Project on PORTFOLIO MANAGEMENT WITH REFERENCE TO ICICI BANK LTD.

BACHELOR OF COMMERCE BANKING AND INSURANCE (V SEMESTER) 2013-2014 In partial fulfillment of the requirement for award of degree of Bachelor of commerce banking and insurance

Submitted by:
KALPANA U PADHY Roll No: 5507

Guided By:
MR. SHAILESH SARGADE

SAKET COLLEGE OF ARTS, COMMERCE, AND SCIENCE KALYAN (EAST), THANE- 421306

CERTIFICATE

I MR. SANTOSH YADAV hereby certify that MS. KALPANA U PADHY student of T.Y.B.com (banking & insurance) Semester V Roll No: 5507 has successfully carried out the project on PORTFOLIO MANAGEMENT WITH REFERENCE TO ICICI BANK LTD. in the academic year 2013-14. The information submitted is true and original to best of my knowledge.

Place: Kalyan

Date:

(Prof .SHAILESH SARGADE) Signature of Project Guide

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DECLARATION

I KALPANA U PADHY, Roll No: 5507, SAKET COLLEGE OF MANAGEMENT, T.Y.B.com (banking & insurance) V semester, hereby declare that I have complete the project on (PORTFOLIO MANAGEMENT WITH REFERENCE TO ICICI BANK LTD.) in academic year 2013-14.

The information submitted is true & original to best of my knowledge.

Place: Kalyan

Date:

Student signature (T. Y. B&I)

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ACKNOWLEDGEMENT

This project bears imprint of all those who have directly or indirectly helped and extended their kind support in completing this project.

At the time of making this report I express my sincere gratitude to all of them.

I would like to express my sincere gratitude to the manager of ICICI Bank Ltd. Malad, Mumbai & Prof. Santosh Sir being a wonderful guide & helped me throughout the project. By his assistance only I could perform & complete this project successfully.

This project report is collective effort of all and I sincerely remember and acknowledge all of them for their excellent help and assistance throughout the project.

(Kalpana Padhy)

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OBJECTIVES OF THE STUDY

To search detailed information of portfolio management in banks. To find out the various factors that an investor should take into consideration to make proper investment decisions. To do an in-detailed analysis of the risk and return characteristics of stocks related to different industries and different companies in banks. To help the investors to decide the effective portfolio of securities. To identify the best portfolio of securities.

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LIMITATIONS OF THE STUDY

The data collected is basically confined to secondary sources, with very little amount of primary data associated with the project.

There is a constraint with regard to time allocated for the research study.

In this study the statistical tools used are risk, return, average, variance, correlation.

The availability of information provided by the visit is not satisfactory as the institution do not entertain such research people as they are scared of their companys confidentiality.

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METHODOLOGY

PRIMARY DATA:
Data collected from the visit of the bank Data obtained from bank brochure journals.

SECONDARY DATA:
Data collected from internet. Data collected from newspapers. Data collected from magazines & articles. Data collected from reference books.

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INDEX Sr. no.

1. 1.1 1.2 1.3 2. 2.1 2.2 2.3 3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 4. 4.1 4.2 4.3 4.4 4.5

Topic
Executive Summary Introduction to ICICI Bank Products & Services provided by ICICI Bank Portfolio Management in ICICI Bank Global View on PM Evolution of PM PM in developed countries History of PM in Indian bank Introduction to PM Definition to PM Precise explanation of PM Role of PM Value of PM Implementation of PM Objectives of PM Types of PM Steps in PM Functions of PM Goals of PM Equity PM Bond PM Advantages of PM Disadvantage of PM Prospects of PM PM services in ICICI Bank Investment in PM service How is PM service different from Mutual fund in ICICI Bank Working of a PM in ICICI Bank PM service charges in ICICI Bank Taxation for PM service in ICICI
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Page No.
1 2

4.6 5. 5.1 5.2 5.3 5.4 5.5 6. 7. 8. 9.

Bank PM schemes in present scenarios in ICICI Bank Portfolio Manager of ICICI bank Qualities of Portfolio Manager of ICICI Bank Code of conduct of Portfolio Manager of ICICI Bank SEBI rules 1993 regarding portfolio Manager Conditions for grant and renewal SEBI rules for registration Findings Conclusion Annexure Bibliography &Webliography

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EXECUTIVE SUMMARY

Investing 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).

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.

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Chapter 1 Introduction of ICICI Bank Ltd

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Introduction of ICICI Bank

ICICI Bank is India's largest private sector bank with total assets of Rs.5, ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002.

ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry,
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and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to lowcost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.

ICICI Bank is India's second-largest bank with total assets of Rs.4,062.34 billion ($91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion ($1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,535 branches and 6,810 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery
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channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Their UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).367.95 billion (US$ 99 billion) at March 31, 2013 and profit after tax Rs. 83.25 billion (US$ 1,533 million) for the year ended March 31, 2013. The Bank has a network of 3,382 branches and 10,943 ATMs in India, and has a presence in 19 countries, including India.

ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.
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ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

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Products & Services provided by the ICICI Bank

Deposits and Accounts

ICICI Bank Privilege Banking has a range of accounts and deposits to

cater to your unique banking needs. Our extensive branch & ATM network along with mobile, phone, internet and doorstep banking, make your banking experience the best.

Types of Accounts offerings:

Titanium Privilege Savings Account Gold Privilege Savings Account Fixed Deposit Recurring Deposits Current Accounts Family Banking

Credit and Debit Cards

Enjoy rewards and privileges along with unmatched convenience when

you sign up for any ICICI Bank Credit or Debit Card.

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Types of Credit & Debit Cards offerings:

Titanium Debit Card Gold Debit Card Rubyx Credit Card

Loans
At ICICI Bank Privilege Banking, we offer you a wide range of loan

products to help you achieve your dreams. Quick, convenient and hassle-free access to car, home and personal loans mean you can get financing when you need it.

Types of Loan offerings:

Home Loan Car Loan Personal Loan

Investments
To secure the financial future for your family and you, an appropriate

range of investments is critical. At ICICI Bank Privilege Banking, we offer you various investment options to help you build your wealth for self and for future generations.

Types of Investment Offerings:

ICICI Bank Pure Gold Foreign Exchange Services Public Provident Fund Account Mutual Funds

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Insurance
At ICICI Bank Privilege Banking, we help you to protect what is

important to you. Our range of third party insurance products covers everything from your health and life, to your home and travels. Enjoy peace of mind and unmatched convenience with insurance products facilitated by ICICI Bank.

Types of Insurance offerings:

Life Insurance Health Insurance Complete Health Insurance Policy Health Care Plus Critical Care Personal Protect Insurance Policy Home Insurance Car Insurance Two Wheeler Insurance

Value-added Services
Value - added services of ICICI Bank like Internet Banking, iMobile, Bill

Pay, e-Locker makes your banking simpler, faster, more convenient. Through these services you can do your day today banking anytime, anywhere.

Types of value-added services:

e-Locker Internet Banking iMobile Bill Pay

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Portfolio Management in ICICI Bank

Portfolio Management Services (PMS) is a sophisticated investment vehicle that offers a range of specialised investment strategies to capitalise on opportunities in the market. ICICI Portfolio Management Services provides solutions for the investment needs of select clientele, through focused portfolios.

ICICI AMC was the first institutional participant to offer Portfolio Management Services to HNIs and Institutions in India, in the year 2000. We have a successful track record of over 10 years of experience in offering Portfolio Management Services and today our strong base of over 7,000 PMS clients stands testament to the quality and value of our services.

Our aim -is to create a portfolio that suits your requirements; therefore we will first seek to understand a clients needs and investment objectives, and on that basis offer a portfolio that best suits these needs and objectives.

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Personalized Advice
Experienced Fund Managers give you sound investment advice and

strategies that help you invest smartly. You get the best fund managers in the industry who craft customized stock portfolios that work wonders. With PMS products distributed by ICICI Bank you get:

More choice in terms of portfolios to suit individual client needs and risk appetite

Ability to structure products that meet specific investment objectives Choice of alternate investment products that were traditionally available to the very wealthy

Professional Management
PMS products distributed by ICICI Bank combine the benefits of

professional money management with the flexibility, control and potential tax advantages of owning individual stocks or other securities. The Portfolio Managers take care of all the administrative aspects of your portfolio with a monthly or semi annual reporting on the ove-rall status of the portfolio and performance.

Continuous Monitoring
The expert Fund Managers and research team keep a constant watch on

your money. The team of experts in these fund houses know exactly how your money is performing through continuous monitoring. You, as a customer are always informed through:

Communications that include relevant information on major market events

Quarterly or semi-annual performance updates

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Chapter 2 Global view on Portfolio Management

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Global views on portfolio management

The scramble to attract and retain the private banking business of the worlds wealthiest families has become that much more competitive amid the fall-out from the worst financial crisis in several generations.

According to the World Wealth Report, the annual survey compiled by Merrill Lynch and Capgemini, the global population of high net worth individuals fell by nearly 15 per cent in 2008, while their total wealth fell 20 per cent, leaving both measures at levels last seen at the end of 2005. Private bankers say the downturn has ushered in a back to basics approach to wealth management, with a renewed focus on long-term client relationships, old-fashioned due diligence and more comprehensive assessment and management of risk. High net worth families will be less willing to compromise in the future than they have been in the past, says Michael Lagopoulos, chief executive officer of the international arm of RBC Wealth Management. They want consistency, reliability and unbiased advice with a focus on what is right for them, rather than what is right for their banker or bank. Above all, clients will be looking to ensure that they are getting value for money on the services they use.

One of the key issues facing the sector is how to meet client demand for improved service and heightened transparency, while many global financial

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groups remain mired in the more pedestrian task of rebuilding their banking franchises.

While economies appear to be improving across the globe, the personal wealth growth rates in China and across the Asia Pacific region continue to fast outpace the Western world, leaving adrift banking groups that lack the capacity to capitalise.

Private bankers insist that the unexpectedly swift resurgence of global stock markets has not altered the concerns of a chastened client base. Transparency and liquidity are now prerequisites for any product offered to the wealthy and very wealthy investor, says Sally Tennant, chief executive officer of Lombard Odier in London. The days of products with black box complexities are over.

The current generation of rich individuals is undeniably more international in both outlook and activities than previous ones, whether in business, investments or personal affairs. Particularly in emerging markets, the ranks of the super -wealthy are now dominated by entrepreneurs who have built up their own business empires, as opposed to inheriting their wealth over generations.

As a result, they expect a more hands-on approach and a more tailored product than the traditional private banking model offers, with its focus on investment advice and portfolio management, says Jane Fraser, head of Citi Private Bank. The coveted private banking client now expects a more holistic approach to wealth management, she says.
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Evolution of Portfolio Management

Portfolio management is essentially a systematic method of maintaining ones investment efficiently. Many factors have contributed to the existence and development of the concept. In the early years of the century analyst used financial statements to find the value of the securities. The first to be analyzed using this was Railroad Securities of the USA. A booklet entitled The Anatomy of the Railroad was published by Thomas F. Woodlock in 1900. As the time progressed this method became very important in the investment field, although most of the writers adopted different ways to publish there data. They generally advocated the use of different ratios for this purpose. John Moody in his book The Art of wall Street Investing, strongly supported the use of financial ratios to know the worth of the investment. The proposed type of analysis later on became the common-size analysis. The other major method adopted was the study of stock price movement with the help of price charts. This method later on was known as Technical Analysis. It evolved during 1900-1902 when Charles H. Dow, the founder of the Dow Jones and Co. presented his view in the series of editorials in the Wall Street Journal in USA. The advocates of technical analysis believed that stock prices movement is ordered and systematic and the definite pattern could be identified. There investment strategy was build around the identification of the trend and pattern in the stock price movement.

Another prominent author who supported the technical analysis was Ralph N. Elliot who published a book in the year 1938 titled The Wave Principle. After analyzing 75 years data of share price, he concluded that the market movement was quite orderly and followed a pattern of waves. His theory is known as Elliot Wave Theory. According to J.C. Francis the development of
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investment management can be traced chronologically through three different phases. First phase is known as Speculative Phase. Investment was not a wide spread activity, but a cake of few rich people. The process is speculative in nature. Investment management was an art and needed skills. Price manipulation was resorted to by the investors. During this time period pools and corners were used for manipulation. The result of this was the stock exchange crash in the year 1929. Finally the daring speculative ventures of investors were declared illegal in the US by the Securities Act of 1934. Second phase began in the year 1930. The phase was of professionalism. After coming up of the Securities Act, the investment industry began the process of upgrading its ethics, establishing standard practices and generating a good public image. As a result the investments market became safer place to invest and the people in different income group started investing. Investors began to analyze the security before investing. During this period the research work of Benjamin Graham and David L. Dood was widely publicized and publicly acclaimed. They published a book Security Analysis in 1934, which was highly sought after. Their research work was considered first work in the field of security analysis and acted as the base for further study. They are considered as pioneers of security analysis as a discipline. Third phase was known as the scientific phase. The foundation of modern portfolio theory was laid by Markowitz. His pioneering work on portfolio management was described in his article in the Journal of Finance in the year 1952 and subsequent books published later on.

He tried to quantify the risk. He showed how the risk can be minimized through proper diversification of investment which required the creation of the portfolio. He provided technical tools for the analysis and selection of optimal portfolio. For his work he won the Noble Prize for Economics in the year 1990. The work of Markowitz was extended by the William Sharpe, John Linter and Jan Mossin through the development of the Capital Asset Pricing Model
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(CAPM). If we talk of the present the last two phases of Professionalism and Scientific Analysis are currently advancing simultaneously with investment in various financial instruments becoming safer, with proper knowledge to each and every investor.

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Portfolio management in developed countries : Deutsche Bank

Deutsche Bank brings Portfolio Management Services (PMS) from seven providers that work towards the growth of funds. The recommendations aim to ensure that the strategy and portfolio are built on solid foundations. Depending on the risk appetite and desired returns, one can select from a range of superior PMS products in the country, including the products from Prudential ICICI, Reliance Capital, Franklin Templeton, and Benchmark Asset Management

ICICI Bank Wealth Management

ICICI Bank Wealth Management assist for the Portfolio Management

Services (PMS) by referring to the partner Asset Management Companies. Their partner Asset Management Companies conduct detailed and scientific analysis of various investment avenues to help you invest your money.

PMS can be of the following categories

Equity-based Products Commodity-based Products Index-linked Products

Federal Bank

Federal Bank launches portfolio investment scheme for NRIs KOCHI: Kerala-based Federal Bank on Friday launched its Portfolio Investment (PIS) Scheme for NRIs in tie up with Geojit BNP Paribas Financial Services Ltd, offering "hassle free" facilities for investments in stock market. The bank, which has been authorized by RBI to administer the scheme, was the first among the traditional private sector banks to offer the facility.
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History of portfolio management in Indian banks

Unit Trust of India
It is a financial organization in India, which was created by the UTI Act passed by the Parliament in 1963. It has over 70 schemes in domestic MF space and has the largest investor base of over 9 million in the whole industry. It is present in over 450 districts of the country and has 100 branches called UTI Financial Centers or UFCs. About 50% of the total IFAs in the industry work for UTI in distributing its products! India Posts, PSU Banks and all the large Private and Foreign Banks have started distributing UTI products. The total average Assets Under Management (AUM) for the month of June 2008 was Rs. 530 billion and it ranked fourth. In terms of equity AUM it ranked second and in terms of Equity and Balanced Schemes AUM put together it ranked FIRST in the industry. This measure indicates its revenue- earning capacity and its financial strength.

Besides running domestic MF Schemes UTI AMC is also a registered portfolio manager under the SEBI (Portfolio Managers) Regulations. It runs different portfolios for its HNI and Institutional clients. It is also running a Sharia Compliant portfolio for its Offshore clients. UTI tied up with Shinsei Bank of Japan to run a large size India-centric portfolio for Japanese investors.

For its international operations UTI has set up its 100% subsidiary, UTI International Limited, registered in Guernsey, Channel Islands. It has branches in London, Dubai and Bahrain. It has set up a Joint Venture with Shinsei Bank in Singapore. The JV has got its license and has started its operations.

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In the area of alternate assets, UTI has a 100% subsidiary called UTI Ventures at Banglore This company runs two successful funds with large international investors being active participants. UTI has also launched a Private Equity Infrastructure Fund along with HSH Nord Bank of Germany and Shinsei Bank of Japan.

Bank Of Baroda
1969 The Bank was brought into existence by a Ordinance issue on 19 th July,

by the Central Government. The Bank is a Government of India. Undertaking and carries on all types of banking business including foreign exchange. The Ordinance was replaced by the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1969. Besides managing public issues and giving underwriting support, The Bank established a `Non-resident Portfolio Management. Consultancy Cell'. Due to closure of 2 branches in U.K. and 1 branch in UAE, non-operative branch in Bangladesh was not taken into account. 1970 Income-Tax consultancy services was set-up in September to assist. Its constituents in the filing of income returns. Bank of Baroda (U.K.) Nominees Ltd., London is a subsidiary of the Bank. Bob Fiscal Services Ltd., is also a subsidiary of the Bank which handles functions such as merchant banking, equipment leasing, investment banking, inter-corporate deposit, etc. Bank of Baroda (Kenya) Ltd., Kenya is subsidiary of the Bank.

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Chapter 3 Portfolio Management

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Introduction of Portfolio Management

An investor considering investment in securities is faced with the problem of choosing from among a large number of securities and how to allocate his funds over this group of securities. Again he is faced with problem of deciding which securities to hold and how much to invest in each. The risk and return characteristics of portfolios. The investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios. As the risk return characteristics of individual securities as well as portfolios also change. This calls for periodic review and revision of investment portfolios of investors. An investor invests his funds in a portfolio expecting to get good returns consistent with the risk that he has to bear. The return realized from the portfolio has to be measured and the performance of the portfolio has to be evaluated. It is evident that rational investment activity involves creation of an investment portfolio. Portfolio management comprises all the processes involved in the creation and maintenance of an investment portfolio. It deals specifically with the security analysis, portfolio analysis, portfolio selection, portfolio revision & portfolio evaluation. Portfolio management makes use of
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analytical techniques of analysis and conceptual theories regarding rational allocation of funds. Portfolio management is a complex process which tries to make investment activity more rewarding and less risky.

Investing in securities such as shares, debentures, and bonds is profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well artistic skill. In such investments both rationale and emotional responses are involved. Investing in financial securities is now considered to be one of the best avenues for investing one savings while it is acknowledged to be one of the best avenues for investing one saving while it is acknowledged to be one of the most risky avenues of investment. It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called portfolio. Creation of a portfolio helps to reduce risk, without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success.

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Definition of 'Portfolio Management'

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.

Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.

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Precise explanation of Portfolio Management

In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio management: passive and active. Passive management simply tracks a market index, commonly referred to as indexing or index investing.

Active management involves a single manager, co-managers, or a team of managers who attempt to beat the market return by actively managing a fund's portfolio through investment decisions based on research and decisions on individual holdings. Closed-end funds are generally actively managed.

Portfolio is none other than Basket of Stocks. Portfolio Management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate). In order to meet specified investment goals for the benefit of the investors. It may refer to:

Investment management, handled by a portfolio manager IT Program management IT portfolio management Project management Project portfolio management

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Role of Portfolio Management:There was a time when portfolio management was an exotic term. A practice which is beyond the reach of the small investor, but the time has changed now. Portfolio management is now a common term and is widely practiced in INDIA. The theories and concepts relating to portfolio management now find there way in the front pages of the financial newspapers and magazines. In early 90s India embarked on a program of economic liberalization and globalization, with high participation of private players. This reform process has made the Indian industry efficient, with rapid computerization, increased market transparency, better infrastructure and customer services, closer integration and higher volume. The markets are dominated by large institutional investors with their diversified portfolios. A large number of mutual funds have come up in the market since 1987. With this development investment in securities has gained considerable momentum

Along with the spread of the securities investment way among Indian investors have changed due to the development of the quantitative techniques. Professional portfolio management, backed by research is now being adopted by mutual funds, investment consultants, individual investors and big brokers. The Securities Exchange Board of India (SEBI) is a regulatory body in INDIA. It ensures that the stock market is free from fraud, and of course the main objective is to ensure that the investors money is safe. With the advent of computers the whole process of portfolio management has become quite easy. The computer can absorb large volumes of data, perform the computations accurately and quickly give out the results in any desired form. Moreover simulation, artificial intelligence etc provides means of testing alternative solutions. The trend towards liberalization and globalization of the
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economy has promoted free flow of capital across international borders. Portfolio not only now include domestic securities but foreign too. So financial investments cant be reaped without proper management.

Another significant development in the field of investment management is the introduction to Derivatives with the availability of Options and Futures. This has broadened the scope of investment management. Investment is no longer a simple process. It requires a scientific knowledge, a systematic approach and also professional expertise.

Portfolio management is the only way through which an investor can get good returns, while minimizing risk at the same time. So portfolio management objectives can be stated as: Risk minimization. Safeguarding capital. Capital Appreciation. Choosing optimal mix of securities. Keeping track on performance.

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The Value of Portfolio Management:-

Portfolio management is a process to ensure that your organization or department spends its scarce resources on the work that is of the most value. If you practice portfolio management throughout your organization, this process helps to ensure that only the most valuable work is approved and managed across the entire enterprise. If you practice portfolio management at a departmental level, it will provide the same function at this lower level.

Department leaders that do not understand how their budgets are spent, and who cannot validate that the work being funded is the most important, will find themselves under greater scrutiny and second-guessing in the future. Portfolio management can help your department answer some of the most basic, yet difficult, questions regarding work performed and value provided.

Improved Resource Allocation. Too often today, low value projects, or projects in trouble, squeeze scarce resources and do not allow more valuable projects to be executed. One critical step is for all departments to prioritize their own work. However, that is only part of the process. True
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portfolio

management

on

an

organization-wide

basis

requires

prioritization of work across all of the departments. In addition to more effectively allocating labor, non-labor resources can be managed in the portfolio as well.

This includes equipment, software, outsourced work, etc. Just because you outsource a project, for instance, and do not use your own labor, does not mean it should not be a part of the portfolio. The same prioritization process should take place with all of the resources proposed for the portfolio.

Improved Scrutiny of Work. Everyone has pet projects that they want to get done. In some departments, managers make funding decisions for their own work and they are not open to challenge and review. Portfolio management requires work to be approved by all the key stakeholders. The proposed work is open to more scrutiny since managers know that when work is approved in one area, it removes funding for potential work in other areas. As stewards of the department's money, the Executive will now have a responsibility to approve and execute the work that is absolutely the highest priority and the highest value.

More Openness of the Authorization Process. Utilizing a portfolio management process removes any clouds of secrecy on how work gets funded. The Business Planning Process allows everyone to propose work and ensures that people know the process that was followed to ultimately authorize work.

Less Ambiguity in Work Authorization. The portfolio management planning process provides criteria for evaluating work more consistently. This makes it easier to compare work on an apples-to-apples basis and do
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a better job in ensuring that the authorized work is valuable, aligned and balanced.

Improved Alignment of the Work. In addition to making sure that only high priority work is approved, portfolio management also results in the work being aligned. All portfolio management decisions are made within the overall context of the department's strategy and goals. In the IT department, portfolio management provides a process for better translating business strategy into technology decisions.

Improved Balance of Work. In financial portfolio management, you make sure that your resources are balanced appropriately between various financial instruments such as stocks, bonds, real estate, etc. Business portfolio management also looks to achieve a proper balance of work.

Example: When you first evaluate your portfolio of work, you may find that your projects are focused too heavily on cost cutting, and not enough on increasing revenue. You might also find that you cannot complete your strategic projects because you are spending too many resources supporting your old legacy systems. Portfolio management provides the perspective to categorize where you are spending resources and gives you a way to adjust the balance within the portfolio as needed.

Changed Focus from Cost to Investment. You don't focus on the "cost" side of your financial portfolio although, in fact, all of your assets were acquired at a cost.

Example: You may have purchased XYZ company stock for $10,000. However, when you discuss your financial portfolio, you don't focus on the
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$10,000 you do not have anymore. You invested the money and now have stock in return so you focus on the stock that you now own. You might also talk about your investment of $10,000 to purchase the stock, but your interest is in its current value and whether it has generated a positive or negative benefit! Likewise, in your business portfolio, you are spending money to receive benefits in return. Portfolio management focuses on the benefit value of the products and services produced rather than just on their cost.

This switch in focus is especially important in the Information Technology (IT) area, where many executives still think of value in terms of the accumulated cost of computers, monitors and printers. Using the portfolio management model, you show the value of all expenditures in your portfolio. These expenditures include not just the computing hardware and software, but also the value associated with all project and support work. If the value is there relative to the cost, the work should be authorized. If the value is not there relative to the cost, the work should be eliminated, cut back or backlogged. However, the basic discussion should be focused on value delivered not just on the cost of the products and services.

Increased Collaboration. In many organizations, senior managers make business decisions while only taking into account their own department.

Example: The Marketing Division is making the best decisions for Marketing, and the Finance Division is making the best decisions for Finance. However, when all the plans are put together, they do not align into an integrated whole, and, in fact, they are sometimes at odds. You cannot perform portfolio management within a vacuum. If you practice portfolio management at the top of your organization, all departments will need to collaborate on an ongoing basis. If you are practicing portfolio management
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within a service department like IT, portfolio management will force collaboration between and among IT and the other client departments.

Enhanced Communication. This is a similar benefit to increased collaboration. In many organizations today, functional departments do not communicate well with their peer departments or even within their own groups. Portfolio management requires an ongoing dialog. If your portfolio is organization-wide, the heads of the departments will need to communicate effectively.

This enhanced communication will also be required between the Executive and the portfolio management team. In addition, there are many more opportunities to communicate the value of the portfolio. Portfolio metrics should be captured and shared with the rest of the departments. A portfolio management dashboard should be created and shared. The business value of portfolio projects should also be measured and shared.

Increased Focus on When to Stop a Project. This is equivalent to selling a part of your financial portfolio because the investment no longer meets your overall goals. It may no longer be profitable, or you may need to change your portfolio mix for the purposes of overall balance. In either case, you need to sell the investment. Likewise, when you are managing a portfolio of work, you are also managing the underlying portfolio of assets that the work represents. In the IT Division, for instance, the assets include business application systems, software, hardware,

telecommunications, etc. As you look at your portfolio, you may recognize the need to "sell" assets. While the asset may not literally be sold, you may decide to retire or eliminate the asset.

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Example: A number of years ago you may have converted to new database software and now you realize that only a couple of the old databases remain in use. It may make sense to proactively migrate the remaining old databases to the new software. This simplifies the technical environment and may also result in eliminating a software maintenance contract. This is equivalent to selling an asset that is no longer useful within the portfolio.

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Implementation of Portfolio Management:Many implementations of portfolio management start directly with trying to identify and p-rioritize the work of the portfolio, most likely because that is obviously where you will find the greatest value. However, if you start there directly, you will soon find your group is in disagreement over what work provides the most value.

The value that work brings to your organization is typically, though not necessarily, based on the cost/benefit implications and how well it aligns with your organization's strategy, goals and objectives. Alignment to strategy is not so easy to achieve without some work up-front. Corporate strategy is usually expressed as high-level statements that describe what your organization is trying to achieve (through goals and objectives) and how the organization plans to achieve it (strategies and tactics). If you do not have this base of reference, you cannot evaluate your work for alignment.

If you are in agreement on the need for alignment, the next question is how best to define the goals and objectives. You cannot just sit down in a room and make the decisions in isolation. The right approach is to develop a corporate strategy that looks at where you are today and where you want to be in the future, then determining how best to get there. Without a clear picture of where you are and where you want to be, it is very difficult to put the necessary organization and processes into place.

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Objectives of Portfolio Management :The main objectives of portfolio management in finance are as follows:-

1. Security of Principal Investment : Investment safety or minimization of risks is one of the most important objectives of portfolio management. Portfolio management not only involves keeping the investment intact but
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also contributes towards the growth of its purchasing power over the period. The motive of a financial portfolio management is to ensure that the investment is absolutely safe. Other factors such as income, growth, etc., are considered only after the safety of investment is ensured.

2. Consistency of Returns : Portfolio management also ensures to provide the stability of returns by reinvesting the same earned returns in profitable and good portfolios. The portfolio helps to yield steady returns. The earned returns should compensate the opportunity cost of the funds invested.

3. Capital Growth : Portfolio management guarantees the growth of capital by reinvesting in growth securities or by the purchase of the growth securities. A portfolio shall appreciate in value, in order to safeguard the investor from any erosion in purchasing power due to inflation and other economic factors. A portfolio must consist of those investments, which tend to appreciate in real value after adjusting for inflation.

4. Marketability : Portfolio management ensures the flexibility to the investment portfolio. A portfolio consists of such investment, which can be marketed and traded. Suppose, if your portfolio contains too many unlisted or inactive shares, then there would be problems to do trading like switching from one investment to another. It is always recommended to invest only in those shares and securities which are listed on major stock exchanges, and also, which are actively traded. 5. Liquidity : Portfolio management is planned in such a way that it facilitates to take maximum advantage of various good opportunities upcoming in the market. The portfolio should always ensure that there are

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enough funds available at short notice to take care of the investors liquidity requirements.

6. Diversification of Portfolio : Portfolio management is purposely designed to reduce the risk of loss of capital and/or income by investing in different types of securities available in a wide range of industries. The investors shall be aware of the fact that there is no such thing as a zero risk investment. More over relatively low risk investment give correspondingly a lower return to their financial portfolio.

7. Favorable Tax Status : Portfolio management is planned in such a way to increase the effective yield an investor gets from his surplus invested funds. By minimizing the tax burden, yield can be effectively improved. A good portfolio should give a favorable tax shelter to the investors. The portfolio should be evaluated after considering income tax, capital gains tax, and other taxes.

The objectives of portfolio management are applicable to all financial portfolios. These objectives, if considered, results in a proper analytical approach towards the growth of the portfolio. Furthermore, overall risk needs to be maintained at the acceptable level by developing a balanced and efficient portfolio. Finally, a good portfolio of growth stocks often satisfies all objectives of portfolio management.

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TYPES OF PORTFOLIO MANAGEMENT :-

The two types of portfolio management services are available for the investors:

1. The Discretionary portfolio management services (DPMS): In this type of services, the client parts with his money in f a v o r o f ma n a g e r , w h o i n r e t u r n , h a n d l e s a l l t h e p a p e r work, makes all the decisions and gives a good return on the investment and for this he charges a certain fees.

In this discretionary PMS, to maximize the yield, almost all portfolio managers parks the funds in the money market s e c u r i t i e s s u c h a s o v e r n i g h t ma r k e t , 1 8 2 d a ys t r e a s u r y bills and 90 days commercial bills.

Normally, return on such investment varies from 14 to 18per cent, depending on the call money rates prevailing at the time of investment.
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2. The Non-discretionary portfolio management services:

The manager function as a counselor, but the investor is free to accept or reject the managers advice, the manager for a services charge also undertakes the paper work.

The manager concentrates on stock market instruments with a portfolio tailor made to the risk taking ability of the investor.

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Steps in portfolio management in ICICI Bank:-

1) IDENTIFICATION OF THE OBJECTIVES

The starting point in the process is to determine the characteristics of an various investment and then matching them with the individuals need and preferences. All the personal investing is designed in order to achieve certain objectives.

These objectives may be tangible such as buying a car, house etc. and intangible objectives such as social status, security etc. Similarly, these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability and liquidity. Personal or an individual objectives may be related to personal characteristics of individuals such as family commitments, status, depends, educational requirements, income, consumption and provision for retirement etc.

2) FORMULATION OF PORTFOLIO STRATEGY

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The aspect of Portfolio Management is the most important element of proper portfolio investment and speculation. While planning , a careful review should be conducted about the financial situation and current capital market conditions.

This will suggest a set of investment and speculation policies to be followed. The statement of investment policies includes the portfolio objectives, strategies and constraints. Portfolio strategy means plan or policy to be followed while investing in different types of assets.

There are different investment strategies. They require changes as time passes, investors wealth changes, security price change, investors knowledge expands. Therefore, the optional strategic asset allocation also changes. The strategic asset allocation policy would call for broad diversification through an indexed holding of virtually all securities in the asset class.

3) SELECTION OF ASSET MIX

The most important decision in portfolio management is selection of asset mix. It means spreading out portfolio investment into different asset classes like bonds, stocks, mutual funds etc. In other words selection of asset mix means investing indifferent kinds of assets and reduces risk and volatility and maximizes returns in investment portfolio.

Selection of asset mix refers to the percentage to the invested in various security classes. The security classes are simply the type of securities asunder:

1. Money market instrument 2. Fixed income security

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3. Equity shares 4. Real estate investment 5. International securities

Once the objective of the portfolio is determined the securities to be included in the portfolio must be selected. Normally the portfolio is selected from a list of high-quality bonds that the portfolio manager has at hand. The portfolio manager has to decide the goals before selecting the common stock. The goal may be to achieve pure growth, growth with some income or income only. Once the goal has been selected, the portfolio manager can select the common stocks.

4) PORTFOLIO EXECUTION:

The process of portfolio management involves a logical set of steps common to any decision, plan implementation and monitor. Applying this process to actual portfolios can be complex

Therefore, in the execution stage, three decisions need to be made, if the percentage holdings of various asset classes are currently different from desired holdings. The portfolio than, should be rebalanced. If the statement of investment policy requires pure investment strategy, this is only thing, which is done in the execution stage.

However, many portfolio managers engage in the speculative transactions in the belief that such transactions will generate excess risk-adjusted returns. Such speculative transactions are usually classified as timing or selection decisions. Timing decisions over or under weight various asset classes, industries or economic sectors from the strategic asset allocation.
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Such timing decisions are known as tactical asset allocation and selection decision deals with securities within a given asset class, industry group or economic sector. The investor has to begin with periodically adjusting the asset mix to the desired mix, which is known as strategic asset allocation. Then the investor or portfolio manager can make any tactical asset allocation or security selection decision.

5) PORTFOLIO REVISION Portfolio management would be an incomplete exercise without periodic review. The portfolio, which is once selected, has to be continuously reviewed over a period of time and if necessary revised depending on the objectives of investor. Thus, portfolio revision means changing the asset allocation of a portfolio.

Investment portfolio management involves maintaining proper combination of securities, which comprise the investors portfolio in a manner that they give maximum return with minimum risk. For this purpose, investor should have continuous review and scrutiny of his investment portfolio. Whenever adverse conditions develop, he can dispose of the securities, which are not worth.

However, the frequency of review depends upon the size of the portfolio, the sum involved, the kind of securities held and the time available to the investor. The review should include a careful examination of investment objectives, targets for portfolio performance, actual results obtained and analysis of reason for variations. The review should be followed by suitable and timely action. There are techniques of portfolio revision .Investors buy stock according to their objectives and return-risk framework. These fluctuations may be related to
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economic activity or due to other factors. Ideally investors should buy when prices are low and sell when prices rise to levels higher than their normal fluctuations. The investor should decide how often the portfolio should be revised .If revision occurs to often, transaction and analysis costs may be high. If revision is attempted too infrequently the benefits of timing may be foregone. The important factor to take into consideration is, thus, timing for revision of portfolio

6) PORTFOLIO PERFORMANCE EVALUATION:

Portfolio management involves maintaining a proper combination of securities, which comprise the investors portfolio in a manner that they give maximum return with minimum risk. The investor should have continues review and scrutiny of his investment portfolio. These rates of return should be based on the market value of the assets of the fund. Complete evaluation of the portfolio performance must include examining a measure of the degree of risk taken by the fund.

A portfolio manager, by evaluating his own performance can identify sources of strength or weakness. It can be viewed as a feedback and control mechanism that can make the investment management process more effective. Good performance in the past might have resulted from good luck, in which case such performance may not be expected to continue in the future. On the other hand, poor performance in the past might have been result of bad luck.

Therefore, the first task in performance evaluation is to determine whether past performance was good or poor. Then the second task is to determine whether such performance was due to skill or luck. Good performance in the past may
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have resulted from the actions of a highly skilled portfolio manager. The performance of portfolio should be measured periodically, preferably once in a month or a quarter. The performance of an individual stock should be compared with the overall performance of the market.

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FUNCTIONS OF PORTFOLIO MANAGEMENT

The basic purpose of portfolio management is to maximize yield and minimize risk. Every investor is risk averse. In order to diversify the risk by investing into various securities following functions are required to be performed.

The functions undertaken by the portfolio management are as follows:

1. To frame the investment strategy and select an investment mix to achieve the desired investment objective;

2. To provide a balanced portfolio which can not only hedge against the inflation but can also optimize returns with the associated degree of risk;

3. To make timely buying and selling of securities;

4. To maximize the after-tax return by investing in various taxes saving investment instruments.

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Goals of Portfolio Management :-

There are three goals of portfolio management:

1. Maximize the value of the portfolio

2. Seek balance in the portfolio

3. Keep portfolio projects strategically aligned

It provides a set of portfolio management tools to help achieve these goals. With multiple business units, product lines or types of development, were commend a strategic allocation process based on the business plan. The Master Project Schedule provides a summary of all-active as well as proposed projects and classifies them by status (active, proposed, on-hold)and by business unit/product line to align projects with the strategic allocation. The Master Project Schedule also provides additional portfolio information to prioritize projects using either a scorecard method or the development productivity index (DPI *). In addition to this prioritization, PD-Trek provides a Risk-Reward Bubble Chart and a Project Type Pie Chart to assure balance. A Product or Technology Roadmap template is provided to help visualize platform and
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technology relationships to assure critical project relationships are not overlooked with this prioritization. This will allow management to develop a balanced approach to selecting and continuing with the appropriate mix of projects to satisfy the three goals.

EQUITY PORTFOLIO MANAGEMENT:-

It is logical that the expected return of a portfolio should depend on the expected return of the security contained in it.

There are two approaches to the selection of equity portfolio.

One is technical analysis and the other is fundamental analysis.

Technical analysis assumes that the price of a stock depends on supply and demand in the stock market.

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All financial and market information of given security is already reflected in the market price.

Charts are drawn to identify price movements of a given security over a period of time.

These charts enable the investors to predict the future movement of the price of security.

Equity portfolio is a risky portfolio, but at the same time the return is also higher.

Equity portfolio provides highest returns.

An efficient portfolio manager can obviously give more weight age to fundamental analysis than the technical analysis.

The fundamental analysis includes the study of ratio analysis, past and present track record of the company, quality of management, government policies etc.

There may be several combinations of investment portfolio.

Allocation of funds for equity portfolio is a question of topmost importance to any portfolio manager.

Among all risky investments, selection of the best possible combination and allocation of funds among these selected investment groups are of great importance.

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BONDS PORTFOLIO MANAGEMENT

The individual investors can invest in bond portfolio.

The portfolio can be spared over variety of securities.

Investment in bond is less risky and safe as compared to equity investment.

However, the return on bond is very low.

There are no much fluctuations in bond prices. Therefore, there is no capital appreciation in this case.

Some bonds are tax saving which help the investor to reduce his tax liability.

There is no much liquidity in bonds, investment in bond portfolio is less risky and safe but, return is reasonable, low liquidity and tax saving are some of the more important features of bond portfolio investment.

However, it is suitable for normal investors for getting average return over their investment.

Bond portfolio includes different types of bond, tax free bonds and taxable bonds.

Tax free bonds are issued by public sector undertaking or Government on which interest s compounded half yearly and payable accordingly.

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They have a maturity of 7 to 10 years with the facility for buyback.

The tax free bonds means the interest income on these bonds is not taxable.

Therefore, the interest rates on these bonds are very low.

However, taxable bonds yield higher interest compounded half yearly and also payable half yearly.

They also have buy back facilities similar to taxable bonds.

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Advantages of Portfolio Management :Capital markets over a long period have always given a better return than any other investment. The investment in stock markets by individuals is a complicated business. It is better that a professional handles this.

Disadvantage of Portfolio Management :The most obvious disadvantage is of active management is that the fund manager may make bad investment choices or follow an unsound theory in managing the portfolio.

The fees associated with active management are also higher than those associated with passive management, even if frequent trading is not present.

Those who are considering investing in an actively-managed mutual fund should evaluate the fund's prospectus carefully.

Data from recent decades demonstrates that the majority of activelymanaged large and mid-cap stock funds in United States fail to outperform their passive stock index counterparts.

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PROSPECTS OF PORTFOLIO MANAGEMENT

At present, there are a very few agencies which render this type of services in an organized and professional way.

However, their share in the total volume is very small.

There is no constraint on the demand for this type of financial service as every entity would be saving and investing and interested in optimizing the rate of return.

The size of capital market is increasing.

There is an increase in the number of stock exchanges.

New instruments are being introduced in the capital market.

The equity cult is spreading in the interiors and rural areas.

The percentage of investment of the household savings is bound to go up.

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It is conservatively estimated that during the eighth plan resources to the tune of over Rs.50000crore will be mobilized through the stock market.

India today has 20 million investors, as compared to 2million in 1980.

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Chapter 4 Portfolio Management Service in ICICI Bank

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Portfolio Management Services in ICICI Bank

Portfolio Management Services account is an investment portfolio in Stocks, Debt and fixed income products 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 portfolios, your account may be unique. As per SEBI guidelines, only those entities who are registered with SEBI for providing PMS services can offer PMS to clients. There is no separate certification required for selling any PMS product. So this is case where miss-selling can happen. As per the SEBI guidelines, the minimum investment required to open a PMS account is Rs. 5 Lacs. However, different providers have different minimum balance requirements for different products. For E.g Birla AMC PMS is having min amount requirement of Rs. 25 lacs for a product. Similarly HSBC AMC is having minimum requirement of 50 lacs for their PMS and Reliance is having min requirement of Rs. 1 Crore. In India Portfolio Management Services are also provided by equity broking firms & wealth management services.

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How can investor invest in a Portfolio Management Services (PMS) in ICICI Bank?

There are two ways in which an investor can invest in a Portfolio Management Services: 1. Through Cheque payment. 2. Through transferring existing shares held by the customer to the PMS account. The Value of the portfolio transferred should be above the minimum investment criteria. Beside this customer will need sign a few documents like PMS agreement with the provider, Power of Attorney agreement, New demat account opening format (even if investor has a demat account he is required to open a new one) and documents like PAN, address proof and Identity proofs are mandatory. NRIs can invest in a PMS. The NRI needs to open a PIS account for investing in PMS. The documentation required for an NRI, however, is different from a resident Indian. A checklist of documents is provided by each PMS provider.

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How is PMS different from a Mutual Fund in ICICI Bank?

Both PMS and Mutual Funds are types of managed Funds. The difference to the investor in a Portfolio Management Services over a Mutual Fund is:

Concentrated Portfolio. Portfolio can be tailored to suit the needs of investor. Investors directly own the stocks, rather than the fund owning the stocks. Difference in taxation

This article is written by guest author Madhupam Krishna. A Post Graduate in Finance, currently he heads sales function for Rajasthan for Principal PNB Mutual Fund.

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Working of a Portfolio Management Services (PMS) in ICICI Bank:Each PMS account is unique and the valuation and portfolio of each account may differ from one another. There is no NAV for a PMS scheme; however the customer will get the valuation of his portfolio on a daily basis from the PMS provider. Each PMS account is unique from one another. Every PMS scheme has a model portfolio and all the investments for a particular investor are done in the Portfolio Management Services on the basis of model portfolio of the scheme. However the portfolio may differ from investor to investor. This is because of:

1. Entry of investors at different time. 2. Difference in amount of investments by the investors 3. Redemptions/additional purchase done by investor 4. Market scenario Eg If the model portfolio has investment in Infosys, and the current view of the Fund Manager on Infosys is HOLD(and not BUY), a new investor may not have Infosys in his portfolio.

Under PMS schemes the fund manager interaction also takes place. The frequency depends on the size of the client portfolio and the Portfolio Management Services provider. Bigger the portfolio, frequency of interaction is more. Generally, the PMS provider arranges for fund manager interaction on a quarterly/half yearly basis.

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Portfolio Management Services (PMS) Charges in ICICI Bank:A PMS charges following fees. The charges are decided at the time of investment and are vetted by the investor. Entry Load PMS schemes may have an entry load of 3%. It is charged at the time of buying the PMS only. Management Charges Every Portfolio Management Services scheme charges Fund Management charges. Fund Management Charges may vary from 1% to 3% depending upon the PMS provider. It is charged on a quarterly basis to the PMS account. Profit Sharing Some PMS schemes also have profit sharing arrangements (in addition to the fixed fees), wherein the provider charges a certain amount of fees/profit over the stipulated return generated in the fund. For Eg PMS X has fixed charges of 2% plus a charge of 20% of fees for return generated above 15% in the year. In this case if the return generated in the year by the scheme is 25%, the fees charged by the PMS will be 2% + {(25%-15%)*20%}. The Fees charged is different for every Portfolio Management Services provider and for every scheme. It is advisable for the investor to check the charges of the scheme.

Apart from the charges mentioned above, the PMS also charges the investors on following counts as all the investments are done in the name of the investor:

Custodian Fee De mat Account opening charges Audit charges Transaction brokerage
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Taxation for Portfolio Management Services in ICICI Bank:-

Any income from Portfolio Management Services account is a business income. Unlike MF, PMS is not required to remain 65%+ invested in equity to get equity taxation benefit. Each Portfolio Management Services account is in the name of additional investor and so the tax treatment is done on an individual investor level. Profit on the same can be considered as business income.( i.e slab wise). Profit can be considered as Capital gains. [STCG (15%) or LTCG(Tax free)]. It depends on clients Chartered Accountant or the assessing officer how he treats this Income. The PMS provider sends an audited statement at the end of the FY giving details of STCG and LTCG, it is on the client and his CA to decide to treat it as capital gain or business income.

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PORTFOLIO MANAGEMENT SCHEMES (PMS) PRESENT SCENARIO in ICICI Bank:The regulatory environment has totally changed now and with SEBI fixing strict norms for companies launching PMS, only the serious players are going to enter his business. The PMS members today have full transparency: managers are required to maintain individual accounts showing all dealings in a clients portfolio.

They must also advise him on all transactions. Secondly, all PMS Managers have to send their clients at least a quarterly report giving the status of their portfolio and the transactions that have taken place. The client-PMS manager contract is as per SEBI ground rules. It has several checks to protect investors interest like laying the custodial responsibility on the manager and preventing any alterations in the scheme without the clients consent. Finally, managers have to send half-yearly reports to SEBI on their portfolio management activities. Experienced handling of cash and money power apart, PMS also takes care of a number of the headaches endemic with investing in the markets. The biggest one is custodial services.

All PMS Managers act as custodians of shares and are responsible for the load of paper work related to the share transfer, documentation work, postal work and even ensuring that dividends are credited to clients account. SEBI directives also put the onus on the PMS promoters to take follow-up action in case shares are lost or damaged.

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Difficulties such as late transfer and postal theft are reduced incase of brokers, because they not only have direct access to registrars but also have branch offices to ensure quicker transfers. All these services come for a fee, of course. While the actual PMS charges vary from a high of 7% of the amount invested to a low of around 3.5%, follow-up services charges extra. As in all schemes, there is a downside to putting cash into portfolio management as well.

The most important is the fact that despite all the SEBI checks. PMS Managers are not allowed to assured any fixed returns. This really discharges the managers for any responsibility if the scheme does badly. So investors have to be very careful in choosing the promoters. Problem inherent in most schemes on offer will be misused of investors funds to some extent. Funds collected from investors will aid the brokers concerned in their own games in the market.

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Chapter 5 Portfolio Manager of ICICI Bank

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Portfolio Manager of ICICI Bank:-

A portfolio manager of icici bank is either a person who makes investment decisions using money other people have placed under his or her control or a person who manages a financial institution's asset and liability (loan and deposit) portfolios. On the investments side, they work with a team of analysts and researchers, and are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for a fund- or asset-management vehicle.

Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-side analysts from investment banks. It is their job to sift through the relevant information and use their judgment to buy and sell securities. Throughout each day, they read reports, talk to company managers and monitor industry and economic trends looking for the right company and time to invest the portfolio's capital.

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A team of analysts and researchers are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for a fund or asset-management vehicle. Portfolio managers make decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.

Portfolio management is about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.

In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio management: passive and active. Passive management simply tracks a market index, commonly referred to as indexing or index investing. Active management involves a single manager, co-managers, or a team of managers who attempt to beat the market return by actively managing a fund's portfolio through investment decisions based on research and decisions on individual holdings. Closed-end funds are generally actively managed.

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QUALITIES OF PORTFOLIO MANAGER of ICICI Bank:1. Sound general knowledge:

Portfolio management in icici bank is an existing and challenging job.

He has to work in an extremely uncertain and conflicting environment.

In the stock market every new piece of information affects the value of the securities of different industries in a different way.

He must be able to judge and predict the effects of the information he gets.

He must have sharp memory, alertness, fast intuition and self-confidence to arrive at quick decisions.

2. Analytical Ability:

He must have his own theory to arrive at the value of the security. An analysis of the securitys values, company, etc. is continues job of the portfolio manager in icici bank. A good analyst makes a good financial consultant. The analyst can know the strengths, weakness, opportunities of the economy, industry and the company.

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3. Marketing skills:

He must be good salesman.

He has to convince the clients about the particular security.

He has to compete with the Stock brokers in the stock market.

In this Marketing skills help him a lot.

4. Experience:

In the cyclical behavior of the stock market history is often repeated, therefore the experience of the different phases helps to make rational decisions. The experience of different types of securities, clients, markets trends etc. makes a perfect professional manager.

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CODE OF CONDUCT- PORTFOLIO MANAGERS of ICICI Bank:

1. A portfolio manager shall, in the conduct of his business, observe high standards of integrity and fairness in all his dealings with his clients and other portfolio managers.

2. The money received by a portfolio manager from a client for an investment purpose should be deployed by the portfolio manager as soon as possible for that purpose and money due and payable toa client should be paid forthwith.

3. A portfolio manager shall render at all time high standards of services exercise due diligence, ensure proper care and exercise independent professional judgment. The portfolio manager shall either avoid any conflict of interest in his investment or disinvestments decision, or where any conflict of interest arises; ensure fair treatment to all his customers. He shall disclose to the clients, possible sources of conflict of duties and interest, while providing unbiased services. A portfolio manager shall not place his interest above those of his clients.

4. A portfolio manager shall not make any statement or become privy to any act, practice or unfair competition, which is likely to be harmful to the interests of other portfolio managers or it likely to place such other portfolio managers in a disadvantageous position in relation to the portfolio manager himself, while competing for or executing any assignment.

5. A portfolio manager shall not make any exaggerated statement, whether oral or written, to the client either about the qualification or the capability to render
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certain services or his achievements in regard to services rendered to other clients.

6. At the time of entering into a contract, the portfolio manager shall obtain in writing from the client, his interest in various corporate bodies, which enables him to obtain unpublished price-sensitive information of the body corporate.

7. A portfolio manager shall not disclose to any clients or press any confidential information about his clients, which has come to his knowledge.

8. The portfolio manager shall where necessary and in the interest of the client take adequate steps for registration of the transfer of the clients securities and for claiming and receiving dividend, interest payment and other rights accruing to the client. He shall also take necessary action for conversion of securities and subscription of/or rights in accordance with the clients instruction.

9. Portfolio manager shall ensure that the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before they take any investment decision.

10. He should render the best possible advice to the client having regard to the clients needs and the environment, and his own professional skills.

11. Ensure that all professional dealings are affected in a prompt, efficient and cost effective manner.

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SECURITIES AND EXCHANGE BOARD OF INDIA RULES, 1993 REGARDING PORTFOLIO MANAGERS
1. No person to act as portfolio manager without certificate.

2. No person shall carry on any activity as a portfolio manager unless he holds a certificate granted by the Board under this regulation.

3. Provided that such person, who was engaged as portfolio manager prior to the coming into force of the Act, may continue to carry on activity as portfolio manager, if he has made an application for such registration, till the disposal of such application.

4. Provided further that nothing contained in this rule shall apply in case of merchant banker holding a certificate granted by the board of India Regulations, 1992 as category I or category II merchant banker, as the case may be.

5. Provided also that a merchant banker acting as a portfolio manager under the second provision to this rule shall also be bound by the rules and regulations applicable to a portfolio manager.

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Conditions to grant or renewal of certificate to portfolio manager:

The board may grant or renew certificate to portfolio manager subject to the following conditions namely:

a) The portfolio manager in case of any change in its status and constitution, shall obtain prior permission of the board to carry on its activities;

b) He shall pay the amount of fees for registration or renewal, as the case may be, in the manner provided in the regulations;

c) He shall make adequate steps for redressed of grievances of the clients within one month of the date of receipt of the complaint and keep the board informed about the number, nature and other particulars of the complaints received;

d) He shall abide by the rules and regulations made under the Act in respect of the activities carried on by the portfolio manager.

Period of validity of the certificate.

The certificate of registration on its renewal, as the case may be, shall be valid for a period of here years from the date of its issue to the portfolio manager.

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SECURITIES AND EXCHANGE BOARD OF INDIA REGULATIONS, 1993

Registration of Portfolio Managers:

1. Application for grant of certificate An application by a portfolio manager for grant of a certificate shall be made to the board on Form A.

Notwithstanding anything contained in sub regulation(1), any application made by a portfolio manager prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in form A shall be treated as an application made in pursuance of sub-regulation and dealt with accordingly.

2. Application of confirm to the requirements Subject to the provisions of sub-regulation (2) of regulation 3, any application, which is not complete in all respects and does not confirm to the instructions specified in the form, shall be rejected:

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Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the board.

3.

Furnishing

of

further

information,

clarification

and

personal representation. The Board may require the applicant to furnish further information or clarification regarding matters relevant to his activity of a portfolio manager for the purposes of disposal of the application.The applicant or, its principal officer shall, if so required, appear before the Board for personal representation.

4. Consideration of application. The Board shall take into account for considering the grant of certificate, all matters which are relevant to the activities relating to portfolio manager andin particular whether the applicant complies with the following requirements namely: The applicant has the necessary infrastructure like to adequate office space, equipments and manpower to effectively discharge his activities;

The applicant has his employment minimum of two persons who have the experience to conduct the business of portfolio manager; A person, directly or indirectly connected with the applicant has not been granted registration by the Board in case of the applicant being a body corporate;

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 The applicant, fulfils the capital adequacy requirements specified in regulation 7 the applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market and which has an adverse bearing on the business of the applicant; The applicant, his director, partner or principal officer has not at any time been convinced for any offence involving moral turpitude or has been found guilty of any economic offences. The applicant has the professional qualification from an institution recognized by the government in finance, law, and accountancy or business management.

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Chapter 7 Findings

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FINDINGS
This case study has been conducted on various age groups of individual investors on portfolio management. These consist of age group ranging from 18-30, 30-45, 45-60 and 60 & above. Following interpretation has been made on the basis of the information collected from individual investors of various age groups through questionnaire:

Age group of 18-30 is more aware about services offered by portfolio manager whereas age group of 60 & above is less aware of such services. Management of mutual fund investment, management of equities, management of money market investment, advisory and consultancy services are the services provided by the portfolio management institution. Amongst these, advisory and consultancy services are the services that the individual investors are more aware of.

Due to lack of experience and market knowledge, the age group of 45-60 is more interested to hire portfolio manager at present in order to manage their portfolio. The age group ranging from 18-30 is more interested in making investment inequities whereas group ranging from 60 & above are more interested in making investment in mutual fund. On the other hand, age group of 30-45 and 45-60 are least interested in any of the services provided by portfolio management institution. Reasons specified for the presence of disinterest in any of these services were that the investors are having good hold on their investment. Also they possess good knowledge with regards to market fluctuations, investment portfolios and other factors relating to portfolio management.

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All the age groups of individual investors in portfolio management believe that there is a better scope for portfolio management in future. Investors would prefer the introduction of services like advisory and consultancy services, investment in mutual funds in the near future.

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Chapter 8 Conclusion

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CONCLUSION

With the help of given project I got an in-depth knowledge about the working of portfolio management. Also I got an insight as too how to invest in portfolio management, which scheme provide better returns compared to other and who are the portfolio management players in the Indian market. It can be concluded from the project that future of portfolio management is bright provided proper regulations prevail and investors needs are satisfied by providing variety of schemes. The interest of investors is protected by SEBI. Portfolio management is governed by SEBI Act. Due to the benefits available to the individuals such as reduction in risk, expert professional management, diversified portfolios, tax benefits etc. young generation (i.e. age group bet. 1830) is willing to invest in different investment avenues through portfolio manager or through mutual funds which are again managed by portfolio managers. On the other hand, age group of 60 & above are least interested in making investment in different avenues through portfolio managers. They believe in investing and managing their portfolio on their own. However, it can be said that the future of portfolio management is bright in years to come.

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Chapter 9 Annexure

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Questionnaire
1. Does your bank provide portfolio management service? Yes No 2. Do all portfolio management tools work in the same way? Yes No 3. Do all projects need to be described similarly? Yes No 4. How do you deal with uncertainty? 5. What services your bank provides? 6. What Portfolio management services does your bank provide? 7. What is portfolio management service? 8. What is portfolio manager? 9. What are the steps taken for effective portfolio management? 10. What are the functions of portfolio management? 11. What is an important quality of a portfolio manager? Analytical ability Marketing skills

12. What are the types of portfolio management? 13. What are the advantages & disadvantages of portfolio management? 14. How portfolio management is implemented? 15. What are the benefits of portfolio management?

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Chapter 10 Bibliography

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NEWSPAPERS
Times of India Hindustan Times

BIBLIOGRAHPY
Harries & Niel Banking with Portfolio Management

WEBLIOGRAPHY
www.icicibank.com http://www.portfoliostep.com http://www.pptfun.com

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