A SUMMER INTERNSHIP PROJECT ON

“A STUDY ON PORTFOLIO MANAGEMENT SERVICES”

FOR THE PARTIAL FULFILLMENT OF POST-GRADUATION
DEGREE IN
“MASTER OF BUSINESS ADMINSTRATION”

UNDER THE ESTEEMED GUIDENCE OF

PROF. RAVI KUMAR
(FACULTY, AGBS HYDERABAD)

SUBMITTED BY
R.DINESH
ROLL NO: A30601909062

AMITY GLOBAL BUSINESS SCHOOL

BANJARA HILLS ROAD NO: 11
HYDERABAD
 DECLARATION

I hereby declare to the best of my knowledge and belief that

the Summer Training Project Report entitled as “PORTFOLIO
MANAGEMENT SERVICES” for SHAREKHAN LIMITED
HYDERABAD being submitted as the partial fulfilment of Master
of Business Administration, has been written and submitted under
the guidance of Mr. Shayam Sundar and Mr K.P.Singh Industry
guides and Mr Ravi Kumar my faculty guide.
I further declare that it is original work done as a part of the
academic course and has not been submitted elsewhere.
The conclusions and recommendations written in this project
are based on the data collected by me while preparing this report.

R.DINESH

A30601909062

Page 2
Page 3
 CERTIFICATE
(Whom so ever it may concern)

This is to certify that the project report entitled “PORTFOLIO

MANAGEMENT SERVICES” carried at SHAREKHAN LIMITED
Hyderabad is a bonafide work done by Mr. R.DINESH, bearing ID
No. A30601909062 a student of AMITY GLOBAL BUSINESS
SCHOOL, Hyderabad and submitted the same in the partial
fulfilment for the award of the degree of “ MASTER OF
BUSINESS ADMINISTRATION” has done his Summer
Internship Program under my guidance from 1st June 2010 to
15th July 2010.
I found him to be good in the task and activities assigned to
him. I wish his success in all future endeavours.

DATE:

PLACE: HYDERABAD (FACULTY GUIDE)

Page 4
 ACKNOWLEDGEMENT

I would like to express word of thanks to all those who have provided me
with sincere advice and information during the course of my training period.
It was indeed a great pleasure for me to work in a very co-operative,
enthusiastic and learning atmosphere at ShareKhan Limited.

I would like to take this opportunity to thank Dr. Prasad Rao (Director
AGBS Hyderabad) and D.Surekha Thakur (corporate relations), Amity
Global Business School for giving me an opportunity for doing a project in
a corporate firm and all my faculty members, senior officials and colleagues
at Share Khan for their help and support during the project.

I would also like to express my sincere thanks to prof. Ravi Kumar

(Faculty Guide-AMITY GLOBAL BUSINESS SCHOOL, Hyderabad) for his
unstinting guidance and support throughout the project. He has been a great
source of motivation to me.

I would also like to extend my regards to my company guides

Mr.K.P.Singh Territory Manager, Share Khan and Mr.Shyam Sundar,
Marketing Manager, Share khan and for helping me and providing me
with right direction during the course of my project. The interaction with him
has provided me with the knowledge which will definitely help me to enrich
my career and help me to perform better in future.

With all the heartiest thanks; I hope my final project report will be a great
success and a good source of learning and information.

R.DINESH

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 INDEX

CHAPTER TABLE OF CONTENTS PG.NO

CHAPTER-1 INTRODUCTION 8-22
Objective 8
Executive summary 9-11
Introduction to study 12-14
Myths About PMS 15-16
Introduction to Stock Exchange 17-
22
CHAPTER-2 COMPANY PROFILE 23-24
Work structure of Share khan 25
Product and Services offered by Company 26-29
Reasons to Choose Share khan 30-32
CHAPTER-3 RESEARCH METHODOLOGY 33-37
Scope of the Study 34
Methodology for Data Collection 35-37
CHAPTER-4 PORTFOLIO MANAGEMENT SERVICES 38-39
Need of PMS 40
Objective of PMS 41
Portfolio Construction 42-49
Risk and Risk Aversion 50-53
Risk versus Return 54-60
Portfolio Diversification 61-66
Techniques of PMS 67-72
Share khan PMS 73-80
DATA ANALYSIS AND 81-97
CHAPTER-5 INTERPRETATION
Case study & Article 98-
106
CHAPTER-6 CONCLUSION & SUGGESTIONS 107
Observation and Findings 108-
109
Limitations of the Project 110
Suggestions & Recommendations 111-
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112
BIBLIOGRAPHY 113
OBJECTIVE OF THE PROJECT

Each research study has its own specific purpose. It is like to discover to
Question through the application of scientific procedure. But the main aim of
our research to find out the truth that is hidden and which has not been
discovered as yet. Our research study has two objectives:-

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OBJECTIVES

 To know the concept of Portfolio Management.

 To know about the schemes offered by the different insurance
companies, new IPO’s, Mutual Funds.
 To know in depth about Insurance, Mutual Funds, Stock, Bonds etc.

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

 To study about the competitive position of Share khan Ltd in

Competitive Market.

 To study about the effectiveness & efficiency of Share khan Ltd in

relation to its competitors

 To study about whether people are satisfied with Share khan Services
& Management System or not.

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

khan.

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

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 EXECUTIVE SUMMARY
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 day’s
investments have become very important part of income saving.

In order to keep the Investor safe from market fluctuation and make them
profitable, Portfolio Management Services (PMS) is fast gaining Investment
Option for the High Net worth Individual (HNI). There is growing competition
between brokerage firms in post reform India. For investor it is always
difficult to decide which brokerage firm to choose.

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

and distributed to Investors. The investor’s profile is based on the results of a
questionnaire that the Investors completed. The Sample consists of 100

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investors from various broker’s premises. The target customers were
Investors who are trading in the stock market.

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

Research is carried throughout the area of Hyderabad. At the time of
investing money everyone look for the Risk factor involve in the Investment
option. The Report is prepared on the basis of Research work done through
the different Research Mythology the data is collected from both the source
Primary sources which consist of Questionnaire and secondary data is
collected from different sources such as Company website, Magazine and
other sources.

As the PMS services of Share khan Limited have the best result in its
field .It has given 43.50% return in Trailing stops, 94.30%return in
Nifty and 38.10% in Beta Portfolio which is the result when the Market
was not doing well from last one year.

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

wealth management so as to understand about the customer’s needs and
wants with respect to market and how a client’s portfolio can be designed
and what factors a portfolio manager must consider for designing a portfolio.

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CHAPTER-1

INTRODUCTION

Page 11
INTRODUCTION TO STUDY

The field of investment traditionally divided into security analysis and

portfolio management. The heart of security analysis is valuation of financial
assets. Value in turn is the function of risk and return. These two concepts
are in the study of investment .Investment can be defined the commitment of
funds to one or more assets that will be held over for some future time
period.

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

to move with changes and grab the best opportunities in the field of
investments a professional fund manager is necessary.

Therefore, in the present scenario the Portfolio Management Services

(PMS) is fast gaining importance as an investment alternative for the High
Net worth Investors.

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

fixed income, debt, cash, structured products and other individual securities,
managed by a professional money manager that can potentially be tailored
to meet specific investment objectives.

When you invest in PMS, you own individual securities unlike a mutual
fund investor, who owns units of the entire fund. You have the freedom and
flexibility to tailor your portfolio to address personal preferences and financial
goals. Although portfolio managers may oversee hundreds of portfolio, your
account may be unique.

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

i. Discretionary

ii. Non Discretionary

iii. Advisory

Discretionary: Under these services, the choice as well as the timings of the
investment decisions rest solely with the Portfolio Manager.

Non Discretionary: Under these services, the portfolio manager only

suggests the investment ideas. The choice as well as the timings of the
investment decisions rest solely with the Investor.
However the execution of trade is done by the portfolio manager.

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

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

Rule 2, clause (d) of the SEBI (portfolio managers) Rules, 1993 defines
the term “Portfolio” as “total holding of securities belonging to any person”.

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

which cannot be defined with certainty new assets could be physical assets,
real estates, land, building, gold etc. or financial assets like stocks, equity,
debenture, deposits etc.

Portfolio management refers to managing efficiently the investment in the

securities held by professional for others.

Merchant banker and the portfolio management with a view to ensure

maximum return by such investment with minimum risk of loss of return on

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the money invested in securities held by them for their clients. The aim
Portfolio

management is to achieve the maximum return from a portfolio, which

has been delegated to be managed by manger or financial institution.

There are lots of organization in the market on the lookout for the people
like you who need their portfolios managed for them .They have trained and
skilled talent will work on your money to make it do more for you.

Therefore, if any investors still insist on managing their own portfolio, then
ensure you build discipline into their investment. Work out their strategy and
stand by it.

MYTHS ABOUT PMS

There are two most common myths found about Portfolio Management
Services (PMS) which we found among most of the Investors. They are as
follows.

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

investment option”

As in the Finance Basket both the PMS and Mutual Fund are used for
minimizing risk and maximize the profit of the Investors. The objectives are
similar as in both the product but they are different from each other in
certain aspects. They are as follows.

Management Side

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 In PMS, it’s ongoing personalized access to professional money
management services. Whereas, in Mutual fund gives personalize access to
money.

Customization

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

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

Ownership

In PMS, Investors directly own the individual securities in their portfolio,

allowing for tax management flexibility, whereas in Mutual Fund Shareholders
own shares of the fund and cannot influence buy and sell decisions or control
their exposure to incurring tax liabilities.

Liquidity

In PMS, managers may hold cash; they are not required to hold cash to
meet redemptions, whereas, Mutual funds generally hold some cash to meet
redemptions.

Minimums

PMS generally gives higher minimum investments than mutual funds.

Generally, minimum ranges from: Rs. 1 Crore + for Equity Options Rs. 5 Crore
+ for Fixed Income Options Rs. 20 Laces + for Structured Products, whereas
in Mutual Fund Provide ongoing, personalized access to professional money
management services.

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 Flexibility

PMS is generally more flexible than mutual funds. The Portfolio Manager may
move to 100% cash if it required. The Portfolio Manager may take his own
time in building up the portfolio. The Portfolio Manager can also manage a
portfolio with disproportionate allocation to select compelling opportunities
whereas, in Mutual Fund comparatively less flexible.

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

Instrument”

In Financial Market Risk factor is common in all the financial products, but yes
it is true that Risk Factor vary from each other due to its nature. All
investments involve a certain amount of risk, including the possible erosion of
the principal amount invested, which varies depending on the security

selected. For example, investments in small and mid-sized companies tend

to involve more risk than investments in larger companies.

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 INTRODUCTION TO STOCK EXCHANGE

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

business passed in the shares of banks like the commercial bank, the
chartered mercantile bank, the chartered bank, the oriental bank and the old
bank of Bombay and shares of cotton presses. In Calcutta, Englishman
reported the quotations of 4%, 5%, and 6% loans of East India Company as
well as the shares of the bank of Bengal in 1836. This list was a further
broadened in 1839 when the Calcutta newspaper printed the quotations of
banks like union bank and Agra bank. It also quoted the prices of business
ventures like the Bengal bonded warehouse, the Docking Company and the
storm tug company.

Between 1840 and 1850, only half a dozen brokers existed for the limited
business. But during the share mania of 1860-65, the number of brokers
increased considerably. By 1860, the number of brokers was about 60 and
during the exciting period of the American Civil war, their number increased
to about 200 to 250. The end of American Civil war brought disillusionment
and many

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

those troublesome times between 1868 and 1875 that brokers organized an
informal association and finally as recited in the Indenture constituting the
“Articles of Association of the Exchange”.

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 On or about 9th day of July,1875, a few native brokers doing brokerage
business in shares and stocks resolved upon forming in Bombay an
association for protecting the character, status and interest of native share
and stock brokers and providing a hall or building for the use of the Members
of such association.

As a meeting held in the broker’ Hall on the 5th day of February, 1887, it
was resolved to execute a formal deal of association and to constitute the
first managing committee and to appoint the first trustees. Accordingly, the
Articles of Association of the Exchange and the Stock
Exchange was formally established in Bombay on 3rd day of December,
1887. The Association is now known as “The Stock Exchange”.

The entrance fee for new member was Re.1 and there were 318 members
on the list, when the exchange was constituted. The numbers of members
increased to 333 in 1896, 362 in 1916and 478 in 1920 and the entrance fee
was raised to Rs.5 in 1877, Rs.1000 in 1896, Rs.2500 in 1916 and Rs. 48,000
in 1920. At present there are 23 recognized stock exchanges with about
6000 stock brokers. Organization structure of stock exchange varies.

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

companies limited by guarantee and 3 are non-profit voluntary organization.
Of the total of 23, only 9 stock exchanges have been permanent recognition.
Others have to seek recognition on annual basis.
These exchange do not work of its own, rather, these are run by some
persons and with the help of some persons and institution. All these are down
as functionaries on stock exchange. These are:

i. Stockbrokers
ii. Sub-broker
iii. Market makers

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 iv. Portfolio consultants etc.

1. Stockbrokers:
Stock brokers are the members of stock exchanges.
These are the persons who buy, sell or deal in securities. A certificate of
registration from SEBI is mandatory to act as a broker. SEBI can impose
certain conditions while granting the certificate of registrations. It is
obligatory for the person to abide by the rules, regulations and the buy-law.
Stock brokers are commission broker, floor broker, arbitrageur etc.

Detail of Registered Brokers

Total no. of registered Total no. of sub-broker as on
brokers as on 31.03.09 31.03.09

9000 24,000

2. Sub-broker:
A sub-broker acts as agent of stock broker. He is not a
member of a stock exchange. He assists the investors in buying, selling or
dealing in securities through stockbroker. The broker and sub-broker should
enter into an agreement in which obligations of both should be specified.
Sub-broker must be registered SEBI for a dealing in securities. For getting
registered with SEBI, he must fulfill certain rules and regulation.

3. Market Makers:
Market maker is a designated specialist in the
specified securities. They make both bid and offer at the same time. A market

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maker has to abide by bye-laws, rules regulations of the concerned stock
exchange. He is exempt from the margin requirements. As per the listing
requirements, a company where the paid-up capital is Rs. 3 Crore but not
more than Rs. 5 core and having a commercial operation for less than 2 years
should appoint a market maker at the time of issue of securities.

4. Portfolio Consultants:
A combination of securities such as stocks,
bonds and money market instruments is collectively called as portfolio.
Whereas the portfolio consultants are the persons, firms or companies who
advise, direct or undertake the management or administration of securities or
funds on behalf of their clients.

Traditionally stock trading is done through stock brokers, personally or

through telephones.
As number of people trading in stock market increase enormously in last
few years, some issues like location constrains, busy phone lines, miss
communication etc start growing in stock broker offices. Information
technology (Stock Market Software) helps stock brokers in solving these
problems with Online Stock Trading.

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

Investor can trade shares through a website without any manual intervention
from Stock Broker.
There are two different type of trading environments available for
online equity trading.

1. Installable software based Stock Trading Terminals

This trading environment requires software to be installed on investor’s
computer. This software is provided by the stock broker. This software

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requires high speed internet connection. These kind of trading terminals are
used by high volume intraday equity traders.

2.Web (Internet) based trading application

This kind of trading environment doesn't require any additional software
installation. They are like other internet websites which investor can access
from around the world through normal internet connection.

Stock exchanges are like market places, where stockbrokers buy and sell
securities for individuals or institutions. As per the SCRA (Securities Contracts
Regulation Act) 1956, the definition of securities includes shares, bonds,
stocks, debentures, government securities, derivatives of securities, units of
collective investment scheme (CIS) etc. The securities market has two
interdependent segments: the primary and secondary market.

The primary market is the channel for creation of new securities issued by
public limited companies or by government agencies. New securities issued
in the primary market are traded in the secondary market.

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

market and the exchange trade market.

Advantages of Stocks Trading

1. Better returns
Actively trading stocks can produce better overall returns than simply
buying and holding.

2. Huge Choice
There are thousands of stocks listed on markets around the world. There is
always a stock whose price is moving - it’s just a matter of finding them.

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 3. Familiarity
The most traded stocks are in the largest companies that most of us have
heard of and understand - Microsoft, IBM, and Cisco etc.

Disadvantages of Stocks Trading

1. Leverage
With a margined account the maximum amount of leverage available for
stock trading is usually 4:1. Meaning a $25,000 could trade up to $100,000 of
stock. This is pretty low compared to Forex trading or futures trading.

2. Pattern Day Trader Rules

It requires at least $25,000 to be held in a trading account if the trader
completes more than 4 trades in a 5 day period. No such rule applies to Forex
trading or futures trading.

3. Uptick Rule on Short Selling

A trader must wait until a stock price ticks up before they can short sell it.
Again there are no such rules in Forex trading or futures trading where going
short are as easy as going long.

4. Need to Borrow Stock to Short

Stocks are physical commodities and if a trader wishes to go short then
the broker must have arrangements in place to borrow that stock from a
shareholder until the trader closes their position. This limits the opportunities

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available for short selling. Contrast this to futures trading where selling is as
easy as buying.

5. Costs
Although online trading costs for stock trading are low they still add
considerably to the costs of day trading. Online futures trading are about 1/4
of the cost for the equivalent value. In the UK 0.5% stamp duty is also levied
on all share purchases making trading virtually impossible, hence the
popularity of spread betting.

CHAPTER- 2

COMPANY PROFILE

Page 23
 COMPANY PROFILE

Share khan is one of the leading retail brokerage of City Venture which is
running successfully since 1922 in the country. Earlier it was the retail
broking arm of the Mumbai-based SSKI Group, which has over eight decades
of experience in the stock broking business. Share khan offers its customers
a wide range of equity related services including trade execution on BSE,
NSE, Derivatives, depository services, online trading, investment advice etc.

Earlier with a legacy of more than 80 years in the stock markets, the SSKI
group ventured into institutional broking and corporate finance 18 years ago.
SSKI is one of the leading players in institutional broking and corporate
finance activities. SSKI holds a sizeable portion of the market in each of these
segments. SSKI’s institutional broking arm accounts for 7% of the market for
Foreign Institutional portfolio investment and 5% of all Domestic Institutional
portfolio investment in the country.

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 It has 60 institutional clients spread over India, Far East, UK and US.
Foreign Institutional Investors generate about 65% of the organization’s
revenue, with a daily turnover of over US$ 2 million. The content-rich and
research oriented portal has stood out among its contemporaries because of
its steadfast dedication to offering customers best-of-breed technology and
superior market information. The objective has been to let customers make
informed decisions and to simplify the process of investing in stocks

Mission of the Share khan is

“To educate and empower the individual investor to make better
investment decisions through
 QUALITY ADVICE
 INNOVATIVE PRODUCTS and
 SUPERIOR SERVICE.”

WORK STRUCUTRE OF SHAREKHAN

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

business. The company has used some of the best-known names in the IT
industry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies,
Nexgenix, VignetteVeriSigngn Financial Technologies India Ltd, Spider
Software Pvt. Ltd. to build its trading engine and content. The City Venture
holds a majority stake in the company. HSBC, Intel & Carlyle are the other
investors.

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 On April 17, 2002 Share khan launched Speed Trade and Trade Tiger, are
net-based executable application that emulates the broker terminals along
with host of other information relevant to the Day Traders. This was for the
first time that a net-based trading station of this caliber was offered to the
traders. In the last six months Speed Trade has become a de facto standard
for the Day Trading community over the net. Share khan’s ground network
includes over 700+ Share shops in 130+ cities in India.

The firm’s online trading and investment site www.sharekhan.com - was

launched on Feb 8, 2000. The site gives access to superior content and
transaction facility to retail customers across the country. Known for its
jargon-free, investor friendly language and high quality research, the site has
a registered base of over 3 Laces customers. The number of trading members
currently stands at over 7 Laces. While online trading currently accounts for
just over 5 per cent of the daily trading in stocks in India, Share khan alone
accounts for 27 per cent of the volumes traded online.

The Corporate Finance section has a list of very prestigious clients and has
many ‘firsts’ to its credit, in terms of the size of deal, sector tapped etc. The
group has placed over US$ 5 billion in private equity deals. Some of the
clients include BPL Cellular Holding, Gujarat Papaya, Essar, Hutchison,
Planetasia, and Shopper’s Stop. Finally, Share khan shifted hands and City
venture get holds on it.
PRODUCT AND SERVICES OFFERD BY SHAREKHAN
1- Equity Trading Platform (Online/Offline).

2- Commodities Trading Platform (Online/Offline).

3- Portfolio Management Service.

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4- Mutual Fund Advisory and Distribution.

5- Insurance Distribution.

6-Forex

6. Forex.

Page 27
 Share khan offers the following products:-

CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through
website www.sharekhan.com and is suitable for the retail investors who is
risk-averse and hence prefers to invest in stocks or who does not trade too
frequently.

Features
 Online trading account for investing in Equity and Derivatives via
www.sharekhan.com
 Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE.
 Integration of On-line trading, Saving Bank and Demat Account.
 Instant cash transfer facility against purchase & sale of shares.

 Competitive transaction charges.

 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).
 Personalized market watch.
 Single screen interface for Cash and derivatives and more.
 Provision to enter price trigger and view the same online in market
watch.

SPEEDTRADE
SPEEDTRADE is an internet-based software application that enables you to
buy and sell in an instant. It is ideal for active traders and jobbers who

Page 28
transact frequently during day’s session to capitalize on intra-day price
movement.

Features
 Instant order Execution and Confirmation.
 Single screen trading terminal for NSE Cash, NSE F&O & BSE.

 Technical Studies.
 Multiple Charting.
 Real-time streaming quotes, tic-by-tic charts.
 Market summary (Cost traded scrip, highest clue etc.)
 Hot keys similar to broker’s terminal.
 Alerts and reminders.
 Back-up facility to place trades on Direct Phone lines.
 Live market debts.
DIAL-N-TRADE
Along with enabling access for trade online, the CLASSIC and SPEEDTRADE
ACCOUNT also gives Dial-n-trade services. With this service, one can dial
Share khan’s dedicated phone lines 1800-22-7500, 3970-7500. Beside this,
Relationship Managers are always available on Office Phone and Mobile to
resolve customer queries.

SHARE MOBILE
Share khan had introduced Share Mobile, mobile based software where
one can watch Stock Prices, Intra Day Charts, Research & Advice and Trading
Calls live on the Mobile. (As per SEBI regulations, buying-selling shares
through a mobile phone are not yet permitted.)

PREPAID ACCOUNT

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 Customers pay Advance Brokerage on trading Account and enjoy
uninterrupted trading in their Account. Beside this, great discount are also
available (up to 50%) on brokerage.
Prepaid Classic Account: - Rs. 2000
Prepaid Speed trade Account: - Rs. 6000

IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite
hassle-free, paperless and time saving. Simply allocate fund to IPO Account,

Apply for the IPO and Sit Back & Relax.

Mutual Fund Online

Investors can apply to Mutual Funds of Reliance, Franklin Templeton
Investments, ICICI Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch,

PRINCIPAL and TATA with Share khan.

Zero Balance ICICI Saving Account

Share khan had tied-up with ICICI bank for Zero Balance Account for Share
khan’s Clients. Now their customers can have a Zero Balance Saving Account

with ICICI Bank after your demat account creation with Share khan.

REASON TO CHOOSE SAHREKHAN LIMITED

Experience
SSKI has more than eight decades of trust and credibility in the Indian
stock market. In the Asia Money broker's poll held recently, SSKI won the

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'India's best broking house for 2004' award. Ever since it launched Share
khan as its retail broking division in February 2000, it has been providing
institutional-level research and broking services to individual investors.

Technology
With their online trading account one can buy and sell shares in an instant
from any PC with an internet connection. Customers get access to the
powerful online trading tools that will help them to take complete control

over their investment in shares.

Accessibility
Share khan provides ADVICE, EDUCATION, TOOLS AND EXECUTION
services for investors. These services are accessible through many centers
across the country (Over 650 locations in 150 cities), over the Internet
(through the website www.sharekhan.com) as well as over the Voice Tool.

Knowledge
In a business where the right information at the right time can translate
into direct profits, investors get access to a wide range of information on the
content-rich portal, www.sharekhan.com. Investors will also get a useful set

of knowledge-based tools that will empower them to take informed decisions.

Convenience
One can call Share khan’s Dial-N-Trade number to get investment advice
and execute his/her transactions. They have a dedicated call-center to

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

Customer Service
Its customer service team assist their customer for any help that they
need relating to transactions, billing, demat and other queries. Their
customer service can be contacted via a toll-free number, email or live chat
on www.sharekhan.com.

Investment Advice
Share khan has dedicated research teams of more than 30 people for
fundamental and technical research. Their analysts constantly track the pulse
of the market and provide timely investment advice to customer in the form
of daily research emails, online chat, printed reports etc.

Benefits
 Free Depository A/c
 Instant Cash Transfer
 Multiple Bank Option.
 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual
purchases.
 24x7 Voice Tool access to your trading account.
 Personalized Price and Account Alerts delivered instantly to your
Mobile Phone & E-mail address.
 Live Chat facility with Relationship Manager on Yahoo Messenger
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Enjoy Automated Portfolio.

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 Buy or sell even single share
 Anytime Ordering.

Page 33
 CHAPTER-3

RESEARCH METHODOLOGY

Scope of the Study

The study of the Portfolio Management Services is helpful in the

following areas.

Page 34
  In today's complex financial environment, investors have unique needs
which are derived from their risk appetite and financial goals. But
regardless of this, every investor seeks to maximize his returns on
investments without capital erosion. Portfolio Management Services
(PMS) recognize this, and manage the investments professionally to
achieve specific investment objectives, and not to forget, relieving the
investors from the day to day hassles which investment require.

 It is offers professional management of equity investment of the

investor with an aim to deliver consistent return with an eye on risk.

 Identify the key Stock in each portfolio.

 To look out for new prospective customers who are willing to invest in
PMS.

 To find out the Share khan, PMS services effectiveness in the current
situation.

 It also covers the scenario of the Investment Philosophy of a Fund

Manager.

RESEARCH DESISGN OF THE STUDY

This report is based on primary as well secondary data, however primary

data collection was given more importance since it is overhearing factor in
attitude studies. One of the most important users of research methodology is
that it helps in identifying the problem, collecting, analyzing the required
information data and providing an alternative solution to the problem .It also
helps in collecting the vital information that is required by the top

Page 35
management to assist them for the better decision making both day to day
decision and critical ones.

The study consists of analysis about Investors Perception about the

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

The methodology adopted includes

 Questionnaire
 Random sample survey of customers

 Discussions with the concerned

SOURCES OF DATA

 Primary data: Questionnaire

 Secondary data: Published materials of Share khan Limited. Such as

periodicals, journals, news papers, and website.

Duration of Study

The Study was carried out for the period of one and half months from 29 th
April to 15th of June2009.

SAMPLING PLAN

Page 36
  Sampling:

Since Share khan Limited has many segments I selected Portfolio

Management Services (PMS) segment as per my profile to do market
research. 100% coverage was difficult within the limited period of time.
Hence sampling survey method was adopted for the purpose of the study.

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

 Sampling size:

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

 Sampling Methods:

Probability sampling requires complete knowledge about all sampling units

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

 Sampling procedure:
From large number of customers & non consumers sample lot were
randomly picked up by me.
Field Study:

Page 37
Directly approached respondents by the following strategies

 Tele-calling

 Personal Visits
 Clients References
 Promotional Activities
 Database provided by the Share khan Limited.

Page 38
 CHAPTER-4

PORTFOLIO MANAGMENT
SERVICES

PORTFOLIO MANGEMNT SERVICES (PMS)

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

or a private individual. Holding a portfolio is often part of an investment and
risk-limiting strategy called diversification. By owning several assets, certain

Page 39
types of risk (in particular specific risk) can be reduced. There are also
portfolios which are aimed at taking high risks – these are called
concentrated portfolios.

Investment management is the professional management of various

securities (shares, bonds etc) and other assets (e.g. real estate), to meet
specified investment goals for the benefit of the investors. Investors may be
institutions (insurance companies, pension funds, corporations etc.) or
private investors (both directly via investment contracts and more commonly
via collective investment schemes e.g. mutual funds).

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

management of collective investments, whilst the more generic fund
management may refer to all forms of institutional investment as well as
investment management for private investors. Investment managers who
specialize in advisory or discretionary management on behalf of (normally
wealthy) private investors may often refer to their services as wealth
management or portfolio management often within the context of so-called
"private banking".

The provision of 'investment management services' includes elements of

financial analysis, asset selection, stock selection, plan implementation and
ongoing monitoring of investments. Outside of the financial industry, the
term "investment management" is often applied to investments other than
financial instruments. Investments are often meant to include projects,
brands, patents and many things other than stocks and bonds. Even in this
case, the term implies that rigorous financial and economic analysis methods
are used.

Need of PMS

Page 40
 As in the current scenario the effectiveness of PMS is required. As the PMS
gives investors periodically review their asset allocation across different
assets as the portfolio can get skewed over a period of time. This can be
largely due to appreciation / depreciation in the value of the investments.

As the financial goals are diverse, the investment choices also need to be
different to meet those needs. No single investment is likely to meet all the
needs, so one should keep some money in bank deposits and / liquid funds to
meet any urgent need for cash and keep the balance in other investment
products/ schemes that would maximize the return and minimize the risk.
Investment allocation can also change depending on one’s risk-return profile.

Page 41
 Objective of PMS

There are the following objective which is full filled by Portfolio

Management Services.

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

Page 42
2. Marketability: -
The investment made in securities should be marketable that
means, the securities must be listed and traded in stock exchange so
as to avoid difficulty in their encashment.

3. Liquidity: -
The portfolio must consist of such securities, which could be en-
cashed without any difficulty or involvement of time to meet urgent
need for funds. Marketability ensures liquidity to the portfolio.

4. Reasonable return: -
The investment should earn a reasonable return to upkeep the
declining value of money and be compatible with opportunity cost of
the money in terms of current income in the form of interest or
dividend.

5. Appreciation in Capital: -
The money invested in portfolio should grow and result into capital
gains.

6. Tax planning: -
Efficient portfolio management is concerned with composite tax
planning covering income tax, capital gain tax, wealth tax and gift tax.
7. Minimize risk: -
Risk avoidance and minimization of risk are important objective of
portfolio management. Portfolio managers achieve these objectives by
effective investment planning and periodical review of market,
situation and economic environment affecting the financial market.

PORTFOLIO CONSTRUCTION

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 The Portfolio Construction of Rational investors wish to maximize the
returns on their funds for a given level of risk. All investments possess
varying degrees of risk. Returns come in the form of income, such as interest
or dividends, or through growth in capital values (i.e. capital gains).

The portfolio construction process can be broadly characterized as

comprising the following steps:

1. Setting objectives.

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

the fund given the constraints (i.e. tax and liquidity requirements) that may
apply. Each investor has different objectives, time horizons and attitude
towards risk. Pension funds have long-term obligations and, as a result,
invest for the long term. Their objective may be to maximize total returns in
excess of the inflation rate. A charity might wish to generate the highest level
of income whilst maintaining the value of its capital received from bequests.
An individual may have certain liabilities and wish to match them at a future
date. Assessing a client’s risk tolerance can be difficult. The concepts of
efficient portfolios and diversification must also be considered when setting
up the investment objectives.

2. Defining Policy.

Once the objectives have been set, a suitable investment policy must be
established. The standard procedure is for the money manager to ask clients
to select their preferred mix of assets, for example equities and bonds, to
provide an idea of the normal mix desired. Clients are then asked to specify
limits or maximum and minimum amounts they will allow to be invested in
the different assets available. The main asset classes are cash, equities,

Page 44
gilts/bonds and other debt instruments, derivatives, property and overseas
assets. Alternative investments, such as private equity, are also growing in
popularity, and will be discussed in a later chapter. Attaining the optimal
asset mix over time is one of the key factors of successful investing.

3. Applying portfolio strategy.

At either end of the portfolio management spectrum of strategies are

active and passive strategies. An active strategy involves predicting trends
and changing expectations about the likely future performance of the various
asset classes and actively dealing in and out of investments to seek a better
performance. For example, if the manager expects interest rates to rise, bond
prices are likely to fall and so bonds should be sold, unless this expectation is
already
factored into bond prices. At this stage, the active fund manager should also
determine the style of the portfolio. For example, will the fund invest
primarily in companies with large market capitalizations, in shares of
companies expected to generate high growth rates, or in companies whose
valuations are low? A passive strategy usually involves buying securities to
match a preselected market index. Alternatively, a portfolio can be set up to
match the investor’s choice of tailor-made index. Passive strategies rely on
diversification to reduce risk. Outperformance versus the chosen index is not
expected. This strategy requires minimum input from the portfolio manager.
In practice, many active funds are managed somewhere between the active
and passive extremes, the core holdings of the fund being passively
managed and the balance being actively managed.

4. Asset selections.

Page 45
 Once the strategy is decided, the fund manager must select individual
assets in which to invest. Usually a systematic procedure known as an
investment process is established, which sets guidelines or criteria for asset
selection. Active strategies require that the fund managers apply analytical
skills and judgment for asset selection in order to identify undervalued assets
and to try to generate superior performance.

5. Performance assessments.

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

the fund is periodically measured against a pre-agreed benchmark – perhaps
a suitable stock exchange index or against a group of similar portfolios (peer
group comparison). The portfolio construction process is continuously
iterative, reflecting changes internally and externally. For example, expected
movements in exchange rates may make overseas investment more
attractive, leading to changes in asset allocation. Or, if many large-scale
investors simultaneously decide to switch from passive to more active
strategies, pressure will be put on the fund managers to offer more active
funds. Poor performance of a fund may lead to modifications in individual
asset holdings or, as an extreme measure; the manager of the fund may be
changed altogether.

Steps to Stock Selection Process

Page 46
 \

Types of assets

Page 47
 The structure of a portfolio will depend ultimately on the investor’s
objectives and on the asset selection decision reached. The portfolio
structure takes into account a range of factors, including the investor’s time
horizon, attitude to risk, liquidity requirements, tax position and availability of
investments. The main asset classes are cash, bonds and other fixed income
securities, equities, derivatives, property and overseas assets.

Cash and cash instruments

Cash can be invested over any desired period, to generate interest income, in
a range of highly liquid or easily redeemable instruments, from simple bank
deposits, negotiable certificates of deposits, commercial paper (short term
corporate debt) and Treasury bills (short term government debt) to money
market funds, which actively manage cash resources across a range of
domestic and foreign markets. Cash is normally held over the short term
pending use elsewhere (perhaps for paying claims by a non-life insurance
company or for paying pensions), but may be held over the longer term as
well. Returns on cash are driven by the general demand for funds in an
economy, interest rates, and the expected rate of inflation. A portfolio will
normally maintain at least a small proportion of its funds in cash in order to
take advantage of buying opportunities.

Bonds

Bonds are debt instruments on which the issuer (the borrower) agrees to
make interest payments at periodic intervals over the life of the bond – this
can be for two to thirty years or, sometimes, in perpetuity. Interest payments

Page 48
can be fixed or variable, the latter being linked to prevailing levels of interest
rates. Bond markets are international and have grown rapidly over recent
years. The bond markets are highly liquid, with many issuers of similar
standing, including governments (sovereigns) and state-guaranteed
organizations. Corporate bonds are bonds that are issued by companies. To
assist investors and to help in the efficient pricing of bond issues, many bond
issues are given ratings by specialist agencies such as Standard & Poor’s and
Moody’s. The highest investment grade is AAA, going all the way down to D,
which is graded as in default. Depending on expected movements in future
interest rates, the capital values of bonds fluctuate daily, providing investors
with the potential for capital gains or losses. Future interest rates are driven
by the likely demand/ supply of money in an economy, future inflation rates,
political events and interest rates elsewhere in world markets. Investors with
short-term horizons and liquidity requirements may choose to invest in bonds
because of their relatively higher return than cash and their prospects for
possible capital appreciation. Long-term investors, such as pension funds,
may acquire bonds for the higher income and may hold them until
redemption – for perhaps seven or fifteen years. Because of the greater risk,
long bonds (over ten years to maturity) tend to be more volatile in price than
medium- and short-term bonds, and have a higher yield.

Equities

Equity consists of shares in a company representing the capital originally

provided by shareholders. An ordinary shareholder owns a proportional share
of the company and an ordinary share carries the residual risk and rewards
after all liabilities and costs have been paid. Ordinary shares carry the right
to receive income in the form of dividends (once declared out of distributable
profits) and any residual claim on the company’s assets once its liabilities
have been paid in full. Preference shares are another type of share capital.

Page 49
They differ from ordinary shares in that the dividend on a preference share is
usually fixed at some amount and does not change. Also, preference shares
usually do not carry voting rights and, in the event of firm failure, preference
shareholders are paid before ordinary shareholders. Returns from investing in
equities are generated in the form of dividend income and capital gain arising
from the ultimate sale of the shares. The level of dividends may vary from
year to year, reflecting the changing profitability of a company. Similarly, the
market price of a share will change from day to day to reflect all relevant
available information. Although not guaranteed, equity prices generally rise
over time, reflecting general economic growth, and have been found over the
long term to generate growing levels of income in excess of the rate of
inflation. Granted, there may be periods of time, even years, when equity
prices trend downwards – usually during recessionary times. The overall long-
term prospect, however, for capital appreciation makes equities an attractive
investment proposition for major institutional investors.

Derivatives

Derivative instruments are financial assets that are derived from existing
primary assets as opposed to being issued by a company or government
entity. The two most popular derivatives are futures and options. The extent
to which a fund may incorporate derivatives products in the fund will be
specified in the fund rules and, depending on the type of fund established for
the client and depending on the client, may not be allowable at all.

Page 50
 A futures contract is an agreement in the form of a standardized
contract between two counterparties to exchange an asset at a fixed price
and date in the future. The underlying asset of the futures contract can be a
commodity or a financial security. Each contract specifies the type and
amount of the asset to be exchanged, and where it is to be delivered (usually
one of a few approved locations for that particular asset). Futures contracts
can be set up for the delivery of cocoa, steel, oil or coffee. Likewise, financial
futures contracts can specify the delivery of foreign currency or a range of
government bonds. The buyer of a futures contract takes a ‘long position’,
and will make a profit if the value of the contract rises after the purchase.
The seller of the futures contract takes a ‘short position’ and will, in turn,
make a profit if the price of the futures contract falls. When the futures
contract expires, the seller of the contract is required to deliver the
underlying asset to the buyer of the contract. Regarding financial futures
contracts, however, in the vast majority of cases no physical delivery of the
underlying asset takes place as many contracts are cash settled or closed out
with the offsetting position before the expiry date.

An option contract is an agreement that gives the owner the right, but
not obligation, to buy or sell (depending on the type of option) a certain asset
for a specified period of time. A call option gives the holder the right to buy
the asset. A put option gives the holder the right to sell the asset. European
options can be exercised only on the options’ expiry date. US options can be
exercised at any time before the contract’s maturity date. Option contracts
on stocks or stock indices are particularly popular. Buying an option involves
paying a premium; selling an option involves receiving the premium. Options
have the potential for large gains or losses, and are considered to be high-
risk instruments. Sometimes, however, option contracts are used to reduce
risk. For example, fund managers can use a call option to reduce risk when
they own an asset. Only very specific funds are allowed to hold options.

Page 51
 Property

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

indirectly by buying shares in listed property companies. Only major
institutional investors with long-term time horizons and no liquidity pressures
tend to make direct property investments. These institutions purchase
freehold and leasehold properties as part of a property portfolio held for the
long term, perhaps twenty or more years. Property sectors of interest would
include prime, quality, well-located commercial office and shop properties,
modern industrial warehouses and estates, hotels, farmland and woodland.
Returns are generated from annual rents and any capital gains on realization.
These investments are often highly illiquid.

Risk and Risk Aversion

Portfolio theory also assumes that investors are basically risk adverse,
meaning that, given a choice between two assets with equal rates of return
they will select the asset with lower level of risk.
For example, they purchased various type of insurance including life
insurance, Health insurance and car insurance. The Combination of risk
preference and risk aversion can be explained by an attitude toward risk that
depends on the amount of money involved.
A discussion of portfolio or fund management must include some thought
given to the concept of risk. Any portfolio that is being developed will have
certain risk constraints specified in the fund rules, very often to cater to a
particular segment of investor who possesses a particular level of risk
appetite. It is, therefore, important to spend some time discussing the basic

Page 52
theories of quantifying the level of risk in an investment, and to attempt to
explain the way in which market values of investments are determined

Definition of Risk

Although there is a difference in the specific definitions of risk and

uncertainty, for our purpose and in most financial literature the two terms are
used interchangeably. In fact, one way to define risk is the uncertainty of
future outcomes. An alternative definition might be the probability of an
adverse outcome.

Composite risks involve the different risk as explained

below:-

(1). Interest rate risk: -

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

rate. In long runs all interest rate move up or downwards. These changes
affect the value of security. RBI, in India, is the monitoring authority which
effectalises the change in interest rate. Any upward revision in interest rate
affects fixed income security, which carry old lower rate of interest and thus
declining market value. Thus it establishes an inverse relationship in the prize
of security.

TYPES RISK EXTENT

Cash equivalent Less vulnerable to interest rate
risk

Page 53
 Long term Bond More vulnerable to interest rate
risk.

(2) Purchasing power risk:

It is known as inflation risk also. This risk emanates from the very fact that
inflation affects the purchasing power adversely. Purchasing power risk is
more in inflationary times in bonds and fixed income securities. It is desirable
to invest in such securities during deflationary period or a period of
decelerating inflation. Purchasing power risk is less in flexible income
securities like equity shares or common stuffs where rise in dividend income
offset increase in the rate of inflation and provide advantage of capital gains.

(3) Business risk:

Business risk emanates from sale and purchase of securities affected by

business cycles, technological change etc. Business cycle affects all the type
of securities viz. there is cheerful movement in boom due to bullish trend in
stock prizes where as bearish trend in depression brings downfall in the
prizes of all types of securities. Flexible income securities are nearly affected
than fix rate securities during depression due to decline n the market prize.

(4) Financial risk:

Financial risk emanates from the changes in the capital structure of the
company. It is also known as leveraged risk and expressed in term of debt
equity ratio. Excess of debts against equity in the capital structure indicates
the company to be highly geared or highly levered. Although leveraged

Page 54
company’s earnings per share (EPS) are more but dependence on borrowing
exposes it to the risk of winding up. For, its inability to the honor its
commitments towards the creditors are most important.

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

which is depicted graphically below

Maximize returns, minimize risks

Page 55
RISK VERSUS RETURN

Risk versus return is the reason why investors invest in portfolios. The
ideal goal in portfolio management is to create an optimal portfolio derived
from the best risk–return opportunities available given a particular set of risk
constraints. To be able to make decisions, it must be possible to quantify the
degree of risk in a particular opportunity. The most common method is to use
the standard deviation of the expected returns. This method measures
spreads, and it is the possible returns of these spreads that provide the
measure of risk. The presence of risk means that more than one outcome is

Page 56
possible. An investment is expected to produce different returns depending
on the set of circumstances that prevail.

For example, given the following for Investment A:

Circumstance Return(x) Probability(p)

I 10% 0.2
II 12% 0.3
III 15% 0.4
IV 19% 0.1

It is possible to calculate:

1. The expected (or average) return

Mean (average) = x = expected value (EV) = ∑px

Circumstan Return(x) Probability px

ce (p)
I 10% 0.2 2.0
II 12% 0.3 3.6
III 15% 0.4 6.0
IV 19% 0.1 1.9

Expected Return (∑px) = 13.5%

2. The Standard deviation

Standard deviation =σ=√ ∑p(x- x) 2

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

σ2

Page 57
 Deviation from
Circumstanc Probabilit
p (x -x)2
Return
expected Return (x
e y

-x)
I 10% 0.2 -3.5% 2.45

II 12% 0.3 -1.5% .68

III 15% 0.4 +1.5% 1.90

IV 19% 0.1 +5.5% 3.03

VARAIANCE=

7.06

Standard deviation (σ) = √Variance

= √ 7.06

= 2.66%

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

standard deviation, the greater the spread, and the greater the spread, the
greater the risk.

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

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

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

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

Plan Expected Return Risk(standard

deviation)
Investment A 9% 2.5%
Investment B 9% 4.0%

Page 58
 Since both investments have the same expected return, the best selection

of investment would be Investment A, which provides the lower risk.

Similarly, if there are two investments presenting the same risk, but one has
a higher return than the other, that investment would be chosen over the
investment with the lower return for the same risk.

In the real world, there are all types of investors. Some investors are
completely risk averse and others are willing to take some risk, but expect a
higher return for that risk. Different investors will also have different
tolerances or threshold levels for risk–return trade-offs – i.e. for a given level
of risk, one investor may demand a higher rate of return than another
investor.

INDIFFERNCE CURVE

Suppose the following situation exists

Plan Expected Return Risk(Standard

Deviation)
Investment A 10% 5%
Investment B 20% 10%

The question to ask here is, does the extra 10% return compensate for the
extra risk? There is no right answer, as the decision would depend on the
particular investor’s attitude to risk. A particular investor’s indifference curve

Page 59
can be ascertained by plotting what rate of return the investor would require
for each level of risk to be indifferent amongst all of the investments.

For example, there may be an investor who can obtain a return of 50% with
zero risk and a return of 55 %with a risk or standard deviation of 5% who will
be indifferent between the two investments. If further investments were
considered, each with a higher degree of risk, the investor would require still
higher returns to make all of the investments equally attractive. The investor
being discussed could present the following as the indifference curve shown
in Figure.

Indifference Curve
Expected Return Risk
50% 0%
55% 5%
70% 10%
100% 15%
120% 18%
230% 25%

Risk

Page 60
Indifference curve

It could be the case that this investor would have different indifference
curves given a different starting level of return for zero risk. The exercise
would need to be repeated for various levels of risk–return starting points. An
entire set of indifference curves could be constructed that would portray a
particular investor’s attitude towards risk

Indifference Curve

Utility scores

At this stage the concept of utility scores can be introduced. These can be
seen as a way of ranking competing portfolios based on the expected return
and risk of those portfolios. Thus if a fund manager had to determine which
investment a particular investor would prefer, i.e. Investment A equaling a
return of 10% for a risk of 5% or Investment B equaling a return of 20% for a

Page 61
risk of 10%, the manager would create indifference curves for that particular
investor and look at the utility scores. Higher utility scores are assigned to
portfolios or investments with more attractive risk–return profiles. Although
several scoring systems are legitimate, one function that is commonly
employed assigns a portfolio or investment with expected return or value EV
and variance of returns σ 2the following utility value:

U = EV –.005Aσ2 where:

U = utility value
A = an index of the investor’s aversion, (the factor of .005 is a scaling
convention that allows expression of the expected return and standard
deviation in the equation as a percentage rather than a decimal).

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

Investors choosing amongst competing investment portfolios will select the
one providing the highest utility value. Thus, in the example above, the
investor will select the investment (portfolio) with the higher utility value of
18.

Expected Standard Utility=EV-.005A

Return(EV) deviation(σ) σ2
10% 5% 10 –.005 4
 25
 = 9.5

20% 10% 20 –.005 4

 100
 = 18

(Assume A= 4 in this case)

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 Portfolio Diversification

There are several different factors that cause risk or lead to variability in
returns on an individual investment. Factors that may influence risk in any
given investment vehicle include uncertainty of income, interest rates,
inflation, exchange rates, tax rates, the state of the economy, default risk
and liquidity risk (the risk of not being able to sell on the investment). In
addition, an investor will assess the risk of a given investment (portfolio)
within the context of other types of investments that may already be owned,
i.e. stakes in pension funds, life insurance policies with savings components,
and property.

One way to control portfolio risk is via diversification, whereby

investments are made in a wide variety of assets so that the exposure to the
risk of any particular security is limited. This concept is based on the old
adage ‘do not put all your eggs in one basket’. If an investor owns shares in
only one company, that investment will fluctuate depending on the factors
influencing that company. If that company goes bankrupt, the investor might
lose 100 per cent of the investment. If, however, the investor owns shares in
several companies in different sectors, then the likelihood of all of those
companies going bankrupt simultaneously is greatly diminished. Thus,
diversification reduces risk. Although bankruptcy risk has been considered
here, the same principle applies to other forms of risk.

Page 63
 RISK –RETURN MATRIX

Covariance and Correlation

The goal is to hold a group of investments or securities within a portfolio

potentially to reduce the risk level suffered without reducing the level of
return. To measure the success of a potentially diversified portfolio,
covariance and correlation are considered. Covariance measures to what
degree the returns of two risky assets move in tandem. A positive covariance

Page 64
means that the returns of the two assets move together, whilst a negative
covariance means that they move in inverse directions.

Covariance

COV(x, y) = ∑p(x-x) (y-y) for two investments x and y, where p

is the probability.

Covariance is an absolute measure, and covariances cannot be compared

with one another. To obtain a relative measure, the formula for correlation
coefficient [r] is used.

Correlation coefficient

r= COVxy

σxσy
To illustrate the above, here is the example:

Circumstanc Probabilit x-x y-y

∑p(x-x) (y-
e y y)
I 0.2 +1.0 -3.5 -0.7

II 0.3 0 -1.5 0

III 0.4 +1.5 +1.5 0.9

IV 0.1 -4 +5.5 -2.2

COVxy =-2.0

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 For data regarding (y – y), see earlier example. Assume that a similar

exercise has been run for data regarding (x – x). Assume the variance or

σ2 of x= 2.45, and the variance or σ2 of y = 7.06. Thus, the correlation

coefficient would be

r
= -2.0 = -0.481

√ 2.45 *√7.056

If, the same example is run again, but using a different set of numbers for
y, a different correlation coefficient might result of say, –0.988. It can be
concluded that a large negative correlation confirms the strong tendency of
the two investments to move inversely.

Perfect positive correlation (correlation coefficient = +1) occurs

when the returns from two securities move up and down together in
proportion. If these securities were combined in a portfolio, the ‘offsetting’
effect would not occur.

Perfect negative correlation (correlation coefficient = –1) takes

place when one security moves up and the other one down in exact
proportion. Combining these two securities in a portfolio would increase the
diversification effect.

Uncorrelated (correlation coefficient = 0) occurs when returns from

two securities move independently of each other – that is, if one goes up, the
other may go up or down or may not move at all. As a result, the combination
of these two securities in a portfolio may or may not create a diversification

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effect. However, it is still better to be in this position than in a perfect positive
correlation situation.

Unsystematic and systematic risk

As mentioned previously, diversification diminishes risk: the more shares

or assets held in a portfolio or in investments, the greater the risk reduction.
However, it is impossible to eliminate all risk completely even with extensive
diversification. The risk that remains is called market risk; the risk that is
caused by general market influences. This risk is also known as systematic
risk or non-diversifiable risk. The risk that is associated with a specific asset
and that can be abolished with diversification is known as unsystematic risk,
unique risk or diversifiable risk.

Total risk = Systematic risk + Unsystematic risk

Systematic risk = the potential variability in the returns offered by a

security or asset caused by general market factors, such as interest rate
changes, inflation rate movements, tax rates, state of the economy.

Unsystematic risk = the potential variability in the returns offered by a

security or asset caused by factors specific to that company, such as
profitability margins, debt levels, quality of management, susceptibility to
demands of customers and suppliers.
As the number of assets in a portfolio increases, the total risk may decline
as a result of the decline in the unsystematic risk in that portfolio. The
relationship amongst these risks can be quantified as follows

TR2 = SR2 + UR2 or σ2i = σs2 + σu2

Where:

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 σ¡ = the investment’s total risk (standard deviation)
σs = the investment‘s systematic risk
σu =the investment’s unsystematic risk.

The correlation coefficient between two investment

opportunities can be expressed as:
σs = σi CORim

Where,
σs = the investment systematic risk
σi = the investment’s total risk (systematic and unsystematic)
CORim = the correlation coefficient between the return of the
investment and those of the market.

If an investment were perfectly correlated to the market so that all its

movements could be fully explained by movements in market, then all of the

risk would be systematic & σi = σ s If an investment were not correlated at

all to the market, then all of its risk would be unsystematic

TECHNOQUES OF PORTFOLIO MANAGEMENT

Various types of portfolio require different techniques to be adopted to

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

(1). Equity portfolio-

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 Equity portfolio is affected by internal and external factors:

(a) Internal factors –

Pertain to the inner working of the particular company of which equity
shares are held. These factors generally include:

(1) Market value of shares

(2) Book value of shares
(3) Price earnings ratio (P/E ratio)
(4) Dividend payout ratio

(b) External factors –

(1) Government policies

(2) Norms prescribed by institutions
(3) Business environment
(4) Trade cycles

(2). Equity stock analysis –

The basic objective behind the analysis is to determine the probable future
– value of the shares of the concerned company. It is carried out primarily
fewer than two ways. :

(a) Earnings per share

(b) Price earnings ratio

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 (A) Trend of earning: -

 A higher price-earnings ratio discount expected profit growth.

Conversely, a downward trend in earning results in a low price-
earnings ratio to discount anticipated decrease in profits, price and
dividend. Rising EPS causes appreciation in price of shares, which
benefits investors in lower tax brackets? Such investors have not pay
tax or to give lower rate tax on capital gains.
 Many institutional investor like stability and growth and support high
EPS.

 Growth of EPS is diluted when a company finances internally its

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

(B) Quality of reported earning: -

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

 Depreciation allowances: -
Larger (Non Cash) deduction for depreciation provides more funds
to company to finance profitable expansion schemes internally. This
builds up future earning power of company.

 Research and development outlets: -

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 There is higher P/E ratio for a company, which carries R&D
programs. R&D enhances profit earning strength of the company
through increased future sales.

 Inventory and other non-recurring type of profit: -

Low cost inventory may be sold at higher price due to inflationary
conditions among profit but such profit may not always occur and
hence low P/E ratio.

(C) Dividend policy: -

Dividend policy is significant in affecting P/E ratio. With higher dividend ratio,
equity price goes up and thus raises P/E ratio. Dividend rates are raised to
push in share prices up. Dividend cover is calculated to find out the time the
dividend is protected, In terms of earnings. It is calculated as under:

Dividend Cover = EPS / Dividend per Share

(D) Investors demand: -

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

(3) Quality of management: -

Investors decide about the ability and caliber of management and hold
and dispose of equity academy. P/E ratio is more where a company is
managed by reputed entrepreneurs with good past records of management
performance.

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 Types of Portfolios

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

maximize profit and minimize losses are different as per their objectives
.They are as follows.

Aggressive Portfolio:

Objective: Growth. This strategy might be appropriate for

investors who seek High growth and who can tolerate wide
fluctuations in market values, over the short term.

Growth Portfolio:

Objective: Growth. This strategy might be appropriate for

investors who have a preference for growth and who can
withstand significant fluctuations in market value.

Page 72
 Balanced Portfolio:

Objective: Capital appreciation and income. This strategy

might be appropriate for investors who want the potential for
capital appreciation and some growth, and who can withstand
moderate fluctuations in market values

Page 73
 Conservative Portfolio:

Objective: Income and capital appreciation. This strategy may

be appropriate for investors who want to preserve their capital
and minimize fluctuations in market value.

Page 74
 Share khan Portfolio Management Services

PM

PRO PRO TECH PRO

PRIME DIVERSIFIED TECH

Pro Prime :-

Product Approach

Investment will be keeping in mind 3 investment tenets.

1. Consistent, steady and sustainable returns.

2. Margin of Safety

3. Low Volatility

Product offering

Pro Prime is the ideal for investors looking at steady and superior with low
and medium risk appetite.

Page 75
 The portfolio consists of a blend of quality blue chip and growth stocks
ensuring a balanced portfolio with relatively medium risk profile.

The portfolio constitutes of relatively large capitalization stocks, based on

sector and themes which have medium to long term growth potential.

Product Characteristics

 Bottom up stock selection

 In depth ,independent fundamental research

 High quality companies with relatively large capitalization

 Disciplined valuation approach applying multiple valuation measure.

 Medium to long term vision, resulting in low portfolio turnover.

How to invest?

 Minimum Investment : 5 Lakhs

 Lock in : 6 months

 Reporting: Access to website showing clients holding

.Monthly reporting of portfolio holding /transaction.

 Charges: 2.5% pa AMC (Annual Maintenances Charges) fees

charged every quarter ,0.5% brokerage ,20% profit sharing

Page 76
 after 15% hurdle is crossed chargeable at the end of fiscal
year.

Pro tech – Diversified :-

Product Approach

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

future. Whenever basis is high we buy the stocks and sell the future to lock in
difference .The difference is bound to be zero at expiry.

Product Offered

Cash –future arbitrage:

The product intends to spot low risk opportunities which will yield more
than the normal low risk product .Whenever such opportunity is spotted
stocks will be bought and to lock in the basis, future will be sold .This position
will be liquated in the expiry or before that if the basis vanishes early
.Similarly the scheme will move on from opportunity to opportunity.

Product Characteristics

moderate –Risk: This is relatively low risk product which can be

compared with liquid funds issued by mutual funds.

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

Product Details

 Minimum Investment:Rs.1 Crore

Page 77
  Lock in :6 months

 Reporting: Fortnightly for portfolio Net worth, Monthly

reporting pf portfolio Holding /transaction.

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

Pro Tech :-

Protech using the knowledge of technique analysis and the power of

depravities markets to identify trading opportunities in the market .The

protech line of the product is designed around various risk /reward /volatility
profiles for the different kind of investment needs.

Product Approach

Better performance is possible from superior market timing and from

picking stocks before inflation points in their trading cycles .Linear return are
possible from having hedged/ sell market positions in downtrends .Absolute
return are targeted by focusing on finding trading opportunities & not out
performance of an index.

Product offered

1. Nifty Thirty :

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

trading system generated calls to go long/short. The exposure will
never exceed the value of portfolio i.e. no leveraging; but allows us to
be short /hedged in Nifty in falling market therefore allowing the client
to earn irrespective of the market direction.

Page 78
2. Beta Portfolio :

Positional trading opportunities are identified in the future segment

based on technical analysis .Inflection points in the momentum cycles
are identified to go long /short on stock/index futures with 1-2 months
time horizon .The idea is to generate the best possible return in the
medium term irrespective of the direction of the market without really
leveraging beyond the portfolio value. Risk protection is done based on
stop losses on daily closing prices.

3. Star Nifty:

Swing trading technique and Dow theory is used to identify short –

term reversal levels for Nifty futures and ride with trend both on the
long and short side .This return can be earned in bull and bear
market .Stop and reverse means to reverse ones position from long to
short or vice a versa at the reversal levels simultaneously .The
exposure never exceeds value of portfolio i.e. there is no leveraging.

4. Trailing Stops.

Momentum trading techniques are used to spot short –term

momentum of 5-10 days in stocks and stocks /index futures .Trailing
stop loss method of risk management or profit protection is used to
lower the portfolio volatility and maximize return .Trading opportunities
are exposed both on the long side and the short side as the market
demands to get the best of both upward and downward trends.

Page 79
Product Characteristics

 Using swing based index –trading systems stop and reverse .trend
following and momentum trading technique.

 Nifty based products for low impact cost and low product volatility

 Both long and short strategies to earn returns even in falling market.

 Trading in future market to allow for active risk protection using trailing
stop losses.

How to invest?

 Minimum : Rs.10 Laces

 Lock in : 6 months

 Reporting: Fortnightly reporting of portfolio Net Worth,

monthly reporting of portfolio Holding /Transaction.

 Charges: 0% AMC (Annual Maintenance Charges),

0.05% brokerage for derivatives, 20% profit sharing on
booked profit quarterly basis

Protech Performance Report

Page 80
Nifty Thrifty:

NIFTY THRIFTY
Date NAV Sensex

01/02/2006 10.00 9859.26

29/04/2009 19.43 11403.25

Returns
94.30 15.66
(%)

How it works:

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

human intervention. This product has come out of its fifth draw-down period

Page 81
(in 28 years of back testing) and the net asset value (NAV) is taking off to
new heights.

Beta portfolio:

BETA PORTFOLIO
Date NAV Sensex
03/08/2007 10.00 15138.40
29/04/2009 13.81 11403.25
Returns (%) 38.10 -24.67

How it works:

Our product is based on positional trading with a long and short model
investing in plain vanilla stock futures. In this, we identify stocks with greater
risk-reward ratios with a time horizon of 1 to 2 months, based on the
prevalent market situation.

Trailing Stops:

TRAILING STOPS
NAV Sensex
20/10/2007 10.00 17559.98
24/04/2009 15.32 9708.50

Returns (%) 43.50 -35.06

How it works:

The trading strategy is to buy short-term momentum over a time frame of

1 to 5 days and then book small profits consistently.

Page 82
Page 83
 CHAPTER -5

DATA ANALYSIS AND

INTERPRETATION

Page 84
 1. Do you know about the Investment Option available?

Interpretation

As the above table shows the knowledge of Investor out of 100

respondent carried throughout the Hyderabad Area is only 85%.
The remaining 15% take his/her residential property as an
investment. According to law purpose this is not an investment
because of it is not create any profit for the owner. The main
problem is that in this time from year 2008-2009 , the recession
and the Inflation make the investor think before investing a even
a Rs. 100.So , it also create the problem for the Investor to not
take interest in Investment option.

Page 85
 2. What is the basic purpose of your Investments?

Interpretation

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

interested in liquidity, returns and tax benefits. And remaining
25% are interested in capital appreciations, risk covering, and
others. In the entire respondent it is common that this time
everyone is looking for minimizing the risk and maximizing their
profit with the short time of period.

Page 86
 As explaining them About the Portfolio Management Services of
Share khan, they were quite interested in Protech Services.

3. What is the most important factor you consider

at the time of Investment?

Interpretation

As the above analysis gives the clear idea that most of the
Investors considered the market factor as around 12% for Risk
and 23% Return, but most important common things in all are that
they are even ready for taking both Risk and Return in around
65% investor.

Page 87
 Moreover, the Market is fluctuating now days, so as it also
getting improvement. So, Investor are looking for Investment in
long term and Short-term.

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

Interpretation

Most of the respondents say they will get more returns in Share
Market. Since Share Market is said to be the best place to invest
to get more returns. The risk in the investment is also high.

Page 88
 Similarly, the Investor are more Interested in Investing their
money in Mutual Fund Schemes as that is also very important
financial product due to its nature of minimizing risk and
maximizing the profit. As the commodities market is doing well
from last few months so Investor also prefer to invest their money
in Commodities Market basically in GOLD nowadays.

Moreover, even who don’t want to take Risk they are looking for
investing in Fixed Deposit for long period of time.

5. “Investing in PMS is far safer than Investing in Mutual

Fund”. Do you agree?

Interpretation

In the above graphs it’s clear that 24% of respondent out of

hundred feel that investing their money in Mutual Fund Scheme
are far safer than Investing in PMS. This is because of lack of

Page 89
proper information about the Portfolio management services. As
the basis is same for the mutual fund and PMS but the investment
pattern is totally different from each other and which depends
upon different risk factor available in both the Financial Products.

6. How much you carry the expectation in Rise of your

Income from Investments?

Interpretation

The optimism is shown in the attitude of the respondents. The

confidence was appreciable with which they are looking forward to
a rise in their investments. Major part of the sample feels that the

Page 90
rise would be of around 15%. Only 8% of the respondents were
confident enough to expect a rise of up to 35%.

As all the respondents were considering the Risk factor also

before filling the questionnaire and they were asking about the
performance report of all the PMS services offered by Share khan
limited.

7. If you invested in Share Market, what has been your

experience?

Interpretation

Page 91
 20% of the respondents have invested in Share market and
received satisfactory returns, 40% of the respondents have not at
all invested in Share Market. Some of the investors face problems
due to less knowledge about the market. Some of the respondents
don’t have complete overview of the happenings and invest their
money in wrong shares which result in Loss. This is the reason
most of the respondents prefer Portfolio Management Services to
trade now a days, which gives the Investor the clear idea when is
the right time to buy and right time to sell the shares which is
recommended by their Fund Manger.

8. How do you trade in Share Market?

Page 92
 Interpretation

As we know that Share market is totally based on psychological

parameters of Investors, which changed as per the market
condition, but at the same time the around 45% investor trade on
the basis of speculation and 31% depend upon Investment option
Bonds, Mutual Funds etc.

9. How do you manage your Portfolio?

Interpretation

About 57% of the respondents say they themselves manage

their portfolio and 43% of the respondents say they depend on the
security company for portfolio Management. 43% of the
respondents prefer PMS of the company because they don’t have

Page 93
to keep a close eye on their investment; they get all the
information time to time from their Fund Manager.

Moreover, talking about the Share khan PMS services they are
far satisfied with the Protect and Prop rime Performance during
last year. They are satisfied with the quick and active services of
Share khan customer services where, they get the updated
knowledge about the scrip detail everyday from their Fund
Manager.

10. If you trade with Share khan limited then why?

Interpretation

As the above research shows the reasons and the parameters

on which investor lie on Share khan and they do the trade.

Page 94
 Among hundred respondents 35% respondents do the trade
with the company due to its research Report, 28% based on
Brokerage Rate whereas 22 % are happy with its Services.

Last but not the least, 15% respondents are depends upon the
tips of Share khan which gives them idea where to invest and
when to invest.

At the time of research what I found is that still Share khan

need to make the clients more knowledge about their PMS
product.

11. Are you using Portfolio Management services (PMS)

of Share khan?

Page 95
 Interpretation

As talking about the Investment option, in most of clients it was

common that they know about the Option but as the PMS of Share
khan have different Product offering, Product Characteristics and
the Investment amount is also different this makes the clients to
think differently.

It is found that 56% of Share khan client where using PMS

services as for their Investment Option.

12. Which Portfolio Type you preferred?

Interpretation

Page 96
 The above analysis shows, in which portfolio the investor like to
deal more in PMS.

As 45% investor likes to go for Equity Portfolio and 28% with

Balanced Portfolio, whereas around 27% investor like to, go for
Debt Portfolio.

13. How was your experience about Portfolio

Management services (PMS) of Share khan Limited?

Interpretation

In the above analysis it is clear that the Investor have the good
and the bad experience both with the Share khan PMS services.

Page 97
 In this current scenario 52% of the Investor earned, whereas
around 18% have to suffer losses in the market. Similarly 30% of
the Respondents are there in Breakeven Point (BEP), where no
loss and no profit.

14. Does Share khan Limited keep it PMS process

Transparent?

Interpretation

The above analysis is talking about the Share khan

Transparency of their PMS services. In hundred respondents 63%
said that they get all the information about their scrip buying and
selling information day by day, where as 37% of respondents are

Page 98
not satisfied with the PMS information and Transparency because
they don’t get any type of extra services in PMS as they were
saying.

15. Do you recommend Share khan PMS to others?

Interpretation

The above analysis shows the Investor perception toward the

Share khan PMS as on the basis of their good and bad experience
with Share khan limited. Among hundred respondents 86%

Page 99
respondents were agree to recommend the PMS of Share khan to
their peers, relatives etc.

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

6. Do you know about the Investment Option available?

CORRELATI
ON Column1
POSITIVE
1 CORRELATION

INTERPETATION

People who think investment in PMS is safer also know the options
available in PMS.

14. Does Share khan Limited keep it PMS process Transparent?

15. Do you recommend Share khan PMS to others?

CORRELATI Column1

Page 100
ON
POSITIVE
1 CORRELATION
Interpretation:

People think PMS is safer recommend others also.

Case Study

Case Study: Project Portfolio Management

with One point in the Manufacturing Industry

Graz, April 7, 2009

Expert conference of German institute for project management

focuses on tools and solutions: One point also present at
exhibition area
At this year's expert conference of the German institute for project
management the successful deployment of a project and portfolio
management (PPM) solution of One point Software in the
manufacturing industry will be presented as a case study. At
Amazonen-Werke H. Dreyer GmbH & Co. KG One point supports
research and development projects. In addition, visitors of the

Page 101
event ("Focus > Project management Tools & Lösungen 2009")
can get first hand experience regarding the usability of One point
Project.

In its third year, the yearly expert conference has established

itself as an important market place for PM tools and solutions.
Project managers and vendors are going to present up-to-date
project work in the form of workshops and presentations as well as
demos in the exhibition area. In doing so, the focus is clearly on
the practical aspects of project management. This year's key
topics are the selection, implementation processes and the
solution aspects of PM tools. In this context the case study
presented by Jörn Henkelmann, project manager construction/R&D
at Amazon, will share his experience applying project
management based on One point Project in his company. The
strongly export-oriented vendor of agricultural implements and
municipal technology sees itself on the road to success since
many years. In order to stay competitive, it constantly stimulates
research and innovation. With its development team distributed
across different locations, Amazon also cooperates closely with
research institutes and universities abroad.

"Development projects are typically time and resource critical and

thus, a major challenge for the project managers," said Gerald
Mesaric, CEO of One point Software. "For the development team
at Amazon One point Project has proven to be an ideal fit since it
integrates ad-hoc monitoring, traffic light functions and

Page 102
plan/actual comparisons. Through the increased transparency
project risks are minimized." These advantages will also be
presented in a public live demo on May 6, 2009.

One point Software will also be present at the exhibition area.

Interested parties have the possibility to get a first impression of
the latest version One point Project 9 in individual live demos. The
Web-based project leadership software provides an innovative
approach to integrated project management from planning to
monitoring and controlling. It is available both for on-premise
installation and as Software as a Service (Seas). Additional
information regarding the event and the registration can be found
at http://www.pm-
institut.de/tagungen/pm_tools2009/pm_tools_2009.htm.

About One point Software

One point Software is the first project and portfolio management
vendor offering both an on demand and an installed Web 2.0-
based solution for the extended enterprise. Unlike traditional PPM
software, One point Project is known to be integrated, real-time,
open, easy-to-use and fast to deploy. One point enables project-
oriented companies and departments to increase project and
portfolio transparency, shorten project lead-times, automate best
practices and reduce project risks. The ROI period of one point
Project is usually well below 12 months.

Page 103
 Article

Portfolio management service — this can pay off for the well-
off

Aerate Krishnan

Portfolio managers
also let you choose
from various `concepts'
or model portfolios.

YOU earn money in

bagfuls, but don't have
the time or inclination
to manage it. If this description fits you, do consider entrusting
your money to a professional portfolio management service (PMS).
In return for a fee, portfolio managers offer to craft a basket of
stocks, bonds or even mutual funds that would fit your personal
investment goals and risk preferences.

Page 104
 Though a few portfolio managers offer standardized packages
for a sum as small as Rs 5-10 laky, it may take a minimum
investment size of Rs 25-50 lakh to fetch you a customized
portfolio. Apart from cash, you can also hand over an existing
portfolio of stocks, bonds or mutual funds to a PMS that could be
revamped to suit your profile.

Why not mutual funds?

But why should you opt for PMS instead of a mutual fund? Here
are a few aspects on which portfolio managers say they score over
the standardized products offered by mutual funds:

Asset allocation: You may know what stocks, equity funds or

bonds you would like to own, but do you know how much of your
savings you should allocate to each of these? The decision on
asset allocation will be crucial in determining investment returns
over the long term. With PMS, an asset allocation plan is tailor-
made for you, after a detailed check on your investment goals,
savings pattern and appetite for risk.

Timing: Have you ever kicked yourself for switching your entire
portfolio into equities just before they tanked? If you have, you
probably need help with regard to timing of investments. Once
you hire a portfolio manager, you can expect assistance on when
you should be investing more money into equities and when you
should be bailing out. A portfolio manager may also switch a

Page 105
portion of your portfolio into cash, if he perceives a big risk to
stock prices. The focus is on preserving value.

Flexibility: You are bullish on FMCG stocks, but find that equity
funds have marginal exposures to the sector. In a PMS, you can
expect the portfolio manager to accommodate your sector
preferences when he invests. But don't expect to completely
dictate what stocks or sectors your portfolio manager will buy for
you, as he will be the best judge of that.

Also, portfolio managers do not have to stick to any rigid rules

on what proportion of your money will be invested in each sector
or stock. They can also use liberal doses of cash or derivative
instruments to pep up your returns. Mutual fund managers have
their hands tied on these aspects by SEBI regulations.

What to expect from PMS

Okay, you have fallen for the sales pitch and entrusted your
money to a PMS. What can you now expect from this service?

More handholding from your portfolio manager than you have

been accustomed to from your mutual fund. You can expect to
have a personal relationship manager through whom you can
interact with the fund manager at any time of your choice. You
can also expect frequent (maybe monthly) interaction with the
portfolio manager to discuss any concerns that you might have.
Expect to be consulted on any major changes in asset allocation
or in the investment strategy relating to your portfolio. All

Page 106
administrative matters, including operating a bank account and
dealing with settlement and depository transactions, will be
handled by the PMS.
If you are the type who likes to watch over your money like a
baby, the disclosures offered by a PMS may be just right for you.
On handing over your money, you will receive a user-ID and
password from the PMS, which will grant you online access to your
portfolio details. You can use these to check back on your portfolio
as often as you like.
Keeping track of capital gains (and losses) for the taxman can
be a depressing chore, when you have furiously churned your
investments through the year. Opting for PMS will free you of this
chore, as a detailed statement of the transactions on your
portfolio for tax purposes comes as a part of the package.

What you pay

Most portfolio managers allow you to choose between a fixed

and a performance-linked management fee. If you opt for the
fixed fee, you may pay between 2-2.5 per cent of portfolio value;
this is usually calculated on a weighted average basis. The
structure for the performance-linked fee differs across players;
usually, this includes a flat fee of 0.5-1.5 per cent. The portfolio
manager also gets to share a percentage of your profit — usually
15-20 per cent — earned over and above a threshold level, which
may range between 8 per cent and 15 per cent. Apart from

Page 107
management fees, separate charges will be levied towards
brokerage, custodial services and towards meeting tax payments.

There are wide variations in fee structure between players and

across products. For instance, Birla Sun Life charges only a
performance-linked fee for its portfolio services. Way2Wealth has
a differential fee structure for its debt and equity dominated
portfolios.

When you opt for a performance-based fee, the profits are

reckoned on the basis of "high watermarking". That is, you pay
the fee only on the positive returns on your portfolio. For instance,
if you invest Rs 100 in a PMS and its value appreciates to Rs 150
at the end of the year, you pay a fee on the profit of Rs 50.
Subsequently, a fee will be levied only on gains over and above
the Rs 150 mark. If the value of your portfolio slumps to Rs 70,
and climbs back to Rs 110, the Rs 40 you earn will not be
reckoned as profit. You will again be charged a fee only if the
value of your portfolio recovers to over Rs 150, the previous "high
watermark."

Who should hire a portfolio manager?

Anybody with a nest egg, which meets the minimum

investment requirement, can consider using a PMS. However, a
PMS may only add significant value in the following cases:

Equity bias: Portfolio management services may be ideal for a

person who seeks a substantial investment in the stock markets.

Page 108
An equity portfolio also offers greater scope for a manager to add
value than does a debt portfolio. Several of the established
players in the PMS business focus on equity investments, though
some also offer hybrid products.
Large surplus to invest: The minimum portfolio size that
portfolio managers accept for a customized portfolio ranges from
Rs 25 lakh to Rs 5 crore. So consider a PMS only if you have a
substantial surplus to invest in stocks. If you don't, evaluate if you
can use the services of a financial planner or an advisor, instead
of a PMS.

If you are willing to handle the paperwork associated with

investing, you can get a financial planner or advisor to construct
an asset allocation plan and guide you on the choice of
investments for a one-time fee of Rs 5,000-15,000.

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 CHAPTER-6

CONCULSION

AND

SUGGESTIONS

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OBSERVATION AND FINDING

 About 85% Respondents knows about the Investment Option, because

remaining 15% take his /her residential property as Investment, but in
actual it not an investment philosophy carries that all the Investment
does not create any profit for the owner.

 More than 75% Investors are investing their money for Liquidity, Return
and Tax benefits.

 At the time of Investment the Investors basically considered the both

Risk and Return in more %age around 65%.

 As among all Investment Option for Investor the most important area to
get more return is share around 22%after that Mutual Fund and other
comes into existence.

 More than 76% of Investors feels that PMS is less risky than investing
money in Mutual Funds.

 As expected return from the Market more than 48% respondents

expect the rise in Income more than 15%, 32% respondents are
expecting between 15-25% return.

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 As the experience from the Market more than 34% Investor had lose
their money during the concerned year, whereas 20% respondents
have got satisfied return.

 About 45% respondents do the Trade in the Market with Derivatives

Tools Speculation compare to 24% through Hedging .And the rest 31%
trade their money in Investments.

 Around 57% residents manage their Portfolio through the different

company whereas 43%Investor manage their portfolio themselves.

 The most important reasons for doing trade with Share khan limited is
Share khan Research Department than its Brokerage rate Structure.

 Out of hundred respondents 56% respondents are using Share khan

PMs services.

 Investors preferred more than 45% equity Portfolio, 28%Balanceed

Portfolio and about 27% Debt Portfolio with Share khan PMS.

 About 52% Respondents earned through Share khan PMS product,

whereas 18% investor faced loses also.

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 More than 63% Investor are happy with the Transparency system of
Share khan limited.

 As based on the good and bad experience with Share khan limited
around 86% are ready to recommended the PMS of Share khan to their
peers, relatives etc.

LIMITATION OF THE PROJECT

 As only Hyderabad was dealt in the survey so it does not represent

the view of the total Indian market.

 The sample size was restricted with hundred respondents.

 There was lack of time on the part of respondents.

 The survey was carried through questionnaire and the questions were
based on perception.

 There may be biasness in information by market participant.

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  Complete data was not available due to company privacy and secrecy.

 Some people were not willing to disclose the investment profile.

CONCLUSION AND SUGGESTIONS

On the basis of the study it is found that Share khan Ltd is better services
provider than the other stockbrokers because of their timely research and
personalized advice on what stocks to buy and sell. Share khan Ltd. provides
the facility of Trade tiger as well as relationship manager facility for
encouragement and protects the interest of the investors. It also provides the
information through the internet and mobile alerts that what IPO’s are
coming in the market and it also provides its research on the future prospect
of the IPO. We can conclude the following with above analysis.

 Share khan Ltd has better Portfolio Management services than Other
Companies

 It keeps its process more transparent.

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 It gives more returns to its investors.

 It charges are less than other portfolio Management Services

 It provides daily updates about the stocks information.

 Investors are looking for those investment options where they get
maximum returns with less returns.

 Market is becoming complex & it means that the individual investor will
not have the time to play stock game on his own.

 People are not so much ware aware about the Investment option
available in the Market.

Suggestions

 The company should also organize seminars and similar activities to

enhance the knowledge of prospective and existing customers, so that
they feel more comfortable while investing in the stock market.
 Investors must feel safe about their money invested.

 Investor’s accounts must be more transparent as compared to other

companies.

 Share khan limited must try to promote more its Portfolio Management
Services through Advertisements.

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  Share khan needs to improve more it’s Customer Services

 There is need to change in lock in period in all three PMS i.e. Protech,
Proprime.

BIBILOGRAPHY

REFERENCES

 www.sharekha.com

 www.sebi.gov.in

 www.moneycontrol.com

 www.karvy.com

 www.valueresarchonline.com

 www.yahoofinance.com

 www.theeconomist.com

 www.nseindia.com

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  www.bseindia.com

Book Referred

 Value guide by Share khan

 Investors Eyes by Share khan

 Business world.

 The economist

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