SIP Final Report Deep Modi

DEEP MODIMOTILAL OSWAL SECURITIES LTD

Summer Internship Final Report

A REPORTON

'ROLE OF EQUITY IN WEALTH CREATION

& FRANCHISEE BUSINESS

DEVELOPMENT'

MOTILAL OSWAL SECURITIES LTD 1


A REPORTON

' ROLE OF EQUITY IN WEALTH CREATION

& FRANCHISEE BUSINESS

DEVELOPMENT''

By:

DEEP MODI15BSP0352

A Report submitted in partial fulfillment of the requirements of

PGPM Program of

IBS Mumbai.

Submitted To:

Prof. Dr Suresh Suralkar Mr. Amar Vora (Faculty Guide-IBS Mumbai) (Company Guide MOSL)



ACKNOWLEDGEMENT

Working on this project was a source of immense knowledge to me. I would like to express my sincere gratitude to my company guide Mr. Amar Vora who inspired me to work well on the topic and seeing to it that my performance is up to the mark. And during the course of this work, the constant association with employees of advisory department of the company has been most pleasurable. I appreciate the support that they have provided to me. And as greatly said Milestones achieved in the journey of life are never achieved alone, I would like to thank my SIP Faculty Guide Dr. Suresh Suralkar, for his support and professional approach in guiding me through the careful details of project.

On a personal note I would also like to thank Mr. Vikas Lodha and Mr. Chetan Shah for providing me knowledge and support during my SIP.

All the above mentioned people have left a mark on this project and I will always remain indebted to them.



TABLE OF CONTENTS

Acknowledgment…………………………………………………………………………………3

Abstract…………………………………………………………………………………………...5

About the Company………………………………………………………………………………6

About the project in Brief………………………………………………………………………9

About the project in Detail……………………………………………………………………..10

Wealth Creation Through Equity

A. Portfolio Management Services...................................................................12

B. Mutual Funds………………………………………………………………17

C. Comparison of PMS & MF………………………………………………..23

Work done at Motilal Oswal

A. Algorithmic Trading……………………………………………………….26

B. Account Opening Contest………………………………………………….27

C. Investment Ideas & Portfolio Restructuring..............................................27

D. Business Portal……………………………………………………………..29

Learnings at Motilal Oswal

A. Understanding the market………………………………………………...30

B. Making Own Portfolios……………………………………………………41

C. Industry Analysis…………………………………………………………..44

Conclusion……………………………………………………………………………………….46

Bibliography……………………………………………………………………………………..47



ABSTRACT

Building wealth is a topic that sparks heated debate, promotes quirky "get rich quick" schemes and drives people to pursue transactions they might otherwise never consider. It is hard to convince an individual to invest their money for long which will give them higher returns in future.

Motilal Oswal as a financial company provides various products which creates wealth for the investors and follows the rule:

“Instead you working for Money,

Let the Money work for you”

Every Investor needs a fundamentals base which can help people rely on and have the faith and trust to invest. That is the way this project is worked upon as to the different ways an investor or trader can create wealth by various instrument available with the company whose motto is:

“Solid Research, Solid Advice”

The project is also about in how various products and services are made for trader and investors as per their need and wants. The Advisors keeps on informing about the benefits and the ways it will increase the business volume of the franchisee.



ABOUT THE COMPANY

Introduction:

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance. Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock broking company and has blossomed into well diversified firm offering a range of financial products and services.It has a diversified client base that includes retail customers (including High Net worth Individuals), mutual funds, foreign institutional investors, financial institutions and corporate clients. The core purpose is to be well respected and preferred global financial services organization enabling wealth creation for all



customers. Research is the solid foundation on which Motilal Oswal Securities, advice is based on.

They give utmost importance to research and use cutting-edge technology to disseminate it to our customers. The research has received wide media coverage and consistently won awards, showcasing their strong research capabilities. This includes being awarded 'Best Performing National Financial Advisor - Equity Broker' for four years in a row at the UTI-CNBC TV18 Financial Advisor Awards. As a retail broking customer anyone can trade in Equity, Derivatives, Commodities, Currencies, Mutual Funds, IPOs, Bonds, and Insurance through them.

Products and Services in Wealth Creation:

Products:

Equity Derivatives Commodities Currency Market Mutual Funds Portfolio Management Service (PMS) Insurance IPO

Services:

Wealth Management

Retail Broking and Distribution

Institutional Broking



Asset Management

Private Equity

Investment Banking

Commodity Broking

Home Finance

Core business:

Motilal Oswal is the leader in many of its services and products. The research papers prepared by the analyst are wanted in the market by many other companies.

Below is the pie chart which explains the revenue from each service:

These services are divided into the department and accordingly the services are provided to the investor/trader and management looks after the whole department.



PROJECT IN BRIF

Wealth Creation through Equity

A)Investment in PMS (PORTFOLIO MANAGEMENT SREVICES).

a) Value Strategy

b) NTDOP (Next Trillion Dollar Opportunity)

c) India Opportunity Portfolio strategy

B) Investment in Mutual fund.

a) SIP (Systematic Investment Plan)

b) Lump sum Investment

C) Comparison of PMS and Mutual Fund

Work done at Motilal Oswal

A) Algorithmic Trading with TGS (Trade Guide Signal):

B) Account Opening Contest

C) Investment Ideas and Portfolio Restructuring

D) Business Portal

Learnings at Motilal Oswal

A) Understanding the Market

B) Making Own Portfolios

C) Industry Analysis



PROJECT IN DETAILS

Wealth Creation through Equity:

It is statistically proven that long term investments in equities (stocks) can outperform any other conventional form of investments or asset classes such as real estate, gold or bank/post office deposits.

However, a lot of people hesitate to invest in the stock markets due to a number of reasons including risk of losing the capital, volatility in the stock market, confusion between speculative trading v/s investment, and the uncertainty around the companies that they invest in or sheer lack of knowledge to pick the right stocks.

Investing in Mutual funds is probably the easiest and safest route to enter the stock market rather than going for direct stock investment. However, the return on investment can be much higher if you go for direct equities as long as you pick the right stocks and companies to invest in.



Wealth Creation Report

Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services discloses the best ways to create wealth.

In stock market there are millions guys, there are millions ways of making money and you have to find your way. It takes lot of time for you to start from nothing and then slowly start getting what is wrong, what doesn’t work for you and what works for you. It is very expensive process, time consuming as well as expensive. Every time you commit mistake you realize that-that was not the way to do it. So now after, like I bought my first stock in 1980 and this is 35 years, this study is only 19 years old but for 35 years I have been buying stocks and thinking about them.

After 35 years of investing I think, for last one – one and half years – two years we are saying that our investment style is QGLP – Quality Growth Longevity at reasonable Price.

First thing is the quality of business and quality of management. A fantastic business Q - Quality which has a long-term tenure say a Coke, Hindustan Unilever or a Nestle or you name it, I mean you name them; so a fantastic business met with fantastic management. Both are 100 times in their own capacity, so terrific business run by terrific management. I think actually you don’t need anything else so that is the thing so Q stands for that.

Once quality is done then G - Growth What happens is you can get a great business but if it is not growing, great business is say valued at Rs 10,000 crore and then it is not growing so it will remain Rs 10,000 crore or 12,000 crore for a very long time to come. For a change of the value, sustained change in the value you need positive growth for that to come to the investors.

Third is L- Longevity now how long this growth is going to be because ultimately entire investing lot of it is about the terminal value and terminally, this high growth is going to continue for 10 years because it cannot keep



growing at 25-30 percent perpetually otherwise the whole world will become your company. So there is a limitation to the growth so how long how much growth is going to happen and how long the goodness of the company is going to continue. Good business and good management and growth all these thing how long it is going to last.

Then eventually investing is all about purchase P-Price are you paying too

much for this? Once you have gauge the quality of business, quality of

management, growth, longevity of goodness and growth then how much you

are paying. So, at some level it is mathematics but still knowing that you are

not paying too much if it is worth in your estimate if it is going to be a lakh

crore are you paying Rs 10,000 crore – 5,000 crore. Are you paying Rs 50,000

crore? Then reasonableness of the valuation comes. You don’t have to buy very

cheap buy you should not be exuberantly paying for something which you love.

Portfolio Management Services (PMS)

Introduction

Portfolio management services are meant for high net worth individuals or institutions who want a personalized management of their finances. A team of expert professionals conduct extensive research on markets to provide a customized solution to achieve unique investment objectives.

It is the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. In other words, Portfolio Management Services (PMS) is a specialized & customized service that offers a range of specialized investment strategies to capitalize on the opportunities in the market.

Though, PMS is managed by a professional portfolio managers, it has potential to address the personal preferences tailored into the investment portfolio giving



the freedom and flexibility required for achieving the financial goals. This is typically a high-end product meant for high net-worth individuals (HNIs) because it needs some significant minimum investment.

Today, the financial market is increasingly complex and managing your own portfolio will take up a lot of your time and effort. There are situations when you don’t have time or knowledge to explore the best investment alternatives in the market. This is a common problem faced by many wannabe investors. At this juncture, portfolio management services can help you get out of this dilemma.

So you can simply assign your investments to portfolio management services who will report to you regularly on your portfolio performance. Don’t feel lost in this complex world of investments. Let the experts do their job.

A)PMS AT MOTILAL OSWAL:

Motilal Oswal provides discretionary Portfolio Management Service, which offers professional management to the Investors with an aim to deliver consistent return. It relieves Investors from all monitoring hassles with benefits like regular reviews, strong risk management flexibility and makes it an ideal investment avenue for high net worth investors. The minimum ticket size for investment in PMS is Rs 25 Laks.

Here Motilal Oswal offers three products in Portfolio Management Services as below.

a) Value Strategy (since 2003)

b) NTDOP – Next Trillion Dollar Opportunity (since 2007)

c) India Opportunity Portfolio Strategy(since 2010)



a) Value Strategy:

The Value Strategy aims to benefit from the long term compounding effect on

investments done in good businesses, run by great business managers for

superior wealth creation. The Strategy has the investment style of buying

Undervalued stock & Sell overvalued stocks, irrespective of index movements.

Following is the comparison of returns of Value Strategy and Nifty 50 Index.

Conclusion:

Since Inception Value Strategy has delivered a CAGR of 26.33% vs. Nifty 50 returns of 17.50%, an outperformance of 8.83% (CAGR).

That means if Rs.1 crore were invested in Value PMS in March 2003 is worth Rs. 19.83 crores as on 31st December 2015. For the same period Rs. 1 crore were invested in Nifty 50 is now worth Rs. 7.86 crores.



b) NTDOP – Next Trillion Dollar Opportunity:

The NTDOP aims to deliver superior returns by investing in focused themes

which are part of the next trillion dollar GDP growth opportunity. This

strategy endeavors to capitalize on the themes of consumerism, Banking &

Financial Services & Infrastructure in the Indian Economy.

NTDOP Strategy has consistently outperformed the benchmark Nifty Midcap 100 Index across market cycles over last 8 years.

Following is the comparison of returns of NTDOP and Nifty Midcap 100 Index.

Conclusion:

In last 1 year NTDOP has delivered 16.03% CAGR returns vs. Nifty Midcap 100 Index returns of 6.46% CAGR. Since Inception NTDOP has delivered an annualized alpha of 11.92%.

That means if Rs. 1 crore were invested in NTDOP Strategy in December 2007 is worth Rs. 3.75 crore as on 31st December 2015. For the same period Rs. 1 crore were invested in Nifty Midcap 100 Index is now worth Rs. 1.58 crore.



c) India Opportunity Portfolio Strategy :

The IOP will aim to capitalize on this growth by investing in companies which

are expected to grow along with India and meet our unique investment

philosophy of QGLP. The Strategy is a Multi-cap strategy with exposure across

market segments such as Large Cap, Midcap & Small cap to take the advantage

of different market trends.

Following is the comparison of returns of IOPS and BSE 200 Index.

Conclusion:

In last 1 year India Opportunity Portfolio Strategy has delivered 5.30% CAGR returns vs. BSE-200 Index returns of -1.48% CAGR.

The chart above illustrates Rs. 1 crore was invested in India Opportunity Portfolio Strategy in February 2010 is worth Rs. 2.08 crore as on 31st December 2015. For the same period Rs. 1 crore was invested in BSE 200 Index is now worth Rs. 1.66 crore. The risk analysis of IOP is not provided as it has recently undergone a change of going retail with the client based. This



means the access is shifted from private clients to all the clients of Motilal Oswal Securities Limited.

This portfolio was restructured keeping “Make in India” and other projects by

the Government in mind. So the returns in the long term are very profitable and

needs to be under watch.

Mutual Fund

Introduction:A mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Mutual funds have advantages over investing directly in individual securities:

Increased diversification: A fund normally holds many securities; diversification decreases risk.

Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell their holdings back to the fund at the close of every trading day at a price equal to the closing net asset value of the fund's holdings.

Professional investment management: Open-and closed-end funds hire portfolio managers to supervise the fund's investments.

Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.

Service and convenience: Funds often provide services such as check writing.

Government oversight: Mutual funds are regulated by the SEC



Ease of comparison: All mutual funds are required to report the same information to investors, which makes them easy to compare.

Mutual funds have disadvantages as well, which include:

Fees Less control over timing of recognition of gains Less predictable income No opportunity to customize

Investment Style

A stock fund may be sub-classified along two dimensions:

1. Market Capitalization: It indicates the size of the companies in which a fund invests, based on the value of the company's stock. Each company's market capitalization equals the number of shares outstanding times the market price of the stock. Market capitalizations are typically divided into the following categories:

Multi Cap Mid Cap Large Cap

2. Investment Style

Stock funds are also sub classified according to their investment style:

Growth funds seek to invest in stocks of fast-growing companies. Value funds seek to invest in stocks that appear cheaply priced. Blend funds are not biased toward either growth or value.



Different Market Caps Categories:

When a mutual fund is described in terms of market cap (i.e., small cap, mid

cap or large cap), it indicates the size of the companies in which the fund

invests, not the size of the mutual fund itself. Market cap is calculated as the

number of shares outstanding multiplied by the current market price of one

share. Thus, a company with one million shares outstanding selling at Rs.100

per share would have a market cap of Rs.100 million.

Multi-Cap Funds:

Multi-cap funds typically include companies with market capitalization of less

than Rs1 billion (bear in mind that these numbers are only approximations that

change over time, and the exact definition of these categories can also vary

between brokerage houses). Generally speaking, smaller companies are those in

the early stages of business. They are presumed to have significant growth

potential, but are not as financially strong or as established as larger companies.

Because multi-cap funds invest in companies that are less stable than large-cap

companies, the funds can be quite volatile. This has its advantages and

disadvantages. In times of market instability, small-cap funds can suffer greatly

as less-established companies go out of business. On the other hand, multi-cap

funds can also be great investments for those who can tolerate more risk and are

looking for more aggressive growth. Investors hoping for aggressive returns

will certainly want to park some money behind these funds. Finally, many

mutual funds cannot take substantial positions in small-cap stocks without

filing with the Securities and Exchange Commission (SEC), and this usually

means greater transparency when it comes to the fund's holdings.



Mid-Cap Funds

The most popular choice among the general investing public, mid-cap funds are

those that invest in companies with market caps of Rs1 billion to Rs8 billion.

Mid-cap companies share some of the growth characteristics of small-cap

companies, but they entail less risk (at least in theory) because they are slightly

larger. You might say that mid-cap funds are to the mutual fund market what

mid-size cars are to the automobile market. The mid cap is a compact vehicle

for the market, falling somewhere between those sporty little small caps and the

massive SUV type large caps.

Mid-cap funds don't always move with the broader market, and they are also

usually not as prone to violent swings as small caps. Mid-cap funds can be

great investment vehicles for investors seeking a fund with great return

possibilities without the risk of small caps and index-related returns like those

of large caps.

Large-Cap Funds

Large-cap funds comprise companies with market caps of Rs8 billion or more -

the "big fish" of Wall Street. However, because of their enormous size, large-

cap funds are often forced to imitate a larger index, such as the S&P 500. This

is because mutual funds have restrictions on the level of ownership they can

have in any one company, which is generally no more than 10% of their

outstanding shares. This results in large-cap funds being forced to buy large

companies - the same ones that make up the major market indexes.

Large-cap funds can be great for investors who have longer-term investment

timelines and would like to "buy and hold". There are many large-cap income



funds that are great income vehicles for those who want to take on less risk. But

for those seeking greater diversification in smaller, more aggressive companies,

large-cap funds probably aren't the answer.

Mutual Funds at Motilal Oswal:

Here Motilal Oswal offers different types of mutual funds for different investors as follows.

Most Focus 30 Small and Mid Cap fund for risk taking investors with 25-27% CAGR return annually.

Most Focus 35 Large and Multi Cap fund for conservative investors with 20-22% CAGR return annually.

Investment in mutual fund can be done with two strategies.

a) Lump sum Investment

b) SIP – Systematic Investment Plan

a) Lump sum Investment: Investment in mutual fund can be done with minimum amount of Rs 500. So it is very easy and convenient to invest in mutual funds. Investors can invest in Mutual Fund as per their requirements of cash in future. There is no upper limit to invest in MF.

Investment in Mutual Fund

Investment in Fixed Deposit

No. of Years 20 20

Total Investment 12 Lakhs 12 Lakhs

Annualized Return 18% 8%

Final Amount 4.27 Crore 31.20 Lakhs



Conclusion:

Above Comparison shows power of compounding.

The table above illustrates if Rs. 12 Lakhs was invested in Mutual Fund Strategy 20 years ago, is worth Rs. 4.27 Crore today. For the same period if Rs. 12 Lakhs was invested in Fixed Deposit is now worth Rs. 31.20 Lakhs.

b) SIP – Systematic Investment Plan: If you are among those who are nervous about investing in equity funds because of market ups and downs, SIP will work best for you. It not only minimizes the risk of losses due to fall in equity markets but also saves you the hassle of timing the markets, that is, investing when they are trading lower and exiting when they are rising.

SIP FD

No. of Years 20 20

Monthly Investment 5000 -

Total Investment 1200000 1200000

Annualized Return 18% 8%

Final Amount 1.17 Cr 31.20 Lakhs

Conclusion:

The table above illustrates if Rs. 12 Lakhs invested through SIP with Rs 5000 a month for 20 years, worths Rs. 1.17 Crore. For the same period if Rs. 12 Lakhs invested in Fixed Deposit worths Rs. 31.20 Lakhs.



Comparison of PMS and Mutual Fund

Asset Classes:PMS can have different asset classes, derivatives sometimes exotic, across different markets, positions suitably hedged and so on. For Mutual funds only long operate. Shorting or derivatives will not be part of the mutual fund, unless permitted to an extent.

Approval Procedure:Portfolio manager has to get approval but not for the portfolio per se. On the other side the theme of the mutual fund has to be approved by the regulator, besides the asset management company.

Benefits:No special taxation benefits will be available, for the portfolio, except what is available for the investor himself. Special taxation benefits are conferred on the mutual funds.

Number of Investors:

Small investors also can invest in mutual funds whereas threshold limits are there for portfolio management schemes as they are for HNIs.

Asset Holdings:

In PMS, investors hold stocks, whereas in mutual funds they hold units. In PMS, the investor can know which stocks he is holding at any given point in time by logging in to his DeMat account. This is difficult in case of mutual funds.

Model Portfolio:

While many PMS providers offer standardized portfolios, some offer investments tailored to clients' goals. For instance, a client may want to invest a



large amount in a single stock. This is not possible in mutual funds, as they cannot hold more than 10% net asset value in a single stock. While this spreads risk, a big disadvantage is that mutual funds cannot hold a big stake in a company even if it is a very good investment. PMS do not have this limitation.

Accountability:Unlike mutual fund managers, PMS managers is directly accountable to the client, who can seek clarifications, especially in the discretionary portfolio.



Work Done at Motilal Oswal:

I have worked on following projects at Motilal Oswal and benefited the company in following manner.

A) Algorithmic Trading with TGS (Trade Guide Signal):

Algorithmic Trading is the future of Trading.

Here Motilal Oswal has introduced the Algo trading for the first time in India

What is Algo Trading?

Algo Trading is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader. The defined sets of rules are based on timing, price, quantity or any mathematical model. Apart from profit opportunities for the trader, algo-trading makes markets more liquid and makes trading more systematic by ruling out emotional human impacts on trading activities.

Algo-trading provides the following benefits:

Trades executed at the best possible prices

Instant and accurate trade order placement (thereby high chances of execution at desired levels)

Trades timed correctly and instantly, to avoid significant price changes

Reduced transaction costs (see the implementation shortfall example below)

Simultaneous automated checks on multiple market conditions

Reduced risk of manual errors in placing the trades.

Back test the algorithm, based on available historical and real time data



Reduced possibility of mistakes by human traders based on emotional and psychological factors.

The greatest portion of present day algo-trading is high frequency trading (HFT), which attempts to capitalize on placing a large number of orders at very fast speeds across multiple markets and multiple decision parameters, based on pre-programmed instructions.

About TGS:

The software introduced by Motilal Oswal Securities Limited helps the Business Partners to trade with Auto Planning execution of Trading plan through the Trading Terminal.

The software helps to trade in both Buy and Sell market and earns profits by generating actionable Buy/Sell signals for all asset classes- Equity, Currency, Commodity.

The uniqueness of the software is - it also tells the No Trade Zone for stocks which have sideways momentum and does not create much profit for the trader. Also it provides a trailing Stop Loss for each stock, this helps to maintain a safety level for the trader.

Following are the main features of the software

Firstly, there a Trader Test which tells the style of trader an individual is –

Intraday (few hours), Swing (Few days), Positional (Few weeks)

After knowing the trading style, the trader should strictly follow the style and maintain discipline.

Secondly, in the Trading Planner there is a fixed entry and exit mode which has to be set only once for the stocks the trader owns. There are 175 high



performing stocks in the software and can be altered by the trader as per the choice.

Thirdly, there is a performance tracker that has the past records of the 175 stocks which can be seen as and when wanted by the trader.

Motilal Oswal Securities Ltd also provides training through –

Recorded videos by specialized trainer, You-tube links in English and Hindi, One-to-one training, Webinars.

This way every advisor develops the business of the franchisees and provides

services of high level which keeps the brand of the company to increase every

year.

B) Account Opening Contest:

Motilal Oswal has held a contest of account opening contest for its NCR that is newly opened franchisees pan India.

In this project I had telephonic conversations with the franchisee owners. My job was to introduce them regarding the ongoing contest and bring in the participation and resolve the quires faced by the business partners during the contest.

The company has benefited with more than 1500 new clients with this project.

C) Investment Ideas and Portfolio Restructuring:

Motilal Oswal firm is known for its Fundamental research. The research team comes up with the fully diversified portfolios for short term and long term investments purposes.



The analyst has made a portfolio of 10 High Conviction Stocks having 20%

upside in the long term. This portfolio is made keeping in mind the following

issues:

2016 Budget

7th Pay Commission

Rural development

New projects signed

Market advantage and leadership

Shifting business for low to high margin

Here my role in this project was to introduce this portfolio to our high potential clients who can invest in these scripts.

The portfolio which I worked upon is as below.



We pushed this portfolio to our clients aggressively as there is high potential growth in these stocks for next three to five years. Some of these stocks has already reached to its target price since this portfolio is been discovered.

I have also worked on the Portfolio Restructuring under this project. Here my job was to refer to the high potential client’s portfolios and check whether they getting the constant return or so. If there are certain stocks which are not performing well, we recognize those stocks and provide solution to clients with the replacement of those stocks.

D) Business Portal:

Motilal Oswal Securities Limited launched UpperMOSt Mobile App (for Android & IOS User) where Franchisee can access information on the mobile itself.

Key Benefits of the Partner Mobile App:

Daily/Weekly/Monthly/Yearly snapshot of Revenue, AUM, Sales & Clients PLUS comparison vs. previous corresponding period

Easy access to Newly acquired, Inactive & Top customers with inbuilt call and email functionality

Quick client search option providing comprehensive information on all clients’ right from Portfolio, Holdings, Transaction, Profit & Loss and Revenue.

Access to Important reports like Client/Product wise Revenue Report, AUM Repot, Running SIP Report, Product Maturity reminder, Single Holding Report etc.

The project needed to inform all the franchisee and guide them through the whole process i.e. From downloading the App, Logging-in with the ID and Password and lastly explaining the above features in detail. This mobile app makes the franchisee handle work in a much easier, simpler and faster way.



Learnings at Motilal Oswal:

Understand the Market:With having a summer internship at Motilal Oswal I have got a wonder opportunity to learn basics of the equity market. Following is my basic understanding regarding the equity market.

The Equity market also known as the stock market is where the listed securities are traded in the secondary market. This is one of the most vital areas of a market economy, as investors have the opportunity to own a slice of ownership in a company with the potential to realize gains based on its future performance.

Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can be either public stocks, which are those listed on the stock exchange, or privately traded stocks.

The place where stocks are traded is the Stock Exchange. There are many stock exchanges around the world, and they can be either physical places or virtual gathering spots. In India, there are two: NSE and BSE, the index followed by these two exchanges are Nifty 50 and S&P BSE respectively.



Nifty 50:

It is National Stock Exchange of India's benchmark stock market index for Indian equity market. The NIFTY 50 covers 22 sectors of the Indian economy. The NIFTY 50 index is a free float market capitalization weighted index. The base period for the CNX Nifty index is November 3, value of the index has been set at 1000, and a base capital of Rs 2.06 trillion.



S&P BSE:

The S&P BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 or simply the SENSEX, is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy. The base value of the BSE SENSEX is taken as 100 on 1 April 1979, and its base year as 1978–79.

29%

18%11%11%

10%

8% 5%3% 2% 2%1%1%

SENSEX 30 companies- Sectorwise weightage (%)

Finance

IT

FMGC

Transport Technology

Oil & Gas

Healthcare

Capital Goods

Matels, Metal products & Mining

Telecom

Chemical & Petrochemicals

Power

Transport Services



Asset Classification for Long term Investment:

The Equity market also known as the stock market is where the listed securities are traded in the secondary market. This is one of the most vital areas of a market economy, as investors have the opportunity to own a slice of ownership in a company with the potential to realize gains based on its future performance.

Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can be either public stocks, which are those listed on the stock exchange, or privately traded stocks.

The place where stocks are traded is the Stock Exchange. There are many stock exchanges around the world, and they can be either physical places or virtual gathering spots. In India, there are two: NSE and BSE, the index followed by these two exchanges are Nifty 50 and S&P BSE respectively.



DERIVATIVES:

A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset.

Types of derivatives: Options Futures Forwards Swaps

All the types of derivatives have their significance and are used by individual. But in this project Options will be covered in depth.



OPTIONS:

Options are called Derivatives, which means an option derives its value from something else.

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties.

The total cost (the price) of an option is called the premium. This price is determined by factors including the stock price, strike price, time remaining until expiration (time value) and volatility. Because of all these factors, determining the premium of an option is complicated and beyond the scope.

The expiry of Options is on the last Thursday of every month.

Because option prices change quite rapidly, owning them requires that you spend a significant amount of time monitoring price changes in the stock and the option. And if you're wrong about the price movement, be prepared to lose all or a significant portion of the money you paid for the options.

Types of options:

People who buy options are called holders and those who sell options are called writers.

Call holders and put holders (buyers) are not obligated to buy or sell. They have the choice to exercise their rights if they choose.

Call writers and put writers (sellers), however, are obligated to buy or sell. This means that a seller may be required to make good on a promise to buy or sell.



Buying a Call:

A call is a contract that gives the owner the right, but not the obligation, to buy 100 shares of a stock at a fixed price, called the strike price, on or before the options expiration date. For example, assume you buy a June Rs120 call option (the option expires on the third Friday of June). The strike price is Rs120. If the stock price reaches Rs120, the value of the contract increases Rs100 for each Rs1 increase of the stock. So if the price of the stock moves from Rs120 to Rs135, the value of the option increases by Rs1,500.

If the price of the stock goes above the strike price and you want to buy the 100 shares, you can exercise the option and buy the 100 shares for Rs120 per share no matter the current value of the stock.

If the value of the stock goes down, the price of the option goes down, and you could hold it or sell it at a loss.

You may sell the option for a profit or loss any time before the contract expires.

The price that you pay for a call option depends on many factors two of which include: the duration of the contract (the longer the duration, the more you pay) and how far the current price of the stock is from the strike price of the contract.



Buying a Put

If you own a stock, you may buy a put as a form of insurance. If the stock falls in price, the put rises in price and helps offset the paper decline in the underlying stock. If you don't own the stock but think it will go down in price, you buy the put to profit from the decline in price of the stock. If the stock price declines, the value of the put rises and you would sell the put for a profit. If the stock increases in price you may sell the put for a loss.

A put option is a contract that gives you the right, but not the obligation, to sell a stock at a preset price. For example, if you buy a put with a strike price of Rs50, you could sell 100 shares of the stock to the put seller when the stock price fell below Rs50. So if the stock fell to Rs30, you could sell it for Rs50 and the seller is obligated to buy the stock at Rs50 even though the current price is Rs30 - not a good deal for the put seller.

The price that you pay for a put option depends the duration of the contract (the longer the duration, the more you pay) and how far the current price of the stock is from the strike price of the contract.

Put buying is different from selling short. With a put option your only liability is the price you paid for the put. With a short sale, you have an unlimited downside liability if the stock goes up. Also, the proceeds from selling short are in a margin account so you have to pay interest and meet margin requirements. Buying puts is a more conservative way of betting on a stock declining in price.



Selling a Call For every buyer of a call there must be a seller, who assumes that the stock price will remain flat or go down. The seller collects the purchase price of the option but has the obligation to sell 100 shares of the stock if the buyer decides to exercise the option. If the seller gets called - he must sell the stock. If the stock continues to appreciate in price after the stock is sold, the seller loses the future price gain.

In most cases you must own 100 shares of the stock for each contract you sell - this is called a covered call. Therefore, if your stock gets called away, you have the 100 shares in your account.

You can sell covered calls to generate a stream of income. If the stock price does not rise enough during the period of the contract, you won't get called and won't have to sell the stock so you keep the money you received when you sold the call.

If your broker lets you, you may sell "uncovered "or "naked" calls in a margin account. This practice lets you sell calls when you don't own the stock. If you get called, you must buy the stock at its current market value to cover the call even when the market price is higher than the strike price of the option. Like any margin account transaction, you must execute the transaction immediately.



Selling a Put

The seller of a put collects the purchase price of the option from the buyer of the put. The seller has the obligation to buy 100 shares at the strike price regardless of the market value of the underlying stock. So if the put buyer decides to exercise the put contract, the seller of the put has to buy the 100 shares at the strike price no matter the current market value of the stock.

For example, the buyer of a put with a strike price of Rs 50 decides to exercise the option, which means he sells 100 shares of the stock at the strike price to the put seller. The put seller must pay Rs 50 per share even though the market value is, for example, Rs 40. When you sell a put, you want the price of the stock to go up so you don't get the stock put to you - buy the stock for more than it's worth.

Selling a put places the money you receive in a margin account so you pay interest on the proceeds until the put contract is closed. If you don't have the financial resources to cover the obligation of buying the stock from the buyer of the put, you sold "naked puts".

There are two main reasons why an investor would use options:

Speculation: You can think of speculation as betting on the movement of a security. The advantage of options is that you aren't limited to making a profit only when the market goes up. Because of the versatility of options, you can also make money when the market goes down or even sideways.

Hedging:

By using options, you would be able to restrict your downside while enjoying the full upside in a cost-effective way.



Market Update:

The way to help the franchisee is to provide them with the market details before the markets open, i.e. before 9.15, so that they can trade in the stocks as per the information. This is done by providing them with daily market outlook.

The market outlook is prepared by specialized analysts, who provide the data by analyzing the stock performance, news of those companies, further effect from various decisions, etc.

With this information, the franchisees trade in the stocks and make profits. Apart from morning updates, the advisors also provide information about a particular stock which starts having momentum in the market. This time to time information flow helps the franchisee to increase their business more.

Any type of doubt about stocks or problem during any transaction is also solved by the advisors. The relationship building with franchisee by the advisors has played a major role in creating trust and faith between both.

Example: Morning Update of 07-04-2016

1. The nifty level will be maintained between 7600-7580, if fall continues then chances of reversal flow.

2. Short term trading in HDFC, in Buy Call, is advised with a target of 1160 and stop loss of 1070.

3. Cement industries continue to do well and UltraTech Cement is the top pick for today.

4. Initiative Coverage is on Sagar Cements which is increasing its sales in the southern region of India due to various factors.

5. Due to the rate cut by the RBI, the market seems to consolidate.6. Crude prices rebound as there is an agreement between OPEC.7. In afternoon, there is a momentum in Sintex Stock, so all the franchisee

are called and informed to buy the stock as the trend is still upward.

This is the way the franchisees are informed daily between 9.00-9.30 and other updates are given when necessary.



Making Own Portfolios:

I have made my own portfolios on the bases of fundamental analysis consist of Large Cap and Mid Cap companies as given below.

Mid Cap Portfolio:

Script NameMarket price as on

15th AprilCurrent Market

Price % IncreaseIOC 398.3 409.05 5.14Atul 1514 1885 24.5P and G 6167.7 6398 3.75M&M 1259.9 1294.05 2.79Axis Bank 445.4 490.85 10.3Bata India 505.9 565.55 11.77GlaxoSmith Con 3436.3 5834 69.8ICICI Bank 234.15 220.05 -5.96BOI 98.75 81.25 -17.72ZEE Entertain 390.8 434.35 11.37Arvind 280.25 301.1 7.54FDC 180 182.95 1.64ITC 327 329.95 0.9Jet Airways 551.75 603.15 9.27HDFC Bank 1048.25 1140.3 8.81Crisil 1802 2081.15 15.49DLF 112.3 122.85 9.69PVR 709 870.45 22.77Raymond 394.5 471.3 19.62

Conclusion:

Above Mid Cap Portfolio has given 11.13% average return within one month.

The table above illustrates if Rs. 1 Lakh was invested in this Mid Cap portfolio 1 month ago, worths Rs. 1.11 Lakhs today.



Multi Cap Portfolio:



Price % IncreaseHDFC Bank 1048.25 1140.3 8.81

Infosys 1182.75 1201.75 1.67TATA Motors 279.5 284.55 2

AXIS Bank 445.4 490.85 10.3Maruti Suzuki 3731.2 3947.05 6.3

YES Bank 833.65 977.5 17.35BAJAJ Fincorp 6638.4 7766.5 17Sun Pharma 844.1 972.04 15.17

Britannia 2765 2933.65 6.1Larsen 1244.35 1257.67 1.1

Ultratech Cement 3197.85 3145.95 -1.6ITC 327 329.95 0.9

HPCL 774.9 831.35 7.27Colpal 851 809.2 -5.13Pidilite 596.85 653.7 9.5Lupin 1555.4 1505.15 -3.21Voltas 276.25 331.75 20.2

Conclusion:

Above Multi Cap Portfolio has given 6.69% average return within one month.

The table above illustrates if Rs. 1 Lakh was invested in this Multi Cap portfolio 1 month ago, worths Rs. 1.067 Lakhs today.



Diversified Portfolio:



Price % IncreaseInfosys 1182.75 1201.75 1.67Larsen 1244.35 1257.67 1.1

HDFC Bank 1048.25 1140.3 8.81M&M 1259.9 1294.04 2.78

Axis Bank 445.4 490.85 10.3TATA Motors 279.5 284.55 2

Cipla 533.85 507.25 -4.83Maruti Suzuki 3731.2 3947.05 6.3

Aurobindo Pharm 742.35 769.5 3.71BPCL 881.1 920.95 4.53

Wipro 554.6 543.25 -1.94Lupin 1555.4 1505.15 -3.21

Bajaj Auto 2315 2461 6.31Vedanta 94.85 96.9 2.16

TCS 2446.2 2532.05 3.51

Conclusion:

Above Diversified Portfolio has given 3.12% average return within one month.

The table above illustrates if Rs. 1 Lakh was invested in this portfolio 1 month ago, worths Rs. 1.031 Lakhs today.



Industry Analysis:

Cement Industry

Structure:Cement is a basic commodity used in construction. The key markets for cement are: Housing (constituting ~64% of the total consumption); infrastructure (17%); commercial construction (~13%); Industrial/others (~6%). The cement consumption in India has grown at an average growth rate of 9.2 % over the past five years.

The Indian cement industry is categorized into five regions: North, West, Central, East, and South. Cement, being bulk in nature, requires significant transportation cost to transfer from one region to another. This makes the producer in one region at a competitive disadvantageous position as against a player in the other region, and hence-the categorization of the Indian cement industry into five regions.

Indian cement industry is concentrated with top five players constituting 50% of the capacity and the top ten groups constituting 70% of the capacity.

What affects the Industry?

Demand: The demand for cement is highly correlated to the GDP growth of a country. It is seasonal in nature with the monsoon quarter (July-Sept) showing the lowest demand as the construction activity slows down during monsoon.

Supply: Cement is a capital intensive industry and a cement plant requires ~24-36 months for construction. This makes the supply unresponsive to demand in the short term.

Expenses: Increase in raw material prices like limestone, coal as well as power & fuel cost affect margins.



How to value cement sector:

Asset based relative valuation tools like EV/ tonne and Price/ Book are more suitable to value cement companies. Cement is a cyclical and seasonal industry, and hence, earnings are prone to fluctuations. The variability in earnings makes the valuation tools based on earnings, read Price/Earnings, market cap/ earnings unsuitable to value cement companies.

Details of Cement Companies:

ULTRATECH CEMENT

UltraTech Cement Limited, founded in 1983, is India's biggest cement company and India’s largest exporter of cement clinker based in Mumbai, India. The company is part of the Aditya Birla Group and division of Grasim Industries. It has an annual capacity of 64 million tonnes. UltraTech cement has been awarded the Super-brand status.

JK LAKSHMI CEMENT

JK Lakshmi Cement Ltd., incorporated in the year 1938, is a Mid Cap company (having a market cap of Rs 4096.68 Cr.) operating in Cement sector. It is promoted by the HS Singhania group, a North India-based cement company. The North and the West account for 90-95% of its current dispatch mix.



CONCLUSION

This project has given me broad aspect to gain knowledge of the financial activities. This project was a good exposure for us to get acquainted with the sector analysis as well as other financial aspects i.e. equity markets, debt markets, mutual funds, derivatives, etc. and how it works in the real life.

From the analysis it can be concluded that, Cement industry is a cyclical commodity industry where the profit and return on capital is dependent on the demand cycle picture. Given the high potential growth, quite a few foreign transnational’s have been eyeing the Indian Markets and are planning to acquire domestic companies. This could lead to higher prospects of growth to this sector in the coming years.

This Internship and project has not only exposed us to do this research but has also given us an opportunity to understand the corporate world, work culture and professionalism, which would help us to excel in our career.

References:



Websites:

www.motilaloswal.com www.motilaloswalmf.com www.investopedia.com www.moneycontrol.com www.equitymaster.com www.economictimes.com

Reports:

Sector and Thematic Reports of Motilal Oswal Securities Limited. 20th Wealth Creation by Raamdeo Agrawal.


http://www.economictimes.com/

http://www.equitymaster.com/

http://www.moneycontrol.com/

http://www.investopedia.com/

http://www.motilaloswalmf.com/

http://www.motilaloswal.com/

SIP Final Report Deep Modi

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