Analysis of Various Investment Products of Pms and Mutual Funds

Project Report
Report on
“ANALYSIS OF VARIOUS INVESTMENT

PRODUCTS OF PMS AND MUTUAL FUNDS”
By
ABHINAV SINGH
At
Edelweiss Securities Ltd.

A Report
On
“ANALYSIS OF VARIOUS INVESTMENT

PRODUCTS OF PMS AND MUTUAL FUNDS”
IN THE PARTIAL FULFILMENT FOR THE AWARD OF POST GRADUATE PROGRAMME
Submitted by
ABHINAV SINGH
MAY 09
AUTHORIZATION
The report is submitted as partial fulfillment of the requirement of MBA program of

ICFAI Business School. He has prepared the report under my guidance and
supervision and I am satisfied with his work.
The project has been submitted by him in accordance with course requirements of
reward of MBA degree from ICFAI Business School during the academic year 2009-
2010.
This is his original work and not submitted elsewhere for award of any other
degree.
Dr. Vipin Khurana

ACKNOWLEDGMENT
It is my great pleasure to take this opportunity to acknowledge the

contribution of number of people who helped me in completing this project.
I express my deep sense of respect to Mr. Girijesh Kumar (T.L.Edelweiss Sect.

Ltd) for giving me an opportunity to work under him and allotting me this project.
I offer my heart self regards to college guide Dr. Vipin Khorana for his
continuous guidance, monitoring and informal discussion which become light for me
in the entire duration of this project in overcoming the barrier and reaching this
stage.
Finally I am sincerely thankful to others who have directly or indirectly

helped me in the completion of the project. I would also like to acknowledge the
support of other company members who has helped me to make this project.
(ABHINAV SINGH)
Icfai Business School,
Noida
PREFACE
Share markets are gaining significant grounds with the onset of booming Indian
Economy. The project involved a “Analysis of various investment products – PMS and
MUTUAL FUNDS”
I had the privilege of doing my summer training with Edelweiss securities Ltd. New
Delhi wherein I was responsible for the sales and distribution of the Demat Account.
This had been a great learning experience for me in terms of corporate culture,
etiquettes and values.
The content of this project report was decided after a detailed survey and analysis of
Share market & mutual funds.
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EXECUTIVE SUMMARY
The project is dealing with the study of PMS and Mutual funds industry.
Portfolio management involves deciding what assets to include in the portfolio,

given the goals of the portfolio owner and changing economic conditions.
Selection involves deciding what assets to purchase, how many to purchase,
when to purchase them, and what assets to divest. These decisions always
involve some sort of performance measurement, most typically expected return
on the portfolio, and the risk associated with this return.
Mutual funds Industry now represent perhaps the most appropriate investment
for small investors. The Indian mutual fund industry has already opened up many
exciting investment opportunities to Indian investors. In a mutual fund, many
investors contribute to form a common pool of money. This pool of money is
invested in accordance with a stated objective. The ownership of the fund is thus
joint or mutual; the fund belongs to all investors. A single investor’s ownership of
the fund is in the same proportion as the amount of the contribution made by
him bears to the total amount of the fund. A mutual fund uses the money
collected from investors to buy those assets which are specifically permitted by
its stated investment objective. Mutual funds have been classified into different
forms. Among them they have equity based funds; debt based funds and
balanced funds. This project deals with the study of these funds and a
comparative analysis among them to find out which option is better to invest in.
This would help to give the investors a clear view and thus encouraging them to
invest in that particular option.
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Project Report
The Report covers the following key topics –
1. Introduction
2. Mutual Funds : In depth
3. E q u i ty
4. PMS
5. Investor’s Behavior
6. Conclusion
7. Appendix
8. References
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Introduction
About Project
Title of the Project: Analysis of various Investment Products – PMS

and MUTUAL FUNDS.
The Project covers a deep analysis of PMS (Portfolio Management Services)

and mutual funds in terms of as a product for investment and formulating
marketing strategies for these products.
The objective of the project is to understand the Capital market and its
products like Portfolio Management Service (Equity, Bonds, Govt.
securities)and mutual funds for the detailed analysis of growing wealth of the
consumer. The Project also elaborates about the buying behavior of consumer
and study of the growth of their funds.
The Project also focuses on marketing strategies for different products e.g.
mutual funds, PMS, etc. and this combines multi-disciplinary and goal-
oriented assignment involving team work.
About Company
Edelweiss, a rare flower found in Switzerland. You will discover in our

identity: A graphic flower that represents ideas. Around it, the protective arms
of the letter ‘ e’: We believe ideas create wealth, but values protect it.
It is the practice of this core thought that has led to Edelweiss becoming one
of the leading financial services company in India. Its current businesses
include investment banking, securities broking, and investment management.
We provide a wide range of services to corporations, institutional investors
and high net-worth individuals.
The core inspiring thought of ‘ideas creating wealth and values protecting it’ is
translated into an approach that is led by entrepreneurship and creativity and
protected by intellectual rigor research and analysis.
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Edelweiss entered into online trading business through “Edelweiss capital”. It

is offering highly competitive brokerage fees with the option for “fixed flat fee
structure”.
Edelweiss is a financial transaction platform offering customers a wide range

of asset classes to diversify their portfolio. Through Edelweiss capital
customers would be in a position to transact in Equity, Derivatives,
Commodities, Forex, IPOs, Mutual Funds and Insurance.
The company is in the process of launching a comprehensive financial portal

enabling customers to carry out on-line trading and investment activities in a
secured, cost-effective and convenient manner.
To enable wider participation, Edelweiss also offers the convenience of off-line

transacting through its branches, call & trade facility, franchisee network and
other technically advanced, user-friendly methods.
 Edelweiss is present in 60 cities. “Best Merchant Banker” by Outlook Money

NDTV Profit Awards 2008. It offer the brokerage services across in Delhi
and Mumbai with various outlets.
Edelweiss consumers can trade in equities, commodities and offshore

investments, IPOs, mutual funds, insurance and money transfer.
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Edelweiss Securities ltd. website: www.edelblue.com
It is one of the best designed financial web sites in India. It will catch visitors’
attention with its neat interface, quality content, fast loading and research
information.
Highlight: Morning News letter from Edelweiss Capital is a must read for every
investor.
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Brokerage fee structure:
Delivery trades – 0.05%
Non- delivery trades – 0.005%
Product & Services
 Online Trading Portal for Stocks & Commodities
 Member of NSE & BSE for Equity Trading
 Member of MCX, NCDEX & DGCX for Commodities
 Off-line Trading also possible
 Unique online Security features for the first time in India
 Support activities : Research, PMS, Call Centre
 Lowest Brokerage and maximum service & Comfort.
 Equity Trading – Delivery, Margin & Derivatives
 Live News available on Portal– Reuters & Dow Jones
 Setting up kiosks at convenient locations for clients to enter

trades.
 Distribution of Financial Products
 Investments in Mutual Funds of all AMC’s
 Purchase of Insurance Policies ( Life & Non-Life)
 IPO & Margin Funding
 Off Shore Investments
 Online Portal for investments / trading in International

markets up to US$ 100,000
 Trading in Commodities, International Indices, Equity of

Overseas Exchanges
 Trading in Fx. Currencies & Offshore Bond Markets
 Other Products
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 Precious Metal Retailing - 999.99% Pure Gold Coins, Assay

Certified
 Foreign Exchange Services – Money Changers
 Travel Card & Traveler Cheques
 Instant Money Transfers from anywhere in the world
 Buying of Foreign Currency in Physical form
 Other Services
 SMS Service is given for Trade confirmation, Research Calls,

Important events / updates, Demat Balance and customers
can get all relevant info on equity, commodity, FX & MF.
 News Service - Online access to world class real time Dow

Jones news, User Defined Alerts based on news / happenings,
Global commodity coverage by Dow Jones, Market round up
by commodities control.
Ideas Create, Values Protect
Trade in Equity
Edelweiss securities offer Indian customers various options while

trading in shares.
Delivery: Using this facility client can buy scripts being traded on NSE and
BSE. Client can also sell Their Demat holding through this facility.
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Margin: Use this facility to for Intraday Trading and leverage up to 4 to 5

times against the available funds. Client can initiate a Buy or a Sell position
anytime during the trading hours but will have to square off the same before
the prescribed time for Auto Square Off which normally is 3:00 pm. Incase
client want; they can also convert their trade to “Delivery” subject to
availability of funds/ shares.
Margin XL: This facility enables client to extra leverage their funds for trading
in select scripts. In fact client can trade up to 20 times of the available funds.
Soon to be introduced.
PTST: Overnight: Normally Client can sell the shares only 2 days post their
purchase i.e. after T+2 days. However “Overnight” allows client to sell shares
even the very next day.
 Customer to Open Account with Edelweiss - One time account

opening charges for corporate customers(the companies listed in NSE and
BSE) is free and for Non- corporate there are various plans of advance
brokerage which will be discussed laterin the project , this account includes
opening of Trading & Demat account. Bank account with ICICI, HDFC & AXIS
Bank can be linked to trading account.
 Security & Safety of trading via Portal is ensured through issuance of

high security tokens which generates identity verification no’s ( apart from
Customer id & Password) for entering the portal. The number changes every
32 seconds.
 Customer can avail any of the following schemes:
Plans Advance Delivery Minimum Intraday Minimum Options

Brokerage Brokerage Cash andBrokerage (whichever is
Futures higher)
Derivatives
Plan 1,000 0.45% 3 Paise 0.045% 1 Paise 2.5% or Rs

I 100 Per Lot
Plan 2,500 0.35% 3 Paise 0.035% 1 Paise 2% or Rs 80

II Per Lot
Plan 5,000 0.25% 3 Paise 0.025% 1 Paise 1.75% r Rs

III 75 Per Lot
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Plan 15,000 0.15% 3 Paise 0.015% 1 Paise 1.5% or Rs

IV 60 Per Lot
Plan 45,000 0.10% 3 Paise 0.01% 1 Paise 1% or Rs 50

V Per Lot
 Innovative use of technology for facilitating convenient

trading/investments –
Kiosks (similar to ATM’s)
 Customer pays a monthly charge for trading through Edelweiss and NO

BROKERAGE is paid by him separately.
 Call n Trade charges - In case customer places a trade and it gets fully
or partially executed he will be charged according. All service calls are
Free.
 Customer can put in his trades at his convenience -
 At his residence / office ( PC’s, Call & Trade facility)
 At Web Worlds (PCs / Kiosks)
 While travelling ( WAP application)
 Partner’s premises, etc.
Trade in Derivatives
Edelweiss, offers their clients the facility to trade in Futures and Options of
Index i.e. Nifty and other Stocks on NSE under its Derivatives Section.
In futures trading, client takes buy/sell positions in index or stocks contracts

depending upon their view of the market. Normally three contracts of Current,
Near and Far month are available for trading at any given point of time. Client
can trade in any of these.
Tools like Margin Calculator are available in the Derivatives section to help the
client calculate the actual margin requirement and know the spread benefits if
any.
Trade in Commodities
Edelweiss brings both the major national level exchanges i.e. NCDEX and
MCX together on a single platform. First Company to provide an on-line
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Commodity Broking Service to the customers. Commodity Futures trading has

certain advantages over regular Index or Stock futures such as:
 Low Margins: The average margin requirement for commodities would

range in between 5% - 10%
 Cash Settlement or Delivery: Client has the option to settle in

cash/delivery depending upon contract specifications.
 Trade for longer hours: The market is open from 10.00am to 11.30pm
on weekdays and also open on Saturdays
 Training Programs: Training programs will be conducted across India to

educate lay investors on commodity trading.
 Low Turnover Cost: Edelweiss will pass on the benefit of their aggregate
Exchange Turnover to their clients. This means that client will always be
charged a very small exchange turnover fee.
Investments in International Markets
 Under the RBI liberalized policy, individuals can invest up to US$ 100,000
every year abroad.
 For the first time in the history of Investments, Edelweiss brings to the
Indian retail investors an opportunity to invest in MULTIPLE international
financial markets through ONE platform!!
 Edelweiss presents Client a unique opportunity to become a truly global

investor. Client can now invest and trade participate in the world’s largest,
deepest and most liquid markets
Product Range
 Foreign Exchange
 Commodities
 Equities
 Indices
 Treasury Bonds
Off-Shore Product Features:
 ALL products on ONE platform.

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 Liquid contracts from across the countries available at the clients’

fingertips.
 Electronic trading – minimal paperwork, no share-certificates, physical

trade confirmation or transfer forms.
 Shorting is as easy as going long.
 Most cost-effective- no DP fee, turnover charges, education cess, stamp

duty or service tax. Forex has no commission/brokerage charge either.
 Minimum lot-size is very low.
 Trading Calls / Third Party Broker relationship to trade on behalf of the

clients.
 Training / market research to be provided extensively.
Investment in Mutual Funds
Edelweiss brings to the clients a unique, hassle-free and paperless way to

invest in Mutual Funds. Clients can now invest on-line in Mutual Funds through
Edelweiss mutual funds.
No more filling application forms manually or any going through other

paperwork. Client needs no signatures or proof of identity for investing. Once
client places a request for investing in a particular fund, there are no manual
processes involved. Their bank funds are automatically debited or credited
while simultaneously crediting or debiting their unit holdings.
Client also gets control over their investments with on-line order confirmations
and order status tracking. Client gets to know the performance of their
investments through online updation of their portfolio with current NAVs.
Edelweiss offers the Clients with various options while investing in

Mutual Funds:
Purchase: Buying of Mutual Fund units is very convenient without the hassles
of filling in the applications manually.
Redemption: As with Purchases, redemptions too can be done online.
Systematic Investment Plan (SIP): SIP, a much disciplined way of

investing, can be done at one go without the client filling up several forms and
signing multiple cheque leaves. Client has to enter the dates and amount once
and the investments automatically happen for Client for the said period.
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Systematic Withdrawal Plan: This allows clients to periodically withdraw a

certain sum of money, over a period of time.
Transfer-in: Client can convert their existing Mutual Funds into electronic
mode through a transfer-in request.
IPO Online
Now anyone can apply in Initial Public Offers (IPOs) without going through the
hassles of filling ANY application form or paperwork and worries of when &
where to submit the form. Get information on new IPOs which are about to hit
the market and reviews on these. IPO news, new listing, Top performing IPOs,
Basis of Allotment is few of the features which will help Client keep track of
the IPO market
Website
Website is been designed addressing specific segments
The home page is divided into three segments
← Beginners
 For new entrants to the world of investments / trading
 Market basics
← Middlers
 For people who have been in the trade
 Analyzing tools to learn more and trade better
← Experts
 For the “know it all” segment
 Advanced technical analysis tools & market information
Knowledge Center
In-depth learning on the markets from basics to trading strategies
The Knowledge Center section covers
← Equity
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← Derivatives
← Commodities
← Forex
← IPO
Research
Exhaustive research from industry experts & in house analysts
Research Report section provides
← Industry Reports
← Company Reports
← News Letter
← Stock of the Week
← Commodity Report
← FX Strategy
Live News
 Flashes “Real Time” news on various markets i.e. Equity, Commodities,

Off-shore, Mutual Fund, IPO.
 News by Dow Jones - One of the leading newswire in the world
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Mutual Funds : In depth
A Mutual Fund is a body corporate that pools the savings of a number of

investors and invests the same in a variety of different financial instruments,
or securities. The income earned through these investments and the capital
appreciation realized by the scheme is shared by its unit holders in proportion
to the number of units owned by them. Mutual funds can thus be considered
as financial intermediaries in the investment business that collect funds from
the public and invest on behalf of the investors. The losses and gains accrue
to the investors only. The Investment objectives outlined by a Mutual Fund in
its prospectus are binding on the Mutual Fund scheme. The investment
objectives specify the class of securities a Mutual Fund can invest in. Mutual
Funds invest in various asset classes like equity, bonds, debentures,
commercial paper and government securities.
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Source : http://www.mfea.com/
An Asset Management Company (AMC) is a highly regulated organization

that pools money from investors and invests the same in a portfolio. They
charge a small management fee, which is normally 1.5 per cent of the total
funds managed.
NAV or Net Asset Value of the fund is the cumulative market value of the
assets of the fund net of its liabilities. NAV per unit is simply the net value of
assets divided by the number of units outstanding. Buying and selling into
funds is done on the basis of NAV-related prices. NAV is calculated as follows
NAV= Market value of the fund’s investments+ Receivables+ Accrued

Income– Liabilities-Accrued Expenses
TYPES OF MUTUAL FUNDS
• By Investment Objective
 Growth Schemes
 Diversified Fund
 Sector Fund
 Index Fund
 Tax Saving Fund
 Debt Fund
 Liquid Funds
 Gilt Funds
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 Balanced Fund
 Hedge Funds
• By Flexibility
 Open - Ended Schemes
 Close - Ended Schemes
 Interval Schemes
• By Geographic Location
 Domestic Funds
 Offshore Funds
(a) On the basis of Objective
Equity Funds/ Growth Funds
Funds that invest in equity shares are called equity funds. They carry the
principal objective of capital appreciation of the investment over the medium
to long-term. The returns in such funds are volatile since they are directly
linked to the stock markets. They are best suited for investors who are
seeking capital appreciation. There are different types of equity funds such as
Diversified funds, Sector specific funds and Index based funds.
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Source : http://www.wealthbuilders.in/image/mutual-fund-types.gif
Diversified funds
These funds invest in companies spread across sectors. These funds are
generally meant for risk-taking investors who are not bullish about any
particular sector.
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Sector funds
These funds invest primarily in equity shares of companies in a particular

business sector or industry. These funds are targeted at investors who are
extremely bullish about a particular sector.
Index funds
These funds invest in the same pattern as popular market indices like S&P 500
and BSE Index. The value of the index fund varies in proportion to the
benchmark Index.
Tax Saving Funds
These funds offer tax benefits to investors under the Income Tax Act.
Opportunities provided under this scheme are in the form of tax rebates U/s
88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for
investors seeking tax concessions.
Debt / Income Funds
These Funds invest predominantly in high-rated fixed-income-bearing

instruments like bonds, debentures, government securities, commercial paper
and other money market instruments. They are best suited for the medium to
long-term investors who are averse to risk and seek capital preservation. They
provide regular income and safety to the investor.
Liquid Funds / Money Market Funds
These funds invest in highly liquid money market instruments. The period of
investment could be as short as a day. They provide easy liquidity. They have
emerged as an alternative for savings and short-term fixed deposit accounts
with comparatively higher returns. These funds are ideal for Corporate,
institutional investors and business houses who invest their funds for very
short periods.
Gilt Funds
These funds invest in Central and State Government securities. Since they are
Government backed bonds they give a secured return and also ensure safety
of the principal amount. They are best suited for the medium to long-term
investors who are averse to risk.
Balanced Funds
These funds invest both in equity shares and fixed-income-bearing

instruments (debt) in some proportion. They provide a steady return and
reduce the volatility of the fund while providing some upside for capital
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appreciation. They are ideal for medium- to long-term investors willing to take
moderate risks.
Hedge Funds
These funds adopt highly speculative trading strategies. They hedge risks in
order to increase the value of the portfolio.
(b) On the basis of Flexibility
Open-ended Funds
These funds do not have a fixed date of redemption. Generally they are open
for subscription and redemption throughout the year. Their prices are linked
to the daily net asset value (NAV). From the investors' perspective, they are
much more liquid than closed-ended funds. Investors are permitted to join or
withdraw from the fund after an initial lock-in period.
Close-ended Funds
These funds are open initially for entry during the Initial Public Offering (IPO)
and thereafter closed for entry as
well as exit. These funds have a
fixed date of redemption. One of the
characteristics of the close-ended
schemes is that they are generally
traded at a discount to NAV; but the
discount narrows as maturity nears.
These funds are open for
subscription only once and can be
redeemed only on the fixed date of
redemption. The units of these
funds are listed (with certain
exceptions), are tradable and the
subscribers to the fund would be
able to exit from the fund at any
time through the secondary market.
Interval funds
These funds combine the features of both open–ended and close-ended funds
wherein the fund is close-ended for the first couple of years and open-ended
thereafter. Some funds allow fresh subscriptions and redemption at fixed
times every year (say every six months) in order to reduce the administrative
aspects of daily entry or exit, yet providing reasonable liquidity.
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(c) On the Basis of Geographic Location
Domestic funds
These funds mobilize the savings of nationals within the country.
Offshore Funds
These funds facilitate cross border fund flow. They invest in securities of
foreign companies. They attract foreign capital for investment.
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ADVANTAGES OF MUTUAL FUNDS
Affordability: A mutual fund invests in a portfolio of assets, i.e. bonds,

shares, etc. depending upon the investment objective of the scheme. An
investor can buy in to a portfolio of equities, which would otherwise be
extremely expensive. Each unit holder thus gets an exposure to such
portfolios with an investment as modest as Rs.500/-. Thus it would be
affordable for an investor to build a portfolio of investments through a mutual
fund rather than investing directly in the stock market.
Diversification: Investments are spread across a wide cross-section of

industries and sectors and so the risk is reduced. Diversification reduces the
risk because all stocks don’t move in the same direction at the same time.
One can achieve this diversification through a Mutual Fund with far less
money than one can on his own.
Variety: Mutual funds offer a whole variety of schemes. This variety is

beneficial in two ways: first, it offers different types of schemes to investors
with different needs and risk appetites; secondly, it offers an opportunity to
an investor to invest sums across a variety of schemes, both debt and equity.
For example, an investor can invest his money in a debt scheme and an
equity scheme depending on his risk appetite to create a balanced portfolio
easily or simply just buy a Balanced Scheme.
Professional Management: Mutual Funds employ the services of skilled

professionals who have years of experience to back them up. They use
intensive research techniques to analyze each investment option for the
potential of returns along with their risk levels to come up with the figures for
performance that determine the suitability of any potential investment.
Potential of Returns: Returns in the mutual funds are generally better than
any other option in any other avenue over a reasonable period of time. People
can pick their investment horizon and stay put in the chosen fund for the
duration.
Equity funds can outperform most other investments over long periods by
placing long-term calls on fundamentally good stocks. The debt funds too will
outperform other options such as banks. Though they are affected by the
interest rate risk in general, the returns generated are more as they pick
securities with different duration that have different yields and so are able to
increase the overall returns from the portfolio.
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Liquidity: You are free to take your money out of open-ended mutual funds
whenever you want, no questions asked. Most open-ended funds mail your
redemption proceeds, which are linked to the fund's prevailing NAV (net asset
value), within three to five working days of your putting in your request.
Regulations: Securities and Exchange Board of India ("SEBI"), the Capital

Markets regulator has clearly defined rules, which govern mutual funds. These
rules relate to the formation, administration and management of mutual funds
and also prescribe disclosure and accounting requirements. Such a high level
of regulation seeks to protect the interest of investors.
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DISADVANTAGES OF MUTUAL FUNDS
Professional Management: Did you notice how we qualified the advantage

of professional management with the word "theoretically"? Many investors
debate over whether or not the so-called professionals are any better than
you or I at picking stocks. Management is by no means infallible, and, even if
the fund loses money, the manager still takes his/her cut.
Costs: Mutual funds don't exist solely to make your life easier--all funds are
in it for a profit. The mutual fund industry is masterful at burying costs under
layers of jargon. These costs are so complicated that in this tutorial we have
devoted an entire section to the subject.
Dilution: It's possible to have too much diversification. Because funds have
small holdings in so many different companies, high returns from a few
investments often don't make much difference on the overall return. Dilution
is also the result of a successful fund getting too big. When money pours into
funds that have had strong success, the manager often has trouble finding a
good investment for all the new money.
Taxes: When making decisions about your money, fund managers don't
consider your personal tax situation. For example, when a fund manager sells
a security, a capital-gain tax is triggered, which affects how profitable the
individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.
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FACTORS TO BE CONSIDERED BEFORE SELECTING A MUTUAL FUND
1. Making Risk- adjusted returns comparison. By doing this the investor

will know whether the returns generated by the scheme have been
adequately compensated for the extra risk undertaken by the scheme.
2. The investor depending upon his risk appetite and preferences should
sub-classify the schemes on the basis of the characteristics of the
schemes, which may be defensive or aggressive in nature.
3. Portfolio objective is also an important factor to be considered. It is

always advisable to choose a scheme, which has a well-diversified portfolio
rather than a concentrated portfolio, as it carries lesser risk.
4. Liquidity of the portfolio is also one of the critical parameters.
5. The fund size of the scheme is also of importance. A large corpus size
firstly denotes investor’s confidence in the scheme and its fund manger
abilities over the years and, secondly it allows the fund manager to
diversify the portfolio, which reduces the overall market risk.
6. Other factors like turnover rates, low expense ratio, load structure etc
of the schemes etc should also be considered before finally zeroing down
on a scheme of your choice.
7. The rankings undertaken by ICRA is an initiative to inform the

investors- who does not have the time or the expertise to undertake the
analysis on their own- about the relative performance of the schemes.
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RECENT TRENDS IN MUTUAL FUNDS
In the last few years Mutual Funds industry has evolved a lot. Private and
foreign mutual funds are operating in the Indian market and constitute a
substantial portion of the mutual fund industry. Today the industry consists of
Unit Trust of India, mutual funds sponsored by public sector banks and
insurance corporations, private and foreign mutual funds. The following
changes can be observed in the Mutual Funds industry.
• Investor’s preference for debt fund has decreased due to low interest
rates.
• Liquid funds have immerged as a new fund option.
• A lot of foreign AMC’s have entered into the Indian market and a lot more
are in the queue. India is emerging as a high potential market.
• Ceiling on aggregate investments by mutual funds in overseas instruments

to be raised from $ 1 billion to $ 2 billion with removal of requirement of
10% reciprocal shareholding.
• Limited number of qualified Indian mutual funds to be allowed to invest,

cumulatively up to $ 1 billion, in overseas exchange traded funds.
• Definition of open-ended equity-oriented schemes of mutual funds in the

Income tax Act aligned with the definition adopted by SEBI.
• Open-ended equity-oriented schemes and close-ended equity oriented

schemes to be treated on par for exemption from dividend distribution tax.
• As per the SEBI circular (SEBI/IMD/CIR No.1/64057/06) dated April 4,

2006, Initial Issue Expenses will henceforth be permitted for closed-ended
schemes only. Open ended schemes should meet the sales, marketing and
other such expenses connected with sales and distribution of schemes
from the entry load and not through initial issue expenses.
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DISTRIBUTION CHANNEL
In the recent years the distribution channel of mutual funds has become very
strong mutual funds are being distributed not only directly through AMC’s but
also through internet, brokers, banks and other agencies. The chart given
below shows the distribution channel of Mutual Funds. Large corporate usually
purchase mutual funds directly through AMC; s. small investors for the sake of
convenience prefer buying mutual fund schemes from distributors and through
internet.
Source : ICI (Investment Company Institute)
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ROLE OF SEBI IN MUTUAL FUND INDUSTRY
In the year 1992, Securities and Exchange Board of India Act was passed. The
objectives of SEBI are to protect the interest of investors in securities and to
promote the development of and to regulate the securities market.
As far as Mutual Fund is concerned, SEBI formulates policies and regulates the
Mutual Fund to protect the interest of the investors. SEBI notified regulations
for the Mutual Funds in 1993. Thereafter, Mutual Funds sponsored by private
sector entities were allowed to enter the capital market. The regulations were
fully revised in 1996 and have been amended thereafter from time to time.
SEBI has also issued guidelines to the Mutual Funds from time to time to
protect the interest of investors.
All Mutual Funds whether promoted by public sector or private sector entities
including those promoted by foreign entities are governed by the same set of
regulations. There is no distinction in regulatory requirements for these Mutual
Funds and all are subject to monitoring and inspections by SEBI. The risks
associated with the schemes launched by the Mutual Funds sponsored by this
entity are of similar type. It may be mentioned here that Unit Trust of India is
not registered with SEBI as a Mutual Fund (as on Jan 15, 2002.)
Some of the major players on the Indian mutual fund scene:
• ABN AMRO Mutual Fund
• Benchmark Mutual Fund
• Birla Mutual Fund
• BOB Mutual Fund
• Canbank Mutual Fund
• Chola Mutual Fund
• Deutsche Mutual Fund
• DSP Merrill Lynch Mutual Fund
• Escorts Mutual Fund
• Fidelity Mutual Fund
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• Franklin Templeton Investments
• HDFC Mutual Fund
• HSBC Mutual Fund
• ING Vysya Mutual Fund
• JM Financial Mutual Fund
• Kotak Mahindra Mutual Fund
• LIC Mutual Fund
• Morgan Stanley Mutual Fund
• PRINCIPAL Mutual Fund
• Prudential ICICI Mutual Fund
• Reliance Mutual Fund
• Sahara Mutual Fund
• SBI Mutual Fund
• Standard Chartered Mutual Fund
• Sundaram Mutual Fund
• Tata Mutual Fund
• Taurus Mutual Fund
• Unit Trust of India
• UTI Mutual Fund
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LIMITATIONS
There are certainly some benefits to mutual fund investing, but you should
also be aware of the drawbacks associated with mutual funds.
No Insurance: Mutual funds, although regulated by the Government, are not

insured against losses. The Federal Deposit Insurance Corporation (FDIC) only
insures against certain losses at banks, credit unions, and savings and loans,
not mutual funds. That means that despite the risk-reducing diversification
benefits provided by mutual funds, losses can occur, and it is possible
(although extremely unlikely) that you could even lose your entire
investment.
Dilution: Although diversification reduces the amount of risk involved in

investing in mutual funds, it can also be a disadvantage due to dilution. For
example, if a single security held by a mutual fund doubles in value, the
mutual fund itself would not double in value because that security is only one
small part of the fund's holdings. By holding a large number of different
investments, mutual funds tend to do neither exceptionally well nor
exceptionally poorly.
Fees and Expenses: Most mutual funds charge management and operating
fees that pay for the fund's management expenses (usually around 1.0% to
1.5% per year). In addition, some mutual funds charge high sales
commissions, 12b-1 fees, and redemption fees. And some funds buy and
trade shares so often that the transaction costs add up significantly. Some of
these expenses are charged on an ongoing basis, unlike stock investments,
for which a commission is paid only when you buy and sell .
Poor Performance: Returns on a mutual fund are by no means guaranteed.

In fact, on average, around 75% of all mutual funds fail to beat the major
market indexes, like the S&P 500, and a growing number of critics now
question whether or not professional money managers have better stock-
picking capabilities than the average investor.
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Loss of Control: The managers of mutual funds make all of the decisions
about which securities to buy and sell and when to do so. This can make it
difficult for you when trying to manage your portfolio. For example, the tax
consequences of a decision by the manager to buy or sell an asset at a certain
time might not be optimal for you. You also should remember that you are
trusting someone else with your money when you invest in a mutual fund.
Trading Limitations: Although mutual funds are highly liquid in general,

most mutual funds (called open-ended funds) cannot be bought or sold in the
middle of the trading day. You can only buy and sell them at the end of the
day, after they've calculated the current value of their holdings.
Size: Some mutual funds are too big to find enough good investments. This is
especially true of funds that focus on small companies, given that there is
strict rules about how much of a single company a fund may own. If a mutual
fund has $5 billion to invest and is only able to invest an average of $50
million in each, then it needs to find at least 100 such companies to invest in;
as a result, the fund might be forced to lower its standards when selecting
companies to invest in.
Inefficiency of Cash Reserves: Mutual funds usually maintain large cash

reserves as protection against a large number of simultaneous withdrawals.
Although this provides investors with liquidity, it means that some of the
fund's money is invested in cash instead of assets, which tends to lower the
investor's potential return.
Different Types: The advantages and disadvantages listed above apply to

mutual funds in general. However, there are over 10,000 mutual funds in
operation, and these funds vary greatly according to investment objective,
size, strategy, and style. Mutual funds are available for virtually every
investment strategy (e.g. value, growth), every sector (e.g. biotech, internet),
and every country or region of the world. So even the process of selecting a
fund can be tedious.
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Equity
Initial Public Offering
Initial Public Offering (IPO) is when an unlisted company makes either a fresh
issue of securities or an offer for sale of its existing securities or both for the
first time to the public. This paves way for listing and trading of the issuer’s
securities.
Follow on Public Offering
A follow on public offering (FPO) is when an already listed company makes

either a fresh issue of securities to the public or an offer for sale to the public,
through an offer document. An offer for sale in such scenario is allowed only if
it is made to satisfy listing or continuous listing obligations
SEBI’s Role in an Issue
Any company making a public issue or a listed company making a rights issue
of value of more than Rs.50 lakhs is required to file a draft offer document
with SEBI for its observations. The company can proceed further on the issue
only after getting observations from SEBI. The validity period of SEBI’s
observation letter is three months only i.e. the company has to open its issue
within three months period.
SEBI does not recommend any issue nor does take any responsibility either
for the financial soundness of any scheme or the project for which the issue is
proposed to be made or for the correctness of the statements made or
opinions expressed in the offer document. It is to be distinctly understood that
submission of offer document to SEBI should not in any way be deemed or
construed that the same has been cleared or approved by SEBI. The Lead
manager certifies that the disclosures made in the offer document are
generally adequate and are in conformity with SEBI guidelines for disclosures
and investor protection in force for the time being. This requirement is to
facilitate investors to take an informed decision for making investment in the
proposed issue.
Red Herring Prospectus is a prospectus, which does not have details of

either price or number of shares being offered, or the amount of issue. This
means that in case price is not disclosed, the number of shares and the upper
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and lower price bands are disclosed. On the other hand, an issuer can state
the issue size and the number of shares are determined later. An RHP for and
FPO can be filed with the RoC without the price band and the issuer, in such a
case will notify the floor price or a price band by way of an advertisement one
day prior to the opening of the issue. In the case of book-built issues, it is a
process of price discovery and the price cannot be determined until the
bidding process is completed. Hence, such details are not shown in the Red
Herring prospectus filed with ROC in terms of the provisions of the Companies
Act. Only on completion of the bidding process, the details of the final price
are included in the offer document. The offer document filed thereafter with
ROC is called a prospectus.
Who decides the price of an issue?
Indian primary market ushered in an era of free pricing in 1992. Following

this, the guidelines have provided that the issuer in consultation with
Merchant Banker shall decide the price. There is no price formula stipulated by
SEBI. SEBI does not play any role in price fixation. The company and
merchant banker are however required to give full disclosures of the
parameters which they had considered while deciding the issue price. There
are two types of issues one where company and LM fix a price (called fixed
price) and other, where the company and LM stipulate a floor price or a price
band and leave it to market forces to determine the final price (price
discovery through book building process).
Fixed Price offers
An issuer company is allowed to freely price the issue. The basis of issue price
is disclosed in the offer document where the issuer discloses in detail about
the qualitative and quantitative factors justifying the issue price. The Issuer
company can mention a price band of 20% (cap in the price band should not
be more than 20% of the floor price) in the Draft offer documents filed with
SEBI and actual price can be determined at a later date before filing of the
final offer document with SEBI / ROCs.
Book building process
“Book Building” means a process undertaken by which a demand for the

securities proposed to be issued by a body corporate is elicited and built up
and the price for the securities is assessed on the basis of the bids obtained
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for the quantum of securities offered for subscription by the issuer. This
method provides an opportunity to the market to discover price for securities.
Book building is a process of price discovery. Hence, the Red Herring

prospectus does not contain a price. Instead, the red herring prospectus
contains either the floor price of the securities offered through it or a price
band along with the range within which the bids can move. The applicants bid
for the shares quoting the price and the quantity that they would like to bid
at. Only the retail investors have the option of bidding at ‘cut-off’. After the
bidding process is complete, the ‘cut-off’ price is arrived at on the lines of
Dutch auction. The basis of Allotment (Refer Q. 15.j) is then finalized and
letters allotment/refund is undertaken. The final prospectus with all the details
including the final issue price and the issue size is filed with ROC, thus
completing the issue process.
Price band
The red herring prospectus may contain either the floor price for the securities
or a price band within which the investors can bid. The spread between the
floor and the cap of the price band shall not be more than 20%. In other
words, it means that the cap should not be more than 120% of the floor price.
The price band can have a revision and such a revision in the price band shall
be widely disseminated by informing the stock exchanges, by issuing press
release and also indicating the change on the relevant website and the
terminals of the syndicate members. In case the price band is revised, the
bidding period shall be extended for a further period of three days, subject to
the total bidding period not exceeding thirteen days.
It may be understood that the regulatory mechanism does not play a role in
setting the price for issues. It is up to the company to decide on the price
or the price band, in consultation with Merchant Bankers. The basis of issue
price is disclosed in the offer document. The issuer is required to disclose in
detail about the qualitative and quantitative factors justifying the issue price.
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DE-MAT ACCOUNT
Dematerialization as the name suggests is an account in which shares are

kept in electronic form. If shares are kept in physical form one cannot sell
shares partly if he wants. But through De-mat account this restriction is
removed.
Dematerialization and trading in the De-mat mode is the safer and faster
alternative to the physical existence of securities. De-mat as a parallel
solution offers freedom from delays, thefts, forgeries, settlement risks and
paper work. This system works through depository participants (DPs) who
offer De-mat services and the securities are held in the electronic form for the
investor directly by the Depository.
As per the requirement, all the public issues of size in excess of Rs.10 crores,
are to made compulsorily in the De-mat more. Thus, if an investor chooses to
apply for an issue that is being made in a compulsory De-mat mode, he has to
have a De-mat account and has the responsibility to put the correct DP ID and
Client ID details in the bid/application forms.
Procedure for getting a De-mat Account
An investor can apply for a De-mat account to a depository participant who

charges little annual fees for that. Investor is required to fill a form and attach
documents like PAN copy, Address proof and photo proof. De-mat Account is
to be renewed every year on the payment of annual charges. Depository
participants are companies like Anand Rathi, Anagram, HDFC etc which are
registered with NSDL and CDSL.
Entities Involved In An issue

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Merchant Bankers to the issue or Book Running Lead Managers (BRLM),

syndicate members, Registrars to the issue, Bankers to the issue, Auditors of
the company, Underwriters to the issue, Solicitors, etc. are the intermediaries
to an issue. The issuer discloses the addresses, telephone/fax numbers and
email addresses of these intermediaries. In addition to this, the issuer also
discloses the details of the compliance officer appointed by the company for
the purpose of the issue.
Role of a Lead Manager (pre and post issue)
In the pre-issue process, the Lead Manager (LM) takes up the due diligence of
company’s operations/ management/ business plans/ legal etc. Other
activities of the LM include drafting and design of Offer documents,
Prospectus, statutory advertisements and memorandum containing salient
features of the Prospectus. The LMs shall ensure compliance with stipulated
requirements and completion of prescribed formalities with the Stock
Exchanges, RoC and SEBI including finalization of Prospectus and RoC filing.
Appointment of other intermediaries viz., Registrar(s), Printers, Advertising
Agency and Bankers to the Offer is also included in the pre-issue processes.
The LM also draws up the various marketing strategies for the issue. The post
issue activities including management of escrow accounts, coordinate non-
institutional allocation, intimation of allocation and dispatch of refunds to
bidders etc are performed by the LM. The post Offer activities for the Offer will
involve essential follow-up steps, which include the finalization of trading and
dealing of instruments and dispatch of certificates and demat of delivery of
shares, with the various agencies connected with the work such as the
Registrar(s) to the Offer and Bankers to the Offer and the bank handling
refund business. The merchant banker shall be responsible for ensuring that
these agencies fulfill their functions and enable it to discharge this
responsibility through suitable agreements with the Company.
Role of a registrar
The Registrar finalizes the list of eligible allottees after deleting the invalid
applications and ensures that the corporate action for crediting of shares to
the Demat accounts of the applicants is done and the dispatch of refund
orders to those applicable are sent. The Lead manager coordinates with the
Registrar to ensure follow up so that that the flow of applications from
collecting bank branches, processing of the applications and other matters till
the basis of allotment is finalized, dispatch security certificates and refund
orders completed and securities listed.
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Role of bankers to the issue
Bankers to the issue, as the name suggests, carries out all the activities of
ensuring that the funds are collected and transferred to the Escrow accounts.
The Lead Merchant Banker shall ensure that Bankers to the Issue are
appointed in all the mandatory collection centers as specified in DIP
Guidelines. The LM also ensures follow-up with bankers to the issue to get
quick estimates of collection and advising the issuer about closure of the
issue, based on the correct figures.
Syndicate Member
The Book Runner(s) may appoint those intermediaries who are registered with
the Board and who are permitted to carry on activity as an ‘Underwriter’ as
syndicate members. The syndicate members are mainly appointed to collect
and entire the bid forms in a book built issue.
Green-shoe Option
Green Shoe option means an option of allocating shares in excess of the

shares included in the public issue and operating a post-listing price stabilizing
mechanism for a period not exceeding 30 days. This is an arrangement
wherein the issue would be over allotted to the extent of a maximum of 15%
of the issue size. From an investor’s perspective, an issue with green shoe
option provides more probability of getting shares and also that post listing
price may show relatively more stability as compared to market.
Basis of Allocation/Basis of Allotment
After the closure of the issue, the bids received are aggregated under different
categories i.e., firm allotment, Qualified Institutional Buyers (QIBs), Non-
Institutional Buyers (NIBs), Retail, etc. The oversubscription ratios are then
calculated for each of the categories as against the shares reserved for each
of the categories in the offer document. Within each of these categories, the
bids are then segregated into different buckets based on the number of shares
applied for. The oversubscription ratio is then applied to the number of shares
applied for and the number of shares to be allotted for applicants in each of
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the buckets is determined. Then, the number of successful allottees is

determined. This process is followed in case of proportionate allotment. In
Case of allotment for QIBs, it is subject to the discretion of the post issue lead
manager.
Preferential allotment
In a book built issue allocation to Retail Individual Investors (RIIs), Non

Institutional Investors (NIIs) and Qualified Institutional Buyers (QIBs) is in the
ratio of 35: 15: 50 respectively. In case the book built issues are made
pursuant to the requirement of mandatory allocation of 60% to QIBs in terms
of Rule 19(2)(b) of SCRR, the respective figures are 30% for RIIs and 10% for
NIIs. This is a transitory provision pending harmonization of the QIB allocation
in terms of the aforesaid Rule with that specified in the guidelines.
Retail Investor
‘Retail individual investor’ means an investor who applies or bids for securities
of or for a value of not more than Rs.1, 00,000.
High Net worth Individuals (HNI)
Although there is no precise definition of how rich somebody must be to fit

into this category, high net worth is generally quoted in terms of liquid assets
over a certain figure. The exact amount differs by financial institution and
region. The categorization is relevant because high net worth individuals
generally qualify for separately managed investment accounts instead of
regular mutual funds.
The most commonly quoted figure for membership in the high net
worth "club" is $1 million in liquid financial assets. An investor with less
than $1 million but more than $100,000 is considered to be "affluent", or
perhaps even "sub-HNWI". The upper end of HNWI is around $5 million, at
which point the client is then referred to as "very HNWI". More than $50
million in wealth classifies a person as "ultra HNWI".
Qualified Institutional Buyer (QIBs)
Qualified Institutional Buyers are those institutional investors who are

generally perceived to possess expertise and the financial muscle to evaluate
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and invest in the capital markets. In terms of clause 2.2.2B (v) of DIP
Guidelines, a ‘Qualified Institutional Buyer’ shall mean:
a) Public financial institution as defined in section 4A of the Companies Act,

1956;
b) Scheduled commercial banks;
c) Mutual funds;
d) Foreign institutional investor registered with SEBI;
e) Multilateral and bilateral development financial institutions;
f) Venture capital funds registered with SEBI.
g) Foreign Venture capital investors registered with SEBI.
h) State Industrial Development Corporations.
i) Insurance Companies registered with the Insurance Regulatory and

Development Authority (IRDA).
j) Provident Funds with minimum corpus of Rs.25 crores
k) Pension Funds with minimum corpus of Rs. 25 crores)
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PMS (Portfolio Management Service)
As Portfolio Managers, Edelweiss endeavor that every portfolio created by that

reflects the values on which Edelweiss Group has been built. A commitment
towards transparency and service. Add to that , a strong research driven
investment process.
Your personal portfolio reflects your investment style and profile, but requires
considerable amount of your time and efforts to manage. Anticipating &
analyzing market movements, financial statements and studying
macroeconomic variables is becoming increasingly complex. You may not have
required time to devote to your investments.
Under Portfolio Management Services, you delegate the responsibility of

managing your portfolio to a team of specialists who understands your
investment objectives.
Edelweiss team of Portfolio Managers, Research Analysts and Relationship

Managers are working continuously to create and actively manage your
portfolio to provide you the best returns in the forever-changing market
dynamics.
Investment Strategy
EDELWEISS follows a robust and disciplined investment process and endeavor

to generate absolute returns consistently over a long term.
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We believe in active management of portfolios to generate superior returns

and regular review of portfolios help in better risk measurement to ensure
consistent performance.
An efficient asset allocation with flexibility to apportion 100% to cash and use
the cash to grab market opportunities when they arise.
Selective use of derivatives as an investment tool for hedging and portfolio re-
balancing.
EDELWEISS research team has the capability to value the companies based
on their current and expected future potential which helps us in generating
better & consistent returns.
Invest in relatively concentrated portfolio of not more than 15 – 20 stocks of

what company believes as excellent picks.
Investment Process
Source : EDELWEISS PMS
Systems and Processes

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Edelweiss operations team takes care of the systems, MIS & related back
office activity. The account details and portfolio valuation can be viewed on
our website with the help of special used id & password for each client.
Deutsche Bank has been appointed as Custodian & Fund Accountant - The
banking, accounting, settlement & clearing operations will be done by
Deutsche Bank AG, thereby providing total transparency to the whole system.
Edelweiss have dedicated team of Advisors, Relationship Managers and

operations team whom you can contact for any specific information related to
your investment.
Investment Considerations
Source :EDELWEISS PMS
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Benefits of PMS
Flexibility - Efficient switch between Cash & Equities
Focused portfolio of select stocks / sector concentrations
Professional Management with the objective of delivering consistent long-

term performance while controlling risks.
Operations efficiency – PMS provider gives the client a customized service.

The company takes care of all the administrative aspects of the client’s
portfolio with periodic reporting.
Transparency – Investors get regular statements and updates of his

investments. Web enabled access will ensure that client is just a click away
from all information related to his investments ( i.e. securities you hold, cost
& current value, securities purchased & sold, dividends received, performance
of portfolio, market commentary, etc).
Customized advise that suits individual requirement to achieve his financial

& investment objectives.
Access to dedicated Relationship Managers / Financial Advisors with

whom the client can interact and discuss concerns on his portfolio.
The Portfolio Manager will provide audited statement of accounts at the end of
financial year to aid the investor in assessing the tax liabilities on his portfolio
including Capital Gains Report. (The PMS provider is a trustee acting in a
fiduciary capacity on behalf of the investor. Therefore, the tax liability for a
PMS investor would remain the same as if the investor is accessing the capital
market directly.).
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Edelweiss endeavor to deliver competitive returns through diligent fund

management framework that is supported by rigorous analysis and a proven
investment methodology. Our investment beliefs from the core of what
company does.
Schemes at Offer
Growth
Value
Growth
A Moderate scheme with growth approach and investments

predominantly in large-cap stocks. The objective is to ensure liquidity
and lower impact cost leading to the construction of a relatively more
stable portfolio. The portfolio management process will also focus on
using cash as an investment tool and derivatives for protection of
portfolio.
Investment Objective – Generate capital appreciation in medium to long

term through investments in equities and equity related instruments
comprising predominantly large cap companies. This scheme will be
benchmarked to the Nifty 50 stocks.
Investment Strategy – The portfolio will have 18-20 high quality stocks and
overweight on large Cap stocks. However select mid cap stocks may also be
considered for investment. The portfolio strives to insulate an investor from
cyclical themes by investing in sectors offering secular growth outlook.
Parameters Driving Investment Decision – The portfolio strives at all

times to achieve an overall 70% allocation to large cap companies. Again the
portfolio will limit the exposure to any sector to be less than 25% of the
portfolio size and to any scrip to be less than 10%.
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 No Lock-in Period, No Exit Load
 Maximize post tax returns by concentrating on long-term gains & low

churning of portfolio
 Fixed and Performance based fee structure
 Funds managed on a Pool basis
Value
A highly flexible investment option, which offers a diversified

investment portfolio across both large-cap and mid-cap stocks. This
option follows a moderately aggressive approach to portfolio
construction. The portfolio management process will also focus on
using cash as an investment tool and derivatives for protection of
portfolio.
Investment Objective – The objective of this scheme is wealth creation by

delivering superior returns over long term (18 months) through investments
in value & growth stocks. This will be benchmarked with BSE 200. .
Investment Strategy – The portfolio will have 18-20 high quality stocks and
overweight on Mid-Cap stocks. The investments will be made for a medium to
long term horizon. Early identification of stocks to ride through the entire
investment cycle. Timing of investment is important to generate superior
returns.
Parameters Driving Investment Decision – Selection of stocks based on

potential for value unlocking based on key events and strong growth potential,
Scalable business potential, Beneficiary of favorable economic cycle and Large
market / business opportunity
 Lock-in Period – 6 months, Exit Load if redeemed between 6-12

months: 2%, redeemed between 12-18 months :1%
 Maximize post tax returns by concentrating on long-term gains & low

churning of portfolio
 Fixed and Performance based fee structure
 Funds managed on a Pool basis
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Investor’s touch points
Emails - Performance Statement ( Monthly Basis)
- Portfolio & Transaction Statement ( Quarterly)
Courier - Newsletters informing you about fund manager’s portfolio

strategy and the equity market outlook. This will also include
International & Indian Market trends.
- CA certified statement of investments ( Annual)
Who can Invest in EDELWEISS PMS
 Resident Indians only
 Partnership / Sole Proprietors
 Hindu undivided family
 Registered Charitable trust
 Companies
RISK FACTORS
(a) Investments in securities are subject to market risks and include price
fluctuation risks. There is no an assurance or guarantees that the objectives of
any of the Schemes will be achieved. The investments may not be suited to all
categories of investors.
(b) The past performance of the Portfolio Manager in any Scheme/option is

not indicative of the future performance in the same Scheme/option or in any
other scheme /option either existing or that may be offered. There is no
assurance that past performances indicated in earlier Schemes/options will be
repeated. Investors are not being offered any guaranteed or indicative returns
through any of the Schemes.
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(c) The names of the Schemes/option do not in any manner indicate their
prospects or returns. The performance in the equity Schemes/options may be
adversely affected by the performance of individual companies changes in the
market place and industry specific and macro economic factors.
(d) Technology stocks and some of the investments in niche sectors run the
risk of volatility, high valuation, obsolescence and low liquidity.
(e) Risk attached with the use of derivatives.
The portfolio manager may use derivative products as may be permitted by

SEBI from time to time. As and when the schemes trade in the derivatives
market there are risk factors and issues concerning the use of derivatives that
investors should understand. Derivative products are specialized instruments
that require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but also of the derivative
itself. Derivatives require maintenance of adequate controls to monitor the
transactions entered into, the ability to assess the risk that a derivative adds
to the portfolio and other related capabilities. There is the possibility that a
loss may be sustained by the portfolio as a result of the failure of another
party (usually referred to as the “counter party”) to comply with the terms of
the derivatives contract. Other risks in using derivatives include market risk,
valuation risk, liquidity risk and basis risk. Also, it is to be noted that the
market for derivative instruments is nascent in India.
(f) In the case of stock lending, risks relate to the defaults from
counterparties with regard to securities lent and the corporate benefits
accruing thereon, inadequacy of the collateral and settlement risks. The
Portfolio Manager is not responsible or liable for any loss resulting from the
operations of the schemes/options.
(g) The Portfolio Manager may invest in the shares, units of mutual funds,
debt, deposits and other financial instruments of group companies.
(h) Each portfolio will be exposed to various risks depending on the

investment objective, investment strategy and the asset allocation. The
investment objective, investment strategy and the asset allocation may differ
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from client to client. However, generally, highly concentrated portfolios with

lesser number of stocks generally will be more volatile than a portfolio with a
larger number of stocks. Portfolios with higher allocation to equities, will be
subject to higher volatility than portfolios with low allocation to equities.
(i) Risk arising out of non-diversification, if any Diversified portfolios (allocated

across companies and broad sectors) generally tend to be less volatile than
non-diversified portfolios.
Investor’s Behavior
When selling mutual funds, the disposition effect -- the tendency to hold
losers too long and sell winners too soon -- dominates investors’ decisions.
When selling mutual funds, investors do not behave as though past returns
predict the future. Consistent with this conclusion, we document a positive
relation between past performance and mutual fund sales. Nearly 40 percent
of all sales occur in funds that rank in the top quintile of past annual returns;
less than 15 percent of all sales occur in funds that rank in the bottom
quintile. As is the case for many other investments, mutual fund investors
hold their losers and sell their winners.
Mutual fund investors face a dilemma: Is there sufficient persistence in the

performance of successful mutual fund managers to offset the costs of chasing
past good performance? In most professional fields, such as corporate
management and law, practitioners vary in ability. Professionals are evaluated
on the basis of past performance. By analogy, one would expect mutual fund
managers to vary in ability and past performance to be indicative of ability.
Yet academic studies find only modest and short term persistence in the
performance of successful funds. For the individual investor, there are at least
two potential drawbacks to chasing past performance.
First, if one sells a currently held fund to buy a winner, this will accelerate the
recognition of capital gains, thus imposing a tax penalty when done in a
taxable account. Second, top performing funds tend to charge higher
ABHINAV SINGH 52
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operating expenses and to have higher turnover. High operating expenses and
high turnover represent a drag on a fund’s gross performance, while high
turnover further accelerates the recognition of capital gains. Thus, if the
fund’s superior gross performance fails to persist, its performance net of fees,
expenses, and taxes is likely to be sub-par.
FACTORS THAT AFFECT INVESTOR’S BEHAVIOR
Investment behavior of people is a wide concept and difficult to explain

precisely. Investment behavior of people is affected by various factors like:
1. Age
2. Income
3. Accumulated wealth
4. Nature of expenses in near future
5. Investment Knowledge
6. Tax structure
7. Type of market
Age- Age often determines your investment profile. According to my

observations I found that young people are willing to take more risk and
invest in equity. Whereas people of age above 45 want safe and assured
returns. Most of the senior citizens don’t want to do the cumbersome job of
tracking their investment, they just want safety of their principal amount and
risk free returns.
ABHINAV SINGH 53
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Income- people who have high income are willing to take high risks and
willing to invest in mutual funds and equity. On the other hand people who
have low and fluctuating income take less risk.
Accumulated Wealth-Those people who have huge accumulated wealth are

ready to take more risk. People who have accumulated wealth do not have to
worry about living expenses, their current income can take care of that.
Therefore they invest more in return bearing securities.
Knowledge-people who have good investment knowledge invest more in

equity and mutual funds whereas people who don’t have good investment
knowledge are hesitant to invest in equity or mutual funds.
Tax structure also affects investor’s behavior. Same investment instruments

like insurance, PPF, ELSS schemes can be used for tax planning purpose.
SUMMARY OF VARIOUS OPTIONS AVAILABLE
Options Retur Returns Risk Liquidit Tax Conven

ns y Shelte ience
Capital r
Curre
nt Appreci
yield ation
Equity Moder High High High No High

share ate
Non- Moder Nil Low Moderat Nil High

convert ate e
ible
Debent
ures
Bank Moder Nil Low High No Very

Deposit ate High
s
PPF Nil High Nil Moderat Yes Very

e High
Life Nil High Nil Moderat Yes High

insuran
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ce e
Mutual Moder High High High Availab Very

Fund ate le in High
ELSS
schem
es
Real Low High Negligib Low Nil Low

estate le
Gold & Nil High Moderat Moderat Nil Moderat

Silver e e e
WHY WE NEED THIS FINANCIAL PLANNING?
With so many investment options available and so many factors to be

considered before investment it becomes very difficult to choose a customized
portfolio. Therefore a complete financial planning is required to reap the
benefits of investment. Financial planning is required due to following reasons
To beat inflation
Inflation is the increase in the general level of prices of a given kind in given
currency. There are 2 ways of identifying the inflation consumer price index
and wholesale price index. We follow the wholesale price index since the
markets in India are very diverse and the grains/vegetables and other basic
commodities might be different quality and different cost levels due to the
different weather cycles. Historically in last few years the WPI inflation rate
has been 5-6%...That means last year if we used to get something at Rs 100,
this year the same product would cost us 105-106. Thus increasing inflation
needs to be beaten by our investment.
ABHINAV SINGH 55
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Source : http://www.mfea.com/
To fund future needs
The needs arising in future have to be identified as early as possible and plan
accordingly. A future need can be a foreseen need or an unforeseen
emergency need, like a laptop purchase might have not been in the dream so
anybody may be 5 yrs back. But in today’s requisite speed to information we
need to carry a laptop and it’s an unforeseen need. So to meet such future
needs we need financial planning and contingency planning too.
To meet contingencies
The famous proverb… Man proposes nature disposes...Many times makes its
presence felt in this material world and there you need to have sufficient
funds to at least carry away safely in that crisis times…e.g.
Earthquake/riots/flood in Mumbai
To maintain the same standard of living after retirement
The style of living comes with the profession and the increments in that
profession with age increases the standard of living. This suddenly gets jolted
when we don’t get any regular income like salary after retirement and creates
a gap in our needs and sources to fulfill that need.
The expenses are on rise since: Inflation is increasing, higher life expectancy
and new products to be taken.
How a financial advisor can help?
- Financial advisor can help you lay down your financial goals.
- Financial advisor can better do detailed risk profiling
- He can create a customized financial plan for an investor.
ABHINAV SINGH 56
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- He can help investor in executing the plan
- Can track performance and optimize, if needed.
- Custodial, tax and succession planning services.
Role of a good financial advisor:
- A good financial advisor has no conflict over the issue of “interest”.
- It sells/recommends 3rd party products only.
- A good financial advisor sells an investment process not an investment

product.
- Market uncertainty is like a fog and never clears. But a good financial
advisor can help investors to achieve their financial goals.
Financial needs of a person
Besides some regular and basic financial expenses there are some which a
person has to do financial planning. These expenses can be listed as follows-
1. Buying house, vehicle etc
2. Child’s education
3. Child’s marriage
4. Post retirement expenses
5. Uncertainties
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FINDINGS AND ANALYSIS OF THE SURVEY
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Income level classification of people
1 = less than 5000 10
2 = 5000 – 15000 30
3 = 15000 – 25000 23
4 = 25000 – 45000 20
5 = 45000 + 17
Grand Total 100
10
17
1 = less then 5000

2 = 5000 - 15000
30 3 = 15000 - 25000
20
4 = 25000 - 45000
5 = 45000 +
23
From the above graph it is very clear that majority of the people are in
middle income group.
Do you Invest?
Yes 87
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no 13
Grand
Total 100
13%
yes
no
87%
From the above graph it clear that most of the people are in habit of saving
and invest it various avenues for returns either fixed or variable.
Where do they like to Invest?
Invest in which
cumulative
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data
0=no answer 1
1 = bonds 19
2 = equity 28
3 = mutual funds 39
4 = bank deposits 69
5 = provident fund 3
9 = others 8
80
69
70
60 0=no answere
1 = bonds
50
2 = equity
39
40 3 = mutual funds
28 4 = bank deposits
30
5 = provident fund
19
20 9 = others
8
10
1 3
0
1
From the above graph it is clear that bank deposits are the most preferred
choice of investment. Though the return may be a bit less than other avenues
but it is sure to yield.
ABHINAV SINGH 61
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Conclusion
We at EDELWEISS have achieved our goals as per the expectations. In order

to achieve the desired expectations and to build more healthier brand image
in consumers’ minds we made corporate tie ups. At the same time we
arranged some corporate presentations to build the right and focused
perception in consumer’s mind. We are more concerned about customer’s
queries and a problem solving approach for better customer satisfaction.
Running a successful investment requires complete understanding of the

peculiarities of the Indian Stock Market and also the psyche of the small
investor. This study has made an attempt to understand the financial Behavior
of small investors in connection with the scheme preference and selection.
The following points have been observed in relation to investor’s behavior.
• People don’t understand the relation between risk and reward. On one
hand they want high returns and on other hand they want to remain risk
free. This is due to lack of knowledge among investors.
• Many people neglect their needs and long-term financial goals before
investing. Unfortunately, this often results in their falling short of their
expectations.
• There is wide untapped Insurance and Mutual funds market in India.
• Investors don’t have good investment knowledge. This leads to the gap in
savings and investment.
 Wide variation in investment pattern.
 Variation in risk taking capability.
 People in age group of 20-45 years were ready to take risk but it declined
with age.
 Income plays a vital role.
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 With the increase in income investment goes up and vise-e-versa.
 Education and Knowledge also plays a vital role.
Though we can see a similar pattern in investment with reference to various

variables like age, income, education, etc…. But we cannot make a conclusion
about the investor on the basis of the results found.
This is evident that individuals behave differently and have different mindsets.
So, we need to understand each individual. Understand his/her needs and
capabilities so as to provide him with a suitable investment avenue.
ABHINAV SINGH 63
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Appendix
Questionnaire
I, ABHINAV SINGH, student of Icfai Business School, am conducting

the survey on mutual funds, its awareness and interest among the people of
Delhi-NCR. So, kindly co-operate and please give your 5 minutes for filling this
questionnaire.
Na m e Age
Ge nde r M a le F e m a le M a rit a l S t a t u s
E d u c a t io n L e v e l O c c u p a t io n
M o n t h ly In c o mRse . C o n ta c t No .
Please tick the appropriate
1. Have you made any investments?
Yes  No 
2. What type of investment have you made?
a. Bonds
b. Equities
c. Mutual funds
d. Bank deposits
e. Others, please specify ……………………….
3. Do you know about EDELWEISS SECURITIES LTD.?
Yes  No 
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4. Rate your knowledge on Share markets?
a. Very bad
b. Bad
c. Ok
d. Exellent
5. Can you specify 3 companies involves in Broking industry?
a. ……………………………………….
b. ……………………………………….
c. ………………………………………..
6. Do you track share prices daily????
Yes No
7. What is the reason for investment in shares?
a. Safety and Security
b. Liquidity of funds
c. Returns
d. Others, please specify ……………………………..
8. Do you know about the various types of mutual funds?
a. Liquid funds
b. Debt funds
c. Balanced funds
d. Equity Funds
9. If you won a prize of Rs.15000/- what will you do with it?
a. I will keep it in my bank
b. I make an investment with it
c. I will buy a gift
d. I will buy something for house hold.
e. If others, specify…………………………………..
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10. How much time do you monitor your investment in a month?
a. Never
b. Occasionally
c. Regularly
d. Only when I want to sell
References
Edelweiss official web site : http://www.edelblue.com
Edelweiss PMS official web site : http://www.edelcap.com
Edelweiss Corporate Presentation
Search Engine : http://www.google.co.in/
Web : http://www.mfea.com/
MAGZINES
 Icfai Journals
 Dalal Street
 Capital Market
 Outlook
 Business India
 Investor’s Insight
ABHINAV SINGH 66

Analysis of Various Investment Products of Pms and Mutual Funds

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Project Report

“ANALYSIS OF VARIOUS INVESTMENT

Edelweiss Securities Ltd.

“ANALYSIS OF VARIOUS INVESTMENT

IN THE PARTIAL FULFILMENT FOR THE AWARD OF POST GRADUATE PROGRAMME

The report is submitted as partial fulfillment of the requirement of MBA program of

Dr. Vipin Khurana

It is my great pleasure to take this opportunity to acknowledge the

I express my deep sense of respect to Mr. Girijesh Kumar (T.L.Edelweiss Sect.

Finally I am sincerely thankful to others who have directly or indirectly

Portfolio management involves deciding what assets to include in the portfolio,

The Report covers the following key topics –

Title of the Project: Analysis of various Investment Products – PMS

The Project covers a deep analysis of PMS (Portfolio Management Services)

Edelweiss, a rare flower found in Switzerland. You will discover in our

Edelweiss entered into online trading business through “Edelweiss capital”. It

Edelweiss is a financial transaction platform offering customers a wide range

The company is in the process of launching a comprehensive financial portal

To enable wider participation, Edelweiss also offers the convenience of off-line

 Edelweiss is present in 60 cities. “Best Merchant Banker” by Outlook Money

Edelweiss consumers can trade in equities, commodities and offshore

Edelweiss Securities ltd. website: www.edelblue.com

Brokerage fee structure:

Delivery trades – 0.05%

Non- delivery trades – 0.005%

Product & Services

 Online Trading Portal for Stocks & Commodities

 Member of NSE & BSE for Equity Trading

 Member of MCX, NCDEX & DGCX for Commodities

 Off-line Trading also possible

 Unique online Security features for the first time in India

 Support activities : Research, PMS, Call Centre

 Lowest Brokerage and maximum service & Comfort.

 Equity Trading – Delivery, Margin & Derivatives

 Live News available on Portal– Reuters & Dow Jones

 Setting up kiosks at convenient locations for clients to enter

 Distribution of Financial Products

 Investments in Mutual Funds of all AMC’s

 Purchase of Insurance Policies ( Life & Non-Life)

 IPO & Margin Funding

 Off Shore Investments

 Online Portal for investments / trading in International

 Trading in Commodities, International Indices, Equity of

 Trading in Fx. Currencies & Offshore Bond Markets

 Precious Metal Retailing - 999.99% Pure Gold Coins, Assay

 Foreign Exchange Services – Money Changers

 Travel Card & Traveler Cheques

 Instant Money Transfers from anywhere in the world

 Buying of Foreign Currency in Physical form

 SMS Service is given for Trade confirmation, Research Calls,

 News Service - Online access to world class real time Dow

Ideas Create, Values Protect

Edelweiss securities offer Indian customers various options while

Margin: Use this facility to for Intraday Trading and leverage up to 4 to 5

 Customer to Open Account with Edelweiss - One time account

 Security & Safety of trading via Portal is ensured through issuance of

 Customer can avail any of the following schemes:

Plans Advance Delivery Minimum Intraday Minimum Options

Plan 1,000 0.45% 3 Paise 0.045% 1 Paise 2.5% or Rs

Plan 2,500 0.35% 3 Paise 0.035% 1 Paise 2% or Rs 80

Plan 5,000 0.25% 3 Paise 0.025% 1 Paise 1.75% r Rs

Plan 15,000 0.15% 3 Paise 0.015% 1 Paise 1.5% or Rs