, the definition of securities includes shares, bonds, stocks, debentures, government

securities, derivatives of securities, units of collective investment scheme (CIS) etc. The

securities market has two interdependent segments: the primary and secondary market.

The primary market is the channel for creation of new securities issued by

public limited companies or by government agencies. New securities issued in the primary

market are traded in the secondary market.

The secondary market operates through the over-the-counter (OTC) market

and the exchange trade market.


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Advantages of Stocks Trading

Better returns

Actively trading stocks can produce better overall returns than simply buying

and holding.

Huge ChoiceThere are thousands of stocks listed on markets around the world. There is always

a stock whose price is moving - its just a matter of finding them.

FamiliarityThe most traded stocks are in the largest companies that most of us have heard of

andunderstand - Microsoft, IBM, and Cisco etc.

Disadvantages of Stocks Trading

LeverageWith a margined account the maximum amount of leverage available for stock

trading is usually 4:1. Meaning a $25,000 could trade up to $100,000 of stock. This is pretty

low compared to Forex trading or futures trading.

Pattern Day Trader RulesIt requires at least $25,000 to be held in a trading account if the trader completes

more than 4 trades in a 5 day period. No such rule applies to Forex trading or futures trading.

Uptick Rule on Short SellingA trader must wait until a stock price ticks up before they can short sell it. Again

there are no such rules in Forex trading or futures trading where going short are as easy as

going long.


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Need to Borrow Stock to ShortStocks are physical commodities and if a trader wishes to go short then the broker

must have arrangements in place to borrow that stock from a shareholder until the trader

closes their position. This limits the opportunities available for short selling. Contrast this to

futures trading where selling is as easy as buying.

CostsAlthough online trading costs for stock trading are low they still add considerably

to the costs of day trading. Online futures trading are about 1/4 of the cost for the

equivalent value. In the UK 0.5% stamp duty is also levied on all share purchases making

trading virtually impossible, hence the popularity of spread betting.


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CHAPTER- 2

COMPANY

PROFILE


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COMPANY PROFILE

SHAREKHAN LIMITED:

Name of the company: Sharekhan ltd. Year of Establishment: 1925 Headquarter:

ShareKhanSSKIA-206PhoenixHousePhoenix Mills CompoundLower ParelMumbai - Maharashtra, INDIA- 400013

Nature of Business : Service Provider Services: Depository Services, Online Services and Technical Research. Number of Employees : Over 3500

Sharekhan is one of the top retail brokerage houses in India with a strong

online trading platform. The company provides equity based products (research, equities,

derivatives,depository, margin funding, etc.). It has one of the largest networks in the country

with 704 share shops in 280 cities and Indias premier online trading portal


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w w w .s h a r e k h a n .c o m. With their research expertise, customer commitment and

superior technology, they provide investors withend-to-end solutions in investments. They

provide trade execution services through multiple channels - an Internet platform, telephone

and retail outlets.

Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family,

continues to remain the largest shareholder. It is the retail broking arm of the Mumbai-

based SSKI[SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED]

Group. SSKI which is established in 1930 is the parent company of Sharekhan ltd.

With a legacy of more than 80 years in the stock markets, the SSKI group ventured into

institutional broking and corporate finance over a decade ago. Presently SSKI is one of

the leading players in institut ional broking and corporate finance activities. Sharekhan

offers its customers a wide range of equity related services including trade execution on BSE,

NSE, and Derivatives. Depository services, online trading, Investment advice,

Commodities, etc.

Sharekhan Ltd. is a brokerage firm which is established on 8th

February 2000 and now it is having all the rights of SSKI. The company was awarded the

2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first

brokerage Company to go online. The Company's online trading and investment site -

www.Sharekhan.com - was also launched on Feb 8, 2000.

This site gives access to superior content and transaction facility to

retail customers across the country. Known for its jargon-free, investor friendly language and

high quality research, the content-rich and research oriented portal has stood out among its

contemporaries because of its steadfast dedication to offering customers best-of-breed

technology and superior market information.

Share khan has one of the best states of art web portal providing

fundamental and statistical information across equity, mutual funds and IPOs. One can

surf across 5,500 companies for in-depth information, details about more than 1,500

mutual fund schemes and IPO data. One can also access other market related details such

as board meetings, result announcements, FII transactions, buying/selling by mutual funds

and much more. Sharekhan's management team is one of t he strongest in the sector and

has positioned Sharekhan to take advantage of the growing consumer demand for

financial services products in India through investments in research, pan-Indian branch

network and an outstanding technology platform. Further, Sharekhan's lineage and

relationship with SSKI Group provide it a unique position to understand and leverage the

growth of the financial services sector. We look forward to providing strategic counsel to

Sharekhan's management as they continue their expansion for the benefit of all

shareholders."

SSKI Group Companies


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SSKI Investor Services Ltd (Share khan)

S.S. Kantilal Ishwarlal Securities

Share khan Commodities Pvt Ltd

Mission of the Share khan is

To educate and empower the individual investor to make better investment decisions

through

QUALITY ADVICE INNOVATIVE PRODUCTS SUPERIOR SERVICE.

WORK STRUCUTRE OF

SHAREKHAN

Share khan has always believed in investing in technology to build its

business. The company has used some of the best-known names in the IT industry, like Sun

Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix, VignetteVeriSigngn

Financial Technologies India Ltd, Spider Software Pvt. Ltd. to build its trading engine and


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content. The City Venture holds a majority stake in the company. HSBC, Intel & Carlyle are

the other investors.

On April 17, 2002 Share khan launched Speed Trade and Trade Tiger, are

net-based executable application that emulates the broker terminals along with host of other

information relevant to the Day Traders. This was for the first time that a net-based trading

station of this caliber was offered to the traders. In the last six months Speed Trade has

become a de facto standard for the Day Trading community over the net. Share khans

ground network includes over 700+ Share shops in 130+ cities in India.

The firms online trading and investment site www.sharekhan.com - was

launched on Feb 8, 2000. The site gives access to superior content and transaction facility to

retail customers across the country. Known for its jargon-free, investor friendly language and

high quality research, the site has a registered base of over 3 Laces customers. The number of

trading members currently stands at over 7 Laces. While online trading currently accounts for

just over 5 per cent of the daily trading in stocks in India, Share khan alone accounts for 27

per cent of the volumes traded online.

The Corporate Finance section has a list of very prestigious clients and has

many firsts to its credit, in terms of the size of deal, sector tapped etc. The group has placed

over US$ 5 billion in private equity deals. Some of the clients include BPL Cellular Holding,

Gujarat Papaya, Essar, Hutchison, Planetasia, and Shoppers Stop. Finally, Share khan

shifted hands and City venture get holds on it.

PRODUCT AND SERVICES OFFERD BY SHAREKHAN

1- Equity Trading Platform (Online/Offline).

2- Commodities Trading Platform (Online/Offline).

3- Portfolio Management Service.

4- Mutual Fund Advisory and Distribution.

5- Insurance Distribution.

6-Forex


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6. Forex.

Share khan offers the following products:-

CLASSIC ACCOUNTThis is a User Friendly Product which allows the client to trade through

website www.sharekhan.com and is suitable for the retail investors who is risk-averse and

hence prefers to invest in stocks or who does not trade too frequently.


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Features

Online trading account for investing in Equity and Derivatives viawww.sharekhan.com

Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE. Integration of On-line trading, Saving Bank and Demat Account. Instant cash transfer facility against purchase & sale of shares. Competitive transaction charges. Instant order and trade confirmation by E-mail. Streaming Quotes (Cash & Derivatives). Personalized market watch. Single screen interface for Cash and derivatives and more. Provision to enter price trigger and view the same online in market watch.

SPEEDTRADESPEEDTRADE is an internet-based software application that enables you to

buy and sell in an instant. It is ideal for active traders and jobbers who transact frequently

during days session to capitalize on intra-day price movement.

Features

Instant order Execution and Confirmation. Single screen trading terminal for NSE Cash, NSE F&O & BSE. Technical Studies. Multiple Charting. Real-time streaming quotes, tic-by-tic charts. Market summary (Cost traded scrip, highest clue etc.) Hot keys similar to brokers terminal. Alerts and reminders. Back-up facility to place trades on Direct Phone lines. Live market debts.


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DIAL-N-TRADEAlong with enabling access for trade online, the CLASSIC and

SPEEDTRADE ACCOUNT also gives Dial-n-trade services. With this service, one can dial

Share khans dedicated phone lines 1800-22-7500, 3970-7500. Beside this, Relationship

Managers are always available on Office Phone and Mobile to resolve customer queries.

SHARE MOBILEShare khan had introduced Share Mobile, mobile based software where one

can watch Stock Prices, Intra Day Charts, Research & Advice and Trading Calls live on the

Mobile. (As per SEBI regulations, buying-selling shares through a mobile phone are not yet

permitted.)

PREPAID ACCOUNTCustomers pay Advance Brokerage on trading Account and enjoy

uninterrupted trading in their Account. Beside this, great discount are also available (up to

50%) on brokerage.

Prepaid Classic Account: - Rs. 2000

Prepaid Speed trade Account: - Rs. 6000

IPO ON-LINECustomers can apply to all the forthcoming IPOs online. This is quite

hassle-free, paperless and time saving. Simply allocate fund to IPO Account, Apply for the

IPO and Sit Back & Relax.

Mutual Fund OnlineInvestors can apply to Mutual Funds of Reliance, Franklin Templeton

Investments, ICICI Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch,

PRINCIPAL and TATA with Share khan.


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Zero Balance ICICI Saving AccountShare khan had tied-up with ICICI bank for Zero Balance Account for

Share khans Clients. Now their customers can have a Zero Balance Saving Account with

ICICI Bank after your demat account creation with Share khan.

REASON TO CHOOSE SAHREKHAN

LIMITED

ExperienceSSKI has more than eight decades of trust and credibility in the Indian

stock market. In the Asia Money broker's poll held recently, SSKI won the 'India's best

broking house for 2004' award. Ever since it launched Share khan as its retail broking

division in February 2000, it has been providing institutional-level research and broking

services to individual investors.

TechnologyWith their online trading account one can buy and sell shares in an

instant from any PC with an internet connection. Customers get access to the powerful online

trading tools that will help them to take complete control over their investment in shares.

AccessibilityShare khan provides ADVICE, EDUCATION, TOOLS AND

EXECUTION services for investors. These services are accessible through many centers

across the country (Over 650 locations in 150 cities), over the Internet (through the website

www.sharekhan.com) as well as over the Voice Tool.

KnowledgeIn a business where the right information at the right time can translate

into direct profits, investors get access to a wide range of information on the content-rich


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portal, www.sharekhan.com. Investors will also get a useful set of knowledge-based tools

that will empower them to take informed decisions.

ConvenienceOne can call Share khans Dial-N-Trade number to get investment

advice and execute his/her transactions. They have a dedicated call-center to provide this

service via a Toll Free Number 1800 22-7500 & 39707500 from anywhere in India.

Customer ServiceIts customer service team assist their customer for any help that they

need relating to transactions, billing, demat and other queries. Their customer service can be

contacted via a toll-free number, email or live chat on www.sharekhan.com.

Investment AdviceShare khan has dedicated research teams of more than 30people for

fundamental and technical research. Theiranalysts constantly track the pulse of the market

andprovide timely investment advice to customer in the formof daily research emails, online

chat, printed reports etc.

Benefits

Free Depository A/c Instant Cash Transfer Multiple Bank Option. Secure Order by Voice Tool Dial-n-Trade. Automated Portfolio to keep track of the value of your actual purchases. 24x7 Voice Tool access to your trading account. Personalized Price and Account Alerts delivered instantly to your Mobile Phone &

E-mail address.

Live Chat facility with Relationship Manager on Yahoo Messenger Special Personal Inbox for order and trade confirmations.


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On-line Customer Service via Web Chat. Enjoy Automated Portfolio. Buy or sell even single share Anytime Ordering.


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CHAPTER-3

RESEARCHMETHODOLOGY


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Scope of the Study

The study of the Portfolio Management Services is helpful in the following areas.

In today's complex financial environment, investors have unique needs which arederived from their risk appetite and financial goals. But regardless of this, every

investor seeks to maximize his returns on investments without capital erosion.

Portfolio Management Services (PMS) recognize this, and manage the investments

professionally to achieve specific investment objectives, and not to forget, relievingthe investors from the day to day hassles which investment require.

It is offers professional management of equity investment of the investor with an aimto deliver consistent return with an eye on risk.

Identify the key Stock in each portfolio. To look out for new prospective customers who are willing to invest in PMS. To find out the Share khan, PMS services effectiveness in the current situation. It also covers the scenario of the Investment Philosophy of a Fund Manager.

RESEARCH DESISGN OF THE STUDYThis report is based on primary as well secondary data, however primary

data collection was given more importance since it is overhearing factor in attitude studies.

One of the most important users of research methodology is that it helps in identifying the

problem, collecting, analyzing the required information data and providing an alternative

solution to the problem .It also helps in collecting the vital information that is required by the

top management to assist them for the better decision making both day to day decision and

critical ones.

The study consists of analysis about Investors Perception about the Portfolio Management

Services offered by Share khan Limited. For the purpose of the study 30 customers werepicked up at random and their views solicited on different parameters.


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The methodology adopted includes

Questionnaire Random sample survey of customers Discussions with the concerned

SOURCES OF DATA

Primary data: Questionnaire

Secondary data: Published materials of Share khan Limited. Such as periodicals,journals, news papers, and website.

Duration of Study

The Study was carried out for the period of one and half months from 20 th June to 30th of July

2011.

SAMPLING PLAN Sampling:

Since Share khan Limited has many segments I selected Portfolio Management Services

(PMS) segment as per my profile to do market research. 100% coverage was difficult within

the limited period of time. Hence sampling survey method was adopted for the purpose of the

study.

Population:(Universe) customers & non consumers of Share khan limited


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Sampling size:

A sample of hundred was chosen for the purpose of the study. Sample consisted of Investoras based on their Income and Profession as well as Educational Background.

Sampling Methods:Probability sampling requires complete knowledge about all sampling units in the universe.

Due to time constraint non-probability sampling was chosen for the study.

Sampling procedure:From large number of customers & non consumers sample lot were randomly picked up by

me.

Field Study:

Directly approached respondents by the following strategies

Tele-calling Personal Visits Clients References Promotional Activities Database provided by the Share khan Limited.


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CHAPTER-4

PORTFOLIOMANAGEMENT

SERVICES


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PORTFOLIO MANAGEMENT SERVICES

Portfolio (finance) means a collection of investments held by an

institution or a private individual. Holding a portfolio is often part of an investment and risk-

limiting strategy called diversification. By owning several assets, certain types of risk (in

particular specific risk) can be reduced. There are also portfolios which are aimed at taking

high risksthese are called concentrated portfolios.

Investment management is the professional management of various

securities (shares, bonds etc) and other assets (e.g. real estate), to meet specified investment

goals for the benefit of the investors. Investors may be institutions (insurance companies,

pension funds, corporations etc.) or private investors (both directly via investment contracts

and more commonly via collective investment schemes e.g. mutual funds).

The term asset management is often used to refer to the investment

management of collective investments, whilst the more generic fund management may refer

to all forms of institutional investment as well as investment management for private

investors. Investment managers who specialize in advisory or discretionary management on

behalf of (normally wealthy) private investors may often refer to their services as wealth

management or portfolio management often within the context of so-called "private banking".

The provision of 'investment management services' includes

elements of financial analysis, asset selection, stock selection, plan implementation and

ongoing monitoring of investments. Outside of the financial industry, the term "investmentmanagement" is often applied to investments other than financial instruments. Investments

are often meant to include projects, brands, patents and many things other than stocks and

bonds. Even in this case, the term implies that rigorous financial and economic analysis

methods are used.


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Need of PMS

As in the current scenario the effectiveness of PMS is required. As the

PMS gives investors periodically review their asset allocation across different assets as the

portfolio can get skewed over a period of time. This can be largely due to appreciation /

depreciation in the value of the investments.

As the financial goals are diverse, the investment choices also need to be different

to meet those needs. No single investment is likely to meet all the needs, so one should keepsome money in bank deposits and / liquid funds to meet any urgent need for cash and keep

the balance in other investment products/ schemes that would maximize the return and

minimize the risk. Investment allocation can also change depending on ones risk-return

profile.


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Objective of PMS

There are the following objective which is full filled by Portfolio Management Services.

1. Safety Of Fund: -The investment should be preserved, not be lost, and should remain in the returnable

position in cash or kind.

2. Marketability: -The investment made in securities should be marketable that means, the securities

must be listed and traded in stock exchange so as to avoid difficulty in their

encashment.

3. Liquidity: -The portfolio must consist of such securities,which could be en-cashed without any

difficulty or involvementof time to meet urgent need for funds. Marketability ensures

liquidity to the portfolio.

4. Reasonable return: -The investment should earn a reasonable return to upkeep the declining value of

money and be compatible with opportunity cost of the money in terms of current

income in theform of interest or dividend.

5. Appreciation in Capital: -

The money invested in portfolio should grow andresult into capital gains.

6. Tax planning: -

Efficient portfolio management is concerned with composite tax planning covering

income tax, capital gain tax,wealth tax and gift tax.

7. Minimize risk: -

Risk avoidance and minimization of risk are important objective of portfolio

management. Portfolio managers achieve these objectives by effective investment


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planning and periodical review of market, situation and economic environment

affecting the financial market.

PORTFOLIO CONSTRUCTION

The Portfolio Construction of Rational investors wish to maximize the returns

on their funds for a given level of risk. All investments possess varying degrees of risk.

Returns come in the form of income, such as interest or dividends, or through growth in

capital values (i.e. capital gains).

The portfolio construction process can be broadly characterized as comprising the following

steps:

1. Setting objectives.

The first step in building a portfolio is to determine the main objectives of the

fund given the constraints (i.e. tax and liquidity requirements) that may apply. Each investor

has different objectives, time horizons and attitude towards risk. Pension funds have long-

term obligations and, as a result, invest for the long term. Their objective may be to maximize

total returns in excess of the inflation rate. A charity might wish to generate the highest level

of income whilst maintaining the value of its capital received from bequests. An individual

may have certain liabilities and wish to match them at a future date. Assessing a clients risk

tolerance can be difficult. The concepts of efficient portfolios and diversification must also be

considered when setting up the investment objectives.

2. Defining Policy.

Once the objectives have been set, a suitable investment policy must be

established. The standard procedure is for the money manager to ask clients to select their

preferred mix of assets, for example equities and bonds, to provide an idea of the normal mix

desired. Clients are then asked to specify limits or maximum and minimum amounts they willallow to be invested in the different assets available. The main asset classes are cash, equities,


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gilts/bonds and other debt instruments, derivatives, property and overseas assets. Alternative

investments, such as private equity, are also growing in popularity, and will be discussed in a

later chapter. Attaining the optimal asset mix over time is one of the key factors of successful

investing.

3. Applying portfolio strategy.

At either end of the portfolio management spectrum of strategies are active

and passive strategies. An active strategy involves predicting trends and changing

expectations about the likely future performance of the various asset classes and actively

dealing in and out of investments to seek a better performance. For example, if the manager

expects interest rates to rise, bond prices are likely to fall and so bonds should be sold, unless

this expectation is already

factored into bond prices. At this stage, the active fund manager should also determine the

style of the portfolio. For example, will the fund invest primarily in companies with large

market capitalizations, in shares of companies expected to generate high growth rates, or in

companies whose valuations are low? A passive strategy usually involves buying securities to

match a preselected market index. Alternatively, a portfolio can be set up to match the

investors choice of tailor-made index. Passive strategies rely on diversification to reduce

risk. Outperformance versus the chosen index is not expected. This strategy requires

minimum input from the portfolio manager. In practice, many active funds are managed

somewhere between the active and passive extremes, the core holdings of the fund being

passively managed and the balance being actively managed .

4. Asset selections.

Once the strategy is decided, the fund manager must select individual

assets in which to invest. Usually a systematic procedure known as an investment process is

established, which sets guidelines or criteria for asset selection. Active strategies require that


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the fund managers apply analytical skills and judgment for asset selection in order to identify

undervalued assets and to try to generate superior performance.

5. Performance assessments.

In order to assess the success of the fund manager, the performance of

the fund is periodically measured against a pre-agreed benchmarkperhaps a suitable stock

exchange index or against a group of similar portfolios (peer group comparison). The

portfolio construction process is continuously iterative, reflecting changes internally and

externally. For example, expected movements in exchange rates may make overseas

investment more attractive, leading to changes in asset allocation. Or, if many large-scale

investors simultaneously decide to switch from passive to more active strategies, pressure

will be put on the fund managers to offer more active funds. Poor performance of a fund may

lead to modifications in individual asset holdings or, as an extreme measure; the manager of

the fund may be changed altogether.


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Steps to Stock Selection Process

\

Types of assets

The structure of a portfolio will depend ultimately on the investors objectives

and on the asset selection decision reached. The portfolio structure takes into account a range

of factors, including the investors time horizon, attitude to risk, liquidity requirements, tax

position and availability of investments. The main asset classes are cash, bonds and other

fixed income securities, equities, derivatives, property and overseas assets.


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Cash and cash instrumentsCash can be invested over any desired period, to generate interest income,

in a range of highly liquid or easily redeemable instruments, from simple bank deposits,

negotiable certificates of deposits, commercial paper (short term corporate debt) and Treasury

bills (short term government debt) to money market funds, which actively manage cash

resources across a range of domestic and foreign markets. Cash is normally held over the

short term pending use elsewhere (perhaps for paying claims by a non-life insurance

company or for paying pensions), but may be held over the longer term as well. Returns on

cash are driven by the general demand for funds in an economy, interest rates, and the

expected rate of inflation. A portfolio will normally maintain at least a small proportion of its

funds in cash in order to take advantage of buying opportunities.

BondsBonds are debt instruments on which the issuer (the borrower) agrees to

make interest payments at periodic intervals over the life of the bond this can be for two to

thirty years or, sometimes, in perpetuity. Interest payments can be fixed or variable, the latter

being linked to prevailing levels of interest rates. Bond markets are international and have

grown rapidly over recent years. The bond markets are highly liquid, with many issuers of

similar standing, including governments (sovereigns) and state-guaranteed organizations.

Corporate bonds are bonds that are issued by companies. To assist investors and to help in the

efficient pricing of bond issues, many bond issues are given ratings by specialist agencies

such as Standard & Poors and Moodys. The highest investment grade is AAA, going all the

way down to D, which is graded as in default. Depending on expected movements in future

interest rates, the capital values of bonds fluctuate daily, providing investors with the

potential for capital gains or losses. Future interest rates are driven by the likely demand/

supply of money in an economy, future inflation rates, political events and interest rates

elsewhere in world markets. Investors with short-term horizons and liquidity requirements

may choose to invest in bonds because of their relatively higher return than cash and their

prospects for possible capital appreciation. Long-term investors, such as pension funds, may

acquire bonds for the higher income and may hold them until redemptionfor perhaps seven


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or fifteen years. Because of the greater risk, long bonds (over ten years to maturity) tend to be

more volatile in price than medium- and short-term bonds, and have a higher yield.

EquitiesEquity consists of shares in a company representing the capital originally

provided by shareholders. An ordinary shareholder owns a proportional share of the company

and an ordinary share carries the residual risk and rewards after all liabilities and costs have

been paid. Ordinary shares carry the right to receive income in the form of dividends (once

declared out of distributable profits) and any residual claim on the companys assets once its

liabilities have been paid in full. Preference shares are another type of share capital. They

differ from ordinary shares in that the dividend on a preference share is usually fixed at some

amount and does not change. Also, preference shares usually do not carry voting rights and,

in the event of firm failure, preference shareholders are paid before ordinary shareholders.

Returns from investing in equities are generated in the form of dividend income and capital

gain arising from the ultimate sale of the shares. The level of dividends may vary from year

to year, reflecting the changing profitability of a company. Similarly, the market price of a

share will change from day to day to reflect all relevant available information. Although not

guaranteed, equity prices generally rise over time, reflecting general economic growth, and

have been found over the long term to generate growing levels of income in excess of the rate

of inflation. Granted, there may be periods of time, even years, when equity prices trend

downwardsusually during recessionary times. The overall long-term prospect, however, for

capital appreciation makes equities an attractive investment proposition for major

institutional investors.

DerivativesDerivative instruments are financial assets that are derived from existing

primary assets as opposed to being issued by a company or government entity. The two most

popular derivatives are futures and options. The extent to which a fund may incorporate


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derivatives products in the fund will be specified in the fund rules and, depending on the type

of fund established for the client and depending on the client, may not be allowable at all.

A futures contract is an agreement in the form of a standardized contract

between two counterparties to exchange an asset at a fixed price and date in the future. The

underlying asset of the futures contract can be a commodity or a financial security. Each

contract specifies the type and amount of the asset to be exchanged, and where it is to be

delivered (usually one of a few approved locations for that particular asset). Futures contracts

can be set up for the delivery of cocoa, steel, oil or coffee. Likewise, financial futures

contracts can specify the delivery of foreign currency or a range of government bonds. The

buyer of a futures contract takes a long position, and will make a profit if the value of the

contract rises after the purchase. The seller of the futures contract takes a short position and

will, in turn, make a profit if the price of the futures contract falls. When the futures contract

expires, the seller of the contract is required to deliver the underlying asset to the buyer of the

contract. Regarding financial futures contracts, however, in the vast majority of cases no

physical delivery of the underlying asset takes place as many contracts are cash settled or

closed out with the offsetting position before the expiry date.

An option contractis an agreement that gives the owner the right, but not

obligation, to buy or sell (depending on the type of option) a certain asset for a specified

period of time. A call option gives the holder the right to buy the asset. A put option gives the

holder the right to sell the asset. European options can be exercised only on the options

expiry date. US options can be exercised at any time before the contracts maturity date.

Option contracts on stocks or stock indices are particularly popular. Buying an option

involves paying a premium; selling an option involves receiving the premium. Options have

the potential for large gains or losses, and are considered to be high-risk instruments.

Sometimes, however, option contracts are used to reduce risk. For example, fund managers

can use a call option to reduce risk when they own an asset. Only very specific funds are

allowed to hold options.


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PropertyProperty investment can be made either directly by buying properties, or

indirectly by buying shares in listed property companies. Only major institutional investors

with long-term time horizons and no liquidity pressures tend to make direct property

investments. These institutions purchase freehold and leasehold properties as part of a

property portfolio held for the long term, perhaps twenty or more years. Property sectors of

interest would include prime, quality, well-located commercial office and shop properties,

modern industrial warehouses and estates, hotels, farmland and woodland. Returns are

generated from annual rents and any capital gains on realization. These investments are often

highly illiquid.

Risk and Risk AversionPortfolio theory also assumes that investors are basically risk adverse,

meaning that, given a choice between two assets with equal rates of return they will select the

asset with lower level of risk.

For example, they purchased various type of insurance including life insurance, Health

insurance and car insurance. The Combination of risk preference and risk aversion can be

explained by an attitude toward risk that depends on the amount of money involved.

A discussion of portfolio or fund management must include some thought given to the

concept of risk. Any portfolio that is being developed will have certain risk constraints

specified in the fund rules, very often to cater to a particular segment of investor who

possesses a particular level of risk appetite. It is, therefore, important to spend some time

discussing the basic theories of quantifying the level of risk in an investment, and to attempt

to explain the way in which market values of investments are determined


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Definition of RiskAlthough there is a difference in the specific definitions of risk and

uncertainty, for our purpose and in most financial literature the two terms are used

interchangeably. In fact, oneway to define risk is the uncertainty of future outcomes. An

alternative definition might be the probability of an adverse outcome.

Composite risks involve the different risk as explained below:-

1. Interest rate risk: -

It occurs due to variability cause in return by changes in level of interest rate.

In long runs all interest rate move up or downwards. These changes affect the value of

security. RBI, in India, is the monitoring authority which effectalises the change in interest

rate. Any upward revision in interest rate affects fixed income security, which carry old lower

rate of interest and thus declining market value. Thus it establishes an inverse relationship in

the prize of security.

TYPES RISK EXTENT

Cash equivalent Less vulnerable to interest rate risk

Long term Bond More vulnerable to interest rate

risk.

2. Purchasing power risk:

It is known as inflation risk also. This risk emanates from the very fact

that inflation affects the purchasing power adversely. Purchasing power risk is more in

inflationary times in bonds and fixed income securities. It is desirable to invest in such

securities during deflationary period or a period of decelerating inflation. Purchasing power

risk is less in flexible income securities like equity shares or common stuffs where rise in


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dividend income offset increase in the rate of inflation and provide advantage of capital

gains.

3. Business risk:

Business risk emanates from sale and purchase of securities affected by

business cycles, technological change etc. Business cycle affects all the type of securities viz.

there is cheerful movement in boom due to bullish trend in stock prizes where as bearish

trend in depression brings downfall in the prizes of all types of securities. Flexible income

securities are nearly affected than fix rate securities during depression due to decline n the

market prize.

4. Financial risk:

Financial risk emanates from the changes in the capital structure of the

company. It is also known as leveraged risk and expressed in term of debt equity ratio.

Excess of debts against equity in the capital structure indicates the company to be highly

geared or highly levered. Although leveraged companys earnings per share (EPS) are more

but dependence on borrowing exposes it to the risk of winding up. For, its inability to the

honor its commitments towards the creditors are most important.

Here it is imperative to express the relationship between risk and return, which is depicted

graphically below


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Maximize returns, Minimize risks

RISK VERSUS RETURN

Risk versus return is the reason why investors invest in portfolios. The ideal

goal in portfolio management is to create an optimal portfolio derived from the best riskreturn opportunities available given a particular set of risk constraints. To be able to make

decisions, it must be possible to quantify the degree of risk in a particular opportunity. The

most common method is to use the standard deviation of the expected returns. This method

measures spreads, and it is the possible returns of these spreads that provide the measure of

risk. The presence of risk means that more than one outcome is possible. An investment is

expected to produce different returns depending on the set of circumstances that prevail.


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For example, given the following for Investment A:

Circumstance Return(x) Probability(p)

I 10% 0.2

II 12% 0.3

III 15% 0.4

IV 19% 0.1

It is possible to calculate:

1. The expected (or average) returnMean (average) = x = expected value (EV) = px

Circumstance Return(x) Probability(p) px

I 10% 0.2 2.0

II 12% 0.3 3.6

III 15% 0.4 6.0

IV 19% 0.1 1.9

Expected Return (px) = 13.5%

2. The Standard deviationStandard deviation == p(x- x) 2

Also. Variance (VAR) is equal to the standard deviation squared or 2


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Circumstance Return Probability

Deviation from

expected Return (x -

p (x -x)2

I 10% 0.2 -3.5% 2.45

II 12% 0.3 -1.5% .68

III 15% 0.4 +1.5% 1.90

IV 19% 0.1 +5.5% 3.03

VARAIANCE= 7.06

Standard deviation () =Variance

= 7.06

= 2.66%

The standard deviation is a measure of risk, whereby the greater the standard deviation, the

greater the spread, and the greater the spread, the greater the risk.

If the above exercise were to be performed using another investment that offered the same

expected return, but a different standard deviation, then the following result might occur:

If the above exercise were to be performed using another investment that offered the same

expected return, but a different standard deviation, then the following result might occur:

Plan Expected Return Risk(standard deviation)Investment A 9% 2.5%

Investment B 9% 4.0%

Since both investments have the same expected return, the best selection of investment would

be Investment A, which provides the lower risk. Similarly, if there are two investments

presenting the same risk, but one has a higher return than the other, that investment would be

chosen over the investment with the lower return for the same risk.


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In the real world, there are all types of investors. Some investors are completely risk averse

and others are willing to take some risk, but expect a higher return for that risk. Different

investors will also have different tolerances or threshold levels for riskreturn trade-offsi.e.

for a given level of risk, one investor may demand a higher rate of return than another

investor.

INDIFFERNCE CURVE

Suppose the following situation exists

Plan Expected Return Risk(Standard Deviation)

Investment A 10% 5%

Investment B 20% 10%

The question to ask here is, does the extra 10% return compensate for the extra risk? There is

no right answer, as the decision would depend on the particular investors attitude to risk. A

particular investors indifference curve can be ascertained by plotting what rate of return the

investor would require for each level of risk to be indifferent amongst all of the investments.

For example, there may be an investor who can obtain a return of 50% with zero risk and a

return of 55 %with a risk or standard deviation of 5% who will be indifferent between the

two investments. If further investments were considered, each with a higher degree of risk,

the investor would require still higher returns to make all of the investments equally

attractive. The investor being discussed could present the following as the indifference curve

shown in Figure.


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Indifference Curve

Expected Return Risk

50% 0%

55% 5%

70% 10%

100% 15%

120% 18%

230% 25%

Utility scores

At this stage the concept of utility scores can be introduced. These can be seen as a way of

ranking competing portfolios based on the expected return and risk of those portfolios. Thus

if a fund manager had to determine which investment a particular investor would prefer, i.e.

Investment A equaling a return of 10% for a risk of 5% or Investment B equaling a return of

20% for a risk of 10%, the manager would create indifference curves for that particular

investor and look at the utility scores. Higher utility scores are assigned to portfolios or

investments with more attractive riskreturn profiles. Although several scoring systems are

legitimate, one function that is commonly employed assigns a portfolio or investment with

expected return or value EV and variance of returns 2the following utility value:

U = EV.005A2 where:

U = utility value

A = an index of the investors aversion, (the factor of .005 is a scaling convention that allows

expression of the expected return and standard deviation in the equation as a percentage

rather than a decimal).

Utility is enhanced by high expected returns and diminished by high risk. Investors choosing

amongst competing investment portfolios will select the one providing the highest utility

value. Thus, in the example above, the investor will select the investment (portfolio) with the

higher utility value of 18.


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Expected Return(EV) Standard deviation() Utility=EV-.005A2

10% 5% 10

20% 10% 20

(Assume A= 4 in this case)

Portfolio Diversification

There are several different factors that cause risk or lead to variability in returns

on an individual investment. Factors that may influence risk in any given investment vehicle

include uncertainty of income, interest rates, inflation, exchange rates, tax rates, the state of

the economy, default risk and liquidity risk (the risk of not being able to sell on the

investment). In addition, an investor will assess the risk of a given investment (portfolio)

within the context of other types of investments that may already be owned, i.e. stakes in

pension funds, life insurance policies with savings components, and property.

One way to control portfolio risk is via diversification, whereby investments are made in a

wide variety of assets so that the exposure to the risk of any particular security is limited.

This concept is based on the old adage do notput all your eggs in one basket. If an investor

owns shares in only one company, that investment will fluctuate depending on the factors

influencing that company. If that company goes bankrupt, the investor might lose 100 per

cent of the investment. If, however, the investor owns shares in several companies in

different sectors, then the likelihood of all of those companies going bankrupt simultaneously


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is greatly diminished. Thus, diversification reduces risk. Although bankruptcy risk has been

considered here, the same principle applies to other forms of risk.

TECHNIQUES OF PORTFOLIO MANAGEMENT

Various types of portfolio require different techniques to be adopted to achieve the

desired objectives. Some of the techniques followed in India by portfolio managers are

summarized below.

1. Equity portfolio-

Equity portfolio is affected by internal and external factors:

(a) Internal factors

Pertain to the inner working of the particular company of which equity shares are held. These

factors generally include:

(1) Market value of shares

(2) Book value of shares

(3) Price earnings ratio (P/E ratio)

(4) Dividend payout ratio

(b) External factors

(1) Government policies

(2) Norms prescribed by institutions

(3) Business environment

(4) Trade cycles


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2. Equity stock analysis

The basic objective behind the analysis is to determine the probable future

value of the shares of the concerned company. It is carried out primarily fewer than two

ways. :

(a) Earnings per share

(b) Price earnings ratio

(A)Trend of earning: - A higher price-earnings ratio discount expected profit growth. Conversely, a

downward trend in earning results in a low price-earnings ratio to discount

anticipated decrease in profits, price and dividend. Rising EPS causes appreciation in

price of shares, which benefits investors in lower tax brackets? Such investors have

not pay tax or to give lower rate tax on capital gains.

Many institutional investor like stability and growth and support high EPS.

Growth of EPS is diluted when a company finances internally its expansion programand offers new stock.

EPS increase rapidly and result in higher P/E ratio when a company finances itsexpansion program from internal sources and borrowings without offering new stock.

(B) Quality of reported earning: -

Quality of reported earnings affects P/E ratio. The factors that affect the quality of reported

earnings are as under:


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Depreciation allowances: -Larger (Non Cash) deduction for depreciation provides more funds to company to

finance profitable expansion schemes internally. This builds up future earning power

of company.

Research and development outlets: -There is higher P/E ratio for a company, which carries R&D programs. R&D

enhances profit earning strength of the company through increased future sales.

Inventory and other non-recurring type of profit: -Low cost inventory may be sold at higher price due to inflationary conditions among

profit but such profit may not always occur and hence low P/E ratio.

(C) Dividend policy: -

Dividend policy is significant in affecting P/E ratio. With higher dividend ratio, equity price

goes up and thus raises P/E ratio. Dividend rates are raised to push in share prices up.

Dividend cover is calculated to find out the time the dividend is protected, In terms of

earnings. It is calculated as under:

Dividend Cover = EPS / Dividend per Share

(D) Investors demand: -

Demand from institutional investors for equity also enhances the P/E ratio.

(3) Quality of management: -

Investors decide about the ability and caliber of management and hold and

dispose of equity academy. P/E ratio is more where a company is managed by reputed

entrepreneurs with good past records of management performance.


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Types of Portfolios

The different types of Portfolio which is carried by any Fund Manager to maximize profit and

minimize losses are different as per their objectives .They are as follows.

Aggressive Portfolio:

Objective: Growth. This strategy might be appropriate for investors who seek High growth

and who can tolerate wide fluctuations in market values, over the short term.

Growth Portfolio:Objective: Growth. This strategy might be appropriate for investors who have a preference

for growth and who can withstand significant fluctuations in market value.


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Balanced Portfolio:

Objective: Capital appreciation and income. This strategy might be appropriate for investors

who want the potential for capital appreciation and some growth, and who can withstand

moderate fluctuations in market values.

Conservative Portfolio:

Objective: Income and capital appreciation. This strategy may be appropriate for investorswho want to preserve their capital and minimize fluctuations in market value.


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Share khan Portfolio Management Services

Pro Prime :- Product Approach

Investment will be keeping in mind 3 investment tenets.

1. Consistent, steady and sustainable returns.2. Margin of Safety3. Low Volatility

PRO TECH DIVERSIFIED PRO TECHPRO PRIME

PMS


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Product offeringPro Prime is the ideal for investors looking at steady and superior with low and

medium risk appetite.

The portfolio consists of a blend of quality blue chip and growth stocks ensuring a balanced

portfolio with relatively medium risk profile.

The portfolio constitutes of relatively large capitalization stocks, based on sector and themes

which have medium to long term growth potential.

Product Characteristics

Bottom up stock selection In depth ,independent fundamental research High quality companies with relatively large capitalization Disciplined valuation approach applying multiple valuation measure. Medium to long term vision, resulting in low portfolio turnover.

How to invest?

Minimum Investment : 10 Laces Lock in : 6 months Reporting: Access to website showing clients holding .Monthly reporting of portfolio

holding /transaction.

Charges: 2.5% pa AMC (Annual Maintenances Charges) fees charged every quarter,0.5% brokerage ,20% profit sharing after 15% hurdle is crossed chargeable at the

end of fiscal year.


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Pro techDiversified :-o Product Approach

An opportunity lies in basis which is the difference between cash and future.

Whenever basis is high we buy the stocks and sell the future to lock in difference .The

difference is bound to be zero at expiry.

Product Offered Cashfuture arbitrage:

The product intends to spot low risk opportunities which will yield more

than the normal low risk product .Whenever such opportunity is spotted stocks will be boughtand to lock in the basis, future will be sold .This position will be liquated in the expiry or

before that if the basis vanishes early .Similarly the scheme will move on from opportunity to

opportunity.

Product Characteristicso moderate Risk: This is relatively low risk product which can be compared with

liquid funds issued by mutual funds.

o High return: Compared with other low risk products, this products offers anindicative post tax return of 8 to 10% plus.

Product Details Minimum Investment:Rs.1 Crore Lock in :6 months Reporting: Fortnightly for portfolio Net worth, Monthly reporting pf portfolio

Holding /transaction.

Charges: 0.035% brokerage for future ,0.07% for delivery


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Pro Tech :-Pro tech using the knowledge of technique analysis and the power of depravities

markets to identify trading opportunities in the market .The protech line of the product is

designed around various risk/reward /volatility profiles for the different kind of investment

needs.

Product ApproachBetter performance is possible from superior market timing and from picking stocks before

inflation points in their trading cycles .Linear return are possible from having hedged/ sell

market positions in downtrends .Absolute return are targeted by focusing on finding trading

opportunities & not out performance of an index.

Product offered1. Nifty Thirty :

Nifty futures will be bought and sold on the basis of an automated

trading system generated calls to go long/short. The exposure will never exceed the

value of portfolio i.e. no leveraging; but allows us to be short /hedged in Nifty in

falling market therefore allowing the client to earn irrespective of the market

direction.

2. Beta Portfolio :Positional trading opportunities are identified in the future segment

based on technical analysis .Inflection points in the momentum cycles are identified to

go long /short on stock/index futures with 1-2 months time horizon .The idea is to


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Reporting: Fortnightly reporting of portfolio Net Worth, monthly reporting ofportfolio Holding/Transaction.

Charges: 0% AMC (Annual Maintenance Charges), 0.05% brokerage forderivatives, 20% profit sharing on booked profit quarterly basis

Protech Performance Report


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Nifty Thrifty:

How it works:

Our first product is based completely on a mathematical model with zero human intervention.

This product has come out of its fifth draw-down period (in 28 years of back testing) and the

net asset value (NAV) is taking off to new heights.

Beta portfolio:

BETA PORTFOLIO

Date NAV Sensex

03/08/2007 10.00 15138.40

29/04/2009 13.81 11403.25

Returns (%) 38.10 -24.67

How it works:

Our product is based on positional trading with a long and short model investing in plain

vanilla stock futures. In this, we identify stocks with greater risk-reward ratios with a time

horizon of 1 to 2 months, based on the prevalent market situation.

Trailing Stops:

TRAILING STOPS

NAV Sensex

20/10/2007 10.00 17559.98

24/04/2009 15.32 9708.50

Returns (%) 43.50 -35.06

NIFTY THRIFTY

Date NAV Sensex

01/02/2006 10.00 9859.26

29/04/2009 19.43 11403.25

Returns (%) 94.30 15.66


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How it works:

The trading strategy is to buy short-term momentum over a time frame of 1 to 5 days and

then book small profits consistently.


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CHAPTER -5

DATA ANALYSIS AND

INTERPRETATION


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1. Do you know about the Investment Option available?

InterpretationAs the above table shows the knowledge of Investor out of 100 respondent

carried throughout the Agra Area is only 85%. The remaining 15% take his/her residential

property as an investment. According to law purpose this is not an investment because of it is

not create any profit for the owner. The main problem is that the recession and the Inflation

make the investor think before investing a even a Rs. 100. So, it also create the problem for

the Investor to not take interest in Investment option.

YES

85%

NO

15%


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2. What is the basic purpose of your Investments?

Interpretation

As with the above analysis, it is found 75% people are interested in liquidity,

returns and tax benefits. And remaining 25% are interested in capital appreciations, risk

covering, and others. In the entire respondent it is common that this time everyone is looking

for minimizing the risk and maximizing their profit with the short time of period.

As explaining them About the Portfolio Management Services of Share khan, they

were quite interested in Protech Services.

0%10%

20%30%

Liqidity

Return

Capital Appreciation

Tax Benefits

Risk Covering

Others

%AGE


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3. What is the most important factor you consider at the time of Investment?

InterpretationAs the above analysis gives the clear idea that most of the Investors considered the

market factor as around 12% for Risk and 23% Return, but most important common things in

all are that they are even ready for taking both Risk and Return in around 65% investor.

Moreover, the Market is fluctuating now days, so as it also getting improvement. So, Investor

are looking for Investment in long term and Short-term.

0%

20%

40%

60%

80%

Risk

Return

Both

12% 23%

65%

%AGE


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4. From which option you will get the best returns?

InterpretationMost of the respondents say they will get more returns in Share Market.

Since Share Market is said to be the best place to invest to get more returns. The risk in the

investment is also high.

Similarly, the Investor are more Interested in Investing their money in

Mutual Fund Schemes as that is also very important financial product due to its nature of

minimizing risk and maximizing the profit. As the commodities market is doing well from

last few months so Investor also prefer to invest their money in Commodities Market

basically in GOLD nowadays.

Moreover, even who dont want to take Risk they are looking for investing in Fixed Deposit

for long period of time.

Mutual Funds

Shares

Commodities Market

Fixed Deposits

Bonds

Property

Others

20%

22%

16%

18%

8%

14%

2%

PERCENATGE OF RESPODENTS


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5. Investing in PMS is far safer than Investing in Mutual Fund. Do you agree?

InterpretationIn the above graphs its clear that 24% of respondent out of hundred feel

that in

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